SIOUX FALLS, S.D., Nov. 16 /PRNewswire-FirstCall/ -- Raven Industries,
Inc. (Nasdaq: RAVN) today reported sales and earnings for its third quarter
ended October 31, 2006. Net sales rose six percent to $57.4 million from
$54.1 million in the third quarter 2005. Net income for the quarter was
relatively flat at $7.0 million, or $0.38 per share, from $6.9 million, or
$0.37 per share in the prior year period. Raven's results this quarter once
again were driven by the strength of its Engineered Films Division. In
addition, the company's Electronic Systems Division reported record
quarterly revenues and strong incremental profitability. Despite continued
weakness in the agricultural markets, the company remains focused on new
products and expanding distribution for its Flow Controls Division.
For the first nine months of the fiscal year, Raven reported total
sales of $166.3 million, an increase of 11 percent from the $150.1 million
a year earlier. Net income for this period rose four percent to $19.6
million, or $1.07 cents per share, from $18.8 million, or $1.03 cents per
share.
Ronald Moquist, chief executive officer, noted, "We continue to benefit
from our investments in specialty films. Meanwhile, the Electronic Systems
Division turned in a stellar performance this quarter. We benefited from
strong incremental demand, demonstrating the ongoing profit potential from
this segment. We were also pleased to see Aerostar post a small profit.
However, Flow Controls continues to be impacted by softer sales trends. In
the near term, Raven continues to produce superior levels of cash flow.
Longer-term, we are optimistic regarding our ability to achieve the
company's targeted 12 percent sales and 15 percent profit growth, although
quarterly comparisons will continue to challenge us until we see the
benefit of our new film capacity and improved farm activity."
Segment Performance
Engineered Films Division (EFD) sales increased 13 percent to $26.2
million for the third quarter, compared with $23.2 million in the same
quarter a year ago. Operating income rose 22 percent to $6.9 million versus
the prior year period. For the nine months, sales were $71.3 million, up 26
percent over last year, and operating income increased 37 percent, reaching
$19.1 million.
Sales this quarter included $5.5 million of disaster film shipments,
which compares to $3.2 million shipped during last year's quarter.
Pit-lining sales to oil and gas fields were also up significantly in the
quarter. Third-quarter selling prices were up approximately 10 percent over
the comparable period last year. The heavy use of existing capacity also
added to profitability.
Moquist noted, "Films has been the driving force behind our growth this
year, but we enter this fourth quarter without any expectation of disaster
film sales. In the fourth quarter last year we shipped over $6 million of
disaster films. In addition, selling prices are beginning to decline,
further reducing revenue comparisons. We have invested significant capital
in technologies that we believe will deliver long-term benefits by
generating continued growth in sales at attractive gross margins. Looking
forward into next year, we do not anticipate the same level of operating
leverage compared to recent quarters since we will no longer be running
near capacity. Early in the first quarter of next year we will have our 60
percent increase in extrusion capacity up and running, increasing our
depreciation expense significantly over this year's levels. While it will
take two or three years to fully utilize this new capacity, we expect that
this division will develop the new products that will produce top line
growth."
Flow Controls Division (FCD) sales for the third quarter fell 18
percent, from $12.5 million in the prior year period, to $10.3 million. The
North American agricultural market remains weak, impacting the company's
customers. Operating income declined 42 percent to $2.1 million from
year-ago levels as a result of the impact of lower sales on relatively
fixed costs. Nine-month sales of $35.1 million were down six percent
compared to the year-earlier period and operating income of $8.1 million
was off 26 percent from the first nine months of the prior year. Nine-month
operating results were impacted by expenses incurred in the first half of
the year to upgrade products in the field and the company's level of
investment in product development, sales and marketing.
