Annual Report (10-k)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


☑						ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2021


☐						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: 001-07982

RAVEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

46-0246171

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

205 E. 6th Street, P.O. Box 5107

Sioux Falls,

57117-5107

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (605) 336-2750

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1 par value

RAVN

Nasdaq

Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes þNo

Indicate by check mark 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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

The aggregate market value of the registrant's common stock held by non-affiliates at July 31, 2020, was approximately $763,599,982. The aggregate market value was computed by reference to the closing price as reported on the Nasdaq Global Select Market, $21.61, on July 31, 2020, which was the last business day of the registrant's most recently completed second fiscal quarter. The number of shares outstanding on March 19, 2021, was 35,869,499

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant's Annual Meeting of Shareholders, to be held May 25, 2021, is incorporated by reference into Part III to the extent described therein.


PART I
Item 1.	BUSINESS	3
Item 1A.	RISK FACTORS	9
Item 1B.	UNRESOLVED STAFF COMMENTS	15
Item 2.	PROPERTIES	15
Item 3.	LEGAL PROCEEDINGS	15
Item 4.	MINE SAFETY DISCLOSURES	15

PART II
Item 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	16
	Company Stock Performance	16
	Dividends	17
	Issuer Purchases of Equity Securities	17


Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
	Executive Summary	18
	Results of Operations - Segment Analysis	20
	Liquidity and Capital Resources	23
	Off-Balance Sheet Arrangements and Contractual Obligations	26
	Critical Accounting Policies and Estimates	27
	Accounting Pronouncements	29
	Forward-Looking Statements	29
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	31
	Management's Report on Internal Control Over Financial Reporting	32
	Reports of Independent Registered Public Accounting Firm - Deloitte & Touche LLP	33
	Consolidated Balance Sheets	36
	Consolidated Statements of Income and Comprehensive Income	37
	Consolidated Statements of Shareholders' Equity	38
	Consolidated Statements of Cash Flows	39
	Notes to Consolidated Financial Statements	40
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	69
Item 9A.	CONTROLS AND PROCEDURES	69
Item 9B.	OTHER INFORMATION	70

PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	70
Item 11.	EXECUTIVE COMPENSATION	70
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	70
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	70
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	70

PART IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULE	70
Item 16.	FORM 10-K SUMMARY	72
SIGNATURES		73
SCHEDULE II		74


PART I

ITEM 1.			BUSINESS

Raven Industries, Inc. (the Company or Raven) was incorporated in February 1956 under the laws of the State of South Dakota and began operations later that same year. The Company is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air, and aerospace and defense markets. The Company markets its products around the world and has its principal operations in the United States of America. Raven began operations as a manufacturer of high-altitude research balloons before diversifying into product lines that extended from technologies and production methods of this original balloon business. The Company employs 1,363 permanent and temporary employees and is headquartered at 205 E. 6th Street, Sioux Falls, SD 57104 - telephone (605) 336-2750. The Company's Internet address is http://www.ravenind.com and its common stock trades on the Nasdaq Global Select Market under the ticker symbol RAVN. The Company has adopted a Code of Conduct applicable to all officers, directors and employees, which is available on its website. Information on the Company's website is not incorporated into this filing.

The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports available, free of charge, in the "Investor Relations" section of the Company's website as soon as reasonably practicable after the Company electronically files these materials with, or furnishes these materials to, the Securities and Exchange Commission (SEC).

These materials are also found on the SEC website at www.sec.gov. This site contains reports, proxy statements and other information regarding issuers that file electronically with the SEC.

This Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Form 10-K are forward-looking statements. Forward-looking statements give the Company's current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance, and business. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that the Company expected. Important factors that could cause actual results to differ materially from the Company's expectations and other important information about forward-looking statements are disclosed under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations, Forward-Looking Statements" in this Form 10-K.

COVID-19

In March 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic. The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of our business. The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on our customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may continue to experience reduced customer demand or constrained supply that could materially adversely impact our business, financial condition, results of operations, liquidity and cash flows in future periods.

BUSINESS SEGMENTS

The Company has three unique operating units, or divisions, that are also its reportable business segments ("segment" or "segments"): Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films), and Aerostar Division (Aerostar). Product lines have been generally grouped in these segments based on technology, manufacturing processes, and end-use application; however, a segment may serve more than one of the product markets identified above. The Company measures profitability and performance of its segments primarily based on their operating income excluding general and administrative expenses. Other income or expense and income taxes are not allocated to individual operating segments, and assets not identifiable to an individual segment are included as corporate assets. Segment information is reported consistent with the Company's management reporting structure.

Applied Technology

Applied Technology sells its precision agriculture equipment to both original equipment manufacturers (OEMs) and through aftermarket distribution partners within agricultural markets both domestically and internationally. Applied Technology competes with other technology-based companies in a number of its product families and may compete with OEMs if they develop their own precision agriculture technology rather than purchase it from a third-party such as Raven. The Company's competitive advantage in this segment is designing and selling innovative, reliable, easy-to-use, and value-add products that are supported by an industry-leading service and support team.

The Company's Applied Technology Division continues to expand its Slingshot® communications platform. Slingshot improves logistics, communications, and application execution, driving business efficiencies for its agriculture retail partners. In January 2019, Applied Technology acquired the assets of AgSync, Inc. (AgSync), an agriculture logistics software company. This acquisition enhanced the division's Slingshot platform by delivering a logistics solution for ag retailers, custom applicators, and enterprise farms.

The Company announced Raven Autonomy™ as a strategic growth initiative in November 2019 to become an industry leader in autonomous agricultural solutions through both technology and autonomous platforms. Raven Autonomy™ is the Company's expansion of its existing machine control technology through autonomous smart machine platforms and implements used in farming. The Company began executing on this strategic growth initiative in the fourth quarter of fiscal 2020 by acquiring Smart Ag, Inc. (Smart Ag®) and Dot Technology Corp. (DOT®). In fiscal 2021, the Company continued to make progress toward its goal to commercialize its first autonomous solutions in ag technology, allowing ag professionals to be more efficient in running their operations with less reliance on human decision making:

•acquired full voting control of DOT in the first quarter

•invested approximately $17 million in research and development and selling activities to drive commercialization

•performed significant field testing, preparing for initial product launches for both the Dot® Power Platform and tractor autonomous power units (APUs) in fiscal 2022;

•began accepting pre-orders for its first commercially available autonomous ag technology, AutoCart®, and established a new headquarters for Raven's business in Canada

Engineered Films

Engineered Films has various fabrication facilities in the United States (U.S.) to provide a heightened level of service and faster product delivery to customers of its geomembrane and construction products. In January 2020, the division expanded its fabrication capabilities to the East Coast, leasing a facility in Waynesboro, Virginia.

Engineered Films sells direct to end-customers and through independent third-party distributors. The majority of products sold into the construction and agriculture markets are sold through distributors, while sales into the geomembrane and industrial markets are generally sold to end-customers. 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 in the markets it serves. Engineered Films' ability to extrude and convert films, along with offering installation services for its geomembrane products, allows it to provide a more customized solution to customers. A number of film manufacturers compete with the Company on both price and product availability.

In November 2019, the Company announced Raven Composites™ as a strategic growth platform for Engineered Films. Raven Composites™ is expected to build on the division's core strengths and expand Engineered Films to become an industry leader in the adjacent reinforced composites market. By leveraging the division's reinforced materials expertise, Engineered Films will develop a range of thinner, lighter, stronger rigid composite material that will include laminated layers of the division's surface films, resulting in superior finish characteristics on rigid materials for the transportation, construction, and industrial market

segments. The Company invested approximately $5 million in research and development equipment in fiscal 2021 to support new product development efforts for Raven Composites™. Larger scale manufacturing equipment to advance Raven Composites™ is on order and expected to be operational during the third quarter of fiscal 2022.

Aerostar

Aerostar sells to government agencies as both a prime contractor and subcontractor and to commercial users primarily as a sub-contractor. Aerostar competes with other technology companies that specialize in aerospace and defense and commercial products and services based on price, performance, and service.

MARKET CONDITIONS AND OUTLOOK

In fiscal 2021, the Company made key advances across the enterprise and through the strategic platforms for growth. In response to the pandemic, the Company identified four priorities for the year that included upholding the Raven Way, emphasizing cash flow, protecting the core business, and aggressively investing in Raven Autonomy™. The Company successfully achieved these goals while managing the business through adverse economic conditions, supply chain constraints, and changing the Company's production processes to promote the health and well-being of team members.

The Company expects to advance on key milestones in fiscal 2022 within Raven Autonomy™, Raven Composites™, and Raven Thunderhead Balloon Systems, while leveraging the strength of our underlying businesses. The Company is focused on aggressively investing in its strategic platforms for growth, and the Company expects to make significant progress on the multi-year plan to drive a step-change in long-term growth.

Applied Technology is expected to capitalize on the momentum generated during fiscal 2021 and drive continued revenue growth as the division leverages its industry-leading product portfolio and customer relationships. Order activity strengthened in the fourth quarter of fiscal 2021 and helped build momentum going into fiscal 2022. In addition, the Company is seeing strength in the agriculture industry as increasing commodity prices have created optimism in the ag market for the first time in several years. Through Raven Autonomy™, the Company expects to deliver AutoCart® systems in advance of the fall harvest and commercialize the Dot® Power Platform in fiscal 2022. The Company will continue to aggressively invest in Raven Autonomy™ as the Company builds the foundation for long-term growth.

In Engineered Films, the Company has experienced improving conditions over the past few months. As conditions continue to improve, the Company expects to experience market share gains and drive meaningful year-over-year revenue growth. In fiscal 2022, the Company expects to pursue growth through acquisition as part of the strategy within Engineered Films to deliver high-value films and composites.

In Aerostar, the division significantly advanced the technology and capabilities of its stratospheric balloon systems over the past eight years as Alphabet's design partner for Loon. The relationship helped deliver connectivity to rural areas of the world and showcased the capabilities of its Thunderhead platform. Moving forward, the division is focused on bringing its stratospheric balloon platform to U.S. government agencies, providing a propriety solution for a variety of applications. In fiscal 2022, the division expects to build on the technology milestones it has achieved over recent months while executing on government contracts. Momentum around utilizing the stratosphere continues to grow, and as the leader in stratospheric technology, Aerostar is well-positioned to capitalize on the substantial opportunity.

MAJOR CUSTOMER INFORMATION

Sales to CNH Industrial, an OEM customer in the Applied Technology Division, accounted for 10% of the Company's consolidated net sales in fiscal year 2021. No customers accounted for 10% or more of consolidated net sales in fiscal years 2020 or 2019.

SEASONAL WORKING CAPITAL REQUIREMENTS

Some seasonal demand exists in both the Applied Technology and Engineered Films divisions, primarily due to their respective exposure to the agricultural market. However, given the overall diversification of the Company, the seasonal fluctuations in net working capital (accounts receivable, net plus inventories less accounts payable) are not usually significant.

FINANCIAL INSTRUMENTS

The principal financial instruments the Company maintains include cash, cash equivalents, short-term investments, marketable equity securities (related to the Company's deferred compensation plan liability), accounts receivable, accounts payable, accrued liabilities, and acquisition-related contingent payments. The Company manages the interest rate, credit, and market risks associated with these accounts through periodic reviews of the carrying value of assets and liabilities and establishment of appropriate allowances in accordance with Company policies.

The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company uses derivative financial instruments to manage foreign currency balance sheet risk. The use of these financial instruments has had no material effect on consolidated results of operations, financial condition, or cash flows.

RAW MATERIALS

The Company sources raw materials from a wide variety of suppliers, including numerous domestic and international vendors. The Company's principal raw materials include electronic components for Applied Technology and Aerostar, various polymeric resins for Engineered Films, and fabrics and film for Aerostar. The Company has experienced some volatility in raw material prices over the past three years. These price increases, including increased material costs or tariffs, could not always be passed on to customers due to weak demand and/or a competitive pricing environment. However, the overall impact was not material to the Company's financial position.

PATENTS

The Company owns a number of patents and also owns licenses that allow the Company to gain access to certain patents of other companies. The Company does not believe that its business, as a whole, is materially dependent on any one patent or related group of patents. The Company focuses its significant research and development (R&D) efforts to develop technology-based offerings. As such, the protection of the Company’s intellectual property is an important strategic objective. Along with an aggressive posture toward patenting new technology and protecting trade secrets, the Company has restrictions on the disclosure of its technology to industry and business partners to ensure that its intellectual property is maintained and protected.

RESEARCH AND DEVELOPMENT

The three business segments conduct ongoing R&D efforts to improve their product offerings and develop new products. R&D investment is particularly strong within Applied Technology and Aerostar. New technology development and product enhancements within Applied Technology are a competitive differentiator and central to its long-term strategy. Engineered Films also utilizes R&D spending to develop new products, value engineer, and reformulate its current products. These R&D investments deliver high-value film solutions to the markets it serves, lower raw material consumption, and improve the quality of existing product lines. Aerostar's investment in the development of new technology has a particular emphasis on its core stratospheric balloon and radar platforms. The Company's total R&D costs are presented in the Consolidated Statements of Income and Comprehensive Income.

GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS

The Company is subject to a wide variety of local, state, and federal laws and regulations in the countries where it conducts business. Compliance with these laws and regulations requires training and dedication of time and effort by the Company's employees, as well as financial resources. In fiscal 2021, compliance with the regulations applicable to Raven did not have a material effect on the Company's capital expenditures, earnings, or competitive position. Additional information about the impact of government regulations on the Company's business is included in Item 1A. “Risk Factors” under the heading Legal, Regulatory and Compliance Risks.

The Company believes that, in all material respects, it is in compliance with applicable federal, state and local environmental laws and regulations. Expenditures incurred in the past relating to compliance for operating facilities have not significantly affected the Company's capital expenditures, earnings, or competitive position. The Company is unaware of any potential liabilities as of January 31, 2021, for any environmental matters that would have a material effect on the Company's results of operations, financial position, or cash flows.

BACKLOG

The Company's backlog represents open customer orders and funded portions of signed government contracts. As of February 1, 2021, the Company's backlog totaled approximately $64 million. Backlog amounts as of February 1, 2020 and 2019, were approximately $60 million and $38 million, respectively. Because the length of time between order and shipment varies considerably by segment and customers can change delivery schedules or potentially cancel orders, the Company does not believe that backlog, as of any particular date, is necessarily indicative of actual net sales for any future period. However, the Company expects that any revenue generated from its backlog, as of February 1, 2021, will be recognized during fiscal year 2022.

HUMAN CAPITAL

Raven believes its employees are essential to the organization’s success in solving great challenges. The Company depends on its highly skilled engineering, sales and service, and manufacturing teams to develop and deliver solutions to its customers. Raven has approximately 1,290 permanent employees as of January 31, 2021. Employees are primarily located throughout the United States with 6% of the Company’s workforce located internationally throughout Canada, Brazil, the Netherlands and Australia.

Talent

Raven’s talent strategy is focused on attracting the best talent, then recognizing and rewarding their performance, while continually developing, engaging, and retaining them. In fiscal 2021, Raven became Great Place to Work-Certified™. Using validated employee feedback gathered with Great Place to Work’s rigorous, data-driven methodology, certification confirms at least 7 out of 10 employees have a consistently positive experience at Raven. Surveyed in August 2020 on topics including their coworkers, their leaders, and their jobs, 85 percent of employees said that Raven is a great place to work, versus 59 percent at a typical company. Raven has a goal to be the employer of choice within the markets and communities it serves, and the Company strives to grow and develop the different capabilities and skills that are needed for the future, while also maintaining a robust pipeline of talent throughout the organization.

Raven is committed to promoting and cultivating an inclusive and diverse culture that welcomes and celebrates everyone without bias. The Company believes culture is the result of its behaviors, its commitment to personal accountability, its continuous improvement mindset, how its teams collaborate, and its employee’s ability appreciate one another’s contributions.

Total Rewards

Raven believes that the Company must offer a comprehensive total rewards program for its employees to attract and retain a talented and experienced workforce. Raven regularly reviews its compensation and benefit plans to ensure they are competitive, align to Raven’s strategic priorities, and support company values. These programs not only include base wages and incentives in support of the Company's pay for performance culture, but also health, welfare, and retirement benefits. Raven focuses many programs on employee wellness and has implemented solutions including onsite wellness centers, onsite and virtual mental health support, telemedicine, and health and nutrition programs. Raven believes that these solutions have helped the Company successfully manage healthcare and prescription drug costs for its employee population. These solutions also promote a culture of Peak Performance — the Company’s commitment to prepare its employees as individuals as well as a corporation to be the best — and reinforce Raven’s belief that every individual is worthy and deserving of good mental well-being and health.

Development

Raven is growing and intends to do so every year. As the Company solves great challenges, Raven will continue to have a strong need for dynamic and successful leaders to carry out the expansion of the business. To meet this great need, Raven designed a system entitled "THRIVE" that allows teams, businesses, and leaders to thrive. THRIVE delivers a sustainable solution, wholly integrated into Raven’s culture and business model. Using several modes of development, THRIVE is designed to leverage the Company’s strong culture, clear set of values, and strategy of growth. THRIVE is intentionally built around three key areas — Raven, Business, and Leadership. THRIVE’s robust approach incorporates business skills and experiential learning, intentionally building competencies with specific Raven context. Incorporating business skills, university-level coursework, and relevant on-the-job experiences, THRIVE operates on a model of continual learning.


INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Name, Age, and Position						Biographical Data
Daniel A. Rykhus, 56						Mr. Rykhus became the Company's President and Chief Executive Officer in 2010. He joined the Company in 1990 as Director of World Class Manufacturing, was General Manager of the Applied Technology Division from 1998 through 2009, and served as Executive Vice President from 2004 through 2010.
President and Chief Executive Officer


Steven E. Brazones, 47						Mr. Brazones was named Division Vice President and General Manager of the Applied Technology Division in January 2021. Mr. Brazones joined the Company in December 2014 and served as its Vice President, Chief Financial Officer, and Treasurer. From 2002 to 2014, Mr. Brazones held a variety of positions with H.B. Fuller Company. Most recently, he served as H.B. Fuller's Americas Region Finance Director. Previously, he served as the Assistant Treasurer and the Director of Investor Relations. Prior to his tenure with H.B. Fuller, Mr. Brazones held various roles at Northwestern Growth.
Division Vice President and General Manager - Applied Technology Division and Vice President and Chief Financial Officer


Taimur Sharih, 47						Mr. Sharih was named Vice President and Chief Financial Officer effective March 1, 2021. Prior to joining the Company Mr. Sharih served as Senior Vice President and CFO of A&R Logistics, a chemical supply chain services company, from October 2019 to January 2021. Prior to that, Mr. Sharih spent two years as CFO for Acetyl Intermediates, a division of Celanese Corporation and 14 years at Praxair in various financial roles, including most recently, Vice President of Finance, U.S. Industrial Gases.
Vice President and Chief Financial Officer









Scott W. Wickersham, 47						Mr. Wickersham was named Division Vice President and General Manager of the Aerostar Division in January 2018. Effective February 1, 2021, Mr. Wickersham was named Division Vice President and General Manager of the Engineered Films Division. He joined the Company in 2010 as the Director of Product Development and Engineering Manager and has been the General Manager for the Aerostar Division since November 2015. Prior to joining the Company, Mr. Wickersham held a range of engineering and operational roles with various technology companies.
Division Vice President and General Manager - Aerostar Division


Lee A. Magnuson, 65						Mr. Magnuson joined the Company in June 2017, as Vice President and General Counsel and also became the Company's Secretary in August 2017. Prior to joining the Company, Mr. Magnuson was managing partner of Lindquist and Vennum Law Firm in the Sioux Falls, SD, office for five years, practicing in the areas of commercial transactions, mergers and acquisitions, corporate matters, real estate and regulatory matters.
Vice President, General Counsel, and Corporate Secretary


Nicole Freesemann, 38						Ms. Freesemann was named Vice President of Human Resources in January 2019. She started at Raven in 2008 and served in several human resources roles, including most recently as Director of Human Resources since January 2014. During her tenure at Raven, Ms. Freesemann developed and executed a new performance management strategy, implemented staffing strategies and programs to identify talent for all levels within the company, and led human resource efforts for acquisition due diligence and integrations.
Vice President of Human Resources


ITEM 1A.			RISK FACTORS

RISKS RELATING TO THE COMPANY

The Company's business is subject to many risks, which by their nature are unpredictable or unquantifiable and may be unknown. In an attempt to provide the reader with information on potential risks the Company may encounter, the Company has provided below, what it believes are the most material risks the Company could potentially face, based on its knowledge, experience, information and assumptions. The risks provided below should be assessed contemporaneously with other information contained in this Form 10-K, including Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the risks and uncertainties addressed under "Forward-Looking Statements," the Notes to the Consolidated Financial Statements, and other information presented in or incorporated by reference into this Form 10-K. The risks contained herein, as well as other statements in this Form 10-K, may include forward-looking statements and, as such, are uncertain. Such statements are not guarantees of future performance and undue reliance should not be placed on them. The indeterminate nature of risk factors makes them subject to change, and certain risks and uncertainties could potentially cause material changes to actual results. Some of these risks may affect the entire Company, where others may only affect particular segments of the Company's business, or may have no material effect at all.

The Company, except as required by law, disclaims any obligation to update or revise the information contained herein, regardless of changes, whether as a result of new information, developments or otherwise. The risks provided in this Form 10-K and in other documents filed with the SEC are not exclusive in nature and, as such, there are other potential risks and uncertainties that the Company is not aware of, or does not presently consider material in nature that could cause actual results to vary materially from expectations.

Operational Risks

The novel coronavirus (COVID-19) has adversely impacted, and could continue to impact the Company, including possible material adverse effects on our business, financial position, and cash flow. Further spread of COVID-19, as well as outbreaks or epidemics of other infectious diseases, may have a similar or worse impact on the Company.

Global pandemics, including the current COVID-19 pandemic and variants of COVID-19, represent significant risks to the Company, our employees, suppliers, and customers and may adversely impact the Company's operations and financial results. The COVID-19 pandemic has caused disruption in capital markets and led to a global economic slowdown. The continuing duration, severity, and scope of the COVID-19 outbreak and the actions taken to contain or treat the outbreak (including the effectiveness and availability of vaccines) remain uncertain at this time.

The potential effects on the Company of outbreaks of infectious disease, including COVID-19, include, but are not limited to the following:

•Economic uncertainty and the potential short-term closures of customer facilities could result in reduced business and consumer spending, as well as customers in weakened financial condition. As a result, the Company may see a slowdown in customer orders, order cancellations, or the inability to collect on delivered orders, adversely affecting our financial condition.

•Instability and volatility in the credit and financial markets could increase the cost of capital and/or limit its availability and adversely affect the Company's ability to borrow and its financial condition.

•Potential disruptions to our supply chain, or further government actions, including shelter-in-place orders, could impact the Company's ability to source materials, produce product, and fulfill customer orders, adversely impacting its financial condition.

•The Company could continue to be adversely impacted by travel restrictions and limitations, resulting in the inability to start or complete projects. It could also continue to restrict the Company’s ability to market new products to customers, delaying the sales launch of these products, and potentially limiting sales. Continuing or further travel restrictions and limitations could adversely impact the Company’s financial condition.

•The Company has taken proactive steps to prevent the spread of COVID-19 amongst employees and has been effective at limiting the spread of COVID-19 amongst employees. However, further spread of the COVID-19 virus or its variants to employees, contracted either at work or from the public, could result in the Company slowing or stopping production, impacting the ability to fulfill orders, and adversely affecting the Company’s financial condition.

