Strong Flow Controls Performance Leads to Gains in Earnings, Revenue and
Cash Flow
SIOUX FALLS, S.D., Nov. 15 /PRNewswire-FirstCall/ -- Raven Industries,
Inc. (Nasdaq: RAVN) today reported it achieved record sales and earnings
for its third quarter, which ended on October 31, 2007. Continued strong
demand in the Flow Controls Division drove an 8 percent increase in sales
for the three months, to $61.8 million from $57.4 million a year ago. Third
quarter net income was up 6 percent to $7.4 million, or $0.41 per diluted
share, for the latest quarter, versus $7.0 million, or $0.38 per diluted
share, at this time last year.
For the first nine months, sales rose 6 percent to $175.6 million from
$166.3 million in 2006. Net income at $21.8 million, or $1.20 per diluted
share, was an 11 percent improvement over the $19.6 million, or $1.07 per
diluted share, reported for the year-ago period.
"Our third quarter represented an intensification of the trends we
experienced in the second," said Ronald M. Moquist, chief executive
officer. "The Flow Controls Division capitalized on a strong agricultural
market, with good acceptance of new products and solid demand across the
entire product line. The Electronic Systems Division and Aerostar also
reported double-digit increases in revenues and operating income. These
advances more than offset declines in the Engineered Films Division, which
were caused primarily by increased price competition in its markets and the
lack of disaster film sales."
Segment Performance
Engineered Films Division (EFD) sales in the third quarter were $21.7
million, off 17 percent from last year's $26.2 million -- which included
$5.5 million in disaster film revenues that were not repeated this year.
Quarterly operating income declined 41 percent to $4.0 million from $6.9
million a year ago, reflecting a product mix with a lower margin, and
selling price pressure that prevented the division from recovering
increases in the cost of plastic resin, the primary raw material used in
film extrusion.
For the first nine months, sales were down 9 percent to $64.8 million
compared with $71.3 million. The primary difference was not having any
disaster film sales in the latest period compared with $9.9 million in the
prior year. Operating income also was affected, decreasing 25 percent to
$14.3 million versus $19.1 million for the previous year's nine months.
"As expected, the lack of disaster film sales reduced revenues," said
Moquist. "This situation, combined with the ramp up of the new extrusion
lines and unfavorable product pricing, lowered operating earnings for EFD.
We experienced additional pressures on performance during the quarter.
First, the softening economy -- particularly in residential construction --
led a number of competitors that traditionally concentrated in other areas
of film to enter our markets. They are resorting to price cutting in an
effort to absorb excess capacity. Second, resin prices continue to be
volatile, and in the current environment we have not been able to pass
along cost increases to our customers. While there is no 'quick fix' for
this situation, we have taken a number of steps to address it. We are
positioning our operations to reflect lower near-term sales. We recently
redirected the focus of our sales efforts to industry niches rather than
territories. This is helping to leverage our product expertise, which we
believe will improve sales over time. Finally, our new extrusion lines are
allowing us to develop higher value-added and more complex films, which
will yield higher margins. A number of these already are in testing and
certification, including our radon-barrier film."
Flow Controls Division (FCD) sales for the latest three months grew 56
percent to $16.1 million from $10.3 million. The division was able to
leverage this increase into operating income of $4.9 million for the
quarter: more than twice the size of the $2.1 million reported a year ago.
For the year-to-date, FCD's sales expanded 36 percent to $47.7 million
from $35.1 million. This led to an 81 percent improvement in operating
income, at $14.6 million, compared with $8.1 million for last year's nine
months.
"Strong crop prices in North America, new product introductions, plus
growing interest from international markets, is expanding demand for our
products," Moquist said. "During the quarter, we saw increasing demand for
our GPS-based precision control systems, which build on our legacy business
in sprayer controls. One example is our SmartBoom(TM) technology. These
systems use GPS to automatically control chemical application, which
reduces costly spraying errors, including skips and overlaps."
