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, 1999
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
- -------------------------------------------------------------------------------
(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 MAY 31, 1999
- --------------------------- --------------------------------------
Common Stock 4,573,286 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets as of April 30, 1999,
January 31, 1999 and April 30, 1998 3
Consolidated Statements of Income for the three months
ended April 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
three months ended April 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-7
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
(Dollars in thousands)
<TABLE>
<CAPTION>
04/30/99 01/31/99 04/30/98
------------ ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................................. $2,055 $5,335 $1,660
Accounts and note receivable, less allowance for
doubtful accounts of $401, $400 and $417 as of 04/30/99,
01/31/99 and 04/30/98, respectively.................................... 24,272 27,399 24,034
Inventories:
Materials.............................................................. 20,419 18,261 20,467
In process............................................................. 5,204 3,662 5,564
Finished goods......................................................... 6,010 4,055 6,558
------------ ------------- -------------
Total inventories.................................................. 31,633 25,978 32,589
Deferred income taxes.................................................... 1,732 1,732 1,682
Prepaid expenses and other current assets................................ 269 417 380
------------ ------------- -------------
Total current assets............................................... 59,961 60,861 60,345
------------ ------------- -------------
Property, plant and equipment............................................ 58,058 57,276 54,955
Less: accumulated depreciation......................................... 39,007 37,713 35,183
------------ ------------- -------------
Net property, plant and equipment.................................. 19,051 19,563 19,772
Note receivable, less current portion.................................... 1,311
Other assets, net........................................................ 3,155 3,250 3,577
------------ ------------- -------------
TOTAL ASSETS............................................................. $82,167 $83,674 $85,005
============ ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, bank....................................................... $4,000
Current portion of long-term debt......................................... $608 $1,060 1,754
Accounts payable.......................................................... 5,418 5,993 6,339
Accrued liabilities and customer advances................................. 10,567 9,739 9,915
------------ ------------- -------------
Total current liabilities........................................... 16,593 16,792 22,008
Long-term debt, less current portion...................................... 3,992 4,572 601
Deferred income taxes..................................................... 21 17 524
Stockholders' equity
Common stock, $1 par value, authorized shares: 100,000,000;
issued: 5,215,489; 5,215,489 and 5,214,406 shares as of
04/30/99, 01/31/99 and 04/30/98, respectively.......................... 5,215 5,215 5,214
Paid in capital......................................................... 2,961 2,940 2,849
Retained earnings....................................................... 61,060 60,369 57,432
------------ ------------- -------------
69,236 68,524 65,495
Less treasury stock, at cost:
623,203; 521,403 and 386,403 shares as of 04/30/99,
01/31/99 and 04/30/98, respectively................................. 7,675 6,231 3,623
------------ ------------- -------------
Total stockholders' equity.......................................... 61,561 62,293 61,872
------------ ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $82,167 $83,674 $85,005
============ ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 3
<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
MONTHS ENDED:
-----------------------------------
04/30/99 04/30/98
-------------- --------------
<S> <C> <C>
Net sales.......................................................... $34,495 $32,162
Cost of goods sold................................................. 28,484 26,743
-------------- --------------
Gross profit..................................................... 6,011 5,419
-------------- --------------
Operating expenses
Selling.......................................................... 1,972 2,081
Administrative................................................... 1,781 1,732
-------------- --------------
Operating income.............................................. 2,258 1,606
-------------- --------------
Interest expense................................................... (103) (84)
Other income, net.................................................. 97 78
-------------- --------------
Income before income taxes....................................... 2,252 1,600
Income taxes....................................................... 813 576
-------------- --------------
Net income....................................................... $1,439 $1,024
============== ==============
Net income per common share:
Basic..................................................... $0.31 $0.21
Diluted................................................... $0.31 $0.21
Cash dividends declared and paid per share......................... $0.16 $0.15
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 4
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED:
---------------------------------------
04/30/99 04/30/98
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $1,439 $1,024
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization................................... 1,380 1,390
Provision for losses on accounts receivable..................... 2 95
Deferred income taxes........................................... 4 4
Interest earned on note receivable.............................. (26) (52)
(Increase) decrease in accounts receivable...P