To the extent the COVID-19 pandemic may adversely affect our business, financial condition, and cash flows, it may also heighten many of the other risks described in the “Risk Factors” section.

The loss, disruption, or material change in the Company's business relationship with single source suppliers for particular materials, components, or services, could cause a disruption in supply, or substantial increase in cost of any such products or services, and therefore could result in harm to the Company's sales, profitability, cash flows and financial condition.

The Company obtains certain materials, components, or services from suppliers that serve as the only source of supply, or that supply the majority of the Company’s requirements of the particular material, component, or service. While these materials, components, services, or suitable replacements, could potentially be sourced from other suppliers, in the event of a disruption or loss of supply of relevant materials, components, or services for any reason, the Company may not be able to immediately find alternative sources of supply, or if found, may not be found on similar terms. If the Company’s relationship with any of these single source suppliers became challenged, or is terminated, the Company could have difficulty replacing these sources without causing disruption to the business.

Price fluctuations in, and shortages of, raw materials could have a significant impact on the Company's ability to sustain and grow earnings.

The Company's Engineered Films Division utilizes significant amounts of polymeric resin, the cost of which depends upon market prices for natural gas and oil and other market forces. These prices are subject to worldwide supply and demand as well as other factors beyond the Company's control. Although the Engineered Films Division is sometimes able to pass on price increases to its customers, significant variations in the cost of polymeric resins can affect the Company's operating results from period to period. Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served. Unusual supply disruptions, such as one caused by a natural disaster, could cause suppliers to invoke "force majeure" clauses in their supply agreements, causing shortages in supply of material. If the Company is not able to fully offset the effects of adverse availability of materials or higher costs, financial results could be adversely affected, which in turn could adversely affect the Company's results of operations, financial condition, liquidity, and cash flows.

Electronic components used by both the Applied Technology Division and Aerostar Division are sometimes in short supply, which may impact the ability to meet customer demand or provide products at a price the customer prefers. If a supplier of raw materials or electronic components were to significantly increase pricing or was unable to deliver due to shortage or financial difficulty, any of the Company's segments could be adversely affected.

Failure to develop and market new technologies and products could impact the Company's competitive position and have an adverse effect on the Company's financial results.

The Company's operating results in Applied Technology, Engineered Films, and Aerostar depend upon the ability to renew the pipeline of new technologies and products, including autonomous technologies, and to bring these to market. This ability could be adversely affected by difficulties or delays in product development, such as the inability to identify viable new products, successfully complete R&D projects, obtain relevant regulatory approvals, obtain intellectual property protection, or gain market acceptance of new products and services. Because of the lengthy development process, technological challenges, and competition, there can be no assurance that any of the products the Company is currently developing, or could begin to develop in the future, will achieve commercial success. Technical advancements in products may also increase the risk of product failure, increasing product returns or warranty claims and settlements. In addition, sales of the Company's new products could replace sales of some of its current products, offsetting the benefit of a successful new product introduction.

Failure to develop and maintain partnerships, alliances, and other distribution or supplier relationships could adversely impact the Company's financial results.

In certain areas of the Company’s business, continued success depends on developing and maintaining relationships with other industry participants, such as original equipment manufacturers, ag retailers, dealers and distributors. If the Company fails to develop and maintain such relationships, or if there is disruption of current business relationships due to actions of the Company, the ability to effectively market and sell certain products could be harmed. The Company’s relationships with other industry participants are complex and multifaceted, and evolve over time. Often, these relationships contribute to substantial ongoing business and operations in particular markets; therefore, changes in these relationships could have an adverse impact on sales and revenue.

Additionally, the Company uses dealer/distributor networks, some of which are affiliated with strategic and industry partners. Enlisting and retaining qualified dealers/distributors and training them in the use and selling of product offerings requires substantial time and resources. If the Company were to lose a significant dealer or distributor relationship, and were forced to identify new channels, the time and expense of training new dealers or distributors may make new-product introduction difficult. This may hinder end-user sales and adoption, which could result in decreased revenues. Additionally, the interruption of dealer coverage within specific regions or markets could cause difficulties in marketing, selling or servicing the Company's products and could harm the Company’s business, operating results or financial condition.

The Company's sales of products that are specialized and highly technical in nature are subject to uncertainties, start-up costs and inefficiencies, as well as market, competitive, and compliance risks.

The Company’s growth strategy relies on the design and manufacture of proprietary products. Highly technical, specialized product inventories may be more susceptible to fluctuations in market demand. If demand is unexpectedly low, write-downs or impairments of such inventory may become necessary. Either of these outcomes could adversely affect the Company's results of operations. Start-up costs and inefficiencies can adversely affect operating results and such costs may not be recoverable in a proprietary product environment because the Company may not receive reimbursement from its customers for such costs.

Competition in agriculture markets, including the market for autonomous ag technologies, could come from the Company's current customers. If OEMs develop and integrate precision agriculture technology products themselves rather than purchasing from third parties, this would reduce demand for Applied Technology’s products.

Regulatory restrictions could be placed on hydraulic fracturing activities as a result of environmental and health concerns, reducing demand for Engineered Film’s products. For Engineered Films, the development of alternative technologies, such as closed loop drilling processes that reduce the need for pit liners in energy exploration, could also reduce demand for the Company’s products.

Aerostar’s future growth includes sales of high-altitude stratospheric platforms, technical services, and radar systems to international markets. In limited cases, such sales may be direct commercial sales to foreign governments rather than foreign military sales through the U.S. government. Direct commercial sales to foreign governments often involve large contracts subject to frequent delays because of budget uncertainties, regional military conflicts, political instability, and protracted negotiation processes. Such delays could adversely affect the Company's results of operations. The nature of these markets impact Aerostar's advanced radar systems and aerostats as these products are particularly susceptible to fluctuations in market demand. Demand fluctuations and the likelihood of delays in sales involving large contracts for such products also increase the risk of these products becoming obsolete, increasing the risk associated with expected sales of such products. To the extent products become obsolete or anticipated sales are not realized, expected future cash flows could be adversely impacted. This could also lead to an impairment, which could adversely impact the Company's results of operations and financial condition.

The Company's Aerostar segment depends on the U.S. government for a significant portion of its sales, creating uncertainty in the timing of and funding for projected contracts.

A significant portion of Aerostar's sales are to the U.S. government or U.S. government agencies as a prime or sub-contractor. Government spending has historically been cyclical. A decrease in U.S. government defense or near-space research spending or changes in spending allocations could result in one or more of the Company's programs being reduced, delayed, or terminated. Reductions in the Company's existing programs, unless offset by other programs and opportunities, could adversely affect its ability to sustain and grow its future sales and earnings. The Company's U.S. government sales are funded by the federal budget, which operates on an October-to-September fiscal year. Changes in congressional schedules, negotiations for program funding levels, reduced program funding due to U.S government debt limitations, automatic budget cuts, extended government shutdowns or unforeseen world events can interrupt the funding for a program or contract. Funds for multi-year contracts can be changed in subsequent years in the appropriations process.

In addition, many U.S. government contracts are subject to a competitive bidding and funding process even after the award of the basic contract, adding an additional element of uncertainty to future funding levels. Delays in the funding process or changes in funding are common and can impact the timing of available funds or can lead to changes in program content or termination at the government's convenience. The loss of anticipated funding or the termination of multiple or large programs could have an adverse effect on the Company's future sales and earnings.

The Company derives a portion of its revenues from foreign markets, which subjects the Company to business risks, including risk of changes in government policies, laws, regulation compliance, or changes in worldwide economic conditions.

The Company's consolidated net sales to locations outside of the U.S. were $45.7 million in fiscal 2021, representing approximately 13% of consolidated net sales. The Company's financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations, along with changes in worldwide economic conditions. These conditions include, but are not limited to, changes in a country's or region's economic or political condition; trade regulations affecting production, pricing, and marketing of products; local labor conditions and regulations; reduced protection of intellectual property rights in some countries; changes in the regulatory or legal environment; restrictions on currency exchange activities; the impact of fluctuations in foreign currency exchange rates, which may affect product demand and may adversely affect the profitability of the Company's products in U.S. dollars in foreign markets where payments are made in the local currency; taxes and tariffs that may not be necessarily passed on to the customers; and other trade barriers. International risks and uncertainties also include changing social and economic

conditions, terrorism, political hostilities and war, difficulty in enforcing agreements or collecting receivables, and increased transportation or other shipping costs. Any of these such risks could lead to reduced sales and reduced profitability associated with such sales.

The Company’s global operations must comply with all applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act. The anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence government officials or private individuals for the purpose of obtaining or retaining a business advantage, regardless of whether those practices are legal or culturally expected in a particular jurisdiction.

The Company’s continued expansion, whether by business locations or increased international sales, in areas that may not have comparable levels of compliance integrity as the United States increases the compliance risk associated with regulations such as the Foreign Corrupt Practices Act, as well as others.

Sales of certain Aerostar products into international markets increase the compliance risk associated with regulations such as International Traffic in Arms Regulations (ITAR) and Foreign Corrupt Practices Act (FCPA), as well as others.

Although Raven has a compliance program in place designed to reduce the likelihood of potential violations of such laws, violations of these laws could result in criminal or civil sanctions and have an adverse effect on Raven’s reputation, business, and results of operations and financial condition.

The Company may pursue or complete acquisitions, which represent additional risk and could impact future financial results.

The Company's business strategy includes pursuing future acquisitions. Acquisitions involve a number of risks, including integration of the acquired company with the Company's operations and unanticipated liabilities or contingencies related to the acquired company. Further, business strategies supported by the acquisition may be in perceived, or actual, opposition to strategies of certain of the Company's customers and the Company's business could be materially adversely affected if those relationships are terminated and the expected strategic benefits are delayed or are not achieved. The Company cannot ensure that the expected benefits of any acquisition will be realized. Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close, which could significantly impact the operating results, financial condition, or cash flows.

Additionally, after the acquisition, unforeseen issues could arise, which adversely affect the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price. Other acquisition risks include delays in realizing benefits from the acquired companies or products; difficulties due to lack of or limited prior experience in any new product or geographic markets entered; unforeseen adjustments, charges or write-offs; unforeseen losses of customers of, or suppliers to, acquired businesses; difficulties in retaining key employees of the acquired businesses; or challenges arising from increased geographic diversity and complexity of operations and information technology systems.

Total goodwill and intangible assets accounted for $152.3 million, or approximately 37%, of the Company's total assets as of January 31, 2021. The Company evaluates goodwill and intangible assets for impairment annually, or when evidence of potential impairment exists. The annual impairment test is based on several factors requiring judgment. Principally, a significant decrease in expected cash flows or changes in market conditions may indicate potential impairment of recorded goodwill or intangible assets. These expected future cash flows are dependent on several factors, including revenue growth in certain product lines, and could be adversely impacted if anticipated revenue growth is not realized. Reductions in cash flows could result in an impairment of goodwill and/or intangible assets, which could adversely impact the Company's results of operations and financial condition.

The Company’s business strategy for the Engineered Films Division includes expanding into the adjacent composites market; this expansion may be facilitated through an acquisition. Entering an expanded adjacent market may pose risks to the Company. This expansion may also divert management time or focus from standard Engineered Films Division operations, which may cause disruption or diverted resources and have an adverse effect on existing Engineered Films operations. There is always risk that expansion may not have the anticipated results or may involve unforeseen operating difficulties or expenditures.

The Company’s business strategy for the Applied Technology Division includes semi-autonomous and autonomous farm equipment. The Company has and plans to continue extensive investment into this strategic platform; however, there is a risk that the products may not perform as expected or may experience unexpected development issues. Additionally, expanding into autonomous farm equipment poses potential safety or regulatory issues, which may result in product liability or other claims against the Company. There is a higher level of risk with this technology as the Company is at the forefront of the market. It is

possible that the Company's autonomous technology offering is too early to the market and the market is not ready for this technology. The Company's significant investment in R&D related to autonomy does not guarantee marketability of its products. Competition in the autonomy landscape and competitive intellectual property could slow down the Company's development and sale of autonomous products.

The Company may fail to continue to attract, develop, and retain key management and other key employees, which could negatively impact operating results.

The Company depends on the performance of its Board of Directors, senior management team and other key employees, including experienced and skilled technical personnel. The loss of certain members of its Board of Directors, senior management, including the Chief Executive Officer, or other key employees, could negatively impact operating results and the ability to execute the Company's business strategy. Future success of the Company will also depend, in part, upon the ability to attract, train, motivate, and retain qualified board members, senior management and other key personnel.

Macroeconomic and Financial Risks

Weather conditions or natural disasters could affect certain Company markets, such as agriculture, construction, geomembrane installation, or the Company's primary manufacturing facilities.

The Company's Applied Technology Division is largely dependent on the ability of growers, agricultural service providers, and custom applicators to purchase agricultural equipment, including its products. If such growers, agricultural service providers, or custom applicators experience weather conditions or natural disasters resulting in unfavorable field conditions, crop prices, or farm incomes, sales in the Applied Technology Division may be adversely affected.

Weather conditions and natural disasters may also adversely affect sales in the Company's Engineered Films Division. To the extent weather conditions or natural disasters impact agriculture, construction, or geomembrane installation activity, sales of the division's plastic sheeting would likely decrease.

Seasonal and weather-related variation could also affect quarterly results. If expected sales are deferred in a fiscal quarter and inventory has been built while operating expenses incurred, financial results could be negatively impacted.

The Company’s primary manufacturing facilities for each of its operating divisions are located on contiguous properties in Sioux Falls, South Dakota. If weather-related natural disasters such as tornadoes or flooding were to occur in the area, such conditions could impede the manufacturing and shipping of products and potentially adversely affect the Company’s sales and transaction processing. The Company has disaster recovery plans in place to manage the Company’s risks to these vulnerabilities, but these measures may not be adequate, implemented properly, or executed timely to ensure that the Company’s operations are not disrupted. Such consequences could adversely affect the Company's results of operations, financial condition, liquidity, and cash flows.

Fluctuations in commodity prices can increase the Company's costs and decrease sales.

Agricultural income levels are affected by agricultural commodity prices (primarily corn, beans, and grains) and input costs. As a result, changes in commodity prices or input costs that reduce agricultural income levels could have a negative effect on the ability of farmers and their service providers to purchase the Company's precision agriculture products manufactured by its Applied Technology Division.

Exploration for oil and natural gas fluctuates with their price and energy market conditions are subject to volatility. Certain plastic sheeting manufactured and sold by the Engineered Films Division is sold as pit and pond liners to contain water used in the drilling processes for these energy commodities. Lower prices for oil and natural gas could reduce exploration activities and demand for its products.

Film manufacturing uses polymeric resins, which can be subject to changes in price as the cost of oil or natural gas changes. Accordingly, volatility in oil and natural gas prices may negatively affect raw material costs and cost of goods sold and potentially cause the division to increase prices, which could adversely affect sales and/or profitability.

Adverse economic conditions in the major industries the Company serves may materially affect segment performance and consolidated results of operations.

The Company's results of operations are impacted by the market fundamentals of the primary industries served. Significant declines of economic activity in the agricultural, oil and gas exploration, construction, industrial, aerospace/defense, and other major markets served may adversely affect segment performance and consolidated results of operations.

Legal, Regulatory, and Compliance Risks

The Company may fail to protect its intellectual property effectively, or may infringe upon the intellectual property of others.

The Company has developed significant proprietary technology and other rights that are used in its businesses. The Company relies on trade secret, copyright, trademark, and patent laws and contractual provisions to protect the Company's intellectual property. While the Company takes enforcement of these rights seriously, other companies, such as competitors or persons in related markets, may attempt to copy or use the Company's intellectual property for their own benefit.

In addition, intellectual property of others has an impact on the Company's ability to offer some of its products and services for specific uses or at competitive prices. Competitors' patents or other intellectual property may limit the Company's ability to offer products and services to its customers. Any infringement or claimed infringement by the Company on the intellectual property rights of others could result in litigation and adversely affect the Company's ability to continue to provide, or could increase the cost of providing, products and services and negatively impact sales and profitability. Any infringement by the Company could also result in judgments against the Company, which could adversely affect results of operations, financial condition, liquidity, and cash flows.

The Company could be impacted by unfavorable results or material settlement of legal proceedings.

The Company is sometimes a party to various legal proceedings and claims that arise in the ordinary course of business. Regardless of the merit of any such claims, litigation is often very costly, time-consuming, and disruptive to the operations and business of the Company, and a distraction to management and other personnel. While these matters generally are not material in nature, it is possible a matter may arise that is material to the Company’s business.

Although the Company believes the probability of a materially adverse outcome is remote, if one or more claims were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements may be materially adversely affected. Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could have a material adverse effect on its businesses, financial condition, results of operation, and cash flows.

Raven is subject to governmental laws, regulations and other legal obligations related to privacy and data protection.

The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving. Raven collects personally identifiable information (PII) and other data as integral parts of its business processes and activities. This data is subject to a variety of U.S. and foreign laws and regulations, including oversight by various regulatory and other governmental bodies. Many foreign countries and governmental bodies, including the European Union, Brazil, individual states within the U.S., and other relevant jurisdictions where we conduct business, have laws and regulations concerning the collection and use of PII and other data obtained from their residents or businesses operating within their jurisdictions. The European Union recently implemented the General Data Protection Regulation (GDPR), which imposes stringent data protection requirements and provides significant penalties for noncompliance. The state of California recently implemented the California Consumer Privacy Act (CCPA). Brazil implemented the Brazilian General Data Protection Law (BGPD). Any inability, or perceived inability, to adequately address privacy and data protection concerns, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to the Company or the Company’s officials, inhibit sales, or result in other adverse effects on the business.

Information Technology and Cybersecurity Risks

Technology failures or cyber-attacks on the Company's systems could disrupt the Company's operations or the functionality of its products and negatively impact the Company's business.

The Company increasingly relies on information technology systems to process, transmit, and store electronic information. In addition, a significant portion of internal communications, as well as communication with customers and suppliers, depends on information technology. Further, the products in Applied Technology and Aerostar segments depend upon GPS and other systems through which products interact with government computer systems and other centralized information sources. The Company is exposed to the risk of cyber incidents in the normal course of business. Cyber incidents may be deliberate attacks for the theft of intellectual property or other sensitive information or may be the result of unintentional events. Like other companies, the Company's information technology systems may be vulnerable to interruption due to a variety of events beyond the Company's control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, foreign governments, and other security issues. Further, attacks on centralized information sources could affect the operation of the Company's products or cause them to malfunction. The Company has technology security initiatives, education and training programs, and disaster recovery plans in place to manage the Company's risk to these vulnerabilities, but these measures may not be adequate, or implemented properly, or executed timely to ensure that operations are not significantly disrupted. Potential consequences of a material cyber incident include damage to the Company's reputation, litigation, and increased cyber security protection and remediation costs. Such consequences could adversely affect results of operations.

The implementation of a new enterprise resource planning (ERP) system may result in short term disruption to the Company’s operations and business, which could adversely impact the Company and damage customer relationships and brand reputation.

The Company depends heavily on its management information systems for several aspects of its business. The Company launched a company-wide initiative during the fiscal 2018 third quarter called "Project Atlas." This is a strategic long-term investment to replace the Company’s existing ERP platform. Project Atlas is being implemented in a phased approach and is expected to take approximately four years to complete. If the new ERP system or legacy system is disrupted, in any material way, during implementation, the Company may incur additional expenses and loss of data. Additionally, if improvements or upgrades are required to meet the evolving needs of the Company's business operations, the Company may be required to incur significant capital expenditures or expenses in the pursuit of improvements or upgrades to the new system. These efforts could potentially increase the amount of time for implementation of the new ERP platform, require expenditures above the anticipated amounts, demand the use of additional resources, distract key personnel and potentially cause short-term disruptions to existing systems and business. Any of these outcomes could impair the Company’s ability to achieve critical strategic initiatives and could adversely impact sales, profitability, cash flows and financial condition. Engineered Films and Aerostar went live on the Company's new ERP platform in fiscal 2020. Applied Technology is expected to go live in fiscal year 2022.


ITEM 1B.			UNRESOLVED STAFF COMMENTS

None.


ITEM 2.			PROPERTIES

Most of the Company's properties are located in the Sioux Falls, South Dakota, and surrounding area. The majority of real estate is owned by the Company and used by all three divisions for sales, manufacturing, and other functions. In addition, the Company owns or leases properties in: Texas, Virginia, Colorado, California, the Netherlands, Brazil, and Canada.

The following is the approximate square footage of the Company's owned or leased facilities by segment as of January 31, 2021: Applied Technology - 207,000; Engineered Films - 875,000; Aerostar - 219,000; and Corporate - 174,000. The Company believes that its properties are suitable and adequate to meet existing production needs.


ITEM 3.			LEGAL PROCEEDINGS

The Company is involved as a party in lawsuits, claims, regulatory inquiries, or disputes arising in the normal course of its business, the potential costs and liability of which cannot be determined at this time. Management does not believe the ultimate outcomes of its legal proceedings are likely to be material to its results of operations, financial position, or cash flows.

The Company has insurance policies that provide coverage to various degrees for potential liabilities arising from legal proceedings.


ITEM 4.			MINE SAFETY DISCLOSURES

Not applicable.


PART II

ITEM 5.			MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMPANY STOCK PERFORMANCE

The Company's common stock is traded on the Nasdaq Global Select Market under the ticker symbol RAVN. Daily market activity along with quoted prices and other trading information are readily available for the Company's common stock on numerous websites including www.nasdaq.com. The graph and table below compares the cumulative total shareholder return of the Company's stock in relation to the cumulative total return of the Russell 2000 and S&P Small Cap 600 indices. These two indices were selected as they are comparable benchmarks and the Company is a component of each index. Investors who hypothetically purchased $100.00 of the Company's stock on January 31, 2016, held the stock for five years and reinvested the dividends, would have seen their value increase to $233.32. Stock performance on the graph is not necessarily indicative of future share price performance.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG RAVEN INDUSTRIES, INC., RUSSELL 2000 INDEX, AND THE S&P SMALL CAP 600 INDEX.


	For the years ended January 31,												5-Year
Company / Index	2016		2017		2018		2019		2020		2021		CAGR(a)
Raven Industries, Inc.	$	100.00	$	171.29	$	267.80	$	260.42	$	224.09	$	233.32	18.5	%
Russell 2000 Index	100.00		133.53		156.47		150.96		164.86		214.61		16.5	%
S&P Small Cap 600 Index	100.00		134.34		156.59		154.64		164.80		202.99		15.2	%
(a) Compound annual growth rate (CAGR)

DIVIDENDS

On August 26, 2020, the Company announced that the Board of Directors indefinitely suspended the Company’s regular quarterly cash dividend on its common stock. The Company has reallocated this capital to supplement and accelerate investments in the Company's Strategic Platforms for Growth: Raven Autonomy™, Raven Composites™, and Raven Thunderhead. Prior to the announcement, the Company paid cash dividends to its shareholders of $0.26 per share in fiscal 2021, or approximately $9 million. The Company paid dividends to its shareholders of $0.52 per share, or approximately $19 million in fiscal 2020 and 2019.

ISSUER PURCHASES OF EQUITY SECURITIES

As of February 18, 2021, the Company had approximately 14,300 beneficial holders, which includes a substantial amount of the Company's common stock held of record by banks, brokers, and other financial institutions.

On November 3, 2014, the Company announced that its Board of Directors ("Board") had authorized a $40.0 million stock buyback program. Since that time, the Board has provided additional authorizations to increase the total amount authorized under the program to $75.0 million. This authorization remains in place until the authorized spending limit is reached or such authorization is revoked by the Board.

