FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended: |
OR
| ( ) | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________
Commission file number: 0-3136
RAVEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| SOUTH DAKOTA | 46-0246171 | ||
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | ||
| incorporation or organization) |
205 East 6th StreetEAST 6TH STREET
P.O. BoxBOX 5107Sioux Falls,SIOUX FALLS, SD 57117-5107
(Address of principal executive offices) (Zip code)
605-336-2750
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X __X__ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of | ||
| Common Stock |
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
| PAGE NO. | |
|---|---|
| PART | |
| Consolidated Balance Sheet as of | ||
| January 31, 2001 and | 3 |
| Consolidated Statement of Income for the three and six | ||
| month periods ended | 4 |
| Consolidated Statement of Cash Flows for the six | ||
| month periods ended | 5 |
| Notes to Consolidated Financial Statements |
| Management’s Discussion and Analysis of Financial | |
| Condition and Results of Operations | 10-14 |
| PART II-OTHER INFORMATION |
PART I -— FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
| July 31, 2001 | Jan. 31, 2001 | July 31, 2000 | ||||||||||||||||||||
| 04/30/01 (unaudited) | 01/31/01 | 04/30/00 (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 14,548 | $ | 10,673 | $ | 1,866 | $ | 17,601 | $ | 10,673 | $ | 1,956 | ||||||||||
| Accounts receivable, less allowance for doubtful accounts of | ||||||||||||||||||||||
| $399, $400 and $461 as of 04/30/01, 01/31/01 and | ||||||||||||||||||||||
| 04/30/00, respectively | 17,214 | 19,274 | 22,687 | |||||||||||||||||||
| Accounts receivable, less allowance for doubtful accounts of $399, $400 and $422 as of 07/31/01, 01/31/01 and 07/31/00, respectively | 13,307 | 19,274 | 20,273 | |||||||||||||||||||
| Inventories: | ||||||||||||||||||||||
| Materials | 12,313 | 12,317 | 16,600 | 11,098 | 12,317 | 17,767 | ||||||||||||||||
| In process | 2,954 | 2,497 | 6,232 | 3,091 | 2,497 | 4,300 | ||||||||||||||||
| Finished goods | 3,360 | 4,170 | 4,355 | 3,542 | 4,170 | 5,219 | ||||||||||||||||
| Total inventories | 18,627 | 18,984 | 27,187 | 17,731 | 18,984 | 27,286 | ||||||||||||||||
| Deferred income taxes | 2,557 | 2,516 | 2,010 | 2,479 | 2,516 | 2,070 | ||||||||||||||||
| Prepaid expenses and other current assets | 505 | 371 | 536 | 446 | 371 | 563 | ||||||||||||||||
| Total current assets | 53,451 | 51,818 | 54,286 | 51,564 | 51,818 | 52,148 | ||||||||||||||||
| Property, plant and equipment | 38,456 | 37,878 | 49,552 | 38,998 | 37,878 | 37,482 | ||||||||||||||||
| Accumulated depreciation | (26,980 | ) | (26,231 | ) | (34,893 | ) | (27,364 | ) | (26,231 | ) | (25,649 | ) | ||||||||||
| Property, plant and equipment, net | 11,476 | 11,647 | 14,659 | 11,634 | 11,647 | 11,833 | ||||||||||||||||
| Other assets, net | 2,723 | 2,191 | 3,592 | 1,794 | 2,191 | 1,725 | ||||||||||||||||
| Noncurrent assets held for sale | – | – | 4,779 | |||||||||||||||||||
| Total assets | $ | 67,650 | $ | 65,656 | $ | 72,537 | $ | 64,992 | $ | 65,656 | $ | 70,485 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||
| Notes payable, bank | $ | 1,000 | $ | – | $ | 3,500 | ||||||||||||||||
| Current portion of long-term debt | $ | 13 | $ | 1,012 | $ | 33 | 13 | 1,012 | 1,023 | |||||||||||||
| Accounts payable | 5,271 | 3,490 | 5,969 | 3,915 | 3,490 | 5,009 | ||||||||||||||||
| Accrued liabilities and customer advances | 9,612 | 9,433 | 8,941 | 9,019 | 9,433 | 8,204 | ||||||||||||||||
| Total current liabilities | 14,896 | 13,935 | 14,943 | 13,947 | 13,935 | 17,736 | ||||||||||||||||
| Long-term debt, less current portion | 2,000 | 2,013 | 3,012 | – | 2,013 | 2,013 | ||||||||||||||||
| Other liabilities, primarily compensation and benefits | 1,722 | 1,719 | 1,987 | 1,793 | 1,719 | 2,039 | ||||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||
| Common stock, $1 par value, authorized shares: 100,000,000; | ||||||||||||||||||||||
| issued: 5,223,239; 5,223,239 and 5,218,114 shares as of | ||||||||||||||||||||||
| 04/30/01, 01/31/01 and 04/30/00, respectively | 5,223 | 5,223 | 5,218 | |||||||||||||||||||
| Common stock, $1 par value, authorized shares: 100,000,000; issued: 7,857,918; 5,223,239 and 5,218,114 shares as of 07/31/01, 01/31/01 and 07/31/00, respectively | 7,858 | 5,223 | 5,218 | |||||||||||||||||||
| Paid in capital | 3,459 | 3,459 | 3,177 | 1,037 | 3,459 | 3,177 | ||||||||||||||||
| Retained earnings | 69,893 | 68,248 | 65,259 | 71,330 | 68,248 | 65,859 | ||||||||||||||||
| 78,575 | 76,930 | 73,654 | 80,225 | 76,930 | 74,254 | |||||||||||||||||
| Less treasury stock, at cost: | ||||||||||||||||||||||
| 2,096,307; 2,063,807 and 1,522,707 shares as of 04/30/01, | ||||||||||||||||||||||
| 01/31/01 and 04/30/00, respectively | 29,543 | 28,941 | 21,059 | |||||||||||||||||||
| 3,232,719; 2,063,807 and 1,853,207 shares as of 07/31/01, | ||||||||||||||||||||||
| 01/31/01 and 07/31/00, respectively | 30,973 | 28,941 | 25,557 | |||||||||||||||||||
| Total stockholders’ equity | 49,032 | 47,989 | 52,595 | 49,252 | 47,989 | 48,697 | ||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 67,650 | $ | 65,656 | $ | 72,537 | $ | 64,992 | $ | 65,656 | $ | 70,485 | ||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial information.
