-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OZDTARKn9Y6o+CR+mX4vukhJtYoxYKMzLx//CDNciO5D43hrK0ZVUYmIXZS8Istg JJtmADocO/QIPRS5cBJ4Qw== 0000897101-98-000908.txt : 19980910 0000897101-98-000908.hdr.sgml : 19980910 ACCESSION NUMBER: 0000897101-98-000908 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19980909 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAVEN INDUSTRIES INC CENTRAL INDEX KEY: 0000082166 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 460246171 STATE OF INCORPORATION: SD FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07982 FILM NUMBER: 98706206 BUSINESS ADDRESS: STREET 1: 205 E 6TH ST STREET 2: PO BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117 BUSINESS PHONE: 6053362750 MAIL ADDRESS: STREET 1: P O BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117-5107 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JULY 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________________________ Commission file number: 0-3136 RAVEN INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) SOUTH DAKOTA 46-0246171 - ------------------------------------------------- --------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 205 EAST 6TH STREET P.O. BOX 5107 SIOUX FALLS, SD 57117-5107 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) 605-336-2750 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AS OF SEPTEMBER 3, 1998 - --------------------------------- ----------------------------------- Common Stock 4,713,803 shares RAVEN INDUSTRIES, INC. AND SUBSIDIARIES INDEX PAGE NO. PART I-FINANCIAL INFORMATION Consolidated Balance Sheets as of July 31, 1998, January 31, 1998 and July 31, 1997 3 Consolidated Statements of Income for the three and six months ended July 31, 1998 and 1997 4 Consolidated Statements of Cash Flows for the six months ended July 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II-OTHER INFORMATION 10 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. AND SUBSIDIARIES (Dollars in thousands)
07/31/98 01/31/98 07/31/97 -------- -------- -------- ASSETS Cash and cash equivalents ................................... $ 2,129 $ 2,850 $ 2,645 Accounts and note receivable, less allowance for doubtful accounts of $407, $390 and $345 .................. 20,066 26,973 18,816 Inventories: Materials ................................................. 19,493 17,801 18,637 In process ................................................ 6,604 3,882 5,013 Finished goods ............................................ 8,462 4,133 7,937 ------- ------- ------- Total inventories ..................................... 34,559 25,816 31,587 Deferred income taxes ....................................... 1,682 1,686 2,064 Prepaid expenses and other current assets ................... 216 506 435 ------- ------- ------- Total current assets .................................. 58,652 57,831 55,547 ------- ------- ------- Property, plant and equipment ............................... 56,040 53,805 50,339 Less: accumulated depreciation ............................ 36,092 33,988 32,062 ------- ------- ------- Net property, plant and equipment ..................... 19,948 19,817 18,277 Note receivable, less current portion ....................... 1,365 1,259 Other assets, net ........................................... 3,482 3,683 5,728 ------- ------- ------- TOTAL ASSETS ................................................ $83,447 $82,590 $79,552 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt ........................... 1,682 1,765 757 Accounts payable ............................................ 5,725 7,480 5,789 Accrued liabilities and customer advances ................... 9,960 10,130 10,352 ------- ------- ------- Total current liabilities ............................. 17,367 19,375 16,898 Long-term debt, less current portion ........................ 4,584 1,128 2,610 Deferred income taxes ....................................... 524 524 736 Stockholders' equity Common stock, $1 par value, authorized shares: 100,000,000; issued: 5,214,406; 5,210,832 and 5,203,395 shares ........ 5,214 5,211 5,203 Paid in capital ........................................... 2,849 2,844 2,758 Retained earnings ......................................... 58,217 57,131 54,257 ------- ------- ------- 66,280 65,186 62,218 Less treasury stock, at cost: 471,203; 386,403 and 352,403 shares ................... 5,308 3,623 2,910 ------- ------- ------- Total stockholders' equity ............................ 60,972 61,563 59,308 ------- ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $83,447 $82,590 $79,552 ======= ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 3 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per-share data)
FOR THE THREE FOR THE SIX MONTHS ENDED MONTHS ENDED ---------------------- ---------------------- 07/31/98 07/31/97 07/31/98 07/31/97 -------- -------- -------- -------- Net sales ................... $ 36,208 $ 34,075 $ 68,370 $ 69,741 Cost of goods sold .......... 30,175 28,000 56,918 56,839 -------- -------- -------- -------- Gross profit .............. 6,033 6,075 11,452 12,902 Operating expenses Selling ................... 2,030 2,018 4,111 3,954 Administrative ............ 1,620 1,650 3,352 3,253 -------- -------- -------- -------- Operating income ....... 2,383 2,407 3,989 5,695 Interest expense ............ (144) (78) (228) (166) Other income, net ........... 102 147 180 281 -------- -------- -------- -------- Income before income taxes 2,341 2,476 3,941 5,810 Income taxes ................ 839 874 1,415 2,074 -------- -------- -------- -------- Net income ................ $ 1,502 $ 1,602 $ 2,526 $ 3,736 ======== ======== ======== ======== Net income per common share: Basic .............. $ 0.31 $ 0.33 $ 0.53 $ 0.77 Diluted ............ $ 0.31 $ 0.33 $ 0.52 $ 0.77 Cash dividends paid per share $ 0.160 $ 0.130 $ 0.320 $ 0.031
