RAVEN INDUSTRIES, INC. (NASDAQ:RAVN) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Item 4.02 Nonreliance on Previously Issued Financial Statements
or a Related Audit Report or Completed Interim Review.
On November 17, 2016, the Audit Committee of the Board of
Directors of Raven Industries, Inc. (the Company), in
consultation with management and after discussion with
PricewaterhouseCoopers LLP, the Companys independent registered
public accounting firm, determined that the Companys previously
issued consolidated financial statements for the three- and
nine-month periods ended October 31, 2015, the fiscal year ended
January 31, 2016, and the three months ended April 30, 2016
should be restated to reflect the impact of certain errors
described below. Accordingly, these financial statements and
related reports of PricewaterhouseCoopers LLP, should no longer
be relied upon.
Directors of Raven Industries, Inc. (the Company), in
consultation with management and after discussion with
PricewaterhouseCoopers LLP, the Companys independent registered
public accounting firm, determined that the Companys previously
issued consolidated financial statements for the three- and
nine-month periods ended October 31, 2015, the fiscal year ended
January 31, 2016, and the three months ended April 30, 2016
should be restated to reflect the impact of certain errors
described below. Accordingly, these financial statements and
related reports of PricewaterhouseCoopers LLP, should no longer
be relied upon.
The Company disclosed on September 12, 2016 in its Form 12b-25
filing that it had identified two deficiencies in the design and
one deficiency in the operating effectiveness of its internal
control over financial reporting each of which existed as of
October 31, 2015, January 31, 2016, and April 30, 2016. As
disclosed in the Form 12b-25, the design deficiencies related to
i) verification and monitoring of the Companys inventory cycle
counting process and ii) managements testing over the reliability
of system-generated information used in its financial reporting
process. The deficiency in operating effectiveness related to the
development and review of estimates used in the cash flow
forecasts related to the fiscal 2016 goodwill impairment
assessment for Vista Research, Inc. (Vista). The Company had
determined that the two design deficiencies are material
weaknesses and was continuing to evaluate the severity of the
operating effectiveness deficiency which could also result in a
material weakness. As a result of the material weaknesses,
management concluded at that time that it would need to file an
amendment to its Annual Report on Form 10-K for the fiscal year
ended January 31, 2016 as well as to its Quarterly Report on Form
10-Q for the quarters ended April 30, 2016 and October 31, 2015
to reflect the conclusions by the Companys management that
internal control over financial reporting and disclosure control
and procedures were not effective as of those dates.
filing that it had identified two deficiencies in the design and
one deficiency in the operating effectiveness of its internal
control over financial reporting each of which existed as of
October 31, 2015, January 31, 2016, and April 30, 2016. As
disclosed in the Form 12b-25, the design deficiencies related to
i) verification and monitoring of the Companys inventory cycle
counting process and ii) managements testing over the reliability
of system-generated information used in its financial reporting
process. The deficiency in operating effectiveness related to the
development and review of estimates used in the cash flow
forecasts related to the fiscal 2016 goodwill impairment
assessment for Vista Research, Inc. (Vista). The Company had
determined that the two design deficiencies are material
weaknesses and was continuing to evaluate the severity of the
operating effectiveness deficiency which could also result in a
material weakness. As a result of the material weaknesses,
management concluded at that time that it would need to file an
amendment to its Annual Report on Form 10-K for the fiscal year
ended January 31, 2016 as well as to its Quarterly Report on Form
10-Q for the quarters ended April 30, 2016 and October 31, 2015
to reflect the conclusions by the Companys management that
internal control over financial reporting and disclosure control
and procedures were not effective as of those dates.
In connection with assessing the severity of the operating
effectiveness deficiency described above related to the goodwill
assessment, the Company has reassessed its previous forecasts
utilized in the initial impairment analysis of the Vista
reporting unit performed during the quarter ended October 31,
2015. Based on that reassessment, the Company has concluded that
certain long-lived assets of the Vista reporting unit, including
finite-lived intangible assets, were impaired as of October 31,
2015. While the Company is still assessing this matter, the range
of estimated long-lived asset impairment for the Vista reporting
unit is $3.5 million to $4.0 million pre-tax ($2.2 million to
$2.5 after tax) for the three- and nine- month periods ended
October 31, 2015 and the fiscal year ended January 31, 2016.