Page 3
PART I –— FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(Dollars in thousands, except per share data)
| FOR THE THREE MONTHS ENDED | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 04/30/01 | 04/30/00 | FOR THE THREE MONTHS ENDED | FOR THE SIX MONTHS ENDED | |||||||||||||||||||
| July 31, 2001 | July 31, 2000 | July 31, 2001 | July 31, 2000 | |||||||||||||||||||
| Net sales | $ | 30,972 | $ | 32,168 | $ | 28,157 | $ | 33,178 | $ | 59,129 | $ | 65,347 | ||||||||||
| Cost of goods sold | 24,733 | 26,010 | 22,858 | 28,105 | 47,591 | 54,116 | ||||||||||||||||
| Gross profit | 6,239 | 6,158 | 5,299 | 5,073 | 11,538 | 11,231 | ||||||||||||||||
| Selling, general and administrative expenses | 2,945 | 3,559 | 2,624 | 3,222 | 5,569 | 6,781 | ||||||||||||||||
| Gain on sale of businesses and assets | (345 | ) | (345 | ) | ||||||||||||||||||
| Operating income | 3,294 | 2,599 | 3,020 | 1,851 | 6,314 | 4,450 | ||||||||||||||||
| Interest expense | (39 | ) | (57 | ) | (30 | ) | (64 | ) | (69 | ) | (121 | ) | ||||||||||
| Other income, net | 160 | 79 | 167 | 45 | 327 | 124 | ||||||||||||||||
| Income before income taxes | 3,415 | 2,621 | 3,157 | 1,832 | 6,572 | 4,453 | ||||||||||||||||
| Income taxes | 1,206 | 944 | 1,114 | 659 | 2,320 | 1,603 | ||||||||||||||||
| Net income | $ | 2,209 | $ | 1,677 | $ | 2,043 | $ | 1,173 | $ | 4,252 | $ | 2,850 | ||||||||||
| Net income per common share: | ||||||||||||||||||||||
| Basic | $ | 0.70 | $ | 0.44 | $ | 0.44 | $ | 0.23 | $ | 0.91 | $ | 0.52 | ||||||||||
| Diluted | $ | 0.70 | $ | 0.44 | $ | 0.43 | $ | 0.23 | $ | 0.90 | $ | 0.52 | ||||||||||
| Cash dividends paid per share | $ | 0.18 | $ | 0.17 | $ | 0.13 | $ | 0.113 | $ | 0.25 | $ | 0.227 | ||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial information.
Page 4
PART I –— FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Dollars in thousands)
| FOR THE THREE MONTHS ENDED | FOR THE SIX MONTHS ENDED | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 04/30/01 | 04/30/00 | July 31, 2001 | July 31, 2000 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 2,209 | $ | 1,677 | $ | 4,252 | $ | 2,850 | ||||||||
| Adjustments to reconcile net income to net | ||||||||||||||||
| cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization | 781 | 1,098 | 1,585 | 2,184 | ||||||||||||
| Provision for losses on accounts receivable, net of recoveries | (10 | ) | 139 | (61 | ) | 173 | ||||||||||
| Gain on sale of businesses and assets | (345 | ) | – | |||||||||||||
| Deferred income taxes | (13 | ) | (161 | ) | 23 | (236 | ) | |||||||||
| Change in accounts and interest receivable | 2,055 | (266 | ) | |||||||||||||
| Change in accounts receivable | 6,013 | 2,063 | ||||||||||||||
| Change in inventories | 371 | (2,725 | ) | 1,410 | (2,824 | ) | ||||||||||
| Change in prepaid expenses and other assets | (714 | ) | 30 | 265 | 3 | |||||||||||
| Change in operating liabilities | 1,963 | 1,503 | (105 | ) | (208 | ) | ||||||||||
| Other, net | – | 16 | ||||||||||||||
| Net cash provided by operating activities | 6,642 | 1,295 | 13,037 | 4,021 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Capital expenditures | (619 | ) | (603 | ) | (1,579 | ) | (1,783 | ) | ||||||||
| Proceeds from the sale of businesses | — | 157 | ||||||||||||||
| Proceeds from the sale of businesses and assets | 550 | 208 | ||||||||||||||
| Other, net | 30 | (66 | ) | 11 | 8 | |||||||||||
| Net cash provided by (used in) investing activities | (589 | ) | (512 | ) | (1,018 | ) | (1,567 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Issuance of short-term debt | 1,200 | 3,500 | ||||||||||||||
| Payment of short-term debt | (200 | ) | – | |||||||||||||
| Long-term debt principal payments | (1,012 | ) | (1,023 | ) | (3,012 | ) | (1,033 | ) | ||||||||
| Proceeds from exercise of stock options | 125 | – | ||||||||||||||
| Dividends paid | (564 | ) | (654 | ) | (1,170 | ) | (1,227 | ) | ||||||||
| Purchase of treasury stock | (602 | ) | (2,947 | ) | (2,032 | ) | (7,445 | ) | ||||||||
| Other, net | (2 | ) | – | |||||||||||||
| Net cash provided by (used in) financing activities | (2,178 | ) | (4,624 | ) | (5,091 | ) | (6,205 | ) | ||||||||
| Net increase (decrease) in cash and equivalents | 3,875 | (3,841 | ) | 6,928 | (3,751 | ) | ||||||||||
| Cash and cash equivalents at beginning of period | 10,673 | 5,707 | 10,673 | 5,707 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 14,548 | $ | 1,866 | $ | 17,601 | $ | 1,956 | ||||||||
The accompanying notes are an integral part of the unaudited consolidated financial information.
