Continued Strength at Flow Controls Division Lifts Earnings 14 Percent
SIOUX FALLS, S.D., Aug. 16 /PRNewswire-FirstCall/ -- Raven Industries,
Inc. (Nasdaq: RAVN) today reported the company achieved record second
quarter results for the period ended July 31, 2007. Significantly higher
contributions from Raven's Flow Controls Division helped increase sales by
10 percent to $55.7 million, versus $50.4 million for last year's second
quarter. Net income expanded 14 percent to $5.8 million, or $0.32 per
share, up from $5.1 million, or $0.28 per share, for the year-ago period.
For the first half of this year, sales reached $113.8 million, a 5
percent improvement over $108.8 million. Net income increased 14 percent to
$14.4 million, or $0.79 per share, for the latest six months, compared with
$12.6 million, or $0.69 per share, at this time last year.
"The second quarter usually is our seasonally lowest period," said
Ronald M. Moquist, chief executive officer. "The Flow Controls Division
continued to drive improved performance, benefiting from an improving
agricultural market and good levels of product demand across all lines.
This was enhanced by Aerostar's improved operating results. Together, this
combination more than offset lower profits at the Engineered Films and
Electronic Systems divisions."
Segment Performance
Engineered Films Division (EFD) second quarter sales rose 4 percent to
$23.5 million, compared with $22.5 million. This was led by particular
strength in orders for existing products -- specifically pit liners for the
oil and gas industry and vapor barriers in the construction market.
Quarterly operating income was off 18 percent to $5.2 million versus $6.4
million a year ago. A competitive pricing environment and higher
depreciation costs negatively affected the second quarter this year. Last
year's second quarter benefited from favorable resin purchases, which did
not recur.
For the six months, sales were down 4 percent to $43.1 million compared
with $45.1 million. This was due primarily to the lack of disaster film
sales in the latest period compared with nearly $4.4 million in last year's
first half. Operating income was also affected, declining 17 percent to
$10.2 million versus $12.3 million for last year's first half.
"The EFD story this year is one of operational advances," Moquist
explained. "We successfully brought our third plastic-film extrusion line
into production, following one each in the last two quarters. It generally
takes two to three years to fully utilize new extrusion capacity, and new
lines experience start-up costs and depreciation expense. We are
capitalizing on EFD's expanded capabilities, and developing new products
for both existing and new markets. This includes radon gas barriers,
geomembranes, and a new vapor and wind barrier used in construction as a
house wrap. The investments we made to expand our capabilities -- and not
seeing a repeat of the $9.9 million in disaster film shipped last year --
will lower operating income for EFD in fiscal 2008. The third quarter will
be a particularly difficult comparison, because we shipped $5.5 million in
disaster film during that period last year. However, we believe the new
equipment will promote our long-term growth."
Flow Controls Division (FCD) revenues for the second quarter increased
40 percent to $11.8 million from last year's $8.4 million. The division's
ability to leverage these sales over its fixed cost base during its
seasonally low second quarter resulted in operating income of $2.6 million
-- an increase of more than three-times the $790,000 seen in last year's
three-month period.
For the year-to-date, FCD's sales grew 28 percent to $31.6 million
versus $24.8 million, driving a 64 percent improvement in operating income,
to $9.7 million from $5.9 million.
"The recovering ag market continued to increase demand for our
precision agriculture products," said Moquist. "We once again experienced
solid sales for new products, such as our Envizio Plus(TM) GPS-based
guidance and control system, and for our anhydrous ammonia controls --
primarily used with corn crops. Teaming with chemical companies and
enhancing our marine navigation systems also paid off with strong
first-half sales. We are in the process of rolling out Control Area Network
or CAN-based systems, which allow customers to use our electronic equipment
in other companies' in-cab consoles. This is taking us one step further
into an open architecture, which means we can leverage the sale of other
companies' equipment in addition to our own."
Electronic Systems Division (ESD) sales for the most recent three
months were $16.7 million compared with $16.5 million one year earlier.
Operating income decreased 13 percent, to $2.5 million from $2.9 million
for last year's second quarter. This was due primarily to weaker than
expected customer demand and also included a less favorable profit margin
mix than in the prior year.