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 4 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
FOR THE SIX MONTHS ENDED --------------------- 07/31/98 07/31/97 -------- -------- Cash flows from operating activities: Net income .......................................... $ 2,526 $ 3,736 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ................... 2,710 2,660 Provision for losses on accounts receivable ..... 104 101 Deferred income taxes ........................... 4 Equity in earnings of affiliate, net of dividends (100) Change in accounts receivable ................... 6,803 6,720 Change in inventories ........................... (8,743) (6,462) Change in other current assets .................. 290 (4) Change in operating liabilities ................. (1,925) (2,509) Other ........................................... (103) (11) ------- ------- Net cash provided by operating activities ........... 1,666 4,131 Cash flows from investing activities: Capital expenditures ................................ (2,680) (2,750) Other ............................................... 37 166 ------- ------- Net cash used in investing activities ............... (2,643) (2,584) Cash flows from financing activities: Issuance of short-term debt ......................... 4,000 Payment of short-term debt .......................... (4,000) Issuance of long-term debt .......................... 5,000 Long-term debt principal payments ................... (1,627) (1,184) Net proceeds from exercise of stock options ......... 8 100 Dividends paid ...................................... (1,440) (1,257) Purchase of treasury stock .......................... (1,685) ------- ------- Net cash provided by (used in) financing activities . 256 (2,341) ------- ------- Net decrease in cash and equivalents ................ (721) (794) Cash and cash equivalents at beginning of period ...... 2,850 3,439 ------- ------- Cash and cash equivalents at end of period ............ $ 2,129 $ 2,645 ======= ======= Cash paid during the period for: Interest .......................................... $ 165 $ 181 Income taxes ...................................... $ 1,525 $ 2,693
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 5 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended July 31, 1998 are not necessarily indicative of the results that may be expected for the year ending January 31, 1999. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended January 31, 1998. 2. Details of the earnings per share computation are presented below (dollars in thousands, except per share data):
FOR THE THREE FOR THE SIX MONTHS ENDED MONTHS ENDED ------------------------- ------------------------- 07/31/98 07/31/97 07/31/98 07/31/97 ---------- ---------- ---------- ---------- Net income ...................... $ 1,502 $ 1,602 $ 2,526 $ 3,736 ========== ========== ========== ========== Average common shares outstanding 4,779,070 4,842,691 4,802,925 4,839,833 Dilutive impact of stock options 8,301 54,186 14,890 41,366 ---------- ---------- ---------- ---------- Average common and common equivalent shares outstanding . 4,787,371 4,896,877 4,817,815 4,881,199 ========== ========== ========== ========== Net income per share: Basic ...................... $ 0.31 $ 0.33 $ 0.53 $ 0.77 Diluted .................... $ 0.31 $ 0.33 $ 0.52 $ 0.77
3. In May 1998, the company borrowed $5.0 million under a long-term unsecured note with Norwest Bank South Dakota, N.A. at 8.0 percent interest. Five $1.0 million principal payments are due under the note beginning in fiscal year 2000 and continue through fiscal year 2004. Page 6 PART I - FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION The company's cash balance was $2.1 million at July 31, 1998, compared with $2.6 million one year earlier. The company obtained additional long-term financing in the amount of $5.0 million. This was used to repay $4.0 million of short-term borrowing and provide funds for the potential repurchase of common shares. The company retains a $5.0 million conditional line of credit. The company repurchased 84,800 shares of its stock during the second quarter. The average purchase price was $19.87 per share for a total of $1.7 million. As of July 31, 1998, the company's long-term debt including the current portion was $6.3 million compared with $3.4 million one year earlier. Inventory levels increased $3.0 million from July 31, 1997, due primarily to later scheduled deliveries in the Sewn Products segment. The company's capital resources continue to be sufficient to fund all its activities. RESULTS OF OPERATIONS Sales were $36.2 million for the quarter ended July 31, 1998, an increase of $2.1 million over the second quarter of the prior year. First half sales of $68.4 million were $1.4 million below the comparable period of the prior fiscal year. Lower sales in both the Plastics segment and the Sewn Products segment contributed to this result. Net income of $1.5 million or $0.31 per share (basic) in the second quarter was $100,000 below the second quarter of fiscal 1998. For the first six months, net income of $2.5 million or $0.53 per share (basic) was $1.2 million or $0.24 per share lower than one year earlier. Operating income for the first six months was lower in each of the company's business segments. Electronics segment sales of $11.5 million in the second quarter were $2.5 million more than the same period the prior year. The second quarter operating income for the Electronics segment was $1.0 million, more than double from the comparable period last year. For the first six months, sales totaled $23.2 million, up 10 percent over last year. Operating income for the first half of the year totaled $2.2 million, which was $247,000 less than the first six months of fiscal 1998. Second quarter sales of $2.9 million for flow control devices represented an increase of 4 percent over last year's second quarter. Despite this result, management expects that the weak agricultural market may have an unfavorable impact on the sales of flow control devices. Sales of contract electronics were up, and the margins generated showed a marked improvement over the first quarter of fiscal 1999. Higher sales of feedmill automation systems, along with increased margins on this product line, have contributed heavily to this segment's performance. Plastics segment sales of $16.8 million for the second quarter were 1 percent higher than the same period last year. Sales of $33.3 million for the first six months were 4 percent lower than the first half of fiscal 1998. Continuing weak sales in the industrial market for plastic storage tanks were offset by a higher sales volume in engineered films and pickup toppers. Operating income for the second quarter was $1.1 million, up 10 percent Page 7 PART I - FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) over last year. For the first six months, operating income was $1.6 million compared with $2.0 million for the same period last year. Sewn Products segment sales of $7.9 million were 6 percent lower than the $8.4 million recorded in the second quarter of last year. Segment sales totaled $11.8 million in the first half of the year, down 16 percent from the six month results of fiscal 1998. Major customers have scheduled later deliveries this year, causing the lower sales. Operating income of $293,000 for the second quarter was 68 percent lower than the same period last year. The first six months generated operating income of $121,000, 90 percent below the first half of last year. The second quarter saw the recovery of the operating loss posted in the first quarter. Lower margins on deliveries of garments, inflatable display products and hot air balloons have compounded the results. Historical deliveries of Sewn Products are low during the first half of the year, therefore, management expects to see an improvement in the next six months. Consolidated gross profits were 1 percent lower for the second quarter and 11 percent lower for the first half when compared with the same periods last year. Second quarter net income of $1.5 million was 6 percent below last year's second quarter. Year-to-date net income of $2.5 million was 32 percent lower the last year's first half. These results were due primarily to the delivery of lower margin products in the Sewn Products and Plastics segments. Selling expenses was 2 percent higher for the second quarter than for the same period the previous year. For the first half of the year, selling expenses were 5 percent higher than the previous year's first half. This reflects an increased emphasis on securing new markets in the Electronics and Plastics segments. Administrative expenses were approximately the same when compared to last year's figures. Pretax income of $2.3 million for the second quarter was 5 percent less than the same period the previous year. The pretax income for the first six months was $3.9 million, 32 percent lower than last year. YEAR 2000 STATEMENT The company is working to resolve the potential impact of the year 2000 date problem. This date problem occurs when computer programs that use a two-digit year designation recognize "00" as the year 1900. The company has completed its assessment of the internal operating software used to run its business and is mid-way into the process required to correct any of the defects found. Internally, the Company is in the process of analyzing two additional areas which are: computerized production equipment and computerized building equipment. Externally, the company is working with its vendors and its customers to insure that there is no break in the delivery process either with incoming or outgoing shipments. Even though the company has not completed all of its assessments, management believes that the costs of addressing this issue will not have a material adverse impact on the company's financial position. This assessment is supported by Page 8 PART I - FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) two factors. First, the diversification of the company mitigates the impact of any business risk. Second, the company obtains a wide variety of raw materials from numerous sources, and alternative sources of supply are generally available. However, if the company and the third parties upon which it relies are unable to address this issue in a timely manner, it could result in a material adverse risk to the company. SAFE HARBOR STATEMENT THIS REPORT CONTAINS DISCUSSIONS OF ITEMS WHICH MAY CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF FEDERAL SECURITIES LAWS. ALTHOUGH RAVEN INDUSTRIES BELIEVES THAT EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCES THAT ITS EXPECTATIONS WILL BE ACHIEVED. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM EXPECTATIONS INCLUDE GENERAL ECONOMIC CONDITIONS, WEATHER CONDITIONS WHICH COULD AFFECT CERTAIN OF THE COMPANY'S PRIMARY MARKETS SUCH AS THE AGRICULTURAL MARKET OR ITS MARKET FOR OUTERWEAR, OR CHANGES IN COMPETITION WHICH COULD IMPACT ANY OF THE COMPANY'S PRODUCT LINES. Page 9 PART II-OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: None Item 3. Defaults upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None. Item 5. Other Information: None Item 6. (a) Exhibits Filed: Exh. 27-Financial Data schedule (for SEC only). (b) Reports on Form 8-K: None (c) Exh. 10.1-Change in Control Agreement between Raven Industries, Inc. and Thomas Iacarella dated as of August 1, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RAVEN INDUSTRIES, INC. /s/ Thomas Iacarella ---------------------------------- Thomas Iacarella Vice President, Finance, Secretary and Treasurer (Principal Financial and Accounting Officer) DATE: SEPTEMBER 9, 1998 Page 10 EX-10.1 2 CHANGE IN CONTROL AGREEMENT Exh 10.1 CHANGE IN CONTROL AGREEMENT AGREEMENT dated as of August 1, 1998, between RAVEN INDUSTRIES, INC., a South Dakota corporation (the "Company"), and Thomas Iacarella (the "Executive"). WITNESSETH: WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the Executive's contribution to the growth and success of the Company and its subsidiaries has been substantial. WHEREAS, the Board has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties. WHEREAS, this Agreement sets forth the severance compensation which the Company agrees it will pay to the Executive if the Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control (as defined herein). NOW THEREFORE, in consideration of the mutual covenants and conditions herein contained and in further consideration of services performed and to be performed by the Executive for the Company, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) CHANGE IN CONTROL. A "Change in Control" of the Company shall occur if: (i) any person, as defined in Sections 3(a)(9) and 13(d)(3) of the '34 Act, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to the '34 Act), directly or indirectly, of 30% or more of combined voting power of the Company's then outstanding securities; or (ii) the occurrence within any twelve-month period during the term of the Agreement of a change in the Board with the result that the Incumbent Members do not constitute a majority of the Board. (b) CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) DATE OF TERMINATION. "Date of Termination" shall mean: (i) if the Executive voluntarily terminates his employment with the Company, the date on which the Executive delivers a Notice of Termination to the Company; or (ii) if the Executive's employment is terminated by the Company, the date on which the Company delivers a Notice of Termination to the Executive. (d) INCUMBENT MEMBERS. "Incumbent Members" in respect of any twelve-month period, shall mean the members of the Board on the date immediately preceding the commencement of such twelve-month period, provided that any person becoming a Director during such twelve-month period whose election or nomination for election was supported by a majority of the Directors who, on the date of such election or nomination for election, comprised the Incumbent Members shall be considered one of the Incumbent Members in respect of such twelve-month period. (e) NOTICE OF TERMINATION. A "Notice of Termination" shall mean a written notice which shall indicate those specific termination provisions in this Agreement relied upon. Any termination by the Company or the Executive shall be communicated by a Notice of Termination. (f) '34 ACT. "'34 Act" shall mean the Securities Exchange Act of 1934, as amended. 2. TERM. This Agreement shall commence on the date first above written and shall continue in effect until August 1, 1999. Commencing on August 1, 1999, and each August 1, thereafter, the term of this Agreement shall automatically be extended for one additional year to August 1, 2000 and each August 1, thereafter, unless at least sixty days immediately preceding such August 1, the Company shall have given the Executive written notice that the Company does not wish to extend this Agreement; provided that this Agreement shall continue in effect beyond the term provided herein if a Change of Control shall have occurred during such term or if any obligation of the Company hereunder remains unpaid as of such time. 3. SEVERANCE COMPENSATION UPON A CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT. If (a) a Change of Control of the Company shall have occurred while the Executive is an employee of the Company, and (b) within two (2) years after the date of such Change in Control the Company, except in the case of the Executive's death, terminates the Executive's employment or the Executive shall voluntarily terminate employment with the Company, then (a) the Company shall pay the Executive any earned and accrued but unpaid installment of base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and all other unpaid amounts to which the Executive is entitled as of the Date of Termination under any compensation plan or program of the Company, including, without limitation, all accrued vacation time; such payments to be made in a lump sum on or before the fifth day following the Date of Termination; (b) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay to the Executive an amount equal to the product of (A) the sum of (i) the Executive's annual base salary in effect as of the Date of Termination and (ii) the target or goal amount under the Management Incentive Plan for the year in which occurs such Date of Termination and (B) the number 2; such payment to be made in a lump sum on or before the fifth calendar day following the Date of Termination; (c) if the payment provided under paragraph (b) above (the "Contract Payment") or any other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, the Company shall pay the Executive on or before the fifth calendar day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Contract Payment and such other Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the Contract Payment and such other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment, whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, its successors, any person whose actions result in a Change in Control of the Company or any corporation affiliated (or which, as a result of the completion of a transaction causing a Change in Control, will become affiliated) with the Company within the meaning of Section 1504 of