Page 5
PART I –— FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| 1. | The accompanying unaudited consolidated financial information has been prepared by Raven Industries, Inc. (the company) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair representation have been included. Financial results for the |
| 2. | Certain reclassifications have been made to the |
| 3. | Options to purchase approximately |
| FOR THE THREE MONTHS ENDED | FOR THE THREE MONTHS ENDED: | FOR THE SIX MONTHS ENDED: | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 04/30/01 | 04/30/00 | |||||||||||||||||||||
| (Dollars in thousands, except per share data) | (Dollars in thousands, except per share data) | 07/31/01 | 07/31/00 | 07/31/01 | 07/31/00 | |||||||||||||||||
| Net income | $ | 2,209 | $ | 1,677 | $ | 2,043 | $ | 1,173 | $ | 4,252 | $ | 2,850 | ||||||||||
| Weighted average common shares | ||||||||||||||||||||||
| outstanding | 3,138,690 | 3,823,361 | ||||||||||||||||||||
| Weighted average common shares outstanding | 4,665 | 5,213 | 4,686 | 5,471 | ||||||||||||||||||
| Dilutive impact of stock options | 19,793 | 0 | 78 | – | 59 | – | ||||||||||||||||
| Weighted average common and common equivalent | ||||||||||||||||||||||
| shares outstanding | 3,158,483 | 3,823,361 | ||||||||||||||||||||
| Weighted average common and | ||||||||||||||||||||||
| common equivalent shares outstanding | 4,743 | 5,213 | 4,745 | 5,471 | ||||||||||||||||||
| Net income per share: | ||||||||||||||||||||||
| Basic | $ | 0.70 | $ | 0.44 | $ | 0.44 | $ | 0.23 | $ | 0.91 | $ | 0.52 | ||||||||||
| Diluted | $ | 0.70 | $ | 0.44 | $ | 0.43 | $ | 0.23 | $ | 0.90 | $ | 0.52 | ||||||||||
| 4. | The company’s reportable segments are defined by their common technologies, production processes and raw materials. These segments are consistent with the company’s management reporting structure. The company measures the performance of its segments based on their operating income exclusive of administrative and general expenses. The results of these segments are shown on the following table: |
Page 6
PART I –— FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| (Dollars in thousands) | FOR THE THREE MONTHS ENDED: | FOR THE SIX MONTHS ENDED: | ||||||||||||
| 07/31/01 | 07/31/00 | 07/31/01 | 07/31/00 | |||||||||||
| NET SALES: | ||||||||||||||
| Electronic Systems | $ | 8,886 | $ | 7,364 | $ | 16,245 | $ | 15,015 | ||||||
| Flow Controls | 2,858 | 2,818 | 10,752 | 8,287 | ||||||||||
| Engineered Films | 10,837 | 10,141 | 20,217 | 18,865 | ||||||||||
| Aerostar | 4,053 | 6,309 | 7,567 | 9,767 | ||||||||||
| Beta Raven | 475 | 782 | 1,288 | 1,783 | ||||||||||
| Businesses sold and for sale | 1,048 | 5,764 | 3,060 | 11,630 | ||||||||||
| Total company | $ | 28,157 | $ | 33,178 | $ | 59,129 | $ | 65,347 | ||||||
| OPERATING INCOME (LOSS): | ||||||||||||||
| Electronic Systems | $ | 766 | $ | (188 | ) | $ | 907 | $ | 305 | |||||
| Flow Controls | 216 | 463 | 2,593 | 2,129 | ||||||||||
| Engineered Films | 2,847 | 2,419 | 5,134 | 4,175 | ||||||||||
| Aerostar | 842 | 419 | 1,051 | 411 | ||||||||||
| Beta Raven | (252 | ) | (137 | ) | (772 | ) | (51 | ) | ||||||
| Businesses sold and for sale | (32 | ) | 409 | 320 | 770 | |||||||||
| Sub-total | 4,387 | 3,385 | 9,233 | 16,972 | ||||||||||
| Administrative and general expenses | (1,367 | ) | (1,534 | ) | (2,919 | ) | (3,289 | ) | ||||||
| Total company | $ | 3,020 | $ | 1,851 | $ | 6,314 | $ | 4,450 | ||||||
| (Dollars in thousands) | FOR THE THREE MONTHS ENDED | |||||||
|---|---|---|---|---|---|---|---|---|
| 04/30/01 | 04/30/00 | |||||||
| NET SALES | ||||||||
| Electronic Systems | $ | 5,718 | $ | 6,281 | ||||
| Flow Controls | 7,894 | 5,469 | ||||||
| Engineered Films | 9,380 | 8,724 | ||||||
| Aerostar | 3,514 | 3,458 | ||||||
| Beta Raven | 2,454 | 2,371 | ||||||
| Businesses sold and for sale | 2,012 | 5,865 | ||||||
| Total company | $ | 30,972 | $ | 32,168 | ||||
| OPERATING INCOME (LOSS) | ||||||||
| Electronic Systems | $ | 9 | $ | 354 | ||||
| Flow Controls | 2,377 | 1,666 | ||||||
| Engineered Films | 2,287 | 1,757 | ||||||
| Aerostar | 209 | (9 | ) | |||||
| Beta Raven | (388 | ) | 225 | |||||
| Businesses sold and for sale | 352 | 362 | ||||||
| Corporate expenses | (1,552 | ) | (1,756 | ) | ||||
| Total company | $ | 3,294 | $ | 2,599 | ||||
| In the quarter ended July 31, 2001, the Electronics Manufacturing Services (EMS) operation of Beta Raven was combined with the Electronic Systems Division. This change combines the common EMS operations of the company and is designed to improve operating results from sharing management, marketing and production techniques. Revised segment history for assets, capital expenditures and depreciation and amortization have not yet been computed as it is not yet practicable to do so. The following table restates segment sales and operating income for the Electronic Systems Division and Beta Raven for the prior six fiscal years: |
Page 7
PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| Electronic Systems Divison | Beta Raven, Inc. | |||||||||||||
| Originally Reported | Restated | Originally Reported | Restated | |||||||||||
| SALES: | ||||||||||||||
