The following commentary on the operating results, liquidity, capital resources, and financial condition ofRaven Industries, Inc. (the Company or Raven) should be read in conjunction with the unaudited Consolidated Financial Statements in Item 1 of Part 1 of this Quarterly Report on Form 10-Q (Form 10-Q) and the Company's Annual Report on Form 10-K for the year endedJanuary 31, 2021 . The Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is organized as follows: •Executive Summary •Results of Operations - Segment Analysis •Market Conditions and Outlook •Liquidity and Capital Resources •Off-Balance Sheet Arrangements and Contractual Obligations •Critical Accounting Policies and Estimates •Accounting Pronouncements
ABSTRACT
Raven is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air, and aerospace and defense markets. The Company is comprised of three unique operating units, classified into reportable segments: Applied Technology,Engineered Films , and Aerostar. Segment information is reported consistent with the Company's management reporting structure.
Management uses a number of metrics to assess company performance:
•Consolidated net sales, gross margin, operating income, operating margin, net income, and diluted earnings per share. •Cash flow from operations and shareholder returns. •Return on sales, average assets, and average equity. •Segment net sales, gross profit, gross margin, operating income, and operating margin. At the segment level, operating income and margin does not include an allocation of general and administrative expenses. Vision and Strategy Raven's purpose is to solve great challenges. Great challenges require great solutions. Raven's three unique divisions share resources, ideas, and a passion to create technology that helps the world grow more food, produce more energy, protect the environment, and live safely. The Raven business model is our platform for success. Raven's business model is defensible, sustainable, and gives us a consistent approach in the pursuit of quality financial results. This overall approach to creating value, which is employed across the three business segments, is summarized as follows: •Intentionally serve market segments with strong growth prospects in both the near and long term. •Consistently manage a pipeline of growth initiatives within our market segments. •Aggressively compete on quality, service, innovation, and peak performance. •Attract and develop exceptional leaders who understand business deeply and can thrive in theRaven Way . •On a path of continuous improvement, integrate sustainability with our operations by consistently taking actions to streamline processes, improve efficiencies, and increase value delivered to our customers. •Value our balance sheet as a source of strength and stability. •Corporate responsibility is a top priority. 17 -------------------------------------------------------------------------------- The following discussion highlights the consolidated operating results for the three-month periods endedApril 30, 2021 and 2020. Segment operating results are more fully explained in the Results of Operations - Segment Analysis section. Three Months Ended April 30, April 30, (dollars in thousands, except per-share data) 2021 2020 % Change Net sales$ 112,486 $ 86,496 30.0 % Gross profit$ 39,986 $ 28,467 40.5 % Gross margin (a) 35.5 % 32.9 % Operating income$ 11,573 $ 3,939 193.8 % Operating margin (a) 10.3 % 4.6 % Other income (expense), net$ 30 $ (468) Net income attributable to Raven Industries, Inc.$ 9,620 $ 4,047 137.7 % Diluted earnings per share$ 0.26 $ 0.11 Cash flow from (used in) operating activities$ (7,779) $ 11,851 (165.6) % Cash outflow for capital expenditures$ (5,605) $ (4,434)
26.4%
(a) The Company’s gross and operating margins may not be comparable to its industry peers due to the variability in expense classification between the industries in which the Company operates.
