Shaylee Healy - Investor Relations Manager Daniel A. Rykhus - President, Chief Executive Officer & Director Steven E.

Brazones - Chief Financial Officer, Treasurer & Head-IR

Ben Hearnsberger - Stephens, Inc. Robert A.

Kosowsky - Sidoti & Co. LLC Andrea Susan James - Dougherty & Co.

LLC Gerald Wayne Hakala - Clarkston Capital Partners LLC Marc S. Heilweil - Spectrum Advisory Services, Inc.

Thank you, Amanda, and welcome everyone. Today's call is being webcast live and will also be archived on our website for future listening.

Joining me today are Dan Rykhus, Raven's President and Chief Executive Officer; and Steven Brazones, Raven's Chief Financial Officer. Before beginning, I would like to inform everyone that certain matters discussed during this call will include forward-looking statements, as that term is defined under the Private Securities Litigation Reform Act of 1995.

Since such statements reflect our current expectations, actual results may differ. In addition, during today's conference call, we will be discussing certain non-GAAP financial measures, specifically net sales, excluding contract manufacturing sales.

All of the non-GAAP measures discussed today should not be construed as an alternative to the reported results determined in accordance with GAAP. Management believes that a discussion of these measures is useful to investors because it assists in understanding the operating performance of the company and its operating segments.

The non-GAAP information discussed today may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the fourth quarter earnings release.

With that, I would now like to turn the call over to Dan.

Thanks, Shaylee, and welcome, everyone. I'll start off with an overview and then talk about each of the divisions in more detail.

Steven will then provide you with a look at our financial, and I'll conclude with our expectations for fiscal 2016. After that, we'll open up the call for your questions.

As you can see from the news release, our 30% decline in earnings was below where we wanted to be, but it was in line with our third quarter view. Despite a solid performance in Engineered Films and gains in Aerostar, we continue to see challenges in the Agriculture Equipment market.

And as anticipated, sales and net income declines resulted. For the fourth quarter, Raven's total sales were $89.9 million.

Sales and operating profit rose in both Engineered Films and Aerostar. This was offset by declines in Applied Technology, which is facing difficult end market conditions that we expect to persist through the year.

As we complete the exit of our low-growth contract manufacturing business, which resides in both Applied Technology and Aerostar, we're working to grow our strategic proprietary product sales, both organically and through acquisition. I'm pleased to report that the exit is nearly complete and this fiscal year will be the last with significant comparables.

The challenges we have in agriculture have given us an opportunity to rebalance the company's profit mix by aggressively growing our Engineered Films and Aerostar divisions. And that's our primary goal moving forward.

Additionally, we have continued to restructure the organization given current and anticipated future conditions. I'll talk about those initiatives more a little later.

As we work to transform and evolve our business to capitalize on key growth opportunities, we are actively managing Raven to optimize our performance. This entails narrowing our investment focus to the essential strategic initiatives that will directly fuel growth, while continuing to reduce our operating expenses.

Now I'll talk about each of our three divisions starting with Engineered Films. Net sales for Engineered Films were $40.9 million in the fiscal fourth quarter, up 14.8% year over year.

The acquisition of Integra Plastics added $5.6 million of sales in this year's fourth quarter. Excluding Integra, net sales for the division were down slightly, primarily due to significant declines in the energy markets.

Operating income for Engineered Films was $4.6 million, up $1.2 million or 37% versus the fourth quarter of 2014. The increase in operating income was driven entirely by improvements in the legacy business as the Integra acquisition was slightly dilutive to earnings in the quarter.

The division's strong value engineering and reformulation efforts, together with a disciplined approach to pricing, led to the improved profitability versus the prior year. Looking ahead, we face significant headwinds within the energy market given the recent and dramatic decline in oil prices.

While this will challenge sales development in the energy end market, we have also realized favorable raw material costs for the overall division. The energy segment now represents about 35% of revenue for Engineered Films.

In January, we took aggressive actions to reduce our operating costs in the division. These actions represent $2.5 million in annualized cost savings.