ESD sales for the latest six months were $31.1 million compared with
$31.6 million at this time last year, off 2 percent. Operating income, at
$4.9 million, was essentially even with last year's first-half results.
"We see short-term fluctuations in production levels because our
business model requires us to be very responsive to customer needs,"
Moquist explained. "Our relationships remain strong because our customers
know we will apply the appropriate resources to respond to demand. ESD has
the capability to generate high levels of cash returns on investment. We
continue to work to optimize profit margins."
Aerostar sales grew 28 percent to $3.7 million for the second quarter,
versus $2.9 million for last year's three months. In addition, operating
income swung to a $304,000 gain from a $306,000 loss in last year's
quarter. These advances reflect improved sales of high-altitude research
balloons and shipments under a contract for protective wear for the
government.
Sales for Aerostar's first six months reached $7.9 million, an 8
percent increase from $7.3 million, and operating income improved to
$518,000 compared with a year-ago operating loss of $78,000.
"The good news is that the turnaround at Aerostar is making progress --
despite a continued hold on the MC-6 Army parachute contract," said
Moquist. "In addition to the sales of research balloons and protective wear
driving top-line growth, our efforts to reduce costs and increase
efficiencies are improving operating income. Our total backlog for the
parachute order remains at more than $14 million. However, we cannot
estimate when shipping will begin, as design and material sourcing issues
continue to cause delays. Once again, when this situation is resolved, we
expect shipments to ramp up quickly, allowing Aerostar to accelerate its
contribution to earnings."
Strong Balance Sheet and Cash Flows
Cash and investment balances were $21.9 million at July 31, 2007,
versus $11.3 million a year ago. Cash continues to grow as a result of
strong operating cash flows from earnings and working capital utilization,
and lower capital expenditures. Operating cash flows for the first half
reached $19.3 million compared with $14.7 million last year. Cash used for
capital expenditures declined to $3.9 million versus $9.9 million a year
ago, when significant investments were being made in extrusion capacity for
EFD. Capital spending for the full year is expected to be in the $7 million
range, down from $16.5 million in fiscal 2007. Dividends increased by 22
percent over the first half of last year, reaching $4.0 million.
Another Record Year Expected
"We believe the powerful combination of a recovering ag market and new
products will continue to propel significant increases in sales and
operating income in the Flow Controls Division over the coming two
quarters. This should help offset the Engineered Films Division's lack of
disaster film orders in fiscal 2008. The upside for Engineered Films
remains filling up the capacity of its new extrusion lines and gaining
acceptance for its new products. The Electronic Systems Division should
again make a solid contribution to revenues, income and cash flow. Aerostar
continues to see its profits increase even without the parachute contract,
which we believe will significantly improve this division's contribution
when the order is released. We expect all of these factors will combine to
give Raven record performance in fiscal 2008 -- despite the potential for a
relatively flat third quarter -- with a double-digit full-year profit
increase likely," Moquist concluded.
About Raven Industries, Inc.
Raven is an industrial manufacturer that provides electronic
precision-agriculture products, reinforced plastic sheeting, electronics
manufacturing services and specialty aeronautics and sewn products to niche
markets.
Conference Call Information
Raven has scheduled a conference call today at 3:00 p.m. Eastern
Daylight Time to discuss its second quarter performance and related trends
in its business. The call will be accessible by telephone and through the
Internet. Interested investors are invited to listen to the call by dialing
888-802-2269. To hear a webcast, log on to 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
following the completion of the call, and will continue through August 23,
2007. To access the rebroadcast, dial 888-203-1112 and enter this passcode:
2947373. A replay of the call will also be available on the Internet at
http://www.ravenind.com for 90 days.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are "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 the company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, there is no assurance that such assumptions are
correct or that these expectations will be achieved. Such 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
certain 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 impact any of the company's product lines, as well as
other risks described in the Company's 10-K under Item 1A. The foregoing
list is not exhaustive and the company disclaims any obligation to
subsequently revise any forward-looking statements to reflect events or
circumstances after the date of such statements.