Consolidated Results For the fiscal 2022 first quarter, net sales were$112.5 million , an increase of$26.0 million , or 30.0%, from$86.5 million in last year's first quarter. The year-over-year growth was driven by increased sales in Applied Technology andEngineered Films . Applied Technology reported record quarterly revenue while overcoming supply chain constraints, as the demand for its industry-leading ag technology solutions was amplified by improved market conditions. InEngineered Films , the division's end-markets continue to recover from the adverse impacts of the global pandemic, leading to an increase in year-over-year volume and revenue across all end-markets, led by construction and agriculture. Aerostar was impacted by the conclusion of Loon activity and a decrease in aerostat sales, leading to a year-over-year decline in revenue. The Company's operating income for the first quarter of fiscal 2022 was$11.6 million , up 193.8% from$3.9 million in the first quarter of fiscal 2021. The strong profitability performance in this year's first quarter was driven by increased sales volume and corresponding positive operating leverage. Included in the results for the first quarter of fiscal 2022 were$4.6 million of research and development and selling expenses to advance Raven Autonomy™, compared to$3.8 million in the prior year. Net income for the first quarter of fiscal 2022 was$9.6 million , or$0.26 per diluted share, compared to net income of$4.0 million , or$0.11 per diluted share, in last year's first quarter. The Company's strategic investment in Raven Autonomy™ reduced net income attributable to Raven by$3.6 million , or$0.10 per diluted share, in the first quarter of fiscal 2022 compared to$2.9 million , or$0.08 per diluted share, in the prior year. Applied Technology Division Results Applied Technology's net sales in the first quarter of fiscal 2022 were$54.9 million , up$12.9 million , or 30.6%, compared to fiscal 2021 first quarter net sales of$42.0 million . The year-over-year sales growth was driven by increased sales in the OEM and aftermarket channels, both domestically and internationally, with substantial growth inEurope . Division operating income in the first quarter of fiscal 2022 was$13.2 million , up$4.2 million , or 47.5% versus the first quarter of fiscal 2021. The year-over-year growth in operating income was driven by increased sales volumes and associated operating leverage, partially offset by rising input costs related to global supply chain dynamics. Included in the results was an incremental investment in research and development and selling expenses in Raven Autonomy™ of$4.6 million on a pre-tax basis, an increase of$0.8 million year-over-year. Engineered Films Division ResultsEngineered Films' net sales in the first quarter of fiscal 2022 were$48.8 million , an increase of$15.4 million , or 46.0%, compared to fiscal 2021 first quarter net sales of$33.4 million . The division generated year-over-year sales growth across all end-markets, with agriculture and construction serving as the largest drivers, as the recovery from the adverse effects of the global pandemic continued to strengthen. Due to volatility in the resin market, the division has adjusted pricing commensurate with the changes in the market input costs. 18 -------------------------------------------------------------------------------- Division operating income in the first quarter of fiscal 2022 was$6.8 million , up$5.2 million , or 321.1% versus the first quarter of fiscal 2021. The year-over-year increase was driven mainly by higher sales volume, resulting in positive operating leverage, and partially offset by rising input costs. Aerostar Division Results Aerostar's net sales in the first quarter of fiscal 2022 were$8.9 million , a decrease of$2.3 million , or 20.3%, compared to fiscal 2021 first quarter net sales of$11.2 million . Year-over-year revenue growth for defense related stratospheric balloon systems was offset by the conclusion of Loon activity, announced in the fourth quarter of fiscal 2021, and a decrease in aerostat revenue. Aerostar's financial performance is driven by the timing of government contracts, which can fluctuate on a quarterly basis. As such, it is beneficial to analyze the division over a longer period of time. Division operating income in the first quarter of fiscal 2022 was$0.6 million , up$0.3 million , or 101.0%, versus the first quarter of fiscal 2021. The year-over-year improvement was driven by product mix and effective cost control measures.
OPERATING RESULTS – SECTOR ANALYSIS
Applied Technology
Applied Technology designs, manufactures, sells, and services innovative
precision agriculture products, autonomous solutions, and information management
tools, which are collectively referred to as precision agriculture equipment,
that help farmers reduce costs, more precisely control inputs, and improve
yields for the global agriculture market.
Three Months Ended
April 30, April 30,
(dollars in thousands) 2021 2020 $ Change % Change
Net sales $ 54,868 $ 42,007 $ 12,861 30.6 %
Gross profit 26,227 20,330 5,897 29.0 %
Gross margin 47.8 % 48.4 %
Operating expenses $ 13,040 $ 11,391 $ 1,649 14.5 %
Operating expenses as % of sales 23.8 % 27.1 %
Operating income(a) $ 13,187 $ 8,939 $ 4,248 47.5 %
Operating margin 24.0 % 21.3 %
(a) At the sector level, the operating result does not include an allocation of general and administrative expenses.