Moquist added, "We just haven't seen the pick up we had hoped to see in
Flow Controls. The weak ag market continues to depress sales and profits in
this division. While we witnessed commodity prices strengthening late in
the quarter, investment activity on the farm is well below the optimal
level. We don't expect a market turnaround any time soon and as a result,
we will continue to emphasize our new products as productivity tools to
help growers manage their operations. We remain committed to expanding our
international distribution network."
Electronic Systems Division (ESD) sales for the third quarter increased
29 percent to $17.6 million and operating income was up 57 percent to $3.0
million, driven by a favorable product mix and strong capacity utilization.
For the nine months, sales of $49.3 million were up 16 percent and
operating income of $7.9 million was up 15 percent from one year earlier.
Operating margins in the 17 percent range reflect the company's focus on
higher margin customers.
Moquist noted, "Within our existing client base, we see a lot of
additional opportunities for high-mix, low-volume projects. We can meet
their product needs in a tight timeframe and we generate good margins.
Customers are accelerating delivery dates and we believe that the fourth
quarter will see continued sales growth with another strong profit
contribution."
Aerostar sales for the third quarter declined 31 percent to $3.2
million from the same period a year ago, resulting in an operating profit
of $147,000 compared to an $805,000 operating profit one year earlier. For
the nine months, sales of $10.6 million were down 24 percent and this
business segment reported an operating profit of $69,000 compared to an
operating profit of $2.2 million in the nine months ended October 2005. In
the year-ago period, the company was still shipping cargo parachutes under
a large military contract, which was completed in October 2005.
Aerostar is under contract to start delivering on a $6.6 million
parachute order during the fourth quarter, with most of the order shipping
in fiscal 2008. The company believes that the order and expected reorders
will help Aerostar regain profitability.
"We were pleased to see Aerostar post a small profit for the third
quarter," Moquist said. "Our strategy is to target more high-tech
opportunities for this group and thus yield higher margins. A big focus
during the third quarter was on developing voice and data relay
opportunities. We've had a great reception from our customers using our
technically-advanced inflatables and see this as a niche that we will
continue to grow. This segment has the potential to generate upwards of $3
million in annual operating income, as it has in the past."
Balance Sheet and Cash Flows
The company's cash and investment balances were $10.6 million at
October 31, 2006, versus $12.2 million one year earlier. Operating cash
flows for the first nine months totaled $21.1 million compared with $15.5
million for the prior year period. Favorable working capital utilization
accounted for most of the improvement. Cash used for capital expenditures
increased by $8.8 million over the prior year due primarily to capacity
expansion in Engineered Films. Cash returned to shareholders increased by
63 percent, from $4.8 million to $7.9 million, as a result of higher
dividends and share repurchases.
Outlook
Moquist summarized, "Our Engineered Films Division has put us on pace
to achieve record earnings in the current fiscal year. In the fourth
quarter, an expected strong performance from our Electronic Systems
Division and a solid turnaround from Aerostar will be important
contributors. However, without a disaster film order, we expect Engineered
Films sales and earnings will decline in the fourth quarter. The Flow
Controls Division is expected to see growth from its navigational guidance
products, but probably not until next year. As a result, we expect
relatively flat fourth quarter earnings when compared to last year."
About Raven Industries, Inc.
Celebrating its 50th anniversary, Raven is an industrial manufacturer
that provides electronics manufacturing services, reinforced plastic
sheeting and flow control devices to various markets.
