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, 2000
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
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(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 AUGUST 31, 2000
-------------------------- -------------------------------------------
Common Stock 3,301,107 shares
<PAGE>
RAVEN INDUSTRIES, INC.
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheet as of July 31, 2000,
January 31, 2000 and July 31, 1999 3
Consolidated Statement of Income for the three
and six month periods ended July 31, 2000 and 1999 4
Consolidated Statement of Cash Flows for the six
month periods ended July 31, 2000 and 1999 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.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
07/31/00 01/31/00 07/31/99
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents ...................................... $ 1,956 $ 5,707 $ 1,804
Accounts and note receivable, less allowance for
doubtful accounts of $422, $400 and $453 as of
07/31/00, 01/31/00 and 07/31/99, respectively ................ 20,273 22,717 22,209
Inventories
Materials .................................................... 18,621 16,260 19,769
In process ................................................... 4,300 4,997 5,372
Finished goods ............................................... 4,365 3,205 8,496
----------- ----------- -----------
Total inventories ........................................ 27,286 24,462 33,637
Deferred income taxes .......................................... 2,070 1,919 1,164
Prepaid expenses and other current assets ...................... 563 566 192
----------- ----------- -----------
Total current assets ..................................... 52,148 55,371 59,006
----------- ----------- -----------
Property, plant and equipment .................................. 37,482 48,949 58,915
Less accumulated depreciation .................................. 25,649 33,881 40,067
----------- ----------- -----------
Property, plant and equipment, net ....................... 11,833 15,068 18,848
Other assets, net .............................................. 1,725 3,608 3,679
Noncurrent assets held for sale ................................ 4,779
----------- ----------- -----------
TOTAL ASSETS ................................................... $ 70,485 $ 74,047 $ 81,533
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Notes payable, bank ............................................ $ 3,500 $ 2,000
Current portion of long-term debt .............................. 1,023 $ 1,044 1,555
Accounts payable ............................................... 5,009 5,320 5,264
Accrued liabilities and customer advances ...................... 8,204 8,338 8,034
----------- ----------- -----------
Total current liabilities ................................ 17,736 14,702 16,853
Long-term debt, less current portion ........................... 2,013 3,024 3,035
Other liabilities, primarily compensation and benefits ......... 2,039 1,802 1,883
Stockholders' equity
Common stock, $1 par value, 100,000,000 authorized shares:
issued: 5,218,114; 5,218,114 and 5,215,489 shares
as of 07/31/00, 01/31/00 and 07/31/99, respectively ......... 5,218 5,218 5,215
Paid-in capital .............................................. 3,177 3,177 2,961
Retained earnings ............................................ 65,859 64,236 62,146
----------- ----------- -----------
74,254 72,631 70,322
Less treasury stock, at cost:
1,853,207; 1,302,007 and 816,098 shares as of 07/31/00,
01/31/00 and 07/31/99, respectively ...................... 25,557 18,112 10,560
----------- ----------- -----------
Total stockholders' equity ............................... 48,697 54,519 59,762
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 70,485 $ 74,047 $ 81,533
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 3
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(Dollars in thousands, except per-share data)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
--------------------------- ---------------------------
07/31/00 07/31/99 07/31/00 07/31/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ......................... $ 32,386 $ 36,965 $ 63,930 $ 71,460
Cost of goods sold ................ 27,236 30,377 52,513 58,861
----------- ----------- ----------- -----------
Gross profit .................... 5,150 6,588 11,417 12,599
Operating expenses
Selling ......................... 1,732 2,020 3,505 3,992
Administrative .................. 1,567 1,765 3,462 3,546
----------- ----------- ----------- -----------
Operating income ................ 1,851 2,803 4,450 5,061
Interest expense .................. (64) (89) (121) (192)
Other income, net ................. 45 128 124 225
----------- ----------- ----------- -----------
Income before income taxes ...... 1,832 2,842 4,453 5,094
Income taxes ...................... 659 1,026 1,603 1,839
----------- ----------- ----------- -----------
Net income ...................... $ 1,173 $ 1,816 $ 2,850 $ 3,255
=========== =========== =========== ===========
Net income per common share:
Basic .................... $ 0.34 $ 0.40 $ 0.78 $ 0.71
Diluted .................. $ 0.34 $ 0.40 $ 0.78 $ 0.71
Cash dividends paid per share ..... $ 0.17 $ 0.16 $ 0.34 $ 0.32
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 4
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