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)
2007 2006 Change 2007 2006 Change
Net sales $55,653 $50,381 10% $113,756 $108,846 5%
Cost of goods sold 42,246 38,198 82,975 80,772
Gross profit 13,407 12,183 10% 30,781 28,074 10%
Selling, general and
administrative expenses 4,864 4,311 13% 9,400 8,725 8%
Operating income 8,543 7,872 9% 21,381 19,349 11%
Other income, net (314) (65) (501) (203)
Income before income
taxes 8,857 7,937 12% 21,882 19,552 12%
Income taxes 3,014 2,810 7,499 6,923
Net income $5,843 $5,127 14% $14,383 $12,629 14%
Net income per common
share:
-basic $0.32 $0.28 14% $0.80 $0.70 14%
-diluted $0.32 $0.28 14% $0.79 $0.69 14%
Weighted average common
shares outstanding:
-basic 18,103 18,089 18,090 18,107
-diluted 18,202 18,285 18,192 18,324
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)
2007 2006 Change 2007 2006 Change
Net Sales:
Engineered Films $23,470 $22,530 4% $43,124 $45,109 (4)%
Flow Controls 11,780 8,419 40% 31,615 24,764 28%
Electronic Systems 16,684 16,519 1% 31,118 31,635 (2)%
Aerostar 3,719 2,913 28% 7,899 7,338 8%
Total Company $55,653 $50,381 10% $113,756 $108,846 5%
Operating Income
(Loss):
Engineered Films $5,230 $6,376 (18)% $10,248 $12,277 (17)%
Flow Controls 2,594 790 228% 9,709 5,936 64%
Electronic Systems 2,520 2,912 (13)% 4,893 4,908 0%
Aerostar 304 (306) 518 (78)
Total Segment Income 10,648 9,772 25,368 23,043
Corporate Expenses (2,105) (1,900) (11)% (3,987) (3,694) (8)%
Total Company $8,543 $7,872 9% $21,381 $19,349 11%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
July 31 January 31 July 31
2007 2007 2006
ASSETS
Cash, cash equivalents and short-term
investments $21,902 $10,783 $11,330
Accounts receivable, net 27,149 31,336 24,390
Inventories 32,202 28,071 29,915
Prepaid expenses and other current
assets 4,115 3,029 3,386
Total current assets 85,368 73,219 69,021
Property, plant and equipment, net 36,758 36,264 32,935
Other assets, net 11,213 10,281 9,325
$133,339 $119,764 $111,281
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $7,889 $6,093 $7,435
Accrued and other liabilities 9,949 10,371 9,255
Total current liabilities 17,838 16,464 16,690
Other liabilities 6,967 5,032 1,934
Shareholders' equity 108,534 98,268 92,657
$133,339 $119,764 $111,281
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands) (Unaudited)
Six Months Ended July 31
2007 2006
Cash flows from operating activities
Net income $14,383 $12,629
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,295 2,709
Deferred income taxes (456) (166)
Other operating activities, net 2,120 (467)
Net cash provided by operating activities 19,342 14,705
Cash flows from investing activities
Capital expenditures (3,881) (9,888)
Other investing activities, net (263) (196)
Net cash used in investing activities (4,144) (10,084)
Cash flows from financing activities
Dividends paid (3,980) (3,258)
Purchase of treasury stock (282) (1,746)
Other financing activities, net 168 302
Net cash used in financing activities (4,094) (4,702)
Effect of exchange rate changes on cash 15 2
Net increase (decrease) in cash and cash
equivalents 11,119 (79)
Cash and cash equivalents at beginning of period 6,783 9,409
Cash and cash equivalents at end of period 17,902 9,330
Short-term investments 4,000 2,000
Cash, cash equivalents and short-term investments $21,902 $11,330
SOURCE Raven Industries, Inc.
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Related links:
http://www.vcall.com
http://www.ravenind.com
CONTACT:
Tom Iacarella, Vice President & CFO of Raven
Industries, Inc., +1-605-336-2750; or Leslie Loyet, Analyst
Inquiries, +1-312-640-6672, or Tim Grace, Media Inquiries,
+1-312-640-6667, both of Financial Relations Board, for Raven
Industries, Inc.
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