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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file number 0-3136
RAVEN INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
South Dakota 46-0246171
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 E. 6th Street, Sioux Falls, South Dakota 57117
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(Address of principal offices)(Zip Code)
Registrant's telephone number, including area code (605) 336-2750
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $1 par value
--------------------------
(Title of each class)
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been sub ject to such filing
requirements for the past ninety days.
Yes __X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based on the closing price of $21.00 per share as reported on the
NASDAQ National Market System on April 15, 1998 was $90,311,277.
Shares of common stock outstanding at April 15, 1998: 4,827,907.
DOCUMENTS INCORPORATED BY REFERENCE
The following table shows, except as otherwise noted, the location of
information, required in this Form 10-K, in the registrant's Annual Report to
Shareholders for the year ended January 31, 1998 and Proxy Statement for
registrant's 1998 annual meeting, a defini tive copy of which was filed on April
16, 1998. All such information set forth under the heading "Reference" below is
incorporated herein by reference. A copy of the registrant's Annual Report to
Shareholders for the year ended January 31, 1998 is included in this report.
PART I. ITEM IN FORM 10-K REFERENCE
------- ----------------- ---------
Item 1. Business Business, pages 4-7, this
document; Business
Segments, page 3, and
Sales by Markets, page
17, Annual Report to
Shareholders
Item 2. Properties Properties, pages 8-9, this
document
Item 3. Pending Legal Pending Legal Proceedings,
Proceedings page 9, this document
Item 4. Submission of Matters Submission of Matters to a
to a Vote of Vote of Security
Security Holders Holders, page 9, this
document
PART II.
- ---------
Item 5. Market for the Regis- Quarterly Summary, page 24,
trant's Common Eleven-year Financial
Equity and Related Summary, pages 18-19,
Stockholder Matters and inside back cover,
Annual Report to
Shareholders
Item 6. Selected Financial Data Eleven-Year Financial
Summary, pages 18-19,
Annual Report to
Shareholders
Item 7. Management's Discussion Financial Review and
and Analysis of Analysis, pages 20-23,
Financial Condition Annual Report to Share
and Results of holders
Operations
DOCUMENTS INCORPORATED BY REFERENCE, Continued
PART II. continued:
--------
ITEM IN FORM 10-K REFERENCE
----------------- ---------
Item 8. Financial Statements and Annual Report to Share-
Supplementary Data holders, pages 25-36
Item 9. Changes in and Disagree- Changes in and Disagree-
ments with Account- ments with Accountants
ants on Accounting on Accounting and
and Financial Financial Disclosure,
Disclosure page 9, this document
PART III.
---------
Item 10. Directors of the Regis- Election of Directors and
trant Executive Compensation,
Proxy Statement
Executive Officers of Executive Officers of
the Registrant Registrant, page 10,
this document and Other
Matters, Proxy
Statement
Item 11. Executive Compensation Executive Compensation,
Proxy Statement
Item 12. Voting Securities and Ownership of Common Stock,
Principal Holders Proxy Statement
Thereof
Item 13. Certain Relationships
and Related Election of Directors,
Transactions Proxy Statement
ITEM IV.
--------
Exhibits, Financial
Item 14. Exhibits, Financial Statement Schedule
Statement Schedule and Reports on Form
and Reports on Form 8-K, pages 10-12,
8-K. this document.
RAVEN INDUSTRIES, INC.
FORM 10-K
year ended January 31, 1998
Item 1. Business
General
Raven Industries, Inc. was incorporated in February 1956 under the
laws of the State of South Dakota and began operations later that same year. The
following terms - the company, Raven or the registrant - are intended to apply
to Raven Industries, Inc. and its consolidated subsidiaries listed in Exhibit 21
to this report. Raven is headquartered in Sioux Falls, South Dakota, employing
approximately 1,500 persons in nine states.
The company began operations as a manufacturer of high-altitude
research balloons. It has diversified over the years to supply specialized
products for a number of markets, including industrial, recreation, agriculture,
automotive and defense. Many of these product lines are an extension of
technology and production methods developed in the original balloon business.
The automotive product line was added via acquisition in fiscal 1987. Page 17 in
the company's Annual Report to Shareholders, incorporated herein by reference,
provides financial information regarding sales by markets.
The company has three business segments: Electronics, Plastics and
Sewn Products. Product lines have been grouped in these segments based on common
technologies, production methods and raw materials. However, more than one
business segment may serve the product markets identified above. Page 3 in the
company's Annual Report to Shareholders, incorporated herein by reference,
provides financial information concerning the three business segments.
