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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, 1999
[ ] 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.
- --------------------------------------------------------------------------------
(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 subject 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 $14.03215 per share as reported on the
NASDAQ National Market System on April 14, 1999 was $57,947,952.
Shares of common stock outstanding at April 14, 1999: 4,641,686.
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, 1999 and Proxy Statement for the
registrant's 1999 annual meeting, a definitive copy of which was filed on April
26, 1999. All such information set forth under the heading "Reference" below is
included herein or incorporated herein by reference. A copy of the registrant's
Annual Report to Shareholders for the year ended January 31, 1999 is included as
an exhibit to this report.
PART I. ITEM IN FORM 10-K REFERENCE
- ------- ----------------- ---------
Item 1. Business Business, pages 4-7, this
document; Business
Segments, page 12, and
Sales by Markets, page
13, Annual Report to
Shareholders
Item 2. Properties Properties, pages 7-8, this
document
Item 3. Pending Legal Pending Legal Proceedings,
Proceedings page 8, this document
Item 4. Submission of Matters Submission of Matters to a
to a Vote of Vote of Security
Security Holders Holders, page 8, this
document
PART II.
- --------
Item 5. Market for the Regis- Quarterly Information
trant's Common (unaudited), page 24,
Equity and Related Eleven-year Financial
Stockholder Matters Summary, pages 18-19,
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
2
ITEM IN FORM 10-K REFERENCE
----------------- ---------
Item 8. Financial Statements and Pages 25-36, Annual Report
Supplementary Data to Shareholders.
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 8, 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 9,
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 Election of Directors,
and Related Proxy Statement
Transactions
PART IV.
- --------
Item 14. Exhibits, Financial Exhibits, Financial
Statement Schedule Statement Schedule
and Reports on Form and Reports on Form
8-K. 8-K, pages 9-10, this
document.
SAFE HARBOR STATEMENT
Certain sections of this report contain discussions of items which may
constitute forward-looking statements within the meaning of federal securities
laws. Although Raven Industries believes that expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurances that its expectations will be achieved. Factors that could cause
actual results to differ from expectations include general economic conditions,
weather conditions which could affect certain of the company's primary markets
such as the agricultural market or its market for outerwear or changes in
competition which could impact any of the company's product lines.
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RAVEN INDUSTRIES, INC.
FORM 10-K
year ended January 31, 1999
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 13 of
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 each of the product markets identified above. Page 12
of 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 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
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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 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 U.S. 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 the National Aeronautics and Space Administration) 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 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
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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 1999. However, the company sells sewn products to several large
customers. In fiscal 1999, 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 produced in spring/summer for summer/fall delivery. Most of
these sales carry net thirty day terms, although some winter-dated terms are
offered. 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 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.
Financial Instruments
The principal financial instruments the company maintains are in
accounts receivable, notes receivable and long-term debt. The company believes
that the interest rate, credit and market risk related to these accounts is not
significant. The company manages the risk associated with these accounts through
periodic reviews of the carrying value for non-collectability of assets and
establishment of appropriate allowances in connection with the company's
internal controls and policies. The company does not enter into hedging or
derivative instruments.
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 the related potential 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
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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, 1999, the company's backlog of firm orders totaled
$47.4 million. Comparable backlog amounts as of February 1, 1998 and 1997 were
$47.2 million and $38.1 million, respectively. Approximately $4 million of the
February 1, 1999 backlog is not scheduled for shipment by January 31, 2000.
Item 2. Properties
All properties, unless otherwise indicated are owned by Raven.
Square Business
Location Feet Use Segments
- -------- ---- --- --------
Sioux Falls, SD 150,000 Corporate office and All
electronics manufacturing
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 Electronics
6,200 Training/meeting center All
Dunnell, MN 81,500 Pickup-truck topper Plastics
manufacturing
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Square Business
Location Feet Use Segments
- -------- ---- --- --------
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
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 Electronics manufacturing Electronics
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 owned 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.
8
Item 10. Executive Officers of the Registrant
Name Age Position Period Served
---- --- -------- -------------
David A. Christensen 64 President and Chief April 1971 to present
Executive Officer
Gary L. Conradi 59 Vice President, January 1980 to present
Corporate Services
Thomas Iacarella 45 Vice President, August 1998 to present
Finance, Secretary
and Treasurer
Ronald M. Moquist 53 Executive Vice January 1979 to present
President
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 exhibit containing
the 1999 Annual Report to Shareholders:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity and
Comprehensive Income
Consolidated Statements of Cash Flows
Notes to 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, 1999.
(c) Exhibits filed
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.*
9
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K,
continued:
Exhibit
Number Description
------ -----------
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
Thomas Iacarella dated as of August 1, 1998 (incorporated by
reference to Exhibit 10.1 of the Company's Form 10-Q for the
quarter ended July 31, 1998).
10(e) Employment Agreement between Raven Industries, Inc. and David
A. Christensen dated as of May 20, 1998.
10(f) Schedule identifying material details of other Employment
Agreements between Raven Industries and other executive
officers substantially identical to the Employment Agreement
filed as Exhibit 10(e).
10(g) 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).
10(h) Deferred Compensation Plan between Raven Industries, Inc. and
David A. Christensen dated as of February 1, 1997.
10(i) Trust Agreement between Raven Industries, Inc. and Norwest
Bank South Dakota, N.A. dated April 26, 1989.*
13 1999 Annual Report to Shareholders (only those portions
specifically incorporated herein by reference shall be deemed
filed with the Commission).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
* Incorporated by reference to corresponding Exhibit
Number of the Company's Form 10-K for the year ended
January 31, 1989.
10
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 26, 1999 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 26, 1999 By: /S/ David A. Christensen
- ----------------------- --------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)
April 26, 1999 /S/ Thomas Iacarella
- ----------------------- --------------------------------------
Date Thomas Iacarella
Vice President, Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Directors:
April 26, 1999 /S/ Conrad J. Hoigaard
- ----------------------- --------------------------------------
Date Conrad J. Hoigaard
April 26, 1999 /S/ John C. Skoglund
- ----------------------- --------------------------------------
Date John C. Skoglund
April 26, 1999 /S/ Mark E. Griffin
- ----------------------- --------------------------------------
Date Mark E. Griffin
April 26, 1999 /S/ Kevin T. Kirby
- ----------------------- --------------------------------------
Date Kevin T. Kirby
April 26, 1999 /S/ Anthony W. Bour
- ----------------------- --------------------------------------
Date Anthony W. Bour
April 26, 1999 /S/ Thomas S. Everist
- ----------------------- --------------------------------------
Date Thomas S. Everist
11
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. has been incorporated by reference in this Annual Report on
Form 10-K from page 36 of the 1999 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 9 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.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 11, 1999
12
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 1999, 1998 and 1997
(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, 1999 $390 $135 None $125 $400
==== ==== ==== ====
Year ended January 31, 1998 $340 $193 None $143 $390
==== ==== ==== ====
Year ended January 31, 1997 $340 $ 88 None $ 88 $340
==== ==== ==== ====
Note:
- -----
(1) Represents uncollectible accounts receivable written off during the
year, net of recoveries.
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