| FY 2001 | $ | 26,354 | $ | 32,039 | $ | 8,951 | $ | 3,266 | ||||||
| FY 2000 | 24,077 | 30,176 | 11,333 | 5,234 | ||||||||||
| FY 1999 | 18,817 | 24,958 | 12,200 | 6,059 | ||||||||||
| FY 1998 | 19,014 | 23,968 | 10,081 | 5,127 | ||||||||||
| FY 1997 | 18,018 | 22,133 | 9,154 | 5,039 | ||||||||||
| FY 1996 | 9,022 | 14,301 | 10,473 | 5,194 | ||||||||||
| OPERATING INCOME (LOSS): | ||||||||||||||
| FY 2001 | $ | (1,070 | ) | $ | (542 | ) | $ | 117 | $ | (411 | ) | |||
| FY 2000 | 728 | 1,632 | 1,644 | 740 | ||||||||||
| FY 1999 | 1,582 | 2,322 | 1,910 | 1,170 | ||||||||||
| FY 1998 | 2,730 | 3,319 | 1,383 | �� | 794 | |||||||||
| FY 1997 | 1,733 | 1,971 | 987 | 749 | ||||||||||
| FY 1996 | 1,336 | 2,088 | 1,351 | 599 | ||||||||||
| 5. | On August 28, 2000, the company sold substantially all of the assets of its Plastic Tank division to Norwesco, Inc. The sale did not include the company’s plant in Tacoma, Washington, for which the company is actively pursuing its sale. The Tacoma plant assets, primarily inventory and manufacturing equipment, are included in the |
| The gain on sale of businesses and assets of $345,000 during the three months ended July 31, 2001 consists primarily of the sale in May 2001 of a Sportswear Division distribution warehouse used by the Aerostar segment. |
| 6. | The company incurred approximately |
| 7. | During the |
| In June 2001, the company entered a new agreement with Wells Fargo Bank South Dakota, N.A. (Wells Fargo) to decrease the short-term credit line to $5.0 million. The terms of this credit line are similar to the $7.0 million line with Wells Fargo that expired on June 30, 2001. On July 31, 2001, the company had no borrowings outstanding under this line of credit. |
| During the quarter ended July 31, 2001, Aerostar International, Inc. (a subsidiary of Raven Industries, Inc.) entered into a new agreement with Wells Fargo for a short-term credit line of $2.0 million that expires in June 2002. The terms of this credit line contain certain restrictive covenants that among other things require Aerostar to maintain a minimum net worth and minimum cash flow coverage. This credit line will be used to finance seasonal accounts receivable and inventories. On July 31, 2001, Aerostar International had borrowings of $1.0 million outstanding under this line of credit and the interest rate on these borrowings was 6.75%. |
Page 8
PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| 8. | On May 23, 2001, the Board of Directors declared a three-for-two stock split of the company’s common stock, to be effected in the form of a stock dividend. The record date for the stock dividend |
| 9. | On June 29, 2001, the Financial Accounting Standard Board approved its proposed Statements of Financial Accounting Standards No. 141 (FAS 141),Business Combinations, and No. 142 (FAS 142),Goodwill And Other Intangible Assets. |
| FAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16),Business Combinations. The most significant changes made by FAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and (2) establishing specific criteria for the recognition of intangible assets separately from goodwill. |
| FAS 142 supercedes APB 17,Intangible Assets. FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of FAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by FAS 142 are (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. |
| These standards only permit prospective application of the new accounting; accordingly, the adoption of these standards will not affect previously reported financial information. The company is in the process of analyzing the impacts of FAS 141 and 142 on its results of operations and financial condition. |
Page 79
PART I – FINANCIAL—FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The company’s cash and cash equivalents balance was $14.5$17.6 million at April 30,July 31, 2001 compared with $1.9$2.0 million one year earlier. On August 28, 2000, the company sold substantially all of the assets of its Plastic Tank division. The cash proceeds from the sale were approximately $12 million. Accounts receivable of $17.2$13.3 million decreased $5.5$7.0 million from April 30,July 31, 2000 due primarily to the sale of the Plastic Tank division.division in August 2000 and lower Aerostar sales volume. Inventory levels of $18.6$17.7 million decreased $8.6$9.6 million from April 30,July 31, 2000 due primarily to the sale of the Plastic tank division, lower sales levels in Aerostar’s specialty apparel products, inventory reduction efforts in the Electronic Systems Division and contract completions in Electronic Systems. Thethe sale of the Plastic Tank division. At July 31, 2001, the company retainsretained a $5.0 million line of credit and it’s Aerostar subsidiary retained an unused balance of $1.0 million on its $7.0$2.0 million seasonal line of credit. Long-term debt, including the current portion, at April 30,July 31, 2001 was $2.0 million$13,000 compared to $3.0 million the prior year. During the quarter ended April 30,July 31, 2001, the company repaid $1.0$2.0 million of its long-term debt originally due in June 2001.2002 and June 2003. The company’s capital resources continue to be sufficient to fund all its activities.