The Company had no share repurchases of the Company's common stock during fiscal 2021. Pursuant to the aforementioned authorizations, the Company made purchases of 332,651 shares at an average price of $32.41, equating to a total cost of $10.8 million during fiscal year 2020. The remaining dollar value authorized for share repurchases is $17.2 million at January 31, 2021.


ITEM 7.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to enhance overall financial disclosure with commentary on the operating results, liquidity, capital resources, and financial condition of Raven Industries, Inc. (the Company or Raven). This commentary provides management's analysis of the primary drivers of year-over-year changes in key financial statement elements, business segment results, and the impact of accounting principles on the Company's financial statements. The most significant risks and uncertainties impacting the operating performance and financial condition of the Company are discussed in section Item 1A. "Risk Factors" of this Annual Report on Form 10-K (Form 10-K).

This discussion should be read in conjunction with Raven's Consolidated Financial Statements and notes thereto in Item 8 of this Form 10-K.

The MD&A is organized as follows:

•Executive Summary

•Results of Operations - Segment Analysis

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements and Contractual Obligations

•Critical Accounting Policies and Estimates

•Accounting Pronouncements

Management's Discussion and Analysis - Fiscal 2020 compared to Fiscal 2019

The comparison of fiscal 2020 with fiscal 2019, including the results of operations and liquidity, can be found in the "Management's Discussion and Analysis" section of the Company's 2020 Form 10-K, which comparison is incorporated by reference herein.

EXECUTIVE SUMMARY

Raven is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air, and aerospace and defense markets. The Company is comprised of three unique operating units, classified into reportable business segments: Applied Technology, Engineered Films, and Aerostar. Segment information is reported consistent with the Company's management reporting structure.

Management uses a number of measures to assess the Company's performance including:

•Consolidated net sales, gross margin, operating income, operating margin, net income and diluted earnings per share.

•Cash flow from operations and shareholder returns.

•Return on sales, average assets and average equity.

•Segment net sales, gross profit, gross margin, operating margin and operating income. At the segment level, operating income does not include an allocation of general and administrative expenses.

Vision and Strategy

Raven's purpose is to solve great challenges. Great challenges require great solutions. Raven’s three unique divisions share resources, ideas and a passion to create technology that helps the world grow more food, produce more energy, protect the environment and live safely.

The Raven business model is its platform for success. Raven's business model is defensible, sustainable, and gives us a consistent approach in the pursuit of quality financial results. This overall approach to creating value, which is employed across the three business segments, is summarized as follows:

•Intentionally serve market segments with strong growth prospects in both the near and long term.

•Consistently manage a pipeline of growth initiatives within our market segments.

•Aggressively compete on quality, service, innovation, and peak performance.

•Attract and develop exceptional leaders who understand business deeply and can thrive in the Raven Way.

•On a path of continuous improvement, integrate sustainability with our operations by consistently taking actions to streamline processes, improve efficiencies, and increase value delivered to our customers.

•Value our balance sheet as a source of strength and stability.

•Corporate responsibility is a top priority.

The following discussion highlights the consolidated operating results for the years ended January 31, 2021 and 2020. Segment operating results are more fully explained in the Results of Operations - Segment Analysis section.


	For the years ended January 31,
(dollars in thousands, except per-share data)	2021			% change		2020
Results of Operations
Net sales	$	348,359		(8.9)	%	$	382,530
Gross margin(a)	33.8		%			32.3		%
Operating income	$	19,651		(50.8)	%	$	39,939
Operating margin(a)	5.6		%			10.4		%
Net income attributable to Raven Industries, Inc.	$	18,876		(46.4)	%	$	35,196
Diluted income per share	$	0.52		(46.4)	%	$	0.97





Cash Flow and Shareholder Returns
Cash flow from operating activities	$	55,472				$	54,872
Cash outflow for capital expenditures	16,147					8,560
Cash dividends	9,318					18,650
Common share repurchases	—					10,781

Performance Measures
Return on net sales(b)	5.4		%			9.2		%
Return on average assets(c)	4.6		%			9.2		%
Return on average equity(d)	5.8		%			11.3		%

(a) The Company's gross and operating margins may not be comparable to industry peers due to variability in the classification of expenses across industries in which the Company operates.
(b) Net income attributable to Raven Industries, Inc. divided by net sales.
(c) Net income attributable to Raven Industries, Inc. divided by average assets. Average assets is the sum of Total Assets for the beginning and ending of the fiscal year divided by two.
(d) Net income attributable to Raven Industries, Inc. divided by average equity. Average equity is the sum of Total Raven Industries, Inc. shareholders' equity for the beginning and ending of the fiscal year divided by two.

Results of Operations - Fiscal 2021 compared to Fiscal 2020

The Company's net sales in fiscal 2021 were $348.4 million, a decrease of $34.1 million, or 8.9%, from the prior year's net sales of $382.5 million. Year-over-year growth in Applied Technology was more than offset by declines in Engineered Films and Aerostar. The year-over-year growth within Applied Technology was driven by increased volumes to OEMs, as the division leveraged its industry-leading technology portfolio. Engineered Films' decline in net sales was driven by weak demand as its end-markets were significantly affected by the global pandemic. The year-over-year decline in revenue for Aerostar was primarily driven by pandemic related travel restrictions enacted by the Department of Defense.

Operating income in fiscal 2021 was $19.7 million, a decrease of $20.2 million, or 50.8%, from the prior year's operating income of $39.9 million.

Fiscal 2021 operating income was reduced by the following:

•Strategic investments in Raven Autonomy™ during fiscal 2021 of $16.8 million, primarily in research and development and selling activities to advance the Company's autonomous ag solutions.

•Lower operating leverage within Engineered Films due to significantly lower sales, primarily in the geomembrane (specifically the energy sub-market) and construction markets.

Net income attributable to Raven for fiscal 2021 was $18.9 million, or $0.52 per diluted share, compared to net income of $35.2 million, or $0.97 per diluted share, in fiscal 2020. The investment in Raven Autonomy™ reduced net income attributable to Raven by $12.9 million, or $0.36 per diluted share in fiscal 2021, and $2.3 million, or $0.06 per diluted share in fiscal 2020.

Applied Technology Division

Fiscal 2021 net sales increased $16.7 million, or 12.8%, from $130.5 million in fiscal 2020 to $147.2 million in fiscal 2021. Applied Technology's increase in sales was driven by growth in the OEM channel, through leveraging its industry-leading technology portfolio and strong customer relationships. This growth was achieved despite economic challenges that included low commodity prices for much of the year and overall weak conditions within the ag industry. The growth included last-time buy activity associated with the exit of a commercial relationship initiated by the Company.

Applied Technology's operating income decreased by 13.7% to $26.5 million from $30.7 million in the prior year. Operating income was reduced by $16.6 million of strategic investment in research and development and selling activities for Raven Autonomy™.

Engineered Films Division

Fiscal 2021 net sales were $147.9 million, a decrease of $49.8 million, or 25.2%, compared to fiscal 2020. Engineered Films faced weak economic conditions across a majority of its end-markets throughout the year, resulting in a decline in net sales year-over-year. Geomembrane (including the energy sub-market) experienced the largest declines as rig counts in the Permian Basin were down 70 percent throughout a significant portion of the year. Net sales in the construction market also declined as there was reduced demand driven by a significant decline in non-residential construction starts versus the prior year. Partially offsetting these declines was the delivery of $4.8 million of film-based medical supplies associated with a FEMA contract to aid in the pandemic response.

Engineered Films' operating income decreased by 45.1% to $15.7 million from $28.7 million in the prior year. The year-over-year decline was driven by lower sales volume and the corresponding negative operating leverage.

Aerostar Division

Fiscal 2021 net sales were $53.3 million, down 2.0%, compared to $54.4 million in fiscal 2020. Declines in stratospheric platforms and radar products more than offset the increase in aerostat system deliveries during the current year, and drove the decline in sales year-over-year.

Aerostar's operating income was $4.4 million, a decrease of 48.8% year-over-year, from $8.6 million. The year-over-year decline was driven by lower margins due to increased material and overhead expenses, as well as a strategic increase in investment in the division's stratospheric systems.

RESULTS OF OPERATIONS - SEGMENT ANALYSIS

Applied Technology

Applied Technology designs, manufactures, sells, and services innovative precision agriculture products, autonomous solutions, and information management tools, which are collectively referred to as precision agriculture equipment, that help farmers reduce costs, more precisely control inputs, and improve farm yields for the global agriculture market.


	For the years ended January 31,
(dollars in thousands)	2021			% change		2020
Net sales	$	147,198		12.8	%	$	130,460
Gross profit	74,370			17.4	%	63,359
Gross margin	50.5		%			48.6		%
Operating expense	$	47,902		46.5	%	$	32,687
Operating expense as % of sales	32.5		%			25.1		%

Operating income(a)	26,468			(13.7)	%	30,672
Operating margin	18.0		%			23.5		%



(a) At the segment level, operating income does not include an allocation of general and administrative expenses.

For fiscal 2021, net sales increased $16.7 million, or 12.8%, to $147.2 million as compared to $130.5 million in fiscal 2020. Operating income decreased $4.2 million, or 13.7%, to $26.5 million as compared to $30.7 million in fiscal 2020.

Fiscal 2021 results compared to fiscal 2020 results were primarily driven by the following factors:

•Market conditions. During the first three quarters of fiscal 2021, the North America ag market was negatively impacted by low commodity prices, and the ongoing pandemic drove further uncertainty in the marketplace. These factors reduced expected farm income, and OEMs responded with lower production of new machines. During the fourth quarter, improving commodity prices have provided optimism about ag market conditions, with the Company seeing an increase in demand. As commodity prices have reached levels not seen since 2014, the Company anticipates these improved conditions will lead to strong results in the first half of fiscal 2022. The Company does not specifically model comparative market share position for any of its operating divisions, but based on the sales developments in fiscal 2021, the Company believes that Applied Technology, in aggregate, has maintained its global market share position during the year.

•Sales volume and selling prices. Geographically, domestic sales were up 14.6% and international sales were up 7.1% year-over-year. Higher sales volume of both new and existing products, rather than an increase in selling price, was the primary driver of the increase in sales. Included within domestic sales totals is $17.0 million of last time buy activity to a non-strategic OEM customer. This is an increase of $9.2 million year-over-year of sales to this customer.

•International sales. Net sales outside the U.S. accounted for 22.8% of segment sales in fiscal 2021 compared to 24.0% in fiscal 2020. International sales of $33.6 million in fiscal 2021 increased $2.2 million, or 7.1%, compared to fiscal 2020. Sales to Australia and Europe, up approximately 61% and 14%, respectively, led the increase in international sales year-over-year. The year-over-year increases were partially offset by a decrease in sales to Latin America.

•Gross margin. Gross margin increased from 48.6% in fiscal 2020 to 50.5% in fiscal 2021. The year-over-year increase in profitability was driven by positive operating leverage from higher sales volume and favorable product mix.

•Operating expenses. Fiscal 2021 operating expenses were 32.5% of net sales compared to 25.1% for the prior year. The increase in operating expenses as a percentage of sales was driven by $16.6 million of Raven AutonomyTM related expenses in fiscal 2021 compared to $2.8 million in fiscal 2020. These expenses primarily consisted of investment in research and development and selling activities to drive the commercialization of autonomous ag solutions.

Engineered Films


	For the years ended January 31,
(dollars in thousands)	2021			% change		2020
Net sales	$	147,921		(25.2)	%	$	197,719
Gross profit	25,687			(32.7)	%	38,166
Gross margin	17.4		%			19.3		%
Operating expenses	$	9,944		5.0	%	$	9,471
Operating expenses as % of sales	6.7		%			4.8		%
Operating income(a)	$	15,743		(45.1)	%	$	28,695
Operating margin	10.6		%			14.5		%


(a) At the segment level, operating income does not include an allocation of general and administrative expenses.

For fiscal 2021, net sales decreased $49.8 million, or 25.2%, to $147.9 million as compared to fiscal 2020. Operating income was $15.7 million, down 45.1% for fiscal 2021 as compared to $28.7 million for fiscal 2020.

Fiscal 2021 results compared to fiscal 2020 results were primarily driven by the following factors:

•Market conditions. In fiscal 2021, the ongoing pandemic and resulting economic slowdown significantly impacted demand in the division's end-markets, with the geomembrane (including the energy sub-market) and construction markets, most significantly impacted. Rig counts within the Permian Basin were down over 70 percent year-over-year for most of fiscal 2021 before beginning to recover during the fourth quarter. In addition, delays in large-scale projects due to the pandemic has led to declines in demand within the construction and installation markets. During fiscal year 2022, the Company expects demand to continue to improve in the aforementioned markets that were significantly impacted by the economic slowdown. The Company does not model comparative market share position for any of its operating divisions, but based on the sales developments in fiscal 2021, the Company believes that Engineered Films, in aggregate, has maintained its market share in its core business.

•Sales volume and selling prices. Sales to geomembrane (including the energy sub-market) and construction markets were down significantly year-over-year. This decline in sales was driven by decreases in rig counts within the Permian Basin, as well as delays in large-scale projects, reducing sales volumes within the geomembrane, construction and installation markets during fiscal 2021. Sales volume, measured in pounds sold, decreased approximately 19% year-over-year for the twelve-month period ended January 31, 2021. The decline in demand in certain end-markets, as well as unfavorable product mix, caused selling prices to decline in fiscal 2021 compared to the prior year.

•Gross margin. Fiscal 2021 gross margin was 17.4%, 1.9 percentage points lower than the prior fiscal year. The decrease in gross margin percentage was led by lower operating leverage due to the reduction in sales volume.

•Operating expenses. Fiscal 2021 operating expenses, as a percentage of net sales, increased to 6.7%, from 4.8% in the prior year. Despite ongoing efforts to reduce costs due to the uncertainty of the pandemic, lower sales and focused research and development expenditures to improve quality and production efficiencies to support Raven Composites™ drove the increase in operating expenses as a percentage of net sales. In addition, the division increased its allowance for uncollectible accounts, contributing to the increase in operating expenses.

Aerostar


	For the years ended January 31,
(dollars in thousands)	2021			% change		2020
Net sales	$	53,343		(2.0)	%	$	54,443
Gross profit	17,673			(20.5)	%	22,222
Gross margin	33.1		%			40.8		%
Operating expenses	$	13,274		(2.6)	%	$	13,625
Operating expenses as % of sales	24.9		%			25.0		%

Operating income(a)	$	4,399		(48.8)	%	$	8,597
Operating margin	8.2		%			15.8		%
(a) At the segment level, operating income does not include an allocation of general and administrative expenses.

Net sales for fiscal 2021 decreased 2.0% to $53.3 million from last year’s net sales of $54.4 million. Operating income decreased $4.2 million to $4.4 million in fiscal 2021 compared to $8.6 million in fiscal 2020.

Fiscal 2021 results compared to fiscal 2020 results were primarily driven by the following factors:

•Market conditions. Aerostar's markets are subject to significant fluctuation in demand due to the timing of contract awards and unpredictability surrounding government spending. While it is particularly challenging to measure market share information for the Aerostar division and the Company does not model comparative market share position for any of its operating divisions, the Company believes that Aerostar has maintained its market share during fiscal 2021.

•Sales volume. The decrease in net sales was driven by sales declines in stratospheric platforms and radar products. Radar products were impacted by a reduction in the scope of the products and services related to the five-year $36 million radar systems contract awarded in fiscal 2019. Partially offsetting these declines were an increase in deliveries on the aerostat contract awarded in fiscal 2020.

•Gross margin. For fiscal 2021, gross margin decreased 7.7 percentage points compared to the prior fiscal year. The decrease in gross margin was driven predominately by an unfavorable sales mix and higher materials and overhead expenses, as well as $0.5 million of inventory write downs for radar products.

•Operating expenses. Operating expenses as a percentage of net sales decreased 0.1 percentage points compared to the prior year. Fiscal 2021 operating expenses were $13.3 million, or 24.9% of net sales, compared to operating expenses of $13.6 million, or 25.0% of net sales in fiscal 2020. The division's research and development expenses increased as it continues investing in stratospheric systems that are expected to drive long-term growth. This increase was more than offset by a reduction in selling expenditures associated with lower sales volume.

Corporate Expenses (administrative expenses; other income (expense), net; and effective tax rate)


	For the years ended January 31,
(dollars in thousands)	2021			2020
Administrative expenses	$	27,031		$	28,025
Administrative expenses as a % of sales	7.8		%	7.3		%
Other income (expense), net	$	(476)		$	95
Effective tax rate	2.1		%	13.5		%

Administrative expenses decreased $1.0 million in fiscal 2021 compared to fiscal 2020. Increased focus on reducing expenditures in response to the pandemic drove down costs, including lower travel expenses due to company-wide travel restrictions and lower consulting and professional services. Lower administrative expenses were also attributable to a reduction of Project Atlas expenditures of $0.6 million year-over-year. Project Atlas related expenses were $2.1 million and $2.7 million in fiscal 2021 and fiscal 2020, respectively.

Other income (expense), net consists primarily of activity related to the Company's equity investments, interest income, foreign currency transaction gains or losses, amortization of debt issuance costs, and other fees related to the Company's credit facility further described in Note 11 "Debt" of the Notes to the Consolidated Financial Statements. There were no significant items in other income (expense), net for fiscal 2021 or fiscal 2020.

The Company's fiscal 2021 effective tax rate was 2.1% compared to 13.5% in the prior year. The decrease in the effective tax rate for fiscal 2021 was driven primarily by the decrease in current year profitability that resulted in a higher R&D tax credit as a percentage of pre-tax income. For further information regarding the change in effective tax rates, refer to Note 10 "Income Taxes" of the Notes to the Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company's balance sheet continues to reflect significant liquidity and a strong capital base. Management focuses on the current cash balance and operating cash flows in considering liquidity, as operating cash flows have historically been the Company's primary source of liquidity. Management expects that current cash, combined with the generation of positive operating cash flows and credit facility access, will be sufficient to fund the Company's normal operating, investing, and financing activities beyond the next twelve months.

In addition, the Company has a $100 million senior revolving credit facility which includes a $100 million borrowing availability expansion feature. If executed, this allows the Company’s total borrowing capacity to reach $200 million. This credit facility has a maturity date of September 20, 2022.

The Company’s cash balances and cash flows were as follows:


	For the years ended January 31,
(dollars in thousands)	2021		2020
Cash and cash equivalents	$	32,938	$	20,707


	For the years ended January 31,
(dollars in thousands)	2021		2020
Cash provided by operating activities	$	55,472	$	54,872
Cash used in investing activities	(15,913)		(58,609)
Cash used in financing activities	(27,131)		(40,887)
Effect of exchange rate changes on cash and cash equivalents	(197)		(456)
Net increase (decrease) in cash and cash equivalents	$	12,231	$	(45,080)

Cash and cash equivalents totaled $32.9 million at January 31, 2021, compared to $20.7 million at January 31, 2020, an increase of $12.2 million. The sequential increase in cash was driven by an increased focus on lowering net working capital during the pandemic, as well as the Company's decision to indefinitely suspend the quarterly cash dividend on its common stock.

At January 31, 2021, the Company held cash and cash equivalents of $2.2 million in accounts outside the United States. These balances included undistributed earnings of foreign subsidiaries. As of January 31, 2021, the Company has no deferred tax liability recognized relating to the Company’s investment in foreign subsidiaries where the earnings have been indefinitely reinvested. The Tax Cuts and Jobs Act (TCJA) generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, and as a result, the accumulated undistributed earnings would only be subject to other taxes, such as withholding taxes and state income taxes, on distribution of such earnings. No additional withholding or income taxes has been provided for any remaining undistributed foreign earnings not subject to the one-time deemed repatriation tax, as it is the Company’s intention for these amounts to continue to be indefinitely reinvested in foreign operations. The Company’s liquidity is not materially impacted by the amount held in accounts outside of the United States as the Company's operating cash flows are primarily driven by U.S. sources.

Operating Activities

Operating cash flows result primarily from cash received from customers, which is offset by cash payments for inventories, services, and employee compensation. Cash provided by operating activities was $55.5 million in fiscal 2021 and $54.9 million in fiscal 2020. The $0.6 million increase in operating cash flows in fiscal 2021 as compared to fiscal 2020 is primarily due to an increased focus on lower net working capital during the pandemic.

The Company's cash needs have minimal seasonal trends. As a result, the discussion of trends in operating cash flows focuses on the primary drivers of year-over-year variability in net working capital. Net working capital and net working capital percentage are metrics used by management as a guide in measuring the efficient use of cash resources to support business activities and growth. The Company's net working capital for the comparative periods was as follows:


	For the years ended January 31,
(dollars in thousands)	2021			2020
Accounts receivable, net	$	48,669		$	62,552
Plus: Inventories, net	52,703			53,899
Less: Accounts payable	18,639			14,893
Net working capital(a)	$	82,733		$	101,558

Annualized net sales(b)	$	320,308		$	343,044
Net working capital percentage(c)	25.8		%	29.6		%
(a) Net working capital is defined as accounts receivable, net plus inventories, net less accounts payable.
(b) Annualized net sales is defined as fourth quarter net sales during the applicable fiscal year multiplied by four.
(c) Net working capital percentage is defined as net working capital divided by annualized net sales.

Net working capital percentage improved from 29.6% at January 31, 2020, to 25.8% at January 31, 2021. The Company's continued focus on maintaining lower net working capital during the pandemic drove the year-over-year change. The Company lowered inventory levels at Engineered Films to align with expected sales, while the increase in accounts payable was due to timing of purchases and the optimization of payment terms, including forgoing early-payment discounts during most of fiscal year 2021. The decrease in accounts receivable was driven by a combination of the timing and fulfillment of sales orders during the fourth quarter and lower sales volume year-over-year.

Inventory levels were down $1.2 million, or 2.2% from $53.9 million at January 31, 2020, to $52.7 million at January 31, 2021. In comparison, net sales decreased $5.7 million or 6.6% year-over-year in the fourth quarter. The decrease in inventory was primarily driven by the Engineered Films division improving operational efficiency and aligning inventory levels with corresponding expected sales.

Accounts receivable levels decreased $13.9 million, or 22.2% from $62.6 million at January 31, 2020, to $48.7 million at January 31, 2021. In comparison, net sales decreased $5.7 million or 6.6% year-over-year in the fourth quarter. The decrease in accounts receivable was driven by a combination of the timing and fulfillment of sales orders during the fourth quarter and lower sales volume year-over-year. In addition, a decrease in unbilled receivables for Aerostar due to timing of billings and fulfillment of certain service contracts contributed to the decrease.

Accounts payable increased $3.7 million, or 25.2% to $18.6 million at January 31, 2021, from $14.9 million at January 31, 2020. The timing of purchases and related payments in the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020, as well as forgoing early-payment discounts for most of fiscal year 2021, led to an increase in the accounts payable balance year-over-year.

Investing Activities

Cash used in investing activities totaled $15.9 million in fiscal 2021 and $58.6 million in fiscal 2020. Capital expenditures totaled $16.1 million in fiscal 2021 compared to $8.6 million in fiscal 2020. The primary drivers of the decrease in cash outflows in fiscal 2021 were the acquisitions of Smart Ag and DOT in the prior fiscal year. There were no business acquisitions in fiscal 2021.

Management anticipates capital spending of approximately $18.0 million in fiscal 2022 primarily for facility expansion and capital investments in Engineered Films and Applied Technology to support the growth of Raven Composites™ and Raven Autonomy™.