Management is continuing to evaluate this matter as well as the
long-lived asset impairment assessments in its other reporting
units. In addition, as result of the reassessment, the Company
has determined that there was an error in the amount of goodwill
impairment originally recognized at October 31, 2015 and that the
goodwill of the Vista reporting unit was fully impaired as of
that date, notwithstanding that the Company is still evaluating
the Vista long-lived assets described above, and therefore the
remaining amount of goodwill of $4.1 million ($2.6 million after
tax) should have been recorded as an additional goodwill
impairment for the three- and nine-month periods ended October
31, 2015 and the fiscal year ended January 31, 2016.
effectiveness deficiency described above related to the goodwill
assessment, the Company has reassessed its previous forecasts
utilized in the initial impairment analysis of the Vista
reporting unit performed during the quarter ended October 31,
2015. Based on that reassessment, the Company has concluded that
certain long-lived assets of the Vista reporting unit, including
finite-lived intangible assets, were impaired as of October 31,
2015. While the Company is still assessing this matter, the range
of estimated long-lived asset impairment for the Vista reporting
unit is $3.5 million to $4.0 million pre-tax ($2.2 million to
$2.5 after tax) for the three- and nine- month periods ended
October 31, 2015 and the fiscal year ended January 31, 2016.
Management is continuing to evaluate this matter as well as the
long-lived asset impairment assessments in its other reporting
units. In addition, as result of the reassessment, the Company
has determined that there was an error in the amount of goodwill
impairment originally recognized at October 31, 2015 and that the
goodwill of the Vista reporting unit was fully impaired as of
that date, notwithstanding that the Company is still evaluating
the Vista long-lived assets described above, and therefore the
remaining amount of goodwill of $4.1 million ($2.6 million after
tax) should have been recorded as an additional goodwill
impairment for the three- and nine-month periods ended October
31, 2015 and the fiscal year ended January 31, 2016.
In addition, in connection with the acquisition of Vista in 2012,
the Company entered into an agreement to make annual payments
based upon percentages of specific revenue streams for seven
years after the acquisition date. In connection with the
reassessment of the forecasted revenues utilized in the goodwill
and long-lived asset impairment analyses for Vista, the Company
has also reassessed the fair value of the acquisition-related
contingent consideration and has concluded that the fair value of
the liability for this contingent consideration was also
incorrect, and therefore there should have been a reduction in
the liability and related benefit recognized of $0.8 million
($0.5 million after tax) for the three- and nine-month periods
ended October 31, 2015 and the fiscal year ended January 31,
2016.
the Company entered into an agreement to make annual payments
based upon percentages of specific revenue streams for seven
years after the acquisition date. In connection with the
reassessment of the forecasted revenues utilized in the goodwill
and long-lived asset impairment analyses for Vista, the Company
has also reassessed the fair value of the acquisition-related
contingent consideration and has concluded that the fair value of
the liability for this contingent consideration was also
incorrect, and therefore there should have been a reduction in
the liability and related benefit recognized of $0.8 million
($0.5 million after tax) for the three- and nine-month periods
ended October 31, 2015 and the fiscal year ended January 31,
2016.
Unrelated to the Vista adjustments described above, management
has determined that other immaterial prior period errors will be
corrected in connection with the restatement of the previously
issued financial statements. Specifically, the financial
statements will also be corrected for income tax related balance
sheet account misclassifications of approximately $0.7 million as
of October 31, 2015; $1.7 million as of January 31, 2016 and
April 30, 2016; and a reduction of tax expense of approximately
$0.5 million for the year ended January 31, 2016.
has determined that other immaterial prior period errors will be
corrected in connection with the restatement of the previously
issued financial statements. Specifically, the financial
statements will also be corrected for income tax related balance
sheet account misclassifications of approximately $0.7 million as
of October 31, 2015; $1.7 million as of January 31, 2016 and
April 30, 2016; and a reduction of tax expense of approximately
$0.5 million for the year ended January 31, 2016.