RESULTS OF OPERATIONS
Reported sales of $31.0$28.2 million for the quarter ended April 30,July 31, 2001 compared to $32.2$33.2 million in the firstsecond quarter of last year. The sales decrease inSales from the Plastic Tank divisionDivision (contained in the “Businesses sold and for sale” segment) for the three and six month periods ended July 31, 2001 were $1.0 and $3.1 million, respectively, compared to the prior year’s three and six month sales of $3.9$5.8 and $11.6 million, respectively. The reported sales decreases were primarily due to the Plastic Tank Division and the Aerostar segment. These decreases were partially offset by increases in the Electronic Systems and Engineered Films divisions. Reported sales for the first half of fiscal 2002 of $59.1 million compared to $65.3 million in the same period of fiscal 2001. The decrease in sales from sold businesses of $8.6 million was offset primarily by sales increases in the Electronic Systems, Flow Controls and Engineered Films segments.divisions. Reported operating income of $3.3$3.0 million for the second quarter and $6.3 million in the first six-months of FY 2002 were $1.2 million above the second quarter of the current fiscal year was $695,000and $1.9 million above the first quartersix-months of fiscal 2001. The impact of lower sales was offset by a higher percentage of products shipped with relatively stronger gross profit rates. In addition, lower selling, general and administrative expenses as well as a gain on the sale of the company’s former warehouse improved operating income. Selling and administrative expenses for the current year’s firstsecond quarter were $2.9$2.6 million compared to $3.6$3.2 million in the previous firstsecond quarter. The decrease is primarily due to the sale of most of the Plastic Tank division and related staff reductions. The improvement in non-operating income for the quarter was the result of a higher net cash position and the associated lower interest expense and higher interest earned. Earnings per share, in the first quarter, on a diluted basis, in the second quarter and first half of fiscal 2002 were 7043 cents and 90 cents per share, respectively, compared to 4423 cents in the second quarter and 52 cents in the first quarterhalf of fiscal 2001. Total average weighted shares outstanding for the quarter ended April 30,July 31, 2001 were 3.24.7 million compared to 3.85.2 million in the previous year’s firstsecond quarter. The lower shares outstanding were primarily a result of the company’s treasury share repurchases.
The results for the quarter and six-months ended April 30,July 31, 2001 include nonrecurring items that the company does not believe are relevant to future operations or cash flows. The discussion of operating results, following the tables, is focused on the results of ongoing operations exclusive of these items. Ongoing operation actual results exclude the results of the company’s Plastic Tank division (both sold and held for sale). Also excluded were current year first quarter write-downs relatedThe gain on sale of businesses and assets of $345,000 (relating primarily to the repositioningsale of the company’s Beta Raven segment, including inventory write-offsAerostar’s distribution warehouse) and other nonrecurring restructuring costs relatedof $333,000 (relating primarily to Beta Raven’s first-quarter charge for the closing of its Alabama plant. These charges totaled $340,000 and were included in cost of goods sold. No such expenses were incurred in the previous year’s first quarter.it’s
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PART I – FINANCIAL—FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Alabama plant) were also excluded from ongoing operation results. There were no such gains, losses or nonrecurring items for the quarter or six months ended July 31, 2000.
