Acquisitions of and Investments in Businesses and Technologies

9 Months Ended

Oct. 31, 2017

Business Combinations [Abstract]

Acquisitions of and Investments in Businesses and Technologies

ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Colorado Lining International, Inc.

On September 1, 2017, the Company completed the acquisition of substantially all of the assets ("the acquisition") of Colorado Lining International, Inc., a Colorado corporation, headquartered in Parker, CO (“CLI”). The acquisition will immediately align under the Company’s Engineered Films Division. The acquisition enhances the Company’s geomembrane market position through extended service and product offerings with the addition of new design-build and installation service components, and will advance Engineered Films’ business model into a vertically-integrated, full-service solutions provider for the geomembrane market. The acquisition constitutes a business and as such was accounted for as a business combination.

The purchase price was approximately $15,088. This includes potential earn-out payments with an estimated fair value of $1,256 which are contingent upon achieving certain revenues and operational synergies. The acquisition includes a working capital adjustment to be settled within ninety days after acquisition.

In the initial acquisition accounting, 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 purchase price over the fair value of the identifiable assets acquired and liabilities assumed is reflected as goodwill. Goodwill recorded as part of the purchase price allocation was $5,941, all of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $610, including definite-lived intangibles, such as customer relationships and order backlog. The estimated fair value of the assets acquired and liabilities assumed are preliminary and may be adjusted as the Company obtains additional information, primarily related to adjustments for the true up of acquired net working capital in accordance with the asset purchase agreement. If there are adjustments made for these items, the fair value of intangible assets and goodwill could be impacted. Thus, the provisional measurements of fair value are subject to change.

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 7 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 method investment.

Acquisition-related Contingent Consideration

The Company has contingent liabilities related to the recent acquisition of CLI, as well as the prior 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 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:

	Three Months Ended						Nine Months Ended
	October 31, 2017			October 31, 2016			October 31, 2017			October 31, 2016
Beginning balance	$	1,567		$	1,901		$	1,741		$	2,059
Fair value of contingent consideration acquired	1,256			—			1,256			—
Change in fair value of the liability	52			(165		)	198			(41		)
Contingent consideration earn-out paid	(44		)	(36		)	(364		)	(318		)
Ending balance	$	2,831		$	1,700		$	2,831		$	1,700
Classification of liability in the Consolidated balance sheet
Accrued Liabilities							$	815		$	315
Other Liabilities, long-term							2,016			1,385
Balance at October 31, 2017							$	2,831		$	1,700

In the recent CLI acquisition, the Company entered into a contingent earn-out agreement, not to exceed $2,000. The earn-out is paid annually for three years after the purchase date, contingent upon achieving certain revenues and operational synergies. To date, the Company has made no payments on this potential earn-out liability.

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. To date, the Company has paid a total of $847 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. To date, the Company has paid a total of $1,572 of this potential earn-out liability.

Schedule of Business Acquisitions by Acquisition, Contingent Consideration [Table Text Block]

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

	Three Months Ended						Nine Months Ended
	October 31, 2017			October 31, 2016			October 31, 2017			October 31, 2016
Beginning balance	$	1,567		$	1,901		$	1,741		$	2,059
Fair value of contingent consideration acquired	1,256			—			1,256			—
Change in fair value of the liability	52			(165		)	198			(41		)
Contingent consideration earn-out paid	(44		)	(36		)	(364		)	(318		)
Ending balance	$	2,831		$	1,700		$	2,831		$	1,700
Classification of liability in the Consolidated balance sheet
Accrued Liabilities							$	815		$	315
Other Liabilities, long-term							2,016			1,385
Balance at October 31, 2017							$	2,831		$	1,700