10-Q 1 0001.txt 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, 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. -------------------------------------------------------------------------------- (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 -------------------------------------------------------------------------------- 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, 2000 --------------------------- ------------------------------------------ Common Stock 3,563,407 shares RAVEN INDUSTRIES, INC. INDEX PAGE NO. -------- PART I-FINANCIAL INFORMATION Consolidated Balance Sheet as of April 30, 2000, January 31, 2000 and April 30, 1999 3 Consolidated Statement of Income for the three months ended April 30, 2000 and 1999 4 Consolidated Statement of Cash Flows for the three months ended April 30, 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 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET Dollars in thousands, except per share data
04/30/00 01/31/00 04/30/99 -------- -------- -------- (unaudited) (unaudited) ASSETS ------ Cash and cash equivalents ........................................ $ 1,866 $ 5,707 $ 2,055 Accounts and note receivable, less allowance for doubtful accounts of $461,000, $400,000 and $401,000 as of 04/30/00, 01/31/00 and 04/30/99, respectively .................. 22,687 22,717 24,272 Inventories, net: Materials ...................................................... 17,417 16,260 20,419 In process ..................................................... 6,232 4,997 5,204 Finished goods ................................................. 3,538 3,205 6,010 -------- -------- -------- Total inventories, net ..................................... 27,187 24,462 31,633 Deferred income taxes ............................................ 2,010 1,919 1,132 Prepaid expenses and other current assets ........................ 536 566 269 -------- -------- -------- Total current assets ....................................... 54,286 55,371 59,361 Property, plant and equipment .................................... 49,552 48,949 58,058 Less accumulated depreciation .................................. 34,893 33,881 39,007 -------- -------- -------- Property, plant and equipment, net ......................... 14,659 15,068 19,051 Other assets, net ................................................ 3,592 3,608 3,734 -------- -------- -------- Total assets ..................................................... $ 72,537 $ 74,047 $ 82,146 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current portion of long-term debt ................................ $ 33 $ 1,044 $ 608 Accounts payable ................................................. 5,969 5,320 5,418 Accrued liabilities and customer advances ........................ 8,941 8,338 8,792 -------- -------- -------- Total current liabilities .................................. 14,943 14,702 14,818 Long-term debt, less current portion ............................. 3,012 3,024 3,992 Other liabilities, primarily compensation and benefits ........... 1,987 1,802 1,775 Commitments and contingencies Stockholders' equity Common stock, $1.00 par value, authorized shares: 100,000,000 issued: 5,218,114; 5,218,114 and 5,215,489 as of 04/30/00, 01/31/00 and 04/30/99, respectively ........... 5,218 5,218 5,215 Paid-in capital ................................................ 3,177 3,177 2,961 Retained earnings .............................................. 65,259 64,236 61,060 -------- -------- -------- 73,654 72,631 69,236 Less treasury stock, at cost 1,522,707; 1,302,007 and 623,203 shares as of 04/30/00, 01/31/00 and 04/30/99, respectively ........................ 21,059 18,112 7,675 -------- -------- -------- Total stockholders' equity ................................. 52,595 54,519 61,561 -------- -------- -------- Total liabilities and stockholders' equity ....................... $ 72,537 $ 74,047 $ 82,146 ======== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. Page 3 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Dollars in thousands, except per share data FOR THE THREE MONTHS ENDED: ----------------------- 04/30/00 04/30/99 --------- --------- Net sales ...................................... $ 31,544 $ 34,495 Cost of goods sold ............................. 25,277 28,484 --------- --------- Gross profit ................................. 6,267 6,011 Operating expenses Selling ...................................... 1,774 1,972 Administrative ............................... 1,894 1,781 --------- --------- Operating income .......................... 2,599 2,258 Interest expense ............................... (57) (103) Other income, net .............................. 79 97 --------- --------- Income before income taxes ................... 2,621 2,252 Income taxes ................................... 944 813 --------- --------- Net income ................................... $ 1,677 $ 1,439 ========= ========= Net income per common share: Basic ................................. $ 0.44 $ 0.31 Diluted ............................... $ 0.44 $ 0.31 Cash dividends declared and paid per share ..... $ 0.17 $ 0.16 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. Page 4 PART I - FINANCIAL INFORMATION RAVEN INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