The following table presents ongoing operation information for the three-month and six-month periods ended April 30,July 31, 2001 and April 30, 2000.July 31, 2000:
| (dollars in thousands) | (dollars in thousands) | THREE MONTHS ENDED 04/30/2001 | THREE MONTHS ENDED 04/30/2000 | (dollars in thousands) | THREE MONTHS ENDED 07/31/2001 | THREE MONTHS ENDED 07/31/2000 | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As Reported | Adjust- ments | Ongoing Operations | As Reported | Adjust- ments | Ongoing Operations | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 28,157 | $ | 1,048 | $ | 27,109 | $ | 33,178 | $ | 5,764 | $ | 27,414 | ||||||||||||||||||||||||||||
| AS REPORTED | ADJUST- MENTS | ONGOING OPERATIONS | AS REPORTED | ADJUST- MENTS | ONGOING OPERATIONS | |||||||||||||||||||||||||||||||||||
| Net Sales | $ | 30,972 | $ | 2,012 | $ | 28,960 | $ | 32,168 | $ | 5,865 | $ | 26,303 | ||||||||||||||||||||||||||||
| Gross profit | 6,239 | 97 | 6,142 | 6,158 | 845 | 5,313 | 5,299 | 28 | 5,271 | 5,073 | 803 | 4,270 | ||||||||||||||||||||||||||||
| Operating expenses | 2,945 | 85 | 2,860 | 3,559 | 483 | 3,076 | 2,624 | (12 | ) | 2,636 | 3,222 | 394 | 2,828 | |||||||||||||||||||||||||||
| Gain on sale of businesses | ||||||||||||||||||||||||||||||||||||||||
| and assets | 345 | 345 | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Operating income | 3,294 | 12 | 3,282 | 2,599 | 362 | 2,237 | 3,020 | 385 | 2,635 | 1,851 | 409 | 1,442 | ||||||||||||||||||||||||||||
| Other income, net | 121 | — | 121 | 22 | — | 22 | ||||||||||||||||||||||||||||||||||
| Other (income) expense | (137 | ) | – | (137 | ) | 19 | (3 | ) | 22 | |||||||||||||||||||||||||||||||
| Net income before taxes | 3,415 | 12 | 3,403 | 2,621 | 362 | 2,259 | 3,157 | 385 | 2,772 | 1,832 | 412 | 1,420 | ||||||||||||||||||||||||||||
| Income taxes | 1,206 | 5 | 1,201 | 944 | 138 | 806 | 1,114 | 135 | 979 | 659 | 152 | 507 | ||||||||||||||||||||||||||||
| Net income | $ | 2,209 | $ | 7 | $ | 2,202 | $ | 1,677 | $ | 224 | $ | 1,453 | $ | 2,043 | $ | 250 | $ | 1,793 | $ | 1,173 | $ | 260 | $ | 913 | ||||||||||||||||
| SIX MONTHS ENDED 07/31/2001 | SIX MONTHS ENDED 07/31/2000 | |||||||||||||||||||
| As Reported | Adjust- ments | Ongoing Operations | As Reported | Adjust- ments | Ongoing Operations | |||||||||||||||
| Net sales | $ | 59,129 | $ | 3,060 | $ | 56,069 | $ | 65,347 | $ | 11,630 | $ | 53,717 | ||||||||
| Gross profit | 11,538 | 125 | 11,413 | 11,231 | 1,649 | 9,582 | ||||||||||||||
| Operating expenses | 5,569 | 73 | 5,496 | 6,781 | 879 | 5,902 | ||||||||||||||
| Gain on sale of businesses | ||||||||||||||||||||
| and assets | 345 | 345 | – | – | – | – | ||||||||||||||
| Operating income | 6,314 | 397 | 5,917 | 4,450 | 770 | 3,680 | ||||||||||||||
| Other (income) expense | (258 | ) | – | (258 | ) | (3 | ) | (3 | ) | – | ||||||||||
| Net income before taxes | 6,572 | 397 | 6,175 | 4,453 | 773 | 3,680 | ||||||||||||||
| Income taxes | 2,320 | 140 | 2,180 | 1,603 | 289 | 1,314 | ||||||||||||||
| Net income | $ | 4,252 | $ | 257 | $ | 3,995 | $ | 2,850 | $ | 484 | $ | 2,366 | ||||||||
In the quarter ended July 31, 2001, the Electronics Manufacturing Services (EMS) operation of Beta Raven was combined with the Electronic Systems Division. Segment sales and operating income in the following tables have been restated to reflect this change.