Although the timing of the energy market decline is unfortunate, our acquisition of Integra Plastics was a key strategic move and has greatly improved our competitive positioning. By leveraging Integra's notable conversion capabilities and getting closer to end customers in key markets, we will deliver improved returns over the long term.

For fiscal 2016, with the acquisition now fully integrated, we're excited about the opportunities to better serve our customers and strengthen Engineered Films' profit contribution. Our focus is on bringing high-value plastic film applications to each of our Engineered Films market and continued improvement in operating margins.

Now let me cover Applied Technology. Fourth quarter net sales for this division were $26.5 million, down 27.3% versus the fourth quarter of 2014.

The decline in sales has predominantly been driven by the significant contraction in demand across the division's agriculture end markets. Operating income was $3.4 million, a $7.4 million or 68% decrease versus the fourth quarter of 2014, largely due to the year-over-year sales declines.

Although the division executed a $7 million annualized cost reduction during this year's fourth quarter, the fourth quarter benefits to these actions were largely offset by severance and related payments made quarter in the quarter as well as product warranty costs. The decline in end market demand for Applied Technology has been more pronounced than previous expectations and is worsening in the first quarter.

Several OEMs are reducing production levels again, and lowering their outlooks for the year. With historically high corn inventories, continued high input costs and waning grower sentiment, we do not expect a rebound in demand until late in the year at best.

Despite these challenging market conditions, our customer and product pipeline opportunities remained strong. We continue to make inroads on multiple fronts with both existing and new customers.

For example, we're proud of the recent news regarding our continued strategic partnership with AGCO, as well as our relatively new partnership with Kinsey. In addition, our new product pipeline is balanced with both near-term contributors such as our newly released Hawkeye product, as well as multiple intermediate and long-term offerings that will positively impact later this year and beyond.

With all that said, we're confident in our optimistic long-term view of the North American ag market. Without question, the world's population is rising and the need to feed a hungry world has never been greater.

Raven's technology helps meet this challenge by improving crop yield and reducing the cost of production. Over the long run, increasing global demand for food will generate solid growth.

And Raven will be in an even better position to leverage our expertise and product portfolio. Turning to Aerostar, fourth quarter net sales for this division were $24.6 million, up 2.9% versus the prior year.

Excluding sales from contract manufacturing, fourth quarter net sales were $15.8 million, a gain of 20.9% versus the fourth quarter of 2014. This is important because the division's focus on proprietary products is leading to significant new business, particularly within Vista Research, which experienced substantial growth year-over-year in the fourth quarter.

Operating income was $4.3 million, a gain of $2 million or 85% from fiscal 2014 fourth quarter. Operating margin improved significantly on strength within both situational awareness and aerospace as well as the continued runoff of contract manufacturing business.

These operating margin improvements reinforce the benefits of our focus on proprietary product lines. Looking at Google Project Loon, our high-altitude balloon technology continues to perform well.

Consistent with recent news reports, we expect Project Loon to continue to build momentum in fiscal 2016. Equally noteworthy, our overall lighter-than-air business grew 26% compared to the fourth quarter last year, reflecting some growth in aerostat revenues.

We are very pleased with the results of the Aerostar division in the fourth quarter. Growing the core business more than 20% and achieving an operating margin of nearly 18% gives us confidence in the future of the business.

While the division's quarterly performance will continue to be somewhat lumpy, until we establish a broader and larger base of business, we expect to make progress toward this end throughout fiscal 2016. For the year, we'll remain steadfast in our focus for Aerostar, expanding our proprietary technology opportunities, including advanced radar systems, high-altitude balloons and aerostats to international markets.

I'd like to now touch on the additional restructuring initiatives that we announced this morning. As a result of the significant declines in Applied Technology and the more pronounced end market weakness for this division, we implemented a $13 million restructuring plan this week to further lower Raven's cost structure.