Electronic Systems Division (ESD) sales for the latest quarter were
$20.2 million, a 15 percent improvement from $17.6 million. Operating
income rose 17 percent to $3.5 million from $3.0 million in the year-ago
quarter. The strong profit margins reflected higher capacity utilization
and a favorable product mix.
For the nine months, ESD sales rose 4 percent to $51.4 million, versus
$49.3 million at this time last year. The $8.4 million in operating income
represented 6 percent growth from the $7.9 million reported for the
year-ago period.
"ESD is generating strong levels of sales, earnings and cash flow. One
reason it can achieve this is by having a business model that is very
responsive to short-term fluctuations in production levels. However, those
fluctuations can have a significant impact on operating results," Moquist
explained.
Aerostar increased sales by 18 percent to $3.8 million for the third
quarter, compared with $3.2 million for last year's three months. Operating
income reached $299,000 from the year-ago quarter's $147,000. This
represents the fifth-consecutive quarter of profitability for Aerostar.
Year-to-date sales for this operation reached $11.7 million, an 11
percent rise from last year's $10.6 million. Operating income expanded to
$817,000 from $69,000 for last year's nine months.
"The improved performance resulted from focusing on areas we can
control," Moquist stated. "This involves keeping the business at the right
size for its revenue opportunities, and continuing to develop our aerostat
and airship businesses. During the quarter, we shipped a major order for a
tethered aerostat design that ultimately will be used by a U.S. agency for
surveillance and communications. We believe this type of airship makes us
competitive in an $80 million market. Our $14 million MC-6 Army parachute
contract is now positioned so that the government will reimburse us on a
timely basis as we wait for design issues -- which are not related to our
work -- to be resolved."
Strong Balance Sheet and Cash Flows
Cash and investment balances were $23.3 million at October 31, 2007,
compared with $10.6 million at this time last year. Cash continues to grow
as a result of strong operating cash flows and lower capital expenditures.
Accounts receivable rose to $35.1 million from last year's $27.3 million,
reflecting strong agricultural sales late in the quarter.
Operating cash flows for the first nine months of 2007 were $23.9
million compared with $21.1 million a year ago. Cash used for capital
expenditures year-to-date declined to $5.1 million from $14.2 million,
which reflected last year's significant investments to increase EFD
extrusion capacity. Capital spending in the current fiscal year is expected
to be between $6 million and $7 million, down from $16.5 million in fiscal
2007. Cash dividends grew by 22 percent from last year's nine months, to
$6.0 million.
Record Sales and Earnings Expected
"One reason we are firm believers in the group of businesses that
comprise Raven is that advances in one area can offset temporary issues in
others," Moquist explained. "We expect that will again be the case in our
fourth quarter.
"The Flow Controls Division should continue to benefit from a strong ag
market and the resulting demand for its products," he continued. "However,
profit growth may be tempered as we invest for future growth. We expect
another challenging quarter for the Engineered Films Division, with sales
likely to be flat with last year's three months. We don't anticipate any
relief from pricing pressure in the next few quarters, which will likely
lead to near-term margin compression. But we remain committed to our
business plan and are taking the steps needed to create more profitable
long-term growth. The coming quarter should be another positive one for the
Electronic Systems Division, as we have additional demand for relatively
higher-margin product. Our outlook beyond this period is less positive,
since one of our major customers was recently acquired and will be moving
its manufacturing -- which represented about $8 million in annual revenue
-- elsewhere. We are aggressively working to replace this business but
understand it may take some time to do so. Aerostar should continue to be
profitable, regardless of the timing of parachute contract revenues.
