

NOTE 11	SHARE-BASED COMPENSATION

At January 31, 2014, Raven 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,
	2014		2013		2012
Share-based compensation cost	$	4,198	$	3,075	$	1,922
Tax benefit	1,460		1,057		547

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

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 Amended and Restated 2010 Stock Incentive Plan (the Plan) which was approved by shareholders on May 22, 2012. The aggregate number of shares initially available for which options may be granted under the Plan was 2,000,000. As of January 31, 2014, the number of shares available for grant under the Plan was 900,761. Option exercises under the Plan are settled in newly issued common shares.

The Plan is administered by the Personnel and Compensation Committee of the Board of Directors (the Committee), consisting of two or more independent directors of the Company. Subject to the provisions set forth in the Plan, all of the members of the Committee shall be non-employee members of the Board of Directors. The Committee determines the option exercise prices. The term of each grant is determined by the Committee. The Committee may accelerate the exercisability of awards under the Plan or extend the term of such awards to the extent allowed by the Plan to a maximum term of ten years. Two types of awards were granted under the Plan in fiscal 2014.

Stock Option Awards

On March 25, 2013, the Company granted 198,900 non-qualified stock options. Options are granted with exercise prices not less than 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 is estimated on the date of grant using the Black-Scholes option pricing model. The Company uses 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 are as follows:



	For the years ended January 31,
	2014			2013			2012
Risk-free interest rate	0.59		%	0.86		%	0.67		%
Expected dividend yield	1.46		%	1.33		%	1.20		%
Expected volatility factor	41.39		%	49.62		%	51.44		%
Expected option term (in years)	3.75			3.75			4.00

Weighted average grant date fair value	$	9.34		$	10.92		$	11.05

Outstanding stock options as of January 31, 2014 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, 2013	910,629		$	23.36
Granted	198,900		32.85
Exercised	(158,971	)	14.28
Forfeited	(4,425	)	23.34
Expired	—		—
Outstanding, January 31, 2014	946,133		$	26.88	$	10,003	2.63

Outstanding exercisable, January 31, 2014	439,783		$	23.06	$	6,327	1.93

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 $3,019, $2,573 and $2,362 during the years ended January 31, 2014, 2013 and 2012, respectively. As of January 31, 2014, the total unrecognized compensation cost for non-vested awards was $3,216, net of the effect of estimated forfeitures. This amount is expected to be recognized over a weighted average period of 2.27 years.

Restricted Stock Unit Awards

The Company granted 25,540 time-vested RSUs to employees during the year ended January 31, 2014. The fair value of a time-vested RSU is measured based upon the closing market price of the Company's common stock on the date of grant. Time-vested RSUs will vest if, at the end of the three-year period, the employee remains employed by the Company. Dividends are cumulatively earned on the time-vested RSUs over the vesting period.

Activity for time-vested RSUs under the Plan in fiscal 2014 was as follows:



	Number of restricted stock units		Weighted average grant date fair value
Outstanding, January 31, 2013	20,640		$	31.66
Granted	25,540		32.85
Vested	—		—
Forfeited	(2,820	)	32.24
Outstanding, January 31, 2014	43,360		$	32.32

Cumulative dividends, January 31, 2014	903

The Company also granted performance-based RSUs during the year ended January 31, 2014. The exact number of performance shares to be issued will vary from 0% to 150% of the target award, depending on the Company's actual performance over the three-year period in comparison to the target award based on return on sales (ROS), which is defined as net income divided by net sales. The performance-based RSUs will vest if, at the end of the three-year performance period, the Company has achieved certain performance goals and the employee remains employed by the Company. Dividends are cumulatively earned on performance-based RSUs over the vesting period.

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 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 an estimated ROS target over the three-year performance period. The estimated ROS performance used to estimate the number of restricted stock units expected to vest is evaluated at least 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 2014 was as follows:



	Number of restricted stock units expected to vest		Weighted average grant date fair value
Outstanding, January 31, 2013	66,233		$	31.66
Granted	56,222		32.85
Vested	—		—
Forfeited	(562	)	31.66
Performance-based adjustment	14,042		32.85
Outstanding, January 31, 2014	135,935		$	32.27

Cumulative dividends, January 31, 2014	2,234

As of January 31, 2014, the total unrecognized compensation cost for nonvested RSU awards was $3,169 net of the effect for estimated forfeitures. This amount is expected to be recognized over a weighted average period of 1.82 years.

Deferred Stock Compensation Plan for Directors

The Company reserves 100,000 shares of its common stock for issuance 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, 2014 and changes during the year then ended are presented below:



	Number of stock units	Weighted average price
Outstanding, January 31, 2013	57,186	$	26.93
Granted	7,700	31.17
Deferred retainers	5,774	31.17
Dividends	958	33.89
Outstanding, January 31, 2014	71,618	$	37.45