Financing Activities

Financing activities consumed cash of $27.1 million in fiscal 2021 compared with $40.9 million in fiscal 2020. The decrease in financing cash outflows was driven by the suspension of the dividend during the current year and share repurchases in the prior year. The payment of $17.9 million in fiscal 2021 related to the redemption of the noncontrolling interest in DOT, partially offset the aforementioned changes.

Dividends paid were $9.3 million and $18.7 million in fiscal years 2021 and 2020, respectively. On August 26, 2020, the Company announced that the Board of Directors indefinitely suspended the Company’s regular quarterly cash dividend on its common stock. The Company intends to reallocate this capital to supplement and accelerate investments in the Company's Strategic Platforms for Growth; Raven Autonomy™ and Raven Composites™. Dividends per share were $0.26 and $0.52 in fiscal years 2021 and 2020, respectively.

In fiscal 2016, the Company began to repurchase common shares as part of the $40.0 million share repurchase plan authorized by the Company’s Board of Directors. Since that time, the Board has provided additional authorizations bringing the total amount authorized under the plan to $75.0 million at January 31, 2021. The Company made no share repurchases in fiscal 2021, however share repurchases totaling $10.8 million were made in fiscal 2020. Approximately $17.2 million of the total authorization remains available for share repurchases under this plan as of January 31, 2021.

Other Liquidity and Capital Resources

In fiscal 2020, the Company replaced its previous credit facility with a three-year $100 million senior revolving credit facility which includes a $100 million borrowing availability expansion feature. This Credit Agreement is more fully described in Note 11 "Debt" of the Notes to the Consolidated Financial Statements. There were no borrowings outstanding at fiscal year-end for any of the periods covered by this Form 10-K. Availability under the Credit Agreement for borrowings as of January 31, 2021, was $100 million.

Letters of credit (LOC) totaling $0.1 million and $0.1 million were outstanding at January 31, 2021 and 2020. Any draws required under the LOCs would be settled with available cash or borrowings under the Credit Agreement.

The Credit Agreement contains customary affirmative and negative covenants, including those relating to financial reporting and notification, limits on levels of indebtedness and liens, investments, mergers and acquisitions, affiliate transactions, sales of assets, restrictive agreements, and change in control as defined in the Credit Agreement. Financial covenants include an interest coverage ratio and funded indebtedness to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement. The Company is in compliance with all financial covenants set forth in the Credit Agreement.

The Company launched a company-wide initiative during the third quarter of fiscal 2018 called Project Atlas. This is a strategic and long-term investment to replace the Company’s existing ERP platform. This investment will drive efficiencies across the enterprise, enable faster integration of future acquisitions, automate a significant portion of internal controls, and enhance the Company's execution of its long-term growth strategy. Engineered Films and Aerostar went live on the Company's new ERP platform in fiscal 2020. Applied Technology is expected to go live in fiscal year 2022. The total project is expected to cost approximately $12 million. The Company recognized $2.1 million and $2.7 million in fiscal years 2021 and 2020, respectively, of expenses for Project Atlas. Project Atlas spending is expected to be approximately $2.0 million in fiscal year 2022.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

As of January 31, 2021, the Company is obligated to make cash payments in connection with its non-cancelable operating leases for facilities and equipment, financing lease obligations and unconditional purchase obligations, primarily for raw materials. Additionally, the Company's known off-balance sheet debt and other unrecorded obligations at January 31, 2021, are listed in the table below.


(dollars in thousands)	Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
Long term notes and credit facility	$	2,124	$	85	$	2,039	$	—	$	—
Financing lease obligations	774		377		374		23		—
Operating leases	7,703		2,308		2,844		2,115		436
Unconditional purchase obligations	39,519		39,519		—		—		—
Postretirement benefits	15,486		369		756		762		13,599
Acquisition-related contingent payments	2,000		2,000		—		—		—
Contractual Gift Agreement	2,140		715		1,425		—		—
Redeemable noncontrolling interest	5,333		5,333		—		—		—
Uncertain tax positions	2,692		—		—		—		—
	$	77,771	$	50,706	$	7,438	$	2,900	$	14,035

Long-term notes and credit facility

The Company entered into a credit facility on September 20, 2019, with Bank of America, N. A., as administrative agent, and Wells Fargo Bank, National Association (the Credit Agreement). The Credit Agreement provides for a syndicated senior revolving credit facility up to $100 million with a maturity date of September 20, 2022. Loan proceeds may be utilized by Raven for strategic business purposes, such as business acquisitions, and for net working capital needs.

The Company is party to a financial assistance agreement (Agreement) between DOT and Western Economic Diversification Canada (WEDC), a government agency in Canada, that was entered into in August 2019. Under the Agreement, the WEDC agrees to contribute up to $5.0 million in Canadian currency, approximately $4.0 million in US dollars, over a three year period for costs incurred to develop a cloud-based distribution and service channel for a particular DOT product being developed. DOT is eligible to receive contributions for costs incurred for purposes specified in the Agreement. The Company is required to repay the funds contributed by WEDC in 60 monthly installments commencing April 1, 2023, plus interest based on an average bank rate plus three percent, accruing from the payment commencement date. As of January 31, 2021, the Company had received $2.0 million in contributions from WEDC and no repayments have been made. The outstanding liability balance is reported as "Long term debt" on the Consolidated Balance Sheets.

Lease obligations

The Company's financing lease obligations are primarily related to vehicles and equipment to support general business operations. Operating leases are primarily related to facilities to support production, R&D, and sales efforts.

Unconditional purchase obligations

Unconditional purchase obligations consist of those for inventory and other obligations that arise in the normal course of business operations. The majority of these are related to the purchase of raw material inventories in the Applied Technology and Engineered Films divisions.

Postretirement benefit obligation

The Company previously provided postretirement medical and other benefits to certain senior executive officers and senior managers. At January 31, 2021, sixteen participants remained eligible to receive postretirement medical and other benefits for their lifetimes. Postretirement benefit amounts presented in the table above represent expected payments on the accumulated postretirement benefit obligation before it is discounted. This benefit obligation is unfunded and is further described in Note 8 "Employee Postretirement Benefits" of the Notes to the Consolidated Financial Statements.

Acquisition-related obligations

The Company has a future obligation for earn-out payments associated with the acquisition of AgSync, completed in fiscal 2019. The total liability recorded on the Consolidated Balance Sheets as of January 31, 2021, related to this future obligation was $2.0 million. The liability recorded represents the present value of earn-out payments classified as consideration at the acquisition date.

Contractual gift agreement

The Company has future obligations related to a gift agreement with the South Dakota State University (SDSU) Foundation, Inc. (the Foundation) effective in January 2018. This gift will be used by SDSU, located in Brookings, SD, for the establishment of a precision agriculture facility to support SDSU's Precision Agriculture degrees and curriculum. This facility will assist the Company in further collaboration with faculty, staff, and students on emerging technology in support of the growing need for precision agriculture practices and tools. The Company will make a $5.0 million gift to the Foundation in annual installments throughout the term of the agreement. The liability recorded for this contingency at January 31, 2021, was $2.0 million (measured based on the present value of the expected future cash outflows).

Redeemable noncontrolling interest

Related to the Company’s majority ownership in DOT, the Company had call rights to purchase shares held by the noncontrolling interest shareholders at a price defined in the purchase agreement. The noncontrolling interest shareholders also had put rights allowing them to sell their minority interest back to the Company at a price derived from a specific formula. Due to the redemption features in these put rights, the minority interest shareholders’ value of shares owned was classified as a redeemable noncontrolling interest in the Company’s Consolidated Balance Sheets at January 31, 2020. During the first quarter of fiscal 2021, the Company was required to redeem the remaining noncontrolling interest in DOT after the minority interest shareholders exercised their put options. The Company closed on the transaction to purchase the shares of the largest minority shareholder for $17.9 million in the second quarter of fiscal 2021, giving the Company full voting control of DOT. The remaining redeemable amount, as well as the liability for the noncontrolling interest redeemed in the prior fiscal year, totaling approximately $5.3 million, is payable in November 2021 and these expected payments are reflected in the table above.

Uncertain tax positions

Raven reported a total liability for uncertain tax positions of $2.7 million at January 31, 2021. The Company is not able to reasonably estimate the timing of future payments relating to these non-current tax benefits. This obligation is retired when the uncertain tax position is settled or the applicable tax year is no longer subject to examination by the tax authorities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are those that require the application of especially challenging, subjective, or complex judgment when valuing assets and liabilities on the Company's balance sheet. These policies and estimates are discussed below because a fluctuation in actual results versus expected results could materially affect operating results and because the policies require significant judgments and estimates to be made. Accounting related to these policies is initially based on best estimates at the time of original entry in the accounting records. Adjustments are periodically recorded when, and if, the Company's actual experience differs from the expectations underlying the estimates. These adjustments could be material if experience were to vary significantly from expectations.

Goodwill

The Company recognizes goodwill as the excess cost of an acquired business over the net amount assigned to assets acquired and liabilities assumed. Goodwill for each reporting unit is assessed for impairment annually during the fourth quarter and between annual tests whenever a triggering event indicates there may be an impairment. The Company performs impairment reviews of goodwill by reporting unit. At the November 30th annual measurement date for fiscal 2021, the Company identified four reporting units: Engineered Films, Applied Technology (excluding Autonomy), Autonomy, and Aerostar.

The Company has the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist.

If the Company performs a quantitative assessment, the fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. Projecting discounted future cash flows requires the Company to make significant estimates and assumptions regarding future revenues and expenses, projected capital expenditures, changes in net working capital, and the appropriate discount rate. In developing the discounted cash flow analysis, assumptions regarding revenue growth rates, operating profit margin percentages, capital expenditures, and changes in net working capital reference both the Company's annual operating plan (budget) and long-term strategic plan for each of the Company’s reporting units. These are updated to reflect the best available information at that time and as appropriate reflect market participant assumptions, if such amounts might differ from the Company-specific assumptions, for each of the Company’s reporting units. Discount rate assumptions for each reporting unit include the Company's estimated weighted average cost of capital, derived using both known and estimated customary market metrics, and management’s assessment of risks inherent to the future cash flows of the respective reporting unit. Use of the market approach includes evaluating comparable publicly-traded companies that are similar in size and industry. Revenue and EBITDA (earnings before interest, tax, depreciation and amortization) multiples for each reporting unit

were reviewed to ascertain the reasonableness of the reporting unit fair values. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures).

For the fiscal 2021 annual assessment, the Company elected to bypass the qualitative assessment and performed a quantitative assessment for each of the four reporting units. The Company's decision was driven by the time lapse since the last quantitative analysis and market conditions during the fiscal year. The fiscal year 2021 annual impairment test determined the estimated fair value exceeded the carrying value in each of our reporting units, therefore, no impairment charge was required.

For the Company's Engineered Films, Applied Technology (excluding Autonomy), and Aerostar reporting units, the fair value of the reporting unit was substantially in excess of the carrying value and not at risk of failing the quantitative analysis. Within the Autonomy reporting unit, the fair value of the reporting unit exceeded the carrying value of the assets by more than 20%. The fair value increase since the prior fiscal year acquisition is largely attributed to the significant investment in research and development activities to advance the autonomous technology, developed synergy between the Smart Ag and DOT acquisitions, and growing interest in the autonomous market. In determining the estimated fair value, the Company estimated a number of significant factors, including projected revenues growth rates, projected operating income results, terminal growth rates, and the discount rate. The Company made reasonable estimates and assumptions based on facts and circumstances available as of the measurement date. However, if actual results are not consistent with the estimates and assumptions used in the calculations, we may be exposed to future impairment losses that could be material. Events and conditions that could negatively impact the estimated fair value include increases in the Company's weighted average cost of capital, further delays in the commercialization of autonomous products, inability to realize the anticipated revenue growth opportunities, and a decrease in projected profitability. Goodwill associated with the Autonomy reporting unit was $56.6 million as of January 31, 2021.

Intangible Assets

Intangible assets are comprised of existing technology, customer relationships, and other definite-lived and indefinite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. The Company typically uses an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions are inherent in the valuation of intangible assets. The valuation of intangibles takes into consideration other marketplace participants, and includes the amount and timing of future cash flows (including expected growth rates, discount rates, and profitability), royalty rates, customer attrition rates, and product obsolescence factors. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. Significant judgment is required to estimate the value of intangibles and in assigning their respective useful lives. Accordingly, the Company typically engages third-party valuation specialists, who work under the direction of management, to assist in valuing intangible assets acquired.

Definite-lived Intangible Assets

The Company amortizes definite-lived assets over their estimated useful lives. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and the undiscounted cash flows method.

Estimated useful lives range from three to twenty years. The Company evaluates definite-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset and its eventual disposition. The Company's estimates of future cash flows attributable to its assets require significant judgment based on the Company's historical and anticipated results. The Company considers various factors that could trigger an impairment review. These factors include the Company's business strategy, negative industry or economic trends, loss of customers, and changes in the manner of how the Company uses its acquired assets.

When the Company determines that the carrying value of the assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure the potential impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds the asset's fair value. Different assumptions and judgments could materially affect the calculation of the fair value of our assets.

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets relate to acquired in-process R&D (IPR&D) and are capitalized and subject to annual impairment testing. As of January 31, 2021, the Company had in-process research and development recorded for $31.6 million. Upon successful completion of each project, the Company makes a separate determination of useful lives of the acquired indefinite-lived intangible assets and the related amortization is recorded as an expense over the estimated useful lives of the

specific projects. Indefinite-lived intangible assets are subject to an annual assessment for impairment using a fair-value based test and between annual tests whenever a triggering event indicates there may be an impairment.

The Company uses a discounted future cash flow method (quantitative analysis) to estimate the fair value of indefinite-lived intangible assets, which is based on expected future cash flows attributable to the respective assets. Significant estimates and assumptions are inherent in the valuation of intangible assets. The valuation of intangibles takes into consideration other marketplace participants, and includes the amount and timing of future cash flows (including expected growth rates, discount rates, and profitability) and product obsolescence factors. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. Accordingly, the Company typically engages third-party valuation specialists, who work under the direction of management, to assist in valuing intangible assets acquired.

For the fiscal 2021 annual assessment, the Company's quantitative assessment indicated no impairment, with the fair value of the indefinite-lived assets exceeding the carrying value of the assets. Management's assessment assumes that the Company will commercialize autonomous products during fiscal 2022.

ACCOUNTING PRONOUNCEMENTS

See Note 1 "Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for a summary of recent accounting pronouncements.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future, not past or historical events. Without limiting the foregoing, the words "anticipates," "believes," "expects," "intends," "may," "plans," "should," "estimate," "would," "will," "predict," "project," "potential," and similar expressions are intended to identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act.

Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions when made, there is no assurance that such assumptions are correct or that these expectations will be achieved. Assumptions involve important risks and uncertainties that could significantly affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions, which could affect sales and profitability in some of the Company's primary markets, such as agriculture and construction and oil and gas drilling; or changes in raw material availability, commodity prices, competition, technology or relationships with the Company's largest customers, risks and uncertainties relating to the impact of the COVID-19 pandemic, development of new technologies to satisfy customer requirements, possible development of competitive technologies, ability to scale production of new products without negatively impacting quality and cost, risks of operating in foreign markets, risks relating to acquisitions, including risks of integration or unanticipated liabilities or contingencies, and ability to finance investment and net working capital needs for new development projects, any of which could adversely impact any of the Company's product lines, risks of litigation, as well as other risks described in Item 1A "Risk Factors" of this Annual Report on Form 10-K. The foregoing list is not exhaustive and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.


ITEM 7A.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The exposure to market risks pertains mainly to changes in interest rates on cash and cash equivalents. The Company's outstanding debt as of January 31, 2021, relates to a long-term note, that bears no interest until April 2023, with an outstanding balance of $2.0 million and $0.8 million of financing lease obligations. The Company does not expect net income or cash flows to be significantly affected by changes in interest rates.

The Company's subsidiaries that operate outside the United States use their local currency as the functional currency. The functional currency is translated into U.S. dollars for balance sheet accounts using the period-end exchange rates and average exchange rates for the statement of income. Cash and cash equivalents held in foreign currency (primarily Euros and Canadian dollars) totaled $2.1 million and $5.3 million at January 31, 2021 and 2020, respectively. Adjustments resulting from financial statement translations are included as cumulative translation adjustments in "Accumulated other comprehensive income (loss)" within shareholders' equity. Foreign currency transaction gains or losses are recognized in the period incurred and are included in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income. Foreign currency fluctuations had no material effect on the Company's financial condition, results of operations, or cash flows.

The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. However, the Company does utilize derivative financial instruments to manage the economic impact of fluctuation in foreign currency exchange rates on those transactions that are denominated in currency other than its functional currency, which is the U.S. dollar. Such transactions are principally Canadian dollar-denominated transactions. The use of these financial instruments had no material effect on the Company's financial condition, results of operations, or cash flows in any of the three previous years.


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements
		Page
Management's Report on Internal Control Over Financial Reporting		32
Reports of Independent Registered Public Accounting Firm - Deloitte & Touche LLP		33
Consolidated Financial Statements
	Consolidated Balance Sheets	36
	Consolidated Statements of Income and Comprehensive Income	37
	Consolidated Statements of Shareholders' Equity	38
	Consolidated Statements of Cash Flows	39
	Notes to Consolidated Financial Statements	40

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed effectiveness of the Company's internal control over financial reporting as of January 31, 2021. In making its assessment of effectiveness of internal control over financial reporting, management used the criteria described by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on this assessment using those criteria, we concluded that, as of January 31, 2021, the Company's internal control over financial reporting was effective at a reasonable assurance level.

The effectiveness of our internal control over financial reporting as of January 31, 2021, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which appears on the next page.


/s/ DANIEL A. RYKHUS						/s/ TAIMUR SHARIH
Daniel A. Rykhus						Taimur Sharih
President and Chief Executive Officer						Vice President and Chief Financial Officer

March 24, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Raven Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Raven Industries, Inc. and subsidiaries (the "Company") as of January 31, 2021 and 2020, the related consolidated statements of income and comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended January 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2021, in conformity accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 24, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Intangible Assets – Autonomy Reporting Unit and In-Process Research and Development— Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The goodwill balance is $107.7 million as of January 31, 2021, of which $56.6 million is allocated to the Autonomy reporting unit. The Company determines the fair value of its Autonomy reporting unit at least annually using a discounted cash flow analysis. The Company has indefinite-lived in-process research and development (“IPR&D”) assets that are associated with the Autonomy reporting unit as well. As of January 31, 2021, the carrying value of the IPR&D assets is $31.6 million. Management estimates the fair value of IPR&D at least annually using an excess earnings method, which is a specific discounted cash flow method. The determination of the fair values using the discounted cash flow methods requires management to make significant estimates and assumptions related to projected revenue growth rates, projected operating profit margins, and the applicable discount rates. The Company has not yet commercialized the autonomous products that will drive the future revenues for the Autonomy reporting unit and associated IPR&D assets.

The fair value of the Autonomy reporting unit and IPR&D intangible assets exceeded the carrying value as of the measurement date and, therefore, no impairment was recognized. Changes in these assumptions could have a significant impact on both the

fair values and the amount of any impairment charges.

Given the significant judgments made by management to estimate the fair values of the Autonomy reporting unit and the IPR&D, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of applicable discount rates, and projections of revenue growth rates and operating profit margins, specifically considering the autonomous products are not yet commercialized, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the projected revenue growth rates, projected operating profit margins, and the selection of discount rates used by management to estimate the fair value of the Autonomy reporting unit and the IPR&D included the following, among others:

•We tested the effectiveness of controls over management’s goodwill and IPR&D impairment evaluation, including those over the determination of the fair value of the Autonomy reporting unit and the IPR&D assets, such as controls related to management’s selection of the discount rates and projections of revenue growth rates and operating profit margins.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rates, including testing the source information underlying the determination of the discount rates, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

•Due to the lack of historical experience available for the autonomous products, we evaluated the reasonableness of management’s projected revenue growth rates and operating profit margins by comparing the forecasts to (1) internal communications to management and the Board of Directors, (2) external communications made by management to analysts, investors and potential customers, (3) management’s estimates of market demand, including consideration of external market sources, (4) forecasted information included in analyst and industry reports for the Company and certain of its peer companies, and (5) the historical operating results of the Company’s existing products.

•We performed inquiries of the R&D personnel that oversee the ongoing IPR&D projects to assess whether there were any indicators that may suggest the IPR&D assets may be impaired.

•We performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the Autonomy reporting unit and IPR&D assets that would result from changes in the assumptions.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota

March 24, 2021

We have served as the Company's auditor since 2017.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Raven Industries, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Raven Industries, Inc. and subsidiaries (the “Company”) as of January 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2021, of the Company and our report dated March 24, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota

March 24, 2021


RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)


	As of January 31,
	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	32,938	$	20,707
Accounts receivable, net	48,669		62,552
Inventories, net	52,703		53,899
Other current assets	5,776		5,436
Total current assets	140,086		142,594

Property, plant and equipment, net	106,007		100,850
Goodwill	107,677		106,509
Intangible assets, net	44,585		46,217
Other assets	11,016		7,087
TOTAL ASSETS	$	409,371	$	403,257

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	18,639	$	14,893
Accrued liabilities	30,401		20,743
Other current liabilities	2,998		2,287
Total current liabilities	52,038		37,923

Long-term debt	1,981		225
Other liabilities	23,997		29,161
Total liabilities	78,016		67,309

Commitments and contingencies (see Note 13)
Redeemable noncontrolling interest	—		21,302

Raven Industries, Inc. shareholders' equity
Common stock, $1.00 par value, authorized shares 100,000; issued 67,533 and 67,436 respectively	67,533		67,436
Additional paid-in capital	66,670		61,508
Retained earnings	311,676		302,300
Accumulated other comprehensive loss	(3,341)		(5,415)
Less treasury stock at cost, 31,665 and 31,665 shares, respectively	(111,183)		(111,183)
Total shareholders' equity	331,355		314,646
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	409,371	$	403,257

The accompanying notes are an integral part of the consolidated financial statements.


RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars in thousands, except per-share amounts)


	For the years ended January 31,
	2021		2020		2019
Net sales	$	348,359	$	382,530	$	406,668
Cost of sales	230,557		258,783		274,119
Gross profit	117,802		123,747		132,549

Research and development expenses	43,094		31,558		26,174
Selling, general and administrative expenses	55,057		52,250		51,242
Operating income	19,651		39,939		55,133

Other income (expense), net	(476)		95		6,437
Income before income taxes	19,175		40,034		61,570

Income tax expense	397		5,421		9,697
Net income	18,778		34,613		51,873

Net income (loss) attributable to the noncontrolling and redeemable noncontrolling interest	(98)		(583)		79

Net income attributable to Raven Industries, Inc.	$	18,876	$	35,196	$	51,794

Net income per common share:
Basic	$	0.52	$	0.98	$	1.44
Diluted	$	0.52	$	0.97	$	1.42

Comprehensive income:
Net income	$	18,778	$	34,613	$	51,873

Other comprehensive income (loss):
Foreign currency translation	2,299		(994)		(1,045)
Postretirement benefits, net of income tax (expense) benefit of $65, $251, and $(99), respectively	(225)		(865)		342
Other comprehensive income (loss), net of tax	2,074		(1,859)		(703)

Comprehensive income	20,852		32,754		51,170

Comprehensive income (loss) attributable to noncontrolling and redeemable noncontrolling interest	(98)		(583)		79
Comprehensive income attributable to Raven Industries, Inc.	$	20,950	$	33,337	$	51,091

The accompanying notes are an integral part of the consolidated financial statements.


RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per-share amounts)



	$1 Par Common Stock		Additional Paid-in Capital		Treasury Stock At Cost		Retained Earnings		Accumulated Other Comprehen-sive Income (Loss)		Raven Industries, Inc. Equity		Non-controlling Interest		Total Equity		Redeem-able Non-controlling Interest

Balance January 31, 2018	$	67,124	$	59,143	$	(100,402)	$	252,772	$	(2,573)	$	276,064	$	2	$	276,066	$	—
Net income	—		—		—		51,794		—		51,794		79		51,873		—
Other comprehensive (loss), net of income tax	—		—		—		—		(703)		(703)		—		(703)		—
Reclassification due to ASU 2018-02 adoption	—		—		—		280		(280)		—		—		—		—
Cash dividends ($0.52 per share)	—		203		—		(18,877)		—		(18,674)		—		(18,674)		—
Dividends of less than wholly-owned subsidiary paid to noncontrolling interest	—		—		—		—		—		—		(79)		(79)		—

Shares issued on stock options exercised, net of shares withheld for employee taxes	113		(2,750)		—		—		—		(2,637)		—		(2,637)		—
Shares issued on vesting of stock units, net of shares withheld for employee taxes	52		(892)		—		—		—		(840)		—		(840)		—

Share-based compensation	—		3,951		—		—		—		3,951		—		3,951		—
Balance January 31, 2019	67,289		59,655		(100,402)		285,969		(3,556)		308,955		2		308,957		—
Net income (loss)	—		—		—		35,196		—		35,196		(1)		35,195		(582)
Other comprehensive (loss), net of income tax	—		—		—		—		(1,859)		(1,859)		—		(1,859)		—
Business acquisition of less than wholly-owned subsidiary (See Note 6)	—		—		—		—		—		—		—		—		24,315
Redemption of noncontrolling interest	—		199		—		—		—		199		—		199		(2,431)
Cash dividends ($0.52 per share)	—		216		—		(18,865)		—		(18,649)		—		(18,649)		—
Dividends of less than wholly-owned subsidiary paid to noncontrolling interest	—		—		—		—		—		—		(1)		(1)		—
Shares issued on stock options exercised, net of of shares withheld for employee taxes	41		(1,069)		—		—		—		(1,028)		—		(1,028)		—
Shares issued on vesting of stock units, net of shares withheld for employee taxes	106		(2,464)		—		—		—		(2,358)		—		(2,358)
Shares repurchased	—		—		(10,781)		—		—		(10,781)		—		(10,781)		—
Share-based compensation	—		4,971		—		—		—		4,971		—		4,971		—
Balance January 31, 2020	67,436		61,508		(111,183)		302,300		(5,415)		314,646		—		314,646		21,302
Net income (loss)	—		—		—		18,876		—		18,876		—		18,876		(98)
Other comprehensive income, net of income tax	—		—		—		—		2,074		2,074		—		2,074		—

Redemption of noncontrolling interest	—		215		—		—		—		215		—		215		(21,204)
Cash dividends ($0.26 per share)	—		182		—		(9,500)		—		(9,318)		—		(9,318)		—

Director shares issued	9		(9)		—		—		—		—		—		—		—
Shares issued on stock options exercised, net of shares withheld for employee taxes	26		(431)		—		—		—		(405)		—		(405)		—
Shares issued on vesting of stock units, net of shares withheld for employee taxes	62		(861)		—		—		—		(799)		—		(799)		—

Share-based compensation	—		6,066		—		—		—		6,066		—		6,066		—
Balance January 31, 2021	$	67,533	$	66,670	$	(111,183)	$	311,676	$	(3,341)	$	331,355	$	—	$	331,355	$	—

The accompanying notes are an integral part of the consolidated financial statements.


RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)


	For the years ended January 31,
	2021		2020		2019
OPERATING ACTIVITIES:
Net income	$	18,778	$	34,613	$	51,873
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	14,893		13,770		13,296
Amortization of intangible assets	2,528		2,471		1,827
Change in fair value of acquisition-related contingent consideration	(437)		412		708
Gain from sale of equity method investments	—		—		(5,785)
Deferred income taxes	(4,320)		1,506		953
Share-based compensation expense	6,066		4,971		3,951
Other operating activities, net	(295)		(335)		(2,424)
Change in operating assets and liabilities	18,259		(2,536)		1,553
Net cash provided by operating activities	55,472		54,872		65,952

INVESTING ACTIVITIES:
Capital expenditures	(16,147)		(8,560)		(14,127)
Payments related to business acquisitions, net of cash acquired	—		(53,317)		(7,671)
Proceeds from sale or maturities of investments	587		1,170		7,334
Purchases of investments	(289)		(1,118)		(745)
Proceeds from sale of assets	251		3,459		832
Other investing activities, net	(315)		(243)		(2,067)
Net cash used in investing activities	(15,913)		(58,609)		(16,444)

FINANCING ACTIVITIES:
Dividends paid	(9,318)		(18,650)		(18,753)
Payments for common shares repurchased	—		(10,781)		—
Proceeds from debt	51,685		33,593		—
Repayments of debt	(50,000)		(39,762)		—
Payments for redeemable noncontrolling interest	(17,853)		—		—
Payment of acquisition-related contingent liabilities	—		(1,306)		(1,324)
Restricted stock units vested and issued, net of taxes	(799)		(2,358)		(840)
Employee stock option exercises net of tax benefit	(405)		(1,028)		(2,637)
Other financing activities, net	(441)		(595)		(201)
Net cash used in financing activities	(27,131)		(40,887)		(23,755)
Effect of exchange rate changes on cash	(197)		(456)		(501)
Net increase (decrease) in cash and cash equivalents	12,231		(45,080)		25,252
Cash and cash equivalents at beginning of year	20,707		65,787		40,535
Cash and cash equivalents at end of year	$	32,938	$	20,707	$	65,787

The accompanying notes are an integral part of the consolidated financial statements.


RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per-share amounts)


NOTE 1			SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

Raven Industries, Inc. (the Company or Raven) is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air, and aerospace and defense markets. The Company conducts this business through the following direct and indirect subsidiaries: Aerostar International, Inc. (Aerostar); Aerostar Technical Solutions, Inc. (ATS), Aerostar Integrated Systems, LLC (AIS); Dot Technology Corp. (DOT); Raven CLI Construction, Inc.; Raven Engineered Films, Inc.; Raven Slingshot, Inc.; Raven International Holding Company BV (Raven Holdings); Raven Industries Canada, Inc. (Raven Canada); Raven Europe BV (formerly known as SBG Innovatie BV or "SBG"); Raven Industries Australia Pty Ltd (Raven Australia); Raven Industries Holding, LLC, and Raven do Brasil Participacoes E Servicos Technicos LTDA (Raven Brazil). The Company and these subsidiaries comprise three unique operating units, or divisions, classified into three reportable business segments (Applied Technology, Engineered Films, and Aerostar).

The consolidated financial statements for the periods included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned or controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

In March 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic. The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company's business. The broader implications of the COVID-19 pandemic on the Company's financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company's customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may continue to experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.

Business Combinations

The Company accounts for the acquisition of a business using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to noncontrolling interest, are recorded at their fair values upon acquisition. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. Independent valuation specialists are used to assist in determining certain fair value calculations. The Company may refine these estimates, if necessary, during the measurement period by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including estimating future cash flows based on revenues and margins that the Company expects to generate following the acquisition, applying an appropriate discount rate to estimate a present value of those cash flows and determining their useful lives. Subsequent changes to projections driven by actual results following the acquisition date could require the Company to record impairment charges.

Acquisition-related costs are recognized as an expense when incurred and are classified as selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. Acquisition-related costs incurred were not material for any of the periods presented in this Form 10-K.

Noncontrolling and Redeemable Noncontrolling Interest

Noncontrolling interests represent capital contributions and income and loss attributable to the owners of less than wholly-owned and consolidated entities. Noncontrolling interests in subsidiaries that are redeemable for cash or other assets outside of

(Dollars in thousands, except per-share amounts)

the Company’s control are classified as mezzanine equity, at the greater of the carrying value or the redemption value, and therefore are not included in either equity or liabilities. The increases or decreases in the estimated redemption amount are recorded with corresponding adjustments to paid-in capital.

The Company owned a 75% interest in a business venture, AIS, to pursue potential product and support services contracts through U.S. government agencies. The Company acquired the remaining 25% noncontrolling interest of AIS in the fourth quarter of fiscal year 2020 at an immaterial additional cost to the Company. This business venture is included in the Aerostar segment.

The Company acquired a majority ownership in DOT in the fiscal year 2020 fourth quarter. Due to the redemption features provided to the minority shareholders in the acquisition, the 36% remaining noncontrolling interest was classified as a redeemable noncontrolling interest in the Company’s Consolidated Balance Sheets as of January 31, 2020. At January 31, 2020, redeemable noncontrolling interests were reported at their carrying value of $21,302 versus the redemption value, as the carrying value was greater than the estimated redemption value. During the second quarter of fiscal year 2021, the Company closed on the transaction to purchase the shares of the largest minority interest shareholder for $17,853 giving the Company full voting control of DOT. The majority ownership in DOT and redeemable noncontrolling interest is further described in Note 6 "Acquisitions and Investments in Businesses and Technologies," and aligns under the Applied Technology segment.

Prior to acquiring the noncontrolling interest in AIS and DOT, the accounts of AIS and DOT were consolidated with the accounts of the Company and a noncontrolling interest was recorded for the noncontrolling investor's interests in the net assets and operations of the business venture.

Related Party Transactions

Following the acquisition of DOT, the Company sold products to, paid rent to, and purchased services for manufacturing, research and development (R&D), selling, and administration from a business owned by the largest minority interest shareholder of DOT. All of the shares formerly held by this minority interest shareholder were acquired in the second quarter of fiscal year 2021 and are owned by Raven; therefore, no transactions with this previous shareholder after July 31, 2020 are considered related party transactions. The total of the related party transactions was $1,954 for the six-month period ended July 31, 2020, none of which was in accounts payable at January 31, 2021. The total of these related party transactions was $3,176 for fiscal year 2020, of which $409 was reported in accounts payable at January 31, 2020.

Equity Investments

The Company owned an interest of approximately 5% in Ag-Eagle Aerial Systems, Inc. (AgEagle) before being sold for an immaterial gain in fiscal year 2019. The Company accounted for its investment in AgEagle under the equity method of accounting as the Company had the ability to exercise significant influence over the operating policies of AgEagle; however the Company did not hold a controlling financial interest.

The Company owned an interest of approximately 22% in Site-Specific Technology Development Group, Inc. (SST) before being sold in fiscal year 2019. The Company's proceeds from the sale of its ownership interest in SST were $6,556 and was reported as "Proceeds from sale or maturity of investments" in the Consolidated Statements of Cash Flows in fiscal year 2019. The Company recognized a gain of $5,785 from the sale reported as "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income for the fiscal year ended January 31, 2019. This amount included a fifteen percent hold-back provision held in an escrow account which was collected in fiscal 2020.

The Company's share of the results of AgEagle and SST operations are included in "Other income (expense), net" for fiscal year 2019.

Use of Estimates

Preparing the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make certain estimates and assumptions. These affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's forecasts, based principally on estimates, are critical inputs to asset valuations such as those for inventory or goodwill. These assumptions and estimates require significant judgment and actual results could differ from assumed and estimated amounts.

Foreign Currency

The Company's subsidiaries that operate outside the United States use the local currency as their functional currency. The functional currency is translated into U.S. dollars for balance sheet accounts using the period-end exchange rates and average exchange rates for the Consolidated Statements of Income and Comprehensive Income. Adjustments resulting from financial

(Dollars in thousands, except per-share amounts)

statement translations are included as foreign currency translation adjustments in "Accumulated other comprehensive income (loss)" within shareholders' equity in the Consolidated Balance Sheets. Foreign currency transaction gains or losses are recognized in the period incurred and are included in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income. Foreign currency transaction gains and losses were not material for fiscal years 2021, 2020 and 2019. Foreign currency transaction gains or losses on intercompany notes receivable and notes payable denominated in foreign currencies for which settlement is not planned in the foreseeable future are considered part of the net investment and are reported in the same manner as foreign currency translation adjustments.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three or fewer months to be cash equivalents. Cash and cash equivalent balances are principally concentrated in checking and money market funds. Certificates of deposit that mature in over 90 days but less than one year are considered short-term investments. Certificates of deposit that mature in one year or more are considered to be other long-term assets and are carried at cost. The Company held cash and cash equivalents in accounts in the United States of $30,721 and $14,003 as of January 31, 2021 and 2020, respectively. The Company held cash and cash equivalents in accounts outside the United States of $2,217 and $6,704 as of January 31, 2021 and 2020, respectively.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at the invoiced amount, do not bear interest, and are considered past due based on invoice terms. The allowance for credit losses is the Company’s best estimate of expected credit losses on trade accounts receivables over their contractual life. The Company's expected credit losses is based on each segments' various macroeconomic indicators, updated Company forecast information and historical write-off experience by segment and an estimate of the collectability of significant past due accounts. Unbilled receivables arise when revenues have been earned, but not billed, and are related to differences in timing. Unbilled receivables were $2,734 and $6,954 as of January 31, 2021 and 2020, respectively.

Inventory Valuation

Inventories are carried at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Property, Plant and Equipment

Property, plant and equipment held for use is carried at the asset's cost and depreciated over the estimated useful life of the asset.

The estimated useful lives used for computing depreciation are as follows:


Building and improvements			15 - 39 years
Manufacturing equipment by segment
Applied Technology			3 - 5 years
Engineered Films			5 - 12 years
Aerostar			3 - 5 years
Furniture, fixtures, office equipment, and other			3 - 7 years

The cost of maintenance and repairs is charged to expense in the period incurred, and renewals and betterments are capitalized. The cost and related accumulated depreciation of assets sold or disposed are removed from the accounts and the resulting gain or loss is reflected in the Consolidated Statements of Income and Comprehensive Income.

Leases

The Company adopted the new lease accounting standard, "Accounting Standards Codification Topic 842 Leases (ASC 842)" using the modified retrospective method for all agreements existing as of February 1, 2019. Results for fiscal year 2021 and 2020 are presented under ASC 842.

The Company recognizes a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease. The right-of-use assets are amortized on a straight-line basis over the lease term, and are tested for impairment in a manner consistent with the other long-lived assets held by the Company.

(Dollars in thousands, except per-share amounts)

Fair Value Measurements

Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses the established fair value hierarchy, which classifies or prioritizes the inputs used in measuring fair value. These classifications include:

Level 1 - Observable inputs such as quoted prices in active markets.

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 - Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company's financial assets required to be measured at fair value on a recurring basis include cash and cash equivalents, short-term investments and mutual funds. The Company determines the fair value of its cash equivalents, short-term investments and mutual funds through quoted market prices. Mutual funds relate to the Company's deferred compensation plan further described within Note 8 "Employee Postretirement Benefits." The fair values of accounts receivable and accounts payable approximate their carrying values because of the short-term nature of these instruments.

The Company's goodwill and long-lived assets, including intangible assets subject to amortization, are measured at fair value on a non-recurring basis. These valuations are derived from valuation techniques in which one or more significant inputs are not observable. Fair value measurements associated with goodwill and long-lived assets are further described in Note 7 "Goodwill and Long-Lived Assets."

For all acquisitions, the Company is required to measure the fair value of the net identifiable tangible and intangible assets acquired. In addition, the Company determines the estimated fair value of contingent consideration as of the acquisition date, and subsequently at the end of each reporting period. These valuations are derived from valuation techniques in which one or more significant inputs are not observable. Fair value measurements associated with acquisitions, including acquisition-related contingent liabilities, are described in Note 6 "Acquisitions and Investments in Businesses and Technologies."

Definite-Lived Intangible Assets

Intangible assets, primarily comprised of technologies acquired through acquisitions, are recorded at cost and presented net of accumulated amortization. Amortization is computed using the method that best approximates the pattern of economic benefits which the asset provides. The Company has used both the straight-line method and the undiscounted cash flows method to appropriately allocate the cost of intangible assets to earnings in each reporting period.

The straight-line method allocates the cost of such intangible assets ratably over the asset’s life. Under the undiscounted cash flow method, the estimated cash flow attributable to each year of an intangible asset’s life is calculated as a percentage of the total of the cash flows over the asset’s life and that percentage is applied to the initial value of the asset to determine the annual amortization to be recorded.

Intangible assets also include patents, trademarks, and other product rights attained to protect the Company’s intellectual property. The estimated useful lives of the Company’s intangible assets range from 3 to 20 years.

Indefinite-lived Intangible Assets

The Company acquired in-process R&D (IPR&D) intangible assets in business combinations transacted during the fourth quarter of fiscal year 2020. These assets are accounted for as indefinite-lived intangible assets and will be amortized when the associated R&D project is completed or abandoned. Upon completion of each project, a determination of the useful life of the acquired intangible assets is made and amortization is recorded to expense over the useful life. Management expects the R&D projects related to the IPR&D intangible assets will be completed in fiscal 2022. These assets are classified as "Intangible assets, net" on the Consolidated Balance Sheets.

Indefinite-lived intangible assets are tested for impairment on an annual basis and between annual tests, whenever a triggering event indicates there may be an impairment. Management has determined that the IPR&D constitutes a single asset, with no separate identifiable cash flows. Prior to completing a quantitative assessment, the Company may perform a qualitative assessment over relevant events and circumstances to determine whether it is more likely than not that the fair value is less than the carrying value. If the assessment indicates that fair value may be less than its carrying value, then the fair values are estimated based on a discounted cash flow method analysis (quantitative analysis). If the fair value of the assets is less than the carrying value, an impairment loss is recognized for the amount that the carrying value exceeds fair value. When performing indefinite-lived intangible asset impairment testing, the fair values of assets are determined based on valuation techniques,

(Dollars in thousands, except per-share amounts)

using the best available information. Such valuations are derived from valuation models in which one or more significant inputs are not observable (Level 3 fair value measures).

Goodwill

The Company recognizes goodwill as the excess cost of an acquired business over the net amount assigned to assets acquired and liabilities assumed. Goodwill is allocated to the reporting units that are expected to benefit from the synergies of the business combination. Acquisition earn-out payments are accrued at fair value as of the purchase date and payments reduce the accrual without affecting goodwill. Any change in the fair value of the contingent consideration after the acquisition date is recognized in "Cost of sales" in the Consolidated Statements of Income and Comprehensive Income.

Goodwill is tested for impairment on an annual basis during the fourth quarter and between annual tests whenever a triggering event indicates there may be an impairment. Impairment tests of goodwill are performed at the reporting unit level. Prior to completing a quantitative assessment, the Company may perform a qualitative impairment assessment over relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the assessment indicates the fair value of a reporting unit may be less than its carrying value, the Company will perform a quantitative assessment. In a quantitative assessment, the fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. The estimated fair value is compared with the corresponding carrying value of the reporting unit. If the fair value of the reporting unit is less than the carrying amount, a goodwill impairment loss is recognized for the amount that the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to the reporting unit. When performing goodwill impairment testing, the fair values of reporting units are determined based on valuation techniques, using the best available information. Such valuations are derived from valuation models in which one or more significant inputs are not observable (Level 3 fair value measures).

Long-Lived Assets

The Company periodically assesses the recoverability of long-lived tangible and intangible assets, including right-of-use assets. An impairment loss is recognized when the carrying amount of an asset group exceeds the estimated undiscounted cash flows used in determining the fair value of the asset group. The amount of the impairment loss to be recorded is the excess of the carrying value of the assets within the group over their fair value. When performing long-lived asset impairment testing, the fair values of an asset are determined based on valuation techniques using the best available information. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures).

Long-lived assets determined to be held for sale and classified as such in accordance with the applicable guidance are reported as long-term assets at the lower of the asset's carrying amount or fair value less the estimated cost to sell. Depreciation is not recorded once a long-lived asset has been classified as held for sale.

Acquisition-Related Contingent Consideration

Acquisition-related contingent consideration represents an obligation of the Company to transfer additional assets or equity interests if specified future events occur or conditions are met. This contingency is accounted for at fair value either as a liability or equity depending on the terms of the acquisition agreement. The Company determines the estimated fair value of contingent consideration as of the acquisition date, and subsequently at the end of each reporting period. In doing so, the Company makes significant estimates and assumptions regarding future events or conditions being achieved under the subject contingent agreement as well as the appropriate discount rate to apply. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures).

Litigation and Contingencies

Legal costs are recognized as an expense in the period incurred. The Company is involved as a party in lawsuits, claims, regulatory inquiries, or disputes arising in the normal course of business, some of which allege substantial monetary damages. The Company accrues for any loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate than any other amount within the range, the minimum amount of the range is recorded as a liability. Amounts recovered by insurance, if any, are recognized when they are realized.

Revenue Recognition

Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

When determining whether the customer has obtained control of the goods or services, the Company considers any future

(Dollars in thousands, except per-share amounts)

performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. In the event significant post-shipment obligations were to exist, revenue recognition would be deferred until the Company had substantially accomplished what it must do to be entitled to the benefits represented by the revenue. Estimated returns, sales allowances, and warranty charges, if applicable, are recorded at the same time revenue is recorded.

Performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for purposes of revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts involving large quantities, the Company accounts for each piece of equipment product separately, as each is a distinct performance obligation from which the customer derives benefit. For contracts with multiple performance obligations, standalone selling price is generally readily observable. The Company’s performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods and services transferred to customers at a point in time accounts for a majority of the Company’s revenues. Revenue on these contracts is recognized when obligations under the terms of the contract with our customer are satisfied; generally this occurs with the transfer of control upon shipment.

The Company uses an input measure to determine progress towards completion for revenue generated from products and services transferred to customers over time. Under this method, net sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion ("the cost-to-cost method") or based on efforts for measuring progress towards completion in situations in which this approach is more representative of the progress on the contract than the cost-to-cost method. Contract costs include labor, material, overhead and, when appropriate, general and administrative expenses. Changes to the original estimates may be required during the life of the contract, and such estimates are reviewed on a regular basis. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs. For performance obligations related to service contracts, when estimates of total costs to be incurred on a performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

Sales returns

The right of return may exist explicitly or implicitly with our customers. The Company’s return policy allows for customer returns only upon the Company's authorization. Goods returned must be a product the Company continues to market and must be in salable condition. When the right of return exists, we adjust the transaction price for the estimated effect of returns. We estimate the expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer and a projection of this experience into the future.

Shipping and handling costs

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in net sales in the accompanying Consolidated Statements of Income and Comprehensive Income. Shipping and handling costs incurred by the Company for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying Consolidated Statements of Income and Comprehensive Income.

Sales tax

Taxes that are collected by the Company from a customer, which are assessed by governmental authorities that are both imposed upon and concurrent with a specific revenue-producing transaction, are excluded from revenues.

Operating Expenses

The primary types of operating expenses are classified in the income statement as follows:

Cost of sales

Research and development (R&D) expenses

Selling, general, and administrative (SG&A) expenses

Direct material costs

Material acquisition and handling costs

Direct labor

Factory overhead including depreciation and amortization

Inventory obsolescence

Product warranties

Shipping and handling cost

Personnel costs
Professional service fees
Material and supplies
Facility allocation

Personnel costs
Professional service fees
Advertising
Promotions
Information technology equipment depreciation
ERP license fees
Facility allocation
Credit loss expense

(Dollars in thousands, except per-share amounts)

Total engineering costs consist of R&D and other engineering support related expenses. R&D costs are internal direct and indirect costs associated with development of technologies to support the Company's proprietary product lines in each of its divisions. These R&D costs are expensed as incurred. Engineering support related expenses may be allocated to overhead, and thus cost of sales, or R&D expenses based on the focus of the engineering effort.

