FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JULY 31, 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 incorporation (I.R.S. Employer
or organization) Identification No.)
205 EAST 6TH STREET
P.O. BOX 5107
SIOUX FALLS, SD 57117-5107
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
605-336-2750
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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 JULY 31, 1997
- ---------------------------- -------------------------------
Common Stock 4,850,992 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets as of July 31, 1997,
January 31, 1997 and July 31, 1996 3
Consolidated Statements of Income for the three months and
six months ended July 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
six months ended July 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>
7/31/97 01/31/97 7/31/96
------- ------- -------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 2,645 $ 3,439 $ 2,929
Accounts receivable, less allowance for
doubtful accounts of $345, $340 and $340 .................. 18,816 25,637 15,605
Inventories:
Materials ................................................. 18,637 16,276 15,886
In process ................................................ 5,013 4,574 5,660
Finished goods ............................................ 7,937 4,275 6,522
------- ------- -------
Total inventories ..................................... 31,587 25,125 28,068
Prepaid expenses and other current assets ................... 435 431 493
Deferred income taxes ....................................... 2,064 2,064 1,579
------- ------- -------
Total current assets .................................. 55,547 56,696 48,674
------- ------- -------
Property, plant and equipment ............................... 50,339 48,315 47,253
Less: accumulated depreciation ............................ 32,062 30,173 28,998
------- ------- -------
Net property, plant and equipment ..................... 18,277 18,142 18,255
Other assets, net ........................................... 5,728 5,824 3,655
------- ------- -------
TOTAL ASSETS ................................................ $79,552 $80,662 $70,584
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt ........................... $ 757 $ 1,366 $ 813
Accounts payable ............................................ 5,789 7,849 6,074
Accrued liabilities and customer advances ................... 10,352 10,801 8,871
------- ------- -------
Total current liabilities ............................. 16,898 20,016 15,758
Long-term debt, less current portion ........................ 2,610 3,181 2,682
Deferred income taxes ....................................... 736 736 815
Stockholders' equity
Common stock, $1 par value, authorized shares: 100,000,000;
issued: 5,203,395; 5,187,961 and 5,083,982 shares ........ 5,203 5,188 5,084
Paid in capital ........................................... 2,758 2,673 614
Retained earnings ......................................... 54,257 51,778 48,541
------- ------- -------
62,218 59,639 54,239
Less treasury stock, at cost:
352,403 shares ........................................ 2,910 2,910 2,910
------- ------- -------
Total stockholders' equity ............................ 59,308 56,729 51,329
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $79,552 $80,662 $70,584
======= ======= =======
</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 SIX
MONTHS ENDED: MONTHS ENDED:
--------------------------- ---------------------------
07/31/97 07/31/96 07/31/97 07/31/96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ................... $ 34,075 $ 31,270 $ 69,741 $ 62,145
Cost of goods sold .......... 28,000 25,872 56,839 50,661
----------- ----------- ----------- -----------
Gross profit .............. 6,075 5,398 12,902 11,484
Operating expenses
Selling ................... 2,018 1,696 3,954 3,450
Administrative ............ 1,650 1,487 3,253 2,993
----------- ----------- ----------- -----------
Operating income ....... 2,407 2,215 5,695 5,041
Interest expense ............ (78) (72) (166) (141)
Other income, net ........... 147 48 281 88
----------- ----------- ----------- -----------
Income before income taxes 2,476 2,191 5,810 4,988
Income taxes ................ 874 782 2,074 1,771
----------- ----------- ----------- -----------
Net income ................ $ 1,602 $ 1,409 $ 3,736 $ 3,217
=========== =========== =========== ===========
Average number of common and
common-equivalent shares
outstanding ............... 4,893,072 4,759,281 4,879,296 4,751,983
=========== =========== =========== ===========
Net income per common and
common-equivalent share ... $ 0.33 $ 0.30 $ 0.77 $ 0.68
=========== =========== =========== ===========
Cash dividends paid per share $ 0.130 $ 0.120 $ 0.260 $ 0.240
