Published:
Raven Industries Reports Strong Performance for Second Quarter, First Half
SIOUX FALLS, S.D., Aug. 19 /PRNewswire-FirstCall/ -- Raven Industries,
Inc. (Nasdaq: RAVN) today announced that continued growth in Flow Controls
Division sales resulted in strong increases in revenues and earnings for the
three and six months ended July 31, 2008.
Strong Performance in Flow Controls, Aerostar Lift Second Quarter, First
Half Results
In the second quarter, sales of $69.3 million grew 24 percent from
$55.7 million for last year's three months. The largest contributor to the
increase was Flow Controls, buoyed by a strong market and demand for its
products, plus improved sales at Engineered Films and Aerostar. Net income
rose 17 percent, to $6.8 million, or 38 cents per diluted share, from
$5.8 million, or 32 cents per diluted share, for last year's second quarter.
For the year-to-date, sales were up 27 percent to $144.4 million, from
last year's $113.8 million. Net income reached $17.7 million, or 98 cents per
diluted share, a 23 percent increase compared with $14.4 million, or 79 cents
per diluted share, for the same six months in 2007.
"While crop prices are down from the records we saw in the first quarter,
they remain at very high levels," said Ronald M. Moquist, chief executive
officer. "Growers are still facing rising input costs for items including
fertilizer and fuel. As a result, leading growers in the U.S. and
international markets are turning to precision agriculture products, which
increase their crop yield while holding down expenses. This is the niche Flow
Controls serves, and why its products are in such demand. The triple-digit
increase in operating income for this business, and for our smaller Aerostar
operation, more than offset lower profits in Engineered Films and Electronic
Systems, which still are managing the headwinds from slow construction and
home-improvement markets."
Engineered Films Reports Mixed Results
Engineered Films Division's second quarter sales improved by 12 percent to
$26.5 million from $23.7 million at this time last year. Operating income was
off 33 percent, at $3.5 million for the most recent three months, compared
with $5.3 million, primarily reflecting higher resin prices. Competitive
pressure in the construction market continues to weaken pricing for films,
further reducing operating margins. This led to additional erosion in
sequential operating margins, to 13.3 percent, compared with 17.6 percent in
the first quarter of this year.
For the first half, revenues were $48.5 million versus $43.3 million, up
12 percent from a year ago. Operating earnings of $7.4 million were down 28
percent from the $10.3 million posted for last year's six months.
"This has truly been a 'good news/bad news' period for Engineered Films,"
Moquist said. "We have seen continued strong demand from the oil and gas
industry, especially for pit liners used in exploration drilling. We also are
experiencing a good deal of interest in two of our new products: the
VaporBlock Plus(TM) radon barrier, and FortressPro(TM) house wrap, which
offers superior air and water protection. Builders choose these products
because they wish to differentiate themselves by using higher quality
materials. But the construction market continues to be a weak one. Add to
this the increasing costs of resin and a higher level of depreciation from
additional capacity in the last few years, and the result is a lower margin."
Flow Controls Continues Record Pace
Flow Controls Division sales grew 93 percent from a year ago, reaching
$22.7 million compared with $11.8 million in the second quarter last year.
Both U.S. and international shipments were strong. Operating income for the
three months jumped 172 percent, to $7.1 million versus last year's
$2.6 million.
In the most recent six months, revenues expanded 82 percent, reaching
$57.6 million from $31.6 million. International sales doubled in the first
half and provided 20 percent of the division's revenue. Operating income
reached $20.6 million. This was a 112 percent improvement from $9.7 million
for last year's first half, and it also exceeded Flow Controls' full-year
record operating earnings of $19.1 million-set last fiscal year.
"We have developed the right product portfolio to capitalize on a strong
market," Moquist explained. "While there is competition for each of our
products, the breadth of products we offer makes us attractive to distributors
because we can provide everything they need. While we didn't introduce any
new products during the quarter, our entry-level GPS guidance system, the
Cruizer(TM), continued to perform ahead of expectations, as did our entire
sprayer line. We are optimizing capacity by outsourcing some manufacturing to
our Electronic Systems Division and other vendors, and by offering additional
sales promotions for early summer shipments, which is expected to moderate
demands on our people and facilities during an anticipated busy fall season."
Electronic Systems Sees Lower Performance
Electronic Systems Division second quarter sales were $14.7 million, down
12 percent from $16.7 million a year ago. Operating income for the latest
three months was $1.2 million, a 51 percent decrease from $2.5 million.
For the year-to-date, sales were off 10 percent to $28.0 million compared
with $31.2 million for this time last year. Operating income was $1.9 million
versus $4.9 million in the first half of the prior year, down 62 percent.
