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, 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 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
--------------------------------------------
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 8/27/99
- ------------------ -----------------------------------------------
Common Stock 4,382,091 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets as of July 31, 1999,
January 31, 1999 and July 31, 1998 3
Consolidated Statements of Income for the three
and six month periods ended July 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the six
month period ended July 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II-OTHER INFORMATION 11
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
07/31/99 01/31/99 07/31/98
-------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents ................................... $ 1,804 $ 5,335 $ 2,129
Accounts and note receivable, less allowance for
doubtful accounts of $453, $400, and $407 as of 07/31/99,
01/31/99 and 07/31/98, respectively ....................... 22,209 27,399 20,066
Inventories:
Materials ................................................. 19,769 18,261 19,493
In process ................................................ 5,372 3,662 6,604
Finished goods ............................................ 8,496 4,055 8,462
-------- -------- --------
Total inventories ..................................... 33,637 25,978 34,559
Deferred income taxes ....................................... 1,802 1,732 1,682
Prepaid expenses and other current assets.................... 192 417 216
-------- -------- --------
Total current assets .................................. 59,644 60,861 58,652
-------- -------- --------
Property, plant and equipment ............................... 58,915 57,276 56,040
Less: accumulated depreciation ............................ 40,067 37,713 36,092
-------- -------- --------
Net property, plant and equipment ..................... 18,848 19,563 19,948
Note receivable, less current portion ....................... 1,365
Other assets, net ........................................... 3,063 3,250 3,482
-------- -------- --------
TOTAL ASSETS................................................. $81,555 $ 83,674 $ 83,447
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Notes payable, bank ......................................... $ 2,000
Current portion of long-term debt ........................... 1,555 $ 1,060 $ 1,682
Accounts payable ............................................ 5,264 5,993 5,725
Accrued liabilities and customer advances ................... 9,917 9,739 9,960
-------- -------- --------
Total current liabilities ............................. 18,736 16,792 17,367
Long-term debt, less current portion ........................ 3,035 4,572 4,584
Deferred income taxes ....................................... 22 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
07/31/99, 01/31/99 and 07/31/98, respectively ............ 5,215 5,215 5,214
Paid in capital ........................................... 2,961 2,940 2,849
Retained earnings ......................................... 62,146 60,369 58,217
-------- -------- --------
70,322 68,524 66,280
Less treasury stock, at cost:
816,098; 521,403 and 471,203 shares as of 07/31/99,
01/31/99 and 07/31/98, respectively.................... 10,560 6,231 5,308
-------- -------- --------
Total stockholders' equity ............................ 59,762 62,293 60,972
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 81,555 $ 83,674 $ 83,447
======== ======== ========
</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 FOR THE SIX
MONTHS ENDED MONTHS ENDED
--------------------- ---------------------
07/31/99 07/31/98 07/31/99 07/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales .................... $ 36,965 $ 36,208 $ 71,460 $ 68,370
Cost of goods sold ........... 30,377 30,175 58,861 56,918
-------- -------- -------- --------
Gross profit ............... 6,588 6,033 12,599 11,452
Operating expenses
Selling .................... 2,020 2,030 3,992 4,111
Administrative ............. 1,765 1,620 3,546 3,352
-------- -------- -------- --------
Operating income ........ 2,803 2,383 5,061 3,989
Interest expense ............. (89) (144) (192) (228)
Other income, net ............ 128 102 225 180
-------- -------- -------- --------
Income before income taxes . 2,842 2,341 5,094 3,941
Income taxes ................. 1,026 839 1,839 1,415
-------- -------- -------- --------
Net income ................. $ 1,816 $ 1,502 $ 3,255 $ 2,526
======== ======== ======== ========
Net income per common share:
Basic ............... $ 0.40 $ 0.31 $ 0.71 $ 0.53
Diluted ............. $ 0.40 $ 0.31 $ 0.71 $ 0.52
Cash dividends paid per share $ 0.160 $ 0.150 $ 0.320 $ 0.300
</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 SIX
MONTHS ENDED
---------------------
07/31/99 07/31/98
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 3,255 $ 2,526
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ....................... 2,758 2,710
Provision for losses on accounts receivable ......... 124 104
Deferred income taxes ............................... (65) 4
Interest earned on note receivable .................. (53) (105)
Change in accounts receivable ....................... 5,119 6,803
Change in inventories ............................... (7,659) (8,743)
Change in prepaid expenses and other current assets . 225 290
Change in operating liabilities ..................... (531) (1,925)
Other ............................................... 12 2
------- -------
Net cash provided by operating activities ............... 3,185 1,666
------- -------
Cash flows from investing activities:
Capital expenditures .................................... (1,874) (2,680)
Other ................................................... 7 37
------- -------
Net cash used in investing activities ................... (1,867) (2,643)
------- -------
Cash flows from financing activities:
Issuance of short-term debt ............................. 2,000 4,000
Payment of short-term debt .............................. (4,000)
Issuance of long-term debt .............................. 5,000
Long-term debt principal payments ....................... (1,042) (1,627)
Net proceeds from exercise of stock options ............. 8
Dividends paid .......................................... (1,478) (1,440)
Purchase of treasury stock .............................. (4,329) (1,685)
------- -------
Net cash provided by (used in) financing activities ..... (4,849) 256
------- -------
Net decrease in cash and equivalents .................... (3,531) (721)
Cash and cash equivalents at beginning of period .......... 5,335 2,850
------- -------
Cash and cash equivalents at end of period ................ $ 1,804 $ 2,129
======= =======
Cash paid during the period for:
Interest .............................................. $ 201 $ 165
Income taxes, net of refund ........................... $ 2,041 $ 1,525
</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 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. 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 only of normal, recurring adjustments)
considered necessary for a fair presentation have been included.
