FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
| [X] | 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 ____________________________________ |
For the transition period from ___________________________
Commission file number: 0-3136
RAVEN INDUSTRIES, INC.
| SOUTH DAKOTA | 46-0246171 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
205 EAST 6TH STREETEast 6th Street
P.O. BOXBox 5107SIOUX FALLS,Sioux Falls, SD 57117-5107
605-336-2750
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 | 4,635,467 shares | |||
| PART I — FINANCIAL INFORMATION | ||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| PART II — OTHER INFORMATION | ||||||||
RAVEN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
| PAGE NO. | ||||||
PART I-FINANCIAL INFORMATION | ||||||
| Consolidated Balance Sheet as of | ||||||
| January 31, 2001 and | 3 | |||||
| Consolidated Statement of Income for the three and | ||||||
| nine month periods ended | 4 | |||||
| Consolidated Statement of Cash Flows for the | ||||||
| nine month periods ended | 5 | |||||
| Notes to Consolidated Financial Statements | 6-9 | |||||
| Management’s Discussion and Analysis of Financial | ||||||
| Condition and Results of Operations | 10-14 | |||||
PART II-OTHER INFORMATION | 15 | |||||
PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
| Oct 31, 2001 | Jan 31, 2001 | Oct 31, 2000 | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 16,773 | $ | 10,673 | $ | 11,926 | ||||||||||
| Accounts receivable, less allowance for doubtful accounts of $400, $400 and $552 as of 10/31/01, 01/31/01 and 10/31/00, respectively | 14,491 | 19,274 | 19,271 | |||||||||||||
| Inventories: | ||||||||||||||||
| Materials | 11,941 | 12,317 | 13,604 | |||||||||||||
| In process | 2,208 | 2,497 | 3,345 | |||||||||||||
| Finished goods | 4,489 | 4,170 | 3,472 | |||||||||||||
| Total inventories | 18,638 | 18,984 | 20,421 | |||||||||||||
| Deferred income taxes | 2,162 | 2,516 | 2,909 | |||||||||||||
| Prepaid expenses and other current assets | 492 | 371 | 216 | |||||||||||||
| Total current assets | 52,556 | 51,818 | 54,743 | |||||||||||||
| Property, plant and equipment | 40,937 | 37,878 | 38,743 | |||||||||||||
| Accumulated depreciation | (27,834 | ) | (26,231 | ) | (27,102 | ) | ||||||||||
| Property, plant and equipment, net | 13,103 | 11,647 | 11,641 | |||||||||||||
| Other assets, net | 1,838 | 2,191 | 1,951 | |||||||||||||
Total assets | $ | 67,497 | $ | 65,656 | $ | 68,335 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Notes payable, bank | $ | 400 | $ | — | $ | — | ||||||||||
| Current portion of long-term debt | 13 | 1,012 | 1,012 | |||||||||||||
| Accounts payable | 4,461 | 3,490 | 4,089 | |||||||||||||
| Income taxes payable | 352 | 68 | 2,308 | |||||||||||||
| Accrued liabilities and customer advances | 9,224 | 9,365 | 9,110 | |||||||||||||
| Total current liabilities | 14,450 | 13,935 | 16,519 | |||||||||||||
| Long-term debt, less current portion | — | 2,013 | 2,013 | |||||||||||||
| Other liabilities, primarily compensation and benefits | 1,851 | 1,719 | 1,801 | |||||||||||||
| Stockholders’ equity: | ||||||||||||||||
| Common stock, $1 par value, authorized shares: 100,000,000; issued: 7,862,150; 5,223,239 and 5,220,614 shares as of 10/31/01, 01/31/01 and 10/31/00, respectively | 7,862 | 5,223 | 5,221 | |||||||||||||
| Paid in capital | 1,076 | 3,459 | 3,420 | |||||||||||||
| Retained earnings | 73,239 | 68,248 | 66,930 | |||||||||||||
| 82,177 | 76,930 | 75,571 | ||||||||||||||
| Less treasury stock, at cost: | ||||||||||||||||