"The same issues we faced for the last few quarters are still present,"
said Moquist. "Soft markets for new home construction and home improvements
negatively affected our bed controls business. We also lost a significant
account, when that company was acquired. Some of this business has been
replaced with lower margin products for avionics, and by supplying circuit
boards to Flow Controls. Electronic Systems has strong manufacturing
processes and controls, resulting from our focus on Six Sigma. However, until
we can increase profit margins, we are reducing our footprint here. That
includes consolidating our twoSioux Falls manufacturing facilities into
one -- which will be completed in September -- improving throughput and
lowering inventories. For the near term, we are managing costs and expenses
to maximize cash flow from this business."
Aerostar Shows Significant Increases
Aerostar's sales of $5.5 million in the latest three months increased
49 percent from $3.7 million a year ago. Operating income expanded
136 percent to $718,000 compared with $304,000 for the second quarter last
year.
First-half sales reached $11.6 million versus $7.9 million, a 46 percent
growth rate. Operating income nearly tripled, to $1.5 million versus $518,000
for last year's six months.
"Sales increased with higher shipments of MC-6 parachutes to the Army,
which we did not have a year ago," Moquist commented. "Sales related to
another contract for fuel-handler coveralls also are new this year. We are
working to qualify for follow-on parachute orders targeted at other areas of
the military."
Balance Sheet, Cash Flows, Remain Strong
Cash and investment balances on July 31, 2008, were $32.2 million, up from
$21.9 million on that date a year ago. This illustrates continued good levels
of cash flows from operations, with modest capital investments. Accounts
receivable increased 29 percent to $34.9 million compared with $27.1 million a
year ago, as a result of stronger Flow Controls sales. The 32 percent rise in
inventory to $42.6 million from $32.2 million at this time in 2007 also
reflected Flow Controls' growth, along with higher plastic resin prices for
Engineered Films.
Higher earnings helped lead to an 18 percent increase in operating cash
flows for the first half, at $22.9 million versus $19.3 million. Cash used
for capital expenditures in the latest period was $3.5 million compared with
$3.9 million one year earlier. Capital expenditures for this fiscal year are
still expected to be in the $8 million range. During the quarter, the company
repurchased about 62,000 shares at a cost of $2.2 million; bringing total
repurchases to date for the year to 161,000 for $5.2 million. Dividends of
$4.7 million for the first half reflected an 18 percent increase in the
quarterly per-share payout.
Record Performance Expected for Fiscal 2009
"We expect to leverage the solid market for Flow Controls products in
several ways," Moquist said. "This includes introducing extensions of our
existing product line and expanding international sales -- in part due to
building a stronger international sales team. We are also increasing prices
to optimize margins in an environment of rising material costs. Engineered
Films should see solid top-line growth as demand from the energy market
continues, and new products gain traction. However, margins remain challenged
by high resin costs. The good news is that we appear to be maintaining our
share in a tough market, and we've got plenty of upside growth potential when
the market improves.
"Because last year's third quarter was especially strong for Electronic
Systems, we know its results will be much lower by comparison this year," he
continued. "We are working hard to get profitability back to acceptable
levels before initiating any programs to add new business. Aerostar will
continue to do well for the balance of the year and is on pace to double its
operating income over the last fiscal year. We expect to supplement sales
from its military contracts with additional revenues related to tethered
aerostats, and ultra long duration balloons for high-altitude research.
"All of our businesses are in a good position to capitalize on market
opportunities," Moquist explained. "Flow Controls and Aerostar should
continue to improve, although their rate of growth will likely moderate.
Engineered Films and Electronic Systems could start showing improvement by the
end of the year. As a result, the third quarter should generate single-digit
year-over-year net income growth, followed by a stronger fourth-quarter
increase. That combination will lead to record sales and earnings for the
year."
About Raven Industries, Inc.
Raven is an industrial manufacturer that provides electronic precision-
agriculture products, reinforced plastic sheeting, electronics manufacturing
services, and specialty aerostats and sewn products to niche markets.
Conference Call Information
Raven has scheduled a conference call today at 3:00 p.m. Eastern Time to
discuss its second quarter performance and related trends in its business
Interested investors are invited to listen to the call by visiting the
company's Web site at http://www.ravenind.com or http://www.vcall.com 15
minutes before the call to download the necessary software.
In addition, a taped rebroadcast will be available beginning one hour
after the call ends, and will continue through August 26, 2008. To access the
rebroadcast, dial 888-203-1112 or 719-457-0820, and enter this passcode:
6472525. A replay of the call will also be available at
http://www.ravenind.com for 90 days.
