Acquisitions of and Investments in Businesses and Technologies

12 Months Ended

Jan. 31, 2012

Business Combinations [Abstract]

Acquisitions of and Investments in Businesses and Technologies

NOTE 5 ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Vista Research

In January 2012, the company completed the stock purchase agreement for all the outstanding stock of Vista Research, Inc. (Vista) for a purchase price of $23,269, of which $12,000 was cash, $2,869 was on assumed line of credit paid by Raven at closing, and $8,400 was valued in contingent consideration and earn-outs.

Vista is a leading provider of surveillance systems that enhance the effectiveness of radars using sophisticated algorithms. Vista's smart sensing radar systems (SSRS) are employed in a host of advanced detection and tracking applications, including wide-area surveillance for the border patrol and the military. In the short term, this acquisition will allow Raven to enhance its tethered aerostat security solutions within its Aerostar Division. Longer-term, the company is positioned to meet growing global demand for low-cost detection and tracking systems used by government and law enforcement agencies. Results of operations subsequent to the acquisition have been combined into the Aerostar Division.

In connection with the stock purchase agreement, Raven has agreed to pay an aggregated $3,250 upon the total receipt of SSRS orders for delivery of a specific quantity by January 31, 2013 and another $3,250 upon the delivery of the total specific quantity by January 31, 2014. No amount would be paid if the specific milestones are not reached by the specific dates. The company will also make annual payments based upon earn-out percentages on specific revenue streams over the next seven years, not to exceed $15,000. The company has determined the fair value of these contingent considerations to be $8,400, of which $3,068 was classified as accrued liabilities and $5,332 as other liabilities in the Consolidated Balance Sheet.

Lastly, the company agreed to fund a revenue based bonus pool for Vista employees using those same earn-out percentages on specific revenue streams over the next seven years, also not to exceed $15,000. Payments related to the Vista employee revenue-based bonus pool were treated as a separate transaction from the acquisition and will be accrued when the specific revenue stream is recorded.

The fair value of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value acquired over the identifiable assets acquired and liabilities assumed is reflected as goodwill. Goodwill recorded as part of the purchase price allocation was $11,497, all of which is tax deductible. Goodwill resulting from this business combination is largely attributable to the experienced workforce of the acquired business and synergies expected to arise after integration of Vista products into existing Aerostar products. Identifiable intangible assets acquired as part of the acquisition were $7,810, including definite-lived intangibles, such as customer relationships, proprietary technology and non-compete agreements, with a useful life ranging from six to ten years. These intangible assets will be amortized on the basis of undiscounted cash flows over a weighted average period of 4.1 years.

The total purchase price has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:

Cash	$	320
Accounts receivable	2,375
Inventory	264
Other current and long term assets	3,342
Property, plant, and equipment, net	834
Goodwill	11,497
Existing technology	4,300
Customer relationships	3,260
Other intangibles	250
Current liabilities	(3,023		)
Other liabilities	(150		)
Total purchase price	$	23,269

Vista net sales and net loss for the period from the acquisition date to January 31, 2012 were $631 and $(125), respectively.

The following pro forma consolidated condensed financial results of operations are presented as if the acquisition described above had been completed at the beginning of each period presented:

	For the years ended January 31
	2012		2011
Pro forma net sales	$	395,974	$	328,361
Pro forma net income attributable to Raven Industries, Inc.	49,907		39,948
Pro forma earnings per common share:
Basic	$	2.75	$	2.21
Diluted	$	2.74	$	2.21

These pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as amortization and acquisition cost. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

SST

In November 2009, the company acquired a 20% interest in Site Specific Technology Development Group, Inc. (SST) for $5,000. SST is a privately held agricultural software development and information services provider. Raven and SST are strategically aligned to provide customers with simple, more efficient ways to move and manage information in the precision agriculture market. At the acquisition date, the carrying value of the SST investment exceeded the company’s share of the underlying net assets of SST by $4,976. The company's analysis of this excess determined that it related to $1,054 of technology-related assets to be amortized over a seven-year period and $3,200 of license-related assets to be amortized over a ten-year period. The remainder of the excess is attributable to equity method goodwill.

Changes in the net carrying value of the investment in SST (Investment in Affiliate) were as follows:

	As of January 31
	2012			2011			2010
Balance at beginning of year	$	4,728		$	5,010		$	—
Acquisition	—			—			5,000
Raven's share of SST earnings	156			195			10
Amortization of intangible assets	(475		)	(477		)	—
Balance at end of year	$	4,409		$	4,728		$	5,010

Ranchview

In November 2009, the company purchased substantially all of the assets of Ranchview, Inc., a privately held Canadian corporation for $1,500 cash and contingent consideration valued at $2,310. Raven agreed to pay additional consideration on a quarterly basis of 6% on future sales of Ranchview products, up to a maximum payment of $4,000. Ranchview developed products that use cellular networks instead of the traditional radio systems that are typically used to deliver RTK (Real Time Kinematic) corrections to GPS enabled equipment. RTK corrections improve the accuracy of GPS equipment. The network can also be used to provide high-speed Internet access.

The allocation of the purchase price is summarized below:

Goodwill	$	2,734
Existing technology	900
Other intangibles	175
Total	$	3,809

The goodwill associated with Ranchview is deductible for tax purposes. Purchased identifiable intangible assets are amortized on a straight-line basis over their respected useful lives. The estimated useful life is six years for existing technology and five to seven years for the remaining intangibles.

The results of operations of Ranchview for periods prior to the company’s acquisition were not material to the company’s Consolidated Statements of Income and Comprehensive Income and, accordingly, pro forma results of operations have not been presented. This operation has been combined into the Applied Technology Division.