

NOTE 5	ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Integra

The Company acquired all of the issued and outstanding shares of Integra Plastics, Inc. (Integra) in a transaction that closed on November 3, 2014. The total purchase price was valued at approximately $48,200, net of an estimated working capital adjustment included in the terms of the merger and acquisition agreement. These terms provided for payment through the issuance of 1,541,696 shares of the Company's common stock valued at $39,252, based on the closing stock price on the date of acquisition and cash payments of $9,361. Integra, which was a privately-held company headquartered in Madison, South Dakota specializes in the manufacture and conversion of high-quality plastic film and sheeting. This acquisition immediately expanded Raven's Engineered Films Division's production capacity with additional extrusion and lamination operations in Brandon, South Dakota and fabrication locations in Madison, South Dakota and Midland, Texas, as well as broadened Engineered Films' product offerings and enhanced current converting capabilities. Results of operations subsequent to acquisition have been included in the Engineered Films segment.

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 $27,216, none 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 Integra products and operations into Engineered Films. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles for customer relationships and other intangibles valued at $10,000 and $200, respectively. These intangible assets are being amortized using the straight-line method over their estimated useful life as follows: customer relationships - twelve years and other intangibles - two years. Liabilities assumed from Integra included a revolving line of credit and long-term notes with Wells Fargo Bank N.A. (Wells Fargo). The Company has a related party relationship with Wells Fargo described in Note 10 Financing Arrangements. This debt was repaid by the Company and there was no debt outstanding at January 31, 2015.

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



Cash	$	1,600
Accounts receivable	4,808
Inventory	7,555
Deferred income taxes	520
Other current assets	24
Property, plant and equipment, net	17,088
Goodwill	27,216
Customer relationships and other definite-lived intangibles	10,200
Short-term and long-term debt	(11,341		)
Current liabilities	(4,084		)
Other liabilities	(5,344		)
Total purchase price	$	48,242

Integra net sales and net loss recognized in fiscal 2015 from the acquisition date to January 31, 2015 were $5,627 and $(874), respectively.

SBG

On May 1, 2014, the Company completed the purchase of all issued and outstanding shares of SBG Innovatie BV and its affiliate, Navtronics BVBA (collectively, SBG). SBG has operations in the Netherlands just outside of Amsterdam and at Navtronics in Geel, Belgium. The acquisition broadens Applied Technology Division’s guided steering system product line by adding high-accuracy implement steering applications. Additionally, SBG’s headquarters will become the new home office for Raven in Europe, expanding the Company’s global presence and reach into key European markets.

In connection with the purchase, the Company paid $5,000 and agreed to pay up to $2,500 in additional earn-out payments calculated using the undiscounted cash flows and paid quarterly over the next 10 years contingent upon achieving certain revenues. The fair value of this contingent consideration determined based on the discounted cash flows at January 31, 2015 is $1,432, of which $236 was classified as "Accrued liabilities" and $1,196 was classified as "Other liabilities". The Company paid $79 in earn-out payments during fiscal 2015.

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 $3,250, none of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $2,104, and included definite-lived intangibles, such as customer relationships and proprietary technology. Amortization is being computed over the estimated useful life using the undiscounted cash flows method as follows: twelve years for customer relationships and five years for proprietary technology. Liabilities acquired included debts to the former owners, a long-term note with a third-party bank, and deferred income taxes. As further described in Note 10 Financing Arrangements this debt was repaid by the Company and there was no debt outstanding at January 31, 2015.

SBG net sales and net income recognized in fiscal 2015 from the acquisition date to January 31, 2015 were $3,245 and $152, respectively.

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 the period presented (unaudited):



	(Unaudited)
	For the year ended January 31,
	2015		2014
Net sales	$	408,906	$	431,917
Net income attributable to Raven Industries, Inc.	34,424		45,747

Earnings per common share:
Basic	$	0.90	$	1.20
Diluted	$	0.90	$	1.20

These unaudited 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 these business combinations occurred at the beginning of each period presented, or of future results of the consolidated entities.

Acquisition-related contingent consideration

In addition to the contingent consideration related to the acquisition of SBG, the Company has contingent liabilities related to prior year acquisitions. Related to the acquisition of Vista in 2012, the Company is committed to make annual payments based upon earn-out percentages on specific revenue streams for seven years after the purchase date, not to exceed $15,000. The fair value of these contingent considerations is $2,989, of which $554 was classified in "Accrued liabilities" and $2,435 as "Other liabilities" in the Consolidated Balance Sheet for the year ended January 31, 2015. At January 31, 2014, the fair value of the contingent consideration for the Vista acquisition was $3,347, of which $890 was classified as "Accrued liabilities" and $2,457 as "Other liabilities" in the Consolidated Balance Sheet for the year ended January 31, 2014. At January 31, 2013, the fair value of the contingent consideration for the Vista acquisition was $3,071, of which $712 was classified as "Accrued liabilities" and $2,359 as "Other liabilities" in the Consolidated Balance Sheet for the year ended January 31, 2013. These fair values were estimated using forecasted discounted cash flows. The Company paid $454, $353, and $6,500 in earn-out payments in fiscal year 2015, 2014 and 2013, respectively.

Pursuant to the Company's 2009 purchase of substantially all of the assets of Ranchview Inc. (Ranchview), a privately-held Canadian corporation, during fiscal 2013 the Company paid $1,841 in cash to the previous Ranchview owner for an early buyout of the outstanding acquisition-related contingent liability. This resulted in a gain of $508 which was included in Applied Technology operating income.

Equity Method Investment SST

In November 2009, the Company acquired a 20% interest in Site Specific Technology Development Group, Inc. (SST). 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.

Changes in the net carrying value of the investment in SST were as follows:



	As of January 31,
	2015			2014			2013
Balance at beginning of year	$	3,684		$	4,063		$	4,409
Income from equity investment	28			116			156
Amortization of intangible assets	(495		)	(495		)	(477		)
Dividend received	—			—			(25		)
Balance at end of year	$	3,217		$	3,684		$	4,063

In October 2012, SST purchased approximately 10% of its outstanding common stock to be held as treasury stock. The impact of this transaction on the Company's noncontrolling interest in SST and the carrying value of its investment was as follows: Raven's ownership interest in SST increased from 20% to 22%; The basis in the net assets at acquisition decreased by $525; and the basis in the technology-related assets and goodwill increased $117 and $408, respectively, with no net impact to the carrying value of the investment.