Page 11
PART I —FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a table of ongoing operation results by segment:
ONGOING OPERATIONS
SALES AND OPERATING INCOME BY SEGMENT
| (dollars in thousands) | THREE MONTHS ENDED APRIL 30 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2001 | 2000 | Percent Change | |||||||||
| NET SALES | |||||||||||
| Electronic Systems | $ | 5,718 | $ | 6,281 | -9 | % | |||||
| Flow Controls | 7,894 | 5,469 | 44 | % | |||||||
| Engineered Films | 9,380 | 8,724 | 8 | % | |||||||
| Aerostar | 3,514 | 3,458 | 2 | % | |||||||
| Beta Raven | 2,454 | 2,371 | 4 | % | |||||||
| Total company | $ | 28,960 | $ | 26,303 | 10 | % | |||||
| (dollars in thousands) | (dollars in thousands) | THREE MONTHS ENDED JULY 31 | SIX MONTHS ENDED JULY 31 | ||||||||||||||||||||||||||||
| 2001 | 2000 | Percent Change | 2001 | 2000 | Percent Change | 2001 | 2000 | Percent Change | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| OPERATING INCOME (LOSS) | |||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||
| Electronic Systems | $ | 9 | $ | 354 | -97 | % | $ | 8,886 | $ | 7,364 | 21 | % | $ | 16,245 | $ | 15,015 | 8 | % | |||||||||||||
| Flow Controls | 2,377 | 1,666 | 43 | % | 2,858 | 2,818 | 1 | % | 10,752 | 8,287 | 30 | % | |||||||||||||||||||
| Engineered Films | 2,287 | 1,757 | 30 | % | 10,837 | 10,141 | 7 | % | 20,217 | 18,865 | 7 | % | |||||||||||||||||||
| Aerostar | 209 | (9 | ) | 4,053 | 6,309 | -36 | % | 7,567 | 9,767 | -23 | % | ||||||||||||||||||||
| Beta Raven | (48 | ) | 225 | -121 | % | 475 | 782 | -39 | % | 1,288 | 1,783 | -28 | % | ||||||||||||||||||
| Corporate expenses | (1,552 | ) | (1,756 | ) | 12 | % | |||||||||||||||||||||||||
| Total company | $ | 3,282 | $ | 2,237 | 47 | % | $ | 27,109 | $ | 27,414 | -1 | % | $ | 56,069 | $ | 53,717 | 4 | % | |||||||||||||
| OPERATING INCOME (LOSS): | OPERATING INCOME (LOSS): | ||||||||||||||||||||||||||||||
| Electronic Systems | $ | 748 | $ | (188 | ) | 498 | % | $ | 889 | $ | 305 | 191 | % | ||||||||||||||||||
| Flow Controls | 216 | 463 | -53 | % | 2,593 | 2,129 | 22 | % | |||||||||||||||||||||||
| Engineered Films | 2,847 | 2,419 | 18 | % | 5,134 | 4,175 | 23 | % | |||||||||||||||||||||||
| Aerostar | 432 | 419 | 3 | % | 641 | 411 | 56 | % | |||||||||||||||||||||||
| Beta Raven | (241 | ) | (137 | ) | -76 | % | (421 | ) | (51 | ) | -725 | % | |||||||||||||||||||
| Administrative and general expenses | (1,367 | ) | (1,534 | ) | 11 | % | (2,919 | ) | (3,289 | ) | 11 | % | |||||||||||||||||||
| Total company | $ | 2,635 | $ | 1,442 | 83 | % | $ | 5,917 | $ | 3,680 | 61 | % | |||||||||||||||||||
Sales from ongoing operations were $27.1 million for the quarter ended July 31, 2001, a decrease of $300,000 from the previous second quarter sales. Sales increases from the previous second quarter were primarily in the Electronic Systems (ESD) and Engineered Films (EFD) segments but were offset by sales decreases in Aerostar’s specialty apparel lines. Increased demand for pit liners in the oil exploration market and foreign research-balloon sales for Engineered Films and increased delivery on Electronic System contracts were responsible for the sales increases. Ongoing operation sales in the first half of fiscal 2002 were $56.1 million versus $53.7 million the first half of the previous fiscal year. In addition to the second quarter sales increases in ESD and EFD, Flow Controls (FCD) experienced sales increases from strong sales of new products in the first quarter of fiscal 2002. Operating income from ongoing operations for the second quarter was $2.6 million compared to $1.4 million in the previous second quarter. Ongoing operating income in the first half of $5.9 million in fiscal 2002 was $2.2 million above the first half of fiscal 2001. The increases in operating income for both the quarter and first half were due primarily to the impact of sales increases in the Flow Controls, Electronic Systems and Engineered Films segments along with lower corporate administrative expenses.
Electronic Systems second quarter sales increased 21% to $8.9 million from $7.4 million the same period last year. The sales rebounded in fiscal 2002 after the fiscal 2001 efforts to streamline Electronic Systems’ customer base. Sales for the first half of fiscal 2002 were $16.2 million, an 8% increase from the $15.0 million in the first half of fiscal 2001. Second quarter operating income increased to $748,000 from an $188,000 loss the prior year. Operating income
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PART I – FINANCIAL—FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales from ongoing operations were $29.0in the first half of fiscal 2002 was $889,000 compared with $305,000 the previous year. Operating income for the three and six-months improved as a result of increased sales and production efficiencies following the repositioning efforts in the prior year.
Flow Controls sales of $2.9 million for the quarter ended April 30, 2001, an increase of $2.7 million from the first quarter of the prior year. The sales increases from the previous firstsecond quarter were primarily inslightly above the Flow Controls and Engineered Films segments. New product introductions in Flow Controls and increased demand for pit liners in the oil exploration market for Engineered Films were responsible for the sales increases. Operating income from ongoing operations for the first quarter was $3.3 million compared to $2.2$2.8 million in the previous first quarter. The increase in operating income was due primarily to the impact of sales increases in the Flow Controls and Engineered Films segments along with lower corporate administrative expenses.
Electronic Systems first quarter sales declined 9% to $5.7 million, a decrease of $563,000 from the same period last year. TheSix-month sales decrease wasof $10.8 million were up 30% from $8.3 million in the result of fiscal 2001 efforts to streamline its customer base. Operating income declined to $9,000 from $354,000 the prior year. The lower operating income was a result of lower sales and production volumes. However, operating income is expected to improve as new contracts begin shipping during the secondfirst half of fiscal 2002.
Flow Controls sales of $7.9 million for the first quarter were 44 percent more than the same period last year.2001. New product introductions in the chemical injection market accounted for the sales increase, including shipments in the first quarter of fiscal 2002 under a $2 million order announced in October 2000. FirstSecond quarter operating income was $2.4 million, up 43 percent from $1.7 million$216,000, below the $463,000 in the previous year’s second quarter. Operating income in the first quarter.six months of $2.6 million was 22% above the $2.1 million for the first half of fiscal 2001. Percentage increases in operating income were lower than the sales increase due to lower profit margins on the new product introductions.