The following factors were the main drivers of the year-over-year three-month changes:
•Market conditions. Grain commodity prices reached levels not seen since 2014 during the first quarter of fiscal 2022 and the prior year fourth quarter, providing optimism within the ag market. These improved conditions, along with more normalized economic activity, has improved both domestic and international ag markets, leading to an increase in demand from both OEMs and aftermarket retailers. The Company does not model comparative market share position for its divisions, but the Company believes Applied Technology maintained or increased its market share in the first three months of fiscal 2022. •Sales volume and selling prices. First quarter fiscal 2022 net sales increased$12.9 million or 30.6%, to$54.9 million compared to$42.0 million in the prior year. Higher sales volume, rather than a change in selling price, was the primary driver of this increase. Aftermarket and OEM sales were up 43.8% and 16.6% year-over-year, respectively. For the three-month period, domestic sales were up$4.8 million year-over-year and international sales were up$8.1 million year-over-year. Domestic OEM net sales in the first quarter of fiscal 2022 included a decrease in last time buy activity to a non-strategic OEM customer of$2.5 million year-over-year. •International sales. For the first quarter of fiscal 2022, international sales totaled$19.2 million , up 72.4% from$11.1 million in the prior year comparative period. International sales represented 35.0% of segment revenue compared to 26.5% of segment revenue in the prior year comparative period. Increased demand inEurope andAustralia drove an increase in international sales during the first quarter. •Gross margin. Gross margin decreased from 48.4% in the prior year first quarter of fiscal 2021 to 47.8% in the first quarter of fiscal 2022. The year-over-year decrease in profitability was driven by higher material costs and production inefficiencies caused by supply chain constraints. •Operating expenses. Fiscal 2022 first quarter operating expenses as a percentage of net sales were 23.8%, down from 27.1% in the prior year comparative period. The decrease was primarily driven by the increase in sales compared to the prior year. 19 --------------------------------------------------------------------------------Engineered Films Engineered Films produces high-performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications and also offers design-build and installation services of these plastic films and sheeting. Plastic film and sheeting can be purchased separately or together with installation services. Three Months Ended April 30, April 30, (dollars in thousands) 2021 2020 $ Change % Change Net sales$ 48,765 $ 33,398 $ 15,367 46.0 % Gross profit 10,036 4,263 5,773 135.4 % Gross margin 20.6 % 12.8 % Operating expenses$ 3,269 $ 2,656 $ 613 23.1 % Operating expenses as % of sales 6.7 % 8.0 % Operating income(a)$ 6,767 $ 1,607 $ 5,160 321.1 % Operating margin 13.9 % 4.8 %
(a) At the sector level, the operating result does not include an allocation of general and administrative expenses.
The following factors were the main drivers of the year-over-year three-month changes:
•Market conditions. In the first quarter, Engineered films continued to see improved demand that started in the fourth quarter of the prior year. Demand was up across all markets, led by the agricultural and construction markets. In addition, the geomembrane market (including the energy sub-market) is showing signs of improvement, with oil prices having rebounded from lows experienced in the prior year and rig counts within thePermian Basin continuing to increase. The Company does not model comparative market share position for its divisions, but the Company believesEngineered Films maintained or increased its market share in most of its end markets in the first three months of fiscal 2022. •Sales volume and selling prices. First quarter net sales were$48.8 million , an increase of$15.4 million , or 46.0%, compared to net sales of$33.4 million in the first quarter fiscal 2021. The division saw an increase in demand across all markets, as uncertainty caused by the global pandemic continues to fall, leading to improved market conditions. While the division adjusted selling prices to recover increasing input costs caused by volatility in the resin market, the primary driver of the increase in sales was an increase in sales volume. Sales volume, measured in pounds sold, increased approximately 45.7% compared to the prior year comparative period. •Gross margin. For the three-month period, gross margin was 20.6%, increasing from 12.8% in the prior year comparative period. Higher sales volumes and operational efficiency gains from improved capacity utilization drove the significant increase in gross margin compared to the prior year first quarter. •Operating expenses. As a percentage of net sales, operating expenses were 6.7% in the current year three-month period as compared to 8.0% in the prior year comparative period. The decrease was primarily driven by the increase in sales compared to the prior year.
Aerostar
Aerostar serves the lighter-than-air commercial and aerospace and defense markets. Aerostar’s main products include high altitude stratospheric balloon systems and radar systems. These products can be integrated with additional third-party sensors to provide research, communication and situational awareness capabilities to government and commercial customers.
Three Months Ended
April 30, April 30,
(dollars in thousands) 2021 2020 $ Change % Change
Net sales $ 8,887 $ 11,151 $ (2,264) (20.3) %
Gross profit 3,730 3,834 (104) (2.7) %
Gross margin 42.0 % 34.4 %
Operating expenses $ 3,141 $ 3,541 $ (400) (11.3) %
Operating expenses as % of sales 35.3 % 31.8 %
Operating income(a) $ 589 $ 293 $ 296 101.0 %
Operating margin 6.6 % 2.6 %
(a) At the sector level, the operating result does not include an allocation of general and administrative expenses.