In connection with the foregoing reviews, the Company has
continued its assessment of its internal control over financial
reporting. Based upon that continued assessment, the Company has
identified the following control deficiencies which existed as of
October 31, 2015, January 31, 2016, and April 30, 2016, which
constitute material weaknesses and resulted in ineffective
disclosure controls and procedures as of those dates:
continued its assessment of its internal control over financial
reporting. Based upon that continued assessment, the Company has
identified the following control deficiencies which existed as of
October 31, 2015, January 31, 2016, and April 30, 2016, which
constitute material weaknesses and resulted in ineffective
disclosure controls and procedures as of those dates:
|
The Companys controls relating to the response of the risks
of material misstatement were not effectively designed. This material weakness contributed to the following additional material weaknesses. |
|
The Companys controls over the accounting for goodwill and
long-lived assets, including finite-lived intangible assets, were not effectively designed and maintained, specifically, the controls related to the identification of the proper unit of account as well as the development and review of assumptions used in interim and annual impairment tests. This control deficiency resulted in the restatement of the Companys financial statements for the three- and nine-month periods ended October 31, 2015, the fiscal year ended January 31, 2016, and the three-month period ended April 30, 2016. |
|
The Companys controls related to the completeness and
accuracy over the accounting for income taxes were not effectively designed and maintained, including the income tax provision and related tax assets and liabilities. This control deficiency resulted in the tax errors noted above. |
|
As previously disclosed in the Form 12b-25 filing, the
Companys controls over the monitoring of inventories subject to cycle count programs were not effectively designed and maintained, specifically, the controls to verify inventory was counted at the frequency levels and accuracy rates required under the Companys policy. |
|
Also as previously disclosed in the Form 12b-25 filing, the
Companys controls over the completeness and accuracy of information used in internal control over financial reporting were not effectively designed and maintained, specifically, the controls to verify the information used in financial reporting was accurate and complete. |
These control deficiencies could result in additional
misstatement of account balances or disclosures that would result
in a material misstatement to the annual or interim consolidated
financial statements that would not be prevented or detected.
misstatement of account balances or disclosures that would result
in a material misstatement to the annual or interim consolidated
financial statements that would not be prevented or detected.
The Company will be amending its Annual Report on Form 10-K for
the fiscal year ended January 31, 2016, as well as its Quarterly
Reports on Form 10-Q for the quarters ended October 31, 2015 and
April 30, 2016 to restate its previously issued financial
statements. The potential impact of all such adjustments that
have been identified to date will reduce pre-tax income up to
$7.3 million for the three- and nine-month periods ended October
31, 2015, and reduce pre-tax income and net income by up to $6.9
million and $3.9 million for the year ended January 31, 2016.
None of these changes impact previously reported cash flows. This
potential impact includes a range of up to $4.0 million for
long-lived assets. The Company has not yet completed its final
determination and review, and therefore the amounts are
preliminary and subject to change. While the Company expects to
report the estimated adjustments described herein, there can be
no assurance that the final adjustments will not differ
materially from the estimated amounts discussed herein, or that
additional errors and internal control deficiencies will not be
identified.
the fiscal year ended January 31, 2016, as well as its Quarterly
Reports on Form 10-Q for the quarters ended October 31, 2015 and
April 30, 2016 to restate its previously issued financial
statements. The potential impact of all such adjustments that
have been identified to date will reduce pre-tax income up to
$7.3 million for the three- and nine-month periods ended October
31, 2015, and reduce pre-tax income and net income by up to $6.9
million and $3.9 million for the year ended January 31, 2016.
None of these changes impact previously reported cash flows. This
potential impact includes a range of up to $4.0 million for
long-lived assets. The Company has not yet completed its final
determination and review, and therefore the amounts are
preliminary and subject to change. While the Company expects to
report the estimated adjustments described herein, there can be
no assurance that the final adjustments will not differ
materially from the estimated amounts discussed herein, or that
additional errors and internal control deficiencies will not be
identified.
In addition, the Company will also restate managements report on
internal control over financial reporting and its evaluation of
disclosure controls and procedures (included in its Annual Report
on Form 10-K for the fiscal year ended January 31, 2016) and will
receive an adverse opinion on the internal control over financial
reporting as of January 31, 2016 from PricewaterhouseCoopers LLP.
With respect to its Form 10-Qs for the quarterly periods ended
October 31, 2015 and April 30, 2016, the Company will also amend
its previously issued Item 4.
internal control over financial reporting and its evaluation of
disclosure controls and procedures (included in its Annual Report
on Form 10-K for the fiscal year ended January 31, 2016) and will
receive an adverse opinion on the internal control over financial
reporting as of January 31, 2016 from PricewaterhouseCoopers LLP.
With respect to its Form 10-Qs for the quarterly periods ended
October 31, 2015 and April 30, 2016, the Company will also amend
its previously issued Item 4.