the Code (together with the Contract Payment, the "Total Payments") shall be treated as "parachute payments" within the meaning of section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Code either in their entirety or in excess of the base amount within the meaning of section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (B) the amount of the Total Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (A), above), and (C) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(d) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess) at the time that the amount of such excess is finally determined; (d) the Company shall maintain in full force and effect for two (2) years following the Date of Termination, or until the Executive reaches age 65, whichever occurs first, for the continued benefit of the Executive, all employee welfare benefit plans and perquisite programs in which the Executive was entitled to participate immediately prior to the Date of Termination provided that the Executive's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Executive's participation in any such plan or program is barred, the Company shall, at its sole cost and expense, arrange to provide the Executive with benefits substantially similar to those which the Executive would otherwise have been entitled to receive under such plans and programs from which his continued participation is barred; and (e) the Executive shall, effective the Date of Termination, be deemed a "Participant" and vested in all respects under the Company's Executive Post-Retirement Health and Survivor Benefit Plan, dated February 1, 1989, regardless of whether the Executive otherwise then satisfies the requirements for eligibility under such Plan; provided that the benefits specified under such Plan shall (A) not become payable until the expiration of two (2) years from the Date of Termination, or when the Executive reaches age 65, whichever occurs first, and (B) not be provided to the extent such benefits are provided to the Executive by another employer at no cost to the Executive. In the event a Change in Control of the Company shall have occurred while the Executive is an employee of the Company and, within two (2) years after the date of such Change in Control the Executive shall die while still an employee of the Company, the amount specified in Subsection 3(a) shall be paid by the Company to such Executive's estate, and such deceased Executive's spouse and eligible dependents shall be entitled to all of the benefits specified in the Company's Executive Post-Retirement Health and Survivor Benefit Plan as if such deceased Executive had delivered a Notice of Termination to the Company immediately prior to such death. 4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL RIGHTS. (a) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination, or otherwise, except as provided in Subsection 3(e)(B). (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, employment agreement or other contract, plan or arrangement. 5. SUCCESSOR TO THE COMPANY. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 5 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. If at any time during the term of this Agreement the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, "Company" as used in this Agreement shall in addition include such employer. In such event, the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 3 hereof. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 6. NOTICE. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Raven Industries, Inc. 205 East 6th Street P.O. Box 5107 Sioux Falls, South Dakota 57117 Attention: President If to the Executive: Thomas Iacarella 913 E. 61st Street Sioux Falls, SD 57108 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 7. MISCELLANEOUS. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of South Dakota. 8. VALIDITY. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. FEES AND EXPENSES. The Company shall pay all fees and expenses (including attorney's fees) which the Executive may incur as a result of the Company's contesting the validity, enforceability or the Executive's interpretation of, or determinations under, this Agreement, regardless of whether the Company is successful in such contest. 11. CONFIDENTIALITY. The Executive shall retain in confidence any and all confidential information known to the Executive concerning the Company and its business so long as such information is not otherwise publicly disclosed. 12. COMPANY'S RIGHT TO TERMINATE. Notwithstanding anything contained in this Agreement to the contrary, the Company may terminate the Executive's employment at any time, for any reason or no reason, and no provision contained herein shall affect the Company's ability to terminate the Executive's employment at any time, with or without cause. Nothing in this Agreement shall in any way require the Company to provide any of the benefits specified in this Agreement prior to a Change in Control, nor shall this Agreement be construed in any way to establish any policies or other benefits for the Executive or any other employee of the Company whose employment with the Company is terminated prior to a Change in Control. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. ATTEST: RAVEN INDUSTRIES, INC. By /s/ Gary L. Conradi By /s/ David A. Christensen Gary L. Conradi, Vice President David A. Christensen, President and Chief Executive Officer ATTEST: By /s/ Karen M. Iversen /s/ Thomas Iacarella Thomas Iacarella EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JAN-31-1999 JUL-31-1998 2,129 0 20,473 407 34,559 58,652 56,040 36,092 83,447 17,367 4,584 0 0 5,214 55,758 83,447 68,370 68,370 56,918 56,918 0 0 228 3,941 1,415 2,526 0 0 0 2,526 0.53 0.52
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