---------------------------
07/31/00 07/31/99
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................. $ 2,850 $ 3,255
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......................... 2,184 2,758
Provision for losses on accounts receivable ............ 173 124
Deferred income taxes .................................. (236) (65)
Change in accounts and interest receivable ............. 2,063 5,066
Change in inventories .................................. (2,824) (7,659)
Change in prepaid expenses and other current assets .... 3 225
Change in operating liabilities ........................ (208) (531)
Other .................................................. 16 12
----------- -----------
Net cash provided by operating activities .................. 4,021 3,185
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ....................................... (1,783) (1,874)
Proceeds from the sale of Glasstite assets ................. 208
Other ...................................................... 8 7
----------- -----------
Net cash used in investing activities ...................... (1,567) (1,867)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term debt ................................ 3,500 2,000
Long-term debt principal payments .......................... (1,033) (1,042)
Dividends paid ............................................. (1,227) (1,478)
Purchase of treasury stock ................................. (7,445) (4,329)
----------- -----------
Net cash used in financing activities ...................... (6,205) (4,849)
----------- -----------
Net decrease in cash and cash equivalents .................. (3,751) (3,531)
Cash and cash equivalents at beginning of period ............. 5,707 5,335
----------- -----------
Cash and cash equivalents at end of period ................... $ 1,956 $ 1,804
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 5
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
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
accounting principles generally accepted in the United States for interim
financial information and 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 notes required
by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair representation have been included. Financial results
for the three and six-month periods ended July 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending January
31, 2001. The January 31, 2000 consolidated balance sheet was derived from
audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States. These
financial statements should be read in conjunction with the consolidated
financial statement and notes included in the company's annual report on
Form 10-K for the year ended January 31, 2000.
2. Certain reclassifications have been made to the July 31, 1999 consolidated
balance sheet to conform to the current year presentation. These
reclassifications had no impact on stockholders' equity or the company's
results of operations.
3. Options to purchase 266,300 and 242,100 shares of the Company's common
stock were excluded from the diluted earnings per share calculations for
the periods ended July 31, 1999 and July 31, 2000, respectively, 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 SIX
MONTHS ENDED MONTHS ENDED
----------------------------------------------------
07/31/00 07/31/99 07/31/00 07/31/99
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ............................... $ 1,173 $ 1,816 $ 2,850 $ 3,255
========== ========== ========== ==========
Weighted average common shares
outstanding ........................... 3,475 4,510 3,647 4,581
Dilutive impact of stock options ......... 0 0 0 0
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding ........ 3,475 4,510 3,647 4,581
========== ========== ========== ==========
Net income per share
Basic ............................... $ 0.34 $ 0.40 $ 0.78 $ 0.71
========== ========== ========== ==========
Diluted ............................. $ 0.34 $ 0.40 $ 0.78 $ 0.71
========== ========== ========== ==========
</TABLE>
Page 6
<PAGE>
PART I - FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. The company's three reportable segments (Electronics, Plastics and Sewn
Products) are 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' results are shown below.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
------------------------------------------------------
07/31/00 07/31/99 07/31/00 07/31/99
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES
---------
Electronics ............... $ 10,964 $ 11,917 $ 25,085 $ 24,834
Plastics .................. 15,113 19,368 29,078 37,978
Sewn Products ............. 6,309 5,680 9,767 8,648
---------- ---------- ---------- ----------
Total company ................... $ 32,386 $ 36,965 $ 63,930 $ 71,460
========== ========== ========== ==========
OPERATING INCOME (LOSS)
-----------------------
Electronics ............... ($ 395) $ 716 $ 1,062 $ 1,582
Plastics .................. 2,115 1,700 3,440 3,275
Sewn Products ............. 131 387 (52) 204
---------- ---------- ---------- ----------
Total company ................... $ 1,851 $ 2,803 $ 4,450 $ 5,061
========== ========== ========== ==========
</TABLE>
5. During the second quarter of fiscal 2001, the company committed to a plan
to sell its Plastic Tank division, part of the company's Plastics Segment.