20 --------------------------------------------------------------------------------
The following factors were the main drivers of the year-over-year three-month changes:
•Market conditions. Aerostar's markets are subject to significant variability in demand due to government spending uncertainties and the timing of contract awards. The Company does not model comparative market share position for its divisions, but the Company believes Aerostar has maintained its market share in the first three months of fiscal 2022. •Sales volume. Net sales decreased 20.3% from$11.2 million for the three-month period endedApril 30, 2020 , to$8.9 million for the three-month period endedApril 30, 2021 . The division saw year-over-year growth for defense related stratospheric balloon systems, however, this was offset by the conclusion of Loon activity and a decrease in aerostat revenue. There was no aerostat revenue in the first quarter of the current year compared to$0.9 million in the first quarter of the prior year. •Gross margin. For the three-month period, gross margin increased from 34.4% to 42.0%. Sales mix and cost control measures implemented during the quarter to reduce overhead expenses drove the improvement in gross margin. •Operating expenses. First quarter fiscal 2022 operating expense was$3.1 million , or 35.3% of net sales, an increase from 31.8% of net sales in the first quarter of fiscal 2021. Despite the$0.4 million decrease in operating expenses, the significant decrease in revenues drove operating expenses as a percentage to sales higher. The division continues to make focused investments in research and development and selling activities to drive growth and secure contract awards. Corporate Expenses (administrative expenses; other income (expense), net; and effective tax rate) Three Months Ended April 30, April 30, (dollars in thousands) 2021 2020 Administrative expenses$ 8,963 $ 6,940 Administrative expenses as a % of sales 8.0 % 8.0 % Other income (expense), net$ 30 $ (468) Effective tax rate 17.1 % (13.8) % Administrative spending for the three-month period of fiscal 2022 was up 29.1% compared to fiscal 2021. Improved profitability during the quarter drove higher incentives, along with continued spending for Project Atlas, an ongoing project to the replace the Company's ERP system. Other income (expense), net consists primarily of activity related to the Company's equity investments, interest income and expense, and foreign currency transaction gains or losses. There were no significant items in other income (expense), net for the three-month period in fiscal 2022 and 2021.
The company’s effective tax rates for the three-month periods ended
MARKET CONDITIONS AND PROSPECTS
The Company is off to a good start in fiscal 2022, with Applied Technology breaking its previous quarterly record for revenue, while also making significant progress on the strategic platforms for growth. The Company saw improving demand during the first quarter within Applied Technology andEngineered Films and is well-positioned to drive revenue and earnings growth for the Company. The Company expects global supply chain constraints to persist throughout the year, but remain confident in the management team's ability to continue to manage these challenges. Applied Technology was able to overcome supply chain constraints experienced across the world to generate record revenue for the first quarter. The momentum and demand in the market continues to grow for the Company's ag technology solutions. Order activity remained strong in the first quarter of fiscal 2022. In Raven Autonomy, the Company is on track for commercialization goals in the current year. The division has secured 36 orders for OMNiDRIVE™ (formerly known as AutoCart®), the Company's advanced Driverless Ag Technology solution. In addition, the division expects to release OMNiDRIVE™ system compatible with Case IH Magnum and New Holland tractors this fall, ahead of the targeted date. For OMNiPOWER™ (formerly known as Dot®), the Company expects to sell out its current manufacturing capacity in the fiscal year. To meet future demand, Applied Technology is planning with a strategic partner to significantly expand production capacity for 21 -------------------------------------------------------------------------------- OMNiPOWER™. Demand for autonomous ag solutions is strong, and the limited commercial releases of OMNiDRIVE™ and OMNiPOWER™ in fiscal 2022 will provide valuable customer engagement and insight as the Company executes on its strategy of advancing technology that improves agriculture practices globally. The solutions being developed are significant advancements in ag technology that will help solve labor shortages, provide greater efficiencies and enhance sustainability in agriculture across the world.Engineered Films generated substantial year-over-year growth as their end-markets continued their recovery from the global pandemic. Rising prices and volatility in the resin market presented challenges in the first quarter of the year. However, the division's offering of highly engineered, high-value films provides flexibility to be able to mitigate rising input costs and maintain strong profitability within the division. In Raven Composites™, the division continued to build out its composites production operations in the first quarter. The Company began installation of its composites equipment and expects to have operations running by the end of the second quarter. In addition, the division continues to build relationships with strategic customers as it executes on its strategy of supplying thinner, lighter and stronger materials that combine high-value films with rigid composites that provide superior value across multiple end-markets. Aerostar continued to advance the technology for the division's stratospheric and radar solutions in the first quarter, while improving profitability year-over-year and sequentially. The momentum around utilizing the division's technology in defense applications continues to grow, and the management team is working to advance solutions down the pathway of becoming a program of record. Over the remainder of the year, the division has a significant number of flight campaigns scheduled with multipleDepartment of Defense agencies as the division continues to showcase the industry-leading capability for stratospheric balloon systems.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet continues to reflect significant liquidity. Management focuses on the current cash balance and operating cash flows in considering liquidity, as operating cash flows have historically been the Company's primary source of liquidity. Management expects that current cash, combined with the generation of positive operating cash flows, will be sufficient to fund the Company's normal operating, investing, and financing activities beyond the next twelve months. In addition, the Company has a three-year,$100 million senior revolving credit facility which includes a$100 million borrowing availability expansion feature. If executed, this allows the Company's total borrowing capacity to reach$200 million . This credit facility has a maturity date ofSeptember 20, 2022 .