| 3,233,219; 2,063,807 and 1,980,957 shares as of 10/31/01, 01/31/01 and 10/31/00, respectively | 30,981 | 28,941 | 27,569 | |||||||||||||
| Total stockholders’ equity | 51,196 | 47,989 | 48,002 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 67,497 | $ | 65,656 | $ | 68,335 | ||||||||||
| July 31, 2001 | Jan. 31, 2001 | July 31, 2000 | |||||||||
| (unaudited) | (unaudited) | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 17,601 | $ | 10,673 | $ | 1,956 | |||||
| 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 | 11,098 | 12,317 | 17,767 | ||||||||
| In process | 3,091 | 2,497 | 4,300 | ||||||||
| Finished goods | 3,542 | 4,170 | 5,219 | ||||||||
| Total inventories | 17,731 | 18,984 | 27,286 | ||||||||
| Deferred income taxes | 2,479 | 2,516 | 2,070 | ||||||||
| Prepaid expenses and other current assets | 446 | 371 | 563 | ||||||||
| Total current assets | 51,564 | 51,818 | 52,148 | ||||||||
| Property, plant and equipment | 38,998 | 37,878 | 37,482 | ||||||||
| Accumulated depreciation | (27,364 | ) | (26,231 | ) | (25,649 | ) | |||||
| Property, plant and equipment, net | 11,634 | 11,647 | 11,833 | ||||||||
| Other assets, net | 1,794 | 2,191 | 1,725 | ||||||||
| Noncurrent assets held for sale | – | – | 4,779 | ||||||||
| Total assets | $ | 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 | 1,023 | ||||||||
| Accounts payable | 3,915 | 3,490 | 5,009 | ||||||||
| Accrued liabilities and customer advances | 9,019 | 9,433 | 8,204 | ||||||||
| Total current liabilities | 13,947 | 13,935 | 17,736 | ||||||||
| Long-term debt, less current portion | – | 2,013 | 2,013 | ||||||||
| Other liabilities, primarily compensation and benefits | 1,793 | 1,719 | 2,039 | ||||||||
| Stockholders’ equity: | |||||||||||
| 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 | 1,037 | 3,459 | 3,177 | ||||||||
| Retained earnings | 71,330 | 68,248 | 65,859 | ||||||||
| 80,225 | 76,930 | 74,254 | |||||||||
| Less treasury stock, at cost: | |||||||||||
| 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 | 49,252 | 47,989 | 48,697 | ||||||||
| Total liabilities and stockholders’ equity | $ | 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 | FOR THE NINE | ||||||||||||||||||
| MONTHS ENDED | MONTHS ENDED | ||||||||||||||||||
| Oct 31, 2001 | Oct 31, 2000 | Oct 31, 2001 | Oct 31, 2000 | ||||||||||||||||
| Net sales | $ | 28,780 | $ | 35,209 | $ | 87,909 | $ | 100,556 | |||||||||||
| Cost of goods sold | 22,389 | 31,474 | 69,980 | 85,590 | |||||||||||||||
| Gross profit | 6,391 | 3,735 | 17,929 | 14,966 | |||||||||||||||
| Selling, general and administrative expenses | 2,683 | 3,295 | 8,252 | 10,076 | |||||||||||||||
| Gain on sale of businesses and assets | (54 | ) | (3,136 | ) | (399 | ) | (3,136 | ) | |||||||||||
| Operating income | 3,762 | 3,576 | 10,076 | 8,026 | |||||||||||||||
| Interest expense | (17 | ) | (83 | ) | (86 | ) | (204 | ) | |||||||||||
| Other income, net | 134 | 99 | 461 | 223 | |||||||||||||||
| Income before income taxes | 3,879 | 3,592 | 10,451 | 8,045 | |||||||||||||||
| Income taxes | 1,369 | 1,929 | 3,689 | 3,532 | |||||||||||||||
| Net income | $ | 2,510 | $ | 1,663 | $ | 6,762 | $ | 4,513 | |||||||||||
| Net income per common share: | |||||||||||||||||||
| Basic | $ | 0.54 | $ | 0.34 | $ | 1.45 | $ | 0.85 | |||||||||||
| Diluted | $ | 0.53 | $ | 0.34 | $ | 1.43 | $ | 0.85 | |||||||||||
| Cash dividends paid per share | $ | 0.13 | $ | 0.12 | $ | 0.38 | $ | 0.35 | |||||||||||
| FOR THE THREE MONTHS ENDED | FOR THE SIX MONTHS ENDED | |||||||||||||