=========== =========== =========== ===========
</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)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED:
-------------------
7/31/97 7/31/96
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 3,736 $ 3,217
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 2,660 2,374
Provision for losses on accounts receivable ..... 101 45
Equity in earnings of affiliate, net of dividends (100) 24
(Increase) decrease in accounts receivable ...... 6,720 352
(Increase) decrease in inventories .............. (6,462) (4,171)
(Increase) decrease in other current assets ..... (4) (80)
Increase (decrease) in operating liabilities .... (2,509) 987
Other ........................................... (11) 48
------- -------
Net cash provided by (used in) operating activities . 4,131 2,796
Cash flows from investing activities:
Capital expenditures ................................ (2,750) (2,536)
Intangible asset expenditures and other ............. 166 38
------- -------
Net cash provided by (used in) investing activities . (2,584) (2,498)
Cash flows from financing activities:
Long-term debt principal payments ................... (1,184) (134)
Proceeds from exercise of stock options ............. 100 94
Dividends paid ...................................... (1,257) (1,133)
------- -------
Net cash provided by (used in) financing activities . (2,341) (1,173)
------- -------
Net increase (decrease) in cash and equivalents ..... (794) (875)
Cash and cash equivalents at beginning of period ...... 3,439 3,804
------- -------
Cash and cash equivalents at end of period ............ $ 2,645 $ 2,929
======= =======
Cash paid during the period for:
Interest .......................................... $ 181 $ 146
Income taxes ...................................... $ 2,693 $ 2,167
</TABLE>
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 six month periods ended July 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 SIX
MONTHS ENDED: MONTHS ENDED:
------------------------ ------------------------
7/31/97 7/31/96 7/31/97 7/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ........................................... $ 1,602 $ 1,409 $ 3,736 $ 3,217
========== ========== ========== ==========
Earnings per common share
- Primary ........................................ $ 0.33 $ 0.30 $ 0.77 $ 0.68
========== ========== ========== ==========
Earnings per common share
- Fully diluted (1) .............................. $ 0.33 $ 0.30 $ 0.77 $ 0.68
========== ========== ========== ==========
Average number of common and common
equivalent shares:
Primary:
Weighted average common
shares outstanding .............................. 4,842,691 4,726,325 4,839,833 4,721,255
Dilutive effect of exercise
of certain stock options ........................ 50,381 32,956 39,463 30,728
---------- ---------- ---------- ----------
Average common shares
- Primary ....................................... 4,893,072 4,759,281 4,879,296 4,751,983
========== ========== ========== ==========
Fully diluted (1):
Weighted average common
shares outstanding .............................. 4,842,691 4,726,325 4,839,833 4,721,255
Dilutive effect of exercise
of certain stock options ........................ 54,186 32,956 41,366 30,728
---------- ---------- ---------- ----------
Average common shares
- Fully diluted ................................. 4,896,877 4,759,281 4,881,199 4,751,983
========== ========== ========== ==========
</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
The company's cash balance was $2.6 million at July 31, 1997, compared to $2.9
million one year earlier. Net cash provided by operating activities was $4.1
million for the six months ended July 31, 1997, an increase of $1.3 million over
the period ended July 31, 1996. Higher earnings and collection of year-end
accounts receivable balances accounted for much of the improvement. The company
prepaid $1 million of long-term debt due in January, 1998 during the second
quarter of the current fiscal year. The company's capital resources continue to
be sufficient to fund all operating activities.
RESULTS OF OPERATIONS
Sales were $34.1 million in the quarter ended July 31, 1997, an increase of 9
percent over the second quarter of the prior year. First half sales of $69.7
million were 12 percent higher than the comparable period of the prior fiscal
year. Most of the sales increase was in the Plastics segment. Net income of $1.6
million in the second quarter was 14 percent higher than the prior year's second
quarter and earnings per share of $.33 was up 10 percent. For the six months,
net income of $3.7 million increased 16 percent and earnings per share of $.77
increased 13 percent over the comparable period of the prior year. 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.
