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: APRIL 30, 1998
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 JUNE 3, 1998
- -------------------------- ------------------------------------------
Common Stock 4,770,803 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets as of April 30, 1998,
January 31, 1998 and April 30, 1997 3
Consolidated Statements of Income for the three months
ended April 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
three months ended April 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II-OTHER INFORMATION 9
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
04/30/98 01/31/98 4/30/97
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 1,660 $ 2,850 $ 2,055
Accounts and note receivable, less allowance for
doubtful accounts of $417, $390 and $342 .................. 24,034 26,973 23,001
Inventories:
Materials ................................................. 20,467 17,801 17,696
In process ................................................ 5,564 3,882 4,783
Finished goods ............................................ 6,558 4,133 5,864
--------- --------- ---------
Total inventories ..................................... 32,589 25,816 28,343
Deferred income taxes ....................................... 1,682 1,686 2,064
Prepaid expenses and other current assets ................... 380 506 328
--------- --------- ---------
Total current assets .................................. 60,345 57,831 55,791
--------- --------- ---------
Property, plant and equipment ............................... 54,955 53,805 49,588
Less: accumulated depreciation ............................ 35,183 33,988 31,183
--------- --------- ---------
Net property, plant and equipment ..................... 19,772 19,817 18,405
Note receivable, less current portion ....................... 1,311 1,259
Other assets, net ........................................... 3,577 3,683 5,852
--------- --------- ---------
TOTAL ASSETS ................................................ $ 85,005 $ 82,590 $ 80,048
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, bank ......................................... $ 4,000 $ 0 $ 0
Current portion of long-term debt ........................... 1,754 1,765 1,766
Accounts payable ............................................ 6,339 7,480 6,526
Accrued liabilities and customer advances ................... 9,915 10,130 10,125
--------- --------- ---------
Total current liabilities ............................. 22,008 19,375 18,417
Long-term debt, less current portion ........................ 601 1,128 2,639
Deferred income taxes ....................................... 524 524 736
Stockholders' equity
Common stock, $1 par value, authorized shares: 100,000,000;
issued: 5,214,406; 5,210,832 and 5,189,953 shares ........ 5,214 5,211 5,190
Paid in capital ........................................... 2,849 2,844 2,693
Retained earnings ......................................... 57,432 57,131 53,283
--------- --------- ---------
65,495 65,186 61,166
Less treasury stock, at cost:
386,403; 386,403 and 352,403 shares ................... 3,623 3,623 2,910
--------- --------- ---------
Total stockholders' equity ............................ 61,872 61,563 58,256
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 85,005 $ 82,590 $ 80,048
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per-share data)
FOR THE THREE
MONTHS ENDED:
-------------------------
04/30/98 04/30/97
---------- ----------
Net sales ......................... $ 32,162 $ 35,666
Cost of goods sold ................ 26,743 28,839
---------- ----------
Gross profit .................... 5,419 6,827
---------- ----------
Operating expenses
Selling ......................... 2,081 1,936
Administrative .................. 1,732 1,603
---------- ----------
Operating income ............. 1,606 3,288
---------- ----------
Interest expense .................. (84) (88)
Other income, net ................. 78 134
---------- ----------
Income before income taxes ...... 1,600 3,334
Income taxes ...................... 576 1,200
---------- ----------
Net income ...................... $ 1,024 $ 2,134
========== ==========
Net income per common share:
Basic .................... $ 0.21 $ 0.44
Diluted .................. $ 0.21 $ 0.44
Cash dividends paid per share ..... $ 0.15 $ 0.13
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED:
-----------------------
04/30/98 04/30/97
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 1,024 $ 2,134
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization ................... 1,390 1,325
Provision for losses on accounts receivable ..... 95 34
Deferred income taxes ........................... 4 0
Equity in earnings of affiliate, net of dividends 0 (100)
(Increase) decrease in accounts receivable ...... 2,844 2,602
(Increase) decrease in inventories .............. (6,773) (3,218)
(Increase) decrease in other current assets ..... 126 103
Increase (decrease) in operating liabilities .... (1,356) (1,999)
Other ........................................... (49) 25
--------- ---------
Net cash provided by (used in) operating activities . (2,695) 906
Cash flows from investing activities:
Capital expenditures ................................ (1,262) (1,539)
Other ............................................... 20 (2)
--------- ---------
Net cash provided by (used in) investing activities . (1,242) (1,541)
Cash flows from financing activities:
Issuance of short-term debt ......................... 4,000 0
Long-term debt principal payments ................... (538) (142)
Net proceeds from exercise of stock options ......... 8 22
Dividends paid ...................................... (723) (629)
--------- ---------
Net cash provided by (used in) financing activities . 2,747 (749)
--------- ---------
Net increase (decrease) in cash and equivalents ..... (1,190) (1,384)
Cash and cash equivalents at beginning of period ...... 2,850 3,439
--------- ---------
Cash and cash equivalents at end of period ............ $ 1,660 $ 2,055
========= =========
Cash paid during the period for:
Interest .......................................... $ 89 $ 95
Income taxes ...................................... $ 421 $ 320
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month period ended April 30, 1998 are
not necessarily indicative of the results that may be expected for the
year ending January 31, 1999. 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,
1998.
