Acquisitions of and Investments in Businesses and Technologies

12 Months Ended

Jan. 31, 2018

Acquisitions of and Investments in Businesses and Technologies



NOTE 6	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 was aligned under the Company’s Engineered Films Division. The acquisition enhanced the Company’s geomembrane market position through extended

service and product offerings with the addition of new design-build and installation service components, and advanced 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 acquisition included a working capital adjustment that was settled in January 2018. The final working capital adjustment was $566 which brought the purchase price to $14,938. The purchase price includes potential earn-out payments with an estimated fair value of $1,256 which are contingent upon achieving certain revenues and operational synergies.

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 $5,714, 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.

Acquisition-related contingent consideration

The Company has contingent liabilities related to the current fiscal year 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:



	For the years ended January 31,
	2018			2017
Beginning balance	$	1,741		$	2,059
Fair value of contingent consideration acquired	1,256			—
Change in fair value of the liability	457			36
Contingent consideration earn-out paid	(408		)	(354		)
Ending balance	$	3,046		$	1,741

Classification of liability in the Consolidated balance sheet
Accrued Liabilities	$	1,036		$	345
Other Liabilities, long-term	2,010			1,396
Balance at January 31, 2018	$	3,046		$	1,741

As part of the CLI acquisition in the current fiscal year, 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 $890 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.

Equity Method Investments

The Company has owned interests in two affiliates accounted for as equity method investments: AgEagle and SST.

AgEagle

In February 2016, the Applied Technology Division acquired an interest of approximately 5% in AgEagle. AgEagle is a privately held company that is a leading provider of unmanned aerial systems (UAS) used for agricultural applications. Contemporaneously with the execution of the stock purchase agreement, AgEagle and the Company entered into a distribution agreement whereby the Company was appointed as the sole and exclusive distributor worldwide 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.

SST

The Company’s owned interest of approximately 22% in SST is accounted for using the equity method. 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 data in the precision agriculture market.

Changes in the net carrying value of the Company's equity investments was as follows:



	As of January 31,
	2018			2017
Balance at beginning of year	$	2,371		$	2,805
Purchase price of equity investment	—			135
(Loss) income from equity investment	(42		)	(72		)
Amortization of intangible assets	(320		)	(497		)
Impairment to equity investment	(72		)	—
Balance at end of year	$	1,937		$	2,371