General and administrative expenses included in SG&A are not allocated at the segment level. The Company's gross margin and segment operating income may not be comparable to industry peers due to variability in the classification of these expenses across the industries in which the Company operates.

Warranties

Accruals necessary for product warranties are estimated based on historical warranty costs in relation to sales and average time elapsed between purchases and claims for each division. Additional accruals are made for any significant, discrete warranty issues.

Share-Based Compensation

The Company records compensation expense related to its share-based compensation plans using the fair value method. Under this method, the fair value of share-based compensation is determined as of the grant date and the related expense is recorded over the period in which the share-based compensation vests.

Income Taxes

Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company's assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance to reflect realizable value. All deferred tax balances are reported as long-term on the Consolidated Balance Sheets. Accruals are maintained for uncertain tax positions.

Accounting Pronouncements

Accounting Standards Adopted

In the first quarter of fiscal year 2021, the Company adopted, Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" (ASU 2018-13), when it became effective. The amendments in ASU 2018-13 remove, modify, and add required disclosures for companies related to recurring and nonrecurring fair value measurements under Topic 820. Certain amendments in this guidance are required to be applied prospectively, and others are to be applied retrospectively. The amendments in ASU 2018-13 only related to financial statement disclosures and did not have a significant impact on the Company's consolidated financial statements or its note disclosures.

In the first quarter of fiscal year 2021, the Company adopted FASB ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), when it became effective along with all subsequent amendments to Topic 326 issued by FASB. Current GAAP generally delays recognition of the full amount of credit losses until the loss is deemed probable of occurring. The amendments in this guidance eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. At adoption, the Company did not have any financial instruments in scope under ASU 2016-13 other than trade accounts receivables. In accordance with ASU 2016-13, the Company updated its current expected credit loss model for its trade accounts receivable and remeasured its allowance for credit losses as of February 1, 2020. The remeasurement impact was immaterial and no cumulative accounting adjustment was recorded to retained earnings in the first quarter of fiscal year 2021.

New Accounting Standards Not Yet Adopted

There are no significant ASUs issued and not yet adopted as of January 31, 2021.

(Dollars in thousands, except per-share amounts)

NOTE 2 SELECTED BALANCE SHEET INFORMATION

Following are the components of selected balance sheet items:


	As of January 31,
	2021		2020
Accounts receivable, net:
Trade accounts	$	47,879	$	56,978
Unbilled receivables	2,734		6,954
Allowance for credit losses	(1,944)		(1,380)
	$	48,669	$	62,552
Inventories, net:
Finished goods	$	7,684	$	6,309
In process	759		3,287
Materials	44,260		44,303
	$	52,703	$	53,899
Other current assets:
Federal income tax receivable	1,440		1,370
Prepaid expenses and other	4,336		4,028
Insurance policy benefit	$	—	$	38
	$	5,776	$	5,436
Property, plant and equipment, net(a):
Land	$	3,117	$	3,117
Buildings and improvements	84,651		80,330
Machinery and equipment	169,252		158,354
Financing lease right-of-use assets	1,282		881
	258,302		242,682
Accumulated depreciation	(152,295)		(141,832)
	$	106,007	$	100,850
Other assets:
Equity investments	$	1,595	$	1,289
Operating lease right-of-use assets	6,850		4,275
Deferred income taxes	360		16
Other	2,211		1,507
	$	11,016	$	7,087
Accrued liabilities:
Salaries and related	$	4,881	$	4,188
Benefits	6,255		5,339
Insurance obligations	1,896		1,680
Warranties	2,068		2,019
Income taxes	238		293
Other taxes	2,386		1,734
Acquisition-related contingent consideration	2,000		763
Lease liability	2,482		2,530
Other	8,195		2,197
	$	30,401	$	20,743
Other liabilities:
Postretirement benefits	$	8,996	$	8,741
Acquisition-related contingent consideration	—		2,171
Lease liability	5,426		2,627
Deferred income taxes	2,091		7,080
Uncertain tax positions	2,692		2,606
Other	4,792		5,936
	$	23,997	$	29,161

(a) Includes assets held for use and assets held for sale. The amount of assets held for sale as of January 31, 2021, and January 31, 2020, were not material.

(Dollars in thousands, except per-share amounts)


NOTE 3			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of shareholders' equity but are excluded from net income. The changes in the components of accumulated other comprehensive income (loss) (AOCI) are shown below:


	Cumulative foreign currency translation adjustment		Postretirement benefits		Total
Balance at January 31, 2019	$	(2,238)	$	(1,318)	$	(3,556)
Other comprehensive (loss) before reclassifications	(994)		—		(994)

Amounts reclassified from accumulated other comprehensive (loss) after tax benefit of $251	—		(865)		(865)
Balance at January 31, 2020	(3,232)		(2,183)		(5,415)
Other comprehensive income before reclassifications	2,299		—		2,299
Amounts reclassified from accumulated other comprehensive (loss) after tax benefit of $65	—		(225)		(225)
Balance at January 31, 2021	$	(933)	$	(2,408)	$	(3,341)

Postretirement benefit cost components are reclassified in their entirety from accumulated other comprehensive loss to net periodic benefit cost. Service cost is reported in net income as "Cost of sales" or "Selling, general, and administrative expenses" in a manner consistent with the classification of direct labor and personnel costs of the eligible employees. The components of the net periodic benefit cost, other than the service cost component, are classified as a non-operating expense in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income.


NOTE 4			SUPPLEMENTAL CASH FLOW INFORMATION


	For the years ended January 31,
	2021		2020		2019
Changes in operating assets and liabilities:
Accounts receivable	$	12,045	$	(9,118)	$	3,938
Inventories	(1,151)		891		1,092
Prepaid expenses and other assets	(340)		2,092		(2,440)
Accounts payable	3,408		5,493		(4,517)
Accrued and other liabilities	4,297		(1,894)		3,480
	$	18,259	$	(2,536)	$	1,553

Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes	$	4,771	$	4,377	$	8,225
Interest paid	281		267		227

Significant non-cash transactions:
Capital expenditures and other intangibles included in accounts payable and other liabilities	$	895	$	740	$	655
Redeemable noncontrolling interest in accrued liabilities	5,333		—		—
Redeemable noncontrolling interest in other liabilities	—		2,224		—
Assets acquired under capital leases	—		—		38
Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	677	$	435	$	—
Operating leases	5,555		1,924		—
Capital expenditures converted from inventories	2,930		—		—

(Dollars in thousands, except per-share amounts)


NOTE 5			REVENUE

Nature of goods and services

The Company is comprised of three unique operating divisions, classified into reportable business segments: Applied Technology, Engineered Films, and Aerostar. The following is a description of principal activities, separated by segment, from which the Company generates revenue. Service revenues and contract losses are not material and are not separately disclosed. Furthermore, the Company primarily acts as a principal in transactions and recognizes revenue on a gross basis for which it is entitled from its customers.

Applied Technology

Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information management tools, which are collectively referred to as precision agriculture equipment, that help farmers reduce costs, more precisely control inputs, and improve farm yields for the global agriculture market. Customers can purchase precision agriculture equipment individually or in large quantities. For purchases made in large quantities, the Company accounts for each piece of equipment separately, as each is a distinct performance obligation from which the customer derives benefit. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products in similar circumstances. Kits or bundles, which can consist of various pieces of equipment, are shipped together and therefore allocation of transaction price does not impact timing of revenue recognition. In the normal course of business the customer agrees to a fixed price and revenue is recognized when control has transferred to the customer.

Engineered Films

Engineered Films produces high-performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications and also offers design-build and installation services of these plastic films and sheeting. Plastic film and sheeting can be purchased separately or together with installation services. The majority of transactions within Engineered Films are considered non-customized product-only sales. The Company accounts for each product separately, as each is a distinct performance obligation from which the customer derives benefit. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products in similar circumstances. In the normal course of business, the customer agrees to a fixed price and revenue is recognized when control has transferred to the customer.

The remaining transactions within Engineered Films are related to installation and/or customized product sales. Installation revenues are recognized over time using the cost incurred input method (i.e., costs incurred to date relative to total estimated costs at completion) because of continuous transfer of control to customers. For customized product-only sales, the Company recognizes revenue over time by applying an output method, such as units delivered, to measure progress.

Aerostar

Aerostar serves the aerospace and defense and commercial lighter-than-air markets. Aerostar's core products include high-altitude stratospheric platforms, technical services, and radar systems. These products can be integrated with additional third-party sensors to provide research, communications, and situational awareness capabilities to governmental and commercial customers. Aerostar pursues product and support services contracts with U.S. government agencies. Product sales to customers for which the division does not continuously transfer control are recognized based on a point-in-time. Contracts with customers which include elements of service, and are considered to be single performance obligations, are recognized over time. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products or services in similar circumstances. In the normal course of business the customer agrees to a fixed price. For revenues recognized at a point-in-time, the Company recognizes revenue when control has transferred to the customer. Certain lighter-than-air contracts are recognized over time using the cost incurred input method. The remaining transactions are recognized over time applying an output method, such as units delivered, to measure progress.

Disaggregation of Revenues

In the following table, revenue is disaggregated by major product category and geography as the Company believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table also includes a reconciliation of the disaggregated revenue for all segments.

(Dollars in thousands, except per-share amounts)


	Revenue by Product Category
	For the year ended January 31, 2021
	ATD		EFD		AERO		ELIM(a)		Total
Lighter-than-Air
Domestic	$	—	$	—	$	36,966	$	—	$	36,966
International	—		—		68		—		68
Plastic Films & Sheeting
Domestic	—		135,842		—		(100)		135,742
International	—		12,079		—		—		12,079
Precision Agriculture Equipment
Domestic	113,640		—		—		(3)		113,637
International	33,558		—		—		—		33,558
Other
Domestic	—		—		16,300		—		16,300
International	—		—		9		—		9
Totals	$	147,198	$	147,921	$	53,343	$	(103)	$	348,359

	For the year ended January 31, 2020
	ATD		EFD		AERO		ELIM(a)		Total
Lighter-than-Air
Domestic	$	—	$	—	$	36,535	$	—	$	36,535
International	—		—		52		—		52
Plastic Films & Sheeting
Domestic	—		187,087		—		(90)		186,997
International	—		10,632		—		—		10,632
Precision Agriculture Equipment
Domestic	99,137		—		—		(2)		99,135
International	31,323		—		—		—		31,323
Other
Domestic	—		—		17,731		—		17,731
International	—		—		125		—		125
Totals	$	130,460	$	197,719	$	54,443	$	(92)	$	382,530

	For the year ended January 31, 2019
	ATD		EFD		AERO		ELIM(a)		Total
Lighter-than-Air
Domestic	$	—	$	—	$	37,866	$	—	$	37,866
International	—		—		932		—		932
Plastic Films & Sheeting
Domestic	—		208,882		—		(512)		208,370
International	—		17,692		—		—		17,692
Precision Agriculture Equipment
Domestic	100,051		—		—		(10)		100,041
International	29,698		—		—		—		29,698
Other
Domestic	—		—		12,062		—		12,062
International	—		—		7		—		7
Totals	$	129,749	$	226,574	$	50,867	$	(522)	$	406,668

(a) Intersegment sales for fiscal years 2021, 2020, and 2019 were primarily sales from Engineered Films to Aerostar.

(Dollars in thousands, except per-share amounts)

Contract Balances

Contract balances include contract assets and contract liabilities that are recorded when the Company enters into a contract with a customer. Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed (unbilled receivables) at the reporting date, or retainage provisions on billings that have been issued. Contract assets are converted to receivables when the right to collect becomes unconditional. The Company's contract assets reported at January 31, 2021 and 2020 primarily relate to Engineered Films' geomembrane installation services and service contracts for Aerostar's lighter-than air products and radar processing systems. Contract assets are reported in "Accounts receivable, net" in the Consolidated Balance Sheets.

Contract liabilities consist of customer advances and deferred revenue. Contract liabilities primarily relate to consideration received from customers prior to transferring goods or services to the customer. Contract liabilities are reported in "Other current liabilities" in the Consolidated Balance Sheets.

The changes in contract assets and liabilities were as follows:


	January 31, 2021		January 31, 2020		$ Change		% Change
Contract assets	$	3,256	$	7,525	$	(4,269)	(56.7)	%

Contract liabilities	$	2,998	$	2,288	$	710	31.0	%

During the twelve months ended January 31, 2021, the Company’s contract assets decreased by $4,269 and contract liabilities increased by $710, primarily as a result of the contract terms which include timing of customer payments, timing of invoicing, and progress made on open contracts. The Company's contract assets at January 31, 2021, are primarily unbilled receivables that will be invoiced in first quarter of next year. The Company's contract liabilities at January 31, 2021, include customer advances that will substantially all convert to revenue recognized during the next fiscal year. Due to the short-term nature of the Company’s contracts, substantially all of the contract assets that existed as of January 31, 2020, were converted to accounts receivable. In addition the Company's contract liabilities that existed as of January 31, 2020, were recognized as revenue during fiscal 2021.

Remaining performance obligations

As of January 31, 2021, the Company has no remaining performance obligations related to customer contracts that had an original expected duration of one year or more.


NOTE 6			ACQUISITIONS AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Fiscal year 2021 acquisitions.

There were no material business acquisitions in the twelve-month period ended January 31, 2021.

Fiscal year 2020 acquisitions

On November 1, 2019, the Company acquired Smart Ag. Smart Ag is a technology company located in Ames, Iowa, that develops autonomous farming solutions for agriculture. Smart Ag currently offers aftermarket retrofit kits to automate farm equipment as well as a platform to connect, manage, and safely operate autonomous agricultural machinery.

On November 13, 2019, the Company acquired a majority ownership in DOT. Simultaneously with acquiring this majority ownership, the Company contributed cash to DOT in exchange for additional equity, making the majority ownership percentage in DOT 60% when the transaction closed. DOT, located in Regina, Saskatchewan, Canada, designs autonomous agriculture solutions and manufactures a unique U-shaped agriculture platform to semi-autonomously handle a large variety of agriculture implements. The acquisition provided noncontrolling interest shareholders various put options that, if exercised, obligated the Company to purchase their outstanding DOT shares. Due to the redemption features, the noncontrolling interest was classified as a redeemable noncontrolling interest in the Company’s Consolidated Balance Sheets as of January 31, 2020.

Both acquisitions aligned under the Company's Applied Technology Division and complement the division's suite of precision ag products and solutions. The aggregate purchase price was approximately $54,000, excluding the noncontrolling interest.

During the first quarter of fiscal 2021, certain minority interest shareholders in DOT exercised their put options, requiring the Company to redeem the remaining noncontrolling interest in DOT. The Company closed on the transaction to purchase the shares of the largest minority shareholder for $17,853 in the second quarter of fiscal 2021. The remaining redeemable amount,

(Dollars in thousands, except per-share amounts)

as well as the liability for the noncontrolling interest redeemed in the prior fiscal year, totaling approximately $5,333, is payable in November 2021 and is classified as "Accrued Liabilities" in the Consolidated Balance Sheets at January 31, 2021.

Including the noncontrolling interest, $56,022 of the purchase price was allocated to goodwill. Identifiable intangible assets acquired of $31,800 were primarily indefinite-lived intangible assets for in-process R&D. Amortization of these indefinite-lived intangible assets will start when the current in-process R&D project is complete and the product is commercialized, which is expected to occur in fiscal 2022. Amortization of the indefinite-lived intangibles will be on a straight-line basis over the remaining estimated useful lives of these assets. The Company expects the useful lives will range from seven to ten years.

The Company completed the valuation of intangible assets and pre-acquisition tax filings during the first and second quarters of fiscal 2021. The following adjustments were made to the purchase price allocation during fiscal 2021:


	Reported January 31, 2020		Measurement Period Adjustments		Adjusted Balance
Current assets	$	2,080	$	—	2,080
Goodwill	$	56,022	$	(440)	$	55,582
Intangible assets, net	31,800		(600)		31,200
Other long-term assets	1,770		—		1,770
Deferred income taxes	(4,158)		1,005		(3,153)
Accounts payable and other current liabilities	(1,462)		35		(1,427)
Long-term liabilities	(7,587)		—		(7,587)
Fair value of consideration transferred, including noncontrolling interest	78,465		—		78,465
Less: redeemable noncontrolling interest	24,315		(redeemed and acquired in fiscal year 2021)
Fair value of purchase price consideration transferred, excluding noncontrolling interest	$	54,150

The following pro forma consolidated condensed financial results of operations are presented as if the acquisitions described above had been completed at the beginning of fiscal 2019 (unaudited):


(Unaudited)
	For the years ended January 31,
	2020		2019
Net sales	$	383,418	$	406,886
Net income attributable to Raven Industries, Inc.	$	29,685	$	48,210

Earnings per common share
Basic	$	0.82	$	1.34
Diluted	$	0.82	$	1.32

These unaudited pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments that were not material in nature. The pro forma information does not purport to be indicative of the results of operations that would have resulted had these business combinations occurred at the beginning of each period presented, or of future results of the consolidated entities. These acquisitions contributed no revenues and reduced fiscal 2020 net income attributable to Raven by $2,279.

Fiscal year 2019 acquisition

On January 1, 2019, the Company completed the acquisition of substantially all of the assets ("AgSync Acquisition") of AgSync Inc. (AgSync), an Indiana corporation, headquartered in Wakarusa, Indiana. This acquisition was aligned under the Company’s Applied Technology Division and enhanced its Slingshot platform by delivering a more seamless logistics solution for ag retailers, aerial applicators, custom applicators and enterprise farms. The AgSync Acquisition constitutes a business and as such was accounted for as a business combination; however, the business combination was not significant enough to warrant pro-forma financial information.

The purchase price was approximately $9,700 which included potential earn-out payments with an estimated fair value of $2,052. The earn-out is contingent upon achieving certain revenue milestones. The purchase price of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price

(Dollars in thousands, except per-share amounts)

over the fair value of the identifiable assets acquired and liabilities assumed is reflected as goodwill, which is fully tax deductible. The Company completed the valuation and the purchase price allocation during the first quarter of fiscal 2020. This resulted in an adjustment in the fiscal 2020 first quarter that increased the purchase price and the estimated fair value of the contingent earn-out payments by approximately $300. The goodwill and identifiable intangible assets recorded as part of the purchase price allocation at January 31, 2020, were $4,526 and $5,700, respectively.

Acquisition-related contingent consideration

The Company has a contingent liability related to the acquisition of AgSync in fiscal 2019. The Company also had contingent liabilities related to the acquisitions of Colorado Lining International, Inc. (CLI) in fiscal 2018; and Raven Europe B.V. (Raven Europe), formerly named SBG Innovatie BV and its affiliate, Navtronics BVBA (collectively, SBG), in fiscal 2015; both of which were settled in the current fiscal year. The fair value of such contingent consideration is estimated as of the acquisition date, and subsequently at the end of each reporting period, using forecasted cash flows. Projecting future cash flows requires the Company to make significant estimates and assumptions regarding future events, conditions or revenues being achieved under the subject contingent agreement as well as the appropriate discount rate. Such valuation techniques include one or more significant inputs that are not observable (Level 3 fair value measures).

Changes in the fair value of the liability for acquisition-related contingent consideration are as follows:


	For the years ended January 31,
	2021		2020
Beginning balance	$	2,934	$	4,172
Fair value of contingent consideration acquired	—		310
Change in fair value of the liability	(437)		412
Contingent consideration earn-out paid	(497)		(1,960)
Ending balance	$	2,000	$	2,934

Classification of liability in the Consolidated Balance Sheets
Accrued Liabilities	$	2,000	$	763
Other Liabilities, long-term	—		2,171
Ending balance	$	2,000	$	2,934

For the acquisition of AgSync, the Company entered into a contingent earn-out agreement, not to exceed $3,500. The earn-out is to be paid annually over three years after the purchase date, contingent upon achieving certain revenue milestones. The Company has made no payments on this potential earn-out liability as of January 31, 2021.

Related to the acquisition of CLI in fiscal 2018, the Company committed to making additional earn-out payments, not to exceed $2,000, calculated and paid annually three years after the purchase date, contingent upon achieving certain revenues and operational synergies. The Company made its final payment related to this agreement in the third quarter of fiscal 2021 and has no further contingent obligations related to the acquisition of CLI. Cumulatively, the Company paid a total of $1,567 related to this earn-out liability.

In connection with the acquisition of Raven Europe, the Company entered into a contingent earn-out agreement, not to exceed $2,500 calculated and paid quarterly for ten years after the purchase date contingent upon achieving certain revenues. All revenue milestones under the agreement were achieved by Raven Europe in fiscal 2021. The Company paid a total of $2,500 related to this potential earn-out liability and has no further contingent obligations related to the acquisition of Raven Europe.


NOTE 7			GOODWILL AND LONG-LIVED ASSETS

Goodwill

For goodwill, the Company performs impairment reviews by reporting unit. As of the measurement date of the fiscal 2021 and 2020 impairment tests the Company identified that it had four reporting units: Applied Technology, Engineered Films, Aerostar, and Autonomy. The Autonomy reporting unit was identified after the acquisitions of Smart Ag and DOT, during the fourth quarter of fiscal year 2020. For fiscal 2019, the Company had three reporting units as of the measurement date: Applied Technology, Engineered Films, and Aerostar.

(Dollars in thousands, except per-share amounts)

The changes in the carrying amount of goodwill by operating segment are shown below:


	Applied Technology		Engineered Films		Aerostar		Total
Balance at January 31, 2019	$	17,076	$	33,232	$	634	$	50,942
Additions due to business combinations	55,989		—		—		55,989

Foreign currency translation adjustment	(422)		—		—		(422)
Balance at January 31, 2020	72,643		33,232		634		106,509
Measurement period adjustments	(440)		—		—		(440)

Foreign currency translation adjustment	1,608		—		—		1,608
Balance at January 31, 2021	$	73,811	$	33,232	$	634	$	107,677

Goodwill gross and net of accumulated impairment losses were as follows:


	As of January 31,
	2021		2020
Gross goodwill	$	119,174	$	118,006
Accumulated impairment loss	(11,497)		(11,497)
Net goodwill	$	107,677	$	106,509

Goodwill for each reporting unit is assessed for impairment on an annual basis during the fourth quarter, and between annual tests whenever a triggering event indicates there may be an impairment. The annual impairment tests were completed for each reporting unit based on a November 30th valuation date.

Fiscal 2021 Goodwill Impairment Testing

For the fiscal 2021 annual assessment, the Company elected to bypass the qualitative assessment and performed a quantitative assessment for each of the four reporting units. Based on the quantitative assessment performed as of the measurement date, as well as the qualitative assessments performed quarterly, no goodwill impairments were identified or recorded in fiscal 2021.

The Company's Applied Technology, Engineered Films, and Aerostar reporting units were determined to have fair values significantly in excess of carrying value. Within the Autonomy reporting unit, the fair value of the reporting unit exceeded the carrying value of the assets by more than 20%. The fair value increase since the prior fiscal year acquisition is largely contributed to the significant investment in research and development activities to advance the autonomous technology, developed synergy between the Smart Ag and DOT acquisitions, and growing interest in the autonomous market. In determining the estimated fair value, the Company estimated a number of significant factors, including projected revenue growth rates, projected operating income results, terminal growth rates, and the discount rate. The Company made reasonable estimates and assumptions based on facts and circumstances available as of the measurement date. However, if actual results are not consistent with the estimates and assumptions used in the calculations, we may be exposed to future impairment losses that could be material. Events and conditions that could negatively impact the estimated fair value include increases in the Company's weighted average cost of capital, delays in the commercialization of autonomous products, inability to realize the anticipated revenue growth opportunities, and a decrease in projected profitability. Goodwill associated with the Autonomy reporting unit was $56,613 as of January 31, 2021.