The cost reductions covered all divisions and included the corporate offices, but were heavily weighted to Applied Technology. This action is in addition to a $2.5 million preemptive restructuring of the Engineered Films division in the fourth quarter that addressed the expected decline in demand in the energy sector, as well as the previously announced $7 million restructuring in Applied Technology.

Related to this, we're pleased to report that effective March 9, we successfully sold and transferred ATD's industrial controls manufacturing operations in the St. Louis, Missouri area.

This operation produced bed controls and is one of the final pieces for completing our runoff of contract manufacturing. Together, all restructurings executed in the fourth quarter of 2015 and the first quarter of 2016 total approximately $23 million in savings on an annualized basis.

The savings in fiscal 2016 are expected to be approximately $20 million from these actions. We believe that the course to recovery starts now and it encompasses a multifaceted approach that will lead to improved financial results.

First, we're executing a dramatic and swift restructuring of our operations. These are never the actions the company wants to take, but they are completely necessary at this time to address our immediate end market environment and preserve the overall health of our business.

Second, we'll leverage the underlying strength of our Engineered Films and Aerostar divisions. Both continue to demonstrate strong profit growth profiles, and we expect this to accelerate with the investments we've made in these divisions.

Next, we will capitalize on the strength of our balance sheet position and pursue strategic acquisitions that are accretive to earnings in the first year. Lastly, we need to optimize our internal investments in each of our three operating divisions and ensure that we continue to invest in those projects with the greatest long-term growth potential.

The combination of all these actions will make us stronger, more nimble and more profitable. Through these actions, we will protect our core as a corporation.

We believe in the long-term prospects of each division, and we're not looking to add a new division or exit any of our three businesses. Each division plays an essential role in the course to recovery.

When our end market conditions recover, we will be well positioned for significant and rapid growth. Before I turn the call over to Steven to discuss our financials, I'd like to officially welcome him to the Raven team.

Steven has a great financial and manufacturing background and we're excited to have him on board and look forward to his contributions as CFO. Steven?

Thanks, Dan. I'm pleased to be here.

As Dan mentioned, net sales for the fourth quarter of fiscal 2015 were $89.9 million, down 3% versus the prior year on a reported basis. Excluding sales from contract manufacturing, fourth quarter net sales were down 1% versus 2014.

Fourth quarter operating income came in at $6.4 million, down $6 million or 48% from 2014. Lower segment operating income and higher corporate expenses drove the decline in operating income year-over-year.

Segment operating income declined $4.1 million, due entirely to the decline in operating profit of Applied Technology. Corporate expenses were higher by $1.9 million, largely due to M&A-related expenses.

Fourth quarter net income was $6.2 million or $0.16 per diluted share versus income of $8.3 million or $0.23 per diluted share in last year's fourth quarter. Net income in this year's fourth quarter benefited from both a favorable discrete tax settlement and the extension of the federal research and development tax credit.

Combined, these two items contributed approximately $1.7 million in after-tax benefit, equivalent to $0.05 per diluted share. For the full year, net sales totaled $378.2 million, down 4.2% versus fiscal year 2014.

Excluding sales from contract manufacturing, fiscal year 2015 net sales were up 1.8%. In total, contract manufacturing sales were $27 million in fiscal 2015, down from $50 million in fiscal year 2014.

For 2016, sales from contract manufacturing activities are expected to be less than $6 million. Operating income for the year was $43.8 million compared to $64 million in fiscal 2014, a decline of $20 million year-over-year.

Both Engineered Films and Aerostar divisions grew operating income significantly for the year, up 20% and 15% respectively. However, the decline in Applied Technology profit and the increase in corporate expenses more than offset these gains.

Looking at the bottom line, net income for fiscal 2015 was $31.7 million or $0.86 per diluted share versus $42.9 million or $1.17 per diluted share in fiscal 2014. Net income for fiscal 2015 benefited from favorable discrete tax settlements in both the second quarter and fourth quarter.