Business Segments
Electronics - Historically, this segment provided a variety of
assemblies and controls to the U.S. Department of Defense and other defense
contractors. The company is expanding this segment's capabilities in contract
electronics assembly for commercial customers to offset a decline in defense
contracts. Assemblies manufactured by the Electronics segment include
communication, computer and other products where high quality is critical. Flow
control devices, used primarily for precision farming applications, are designed
and produced within this business segment. These devices are also used for
roadside and turf spraying. Management
Item 1. Business, continued:
Business Segments, continued:
believes that acquisition of new technologies for height and depth control will
expand the company's capabilities to support precision farming in future years.
The segment also builds and installs automated control systems for use in
feedmills.
Contract electronics assembly sales are made in response to
competitive bid requests by defense agencies or other contractors. The level and
nature of competition vary with the type of product, but the company frequently
competes with a number of assembly manufacturers on any given bid request. Home
office personnel sell flow control devices directly to original equipment
manufacturers (OEMs) and distributors. Company sales representatives sell
automated systems directly to feedmills. All the product markets the company
participates in are competitive, with customers having a number of suppliers to
choose from.
Plastics - Products in this segment include heavy-duty sheeting for
industrial and agricultural applications; fiberglass, polyethylene and
dual-laminate tanks for industrial and agricultural use; high altitude balloons
for public and commercial research; and pickup-truck toppers sold in the small
truck aftermarket. The company's capability to produce dual-laminate tankage
resulted from the acquisition of Norcore Plastics in January 1997.
The company sells plastic sheeting to distributors in each of the
various markets it serves. The company extrudes a significant portion of the
film converted for its commercial products and believes it is one of the largest
sheeting converters in the United States. A number of suppliers of sheeting
compete with Raven on both price and product availability.
Home office personnel and manufacturer's representatives sell
storage tanks to OEMs and through distributors. Competition comes not only from
many other plastic tank manufacturers, but also from manufacturers using other
materials (aluminum and steel). The company makes a number of custom fiberglass
and dual-laminate products, but polyethylene tanks tend to be commodity products
and subject to intense price competition.
The company sells research balloons directly to public agencies
(usually funded by NASA) or commercial users. Demand is small but stable. Raven
is the largest balloon supplier for high-altitude research in the United States.
Pickup-truck toppers are sold throughout the U.S., using a dealer
network. The overall market for toppers has declined since the late 1980's as
alternatives to pickups with toppers, primarily
Item 1. Business, continued:
Business Segments, continued:
minivans and sport-utility vehicles, increased in popularity. The
number of topper manufacturers has fallen but is still substantial.
Sewn Products - This segment produces and sells outerwear for a
variety of recreational activities, including skiing, hunting and fishing. The
segment also manufactures sport balloons principally for recreational use.
Another major product is large inflatable devices, which enjoy a number of uses,
such as parade floats and advertising media.
Recreational outerwear is sold both to retailers through an
independent sales representative network, and by home office personnel to
catalog retailers. There are many outerwear manufacturers in the U.S. and
abroad, and considerable competition exists. The company competes successfully
in the medium-to-higher priced range of the market where specialty fabrics such
as Gore-Tex(R) are involved, emphasizing quality, service and manufacturing
expertise.
The segment sells balloons through a dealer network. Raven is the
originator of modern hot-air ballooning and continues to be a leader in design
and technical expertise. The company believes it has approximately 40 percent of
the U.S. hot-air balloon market, although others are able to compete with
lower-cost products. Inflatables are sold directly to corporate customers and
are subject to varying levels of competition. Generally, the more customized the
product, the greater the company's market share.
Major Customer Information
No customer accounted for more than 10 percent of consolidated sales
in fiscal 1998. However, the company sells sewn products to several large
customers. In fiscal 1998, the top five customers in the Sewn Products segment
accounted for more than two-thirds of the sales in that segment. Although the
loss of these accounts would adversely affect profitability, the company
believes that, over the long term, addition of new customers and sales growth
from existing customers would replace any lost sales.
Seasonality/Working Capital Requirements
Some seasonality in demand exists for the company's outerwear
products, many of which are built in spring/summer for summer/fall delivery.
Most of these sales carry net thirty day terms, although some winter-dated terms
are available. Sales to the agricultural market (flow controls, plastic tanks)
also experience some seasonality, building in the fall for winter/spring
delivery. Certain sales to agricultural customers offer spring dating terms
Item 1. Business, continued:
Seasonality/Working Capital Requirements Continued:
for late fall and early winter shipments. The resulting fluctuations in
inventory and accounts receivable balances may require and have required
seasonal short-term financing.