Operating results and cash flows for the three and six-month periods
ended July 31, 1999 are not necessarily indicative of the results that
may be expected for the year ending January 31, 2000. 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, 1999.
2. Outstanding options for the three and six month periods ended 07/31/99,
were excluded from the diluted earnings per share calculations because
their exercise prices were greater than the average market price of the
company's common stock during those periods. Details of the earnings
per share computation are presented below (in thousands, except per
share data):
<TABLE>
<CAPTION>
FOR THE THREE F0R THE SIX
MONTHS ENDED MONTHS ENDED
--------------------------------------
07/31/99 07/31/98 07/31/99 07/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income ................................ $1,816 $1,502 $3,255 $2,526
====== ====== ====== ======
Weighted average common shares outstanding 4,510 4,779 4,581 4,803
Dilutive impact of stock options .......... 0 8 0 15
------ ------ ------ ------
Weighted average common and common
equivalent shares outstanding ........... 4,510 4,787 4,581 4,818
====== ====== ====== ======
Net income per share:
Basic ................................ $ 0.40 $ 0.31 $ 0.71 $ 0.53
====== ====== ====== ======
Diluted .............................. $ 0.40 $ 0.31 $ 0.71 $ 0.52
====== ====== ====== ======
</TABLE>
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
within 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.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED: MONTHS ENDED:
-----------------------------------------
07/31/99 07/31/98 07/31/99 07/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES
Electronics .................... $11,917 $11,480 $24,834 $23,245
Plastics ....................... 19,368 16,819 37,978 33,338
Sewn Products .................. 5,680 7,909 8,648 11,787
------- ------- ------- -------
TOTAL COMPANY ........................ $36,965 $36,208 $71,460 $68,370
======= ======= ======= =======
OPERATING INCOME
Electronics .................... $ 716 $ 1,007 $ 1,582 $ 2,238
Plastics ....................... 1,700 1,083 3,275 1,630
Sewn Products .................. 387 293 204 121
======= ======= ======= =======
TOTAL COMPANY ........................ $ 2,803 $ 2,383 $ 5,061 $ 3,989
======= ======= ======= =======
</TABLE>
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 was $1.8 million at July 31,
1999, compared with $2.1 million one year earlier. As of July 31, 1999, the
company's long term debt, including the current portion, was $4.6 million
compared to $6.3 million the prior year. The company obtained short term
financing in the amount of $2.0 million during the second quarter of fiscal year
2000 in order to help fund the repurchase of common shares. At July 31, 1999,
the company retained an unused balance of $3.0 million on its $5.0 million line
of credit. During the second quarter, the company repurchased 192,895 shares of
its common stock. The average purchase price was $14.96 per share for a total
cost of $2.9 million. Inventory levels decreased $922,000 from the July 31, 1998
level due primarily to a reduced order base in the Sewn Products segment.
Accounts Receivable increased $1.9 million over last year's level, due primarily
to heavy deliveries in the Plastics segment. The company's capital resources
continue to be sufficient to fund all its activities.
RESULTS OF OPERATIONS
Sales, net earnings and earnings per share were at record highs in the company's
second quarter. Sales were $37.0 million for the quarter ended July 31, 1999, an
increase of $757,000 over the second quarter of the prior year. First half sales
of $71.5 million were $3.1 million greater than the comparable period of the
previous year. The Plastics segment and Electronics segment generated sales
increases over last year for both the second quarter and the year-to-date
figures. Net income for the second quarter increased 21 percent to $1.8 million
from $1.5 million a year earlier. Earnings per share, on a diluted basis, rose
29 percent to 40 cents a share, compared to 31 cents a share in the second
quarter of last year, with 277,000 fewer average common equivalent shares
outstanding. For the first six months of the year, net income rose 29 percent to
$3.3 million, or 71 cents per diluted share, versus $2.5 million, or 52 cents
per diluted share, last year. Operating income for the first half of the year
was up 29 percent to $5.1 million.