Forward-looking Statements
This news release contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, including statements
regarding the expectations, beliefs, intentions or strategies regarding the
future. Without limiting the foregoing, the words, "anticipates," "believes,"
"expects," "intends," "may," "plans," and similar expressions are intended to
identify forward-looking statements. The company intends that all forward-
looking statements be subject to the safe harbor provisions of the Private
Securities Litigation Reform Act. Although management believes that the
expectations reflected in forward-looking statements are based on reasonable
assumptions, there is no assurance these assumptions are correct or that these
expectations will be achieved. Assumptions involve important risks and
uncertainties that could significantly affect results in the future. These
risks and uncertainties include, but are not limited to, those relating to
weather conditions, which could affect some of the company's primary markets,
such as agriculture and construction; or changes in competition, raw material
availability, technology or relationships with the company's largest
customers-any of which could adversely affect any of the company's product
lines, as well as other risks described in Raven's 10-K under Item 1A. This
list is not exhaustive, and the company does not have an obligation to revise
any forward-looking statements to reflect events or circumstances after the
date these statements are made.
For more information on Raven Industries, please visit
http://www.ravenind.com.
FINANCIAL TABLES FOLLOW ...
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share) (Unaudited)
Three Months Ended Six Months Ended
July 31 July 31
Fav Fav
(Unfav) (Unfav)
2008 2007 Change 2008 2007 Change
Net sales $69,278 $55,653 24% $144,444 $113,756 27%
Cost of goods sold 53,492 42,246 106,643 82,975
Gross profit 15,786 13,407 18% 37,801 30,781 23%
Selling, general and
administrative expenses 5,474 4,864 10,848 9,400
Operating income 10,312 8,543 21% 26,953 21,381 26%
Other income, net (176) (314) (294) (501)
Income before income
taxes 10,488 8,857 18% 27,247 21,882 25%
Income taxes 3,673 3,014 9,550 7,499
Net income $6,815 $5,843 17% $17,697 $14,383 23%
Net income per common share:
-basic $0.38 $0.32 19% $0.98 $0.80 23%
-diluted $0.38 $0.32 19% $0.98 $0.79 24%
Weighted average common
shares outstanding:
-basic 18,033 18,103 18,068 18,090
-diluted 18,091 18,202 18,119 18,192
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY SEGMENT
(In thousands) (Unaudited)
Three Months Ended Six Months Ended
July 31 July 31
Fav Fav
(Unfav) (Unfav)
2008 2007 Change 2008 2007 Change
Net Sales:
Engineered Films $26,504 $23,670 12% $48,509 $43,324 12%
Flow Controls 22,716 11,780 93% 57,562 31,615 82%
Electronic Systems 14,739 16,707 (12)% 28,018 31,179 (10)%
Aerostar 5,547 3,719 49% 11,566 7,899 46%
Intersegment
Eliminations (228) (223) (1,211) (261)
Total Company $69,278 $55,653 24% $144,444 $113,756 27%
Operating Income (Loss):
Engineered Films $3,515 $5,283 (33)% $7,379 $10,301 (28)%
Flow Controls 7,060 2,594 172% 20,606 9,709 112%
Electronic Systems 1,239 2,520 (51)% 1,879 4,893 (62)%
Aerostar 718 304 136% 1,524 518 194%
Intersegment
Eliminations 26 (53) (3) (53)
Total Segment Income 12,558 10,648 31,385 25,368
Corporate Expenses (2,246) (2,105) (7)% (4,432) (3,987) (11)%
Total Company $10,312 $8,543 21% $26,953 $21,381 26%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
July 31 January 31 July 31
2008 2008 2007
ASSETS
Cash, cash equivalents and short-term
investments $32,236 $22,772 $21,902
Accounts receivable, net 34,936 36,538 27,149
Inventories 42,552 36,529 32,202
Other current assets 5,670 5,030 4,115
Total current assets 115,394 100,869 85,368
Property, plant and equipment, net 35,358 35,743 36,758
Other assets, net 10,626 11,249 11,213
$161,378 $147,861 $133,339
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $12,915 $8,374 $7,889
Accrued and other liabilities 13,782 13,734 9,949
Total current liabilities 26,697 22,108 17,838
Other liabilities 7,916 7,478 6,967
Shareholders' equity 126,765 118,275 108,534
$161,378 $147,861 $133,339
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands) (Unaudited)
Six Months Ended July 31
2008 2007
Cash flows from operating activities
Net income $17,697 $14,383
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,748 3,295
Deferred income taxes 437 (456)
Other operating activities, net 1,009 2,120
Net cash provided by operating activities 22,891 19,342
Cash flows from investing activities
Capital expenditures (3,489) (3,881)
Other investing activities, net (735) (263)
Net cash used in investing activities (4,224) (4,144)
Cash flows from financing activities
Dividends paid (4,692) (3,980)
Purchase of treasury stock (5,180) (282)
Other financing activities, net 76 168
Net cash used in financing activities (9,796) (4,094)
Effect of exchange rate changes on cash (7) 15
Net increase in cash and cash equivalents 8,864 11,119
Cash and cash equivalents at beginning of
period 21,272 6,783
Cash and cash equivalents at end of period 30,136 17,902
Short-term investments 2,100 4,000
Cash, cash equivalents and short-term
investments $32,236 $21,902
SOURCE Raven Industries, Inc.
Copyright © 2009, PRNewswire
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