These settlements contributed approximately $1.7 million in after-tax benefits, equivalent to $0.05 per diluted share. Although the impact of the extension of the federal research and development tax credit significantly benefited the fourth quarter, it was largely neutral on a full-year basis.

For fiscal year 2016, we expect a marginal tax rate of approximately 32.5%, excluding the impact of discrete items and assuming the federal R&D tax credit is not extended. Turning to the balance sheet, we ended the fourth quarter with $52.2 million in cash, down $14.4 million versus the third quarter.

The sequential decline in cash was driven largely by the acquisition of Integra Plastics. Cash consideration net totaled $7 million and debt that was assumed and subsequently paid off in the fourth quarter totaled $11 million.

Net working capital, defined as net accounts receivable, plus inventory, less accounts payable, was $100.2 million or 27.9% of annualized fourth quarter sales. Excluding the impact of the Integra acquisition, net working capital was $88.2 million or 26.1% of annualized sales in this year's fourth quarter.

This compares to $97.2 million or 26.2% in last year's fourth quarter. Sequentially, net working capital adjusted for Integra was up slightly as a percentage of annualized net sales.

Cash flow from operations was $14.4 million in the fourth quarter versus $15.6 million in the previous year's fourth quarter. Despite lower net income, reductions in inventory levels year-over-year reduced net working capital and resulted in a positive impact to cash flow.

Capital expenditures were $4.2 million, down $2.6 million from $6.8 million in the fourth quarter of 2014. For fiscal 2016, we expect total capital expenditures to be between $13 million and $15 million.

With that, I'd like to turn the call back to Dan.

Thanks, Steven. Despite the near-term challenges that we're facing, the company's financial objectives remain unchanged and we continue to target long-term growth in operating income of 10% to 12%.

Let me close by saying that for 59 years, Raven has demonstrated strength and persistence by never compromising our values and being willing to make adjustments to the execution of our strategy as conditions change. We are making the difficult decisions today to address the current end market weakness, while prudently continuing to invest for the future.

Fiscal 2016 will be a challenging year, with the first quarter being the toughest, but we're steadfast in our resolve to adapt, meet these challenges and return to our long-term growth objectives. And with that, we'd like to open up the call for your questions.

Operator?

Hi. Thanks for taking my question.

First on the restructuring, can you help us get a sense for the quarterly impacts and how that kind of plays out throughout the year? Do we see it all immediately or should we see it incrementally more throughout the next year?

Sure. I'll answer high-level, and Steven, if you want to provide more color, feel free.

So we're starting to see some of the impact in Q1 from the adjustments we made back in November and January, but those have been – those will start to show up now. The larger part of the impact is going to come as we close out our first quarter and start to impact Q2 and Q3 and Q4.

So that's sort of – it's not all going to happen today, but significant impact should start to show up in April and then be strong throughout the rest of the year.

And the expectation is that that's $20 million on the P&L for fiscal year 2016?

That's correct.

Okay. And then your EFD business.

Can you help us understand the more favorable cost dynamics? We've seen polyethylene pricing come down.

Can you help us understand how that flows through your P&L and then do you have to get some of that back on the other end in pricing?

Yeah. Ben, this is Steven.

So from a raw material standpoint, we are seeing our raw material costs decline somewhat here in the first quarter. And we are expecting raw material cost to remain relatively stable at this level through the first half of the year.

And based on what we're seeing in the marketplace, we would expect raw material inflation to increase in the second half of the year. Now how does that flow through our P&L?

Obviously, as we bring on lower cost inventories, we carry about 30 to 45 days of raw material inventories, and so it takes about a half a quarter for those to start flowing through the P&L. And so we're starting to see that flow through here in the first quarter, and we saw that flow through a little bit in the fourth quarter as well.

And in tandem with that, we're really focusing in on, we're maintaining pricing discipline. And so we want to make sure that we are valuing our products appropriately and pricing them to value.

And as a value provider of films, we really are focusing in on that to recover some of the margin shortfall that we've had in the past.