| July 31, 2001 | July 31, 2000 | July 31, 2001 | July 31, 2000 | |||||||||||
| Net sales | $ | 28,157 | $ | 33,178 | $ | 59,129 | $ | 65,347 | ||||||
| Cost of goods sold | 22,858 | 28,105 | 47,591 | 54,116 | ||||||||||
| Gross profit | 5,299 | 5,073 | 11,538 | 11,231 | ||||||||||
| Selling, general and administrative expenses | 2,624 | 3,222 | 5,569 | 6,781 | ||||||||||
| Gain on sale of businesses and assets | (345 | ) | (345 | ) | ||||||||||
| Operating income | 3,020 | 1,851 | 6,314 | 4,450 | ||||||||||
| Interest expense | (30 | ) | (64 | ) | (69 | ) | (121 | ) | ||||||
| Other income, net | 167 | 45 | 327 | 124 | ||||||||||
| Income before income taxes | 3,157 | 1,832 | 6,572 | 4,453 | ||||||||||
| Income taxes | 1,114 | 659 | 2,320 | 1,603 | ||||||||||
| Net income | $ | 2,043 | $ | 1,173 | $ | 4,252 | $ | 2,850 | ||||||
| Net income per common share: | ||||||||||||||
| Basic | $ | 0.44 | $ | 0.23 | $ | 0.91 | $ | 0.52 | ||||||
| Diluted | $ | 0.43 | $ | 0.23 | $ | 0.90 | $ | 0.52 | ||||||
| Cash dividends paid per share | $ | 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 NINE | ||||||||||
| MONTHS ENDED | ||||||||||
| Oct 31, 2001 | Oct 31, 2000 | |||||||||
Cash flows from operating activities: | ||||||||||
| Net income | $ | 6,762 | $ | 4,513 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 2,291 | 3,011 | ||||||||
| Provision for losses on accounts receivable, net of recoveries | (51 | ) | 475 | |||||||
| Gain on sale of businesses and assets | (399 | ) | (3,136 | ) | ||||||
| Deferred income taxes | 323 | (1,108 | ) | |||||||
| Change in accounts receivable | 4,819 | 239 | ||||||||
| Change in inventories | 309 | 2,477 | ||||||||
| Change in prepaid expenses and other assets | 288 | 349 | ||||||||
| Change in operating liabilities | 1,233 | 1,696 | ||||||||
| Other, net | 17 | 34 | ||||||||
| Net cash provided by operating activities | 15,592 | 8,550 | ||||||||
Cash flows from investing activities: | ||||||||||
| Capital expenditures | (3,796 | ) | (2,412 | ) | ||||||
| Proceeds from the sale of businesses and assets | 663 | 12,318 | ||||||||
| Other, net | (101 | ) | 37 | |||||||
| Net cash provided by (used in) investing activities | (3,234 | ) | 9,943 | |||||||
Cash flows from financing activities: | ||||||||||
| Issuance of short-term debt | 1,470 | 3,500 | ||||||||
| Payment of short-term debt | (1,070 | ) | (3,500 | ) | ||||||
| Long-term debt principal payments | (3,012 | ) | (1,043 | ) | ||||||
| Proceeds from exercise of stock options | 168 | 45 | ||||||||
| Dividends paid | (1,771 | ) | (1,819 | ) | ||||||
| Purchase of treasury stock | (2,040 | ) | (9,457 | ) | ||||||
| Other, net | (3 | ) | — | |||||||
| Net cash provided by (used in) financing activities | (6,258 | ) | (12,274 | ) | ||||||
| Net increase (decrease) in cash and equivalents | 6,100 | 6,219 | ||||||||
| Cash and cash equivalents at beginning of period | 10,673 | 5,707 | ||||||||
| Cash and cash equivalents at end of period | $ | 16,773 | $ | 11,926 | ||||||
| FOR THE SIX MONTHS ENDED | ||||||||
| July 31, 2001 | July 31, 2000 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 4,252 | $ | 2,850 | ||||
| Adjustments to reconcile net income to net | ||||||||
| cash provided by operating activities: | ||||||||
| Depreciation and amortization | 1,585 | 2,184 | ||||||
| Provision for losses on accounts receivable, net of recoveries | (61 | ) | 173 | |||||
| Gain on sale of businesses and assets | (345 | ) | – | |||||
| Deferred income taxes | 23 | (236 | ) | |||||
| Change in accounts receivable | 6,013 | 2,063 | ||||||
