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, 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.
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(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 11/30/99
- ---------------------------- -------------------------------------------
Common Stock 4,051,082 shares
<PAGE>
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets as of October 31, 1999,
January 31, 1999 and October 31, 1998 3
Consolidated Statements of Income for the three and
nine month periods ended October 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the nine
month periods ended October 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>
10/31/99 01/31/99 10/31/98
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents .......................................... $ 4,557 $ 5,335 $ 2,932
Accounts and notes receivable, less allowance for
doubtful accounts of $502, $400 and $400 as of 10/31/99,
01/31/99 and 10/31/98, respectively .............................. 31,339 27,399 26,841
Inventories:
Materials ........................................................ 19,270 18,261 18,528
In process ....................................................... 4,702 3,662 5,380
Finished goods ................................................... 3,366 4,055 5,716
----------- ----------- -----------
Total inventories ............................................ 27,338 25,978 29,624
Deferred income taxes .............................................. 2,161 1,732 1,682
Prepaid expenses and other current assets .......................... 309 417 391
----------- ----------- -----------
Total current assets ......................................... 65,704 60,861 61,470
----------- ----------- -----------
Property, plant and equipment ...................................... 49,691 57,276 56,573
Less: accumulated depreciation ................................... 34,848 37,713 37,311
----------- ----------- -----------
Net property, plant and equipment ............................ 14,843 19,563 19,262
Note receivable, less current portion .............................. 1,418
Other assets, net .................................................. 3,017 3,250 3,338
----------- ----------- -----------
TOTAL ASSETS ....................................................... $ 83,564 $ 83,674 $ 85,488
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current portion of long-term debt .................................. $ 1,555 $ 1,060 $ 1,645
Accounts payable ................................................... 7,029 5,993 6,260
Accrued liabilities and customer advances .......................... 12,278 9,739 11,129
----------- ----------- -----------
Total current liabilities .................................... 20,862 16,792 19,034
Long-term debt, less current portion ............................... 3,024 4,572 4,512
Deferred income taxes .............................................. 17 524
Stockholders' equity
Common stock, $1 par value, authorized shares: 100,000,000;
issued: 5,215,489; 5,215,489 and 5,214,989 shares as of
10/31/99, 01/31/99 and 10/31/98, respectively ................... 5,215 5,215 5,215
Paid in capital .................................................. 2,961 2,940 2,917
Retained earnings ................................................ 63,665 60,369 59,517
----------- ----------- -----------
71,841 68,524 67,649
Less treasury stock, at cost:
909,848; 521,403 and 521,403 shares as of 10/31/99,
01/31/99 and 10/31/98, respectively .......................... 12,163 6,231 6,231
----------- ----------- -----------
Total stockholders' equity ................................... 59,678 62,293 61,418
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $ 83,564 $ 83,674 $ 85,488
=========== =========== ===========
</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 NINE
MONTHS ENDED MONTHS ENDED
----------------------- -----------------------
10/31/99 10/31/98 10/31/99 10/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................................ $ 44,971 $ 44,787 $ 116,431 $ 113,157
Cost of goods sold ....................... 38,486 37,746 97,347 94,664
--------- --------- --------- ---------
Gross profit ........................... 6,485 7,041 19,084 18,493
Operating expenses
Selling ................................ 2,051 2,219 6,043 6,330
Administrative ......................... 1,811 1,625 5,357 4,977
Gain on sale of assets ................. (966) (966)
--------- --------- --------- ---------
Operating income .................... 3,589 3,197 8,650 7,186
Interest expense ......................... (141) (127) (333) (355)
Other income, net ........................ 79 132 304 312
--------- --------- --------- ---------
Income before income taxes ............. 3,527 3,202 8,621 7,143
Income taxes ............................. 1,273 1,149 3,112 2,564
--------- --------- --------- ---------
Net income ............................. $ 2,254 $ 2,053 $ 5,509 $ 4,579
========= ========= ========= =========
Net income per common share:
Basic ............................ $ 0.52 $ 0.44 $ 1.22 $ 0.96
Diluted .......................... $ 0.52 $ 0.44 $ 1.22 $ 0.96
Cash dividends paid per share ............ $ 0.17 $ 0.16 $ 0.49 $ 0.48
</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 NINE
MONTHS ENDED
-------------------------
10/31/99 10/31/98
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 5,509 $ 4,579
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................................ 4,074 4,045
Provision for losses on accounts receivable .................. 232 111
Gain on sale of assets ....................................... (966)
Deferred income taxes ........................................ (492) 4
Interest earned on note receivable ........................... (79) (159)
Change in accounts receivable ................................ (5,661) 21
Change in inventories ........................................ (3,112) (3,808)