The company’s cash balances and cash flows were as follows:
April 30, January 31, April 30, (dollars in thousands) 2021 2021 2020 Cash and cash equivalents$ 17,764 $ 32,938 $ 72,581 Three Months Ended April 30, (dollars in thousands) April 30, 2021 2020 Cash provided by (used in) operating activities$ (7,779) $ 11,851 Cash used in investing activities (7,041) (4,290) Cash provided by (used in) financing activities (389) 44,648 Effect of exchange rate changes on cash and cash equivalents 35 (335) Net change in cash and cash equivalents
Cash and cash equivalents totaled$17.8 million atApril 30, 2021 , a sequential decrease of$15.2 million fromJanuary 31, 2021 . The decrease in cash was driven by an increase in net working capital needs due to the significant increase in revenue in Applied Technology andEngineered Films operating segments as well as investments to advance Raven Autonomy™ and Raven Composites™. Cash and cash equivalents as ofApril 30, 2020 was$72.6 million . In the first quarter of the prior year, during the early stages of the pandemic, the Company made a$50.0 million draw on its credit facility. No draws were made on the credit facility in the first quarter of fiscal 2022. 22 -------------------------------------------------------------------------------- Operating Activities Cash provided by operating activities was primarily derived from cash received from customers, offset by cash payments for inventories, services, and employee compensation. Cash used in operating activities was$7.8 million for the first three months of fiscal 2022 compared with cash provided by operating activities of$11.9 million in the first three months of fiscal 2021. The decrease in operating cash flows year-over-year was driven by the increase in net working capital in the current year to support the significant increase in sales orders in Applied Technology andEngineered Films . In the prior year first quarter, the Company took significant steps to reduce working capital due to the economic downturn caused by pandemic. There was a sequential increase in net working capital of$26.2 million in the three months endedApril 30, 2021 , but as a percentage of sales, net working capital declined. Net working capital for the three months endedApril 30, 2020 decreased$4.5 million .
The company’s net working capital for the comparative periods was as follows: (dollars in thousands)
April 30, 2021 April 30, 2020 Accounts receivable, net$ 68,064 $ 60,336 Plus: Inventories, net 63,407 57,101 Less: Accounts payable 22,535 20,392 Net working capital(a)$ 108,936 $ 97,045 Annualized net sales(b) 449,944 345,984 Net working capital percentage(c) 24.2 % 28.0 % (a) Net working capital is defined as accounts receivable, (net) plus inventories, (net) less accounts payable. (b) Annualized net sales is defined as the most recent quarter net sales times four for each of the fiscal periods, respectively. (c) Net working capital percentage is defined as net working capital divided by annualized net sales. Year-over-year, net working capital increased$11.9 million , to$108.9 million atApril 30, 2021 . The Company increased inventory in Applied Technology andEngineered Films to meet increased demand in fiscal 2022 and accounts receivable increased as sales were up significantly year-over-year. Although net working capital increased, net working capital percentage was down year-over-year in the first quarter of fiscal 2022. The decline in net working capital percentage was due to a significant increase in sales, indicating working capital is within the appropriate range for normalized operations. Inventory levels increased$6.3 million , or 11.0%, year-over-year from$57.1 million atApril 30, 2020 , to$63.4 million atApril 30, 2021 . In comparison, consolidated net sales increased$26.0 million , or 30.0%, year-over-year in the first quarter. The increase in inventory was primarily driven by strategic actions within Applied Technology andEngineered Films divisions to fulfill the increase in sales order backlog. Accounts receivable increased$7.8 million or 12.8%, year-over-year to$68.1 million atApril 30, 2021 , from$60.3 million atApril 30, 2020 . In comparison, consolidated net sales increased$26.0 million , or 30.0%, year-over-year in the first quarter. Higher sales volume was the primary driver of the year-over-year increase in accounts receivable. Accounts payable increased$2.1 million , or 10.5%, year-over-year from$20.4 million atApril 30, 2020 , to$22.5 million atApril 30, 2021 . The increase in accounts payable year-over-year was primarily due to timing of purchases and increase in raw materials inventory to support increased demand. Investing Activities Cash used by investing activities was$7.0 million for the first three months of fiscal 2022 compared with cash used of$4.3 million in the first three months of fiscal 2021. Capital expenditure spending increased$1.2 million compared to the prior year three-month period primarily due to investments in equipment forEngineered Films to support Raven Composites™. In the first quarter of fiscal 