FOR THE THREE MONTHS ENDED: --------------------- 04/30/00 04/30/99 -------- -------- Cash flows from operating activities Net income ................................................. $ 1,677 $ 1,439 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization .......................... 1,098 1,380 Provision for losses on accounts receivable ............ 139 2 Deferred income taxes .................................. (161) 4 Change in accounts and interest receivable ............. (266) 3,125 Change in inventories .................................. (2,725) (5,655) Change in prepaid expenses and other current assets .... 30 148 Change in operating liabilities ........................ 1,503 273 Other .................................................. (17) -------- -------- Net cash provided by operating activities .................. 1,295 699 Cash flows from investing activities Capital expenditures ....................................... (603) (782) Proceeds from the sale of Glasstite assets ................. 157 Other ...................................................... (66) 27 -------- -------- Net cash used in investing activities ...................... (512) (755) Cash flows from financing activities Long-term debt principal payments .......................... (1,023) (1,032) Dividends paid ............................................. (654) (748) Purchase of treasury stock ................................. (2,947) (1,444) -------- -------- Net cash used in financing activities ...................... (4,624) (3,224) -------- -------- Net decrease in cash and cash equivalents .................. (3,841) (3,280) Cash and cash equivalents at beginning of period ............. 5,707 5,335 -------- -------- Cash and cash equivalents at end of period ................... $ 1,866 $ 2,055 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. Page 5 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 presentation have been included. Financial results for the three-month period ended April 30, 2000 are not necessarily indicative of 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 consolidated disclosure required by accounting principles generally accepted in the United States. These financial statements should be read in conjunction with the consolidated financial statements 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 April 30, 1999 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. 269,800 and 242,100 options were excluded from diluted earnings per share calculation on April 30, 1999 and April 30, 2000, respectively, because their excercise prices were greater than the average market price of the company's common stock during the period. Details of the earnings per share computation are presented below (dollars in thousands, except per share data). FOR THE THREE MONTHS ENDED: ------------------------ 04/30/00 04/30/99 ---------- ---------- Net income ............................... $ 1,677 $ 1,439 ========== ========== Weighted average common shares outstanding ............................ 3,823,361 4,652,019 Dilutive impact of stock options ......... 0 0 ---------- ---------- Weighted average common and common equivalent shares outstanding .......... 3,823,361 4,652,019 ========== ========== Net income per share Basic ................................ $ 0.44 $ 0.31 ========== ========== Diluted .............................. $ 0.44 $ 0.31 ========== ========== Page 6 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. FOR THE THREE MONTHS ENDED: ----------------------- 04/30/00 04/30/99 --------- --------- NET SALES --------- Electronics ................. $ 14,121 $ 12,917 Plastics .................... 13,965 18,610 Sewn Products ............... 3,458 2,968 --------- --------- Total company ................. $ 31,544 $ 34,495 ========= ========= OPERATING INCOME ---------------- Electronics ................. $ 1,457 $ 866 Plastics .................... 