Engineered FilmFilms sales of $9.4$10.8 million for the firstsecond quarter were $656,000$696,000 ahead of the $8.7$10.1 million sales in the same period last year. Six-month sales of $20.2 million were $1.4 million ahead of the first six month in fiscal 2001. Increased demand for pit-liners in the oil exploration market and foreign research balloons more than offset a decline in manufactured housing market sales. FirstSecond quarter operating income of $2.3$2.8 million was 30%18% above the $1.7$2.4 million generated in the firstsecond quarter of fiscal 2001. Operating income for the first half of fiscal 2002 of $5.1 million was 23% over the $4.2 million in the same period last year. Operating income benefited from increased sales that led to favorable manufacturing efficiencies.efficiencies and a higher-margin product mix.
Aerostar firstsecond quarter sales of $3.5$4.1 million were even with$2.3 million below last year’s second quarter. Sales for the first quarter and exceeded anticipated sales.six months of $7.6 million were $2.2 million below the same period the previous year. Operating income of $209,000 compared favorably to the$432,000 was slightly above prior year’s second quarter income of $419,000. Operating income in the first quarter $9,000 loss.six months was $641,000 and was 56% above the $411,000 income in the first half of fiscal 2001. Operating profit was impacted favorably by sales of several inflatable display projects that carried higher than normal profits. The impact of a new operating structure, including the closure of two sewing plants in the fourth quarter of the prior fiscal year, helped stabilize profits on a lower sales base. The backlog for sewn products at April 30,July 31, 2001 remains significantly lower than one year earlier.
Beta Raven sales in the firstsecond quarter of $2.5$475,000 were below the $782,000 in previous year’s second quarter. Six-month sales of $1.3 million were slightly above$495,000 below the $2.4 million in previous first quarter.six months of last fiscal year. The firstsecond quarter operating loss of $48,000$241,000 was unfavorable to the $225,000$137,000 operating profitloss the previous second quarter. Operating losses for the six months were $421,000 and compared unfavorably to the $51,000 loss in the first quarter.half of fiscal 2001. The continued weakness in the American poultry industry adversely affected sales and profit margins.
OUTLOOK
The company believes it had a good second quarter and an outstanding first half in terms of revenue and earnings. Management expects ongoing earnings in the second half will enjoy gains over year-earlier results, however, the increases will not be as strong as gains in the first half over the previous year’s comparable period. The Aerostar subsidiary virtually always has its strongest quarter in the third period, so the significant long-term impact of closing two apparel plants last November will be seen in the second half of fiscal 2002. However, improved ongoing operating earnings for the full fiscal year ending January 31, 2002 are expected due to the strong demand for plastic films and higher margins in the Electronic Systems division.
Page 13
PART I —FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEW ACCOUNTING STANDARDS
On June 29, 2001, the Financial Accounting Standard Board approved its proposed Statements of Financial Accounting Standards No. 141 (FAS 141),Business Combinations, and No. 142 (FAS 142),Goodwill And Other Intangible Assets.
FAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16),Business Combinations. The most significant changes made by FAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and (2) establishing specific criteria for the recognition of intangible assets separately from goodwill.
FAS 142 supercedes APB 17,Intangible Assets. FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of FAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by FAS 142 are (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years.
These standards only permit prospective application of the new accounting; accordingly, the adoption of these standards will not affect previously reported financial information. The company is in the process of analyzing the impacts of FAS 141 and 142 on its results of operations and financial condition.
FORWARD-LOOKING STATEMENTS
Certain sections of this report contain discussions of itemsstatements which may constitute forward-looking statements within the meaning of federal securities laws. Although Raven Industries, Inc. believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. Factors that could cause actual results to differ from expectations include general economic conditions, weather conditions which could affect certain of the company’s primary markets such as agriculture or construction, or changes in competition or the company’s customer base which could impact any of the company’s product lines.
Page 1014
PART II-OTHERII — OTHER INFORMATION
Item 1. Legal Proceedings:
The company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of business. The settlement of such claims cannot be determined at this time. Management believes that any liability resulting from these claims will be substantially mitigated by insurance coverage. Accordingly, management does not believe the ultimate outcome of these matters will be significant to its results of operations, financial position or cash flows.
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
The company’s annual meeting of stockholders was held on May 23, 2001. The following members were elected to the company’s Board of Directors to hold office for the ensuing year.
| Nominee | In Favor | Withheld |
|---|---|---|
| Anthony W. Bour | 2,786,213 | 15,929 |
| David A. Christensen | 2,783,731 | 18,411 |
| Thomas S. Everist | 2,774,487 | 27,655 |
| Mark E. Griffin | 2,784,320 | 17,822 |
| Conrad J. Hoigaard | 2,775,089 | 27,053 |
| Kevin T. Kirby | 2,786,782 | 15,360 |
| Ronald M. Moquist | 2,778,232 | 23,910 |
Item 5. Other Information: None
Item 6. (a) Exhibits Filed: None
(b) Reports on Form 8-K: None
| (b) Reports on Form 8-K: None |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RAVEN INDUSTRIES, INC. | |
/s/ Thomas Iacarella | |
Thomas Iacarella | |
Vice President | |
and Treasurer (Principal Financial | |
and Accounting Officer) |
Date: June 8,September 7, 2001
Page 1115