10-Q 1 raven011875_10q.htm RAVEN INDUSTRIES, INC. FORM 10-Q Raven Industries, Inc. Form 10-Q

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, 2001

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, 2001  
Common Stock  3,125,604 shares 

 

RAVEN INDUSTRIES, INC. AND SUBSIDIARIES

INDEX



PART I–FINANCIAL INFORMATION   PAGE NO.

Consolidated Balance Sheet as of April 30, 2001,
    January 31, 2001 and April 30, 2000 		   
3

Consolidated Statement of Income for the three
   month periods ended April 30, 2001 and 2000 		   
4

Consolidated Statement of Cash Flows for the three
   month periods ended April 30, 2001 and 2000 		   
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

 

PART I - FINANCIAL INFORMATION

RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)

04/30/01
(unaudited)		 01/31/01
 		 04/30/00
(unaudited)
ASSETS                
Cash and cash equivalents   $ 14,548   $ 10,673   $ 1,866  
Accounts receivable, less allowance for doubtful accounts of  
$399, $400 and $461 as of 04/30/01, 01/31/01 and  
04/30/00, respectively    17,214    19,274    22,687  
Inventories:  
  Materials    12,313    12,317    16,600  
  In process    2,954    2,497    6,232  
  Finished goods    3,360    4,170    4,355  
      Total inventories    18,627    18,984    27,187  
Deferred income taxes    2,557    2,516    2,010  
Prepaid expenses and other current assets    505    371    536  
      Total current assets    53,451    51,818    54,286  
                  
Property, plant and equipment    38,456    37,878    49,552  
Accumulated depreciation    (26,980 )  (26,231 )  (34,893 )
      Property, plant and equipment, net    11,476    11,647    14,659  
Other assets, net    2,723    2,191    3,592  
Total assets   $ 67,650   $ 65,656   $ 72,537  
                  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current portion of long-term debt   $ 13   $ 1,012   $ 33  
Accounts payable    5,271    3,490    5,969  
Accrued liabilities and customer advances    9,612    9,433    8,941  
      Total current liabilities    14,896    13,935    14,943  
                  
Long-term debt, less current portion    2,000    2,013    3,012  
Other liabilities, primarily compensation and benefits    1,722    1,719    1,987  
                  
Stockholders’ equity:  
  Common stock, $1 par value, authorized shares: 100,000,000;  
  issued: 5,223,239; 5,223,239 and 5,218,114 shares as of  
  04/30/01, 01/31/01 and 04/30/00, respectively    5,223    5,223    5,218  
  Paid in capital    3,459    3,459    3,177  
  Retained earnings    69,893    68,248    65,259  
     78,575    76,930    73,654  
                  
  Less treasury stock, at cost:  
    2,096,307; 2,063,807 and 1,522,707 shares as of 04/30/01,  
    01/31/01 and 04/30/00, respectively    29,543    28,941    21,059  
    Total stockholders’ equity    49,032    47,989    52,595  
Total liabilities and stockholders’ equity   $ 67,650   $ 65,656   $ 72,537  

The accompanying notes are an integral part of the unaudited consolidated financial information.


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PART I – FINANCIAL INFORMATION

RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(Dollars in thousands, except per share data)

  FOR THE THREE
MONTHS ENDED		  
04/30/01 04/30/00
             
Net sales     $ 30,972   $ 32,168  
Cost of goods sold    24,733    26,010  
             
  Gross profit    6,239    6,158  
             
Selling, general and administrative expenses    2,945    3,559  
             
     Operating income    3,294    2,599  
             
             
Interest expense    (39 )  (57 )
Other income, net    160    79  
             
  Income before income taxes    3,415    2,621  
             
Income taxes    1,206    944  
  Net income   $ 2,209   $ 1,677  
             
             
Net income per common share:  
             
        Basic   $ 0.70   $ 0.44  
             
        Diluted   $ 0.70   $ 0.44  
             
Cash dividends paid per share   $ 0.18   $ 0.17  

The accompanying notes are an integral part of the unaudited consolidated financial information.


