Company on Track for Record Year in Sales and Earnings
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 two Sioux 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.
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Related links:
http://www.ravenind.com
CONTACT:
Tom Iacarella, Vice President & CFO of Raven
Industries, Inc., +1-605-336-2750; or Analyst Inquiries, Leslie
Loyet, +1-312-640-6672, or Media Inquiries, Tim Grace,
+1-312-640-6667, both of Financial Relations Board, for Raven
Industries, Inc.
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