Change in prepaid expenses and other current assets .......... 85 115
Change in operating liabilities .............................. 3,196 (221)
Other ........................................................ (21) 3
---------- ----------
Net cash provided by operating activities ........................ 2,765 4,690
---------- ----------
Cash flows from investing activities:
Capital expenditures ............................................. (2,619) (3,225)
Sale of assets, net of cash sold $135 thousand ................... 8,228
Other ............................................................ 45 76
---------- ----------
Net cash provided by (used in) investing activities .............. 5,654 (3,149)
---------- ----------
Cash flows from financing activities:
Issuance of short-term debt ...................................... 6,000 4,000
Payment of short-term debt ....................................... (6,000) (4,000)
Issuance of long-term debt ....................................... 5,000
Long-term debt principal payments ................................ (1,053) (1,736)
Net proceeds from exercise of stock options ...................... 77
Dividends paid ................................................... (2,212) (2,192)
Purchase of treasury stock ....................................... (5,932) (2,608)
---------- ----------
Net cash provided by (used in) financing activities .............. (9,197) (1,459)
---------- ----------
Net increase (decrease) in cash and equivalents .................. (778) 82
Cash and cash equivalents at beginning of period ................... 5,335 2,850
---------- ----------
Cash and cash equivalents at end of period ......................... $ 4,557 $ 2,932
========== ==========
Cash paid during the period for:
Interest ....................................................... $ 318 $ 330
Income taxes, net of refund .................................... $ 3,431 $ 2,803
</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
(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
considered necessary for a fair presentation have been included. Operating
results for the three and nine-month periods ended October 31, 1999 are not
necessarily indicative of the results that may be 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. Certain outstanding options for the three and nine month periods ended
10/31/99 and 10/31/98, 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 FOR THE NINE
MONTHS ENDED MONTHS ENDED
------------------------ ------------------------
10/31/99 10/31/98 10/31/99 10/31/98
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ....................................... $ 2,254 $ 2,053 $ 5,509 $ 4,579
========== ========== ========== ==========
Weighted average common shares outstanding ....... 4,332,108 4,705,531 4,498,194 4,770,460
Dilutive impact of stock options ................. 739 0 0 8,111
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding .................. 4,332,847 4,705,531 4,498,194 4,778,571
========== ========== ========== ==========
Net income per share:
Basic ....................................... $ 0.52 $ 0.44 $ 1.22 $ 0.96
========== ========== ========== ==========
Diluted ..................................... $ 0.52 $ 0.44 $ 1.22 $ 0.96
========== ========== ========== ==========
</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) are
based upon 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 NINE
MONTHS ENDED MONTHS ENDED
---------------------- ----------------------
10/31/99 10/31/98 10/31/99 10/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES
---------
Electronics .................... $ 12,181 $ 11,503 $ 37,015 $ 34,748
Plastics ....................... 19,991 19,178 57,969 52,516
Sewn Products .................. 12,799 14,106 21,447 25,893
--------- --------- --------- ---------
TOTAL COMPANY ..................... $ 44,971 $ 44,787 $ 116,431 $ 113,157
========= ========= ========= =========
OPERATING INCOME
----------------
Electronics .................... $ 679 $ 872 $ 2,261 $ 3,110
Plastics ....................... 2,599 1,564 5,874 3,194
Sewn Products .................. 311 761 515 882
--------- --------- --------- ---------
TOTAL COMPANY ..................... $ 3,589 $ 3,197 $ 8,650 $ 7,186
========= ========= ========= =========
</TABLE>
4. On October 29, 1999, the company sold the assets of its Glasstite
subsidiary to Penda Corporation resulting in a pretax gain of $966,000. The
gain on the sale reflects an estimate for the cost of remedial actions on
certain environmental concerns. At the closing, the company received $8.4
million in cash and delivered all tangible and intangible assets of the
subsidiary, including $135,000 of cash, netting to $8.2 million of cash
received. In addition, the company has receivable for certain working
capital adjustments yet to be finalized, and the buyer assumed certain
liabilities.
Page 7
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
On October 29, 1999, the company sold the assets of its Glasstite subsidiary for
$8.4 million cash. In addition, the company has a receivable for certain working
capital adjustments yet to be finalized, and the buyer assumed certain
liabilities. From a portion of the proceeds of this sale, the company repaid
$5.0 million in short term debt. During the nine months ended October 31,1999,
the company repurchased 388,445 shares of its common stock. The average purchase
price was $15.27 per share for a total cost of $5.9 million. Subsequent to the
third quarter the company repurchased an additional 270,000 shares for a total
of 658,445 shares for the year. The company's cash was $4.6 million at October
31, 1999, compared with $2.9 million one year earlier. Inventory levels
decreased $2.3 million from the October 31, 1998, level due primarily to the
sale of Galsstite's assets. The Company retains its minimum $5.0 million line of
credit. The company's capital resources continue to be sufficient to fund all
its activities.