Page 4

PART I – FINANCIAL INFORMATION

RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Dollars in thousands)

  FOR THE THREE
MONTHS ENDED
04/30/01 04/30/00
Cash flows from operating activities:            
  Net income   $ 2,209   $ 1,677  
  Adjustments to reconcile net income to net  
    cash provided by operating activities:  
      Depreciation and amortization    781    1,098  
      Provision for losses on accounts receivable, net of recoveries    (10 )  139  
      Deferred income taxes    (13 )  (161 )
      Change in accounts and interest receivable    2,055    (266 )
      Change in inventories    371    (2,725 )
      Change in prepaid expenses and other assets    (714 )  30  
      Change in operating liabilities    1,963    1,503  
  Net cash provided by operating activities    6,642    1,295  
             
Cash flows from investing activities:  
  Capital expenditures    (619 )  (603 )
  Proceeds from the sale of businesses    —    157  
  Other, net    30    (66 )
  Net cash provided by (used in) investing activities    (589 )  (512 )
             
Cash flows from financing activities:  
  Long-term debt principal payments    (1,012 )  (1,023 )
  Dividends paid    (564 )  (654 )
  Purchase of treasury stock    (602 )  (2,947 )
  Net cash provided by (used in) financing activities    (2,178 )  (4,624 )
             
  Net increase (decrease) in cash and equivalents    3,875    (3,841 )
             
Cash and cash equivalents at beginning of period    10,673    5,707  
             
Cash and cash equivalents at end of period   $ 14,548   $ 1,866  

The accompanying notes are an integral part of the unaudited consolidated financial information.


Page 5

PART I – FINANCIAL INFORMATION

RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. The accompanying unaudited consolidated financial information has been prepared by Raven Industries, Inc. (the company) in accordance with accounting principles generally accepted in the United States of America 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, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America 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-month period ended April 30, 2001 are not necessarily indicative of the results that may be expected for the year ending January 31, 2002. The January 31, 2001 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 of America. This financial information 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, 2001.

2. Certain reclassifications have been made to the April 30, 2000 and January 31, 2001 consolidated balance sheets and the April 30, 2000 statement of income to conform to the April 30, 2001 presentation. These reclassifications had no impact on previously reported total assets, total liabilities, stockholders’ equity or the company’s results of operations.

3. Options to purchase approximately 242,000 and 112,000 shares of the Company’s common stock were excluded from the diluted earnings per share calculations for each of the periods ended April 30, 2000 and April 30, 2001, 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 (dollars in thousands, except per share data):

  FOR THE THREE
MONTHS ENDED
04/30/01 04/30/00
             
Net income     $ 2,209   $ 1,677  
             
Weighted average common shares  
     outstanding    3,138,690    3,823,361  
             
Dilutive impact of stock options    19,793    0  
Weighted average common and common equivalent  
     shares outstanding    3,158,483    3,823,361  
             
Net income per share:  
     Basic   $ 0.70   $ 0.44  
     Diluted   $ 0.70   $ 0.44  

4. The company’s reportable segments are defined by their common technologies, production processes and raw materials. These segments are consistent with the company’s management reporting structure. The company measures the performance of its segments based on their operating income exclusive of administrative and general expenses. The results of these segments are shown on the following table:

Page 6

PART I – FINANCIAL INFORMATION

RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


(Dollars in thousands) FOR THE THREE
MONTHS ENDED		  
04/30/01 04/30/00
NET SALES            
Electronic Systems   $ 5,718   $ 6,281  
Flow Controls    7,894    5,469  
Engineered Films    9,380    8,724  
Aerostar    3,514    3,458  
Beta Raven    2,454    2,371  
Businesses sold and for sale    2,012    5,865  
             
Total company   $ 30,972   $ 32,168  
             
OPERATING INCOME (LOSS)  
Electronic Systems   $ 9   $ 354  
Flow Controls    2,377    1,666  
Engineered Films    2,287    1,757  
Aerostar    209    (9 )
Beta Raven    (388 )  225  
Businesses sold and for sale    352    362  
Corporate expenses    (1,552 )  (1,756 )
             
Total company   $ 3,294   $ 2,599  

5. On August 28, 2000, the company sold substantially all of the assets of its Plastic Tank division to Norwesco, Inc. The sale did not include the company’s plant in Tacoma, Washington, for which the company is actively pursuing its sale. The Tacoma plant assets, primarily inventory and manufacturing equipment, are included in the April 30, 2001 and January 31, 2001 balance sheets at their estimated net realizable value.