Fiscal 2020 & 2019 Goodwill Impairment Testing

In fiscal 2020 and 2019 no impairments were recorded as a result of the annual impairment testing. In its annual impairment testing, the Company concluded a quantitative analysis was not required for any of its reporting units based on the Company's qualitative analysis.

(Dollars in thousands, except per-share amounts)

Intangible Assets

The following table provides the gross carrying amount for intangible assets and the related accumulated amortization of definite-lived intangible assets:


	For the years ended January 31,
	2021						2020
			Accumulated amortization						Accumulated amortization
	Amount				Net		Amount				Net
Existing technology	$	9,263	$	(8,304)	$	959	$	9,190	$	(7,706)	$	1,484
Customer relationships	16,128		(8,248)		7,880		16,067		(6,868)		9,199
Patents and other intangibles	7,297		(3,126)		4,171		6,678		(2,444)		4,234
In-process research and development(a)	31,575		—		31,575		31,300		—		31,300
Total	$	64,263	$	(19,678)	$	44,585	$	63,235	$	(17,018)	$	46,217
(a) Refer to Note 6 "Acquisitions and Investments in Businesses and Technologies" for a more detailed description of these indefinite-lived intangible assets acquired in business combinations in fiscal 2020. A portion of these intangible assets are denominated in a foreign currency and subject to exchange rate fluctuations.

The estimated future amortization expense for these definite-lived intangible assets during the next five years is as follows:


	2022		2023		2024		2025		2026
Estimated amortization expense	$	2,498	$	2,389	$	1,907	$	1,878	$	1,582

The estimated future amortization expense table above does not reflect the expected amortization associated with indefinite-lived in-process R&D assets acquired in business combinations during fiscal 2020. Amortization of these indefinite-lived intangible assets will start upon completion of the current R&D projects, on a straight-line basis over their remaining estimated useful life. The applicable table will be updated at such time these intangible assets are placed into service.

Indefinite-lived intangible assets

Indefinite-lived intangible assets are assessed for impairment on an annual basis during the fourth quarter, and between annual tests whenever a triggering event indicates there may be an impairment. The annual impairment tests were completed for indefinite-lived intangible assets on a November 30th valuation date.

Fiscal 2021 Indefinite-lived Intangible Impairment Testing

For the fiscal 2021 annual assessment, the Company's quantitative assessment indicated no impairments, with the fair value of the indefinite-lived assets exceeding the carrying value of the assets. Management's assessment assumes that the Company will commercialize autonomous products during fiscal 2022.

Fiscal 2020 Indefinite-lived Intangible Impairment Testing

In fiscal 2020, no impairments were recorded as a result of the annual impairment assessment. In its annual impairment assessment, the Company concluded a quantitative analysis was not required for its indefinite-lived intangible assets based on the Company's qualitative analysis.

Long-lived assets, including definite-lived intangible assets

The Company assesses the recoverability of long-lived assets, including definite-lived intangibles, equity method investments, and property plant and equipment if events or changes in circumstances indicate that an asset might be impaired. For long-lived and intangible assets, the Company performs impairment reviews by asset groups. Management periodically assesses for triggering events and discusses any significant changes in the utilization of long-lived assets. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

When performing long-lived asset testing, the fair values of assets are determined based on valuation techniques using the best available information. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures). An impairment loss is measured and recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows.

Fiscal 2021, 2020 and 2019 Long-lived Assets Impairment Assessment

There were no impairment losses reported in the year ended January 31, 2021, 2020, or 2019 for any of the Company's long-lived assets.

(Dollars in thousands, except per-share amounts)


NOTE 8			EMPLOYEE POSTRETIREMENT BENEFITS

Defined contribution 401(k) plan

The Company has one 401(k) plan covering substantially all employees and this plan matches employee contributions up to 5%. Under this plan all account balances and future contributions and related earnings can be invested in several investment alternatives as well as the Company's common stock in accordance with each participant's elections. Participants may choose to make separate investment choices for current account balances and for future contributions. Participants may elect to direct up to 10% of their contributions and the employers matching contributions to the 401(k) plan into the Company's common stock. In addition, the plan does not allow a participant to exchange more than 10% of their existing account balance into the Company’s common stock or permit exchanges that would cause the participant’s investment in the Company’s common stock to exceed 10% of the participant's total balance in the 401(k) plan. Officers of the Company may not include Raven's common stock in their 401(k) plan elections.

Total contribution expense was $3,935, $3,696, and $3,006 for fiscal 2021, 2020, and 2019, respectively.

Deferred compensation plan

Effective January 1, 2018, the Company established a section 409A non-qualified deferred compensation plan (the "Plan") and associated rabbi trust for participants approved by the Board of Director's Personnel and Compensation Committee. The purpose of the deferred compensation plan is to attract and retain key employees by providing them with an opportunity to defer a portion of their compensation. The Plan's rabbi trust is funded from the participant's deferred compensation as the Company does not contribute or match participant contributions. Any assets held in rabbi trust are part of the Company's general assets and are subject to creditor's claims. The Company's common stock is not an investment option under this Plan as all contributions to the rabbi trust are invested in open-end mutual funds registered with the Securities and Exchange Commission based on the participant's investment elections.

The Company reports these financial instruments at fair value using level 1 observable inputs and are primarily classified as long term assets and reported as "Other assets" in the Consolidated Balance Sheets. The fair value of the liability and financial instruments held were $1,697 and $1,691, respectively, at January 31, 2021. The fair value of the liability and financial instruments held were $1,363 and $1,358, respectively, at January 31, 2020. Changes in the fair value of these financial instruments, realized gains and losses, dividends, and interest income were reported in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income and were not material for fiscal years 2021, 2020 and 2019.

Defined benefit postretirement plan

In addition, the Company provides postretirement medical and other benefits to certain senior executive officers and senior managers. These plan obligations are unfunded and therefore have no assets as of January 31, 2021, and 2020. The accumulated benefit obligation is as follows:


	For the years ended January 31,
	2021		2020
Benefit obligation at beginning of year	$	9,073	$	8,001
Service cost	36		27
Interest cost	280		333
Actuarial loss and assumption changes	303		1,053
Retiree benefits paid	(332)		(341)
Benefit obligation at end of year	$	9,360	$	9,073

Service cost is reported in net income as "Cost of sales" or "Selling, general, and administrative expenses" in a manner consistent with the classification of direct labor and personnel costs of the eligible employees. The components of the net periodic benefit cost, other than the service cost component, are classified as a non-operating expense in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income.

(Dollars in thousands, except per-share amounts)

The following tables set forth the plan's pre-tax adjustment to accumulated other comprehensive income/loss


	For the years ended January 31,
	2021		2020
Amounts not yet recognized in net periodic benefit cost:
Net actuarial loss	$	2,817	$	3,070
Prior service cost	290		(253)
Total pre-tax accumulated other comprehensive loss	$	3,107	$	2,817

Pre-tax accumulated other comprehensive loss - beginning of year related to benefit obligation	$	2,817	$	1,701
Reclassification adjustments recognized in benefit cost:
Recognized net (loss)	(173)		(97)
Amortization of prior service cost	160		160
Amounts recognized in AOCI during the year:
Net actuarial loss	303		1,053
Pre-tax accumulated other comprehensive loss - end of year related to benefit obligation	$	3,107	$	2,817

The net actuarial loss for fiscal year 2021 was the result of a decrease in the discount rate by 24 basis points. The mortality assumptions, claims experience and demographics were also updated and were unfavorable to the benefit obligation at January 31, 2021 by approximately $31. The net actuarial loss for fiscal year 2020 was the result of a decrease in the discount rate by 111 basis points. The mortality assumptions and claims experience were also updated and were favorable to the benefit obligation at January 31, 2020 by approximately $400.

The liability and net periodic benefit cost reflected in the Consolidated Balance Sheets and Consolidated Statements of Income and Comprehensive Income were as follows:


	For the years ended January 31,
	2021			2020
Beginning liability balance	$	9,073		$	8,001
Net periodic benefit cost	329			297
Other comprehensive loss	290			1,116
Total recognized in net periodic benefit cost and other comprehensive income	619			1,413
Retiree benefits paid	(332)			(341)
Ending liability balance	$	9,360		$	9,073

Current portion in accrued liabilities	$	364		$	332
Long-term portion in other liabilities	$	8,996		$	8,741

Assumptions used to calculate benefit obligation:
Discount rate	2.90		%	3.14		%
Rate of compensation increase	4.00		%	4.00		%
Health care cost trend rates:
Health care cost trend rate assumed for next year	6.00		%	6.17		%
Ultimate health care cost trend rate	4.50		%	4.50		%
Year that the rate reaches the ultimate trend rate	2030			2030
Assumptions used to calculate the net periodic benefit cost:
Discount rate	3.14		%	4.25		%
Rate of compensation increase	4.00		%	4.00		%

The discount rate is based on matching rates of return on high-quality fixed-income investments with the timing and amount of expected benefit payments. No material fluctuations in retiree benefit payments are expected in future years.

The Company expects to make $369 in postretirement medical and other benefit payments in fiscal 2022. The following postretirement other than pension benefit payments, which reflect expected future service as appropriate, are expected to be

(Dollars in thousands, except per-share amounts)

paid:


	2022		2023		2024		2025		2026		2027 - 2030
Expected postretirement medical and other benefit payments	$	369	$	377	$	379	$	378	$	384	$	2,049


NOTE 9			WARRANTIES

Changes in the warranty accrual were as follows:


	For the years ended January 31,
	2021		2020		2019
Beginning balance	$	2,019	$	890	$	1,163
Change in provision	2,095		3,326		1,449
Settlements made	(2,046)		(2,197)		(1,722)
Ending balance	$	2,068	$	2,019	$	890


NOTE 10			INCOME TAXES

The reconciliation of income tax computed at the federal statutory rate to the Company's effective income tax rate was as follows:


	For the years ended January 31,
	2021		2020		2019
Tax at U.S. federal statutory rate	21.0	%	21.0	%	21.0	%

State and local income taxes, net of U.S. federal tax benefit	2.0		0.8		1.7
Tax credit for research activities	(13.4)		(4.6)		(2.3)

Tax benefit from foreign-derived intangible income	(1.5)		(1.1)		(0.8)
Tax benefit on insurance premiums	(2.5)		(1.2)		(0.8)
Change in uncertain tax positions	0.8		0.3		—
Foreign tax rate difference	(2.4)		—		0.1
Impact of settlement of stock-based awards	(0.1)		(3.3)		(2.4)
Change in valuation allowances	(1.7)		0.8		—
Non-deductible compensation	2.0		0.8		—
Other, net	(2.1)		—		(0.8)
Effective Tax Rate	2.1	%	13.5	%	15.7	%

The decrease in the effective tax rate for fiscal 2021 and fiscal 2020, respectively, compared to the previous fiscal years, were both driven primarily by an increase in R&D spend and an a decrease in profitability, which resulted in a higher R&D tax credit as a percentage of pre-tax income.

The expense (benefit) for income taxes consists of:


	For the years ended January 31,
	2021		2020		2019
Current expense (benefit):
Federal	$	3,500	$	3,401	$	6,910
State	688		416		1,099
Foreign	529		98		735
	4,717		3,915		8,744
Deferred expense (benefit):
Federal	(1,508)		1,271		1,018
State	(131)		204		73
Foreign	(2,681)		31		(138)
	(4,320)		1,506		953
Income tax expense	$	397	$	5,421	$	9,697

(Dollars in thousands, except per-share amounts)

Deferred Tax Assets (Liabilities)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows:


	As of January 31,
	2021		2020
Deferred tax assets:
Accounts receivable	$	412	$	286
Inventories	1,487		1,152
Accrued vacation	966		778
Insurance obligations	150		205
Warranty obligations	441		454
Postretirement benefits	2,106		2,042
Uncertain tax positions	429		445
Share-based compensation	2,239		1,927
Tax loss carryforwards	6,684		3,929
Leases	1,541		962
Other accrued liabilities	1,472		952
	17,927		13,132
Valuation allowance	—		(630)
	17,927		12,502
Deferred tax (liabilities):
Depreciation and amortization	(17,599)		(18,086)
Leases	(1,541)		(962)
Other	(518)		(518)
	(19,658)		(19,566)
Net deferred tax asset (liability)	$	(1,731)	$	(7,064)

Uncertain Tax Positions

A summary of the activity related to the gross unrecognized tax benefits (excluding interest and penalties) is as follows:


	For the years ended January 31,
	2021		2020		2019
Gross unrecognized tax benefits at beginning of year	$	2,176	$	2,228	$	2,216
Increases in tax positions related to the current year	427		338		415
Increases in tax positions related to prior years	27		45		—
Decreases as a result of lapses in applicable statutes of limitation	(365)		(435)		(403)

Gross unrecognized tax benefits at end of year	$	2,265	$	2,176	$	2,228

The total unrecognized tax benefits (including interest and penalty) that, if recognized, would affect the Company's effective tax rate were $2,264, $2,162, and $2,183 as of January 31, 2021, 2020, and 2019, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At January 31, 2021, 2020, and 2019, accrued interest and penalties were $427, $430, and $442, respectively. The Company does not expect any significant change in the amount of unrecognized tax benefits in the next fiscal year.

Additional Tax Information

The Company files tax returns, including returns for its subsidiaries, with various federal, state, and local jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. As of January 31, 2021, federal tax returns filed in the U.S. for fiscal years ended January 31, 2018 through January 31, 2020 remain subject to examination by federal tax authorities. In state and local jurisdictions, tax returns for fiscal years ended January 31, 2015 through January 31, 2020 remain subject to examination by state and local tax authorities. International jurisdictions have open tax years varying by location beginning in fiscal 2015.

Pre-tax book income (loss) for the U.S. companies and the foreign subsidiaries was $25,356 and $(6,181), respectively. As of January 31, 2021, the Company has no deferred tax liability recognized relating to the Company’s investment in foreign subsidiaries where the earnings have been indefinitely reinvested. The Tax Cuts and Jobs Act generally eliminates U.S. federal

(Dollars in thousands, except per-share amounts)

income taxes on dividends from foreign subsidiaries, and as a result, the accumulated undistributed earnings would only be subject to other taxes, such as withholding taxes and state income taxes, on distribution of such earnings. No additional withholding or income taxes have been provided for any remaining undistributed foreign earnings, as it is the Company’s intention for these amounts to continue to be indefinitely reinvested in foreign operations.


NOTE 11			DEBT

Credit Facility

The Company entered into a credit facility on September 20, 2019, with Bank of America, N. A., as administrative agent, and Wells Fargo Bank, National Association (the Credit Agreement). The Credit Agreement provides for a syndicated senior revolving credit facility up to $100,000 with a maturity date of September 20, 2022. Loan proceeds may be utilized by Raven for strategic business purposes, such as business acquisitions, and for net working capital needs.

The unamortized debt issuance costs associated with this Credit Agreement were as follows:


	As of January 31,
	2021		2020
Unamortized debt issuance costs(a)	$	133	$	215

(a) Unamortized debt issuance costs are amortized over the term of the Credit Agreement and are reported as "Other assets" in the Consolidated Balance Sheets.

Loans or borrowings defined under the Credit Agreement bear interest and fees at varying rates and terms defined in the Credit Agreement based on the type of borrowing as defined. The Credit Agreement includes an annual administrative fee as well as an unborrowed capacity fee. Such fees were $79, $181 and $212 for the years ended January 31, 2021, 2020 and 2019, respectively.

The Credit Agreement also contains customary affirmative and negative covenants, including those relating to financial reporting and notification, limits on levels of indebtedness and liens, investments, mergers and acquisitions, affiliate transactions, sales of assets, restrictive agreements, and change in control as defined in the Credit Agreement. Financial covenants include an interest coverage ratio and funded indebtedness to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement. The Company is in compliance with all financial covenants as of January 31, 2021.

Letters of credit (LOC) issued and outstanding were as follows:


	As of January 31,
	2021		2020
Letters of credit outstanding(a)	$	50	$	50

(a)Any draws required under the LOC would be settled with available cash or borrowings under the Credit Agreement.

There were no borrowings outstanding at January 31, 2021 or January 31, 2020. Availability under the Credit Agreement for borrowings as of January 31, 2021 was $100,000.

Long-Term Notes

The Company assumed certain long-term notes pursuant to the acquisition of DOT in fiscal year 2020 as described in Note 6 "Acquisitions and Investments in Businesses and Technologies". The related financial assistance agreement (Agreement) is between DOT and Western Economic Diversification Canada (WEDC), a government agency in Canada, that was entered into in August 2019. Under the Agreement, the WEDC agrees to contribute up to $5,000 in Canadian dollars, approximately $4,000 in US dollars, over a three-year period for costs incurred to develop a cloud-based distribution and service channel for a particular product being developed by DOT. DOT is eligible to receive contributions for costs incurred for purposes specified in the Agreement. The Company is required to repay the funds contributed by WEDC in 60 monthly installments beginning April 1, 2023, plus interest that begins on April 1, 2023, based on an average bank rate plus 3%. As of January 31, 2021, the Company had received $1,981 in contributions from WEDC and no repayments have been made. The outstanding liability balance is reported as "Long-term borrowings" on the Consolidated Balance Sheets. No interest expense is being recorded prior to the interest start date.

(Dollars in thousands, except per-share amounts)

At January 31, 2021, the Company's debt maturities based on outstanding principal were as follows:


	2022		2023		2024		2025		2026		Thereafter
Maturities of debt	$	—	$	—	$	1,981	$	—	$	—	$	—


NOTE 12			LEASES

The Company enters into operating and finance lease contracts related to facilities, vehicles and equipment. Operating leases are primarily related to facilities to support production, R&D, and sales efforts. Finance leases are primarily related to vehicles and equipment to support general business operations. Lease payments are typically fixed and carry lease terms of one to five years, some of which have an option to terminate or extend up to an additional five years. For purposes of the quantitative disclosures below related to the calculation of operating and finance leases, lease terms predominantly did not include options to terminate or extend, as the Company is reasonably certain it would not exercise the options. Most of the Company's leases do not contain a purchase option, material residual value guarantee, or material restrictive covenants.

The Company is primarily a lessee in all lease arrangements but may become a lessor and lease or sublease certain assets to other entities if not fully utilized. These lessor activities are not material and are not separately disclosed.

To determine whether a contract is or contains a lease, the Company assessed its right to control the use of the identified asset, whether explicitly or implicitly stated, for a period of time while considering all facts and circumstances for each individual arrangement. The Company also has leases with non-lease components which are separately stated within the agreement and not included in the recognition of the right-of use asset and lease liability balances.

The discount rate used to calculate the present value of the lease liabilities is based upon the implied rate within each contract. If the rate is unknown or cannot be determined, the Company uses an incremental borrowing rate, which is determined by the length of the contract, asset class, and the Company's borrowing rates as of the commencement date of the contract.

Components of Company lease costs, including operating, finance, and short-term leases are included in the table below. Depreciation of right-of-use assets, operating lease costs, and short-term lease costs are reported in net income as "Cost of sales," "Research and development expenses," or "Selling, general, and administrative expenses," depending on what business function the asset primarily supports. Interest on finance lease liabilities are classified as a non-operating expense in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income.


	For the years ended January 31,
	2021		2020
Lease Costs:
Finance Leases
Depreciation of right-of-use assets	$	442	$	413
Interest on lease liabilities	24		21
Total finance lease cost	$	466	$	434

Operating Leases
Operating lease cost	$	2,205	$	1,536
Short-term lease cost	755		446
Total operating lease cost	2,960		1,982
Total finance and operating lease cost	$	3,426	$	2,416

(Dollars in thousands, except per-share amounts)

Supplemental balance sheet information related to operating and finance leases include:


	As of January 31,
	2021		2020
Operating Leases
Operating lease right-of-use assets	$	6,850	$	4,275

Current lease liability	$	2,120	$	2,272
Non-current lease liability	5,038		2,370
Total operating lease liabilities	$	7,158	$	4,642

Finance Leases
Property, plant and equipment, at cost	$	1,282	$	881
Accumulated depreciation	(532)		(366)
Property, plant and equipment, net	$	750	$	515

Current lease liability	$	362	$	258
Non-current lease liability	388		257
Total finance lease liabilities	$	750	$	515

Weighted average remaining lease terms and discount rates include:


	As of January 31,
	2021		2020
Weighted Average Remaining Lease Term:
Operating leases	5 years		4 years
Finance leases	2 years		2 years
Weighted Average Discount Rate:
Operating leases	2.7	%	3.5	%
Finance leases	2.9	%	3.5	%

Supplemental unaudited cash flow information related to operating and finance leases include:


	For the years ended January 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,959	$	1,536
Operating cash flows from finance leases	$	24	$	21
Financing cash flows from finance leases	$	441	$	413

Future operating and finance lease obligations that have not yet commenced as of January 31, 2021, were immaterial and excluded from the lease liability schedule below accordingly.


	As of January 31, 2021
	Operating Leases		Finance Leases
Fiscal 2022	$	2,308	$	377
Fiscal 2023	1,592		258
Fiscal 2024	1,252		116
Fiscal 2025	1,050		23
Fiscal 2026	1,065		—
Thereafter	436		—
Total lease payments	7,703		774
Less imputed interest	(545)		(24)
Total lease liabilities	$	7,158	$	750

(Dollars in thousands, except per-share amounts)


NOTE 13			COMMITMENTS AND CONTINGENCIES

The Company entered into a Gift Agreement (the Agreement) effective in January 2018 with the South Dakota State University Foundation, Inc. (the Foundation). This gift will be used for the establishment of a precision agriculture facility to support South Dakota State University's Precision Agriculture degrees and curriculum. The Agreement states that the Company will make a $5,000 gift to the Foundation conditional on certain actions. These conditions were met and $4,503 of contribution expense was recognized in first quarter of fiscal 2019 and reported as "Selling, general, and administrative expenses" with interest expense to be recognized in periods thereafter. The fair value of this contingency at January 31, 2021, was $1,991 (measured based on the present value of the expected future cash outflows) of which $691 was classified as "Accrued liabilities" and $1,300 was classified as "Other liabilities" on the Consolidated Balance Sheet. The fair value of this contingency at January 31, 2020, was $2,607 of which $691 was classified as "accrued liabilities" and $1,916 was classified as "Other liabilities" on the Consolidated Balance Sheet. As of January 31, 2021, the Company has made payments related to the commitment totaling $2,860.

In addition to commitments disclosed elsewhere in the Notes to the Consolidated Financial Statements, the Company has approximately $40,000 of unconditional purchase obligations for inventory and other obligations that arise in the normal course of business operations and have a term of less than one year. The majority of these obligations are related to the Applied Technology and Engineered Films divisions and arise from the purchase of raw materials inventory.


NOTE 14			SHARE-BASED COMPENSATION

At January 31, 2021, the Company had two shareholder approved share-based compensation plans, which are described below. The compensation cost and related income tax benefit for these plans were as follows:


	For the years ended January 31,
	2021		2020		2019
Share-based compensation cost	$	6,066	$	4,971	$	3,951
Tax benefit	$	1,013	$	670	$	736

Share-based compensation cost capitalized as part of inventory is not material.