The Company is actively engaged in the planning for, and
implementation of, remediation efforts to address the underlying
causes of the control deficiencies that gave rise to the material
weaknesses and has engaged outside accounting experts to assist
with those efforts, which will be discussed further in the
Companys amended filings.
implementation of, remediation efforts to address the underlying
causes of the control deficiencies that gave rise to the material
weaknesses and has engaged outside accounting experts to assist
with those efforts, which will be discussed further in the
Companys amended filings.
Item 8.01. Other Events.
Once the Company completes its analysis with respect to the
restatement and the amended filings discussed above have been
made, the Company will then file its Form 10-Q for the fiscal
2017 second quarter ending July 31, 2016, announce its fiscal
2017 third quarter financial results, and hold an investor
conference call to discuss the fiscal 2017 third quarter results.
Given the time needed to complete these amended filings, the
filing of the fiscal 2017 third quarter Form 10-Q for the period
ended October 31, 2016, will be delayed.
restatement and the amended filings discussed above have been
made, the Company will then file its Form 10-Q for the fiscal
2017 second quarter ending July 31, 2016, announce its fiscal
2017 third quarter financial results, and hold an investor
conference call to discuss the fiscal 2017 third quarter results.
Given the time needed to complete these amended filings, the
filing of the fiscal 2017 third quarter Form 10-Q for the period
ended October 31, 2016, will be delayed.
In a Current Report on Form 8-K filed on September 16, 2016, the
Company reported receipt of a notice of non-compliance with
Nasdaq listing rule 5250(c)(1) as a result of its failure to
timely file its quarterly report for the second quarter of fiscal
2017. The Company has received an extension of time from Nasdaq,
until March 8, 2017, to come into compliance with the listing
standards.
Company reported receipt of a notice of non-compliance with
Nasdaq listing rule 5250(c)(1) as a result of its failure to
timely file its quarterly report for the second quarter of fiscal
2017. The Company has received an extension of time from Nasdaq,
until March 8, 2017, to come into compliance with the listing
standards.
Cautionary Statement:
This Current Report on Form 8-K contains forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding
the
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding
the
expectations, beliefs, intentions or strategies regarding the
future. Without limiting the foregoing, the words anticipates,
believes, expects, intends, may, plans, and similar expressions
are intended to identify forward-looking statements. The Company
intends that all forward-looking statements be subject to the
safe harbor provisions of the Private Securities Litigation
Reform Act. Although management believes that the expectations
reflected in forward-looking statements are based on reasonable
assumptions, there is no assurance these assumptions are correct
or that these expectations will be achieved. Assumptions involve
important risks and uncertainties that could significantly affect
results in the future. These risks and uncertainties include, but
are not limited to, the Companys ability to regain compliance
with the Nasdaq continued listing rules by filing its Form 10-Q
for the fiscal 2017second quarter ending July 31, 2016. This list
is not exhaustive, and the Company does not have an obligation to
revise any forward-looking statements to reflect events or
circumstances after the date these statements are made.
future. Without limiting the foregoing, the words anticipates,
believes, expects, intends, may, plans, and similar expressions
are intended to identify forward-looking statements. The Company
intends that all forward-looking statements be subject to the
safe harbor provisions of the Private Securities Litigation
Reform Act. Although management believes that the expectations
reflected in forward-looking statements are based on reasonable
assumptions, there is no assurance these assumptions are correct
or that these expectations will be achieved. Assumptions involve
important risks and uncertainties that could significantly affect
results in the future. These risks and uncertainties include, but
are not limited to, the Companys ability to regain compliance
with the Nasdaq continued listing rules by filing its Form 10-Q
for the fiscal 2017second quarter ending July 31, 2016. This list
is not exhaustive, and the Company does not have an obligation to
revise any forward-looking statements to reflect events or
circumstances after the date these statements are made.
About RAVEN INDUSTRIES, INC. (NASDAQ:RAVN)
Raven Industries, Inc. is a diversified technology company providing a range of products to customers within the industrial, agricultural, energy, construction and defense markets. The Company operates through three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats and radar processing systems. It conducts business through its subsidiaries, including Aerostar International, Inc. (Aerostar), Vista Research, Inc. (Vista), Raven International Holding Company BV (Raven Holdings) and Raven Industries Canada, Inc. RAVEN INDUSTRIES, INC. (NASDAQ:RAVN) Recent Trading Information
RAVEN INDUSTRIES, INC. (NASDAQ:RAVN) closed its last trading session down -0.15 at 25.30 with 141,061 shares trading hands.