Accordingly, the non-current assets of these operations of $4,779,000,
consisting primarily of property, plant, equipment and certain intangible
assets, were reclassified as assets held for sale as of July 31, 2000. In
addition, the company is selling certain current assets of the division.
The Plastic Tank division is expected to be sold during the company's third
quarter of fiscal 2001. Based on signed letters of intent, the cash
proceeds of the sale are expected to be approximately $11.5 million,
resulting in an expected after-tax gain on the sale of approximately $1.5
million to be recognized in the company's third quarter. Certain
liabilities of the company will be assumed by the buyers. In August 2000,
the company did sell certain net assets of the Plastic Tank division and
received approximately $11.0 million at the closing. Sales and operating
income (before allocation of certain administrative expense) of the
company's Plastic Tank division were approximately $10.8 million and
$830,000, respectively, for the six month period ended July 31, 2000 and
$18.2 million and $100,000, respectively for the year ended January 31,
2000.
6. In June 2000, the company entered into a new agreement with Norwest Bank
South Dakota, N.A. (Norwest) to increase the short-term credit line to $7.0
million. The terms of this credit line are similar to the $5.0 million line
with Norwest that expired on June 30, 2000. At July 31, 2000, the company
had borrowings of $3.5 million outstanding under this line of credit.
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 $2.0 million at July 31,
2000, compared with $1.8 million one year earlier. As of July 31, 2000, the
company's long term debt, including the current portion, was $3.0 million
compared to $4.6 million the prior year. The company obtained short term
financing in the amount of $3.5 million during the second quarter of fiscal year
2001 in order to help fund the repurchase of common shares. At July 31, 2000,
the company retained an unused balance of $3.5 million on its $7.0 million line
of credit. During the second quarter, the company repurchased 330,500 shares of
its common stock. The average purchase price was $13.61 per share for a total
cost of $4.5 million. The company purchased 551,200 shares at an average
purchase price of $13.51 for a total of $7.4 million during the six months ended
July 31, 2000. Inventory levels decreased $6.4 million from the July 31, 1999
level due primarily to the sale of the assets of the Glasstite subsidiary and
the sale of the skiwear line in fiscal 2000.
As described in footnote 5 to the consolidated financial statements, the sale of
the assets of the company's Plastic Tank Division is expected to be completed
during the third quarter ending October 31, 2000. These transactions should
generate approximately $9 million of cash after income taxes are paid. In
addition, certain liabilities of the company will be assumed by the buyers.
After repaying its short term borrowings, the company intends to use the
proceeds to expand its core businesses and repurchase its own shares. The
company's capital resources continue to be sufficient to fund all its
activities.
RESULTS OF OPERATIONS
Sales were $32.4 million for the quarter ended July 31, 2000, down $4.6 million
from the previous year's results. The decrease was due to the sale of the
company's Glasstite subsidiary in fiscal year 2000, which contributed $6.1
million of sales in the prior year's second quarter. After adjusting last year's
results for the Glasstite sale, sales increased $1.5 million this quarter. The
Plastics segment generated sales increases over last year for the second
quarter. After adjusting last year's operating income for Glasstite's
contribution of $788,000, operating income for the first six months was 4
percent higher than the prior year. Net income for the second quarter decreased
$.6 million from $1.8 million one year earlier. The decrease was due to the sale
of the Glasstite subsidiary combined with lower sales and production
efficiencies in the Electronics segment. Earnings per share, on a diluted basis,
were 34 cents a share, compared to 40 cents a share in the second quarter of
last year. For the first six months of the year, net income was $2.9 million, or
78 cents per diluted share, versus $3.3 million, or 71 cents per diluted share,
last year.
Electronics segment sales of $11.0 million in the second quarter were $953,000
below the same period last year. Sales of feedmill automation systems fell
$523,000 due to a downturn in the agricultural market demand for new systems.