Raw Materials
The company obtains a wide variety of materials from numerous
vendors. Principal materials include numerous electronic components for the
Electronics segment; various plastic resins for the Plastics segment; and fabric
for the Sewn Products segment. The company has not experienced any significant
shortages or other problems in purchasing raw materials to date, and alternative
sources of supply are generally available. However, predicting future material
shortages and their impact on Raven is not possible.
Patents
The company owns a number of patents. However, Raven does not
believe that its business as a whole is materially dependent on any one patent
or related group of patents. It believes the successful manufacture and sale of
its products generally depend more upon its technical expertise and
manufacturing skills.
Research and Development
The business segments noted above conduct ongoing research and
development efforts. Most of the company's research and development expenditures
are directed toward new products in the Electronics and Plastics segments. Total
company research and development costs are disclosed in Note 1 to the
consolidated financial statements located on page 29 of the Annual Report to
Shareholders, incorporated herein by reference.
Environmental Matters
Raven believes that it is in compliance in all material respects
with applicable federal, state and local environmental laws and regulations.
Expenditures relating to compliance for operating facilities incurred in the
past and anticipated in the future have not significantly affected capital
expenditures, earnings or competitive position.
Backlog
As of February 1, 1998, the company's backlog of firm orders totaled
$47.2 million. Comparable backlog amounts as of February 1, 1997 and 1996 were
$38.1 million and $32.5 million, respectively. Approximately $4 million of the
February 1, 1998 backlog is not scheduled for shipment by January 31, 1999.
Item 2. Properties
Square Business
Location Feet Use Segments
- -------- ---- --- --------
Sioux Falls, SD 150,000 Corporate office and Corporate and
electronics manufacturing Other
Electronics
73,300 Storage tank Plastics
manufacturing
68,400 Sewn products warehouse Sewn Products
62,300 Plastic sheeting Plastics
manufacturing
59,000 Plastic sheeting and hot- Plastics
air balloon manufacturing Sewn Products
31,400 Storage tank Plastics
manufacturing
27,000 Offices and material Sewn Products
handling facility
25,300 Inflatable manufacturing Sewn Products
24,000 Prototype manufacturing Electronics
10,200 Machine Shop Corporate and
Other
6,200 Training/meeting center Corporate and
Other
Dunnell, MN 81,500 Pickup-truck topper Plastics
manufacturing
Eloy, AZ 51,600 Pickup-truck topper Plastics
manufacturing
Albertville, AL 49,600 Storage tank Plastics
manufacturing
Tacoma, WA *46,650 Storage tank Plastics
manufacturing
Sulphur Springs, TX *45,400 Research balloon Plastics
manufacturing
Springfield, OH 30,000 Plastic sheeting Plastics
manufacturing
Square Business
Location Feet Use Segments
- -------- ---- --- --------
Huron, SD 24,100 Sewing plant Sewn Products
Washington Court 21,500 Storage tank Plastics
House, OH manufacturing
St. Louis, MO 21,000 Electronics manufacturing Electronics
Gordo, AL *20,000 Feedmill automation Electronics
equipment manufacturing
Beresford, SD 20,000 Sewing plant Sewn Products
Madison, SD 20,000 Sewing plant Sewn Products
DeSmet, SD 15,000 Sewing plant Sewn Products
Salem, SD 15,000 Sewing plant Sewn Products
Parkston, SD 14,000 Sewing plant Sewn Products
* Leased short-term
Most of the company's manufacturing plants also serve as distribution centers
and contain offices for sales, engineering and manufacturing support staff. The
company believes that its properties are, in all material respects, in good
condition and are adequate to meet existing production needs. The company owns
6.95 acres of undeveloped land adjacent to the other company property in Sioux
Falls which is available for expansion.
Item 3. Pending Legal Proceedings
There are no pending legal proceedings wherein the claim for damages exceeds 10%
of the registrant's current assets.
Item 4. Submission of Matters to a Vote of Security Holders
There was no matter submitted during the fourth quarter to a vote of security
holders.
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
None.
Item 10. Executive Officers of the Registrant
Name Age Position Period Served
---- --- -------- -------------
David A. Christensen 63 President and Chief April 1971 to present
Executive Officer
Gary L. Conradi 58 Vice President, January 1980 to present
Corporate Services
Ronald M. Moquist 52 Executive Vice January 1979 to present
President
Arnold J. Thue 59 Vice President, January 1980 to present
Finance, Secretary
and Treasurer
Each of the above named individuals serves at the pleasure of the Board of
Directors. Each serves on a year-to-year basis.
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K
(a) Consolidated Financial Statements and Schedule
1. Incorporated by reference from the attached 1998 Annual Report
to Shareholders:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. Included in Part II:
Report of Independent Accountants on Financial
Statement Schedule
Schedule II - Valuation and Qualifying Accounts
The following schedules are omitted for the reason that they are not
applicable or are not required: I, III and IV.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth quarter
ended January 31, 1998.