So should we expect the lower COGS in the segment to offset the top-line headwinds enough to grow EBIT in that segment for the year?

Well, as you know, this is creating two impacts for us. On the top line, we have some headwinds from a demand standpoint as oil prices have declined.

We have seen demand for our products go down. We sell products into the energy sector where if they're drilling new wells, they're going to require our products.

And so we're seeing a decline in that and we're expecting 20% to 25% decline in that market. Now offsetting that, as you point out, is the raw material benefit that we should garner as a result of that.

Most of our raw materials in the EFD division are petrochemical-based. And however, I'm not sure that's going to totally offset the top-line pressures that we're seeing in that market.

Okay. That's very helpful.

Thanks.

To give you a little summary statement, though, just to be clear, we do expect to grow division operating income in Films. It's essential to our strategy this year and it's essential to our expectation.

And we're going to do that through some margin expansion that'll come from the disciplined pricing as well as the value engineering, as well as our ability to get closer to our end customers as a result of our investment in Integra. So, just to be clear, we are expecting full-year growth from Films.

Okay. That's very helpful.

And then maybe stepping back and looking at consolidated results, I know you've got pretty significant ATD headwinds. But if you can grow EBIT in Films, grow EBIT in Aerostar, and then you've got the restructuring cost savings in ATD, on a consolidated basis, can you grow EBIT next year with all the top-line headwinds?

You know, it's early in the year. And what I will tell you is that Q1 is going to be challenging for us as a corporation.

But we are making aggressive changes that we feel are necessary to put the company in the best shape possible to optimize our earnings for the full year. And there's a lot of year to come.

We do have high expectations for Films and Aero. We're managing ATD aggressively and we're preparing for a difficult end market environment through the full year, and we'll see how it pans out.

But that's what I can tell you for now. We're focused on returning to our long-term objective of 10% to 12% earnings growth.

Yeah. Thank you both for the color.

I'll jump back in the queue.

Hi. Good morning, everyone.

How are you doing?

Hi.

Good, Rob.

First off, unfortunate to hear about the restructuring, but I guess that's just the reality that we're in, and on that line, I was wondering if there were any restructuring charges in 4Q that may have depressed margins in Applied Tech?

Yeah. Rob, we had about $300,000 of severance-related expenses in the fourth quarter related to the $7 million restructuring that we had announced in November.

Okay. And how do you see that prospectively as well?

Yeah. In the first quarter related to the $13 million restructuring, we will have costs, and that $13 million is net of those costs.

And we expect those costs to be less than $0.5 million.

Okay. So, basically, the $13 million is net of all the restructuring, so that should be the clean accretion that you're going to see?

That's correct. But as Dan mentioned too, I mean those are all going to come in the first quarter for us, and so that's going to limit the benefit that we have in the first quarter from the restructuring.

Okay. And then secondly, can you discuss the growth drivers in Vista, maybe by distribution channel and just the growth rate expectation for this year and the next few years?

We continue to have high expectations for Vista based on a lot of different factors, one, on their historical performance has been very strong since we made the acquisition, growing 30% to 40% annually, as well as the value that the technology provides for situational surveillance. Fourth quarter was strong, but when – first quarter is not going to be as strong.

But for the full year, we do expect to continue our historical growth rates that we've accomplished over the last two years, three years for Vista. We are selling our radar systems into lots of different applications, many find their way onto UAVs.

Others are installed in towers and others are installed on aerostats. So we have a broad range of applications, a broad range of geographies that our radars find their way to and a good set of end customers.

Okay. And then how – what inning would you say you're in regarding penetrating this opportunity with Vista?

Because obviously it's been pretty nice growth from $14 million when you bought it versus where it is today, and you'd mentioned some of the applications that it's on. I'm just wondering how far or how penetrated do you think you are in the market at this point?

Second inning.

Second inning? Okay.

And then finally – go ahead. All right.

And then finally, just any update on Project Loon, I believe you transitioned from a pilot facility to a higher production facility. A) Is that complete?