................... 3,151 2,844
(Increase) decrease in inventories.............................. (5,655) (6,773)
(Increase) decrease in other current assets..................... 148 126
Increase (decrease) in operating liabilities.................... 273 (1,356)
Other........................................................... (17) 3
---------------- ----------------
Net cash provided by (used in) operating activities................. 699 (2,695)
Cash flows from investing activities:
Capital expenditures................................................ (782) (1,262)
Other............................................................... 27 20
---------------- ----------------
Net cash provided by (used in) investing activities................. (755) (1,242)
Cash flows from financing activities:
Issuance of short-term debt......................................... 4,000
Long-term debt principal payments................................... (1,032) (538)
Net proceeds from exercise of stock options......................... 8
Dividends paid...................................................... (748) (723)
Purchase of treasury stock.......................................... (1,444)
---------------- ----------------
Net cash provided by (used in) financing activities................. (3,224) 2,747
---------------- ----------------
Net decrease in cash and cash equivalents........................... (3,280) (1,190)
Cash and cash equivalents at beginning of period...................... 5,335 2,850
---------------- ----------------
Cash and cash equivalents at end of period............................ $2,055 $1,660
================ ================
Cash paid during the period for:
Interest.......................................................... $82 $89
Income taxes...................................................... $194 $421
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 5
<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 by Raven Industries, Inc. (the company) 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, 1999 are not necessarily
indicative of the results that may be expected for the year ending January
31, 2000. The January 31, 1999 balance sheet was derived from audited
financial statements, but does not include all disclosure required by
generally accepted accounting principles. These financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the company's annual report on Form 10-K for the year
ended January 31, 1999.
2. Outstanding options for the three months ended 04/30/99, were excluded from
the diluted earnings per share calculation because the exercise price was
greater than the average market price of the company's common stock during
that period. Details of the earnings per share computation are presented
below (dollars in thousands, except per share data):
FOR THE THREE
MONTHS ENDED:
----------------------------
04/30/99 04/30/98
---------- -----------
Net income ....................................... $1,439 $1,024
========== ===========
Weighted average common shares outstanding........ 4,652,019 4,826,780
Dilutive impact of stock options.................. 24,560
---------- -----------
Weighted average common and common
equivalent shares outstanding................... 4,652,019 4,851,340
========== ===========
Net income per share:
Basic...................................... $0.31 $0.21
========== ===========
Diluted.................................... $0.31 $0.21
========== ===========
Page 6
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. The company's three segments (Electronics, Plastics, and Sewn Products)
were defined by their common technologies, raw materials, and production
processes. These segments are consistent with the company's management
reporting structure. The company's customers (distributors or original
equipment manufacturers) provide opportunities for each segment to serve
various markets. Distribution methods are similar across and with segments.
These segments, whose results are shown below, are Electronics, whose
principal products include industrial controls, computerized flow control
hardware and software, and printed circuit boards and assemblies; Plastics,
providing plastic films, large-volume plastic and fiberglass tanks, and
fiberglass pick-up truck toppers; and Sewn Products, providing
superior-performance outerwear and sewn inflatables including hot-air
balloons.
FOR THE THREE
MONTHS ENDED:
----------------------------
04/30/99 04/30/98
------------ ------------
SALES
Electronics................................ $12,917 $11,765
Plastics................................... 18,610 16,519
Sewn Products.............................. 2,968 3,878
----------- ------------
Total Company.................................... $34,495 $32,162
=========== ============
OPERATING INCOME
Electronics................................ $866 $1,231
Plastics................................... 1,575 547
Sewn Products.............................. (183) (172)
------------ ------------
============ ============
Page 7
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The company's cash and cash equivalents balance of $2.1 million at April 30,
1999, was $3.3 million less than January 31, 1999 and $395,000 more than April
30, 1998. The company has no short term borrowings at January 31, 1999 or at
April 30, 1999, which was down $4.0 million from April 30, 1998. The cash
balance as of January 31, 1999, was sufficient to fund the seasonal increases in
inventory levels. Inventory levels declined $956,000 from April 30, 1998, to
April 30, 1999, due primarily to lower projected sales in the Sewn Products
segment. From April 30, 1998, through April 30, 1999, the company repurchased
236,800 shares of its common stock for a total of $4.1 million, including $1.4
million in the quarter ended April 30, 1999. Funding the stock repurchases
increased long term debt, including the current portion, from $2.2 million at
April 30, 1998, to $4.6 million at April 30, 1999. The April 30, 1999, long-term
debt balance was $1.0 million less than January 31, 1999, balance because of
payments made during the first quarter. The company's capital resources continue
to be sufficient to fund all its activities.