Conference Call Information
Raven has scheduled a conference call today at 3:00 p.m. Eastern Time
to discuss its third quarter fiscal 2007 performance and related trends in
its business. The conference call will be accessible by telephone and
through the Internet. Interested individuals are invited to access the call
by dialing 800-811-8824. To participate on the webcast, log on to the
company's website at http://www.ravenind.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
23. To access the rebroadcast, dial 888-203-1112 and request reservation
number 4583104. 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 the company's
website at 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)
2006 2005 Change 2006 2005 Change
Net sales $57,435 $54,135 6 % $166,281 $150,143 11 %
Cost of goods sold 42,955 39,922 123,727 109,887
Gross profit 14,480 14,213 2 % 42,554 40,256 6 %
Selling, general and
administrative expenses 3,940 3,645 12,665 11,253
Operating income 10,540 10,568 0 % 29,889 29,003 3 %
Other income, net (173) (67) (376) (121)
Income before income
taxes 10,713 10,635 1 % 30,265 29,124 4 %
Income taxes 3,745 3,766 10,668 10,324
Net income $6,968 $6,869 1 % $19,597 $18,800 4 %
Net income per common
share:
-basic $0.39 $0.38 3 % $1.08 $1.04 4 %
-diluted $0.38 $0.37 3 % $1.07 $1.03 4 %
Weighted average common
shares outstanding:
-basic 18,075 18,059 18,096 18,050
-diluted 18,247 18,326 18,298 18,312
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)
2006 2005 Change 2006 2005 Change
Net Sales:
Engineered Films $26,230 $23,197 13 % $71,339 $56,734 26 %
Flow Controls 10,335 12,544 (18)% 35,099 37,259 (6)%
Electronic Systems 17,641 13,692 29 % 49,276 42,313 16 %
Aerostar 3,229 4,702 (31)% 10,567 13,837 (24)%
Total Company $57,435 $54,135 6 % $166,281 $150,143 11 %
Operating Income:
Engineered Films $6,851 $5,632 22 % $19,128 $13,935 37 %
Flow Controls 2,117 3,631 (42)% 8,053 10,934 (26)%
Electronic Systems 3,012 1,921 57 % 7,920 6,914 15 %
Aerostar 147 805 (82)% 69 2,162 (97)%
Total Segment
Income 12,127 11,989 35,170 33,945
Corporate Expenses (1,587) (1,421) (12)% (5,281) (4,942) (7)%
Total Company $10,540 $10,568 0 % $29,889 $29,003 3 %
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
October 31 January 31 October 31
2006 2006 2005
ASSETS
Cash, cash equivalents and short-term
investments $10,555 $11,409 $12,215
Accounts receivable, net 27,275 29,290 29,435
Inventories 28,078 27,819 25,458
Prepaid expenses and other current
assets 3,417 2,827 3,209
Total current assets 69,325 71,345 70,317
Property, plant and equipment, net 35,334 25,602 22,112
Other assets, net 9,334 9,210 9,746
$113,993 $106,157 $102,175
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $4,800 $8,179 $8,623
Accrued and other liabilities 10,233 11,871 11,646
Total current liabilities 15,033 20,050 20,269
Other liabilities 2,046 1,718 1,473
Shareholders' equity 96,914 84,389 80,433
$113,993 $106,157 $102,175
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands) (Unaudited)
Nine Months Ended October 31
2006 2005
Cash flows from operating activities
Net income $19,597 $18,800
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,264 3,634
Deferred income taxes (246) (455)
Other operating activities, net (2,538) (6,480)
Net cash provided by operating activities 21,077 15,499
Cash flows from investing activities
Capital expenditures (14,223) (5,409)
Acquisition of businesses - (2,803)
Other investing activities, net (183) 506
Net cash used in investing activities (14,406) (7,706)
Cash flows from financing activities
Dividends paid (4,884) (3,791)
Purchase of treasury stock (3,007) (1,038)
Long-term debt principal payments (16) (55)
Other financing activities, net 378 193
Net cash used in financing activities (7,529) (4,691)
Effect of exchange rate changes on cash 4 (6)
Net increase (decrease) in cash and cash
equivalents (854) 3,096
Cash and cash equivalents at beginning of
period 9,409 6,619
Cash and cash equivalents at end of period 8,555 9,715
Short-term investments 2,000 2,500
Cash, cash equivalents and short-term
investments $10,555 $12,215
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 Leslie Loyet, Analyst
Inquiries, +1-312-640-6672, or Tim Grace, Media Inquiries,
+1-312-640-6667, both of Financial Relations Board
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