Acquisitions and Divestitures of and Investments in Businesses and Technologies

3 Months Ended

Apr. 30, 2018

Acquisitions of and Investments in Businesses and Technologies

ACQUISITIONS AND DIVESTITURES 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 immediately 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 constituted a business and as such was accounted for as a business combination.

The purchase price of $14,938 included a potential earn-out with an estimated fair value of $1,256. The earn-out payments are contingent upon achieving certain revenue targets 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 was recorded as goodwill. Goodwill recorded as part of the purchase price allocation was $5,714, all of which is tax deductible. Intangible assets acquired in the acquisition related to customer relationships, order backlog and non-complete agreements and were valued at $610.

Aerostar's Client Private Business

In fiscal 2018 Aerostar actively marketed the sale of its client private business and classified it as held for sale. During the first quarter of fiscal 2019, the client private business was sold for $832 which resulted in an immaterial gain.

Site-Specific Technology Development Group, Inc. (SST)

In February 2018 the Company sold its ownership interest, which was being accounted for as an equity method investment, of approximately 22% in SST with a carrying value of $1,937. Raven received $6,556 in cash at closing. The Company recognized a gain on the sale of $5,785 for the three months ended April 30, 2018 and this gain was reported in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income. This amount includes a fifteen percent hold-back provision held in an escrow account which is expected to be settled in fiscal 2020.

Acquisition-related Contingent Consideration

The Company has contingent liabilities related to the acquisition of CLI in September 2017, 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
	April 30, 2018			April 30, 2017
Beginning balance	$	3,046		$	1,742
Change in fair value of the liability	152			91
Contingent consideration earn-out paid	(295		)	(161		)
Ending balance	$	2,903		$	1,672

Classification of liability in the Consolidated balance sheet
Accrued liabilities	$	1,483		$	434
Other liabilities, long-term	1,420			1,238
Balance at April 30	$	2,903		$	1,672

In the 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 $974 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 $1,783 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
	April 30, 2018			April 30, 2017
Beginning balance	$	3,046		$	1,742
Change in fair value of the liability	152			91
Contingent consideration earn-out paid	(295		)	(161		)
Ending balance	$	2,903		$	1,672

Classification of liability in the Consolidated balance sheet
Accrued liabilities	$	1,483		$	434
Other liabilities, long-term	1,420			1,238
Balance at April 30	$	2,903		$	1,672