FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: OCTOBER 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________________
Commission file number: 0-3136
RAVEN INDUSTRIES, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
SOUTH DAKOTA 46-0246171
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
205 EAST 6TH STREET
P.O. BOX 5107
SIOUX FALLS, SD 57117-5107
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(Address of principal executive offices) (Zip code)
605-336-2750
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF OCTOBER 31, 1997
- --------------- -----------------------------------------------
Common Stock 4,858,283 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I-FINANCIAL INFORMATION --------
Consolidated Balance Sheets as of October 31, 1997,
January 31, 1997 and October 31, 1996 3
Consolidated Statements of Income for the three months and
nine months ended October 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
nine months ended October 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Computations of Earnings Per Common Share 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II-OTHER INFORMATION 10
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
10/31/97 01/31/97 10/31/96
------- ------- -------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 1,585 $ 3,439 $ 1,960
Accounts receivable, less allowance for
doubtful accounts of $352, $340 and $337 .................. 23,926 25,637 21,243
Inventories:
Materials ................................................. 18,870 16,276 16,364
In process ................................................ 5,107 4,574 5,094
Finished goods ............................................ 5,876 4,275 4,944
------- ------- -------
Total inventories ..................................... 29,853 25,125 26,402
Prepaid expenses and other current assets ................... 392 431 365
Deferred income taxes ....................................... 2,064 2,064 1,579
------- ------- -------
Total current assets .................................. 57,820 56,696 51,549
Property, plant and equipment ............................... 51,731 48,315 47,320
Less: accumulated depreciation ............................ 32,992 30,173 29,429
------- ------- -------
Net property, plant and equipment ..................... 18,739 18,142 17,891
Other assets, net ........................................... 5,709 5,824 3,619
------- ------- -------
TOTAL ASSETS ................................................ $82,268 $80,662 $73,059
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, bank ......................................... $ 1,000 $ 0 $ 0
Current portion of long-term debt ........................... 1,119 1,366 813
Accounts payable ............................................ 6,156 7,849 5,748
Accrued liabilities and customer advances ................... 10,797 10,801 10,010
------- ------- -------
Total current liabilities ............................. 19,072 20,016 16,571
Long-term debt, less current portion ........................ 2,216 3,181 2,618
Deferred income taxes ....................................... 736 736 815
Stockholders' equity
Common stock, $1 par value, authorized shares: 100,000,000;
issued: 5,210,686; 5,187,961 and 5,093,109 shares ........ 5,211 5,188 5,093
Paid in capital ........................................... 2,773 2,673 645
Retained earnings ......................................... 55,170 51,778 50,227
------- ------- -------
63,154 59,639 55,965
Less treasury stock, at cost:
352,403 shares ........................................ 2,910 2,910 2,910
------- ------- -------
Total stockholders' equity ............................ 60,244 56,729 53,055
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $82,268 $80,662 $73,059
======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
--------------------------------------------------------
10/31/97 10/31/96 10/31/97 10/31/96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ................... $ 41,321 $ 38,943 $ 111,062 $ 101,088
Cost of goods sold .......... 35,208 31,888 92,047 82,549
----------- ----------- ----------- -----------
Gross profit .............. 6,113 7,055 19,015 18,539
Operating expenses
Selling ................... 2,044 1,903 5,998 5,353
Administrative ............ 1,564 1,554 4,817 4,547
----------- ----------- ----------- -----------
Operating income ....... 2,505 3,598 8,200 8,639
Interest expense ............ (71) (83) (237) (224)
Other income, net ........... 114 56 395 144
----------- ----------- ----------- -----------
Income before income taxes 2,548 3,571 8,358 8,559
Income taxes ................ 907 1,268 2,981 3,039
----------- ----------- ----------- -----------
Net income ................ $ 1,641 $ 2,303 $ 5,377 $ 5,520
=========== =========== =========== ===========
Average number of common and
common-equivalent shares
outstanding ............... 4,904,548 4,774,665 4,899,326 4,759,543
=========== =========== =========== ===========
Net income per common and
common-equivalent share ... $ 0.33 $ 0.48 $ 1.10 $ 1.16
=========== =========== =========== ===========
Cash dividends paid per share $ 0.15 $ 0.13 $ 0.41 $ 0.37
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
FOR THE NINE
MONTHS ENDED
-------------------
10/31/97 10/31/96
------- -------
Cash flows from operating activities:
Net income .......................................... $ 5,377 $ 5,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 3,944 3,529
Provision for losses on accounts receivable ..... 157 71
Equity in earnings of affiliate, net of dividends (175) (1)
(Increase) decrease in accounts receivable ...... 1,554 (5,312)
(Increase) decrease in inventories .............. (4,728) (2,505)
(Increase) decrease in other current assets ..... 39 48
Increase (decrease) in operating liabilities .... (1,697) 1,800
Other ........................................... (19) 54
------- -------
Net cash provided by (used in) operating activities . 4,452 3,204
Cash flows from investing activities:
Capital expenditures ................................ (4,485) (3,262)
Other investing activities, net ..................... 255 28
------- -------
Net cash provided by (used in) investing activities . (4,230) (3,234)
Cash flows from financing activities:
Issuance of short-term debt ......................... 2,000 0
Payment of short-term debt .......................... (1,000) 0
Long-term debt principal payments ................... (1,214) (198)
Proceeds from exercise of stock options ............. 123 134
Dividends paid ...................................... (1,985) (1,750)
------- -------
Net cash provided by (used in) financing activities . (2,076) (1,814)
------- -------
Net increase (decrease) in cash and equivalents ..... (1,854) (1,844)
Cash and cash equivalents at beginning of period ...... 3,439 3,804
------- -------
Cash and cash equivalents at end of period ............ $ 1,585 $ 1,960
======= =======
Cash paid during the period for:
Interest .......................................... $ 253 $ 229
Income taxes ...................................... $ 3,410 $ 2,737
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring entries)
considered necessary for a fair presentation have been included.