Equity Compensation Plans

The Company reserved shares of its common stock for issuance to directors, officers, employees and certain advisors of the Company through incentive stock options and non-statutory stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units (RSUs) and performance awards to be granted under the 2019 Equity Incentive Plan (the Plan) which was approved by shareholders on May 21, 2019. The number of shares initially available for grant under the Plan was 1,300,000. As of January 31, 2021, the number of shares available for grant was 886,842.

Shares outstanding under the Amended and Restated 2010 Stock Incentive Plan (the "2010 Plan") are still subject to terms of the 2010 Plan, but if those awards subsequently expire, are forfeited or cancelled, or are settled in cash, the shares subject to those awards will become available under the Plan. Under both Plans, option exercises or units and awards vested are settled in newly issued common shares. As of January 31, 2021, the number of shares reserved for issuance under the 2010 plan for grants, RSUs or awards was 930,194.

Both plans are administered by the Personnel and Compensation Committee of the Board of Directors (the Committee), consisting of two or more independent directors of the Company. The Committee determines the option exercise prices and the term of each grant. The Committee may accelerate the exercisability of awards under either plan or extend the term of such awards to the extent allowed to a maximum term of ten years. One type of award, restricted stock units, was granted in fiscal 2021 and fiscal 2020.

(Dollars in thousands, except per-share amounts)

Stock Option Awards

The Company granted no non-qualified stock options during fiscal 2021 or fiscal 2020. For fiscal years prior to fiscal 2020, options were granted with exercise prices not less than the market value of the Company's common stock at the date of grant. The stock options vest over a four-year period and expire after five years. Options contain retirement and change-in-control provisions that may accelerate the vesting period. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company used historical data to estimate option exercises, employee terminations and volatility within this valuation model.

The weighted average assumptions used for the Black-Scholes option pricing model by grant year were as follows:


	For the year ended January 31, 2019

Risk-free interest rate	2.51		%
Expected dividend yield	1.48		%
Expected volatility factor	35.20		%
Expected option term (in years)	4.25

Weighted average grant date fair value	$	9.83

Outstanding stock options as of January 31, 2021, and activity for the year then ended are presented below:


	Number of options	Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding, January 31, 2020	214,260	$	25.03
Granted	—	—
Exercised	(93,475)	16.13


Forfeited	(5,630)	32.5
Outstanding, January 31, 2021	115,155	$	31.89	$	192	1.58

Outstanding exercisable, January 31, 2021	72,855	$	31.44	$	138	1.47

Options vested, or expected to vest, January 31, 2021	115,155	$	31.89	$	192	1.58

The intrinsic value of a stock award is the amount by which the fair value of the underlying stock exceeds the exercise price of the award. The total intrinsic value of options exercised was $1,157, $2,620, and $7,568 during the years ended January 31, 2021, 2020, and 2019, respectively. The total fair value of options vested was $453, $749, and $892, during the years ended January 31, 2021, 2020, and 2019, respectively. As of January 31, 2021, the total unrecognized compensation cost for non-vested awards was $78. This amount is expected to be recognized over a weighted average period of one year.

Restricted Stock Unit Awards

The Company granted 127,365 time-vested RSUs during the year ended January 31, 2021. The fair value of a time-vested RSU is measured based upon the closing market price of the Company's common stock on the day prior to the date of grant. Time-vested RSUs will vest if, at the end of the vesting period, the employee remains employed by the Company. RSUs contain retirement and change-in-control provisions that may accelerate the vesting period. Dividends are cumulatively earned on the time-vested RSUs over the vesting period and are forfeited if such RSUs do not vest.

(Dollars in thousands, except per-share amounts)

Activity for time-vested RSUs under the Plan in fiscal 2021 was as follows:


	Number of restricted stock units	Weighted average grant date fair value per share
Outstanding, January 31, 2020	300,512	$	34.69
Granted	127,365	19.92
Vested	(64,099)	30.11
Forfeited	(15,827)	29.88
Outstanding, January 31, 2021	347,951	$	30.35

Cumulative dividends, January 31, 2021	6,490

The Company also granted performance-based RSUs during the year ended January 31, 2021. The exact number of performance shares to be issued will vary from 0% to 200% of the target award, depending on the Company's actual performance over the vesting period in comparison to the target award. The target awards for the fiscal 2020 and 2019 grants are based on return on equity (ROE), which is defined as net income attributable to Raven divided by the average of beginning and ending shareholders' equity for the fiscal year. There were two performance-based RSUs granted in fiscal 2021. One grant is specific to Applied Technology and is based on the amount of Autonomy revenue generated and the other grant is based on ROE. The performance-based RSUs will vest if, at the end of the performance period, the Company has achieved certain performance goals and the employee remains employed by the Company. Performance-based RSUs contain retirement and change-in-control provisions that may accelerate the vesting period. Dividends are cumulatively earned on performance-based RSUs over the vesting period and are forfeited if such RSUs do not vest.

The fair value of the performance-based restricted stock units is based upon the closing market price of the Company's common stock on the day prior to the grant date. The number of restricted stock units granted is based on 100% of the target award. The number of RSUs that will vest is determined by the estimated ROE target over the performance period. The estimated performance factor used to estimate the number of restricted stock units expected to vest is evaluated quarterly. The number of restricted stock units issued at the vesting date will be based on actual results.

Activity for performance-based RSUs under the Plan in fiscal 2021 was as follows:


	Number of restricted stock units expected to vest	Weighted average grant date fair value per share
Outstanding, January 31, 2020	159,047	$	36.22
Granted	124,667	21.51
Vested	(31,406)	29.20
Forfeited	(20,416)	31.05
Performance-based adjustment	(28,942)	36.48
Outstanding, January 31, 2021	202,950	$	28.75

Cumulative dividends, January 31, 2021	3,507

The weighted average grant date fair values of the time-based and performance-based RSUs by grant year are as follows:


	For the years ended January 31,
	2021		2020		2019
Weighted average grant date fair value: time-based RSUs	$	19.92	$	36.04	$	35.15
Weighted average grant date fair value: performance-based RSUs	$	21.51	$	39.01	$	35.05

The total intrinsic value of RSUs vested (or converted to shares) was $1,996, $6,120, and $2,468 during the years ended January 31, 2021, 2020, and 2019, respectively. The total fair value of RSUs vested (or converted to shares) was $1,952, $5,948, and $2,477, during the years ended January 31, 2021, 2020, and 2019, respectively. As of January 31, 2021, there were

(Dollars in thousands, except per-share amounts)

550,901 outstanding RSUs expected to vest with a weighted average term of 1.8 years and an aggregate intrinsic value of $17,778. None of the outstanding RSUs are vested as of January 31, 2021. The total unrecognized compensation cost for non-vested RSU awards at January 31, 2021, was $7,891. This amount is expected to be recognized over a weighted average period of 1.8 years.

Deferred Stock Compensation Plan for Directors

The Company issues common stock to certain members of its Board of Directors under the Deferred Stock Compensation Plan for Directors of Raven Industries, Inc. (the Director Plan). The Director Plan is administered by the Personnel and Compensation Committee of the Board of Directors. Under the Director Plan, any non-employee director receives a grant of a number of stock units as deferred compensation to be converted into common stock after retirement from the Board of Directors and may elect to have a specified percentage of their annual retainer converted to stock units. Under the Director Plan, a stock unit is the right to receive one share of the Company's common stock as deferred compensation, to be distributed from an account established by the Company in the name of the non-employee director. Stock units have the same value as a share of common stock but cannot be sold. Stock units are a component of the Company's equity.

Stock units granted under the Director Plan vest immediately and are expensed at the date of grant. When dividends are paid on the Company's common shares, stock units are added to the directors' balances and a corresponding amount is removed from retained earnings. The intrinsic value of a stock unit is the fair value of the underlying shares.

Outstanding stock units as of January 31, 2021, and changes during the year then ended are presented below:


	Number of stock units	Weighted average price
Outstanding, January 31, 2020	129,413	$	24.95
Granted	27,727	21.46
Deferred retainers	2,330	21.46
Dividends	1,685	21.64
Converted into common shares	(9,184)	21.56
Outstanding, January 31, 2021	151,971	$	24.43


NOTE 15			NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted average common shares and stock units outstanding. Diluted net income per share is computed by dividing net income by the weighted average common and common equivalent shares outstanding which includes the shares issuable upon exercise of employee stock options (net of shares assumed purchased with the option proceeds), stock units and restricted stock units outstanding. Performance share awards are included in the diluted calculation based upon what would be issued if the end of the most recent reporting period was the end of the term of the award.

Certain outstanding options and restricted stock units were excluded from the diluted net income per-share calculations because their effect would have been anti-dilutive under the treasury stock method. The options and restricted stock units excluded from the diluted net income per share calculation were as follows:


	For the years ended January 31,
	2021	2020	2019
Anti-dilutive options and restricted stock units	263,508	29,876	54,631

(Dollars in thousands, except per-share amounts)

The computation of earnings per share is presented below:


	For the years ended January 31,
	2021		2020		2019
Numerator:
Net income attributable to Raven Industries, Inc.	$	18,876	$	35,196	$	51,794

Denominator:
Weighted average common shares outstanding	35,837,750		35,861,255		35,907,041
Weighted average stock units outstanding	147,776		122,792		99,922
Denominator for basic calculation	35,985,526		35,984,047		36,006,963

Weighted average common shares outstanding	35,837,750		35,861,255		35,907,041
Weighted average stock units outstanding	147,776		122,792		99,922
Dilutive impact of stock options and RSUs	164,695		231,708		431,595
Denominator for diluted calculation	36,150,221		36,215,755		36,438,558

Net income per share - basic	$	0.52	$	0.98	$	1.44
Net income per share - diluted	$	0.52	$	0.97	$	1.42


NOTE 16			BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION

The Company's operating segments, which are also its reportable business segments, are defined by their product lines which have been generally grouped based on technology, manufacturing processes, and end-use application. The Company's business segments are Applied Technology Division, Engineered Films Division, and Aerostar Division. Separate financial information is available for each segment and regularly evaluated by the Company's chief operating decision-maker, the President and Chief Executive Officer, in making resource allocation decisions for the Company's segments. Segment information is reported consistent with the Company's management reporting structure.

Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information management tools, which are collectively referred to as precision agriculture equipment, that help farmers reduce costs, more precisely control inputs, and improve farm yields for the global agriculture market. The Applied Technology product families include application controls, GPS-guidance steering systems, field computers, automatic boom controls, machine automation, and injection systems. Applied Technology's services include wireless connectivity, cloud-based data management and logistics services. Applied Technology’s acquisition of Smart Ag and DOT in November 2019, further disclosed in Note 6 Acquisitions and Investments in Businesses and Technologies, brings a unique U-shaped platform designed to autonomously handle a large variety of agriculture implements along with perception, path planning, machine safety, and remote communication solutions to the precision ag market.

Engineered Films produces high-performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications and also offers design-build and installation services of these plastic films and sheeting. Plastic film and sheeting can be purchased separately or together with installation services. Engineered Films sells both direct to end-customers and through independent third-party distributors. The majority of product sold into the construction and agriculture markets is through distributors, while sales into the geomembrane and industrial markets are more direct in nature. 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 in the markets it serves. Engineered Films' ability to extrude and convert films, along with offering installation services for its geomembrane products, allows it to provide a more customized solution to customers. A number of film manufacturers compete with the Company on both price and product availability.

(Dollars in thousands, except per-share amounts)

The Company measures the performance of its segments based on their operating income excluding administrative and general expenses. The accounting policies of the operating segments are the same as those described in Note 1 "Summary of Significant Accounting Policies." Other income, interest expense, and income taxes are not allocated to individual operating segments, and assets not identifiable to an individual segment are included as corporate assets.


Business segment financial performance and other information is as follows:
	For the years ended January 31,
	2021		2020		2019
APPLIED TECHNOLOGY DIVISION
Sales	$	147,198	$	130,460	$	129,749
Operating income(a)(f)	26,468		30,672		39,044
Assets(b)(c)	176,535		172,320		79,742
Capital expenditures	2,571		1,464		2,050
Depreciation and amortization	5,093		3,995		3,433
ENGINEERED FILMS DIVISION
Sales(d)	$	147,921	$	197,719	$	226,574
Operating income(a)	15,743		28,695		39,714
Assets(b)	147,085		158,440		159,592
Capital expenditures	11,583		5,317		9,544
Depreciation and amortization	9,719		9,518		9,149
AEROSTAR DIVISION
Sales	$	53,343	$	54,443	$	50,867
Operating income(a)	4,399		8,597		8,179
Assets(b)	22,896		26,344		21,515
Capital expenditures	1,148		652		168
Depreciation and amortization	1,065		933		891
INTERSEGMENT ELIMINATIONS
Sales
Applied Technology Division	$	(3)	$	(2)	$	(10)
Engineered Films Division	(100)		(90)		(512)
Aerostar Division	—		—		—
Operating income(a)	72		—		(35)
Assets(b)	(32)		(104)		(104)
REPORTABLE SEGMENTS TOTAL
Sales(d)	$	348,359	$	382,530	$	406,668
Operating income(a)(f)	46,682		67,964		86,902
Assets(b)	346,484		357,000		260,745
Capital expenditures	15,302		7,433		11,762
Depreciation and amortization	15,877		14,446		13,473
CORPORATE & OTHER
Operating (loss) from administrative expenses(a)(e)	$	(27,031)	$	(28,025)	$	(31,769)
Assets(b)(c)(g)	62,887		46,257		99,500
Capital expenditures	845		1,127		2,365
Depreciation and amortization	1,544		1,795		1,650
TOTAL COMPANY
Sales(d)	$	348,359	$	382,530	$	406,668
Operating income(e)(f)	19,651		39,939		55,133
Assets	409,371		403,257		360,245
Capital expenditures	16,147		8,560		14,127
Depreciation and amortization	17,421		16,241		15,123

(Dollars in thousands, except per-share amounts)

(a) At the segment level, operating income does not include an allocation of general and administrative expenses and, as a result, general and administrative expenses are reported as "Operating (loss) from administrative expenses" in Corporate & Other.

(b) Certain facilities owned by the Company are shared by more than one reporting segment. All facilities are reported as an asset based on the segment that acquired the asset as the Company believes this most appropriately reflects the total assets of each business segment. Expenses and costs related to these facilities, including depreciation expense, are allocated and reported in each reporting segment's operating income for each fiscal year presented.

(c) Applied Technology fiscal 2021 and 2020 Assets include goodwill and intangible assets related to the acquisitions of Smart Ag and DOT. These assets are further disclosed in Note 6 "Acquisitions and Investments in Business Technologies". Fiscal 2020 Assets for the Corporate & Other segment reflect the use of cash to fund the acquisitions of Smart Ag and DOT.

(d) Economic conditions as a result of the global pandemic have created weak demand across a majority of Engineered Films' end-markets for fiscal 2021. Additionally, there were no sales of hurricane recovery film in fiscal 2021, while in fiscal 2020 and 2019 there were hurricane film sales of $1,860 and $14,494, respectively.

(e) Fiscal 2019 administrative expenses included a $4,503 expense related to the previously announced gift to SDSU. Fiscal 2021 and 2020 included approximately $2,089 and $2,700 of expenses related to Project Atlas. Project Atlas related expenses in fiscal 2019 were approximately $4,000.

(f) Applied Technology's operating income for fiscal 2021 includes $16,646 of costs and expenses incurred primarily for research and development related to Raven Autonomy™ to drive commercialization of its autonomous technology. Applied Technology's operating income for fiscal 2020 includes $2,834 of costs and expenses incurred in fourth quarter of fiscal 2020 related to Raven Autonomy™ .

(g) Assets are principally cash, investments, and other receivables.

Sales to one OEM customer in the Applied Technology Division accounted for 10% of the Company's consolidated nets sales in fiscal year 2021 and 14% of consolidated accounts receivable at January 31, 2021. No customers accounted for 10% or more of consolidated net sales in fiscal 2020 or 2019.

Substantially all of the Company's long-lived assets are located in the United States. Foreign sales are attributed to countries based on location of the customer. Net sales to customers outside the United States were as follows:


	For the years ended January 31,
	2021		2020		2019
Canada	$	13,025	$	12,121	$	12,492
Europe	15,867		14,681		15,786
Latin America	6,709		8,261		5,950
Asia	5,168		3,387		7,240
Other foreign sales	4,945		3,682		6,861
Total foreign sales	45,714		42,132		48,329
United States	302,645		340,398		358,339
	$	348,359	$	382,530	$	406,668


NOTE 17			SUBSEQUENT EVENTS

The Company has evaluated events up to the filing date of this Annual Report on Form 10-K and concluded that no subsequent events have occurred that would require recognition or disclosure in the Notes to the Consolidated Financial Statements.


ITEM 9.			CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.			CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure. As of January 31, 2021, the end of the period covered by this report, management evaluated the effectiveness of the Company's disclosure controls and

procedures as of such date. Based on their evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of January 31, 2021.

Management's Report on Internal Control Over Financial Reporting

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company included management’s assessment of the design and effectiveness of its internal controls over financial reporting as part of this Annual Report on Form 10-K for the fiscal year ended January 31, 2021. Management's report and the report of the Company's independent registered public accounting firm are included in Part II, Item 8. captioned "Management's Report on Internal Control Over Financial Reporting" and "Reports of Independent Registered Public Accounting Firm" and are incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three- or twelve -month periods ended January 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


ITEM 9B.			OTHER INFORMATION

Not applicable.


PART III

ITEMS 10, 11, 12, 13 and 14.			DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE; EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE; AND PRINCIPAL ACCOUNTING FEES AND SERVICES

The Company will file a definitive proxy statement with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act (the Proxy Statement) relating to the Company's 2021 Annual Meeting of Shareholders. Information required by Items 10 through 14 will appear in the Proxy Statement and is incorporated herein by reference.


PART IV

ITEM 15.			EXHIBITS, FINANCIAL STATEMENT SCHEDULE

LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

Financial Statements

See PART II, Item 8.

Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts for the years ended January 31, 2021, 2020, and 2019; included on the last page within Item 16 below.

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

Exhibits

See index to Exhibits below.


Exhibit Number						Description

3(a)						Restated Articles of Incorporation of Raven Industries, Inc. and all amendments thereto dated as of December 12, 2018 (incorporated herein by reference to Exhibit 3.1 of the Company's Form 10-K filed March 22, 2019).

3(b)						Amended and Restated Bylaws of Raven Industries, Inc. (incorporated herein by reference to Exhibit B of the Company's definitive Proxy Statement filed April 12, 2012).


Exhibit Number						Description
4(a)						Description of Raven Industries, Inc. Common Stock (incorporated herein by reference to Exhibit 4.1. of the Company's Form 10-K filed March 26, 2020).

10(a)*						Amended and Restated Credit Agreement dated November 8, 2019, by and among Raven Industries, Inc. as the Borrower, certain subsidiaries of the Company, as Designated Borrowers, Bank of America, N.A., as Administrative Agent, Swingline Lender, and an L/C issuer and each of the other lenders party thereto, (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-K filed March 26, 2020).

10(b)						Form of Performance Stock Unit Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-K filed March 26, 2020). †

10(c)						Form of Restricted Stock Unit Award Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-K filed March 26, 2020). †

10(d)						Raven Industries, Inc. 2019 Equity Incentive Plan adopted May 21, 2019 (incorporated herein by reference to Appendix A of the Company’s definitive Proxy Statement filed April 8, 2019). †

10(e)						Form of Performance Stock Unit Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-Q filed November 27, 2019). †

10(f )						Form of Restricted Stock Unit Award Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-Q filed November 27, 2019). †

10(g )						Amended and Restated Deferred Stock Compensation Plan for Directors of Raven Industries, Inc., effective July 11, 2018 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K filed July 12, 2018). †

10(h )						Amended and Restated 2010 Stock Incentive Plan adopted May 25, 2017 (incorporated herein by reference to Exhibit A of the Company’s definitive Proxy Statement filed April 19, 2017). †

10(i )						Form of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10(r) of the Company's Form 10-Q filed June 4, 2012). †

10(j )						Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10(s) of the Company's Form 10-Q filed June 4, 2012). †

10(k )						Raven Industries, Inc. Non-Qualified Deferred Compensation Plan, effective as of January 1, 2018 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-K filed March 23, 2018). †


10(l )						Amended and Restated Employment Agreement between Raven Industries, Inc. and Daniel A. Rykhus dated as of March 29, 2017 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-K filed March 31, 2017). †

10(m )						Amended and Restated Employment Agreement between Raven Industries, Inc. and Steven E. Brazones dated as of March 29, 2017 (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-K filed March 31, 2017). †

10(n )						Form of Amended and Restated Change in Control Agreement between Raven Industries, Inc. and the following senior executive officers: Anthony D. Schmidt dated as of March 28, 2016 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-K filed March 29, 2016). †

10(o)						Employment Agreement between Raven Industries, Inc. and Anthony D. Schmidt dated as of February 1, 2012 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K filed February 1, 2012). †

10(p)						Form of Schedule A to Employment Agreement, revised effective January 1, 2016, between Raven Industries, Inc. and the following senior executive officers: Anthony D. Schmidt (incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-K filed March 31, 2017). †

21						Subsidiaries of the Registrant.

23.1						Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.

31.1						Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.SCH						XBRL Taxonomy Extension Schema

101.CAL						XBRL Taxonomy Extension Calculation Linkbase

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension Label Linkbase


Exhibit Number						Description
101.PRE						XBRL Taxonomy Extension Presentation Linkbase

104						Cover page Interactive Data File is formatted in Inline XBRL and is contained in Exhibit 101

†						Management contract or compensatory plan or arrangement.

* The exhibits and schedules to this Amended and Restated Credit agreement listed in the table of contents of the Credit Agreement do not contain material information and have been omitted from this filing pursuant to item 601(a)(5) of Regulation S-K. Raven Industries, Inc. will furnish copies of such exhibits and schedules to the Securities and Exchange Commission upon request.


ITEM 16.			FORM 10-K SUMMARY

None.

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)

By: /s/ DANIEL A. RYKHUS

Daniel A. Rykhus

President and Chief Executive Officer

Date: March 24, 2021


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ DANIEL A. RYKHUS						/s/ JANET M. HOLLOWAY
Daniel A. Rykhus						Janet M. Holloway
President and Chief Executive Officer						Director
(Principal Executive Officer) and Director


/s/ TAIMUR SHARIH						/s/ KEVIN T. KIRBY
Taimur Sharih						Kevin T. Kirby
Vice President and Chief Financial Officer						Director
(Principal Financial and Accounting Officer)


/s/ MARC E. LEBARON						/s/ LOIS M. MARTIN
Marc E. LeBaron						Lois M. Martin
Chairman of the Board						Director


/s/ JASON M. ANDRINGA						/s/ RICHARD W. PAROD
Jason M. Andringa						Richard W. Parod
Director						Director


/s/ THOMAS S. EVERIST
Thomas S. Everist
Director


						Date: March 24, 2021

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the years ended January 31, 2021, 2020 and 2019

(in thousands)


			Additions
Description	Balance at Beginning of Year		Charged to Costs and Expenses		Charged to Other Accounts		Deductions From Reserves (1)		Balance at End of Year
Deducted in the balance sheet from the asset to which it applies:
Allowance for credit losses:
Year ended January 31, 2021	$	1,380	$	1,530	$	—	$	966	$	1,944
Year ended January 31, 2020	739		816		—		175		1,380
Year ended January 31, 2019	978		37		—		276		739

Note:

(1)Represents uncollectable accounts receivable written off during the year, net of recoveries.

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