Lower contract electronic sales were a result of an unexpected decline in demand
from a PC-board customer. The Electronics segment experienced an operating loss
during the quarter of $395,000, compared to operating income of $716,000 for the
same period last year. The lower sales and additional one-time costs in the new
Sioux Falls Electronics facility caused the loss of earnings. For the first six
months, sales totaled $25.1 million compared to $24.8 million for the same
period in fiscal 2000. Operating income for the first half of fiscal 2001 was
$1.1 million, down $520,000 from the prior year. The six-month decrease in
earnings is primarily due to the shortfalls in the second quarter, partially
offset by strong shipments of flow control devices to the agricultural market in
the first quarter of the current fiscal year.
Page 8
<PAGE>
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Plastics segment sales of $15.1 million in the quarter ended July 31, 2000
compared to $19.4 million last year, and $13.3 million after adjusting for
Glasstite's second quarter fiscal 2000 sales, or an increase in Plastic segment
sales of $1.8 million. The sales increase was the result of increased market
share in our engineered films product line and a rebounding demand for
dual-laminate tanks in the semiconductor industry. Plastics segment operating
income for the second quarter was $2.1 million, a 24 percent increase above the
prior year. Excluding Glasstite's contribution of $407,000 in the first six
months of fiscal 2000, operating income was up 64 percent from the prior year.
The improvements in operating income are primarily due to better plant
utilization from increased sales volume. Plastics segment sales for the first
half of fiscal 2001 were $29.1 million compared to $38.0 million in fiscal 2000.
First half sales in fiscal 2001 were up 11 percent after adjusting for Glasstite
sales in the prior year's first half. Operating income was up 38 percent from
the prior fiscal year results of $2.5 million, after adjusting for the Glasstite
sale of $3.4 million.
Sewn Products segment sales of $6.3 million for the second quarter were $629,000
above the $5.7 million recorded in the same period last year. Year-to-date sales
of $9.8 million were 13 percent above the first half results of fiscal 2000. For
the quarter, operating income was $131,000 compared to $387,000 the prior year,
and year-to-date operating loss was $52,000, compared to operating income of
$204,000 in last year's first half. This segment continued to experience
offshore competitive pressures. The first half of the year is the seasonal low
for the Sewn Products segment.
Consolidated gross profits of $5.2 million in the second quarter were $1.4
million below the second quarter of last year. The first six months generated
gross profits of $11.4 million compared to $12.6 million the prior year. Selling
expenses were down $288,000 for the quarter and $487,000 in the first half of
fiscal 2001 due to the sale of the Glasstite subsidiary and the skiwear line.
Administrative expenses were down $198,000 for the quarter and $84,000 on a
year-to-date basis, due again primarily to the sale of the Glasstite subsidiary.
Second quarter pretax income of $1.8 million was $1.0 million below the same
period last year. The pretax income for the first six months was $4.5 million
compared to $5.1 million last year. These results generated a 10 percent
increase in year-to-date earnings per diluted share, rising from 71 cents in
fiscal 2000 to 78 cents in fiscal 2001. The increase in earnings per share
results from fewer shares outstanding. The company repurchased 1,037,109 shares
from July 1999 to July 2000.
FORWARD-LOOKING STATEMENTS
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
The company is involved as a defendant in lawsuits, claims or disputes
arising in the normal course of business. The settlement of such claims cannot
be determined at this time. Management believes that any liability resulting
from these claims will be substantially mitigated by insurance coverage.
Accordingly, management does not believe the ultimate outcome of these matters
will be significant to its results of operations, financial position or cash
flows.
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 24, 2000.
The following members were elected to the company's Board of Directors to hold
office for the ensuing year.
Nominee In Favor Withheld
--------------------------- ----------- -----------
Anthony W. Bour 2,995,619 33,655
David A. Chirstensen 2,999,291 29,983
Thomas S. Everist 2,987,389 41,885
Mark E. Griffin 2,996,003 33,271
Conrad J. Hoigaard 2,995,683 33,591
Kevin T. Kirby 2,996,203 33,071
Ronald M. Moquist 2,991,332 37,942
The shareholders approved the Company's 2000 Stock Option and
Compensation Plan with 2,376,179 votes in favor, 102,615 votes against, 24,002
abstentions and 526,478 broker non-votes.
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
DATE: SEPTEMBER 7, 2000 and Accounting Officer)
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