Operating results for the three month and nine month periods ended
October 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending January 31, 1998. For further
information, refer to the consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-K for the
year ended January 31, 1997.
2. In March 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings per Share," which the Company will adopt
effective for its fiscal 1998 year end reporting. The Company will be
required to report basic net income per share based on weighted average
common shares outstanding, without considering common equivalent
shares, and diluted net income per share based on weighted average
common and common equivalent shares outstanding. Diluted net income per
share would be equivalent to the Company's current reporting of net
income per common and common-equivalent share.
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE (UNAUDITED)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED: MONTHS ENDED:
-------------------------------------------------
10/31/97 10/31/96 10/31/97 10/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ........................................... $ 1,641 $ 2,303 $ 5,377 $ 5,520
========== ========== ========== ==========
Earnings per common share
- Primary ........................................ $ 0.33 $ 0.48 $ 1.10 $ 1.16
========== ========== ========== ==========
Earnings per common share
- Fully diluted (1) .............................. $ 0.33 $ 0.48 $ 1.10 $ 1.16
========== ========== ========== ==========
Average number of common and common equivalent shares:
Primary:
Weighted average common
shares outstanding .............................. 4,855,159 4,738,928 4,844,941 4,727,145
Dilutive effect of exercise
of certain stock options ........................ 49,389 35,737 54,385 32,398
---------- ---------- ---------- ----------
Average common shares
- Primary ....................................... 4,904,548 4,774,665 4,899,326 4,759,543
========== ========== ========== ==========
Fully diluted (1):
Weighted average common
shares outstanding .............................. 4,855,159 4,738,928 4,844,941 4,727,146
Dilutive effect of exercise
of certain stock options ........................ 49,389 38,022 54,385 33,159
---------- ---------- ---------- ----------
Average common shares
- Fully diluted ................................. 4,904,548 4,776,950 4,899,326 4,760,305
========== ========== ========== ==========
</TABLE>
(1) THIS CALCULATION IS SUBMITTED IN ACCORDANCE WITH REGULATION S-K ITEM
601(b)(11) ALTHOUGH NOT REQUIRED BY FOOTNOTE 2 TO PARAGRAPH 14 OF APB OPINION
NO. 15 BECAUSE IT RESULTS IN DILUTION OF LESS THAN 3%.
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At October 31, 1997, the company had $1.6 million of cash and borrowed $1.0
million on a short-term basis. At October 31, 1996 the company had $2.0 million
of cash and no short-term borrowings. Cash is typically used during the first
nine months of the year to finance seasonal increases in inventories. Capital
expenditures were $1.2 million higher for the nine months ended October 31, 1997
than the comparable period of the prior fiscal year. Spending was higher in the
Plastics and Electronics segments. The higher spending was funded by increased
cash provided by operating activities. The company's capital resources continue
to be sufficient to fund its operating and investing activities. On November 24,
1997, the company announced that it had been authorized by its board of
directors to repurchase up to 500,000 shares of its common stock. Depending on
the number of shares repurchased and the price of those shares, additional
long-term debt financing may be required by the company. Management believes
such financing would be available to the company at interest rates equivalent to
current financing arrangements.
RESULTS OF OPERATIONS
Third quarter sales of $41.3 million were 6 percent higher than the comparable
quarter of the prior year. Unfavorable operating results in the company's
Plastics segment were primarily responsible for lower operating and net income.
Net income of $1.6 million was 29 percent lower than one year earlier and on a
per share basis of $.33 was down 31 percent from the comparable period of the
prior year. For the nine months, sales of $111.1 million were 10 percent higher
than the first nine months of the prior year. Nine month net income of $5.4
million was down 3 percent from the prior year and on a per share basis declined
5 percent to $1.10 per share. The increase in the number of average shares
outstanding was due primarily to the issuance of 93,701 shares of common stock
in connection with the January, 1997 acquisition of Norcore Plastics, Inc.