"While our third quarter results were better than anticipated, the
factors mentioned above temper our expectations for the fourth quarter, but
our outlook for the full year remains essentially unchanged. Looking toward
the coming fiscal year, we believe Raven will show growth in sales and
earnings similar to fiscal 2008," 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
Standard Time to discuss its third quarter performance and related trends
in its business. Interested investors are invited to listen to the call by
logging 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 November
22, 2007. To access the rebroadcast, dial 888-203-1112 and enter this
passcode: 2412890. A replay of the call will also be available on the
Internet 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
the company 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 Nine Months Ended
October 31 October 31
Fav Fav
(Unfav) (Unfav)
2007 2006 Change 2007 2006 Change
Net sales $61,842 $57,435 8% $175,598 $166,281 6%
Cost of goods sold 46,543 42,955 129,518 123,727
Gross profit 15,299 14,480 6% 46,080 42,554 8%
Selling, general and
administrative expenses 4,359 3,940 11% 13,759 12,665 9%
Operating income 10,940 10,540 4% 32,321 29,889 8%
Other income, net (314) (173) (815) (376)
Income before income
taxes 11,254 10,713 5% 33,136 30,265 9%
Income taxes 3,856 3,745 11,355 10,668
Net income $7,398 $6,968 6% $21,781 $19,597 11%
Net income per common
share:
-basic $0.41 $0.39 5% $1.20 $1.08 11%
-diluted $0.41 $0.38 8% $1.20 $1.07 12%
Weighted average common
shares outstanding:
-basic 18,118 18,075 18,099 18,096
-diluted 18,241 18,247 18,203 18,298
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY SEGMENT
(In thousands) (Unaudited)
Three Months Ended Nine Months Ended
October 31 October 31
Fav Fav
(Unfav) (Unfav)
2007 2006 Change 2007 2006 Change
Net Sales:
Engineered Films $21,700 $26,230 (17)% $64,824 $71,339 (9)%
Flow Controls 16,081 10,335 56% 47,696 35,099 36%
Electronic Systems 20,245 17,641 15% 51,363 49,276 4%
Aerostar 3,816 3,229 18% 11,715 10,567 11%
Total Company $61,842 $57,435 8% $175,598 $166,281 6%
Operating Income:
Engineered Films $4,009 $6,851 (41)% $14,257 $19,128 (25)%
Flow Controls 4,889 2,117 131% 14,598 8,053 81%
Electronic Systems 3,528 3,012 17% 8,421 7,920 6%
Aerostar 299 147 103% 817 69
Total Segment
Income 12,725 12,127 38,093 35,170
Corporate Expenses (1,785) (1,587) (12)% (5,772) (5,281) (9)%
Total Company $10,940 $10,540 4% $32,321 $29,889 8%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
October 31 January 31 October 31
2007 2007 2006
ASSETS
Cash, cash equivalents and short-term
investments $23,274 $10,783 $10,555
Accounts receivable, net 35,119 31,336 27,275
Inventories 32,296 28,071 28,078
Prepaid expenses and other current
assets 3,984 3,029 3,417
Total current assets 94,673 73,219 69,325
Property, plant and equipment, net 36,220 36,264 35,334
Other assets, net 11,310 10,281 9,334
$142,203 $119,764 $113,993
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $8,174 $6,093 $4,800
Accrued and other liabilities 12,588 10,371 10,233
Total current liabilities 20,762 16,464 15,033
Other liabilities 7,143 5,032 2,046
Shareholders' equity 114,298 98,268 96,914
$142,203 $119,764 $113,993
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands) (Unaudited)
Nine Months Ended October 31
2007 2006
Cash flows from operating activities
Net income $21,781 $19,597
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,265 4,264
Deferred income taxes (703) (246)
Other operating activities, net (2,413) (2,538)
Net cash provided by operating activities 23,930 21,077
Cash flows from investing activities
Capital expenditures (5,139) (14,223)
Other investing activities, net (315) (183)
Net cash used in investing activities (5,454) (14,406)
Cash flows from financing activities
Dividends paid (5,972) (4,884)
Purchase of treasury stock (282) (3,007)
Other financing activities, net 242 362
Net cash used in financing activities (6,012) (7,529)
Effect of exchange rate changes on cash 27 4
Net increase (decrease) in cash and cash
equivalents 12,491 (854)
Cash and cash equivalents at beginning of
period 6,783 9,409
Cash and cash equivalents at end of period 19,274 8,555
Short-term investments 4,000 2,000
Cash, cash equivalents and short-term
investments $23,274 $10,555
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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