RESULTS OF OPERATIONS
Sales for the quarter ended April 30, 1999, were $34.5 million, up $2.3 million
from the previous year's results. April year-to-date net income of $1.4 million
was $415,000 greater than the first quarter results last year. First quarter
diluted earnings per share increased to $0.31, up from $0.21 for the same period
the previous year. The Plastics segment garnered the largest gains with an
increase in sales and net income of 13 percent and 188 percent, respectively.
Electronics segment sales of $12.9 million in the first quarter were 10 percent
higher than one year earlier. Contract electronics showed excellent gains during
the first quarter, logging a 71 percent increase in sales over last year's
totals, due primarily to heavy deliveries of a long term contract relating to
the computer industry. Sales of flow control devices declined by more than
$746,000 in the first quarter because of the continuing weakness in the
agricultural markets. Feedmill automation systems sales fell $512,000 due to the
timing of deliveries. The company does not expect these results to be
representative of the remainder of the year. Operating income was $866,000 in
the Electronics segment during the quarter, 30 percent lower than the comparable
period the prior year. Contract electronics experienced lower gross margins, due
to the highly competitive nature of the computer industry, along with
substantial start-up costs associated with this contract. Flow control devices
and feedmill automation systems logged lower operating profits which correspond
to the lower sales volume.
Plastics segment sales of $18.6 million in the quarter ended April 30, 1999,
were 13 percent higher than the first quarter of the previous year. The
engineered films and pickup truck topper product lines increased their first
quarter sales by $1.1 million and $1.2 million respectively compared to last
year. The plastic storage tank product line sales were slightly less than last
year due to weakness in the agricultural market. Plastics segment operating
profits for the first quarter of fiscal 2000 were $1.6 million, three times more
than the previous year. Improved gross profit rates on the balloon and
engineering product lines, plus favorable raw material purchases contributed
heavily to this increase.
Page 8
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Sewn Products segment sales are typically at a seasonal low in the first quarter
of the fiscal year. Although the company is projecting lower sales totals for
the year due to offshore competition, the first quarter results are not expected
to be representative of the full year. First quarter sales of $3.0 million were
down from the $3.9 million recorded recorded in the first quarter of last year.
The lower sales generated in first quarter operating loss of $183,000, compared
with an operating loss of $172,000 in the prior year.
Consolidated gross profits of $6.0 million in the first quarter were 11 percent
higher than the prior year's first quarter, due primarily to the strong
performance of the Plastics segment. Selling expenses were 5 percent lower than
the prior year because of decreased selling staff. Administrative expenses were
less than 3 percent higher than the previous year, reflecting only the annual
wage adjustments. First quarter pretax income of $2.3 million was 41 percent
higher than the first quarter of the prior fiscal year. These results generated
a 48 percent increase in diluted earnings per share, rising from $0.21 in fiscal
1999 to $0.31 in fiscal 2000. The average number of shares outstanding for the
first quarter ended April 30, 1999 were down 175,000 shares due to the company's
on-going repurchase of stock.
YEAR 2000
All of the company's business software has been changed to be 2000-compliant and
will be fully tested by July 1, 1999. The platform on which this software runs
is 2000-compliant. Production equipment is being checked and this procedure
should be completed by August 1, 1999. Building equipment has been checked, and
only one problem was found, which was correct in March of 1999. Since the
company does not run its primary business software on personal computers,
management does not expect any material problems from non-compliant personal
computers. Vendors and service providers are being surveyed to ensure that they
are 2000-compliant and will be able to continue to meet the company's demands.
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 9
<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/ Thomas Iacarella
------------------------------
Thomas Iacarella
Vice President, Finance, Secretary
and Treasurer (Principal Financial
and Accounting Officer)
DATE: JUNE 14, 1999
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> APR-30-1999
<CASH> 2,055
<SECURITIES> 0
<RECEIVABLES> 24,673
<ALLOWANCES> 401
<INVENTORY> 31,633
<CURRENT-ASSETS> 59,961
<PP&E> 58,058
<DEPRECIATION> 39,007
<TOTAL-ASSETS> 82,167
<CURRENT-LIABILITIES> 16,593
<BONDS> 3,992
0
0
<COMMON> 5,215
<OTHER-SE> 56,346
<TOTAL-LIABILITY-AND-EQUITY> 82,167
<SALES> 34,495
<TOTAL-REVENUES> 34,495
<CGS> 28,484
<TOTAL-COSTS> 28,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 2,252
<INCOME-TAX> 813
<INCOME-CONTINUING> 1,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,439
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