RESULTS OF OPERATIONS
Sales were $45.0 million for the quarter ended October 31, 1999, an increase of
$184,000 over the third quarter of the prior year. For the nine months ended
October 31, 1999, sales increased 3 percent to $116.4 million compared to last
year's $113.2 million. Net income climbed 20 percent to $5.5 million or a record
$1.22 per diluted share, compared to $4.6 million or 96 cents per diluted share
in the first nine months of the previous year. Results included a $966,000
pretax gain on the Glasstite sale, and a $800,000 pretax inventory charge
related to third-quarter actions by the new managers of Raven operating units
who are repositioning certain elements of the company's business. The Plastic
segment and Electronics segment generated sales increases over last year for
both the third quarter and the year-to-date figures. Operating income for the
third quater increased 12 percent to $3.6 million from $3.2 million a year
earlier. Third-quarter earnings per share on a diluted basis rose 18 percent to
52 cents a diluted share, compared to 44 cents a share in the third quarter of
last year, with 372,684 fewer average common equivalent shares outstanding. For
the nine months, operating income rose 20 percent to $8.6 from $7.2 million for
the same period last year.
Electronics segment third-quarter sales were $12.2 million, which was an
increase of 6 percent or $678,000 over the same period last year. Operating
income, however, declined 22 percent to $679,000 from $872,000 the prior year.
The increase in sales was due primarily to stronger deliveries from the contract
manufacturing operations. Their sales increased to $5.8 million in the third
quarter from $5.0 million last year. The decline in operating income was due to
the impact of $300,000 in inventory valuation adjustments described above and
continuing inefficiencies in new business in the contract manufacturing
operations. Sales of flow control devices in the third quarter at $3.4 million
were even with last year's third quarter due to the continuing weakness in the
agricultural markets. However, through cost cutting and production efficiencies
they were able to improve their gross margin rates. Third-quarter sales of
feedmill automation systems fell $192,000 to $3.0 million due to a decrease in
demand for new systems. Sales for the nine months totaled $37.0 million compared
to $34.7 million for the same period in fiscal 1999. Operating income for the
nine months was $2.3 million, down 27 percent from the prior year's $3.1
million.
Plastics segment sales of $20.0 million for the third quarter were 4 percent
more than the same period last year. Sales of $58.0 million for the first nine
months were 10 percent greater than the $52.5 million generated in the first
nine months of fiscal 1999. Third quarter operating income for the segment was
$2.6 million, up sharply
Page 8
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
due in substantial part to the $966,000 gain on the sale of Glasstite. Adjusted
for the gain, operating income was up slightly, but partially offset by $250,000
in inventory-valuation adjustments. The research balloons, engineered films, and
pickup truck topper product lines showed increased sales in both the second
quarter and the year-to-date figures. Year-to-date operating income was $5.9
million compared to $3.2 million the first nine months of last fiscal year. The
increase in operating margins in the Plastics segment was due primarily to the
sale of Glasstite. However, there were also positive effects from slightly
better prices on purchased material, small increases in selling prices, and
better equipment and labor utilization.
Sewn Products segment sales of $12.8 million for the third quarter were short of
the $14.1 million figure logged for the same period last year. Year-to-date
sales of $21.4 million were 17 percent below the nine-month results of fiscal
1999. Management is projecting lower sales totals in the segment's contract
sewing product line due to offshore competition. Third quarter operating income
of $311,000 compares to $761,000 generated in the third quarter of fiscal 1999.
This result reflects $250,000 of inventory valuation adjustments described above
in the contract sewing product line. New management in contract sewing line is
repositioning the focus of the product offering. Year-to-date operating income
was $515,000, $367,000 less than last year's nine-month total.
Consolidated gross profits of $6.5 million in the third quarter were $556,000
less than the third quarter last year. The current year figure reflects $800,000
in inventory charges. The nine months generated an increase of $591,000 in gross
profits, rising from $18.5 million to $19.1 million 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 8 percent for the quarter and 5
percent for the nine months due to decreased selling staff. Administrative
expenses were up 12 percent for the quarter and 8 percent on a year-to-date
basis reflecting increases in bad debt expenses, consulting and compensation.
Third quarter pretax income of $3.5 million was 10 percent higher than last
year's $3.2 million. The pretax income for the nine months was $8.6 million
compared to $7.1 million last year. These results generated a 27 percent
increase year-to-date in per share diluted earnings, rising from 96 cents in
fiscal 1999 to $1.22 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 any problems
identified are being addressed. Building equipment has been checked, and only
one problem was 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.
Page 9
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
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: An 8-K was filed November 9, 1999, concerning
the October 29, 1999 sale of the assets of the Company's Glasstite
Subsidiary.
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: DECEMBER 15, 1999
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 4,557
<SECURITIES> 0
<RECEIVABLES> 31,841
<ALLOWANCES> 502
<INVENTORY> 27,338
<CURRENT-ASSETS> 65,704
<PP&E> 49,691
<DEPRECIATION> 34,848
<TOTAL-ASSETS> 83,564
<CURRENT-LIABILITIES> 20,862
<BONDS> 3,024
0
0
<COMMON> 5,215
<OTHER-SE> 54,463
<TOTAL-LIABILITY-AND-EQUITY> 83,564
<SALES> 116,431
<TOTAL-REVENUES> 116,431
<CGS> 97,347
<TOTAL-COSTS> 97,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 333
<INCOME-PRETAX> 8,621
<INCOME-TAX> 3,112
<INCOME-CONTINUING> 5,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,509
<EPS-BASIC> 1.22
<EPS-DILUTED> 1.22
</TABLE>