6. The company incurred approximately $340,000 of inventory write-downs and other costs of goods sold in the quarter ended April 30, 2001 related to the repositioning of its Beta Raven subsidiary, including the closing of its Alabama plant.

7. During the first quarter ended April 30, 2001, the company repaid $1.0 million of its debt originally due in June 2001.

8. On May 23, 2001, the Board of Directors declared a three-for-two stock split of the company’s common stock, to be effected in the form of a stock dividend. The record date for the stock dividend is June 25, 2001, with distribution of the shares on July 13, 2001. Earnings per share calculations included in this report have not been restated to reflect this stock split.


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 was $14.5 million at April 30, 2001 compared with $1.9 million one year earlier. On August 28, 2000, the company sold substantially all of the assets of its Plastic Tank division. The cash proceeds from the sale were approximately $12 million. Accounts receivable of $17.2 million decreased $5.5 million from April 30, 2000 due primarily to the sale of the Plastic Tank division. Inventory levels of $18.6 million decreased $8.6 million from April 30, 2000 due primarily to the sale of the Plastic tank division, lower sales levels in Aerostar’s specialty apparel products and contract completions in Electronic Systems. The company retains its $7.0 million line of credit. Long-term debt, including the current portion, at April 30, 2001 was $2.0 million compared to $3.0 million the prior year. During the quarter ended April 30, 2001, the company repaid $1.0 million of its debt originally due in June 2001. The company’s capital resources continue to be sufficient to fund all its activities.

RESULTS OF OPERATIONS

Reported sales of $31.0 million for the quarter ended April 30, 2001 compared to $32.2 million in the first quarter of last year. The sales decrease in the Plastic Tank division (contained in the “Businesses sold and for sale” segment) of $3.9 million was offset primarily by sales increases in the Flow Controls and Engineered Films segments. Reported operating income of $3.3 million for the first quarter of the current fiscal year was $695,000 above the first quarter of fiscal 2001. The impact of lower sales was offset by a higher percentage of products shipped with relatively stronger gross profit rates. In addition, lower selling general and administrative expenses improved operating income. Selling and administrative expenses for the current year’s first quarter were $2.9 million compared to $3.6 million in the previous first quarter. The decrease is primarily due to the sale of most of the Plastic Tank division and related staff reductions. The improvement in non-operating income for the quarter was the result of a higher net cash position and the associated lower interest expense and higher interest earned. Earnings per share in the first quarter, on a diluted basis, were 70 cents per share, compared to 44 cents in the first quarter of fiscal 2001. Total average weighted shares outstanding for the quarter ended April 30, 2001 were 3.2 million compared to 3.8 million in the previous year’s first quarter.

The results for the quarter ended April 30, 2001 include nonrecurring items that the company does not believe are relevant to future operations or cash flows. The discussion of operating results, following the tables, is focused on the results of ongoing operations exclusive of these items. Ongoing operation actual results exclude the results of the company’s Plastic Tank division (both sold and held for sale). Also excluded were current year first quarter write-downs related to the repositioning of the company’s Beta Raven segment, including inventory write-offs and other costs related to the closing of its Alabama plant. These charges totaled $340,000 and were included in cost of goods sold. No such expenses were incurred in the previous year’s first quarter.



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PART I – FINANCIAL INFORMATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following table presents ongoing operation information for the three-month periods ended April 30, 2001 and April 30, 2000.

(dollars in thousands) THREE MONTHS ENDED
04/30/2001		 THREE MONTHS ENDED
04/30/2000
   
  AS
REPORTED		 ADJUST-
MENTS		 ONGOING
OPERATIONS		 AS
REPORTED		 ADJUST-
MENTS		 ONGOING
OPERATIONS
   
Net Sales     $ 30,972   $ 2,012   $ 28,960   $ 32,168   $ 5,865   $ 26,303  
Gross profit    6,239    97    6,142    6,158    845    5,313  
Operating expenses    2,945    85    2,860    3,559    483    3,076  
Operating income    3,294    12    3,282    2,599    362    2,237  
Other income, net    121    —    121    22    —    22  
Net income before taxes    3,415    12    3,403    2,621    362    2,259  
Income taxes    1,206    5    1,201    944    138    806  
Net income   $ 2,209   $ 7   $ 2,202   $ 1,677   $ 224   $ 1,453  

Following is a table of ongoing operation results by segment:

ONGOING OPERATIONS
SALES AND OPERATING INCOME BY SEGMENT

(dollars in thousands) THREE MONTHS ENDED APRIL 30
2001 2000 Percent
Change
NET SALES                
Electronic Systems   $ 5,718   $ 6,281    -9 %
Flow Controls    7,894    5,469    44 %
Engineered Films    9,380    8,724    8 %
Aerostar    3,514    3,458    2 %
Beta Raven    2,454    2,371    4 %
Total company   $ 28,960   $ 26,303    10 %

2001 2000 Percent
Change
OPERATING INCOME (LOSS)                
Electronic Systems   $ 9   $ 354    -97 %
Flow Controls    2,377    1,666    43 %
Engineered Films    2,287    1,757    30 %
Aerostar    209    (9 )
Beta Raven    (48 )  225    -121 %
Corporate expenses    (1,552 )  (1,756 )  12 %
Total company   $ 3,282   $ 2,237    47 %


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PART I – FINANCIAL INFORMATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Sales from ongoing operations were $29.0 million for the quarter ended April 30, 2001, an increase of $2.7 million from the first quarter of the prior year. The sales increases from the previous first quarter were primarily in the Flow Controls and Engineered Films segments. New product introductions in Flow Controls and increased demand for pit liners in the oil exploration market for Engineered Films were responsible for the sales increases. Operating income from ongoing operations for the first quarter was $3.3 million compared to $2.2 million in the previous first quarter. The increase in operating income was due primarily to the impact of sales increases in the Flow Controls and Engineered Films segments along with lower corporate administrative expenses.

Electronic Systems first quarter sales declined 9% to $5.7 million, a decrease of $563,000 from the same period last year. The sales decrease was the result of fiscal 2001 efforts to streamline its customer base. Operating income declined to $9,000 from $354,000 the prior year. The lower operating income was a result of lower sales and production volumes. However, operating income is expected to improve as new contracts begin shipping during the second half of fiscal 2002.

Flow Controls sales of $7.9 million for the first quarter were 44 percent more than the same period last year. New product introductions in the chemical injection market accounted for the sales increase including shipments under a $2 million order announced in October 2000. First quarter operating income was $2.4 million, up 43 percent from $1.7 million in the previous first quarter. Percentage increases in operating income were lower than the sales increase due to lower profit margins on the new product introductions.

Engineered Film sales of $9.4 million for the first quarter were $656,000 ahead of the $8.7 million sales in the same period last year. Increased demand for pit-liners in the oil exploration market and research balloons more than offset a decline in manufactured housing market sales. First quarter operating income of $2.3 million was 30% above the $1.7 million generated in the first quarter of fiscal 2001. Operating income benefited from increased sales that led to favorable manufacturing efficiencies.

Aerostar first quarter sales of $3.5 million were even with last year’s first quarter and exceeded anticipated sales. Operating income of $209,000 compared favorably to the prior year’s first quarter $9,000 loss. The impact of a new operating structure, including the closure of two sewing plants in the fourth quarter of the prior fiscal year, helped stabilize profits on a lower sales base. The backlog for sewn products at April 30, 2001 remains significantly lower than one year earlier.

Beta Raven sales in the first quarter of $2.5 million were slightly above the $2.4 million in previous first quarter. The first quarter operating loss of $48,000 was unfavorable to the $225,000 operating profit the previous first quarter. The continued weakness in the American poultry industry adversely affected profit margins.

FORWARD-LOOKING STATEMENTS

Certain sections of this report contain discussions of items which may constitute forward-looking statements within the meaning of federal securities laws. Although Raven Industries, Inc. 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 agriculture or construction, or changes in competition or the company’s customer base which could impact any of the company’s product lines.


Page 10

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:

        The company’s annual meeting of stockholders was held on May 23, 2001. 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 2,786,213  15,929 
David A. Christensen 2,783,731  18,411 
Thomas S. Everist 2,774,487  27,655 
Mark E. Griffin 2,784,320  17,822 
Conrad J. Hoigaard 2,775,089  27,053 
Kevin T. Kirby 2,786,782  15,360 
Ronald M. Moquist 2,778,232  23,910 

Item 5. Other Information: None

Item 6. (a) Exhibits Filed: None

            (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 and CFO, Secretary
  and Treasurer (Principal Financial
  and Accounting Officer)

Date: June 8, 2001


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