And then, B) any outlook that you can give for that slice of the business going into next year?

So we continue to be very bullish and have high expectations for the Project Loon. And Google has been a lot more – they've been a lot more involved in providing insights as to their expectations for Project Loon.

And I would point you to do a search and really look for what they're saying about Project Loon. They're focused on commercialization efforts this year and we're a part of that.

The balloon technology is working well, meeting expectations. The customer continues to work with great success on the communications aspects as well as building the relationships with telcos across the world and the business model in particular is looking to be very promising for them.

We were – we're very proud of our 187-day balloon duration that they've cited recently in their publications and that sets all kinds of records. Remember, we started with balloon technology that lasted for one day with a 100-day target, and now we've accomplished 187-day balloon duration.

So, look, we're excited about where this can go long-term. And this year, it's going to be about commercialization effort.

We don't expect a significant ramp in terms of production units this year. But all the momentum and all the press that they're choosing to give the project is very encouraging for us.

And our role with them is as strong as it's ever been. Our level of collaboration and integration with their efforts is greater than it's ever been, so we continue to be bullish about this opportunity.

All right. Thank you very much.

You bet.

Thanks so much for taking my questions. How do you see your acquisition pipeline and can you give us a sense of the size and scope of where you see acquisition opportunity?

Sure. So we've had a lot of opportunities in the past six months as we've been active in looking at those as opportunities to grow our three divisions.

And I will say I want to clarify that. The acquisition – our acquisition strategy starts with that of strengthening our existing divisions.

We're not looking to make it a big acquisition and add a fourth division. We like the three divisions we have.

They serve great long-term markets. And we have our opportunities to strengthen both our product lines and/or our distribution channels through strategic acquisitions.

We've looked at several companies. We've passed on some.

We made the Integra acquisition. And we continue to have high-quality targets within our existing divisions.

It's always a delicate dance because I can't tell you a lot of specifics. I probably told you a lot more than we have traditionally in the past already.

But we feel that there's good opportunity to put our balance sheet to work more aggressively than we have in the past. We're not going to make a – we're not going to do a bet-the-company type acquisition.

That's not who we are. If we do acquisitions, they'll be strategic in nature and that they will give us opportunity to grow one of our existing divisions in a way that we wouldn't have today.

But they also need to meet a threshold now of being accretive to earnings in the first year.

I appreciate that. And then for my second question, I like to just bundle three quick accounting questions, that should be pretty easy housekeeping.

What are your CapEx expectations for this upcoming year?

$13 million to $15 million.

$13 million to $15 million, you said?

Correct.

Okay. And then you had a jumping goodwill and intangibles on the balance sheet to $70 million, is that primarily Integra Plastics?

That's correct.

Okay. And then finally, I had been modeling in some payment – some interest payments going forward.

But it looks like you might have just paid off that acquisition related debt. Is that correct?

That's correct, Andrea. We paid that all up in the fourth quarter, so we will have no interest expense at this point in time.

I appreciate that. I'll hop back in the queue.

Thank you.

Hi. Thanks a lot for taking my question.

Given the weakness in the ag market at the Applied Technology level, should we be expecting maybe some weakness in the Films coming up or is there a difference in the end customer or maybe the channel or does that speak to something competitively going on in the Applied Technology segment?

That's a great question. So I'm glad to be given the opportunity to clarify that.

We do have a portion of our Engineered Films business that we call the ag segment. And let me just start by explaining what ATD does, so ATD is machine control and our whole suite of precision ag products is geared towards row-crop and crop production.

We optimize – we help farmers optimize crop production by increasing yields and reducing cost. So the crop reduction segment is a tough segment right now given the corn and soybean prices.

So pivoting over to Engineered Films, the ag segment within Engineered Films is very different. The majority of our ag sales in Films go to high-value fruit production primarily throughout the Western U.S.

and somewhat in the Southeastern U.S., that's a vast majority, and that market's fine. The second portion, which is maybe less than 15% or 10%, goes to what we would call silage covers, and silage is a feedstock used mostly in dairy, but in raising cattle, and that market is good.