2. Details of the earnings per share computation are presented below
(dollars in thousands, except per share data):
FOR THE THREE
MONTHS ENDED:
------------------------
4/30/98 4/30/97
---------- ----------
Net income ...................... $ 1,024 $ 2,134
========== ==========
Average common shares outstanding 4,826,780 4,836,975
Dilutive impact of stock options 24,560 28,545
---------- ----------
Average common and common
equivalent shares outstanding . 4,851,340 4,865,520
========== ==========
Net income per share:
Basic .................... $ 0.21 $ 0.44
========== ==========
Diluted .................. $ 0.21 $ 0.44
========== ==========
6
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The company's cash balance of $1.7 million at April 30, 1998 was $1.2 million
less than January 31, 1998 and $395,000 less than April 30, 1997. Notes payable
of $4.0 million at April 30, 1998 were required to fund seasonal increases in
inventory levels; no such borrowings were required at January 31, 1998 or April
30, 1997. Inventory levels increased by $4.2 million from April 30, 1997 to
April 30, 1998 in support of increased sales order backlogs in the Electronics
and Sewn Products segments. Subsequent to April 30, 1998, the company increased
its available credit facilities with Norwest Bank South Dakota N.A. from $5
million to $10 million, providing additional funding for potential repurchases
of common shares. The company's capital resources continue to be sufficient to
fund all its activities.
RESULTS OF OPERATIONS
Sales and net income for the quarter ended April 30, 1998 fell 10 percent and 52
percent, respectively from the first quarter records of the previous year. First
quarter sales of $32.2 million were down $3.5 million from the comparable period
of the prior year. Net income of $1.0 million or $0.21 per share in the first
quarter was $1.1 million or $0.23 per share lower than one year earlier. Sales
and operating income were lower in each of the company's business segments.
Electronics segment sales of $11.7 million in the first quarter were 3 percent
lower than one year earlier. Contract electronics sales were $1.0 million lower
than the prior year. This reduction relates to the timing of shipments and is
not expected to impact full year results. Sales of flow control devices were
reduced by over $500,000 in the first quarter as a result of weakness in the
agricultural market due to unfavorable weather in the southeastern United States
and the impact of lower wheat prices. These shortfalls were partially offset by
higher sales of feedmill automation systems. Operating income was $1.2 million
in the Electronics segment during the quarter, 38 percent lower than the
comparable period of the prior year. With sales levels lower than planned, and
relatively lower sales of products with stronger gross profit rates, the gross
profit rate in this segment was 3.9 percentage points lower than the year
earlier period.
Plastics segment sales were $16.5 million in the quarter ended April 30, 1998
and were 8 percent lower than the first quarter of the previous year. Higher
sales of engineered films were offset by continuing weakness in the industrial
market for plastic storage tanks. Sales of pickup-truck toppers also declined
slightly. Compared to the first quarter of the prior year, operating income of
$547,000 was down 45 percent. This reduction was due primarily to the weakness
in demand, associated idle capacity costs and reduced gross profits in the
plastic tank business. Compared to the third and fourth quarters of the prior
7
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
fiscal year, operating margins in the company's plastic tank business improved
in the quarter just ended, but remain at levels unacceptable to management.
Sewn Products segment sales are typically at the seasonal low point in the first
quarter of the fiscal year. As a result, performance measures may not be, and
are not expected to be, representative of the full year. First quarter sales of
$3.9 million were down 31 percent from the first quarter of the prior year.
Later scheduled deliveries to major customers caused the lower sales and created
a 22 percent increase in Sewn Products backlog at April 30, 1998 when compared
to April 30, 1997. The relatively low sales generated a first quarter operating
loss of $172,000 compared to operating income of $306,000 in the prior year.
Consolidated gross profits of $5.4 million in the first quarter were 21 percent
lower than the prior year's first quarter due primarily to the lower sales.
Selling expenses were 7 percent higher as a result of an increased emphasis on
penetrating new markets in the Electronics and Plastics segments. Administrative
expense includes an increased provision for losses on accounts receivable. First
quarter operating income of $1.6 million was 51 percent lower than the previous
year. Other income in the quarter ended April 30, 1997 included $100,000 from
the company's 50 percent owned affiliate, which was sold in January 1998. First
quarter pretax income of $1.6 million was 52 percent lower than the first
quarter of the prior 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.
8
<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).
(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: JUNE 8, 1998
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 1,660
<SECURITIES> 0
<RECEIVABLES> 24,451
<ALLOWANCES> 417
<INVENTORY> 32,589
<CURRENT-ASSETS> 60,345
<PP&E> 54,955
<DEPRECIATION> 35,183
<TOTAL-ASSETS> 85,005
<CURRENT-LIABILITIES> 22,008
<BONDS> 601
0
0
<COMMON> 5,214
<OTHER-SE> 56,658
<TOTAL-LIABILITY-AND-EQUITY> 85,005
<SALES> 32,162
<TOTAL-REVENUES> 32,162
<CGS> 26,743
<TOTAL-COSTS> 26,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 1,600
<INCOME-TAX> 576
<INCOME-CONTINUING> 1,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