Plastics segment sales of $16.6 million in the second quarter were 17 percent
higher than the year earlier period. The acquisition of Norcore Plastics added
$1.8 million to sales in this segment during the quarter and $4.5 million during
the first half of the year. Excluding the impact of the acquisition, sales of
plastic and fiberglass tanks, and engineered films increased. First half sales
of $34.6 million in this segment were 23 percent higher than the first half of
the prior year. Second quarter operating income of $989,000 was 8 percent lower
than the comparable period of the prior year in the Plastics segment. The profit
impact of higher sales was offset by increased selling expenses and lower gross
profit rates. Six month operating income was $2.0 million in this segment, 4
percent less than the first six months of the prior fiscal year.
Electronics segment sales of $9.0 million in the second quarter were 1 percent
lower than the prior year. A small increase in the company's product lines in
support of precision farming was offset by delayed demand from contract
manufacturing customers. Contract manufacturing revenues are projected to
increase during the second half of the year. For the six months, sales of $21.2
million were essentially unchanged from one year earlier. Operating income of
$490,000 in the second quarter was 10 percent higher than the prior year's
comparable quarter. Improved operating efficiencies offset the impact of lower
sales. First half operating income in the Electronics segment of $2.5 million
was 12 percent higher than the first six months of the prior year.
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Sewn Products sales of $8.4 million were 5 percent higher in the second quarter
of the current year and up 9 percent for the six month period, totaling $14.0
million. Operating income was $928,000 for the quarter and $1.2 million for the
six months, an increase of 34 percent and 59 percent, respectively, over the
comparable periods of the prior year. The first half of the year is the seasonal
low for Sewn Products deliveries, therefore the percentage increases are
reflective of the timing of deliveries. Full year projections for this segment
continue to indicate sales approximating fiscal 1997 levels.
Consolidated gross profits were up 13 percent in the second quarter and 12
percent in the first half compared to one year earlier, due to the higher sales
levels in the Plastics and Sewn Products segments and improved gross profit
rates in the Electronics and Sewn Products segments. Selling expenses increased,
from 5.4 percent of sales in the second quarter of the prior year to 5.9 percent
in the most recent quarter, to improve future growth opportunities in the
Electronics and Plastics segments. Administrative expenses were 4.8 percent of
sales in both the most recent and prior year's second quarter. On a year to date
basis, selling and administrative expenses are relatively unchanged as a
percentage of sales. Miscellaneous income increased by $99,000 in the second
quarter and $193,000 for the six months, due primarily to improved results at
the company's 50 percent owned affiliate. Consolidated income before income
taxes increased by 13 percent in the second quarter and 16 percent for the six
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:
The Company's annual meeting of stockholders was held on May 22, 1997. The
following members were elected to the Company's Board of Directors to hold
office for the ensuing year.
Nominee In Favor Withheld
- --------------------------------- ----------- ---------
Tony W. Bour 4,280,137 77,539
David A. Christensen 4,285,072 72,604
Mark E. Griffin 4,282,437 75,239
Thomas S. Everist 4,277,437 80,239
Conrad J. Hoigaard 4,281,643 76,033
Kevin T. Kirby 4,282,137 75,539
John C. Skoglund 4,281,643 76,033
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: SEPTEMBER 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1997
<CASH> 2,645
<SECURITIES> 0
<RECEIVABLES> 19,161
<ALLOWANCES> 345
<INVENTORY> 31,587
<CURRENT-ASSETS> 55,547
<PP&E> 50,339
<DEPRECIATION> 32,062
<TOTAL-ASSETS> 79,552
<CURRENT-LIABILITIES> 16,898
<BONDS> 2,610
0
0
<COMMON> 5,203
<OTHER-SE> 54,105
<TOTAL-LIABILITY-AND-EQUITY> 79,552
<SALES> 69,741
<TOTAL-REVENUES> 69,741
<CGS> 56,839
<TOTAL-COSTS> 56,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> 5,810
<INCOME-TAX> 2,074
<INCOME-CONTINUING> 3,736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,736
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
</TABLE>