And then we also have a part of our business that's used in a small part in covering grain pile. So, when you produce a lot of grain and there should be strong production, that's why the commodity prices are so low, it's that we keep producing record crops, there continued to be need to cover grain and that's a part of our Engineered Films division.

So, long answer, we're not concerned about pressure in the ag segment in our Engineered Films division.

Thanks. That's really helpful.

And then as a follow-up, so there's been a lot of talk about acquisitions. How do you feel about share buybacks at these prices and the share price?

So, we do have an authorization. And we believe that our first and best use of cash would be continued strategic acquisition.

We want to use our cash to grow the company. We believe in maintaining our dividend distribution.

That's a part of what we are, that's a part of the investment proposition that we offer. But we do see that there may be opportunity to get into the market and use some cash for a buyback, we're authorized to do so.

And we'll continue to look at, as a board, what's the best use of cash and what's the best mix of those competing uses of cash. Steven, if you want to add any color, feel free.

Yeah, I would just add in to what Dan said is, we kind of look at share buybacks opportunistically. We look at them over a long term.

It's a strategic mechanism for us to return capital to shareholders. And I would envision us being opportunistic at times when appropriate.

Thanks, Dan. Thanks, Steven.

I'll go back in the queue.

Good morning. Thanks for taking my question.

This is concerning Activa Plastics (sic) [Integra Plastics] acquisition whereby at $48 million, you issued 1.5 million shares. I wondered if you had considered issuing debt or an all-cash acquisition versus issuing the 1.54 million shares, I could be wrong, but it seems to me like this may have put undue pressure on the stock whereby Activa (sic) [Integra] shareholders that got shares of Raven sold the stock.

I noticed it went down $2 a few weeks ago. And to me, that was negative to we existing shareholders.

Thank you.

So, I'll attempt to answer that. So, Integra Plastics, we did approximately 80% with shares, 20% with cash.

We got to a place where in working with the sellers and considering the tax implications with both parties and considering a range of purchase valuation that this mix allowed us to buy the company at the best value for our shareholders. That's exactly why we chose to structure it the way we did.

What they've done with their shares, I really have no idea on what they've done with their shares. We also authorized a buyback.

And as we've already talked about, that remains an opportunity for us.

Hello, Dan and Dave, good morning. I had two questions.

In the Applied Technologies, in addition to the weakness in the agricultural market that you cite, have you lost your position on any of the OEM business being displaced?

Marc, thanks for the question. This is Dan.

We don't – no, we don't believe so. We've been in consistent and ongoing contact with all of our OEM customers.

And in the contrary, we're all in this together in this tough ag market, and we have longstanding relationships with all of our OEM customers. And we have 33 of them.

And we've been working with them to work our way through a really difficult market where their machine volumes are down dramatically. We're trying to expand our take-rate of our technology, as well as the breadth of the technology that they put on the machines, but it's tough.

But our ongoing relationships are strong, and we're working together to work through this. And I would say the same with our aftermarket partners.

Secondly, and maybe this was covered when I wasn't on the call, but Integra was initially viewed as an accretive acquisition. And I noticed you're using the word strategic now.

Does that mean it's not accretive for the coming year?

No, that doesn't mean that at all. We're not – I don't really think of those words as one or the other.

We're looking for strategic acquisitions that are accretive in the first year. And in particular as it relates to Integra, we do expect Integra to be accretive to earnings in the first full year.

We did expect it to be accretive in our fourth quarter that we just closed out and it came up just a little bit short of that. And that was based on the energy market drop-off that started in early November and continued through the quarter.

But if we didn't call it strategic before, then that was a mistake. It's always been a strategic acquisition for us, that's why we did it.

And this is – I'm so pleased that we made that acquisition when you consider the energy market that we face today. Now we're able to convert more goods in locations where the energy market is strong.