For the full year, unfavorable results in the Plastic segment are expected to
reduce operating income for the company below the $12.0 million recorded in
fiscal 1997. Demand for industrial plastic tanks remains weak and seasonal
strength in agricultural tank sales in not expected to offset the overall profit
decline.
Plastics segment sales of $17.1 million in the third quarter were 13 percent
higher than one year earlier. The acquisition of Norcore Plastics added $1.0
million to sales in the quarter and $5.5 million in the first nine months of the
current year. Excluding the impact of the acquisition, sales of industrial
plastic tanks dropped significantly, while pick-up truck topper sales were flat.
Sales of engineered films rose 19 percent in the third quarter and were up 10
percent for the nine months. Total Plastics sales for the nine months ended
October 31, 1997 were $51.7 million compared to $43.3 million in the comparable
period of
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
the prior year. Losses in the industrial tank business and to a lesser extent
the pick-up truck topper business reduced operating income in this segment to
$70,000 in the third quarter and $2.0 million for the nine months. Comparable
operating income figures for the prior year were $925,000 and $3.0 million,
respectively.
Electronics segment sales of $11.5 million in the quarter ended October 31, 1997
were 8 percent higher than the comparable quarter of the prior fiscal year. The
improvement was due primarily to increases in the company's contract electronics
manufacturing business. For the nine month period, sales of $32.7 million were 3
percent higher than the comparable period of the previous year. Gross profit
rates improved throughout the segment. Operating income for the three month
period of $1.4 million was 30 percent higher and for the nine months was $3.9
million - up 18 percent from the comparable periods of the prior year.
Sewn Products sales of $12.7 million in the third quarter were down 3 percent
from the prior year's third quarter, but, at $26.7 million on a year-to-date
basis were 3 percent higher than the prior year. The variances relate primarily
to the timing of shipments. Relatively higher sales of lower margin products
during the quarter combined with the lower sales to reduce profitability.
Operating income of $1.0 million in the third quarter was 36 percent lower than
the comparable period of the prior year. Nine month operating income of $2.2
million was 5 percent lower than the first nine months of the prior fiscal year.
Consolidated gross profits were down 13 percent in the third quarter and were 3
percent higher for the nine month period, when compared to the prior year, as a
result of the operating performance in the Plastics and Sewn Products segments
discussed above. Selling and administrative expenses, combined, were relatively
unchanged as a percentage of sales. Improved results at the company's 50 percent
owned affiliate increased other income for both the third quarter and nine month
periods. Consolidated income before income taxes decreased by 29 percent in the
third quarter and 2 percent for the nine month period when compared to the same
periods in the previous fiscal year.
SAFE HARBOR STATEMENT
THIS REPORT CONTAINS DISCUSSIONS OF ITEMS WHICH MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF FEDERAL SECURITIES LAWS. ALTHOUGH RAVEN
INDUSTRIES BELIEVES THAT EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCES THAT
ITS EXPECTATIONS WILL BE ACHIEVED. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER FROM EXPECTATIONS INCLUDE GENERAL ECONOMIC CONDITIONS, WEATHER CONDITIONS
WHICH COULD AFFECT CERTAIN OF THE COMPANY'S PRIMARY MARKETS SUCH AS THE
AGRICULTURAL MARKET OR ITS MARKET FOR OUTERWEAR, OR CHANGES IN COMPETITION WHICH
COULD IMPACT ANY OF THE COMPANY'S PRODUCT LINES.
<PAGE>
PART II-OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. (a) Exhibits Filed: Exh. 27-Financial Data schedule (for SEC only).
(See Part 1, page 7 for Earnings Per Share computation)
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAVEN INDUSTRIES, INC.
/s/ Arnold J. Thue
----------------------------------
Arnold J. Thue
Vice President, Finance, Secretary
and Treasurer (Principal Financial
and Accounting Officer)
DATE: DECEMBER 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 1,585
<SECURITIES> 0
<RECEIVABLES> 24,278
<ALLOWANCES> 352
<INVENTORY> 29,853
<CURRENT-ASSETS> 57,820
<PP&E> 51,731
<DEPRECIATION> 32,992
<TOTAL-ASSETS> 82,268
<CURRENT-LIABILITIES> 19,072
<BONDS> 2,216
0
0
<COMMON> 5,211
<OTHER-SE> 55,033
<TOTAL-LIABILITY-AND-EQUITY> 82,268
<SALES> 111,062
<TOTAL-REVENUES> 111,062
<CGS> 92,047
<TOTAL-COSTS> 92,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 8,358
<INCOME-TAX> 2,981
<INCOME-CONTINUING> 5,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,377
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