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K, continued:
(c) Exhibits filed
Exhibit
Number Description
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3(a) Articles of Incorporation of Raven Industries, Inc. and
all amendments thereto.*
3(b) By-Laws of Raven Industries, Inc.*
3(c) Extract of Shareholders Resolution adopted on April 7,
1962 with respect to the by-laws of Raven Industries,
Inc.*
4(a) Rights Agreement dated as of March 16, 1989 between
Raven Industries, Inc. and Norwest Bank Minnesota,
National Association (incorporated by reference to
Exhibit 1 to the Company's Report on Form 8-K dated
March 16, 1989).
10(a) Change in Control Agreement between Raven Industries,
Inc. and David A. Christensen dated as of March 17,
1989.*
10(b) Change in Control Agreement between Raven Industries,
Inc. and Gary L. Conradi dated as of March 17, 1989.*
10(c) Change in Control Agreement between Raven Industries,
Inc. and Ronald M. Moquist dated as of March 17, 1989.*
10(d) Change in Control Agreement between Raven Industries,
Inc. and Arnold J. Thue dated as of March 17, 1989.*
10(f) The Raven Industries, Inc. Health and Survivor Benefit
Plan.*
10(g) The Raven Industries, Inc. Post-Retirement Health and
Survivor Benefit Plan.*
10(h) Deferred Compensation Plan between Raven Industries,
Inc. and David A. Christensen dated as of June 1, 1986.*
10(i) Trust Agreement between Raven Industries, Inc. and
Norwest Bank South Dakota, N.A. dated April 26, 1989.*
10(n) Form of Incentive Stock Option Agreements.*
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K, continued:
Exhibit
Number Description
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10(o) Form of Nonqualified Stock Option Agreements.*
10(p) Form of Amendment Agreement relating to outstanding
Incentive Stock Options.*
10(q) Raven Industries, Inc. 1990 Stock Option Plan adopted
January 30, 1990 (incorporated by reference to Exhibit A
to the Company's definitive Proxy Statement filed April
25, 1990).
13 1998 Annual Report to Shareholders (only those portions
specifically incorporated herein by refer ence shall be
deemed filed with the Commission).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule (for S.E.C. only).
* Incorporated by reference to corresponding Exhibit
Number of the Company's Form 10-K for the year
ended January 31, 1989.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RAVEN INDUSTRIES, INC.
(Registrant)
April 24, 1998 By: /S/ David A. Christensen
- ----------------------- -------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
April 24, 1998 By: /S/ David A. Christensen
- ----------------------- -------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)
April 24, 1998 /S/ Arnold J. Thue
- ----------------------- -------------------------------------
Date Arnold J. Thue
Vice President, Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Directors:
April 24, 1998 /S/ Conrad J. Hoigaard
- ----------------------- -------------------------------------
Date Conrad J. Hoigaard
April 24, 1998 /S/ John C. Skoglund
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Date John C. Skoglund
April 24, 1998 /S/ Mark E. Griffin
- ----------------------- -------------------------------------
Date Mark E. Griffin
April 24, 1998 /S/ Kevin T. Kirby
- ----------------------- -------------------------------------
Date Kevin T. Kirby
April 24, 1998 /S/ Anthony W. Bour
- ----------------------- -------------------------------------
Date Anthony W. Bour
April 24, 1998 /S/ Thomas S. Everist
- ----------------------- -------------------------------------
Date Thomas S. Everist
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
Raven Industries, Inc.:
Our report on the consolidated financial statements of Raven
Industries, Inc. and Subsidiaries has been incorporated by reference in this
Form 10-K from page 36 of the 1998 Annual Report to Shareholders of Raven
Industries, Inc. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in Item
14.(a)2. on page 10 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
March 6, 1998
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 1998, 1997 and 1996
(Dollars in thousands)
----------
Column A Column B Column C Column D Column E
-------- ---------- ---------------------------- ----------- --------
Additions
----------------------------
Balance at Charged to Charged to Deductions
Beginning Costs and Other From Balance at
Description of Year Expenses Accounts Reserves(1) End of Year
----------- ------- -------- -------- ----------- -----------
Deducted in the balance sheet
from the asset to which it
applies:
Allowance for doubtful
accounts:
Year ended January 31, 1998 $340 $193 None $143 $390
==== ==== ==== ====
Year ended January 31, 1997 $340 $ 88 None $ 88 $340
==== ==== ==== ====
Year ended January 31, 1996 $350 $ 68 None $ 78 $340
==== ==== ==== ====
Note:
(1) Represents uncollectible accounts receivable written off during the
year, net of recoveries.