And we have a distribution channel that's significantly more efficient that allows us to, one, understand the nuances and the dynamics of the market differently, but two, continue to be competitive in serving those markets. So, it is strategic, it is intended to be accretive to earnings in this first full year and it was not in the fourth quarter.

Thanks for taking my follow-up. Dan, I think you mentioned that you think 1Q is probably the trough for your ATD segment before improving throughout the year.

Maybe if you could give us some color on what you're seeing in the business or hearing from your customers that gives you confidence that 1Q will be the trough and we'll see things work up from there.

So, I'm not saying that we're going to have dramatic improvement in market conditions in the second quarter. I'm saying that we've made – we've taken actions to put a cost structure in place that will allow us to improve our profit margins and improve our profitability on the business that we have available to us.

So, we're controlling everything that we can on this end. We are doing everything we can to get the sales that the market will allow.

And we believe that the net results of that is going to allow us to continue to improve out of the trough, that is Q1.

Okay. That's helpful.

And then a follow-up for Steven on balance sheet capacity for M&A. Are you guys considering adding leverage to your balance sheet if you've got a bigger deal out there that's in front of you?

Yeah. I think for the right transaction, Ben, we would be putting leverage on the balance sheet.

And so, we've got about $50 million in cash today and quite a bit of room on the debt side to make acquisitions and still not, as Dan said, make a huge bet. But definitely something we consider doing.

Could you give us a sense for how much room you think you guys have?

Well, I mean I think in the event that we were to take on debt for a transaction, we're looking at maintaining investment grade credit quality metrics. So, you can apply those to our EBITDA in a pro forma situation and come up with an estimate, but I think we could comfortably do $100 million to $200 million utilizing the cash we have.

Okay. Thank you, gentlemen, very much.

Thanks for taking my two follow-ups. So, AGCO recently said Raven was a strategic partner.

Can you help us understand how this is different? I know you have a longstanding relationship with them.

Sure. Thanks, Andrea.

So we do have a long relationship. And AGCO, like a lot of the OEMs, continues to see the great value in adding more and more technology to their equipment.

And they have a broad strategy to bring in their closest partners in technology, of which they consider us one of those. We've renewed our ongoing relationship that we've had in the past and memorialized that with the right documents, that allows both of us the confidence that we can continue to collaborate with new developments for them, in particular, our latest field computer called Viper 4.

But in addition, many of the legacy products that we've enjoyed such a good relationship on over the past just continue to give us opportunity to work with them to refine that technology.

And then one more, I think you said Integra contributed $5.6 million in Q4. Is that over or under your expectation?

Under...

Is that – and what is it – go ahead.

Due to the energy market, so 35% of Integra, just like 30% or 35% of Engineered Films, was related to the energy market. And the distribution channel that we acquired through Integra faced obviously the same headwinds that we faced because it's a market-based problem.

So we had a shortfall on the energy segment with Integra.

Thank you. I appreciate.

Go ahead.

You bet.

Sure. I guess I would just – I want to reinforce that we strongly believe that we're on the course to recovery.

We've made some tough choices and implemented some decisions over the last 24 hours that none of us want to go through. But as we've looked at the business, we know that it's a prudent thing to do and it's the right thing to do.

We're on the course to recovery. We believe, in all three of our divisions, we're proud of the performance that Aerostar and Engineered Films turned in last year.

Two out of three divisions met our long-term objectives for earnings growth. ATD hit a market headwind and we're working our way through that.

We're controlling what we can and we're being responsible with the business. And we are looking – continue to look at acquisitions as a part of this course to recovery and we're optimizing our internal investments.

What that means is we're sharpening our focus as it relates to R&D as well as capital expenditures. We like each of the businesses that we have, they serve great long-term markets.

We've got strong businesses and we're going to continue to invest in those. We remain true to the Raven business model and exercising fiscal prudence and honoring our purpose to solve great challenges and that we're optimistic that the markets we've chosen will continue to provide long-term profitable growth opportunities.

We look forward to updating you on our first quarter in May. Thank you.