2022, capitalized spending for intangibles included approximately$0.8 million for capitalized software development costs in Applied Technology, compared to none in the prior year. Financing Activities Cash provided by financing activities for the first three months of fiscal 2022 decreased$45.0 million compared to the first three months of fiscal 2021. In the first quarter of the current year, the Company made no draws on its credit facility, compared to the$50.0 million draw made on its credit facility during the early stages of the pandemic in the prior year. Offsetting this decrease was$4.7 million cash outflows for dividends in first three months of the prior year compared to no dividend payments in the current year. OnAugust 26, 2020 , the Company announced that the board of directors indefinitely suspended the 23 -------------------------------------------------------------------------------- Company's regular quarterly cash dividend on its common stock. The Company has reallocated this capital to supplement and accelerate investments in the Company's Strategic Platforms for Growth; Raven Autonomy™, Raven Composites™, and Raven Thunderhead Balloon Systems. Other Liquidity and Capital Resources The Company entered into a$100 million credit agreement onSeptember 20, 2019 , with a maturity date ofSeptember 20, 2022 . Availability under the Credit Agreement for borrowings as ofApril 30, 2021 , was$100.0 million . This agreement (Credit Agreement) is more fully described in Note 10 Debt of the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q. Debt under the Credit Agreement is subject to customary affirmative and negative covenants, including financial covenants. These financial covenants include a consolidated interest coverage ratio and consolidated leverage ratio, both of which are defined in the Credit Agreement. Non-financial covenants, include those relating to financial reporting and notification, limits on levels of indebtedness and liens, investments, mergers and acquisitions, affiliate transactions, sales of assets, restrictive agreements, and change in control as defined in the Credit Agreement. The Company is in compliance with all financial covenants set forth in the Credit Agreement.
Total Letters of Credit (LOC)
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
There have been no material changes in the Company's known off-balance sheet debt and other unrecorded obligations since the fiscal year endedJanuary 31, 2021 .
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those that require the application of judgment when valuing assets and liabilities on the Company's balance sheet. For a description of our critical accounting policies and estimates, see Critical Accounting Policies and Estimates in Item 7 of our Annual Report on Form 10-K for the year endedJanuary 31, 2021 , filed with theSEC . There have been no material changes to our critical accounting policies and estimates during the three-month period endedApril 30, 2021 .
ACCOUNTING PRONUNCTIONS
See note 2 Summary of significant accounting policies in the notes to the consolidated financial statements included in item 1 of this Form 10-Q for a summary of recent accounting pronouncements.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are "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 expectations, beliefs, intentions or strategies regarding the future, not past or historical events. Without limiting the foregoing, the words "anticipates," "believes," "expects," "intends," "may," "plans," "should," "estimate," "predict," "project," "would," "will," "potential," and similar expressions are intended to identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions when made, there is no assurance that such 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, those relating to weather conditions, which could affect sales and profitability in some of the Company's primary markets, such as agriculture and construction and oil and gas drilling; or changes in raw material availability, commodity prices, competition, technology or relationships with the Company's largest customers, risks and uncertainties relating to the impacts of the COVID-19 pandemic, development of new technologies to satisfy customer requirements, possible development of competitive technologies, ability to scale production of new products without negatively impacting quality and cost, risks of operating in foreign markets, risks relating to acquisitions, including risks of integration or unanticipated liabilities or contingencies, and ability to finance investment and net working capital needs for new development projects, any of which could adversely impact any of the Company's product lines, risks of litigation, as well as other risks 24
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described in Item 1A., Risk Factors, of the Company's Annual Report on Form 10-K for the fiscal year endedJanuary 31, 2021 . The foregoing list is not exhaustive and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
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