Acquisitions of and Investments in Businesses and Technologies

3 Months Ended

Apr. 30, 2017

Business Combinations [Abstract]

Acquisitions of and Investments in Businesses and Technologies

ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Ag-Eagle Aerial Systems, Inc.

In February 2016, the Applied Technology Division acquired an interest of approximately 5% in AgEagle Aerial Systems, Inc. (AgEagle). AgEagle is a privately held company that is a provider of unmanned aerial systems (UAS) used for agricultural applications. Contemporaneously with the execution of this agreement, AgEagle and the Company entered into a distribution agreement whereby the Company was appointed as the exclusive distributor of the existing AgEagle system as it pertains to the agriculture market. The Company’s equity ownership interest is considered a variable interest and it accounts for this investment under the equity method of accounting. The Company is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the entity. The purchase price was allocated between the equity ownership interest and an intangible asset for the exclusive distribution agreement. In April 2017, the Company determined that the investment in AgEagle, was fully impaired, further described in Note 6 Goodwill, Long-lived Assets and Other Intangibles, due to lower than expected cash flows. The Company has no commitments or guarantees related to this equity investment.

Acquisition-related Contingent Consideration

The Company has contingent liabilities related to prior year acquisitions of SBG Innovatie BV and its affiliate, Navtronics BVBA (collectively, SBG) in May 2014 and Vista Research, Inc. (Vista) in January 2012. 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 valuations techniques include one or more significant inputs that are not observable (Level 3 fair value measures).

In connection with the acquisition of SBG, Raven is committed to making additional earn-out payments, not to exceed $2,500 calculated and paid quarterly for ten years after the purchase date contingent upon achieving certain revenues. At April 30, 2017, the fair value of this contingent consideration was $1,385, of which $270 was classified as "Accrued liabilities" and $1,115 was classified as "Other liabilities" in the Consolidated Balance Sheet. At January 31, 2017, the fair value of this contingent consideration was $1,409, of which $247 was classified as "Accrued liabilities" and $1,162 was classified as "Other liabilities". At April 30, 2016, the fair value of this contingent consideration was $1,491, of which $237 was classified as "Accrued liabilities" and $1,254 as "Other liabilities." The Company paid $61, $36, and $59 in earn-out payments in the three-month periods ended April 30, 2017, January 31, 2017, and April 30, 2016, respectively. To date, the Company has paid a total of $643 of this potential earn-out liability.

Related to the acquisition of Vista in 2012, the Company is committed to making annual payments based upon earn-out percentages on specific revenue streams for seven years after the purchase date, not to exceed $15,000. At April 30, 2017, the fair value of this contingent consideration was $287, of which $164 was classified in "Accrued liabilities" and $123 as "Other liabilities" in the Consolidated Balance Sheet. At January 31, 2017, the fair value of this contingent consideration was $332, of which $98 was classified in "Accrued liabilities" and $234 as "Other liabilities." At April 30, 2016 the fair value of this contingent consideration was $493, of which $105 was classified as "Accrued liabilities" and $388 as "Other liabilities." The Company paid $100 and $79 in the three-month periods ended April 30, 2017 and 2016, respectively. There were no payments made in the three-month period ended January 31, 2017. To date, the Company has paid a total of $1,572 of this potential earn-out liability.