Electronics segment sales of $11.9 million in the second quarter were $437,000
more than the same period last year. Sales of flow control devices declined by
$180,000 in the second quarter because of the continuing weakness in the
agricultural markets. Sales of feedmill automation systems fell $422,000 due to
a decrease in demand for new systems. Operating income was $716,000 in the
Electronics segment during the quarter, 29 percent lower than the comparable
period the prior year. For the first six months, sales totaled $24.8 million
compared to $23.2 million for the same period in fiscal 1999. Operating income
for the first half of fiscal 2000 was $1.6 million, down 29 percent from the
prior year. Contract electronics was the primary source for both the sales
increase and the decrease in operating income in both the three and six month
periods. Contract electronics generated a second quarter and year-to-date sales
increase of 20 percent and 40 percent, respectively. The addition of new
contract manufacturing accounts added to revenues, but lower than expected
efficiencies and start up costs reduced profitability.
Page 8
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Plastics segment sales of $19.4 million for the second quarter were 15 percent
more than the same period last year. Sales of $38.0 million for the first six
months were 14 percent greater than the first half of fiscal 1999. The three
product lines of this segment, which include research balloons and engineered
films, plastic storage tanks, and pickup truck toppers, all showed increases in
sales in both the second quarter and the year-to-date figures. Operating income
for the second quarter was $1.7 million, up 57 percent over the previous year.
Year-to-date operating income was $3.3 million compared to $1.6 million the
first six months of last fiscal year. A significant portion of the $1.7 million
year-to-date increase in operating income was generated in the research balloons
and engineered films product line. This increase in profitability for both
second quarter and year-to-date figures in research balloons and engineered
films was due to slightly better prices on purchased material, small increases
in selling prices and better equipment and labor utilization.
Sewn Products segment sales of $5.7 million for the second quarter were short of
the $7.9 million figure recorded in the same period last year. Year-to-date
sales of $8.6 million were 27 percent below the first half results of fiscal
1999. Management is projecting lower sales totals in the segment's contract
sewing product line due to offshore competition. Management's adjustments to
expenditure levels in anticipation of the shortfall in sales were reflected in
the operating income totals. For the quarter, operating income was $387,000
compared to $293,000 the prior year, and year-to-date operating income was
$204,000, $83,000 superior to last year's first half. The first half of the year
is the seasonal low for the Sewn Products segment.
Consolidated gross profits of $6.6 million in the second quarter were $555,000
more than the second quarter last year. The first six months generated an
increase of $1.1 million in gross profit over the same period the prior year.
These increases were due primarily to the strong performance of the Plastics
segment. Selling expenses were down by 0.5 percent for the quarter and 3 percent
for the first half due to decreased selling staff. Administrative expenses were
up 9 percent for the quarter and 6 percent on a year-to-date basis reflecting
increases in professional service, salaries and bad debt expense. Second quarter
pretax income of $2.8 million was 21 percent higher than last year's $2.3
million. The pretax income for the first six months was $5.1 million compared to
$3.9 million last year, which is a 29 percent increase. These results generated
a 37 percent increase in year-to-date earnings per diluted share, rising from 52
cents in fiscal 1999 to 71 cents in fiscal 2000.
YEAR 2000 STATEMENT
All of the company's business software has been changed to be 2000-compliant and
is currently in daily production. The platform on which this software runs is
2000-compliant. Production equipment is being checked, and this procedure should
be completed by October 1, 1999. Building equipment has been checked, and only
one problem was
Page 9
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
found, which was corrected in March 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 have been surveyed to ensure that they are 2000-compliant. Any
problems identified are being addressed.
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 10
<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: AUGUST 31, 1999
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 1,804
<SECURITIES> 0
<RECEIVABLES> 22,662
<ALLOWANCES> 453
<INVENTORY> 33,637
<CURRENT-ASSETS> 59,644
<PP&E> 58,915
<DEPRECIATION> 40,067
<TOTAL-ASSETS> 81,555
<CURRENT-LIABILITIES> 18,736
<BONDS> 3,035
0
0
<COMMON> 5,215
<OTHER-SE> 54,547
<TOTAL-LIABILITY-AND-EQUITY> 81,555
<SALES> 71,460
<TOTAL-REVENUES> 71,460
<CGS> 58,861
<TOTAL-COSTS> 58,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192
<INCOME-PRETAX> 5,094
<INCOME-TAX> 1,839
<INCOME-CONTINUING> 3,255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,255
<EPS-BASIC> 0.71
<EPS-DILUTED> 0.71
</TABLE>