1,325 1,575 Sewn Products ............... (183) (183) --------- --------- Total company ................. $ 2,599 $ 2,258 ========= ========= 5. During the first quarter of fiscal 2001, the company repaid $1.0 million of its debt originally due in June 2000. Page 7 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 $1.9 million at April 30, 2000 was $3.8 million less than January 31, 2000, and $189,000 lower than April 30, 1999. There were no borrowings against the company's line of credit as of April 30, 2000, which was the same as January 31, 2000 and April 30, 1999. The cash balance as of January 31, 2000 was sufficient to fund the seasonal increases in inventory levels and prepay $1.0 million of long-term debt due in June 2000. Inventory levels declined $4.4 million from April 30, 1999 to April 30, 2000, due primarily to the sale of the assets of our Glasstite subsidiary in fiscal 2000. From April 30, 1999 through April 30, 2000, the company repurchased 899,504 shares of its common stock for a total of $13.4 million, including $2.9 million in the quarter ended April 30, 2000. The company had $3.0 million in long-term debt at April 30, 2000, including the current portion, down from $4.6 million at April 30, 1999. The company's capital resources continue to be sufficient to fund all its activities. RESULTS OF OPERATIONS Sales for the quarter ended April 30, 2000, were $31.5 million, down $3.0 million from the previous year's results, due primarily to the sale of our Glasstite subsidiary in fiscal 2000. Glasstite sales for the first quarter last year totaled $5.7 million. After adjusting last fiscal year's first quarter results for the Glasstite sale, sales increased $2.7 million this quarter. Most of this sales increase was generated in our Electronics and Plastics segments. Net income for the first quarter was $1.7 million, $238,000 superior to last year's first quarter. Last year's results included Glasstite's contribution of $381,000 to operating income. The number of shares outstanding for the first quarter ended April 30, 2000, compared to the first quarter April 30, 1999, was down 899,504 shares due to the company's on-going repurchase of stock. Earnings per diluted share climbed to a first quarter record-tying $0.44 from $0.31 in the first quarter of the previous year. Electronics segment sales of $14.1 million in the first quarter were 9 percent higher than one year earlier. Sales of flow control devices increased by more than $1.0 million in the first quarter, due primarily to increased product recognition in the marketplace and aggressive marketing. Management remains cautious about the sustainability of this demand in what continues to be a weak agricultural marketplace. Sales of feedmill automation systems were down 13 percent, due to the continuing poor ag economy. Contract electronics showed excellent gains during the first quarter, logging a 9 percent increase in sales over last year's total, due primarily to heavy deliveries of a long-term contract relating to the computer industry. First quarter operating income for the Electronics segment was $1.5 million, up 68 percent from last year's $866,000. This increase is due to improved sales of higher-margin products along with higher sales volumes, which allow for improved factory utilization and labor efficiencies. Page 8 PART I - FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Plastics segment sales of $14.0 million in the quarter ended April 30, 2000 compared to $18.6 million last year, and $12.9 million after adjusting for Glasstite's first quarter 1999 sales, or an increase in Plastic segment sales of $1.1 million. All of this increase was generated in our engineered films product line, due to increased market share. Sales of plastic tanks were down slightly, due primarily to continuing weak agricultural demand. Operating income for the segment in fiscal 2001 was $1.3 million, down 16 percent from last year's $1.6 million, which included Glasstite's contribution to $381,000 of operating income in the first quarter of last year. Sewn Products segment sales are typically at a seasonal low in the first quarter of the fiscal year. First quarter sales of $3.5 million were up $490,000 over last year's $3.0 million. The sales increase was due to off-season contracts obtained to provide work for our factories. The operating loss for the segment was unchanged from last year at $183,000. This loss is the result of the less profitable off-season business. Management does not expect first quarter results to be representative of the full year. Although full-year sales are expected to decline from last year's $28 million for this segment, management expects the segment will generate an operating profit during that timeframe. Consolidated gross profits of $6.3 million in the first quarter were 4 percent higher than the prior year's first quarter, due primarily to the strong performance of the Electronics segment. Selling expenses were 10 percent lower than the prior year because of the sale of our Glasstite subsidiary operation and of the company's proprietary skiwear product line, which had higher selling expenses than other businesses of the company. Administrative expenses were 6 percent higher than the previous year reflecting increased bad debt and benefits expenses. Pretax income of $2.6 million was 16 percent greater than the first quarter of the prior fiscal year. 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 PART II - OTHER INFORMATION Item 1. Legal Proceedings: 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 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 5, 2000 Page 10