| Change in inventories | 1,410 | (2,824 | ) | |||||
| Change in prepaid expenses and other assets | 265 | 3 | ||||||
| Change in operating liabilities | (105 | ) | (208 | ) | ||||
| Other, net | – | 16 | ||||||
| Net cash provided by operating activities | 13,037 | 4,021 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (1,579 | ) | (1,783 | ) | ||||
| Proceeds from the sale of businesses and assets | 550 | 208 | ||||||
| Other, net | 11 | 8 | ||||||
| Net cash provided by (used in) investing activities | (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 | (3,012 | ) | (1,033 | ) | ||||
| Proceeds from exercise of stock options | 125 | – | ||||||
| Dividends paid | (1,170 | ) | (1,227 | ) | ||||
| Purchase of treasury stock | (2,032 | ) | (7,445 | ) | ||||
| Other, net | (2 | ) | – | |||||
| Net cash provided by (used in) financing activities | (5,091 | ) | (6,205 | ) | ||||
| Net increase (decrease) in cash and equivalents | 6,928 | (3,751 | ) | |||||
| Cash and cash equivalents at beginning of period | 10,673 | 5,707 | ||||||
| Cash and cash equivalents at end of period | $ | 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 interim three and |
| 2. | Certain reclassifications have been made to the |
| 3. | Options to purchase approximately |
| FOR THE THREE | FOR THE NINE | |||||||||||||||
| MONTHS ENDED: | MONTHS ENDED: | |||||||||||||||
| (In thousands, except per share data) | 10/31/01 | 10/31/00 | 10/31/01 | 10/31/00 | ||||||||||||
| Net income | $ | 2,510 | $ | 1,663 | $ | 6,762 | $ | 4,513 | ||||||||
| Weighted average common shares outstanding | 4,627 | 4,943 | 4,666 | 5,293 | ||||||||||||
| Dilutive impact of stock options | 90 | 4 | 71 | 1 | ||||||||||||
| Weighted average common and common equivalent shares outstanding | 4,717 | 4,947 | 4,737 | 5,294 | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.54 | $ | 0.34 | $ | 1.45 | $ | 0.85 | ||||||||
| Diluted | $ | 0.53 | $ | 0.34 | $ | 1.43 | $ | 0.85 | ||||||||
Page 6
PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.FOR THE THREE
MONTHS ENDED:FOR THE SIX
MONTHS ENDED:(Dollars in thousands, except per share data) 07/31/01 07/31/00 07/31/01 07/31/00 Net income $ 2,043 $ 1,173 $ 4,252 $ 2,850 Weighted average common shares outstanding 4,665 5,213 4,686 5,471 Dilutive impact of stock options 78 – 59 – Weighted average common and common equivalent shares outstanding 4,743 5,213 4,745 5,471 Net income per share: Basic $ 0.44 $ 0.23 $ 0.91 $ 0.52 Diluted $ 0.43 $ 0.23 $ 0.90 $ 0.52
(unaudited)
| 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
| (Dollars in thousands) | FOR THE THREE | FOR THE NINE | |||||||||||||||
| MONTHS ENDED: | MONTHS ENDED: | ||||||||||||||||
| 10/31/01 | 10/31/00 | 10/31/01 | 10/31/00 | ||||||||||||||
NET SALES: | |||||||||||||||||
| Electronic Systems | $ | 6,737 | $ | 7,650 | $ | 22,982 | $ | 22,665 | |||||||||
| Flow Controls | 5,099 | 4,077 | 15,851 | 12,364 | |||||||||||||
| Engineered Films | 10,562 | 11,128 | 30,779 | 29,993 | |||||||||||||
| Aerostar | 5,240 | 9,225 | 12,807 | 18,992 | |||||||||||||
| Beta Raven | 928 | 744 | 2,216 | 2,527 | |||||||||||||
| Businesses sold and for sale | 214 | 2,385 | 3,274 | 14,015 | |||||||||||||
| Total company | $ | 28,780 | $ | 35,209 | $ | 87,909 | $ | 100,556 | |||||||||
OPERATING INCOME (LOSS): | |||||||||||||||||
| Electronic Systems | $ | 508 | $ | (1,985 | ) | $ | 1,415 | $ | (1,680 | ) | |||||||
| Flow Controls | 1,423 | 571 | 4,016 | 2,700 | |||||||||||||
| Engineered Films | 2,822 | 2,642 | 7,956 | 6,817 | |||||||||||||
| Aerostar | 330 | 853 | 1,381 | 1,264 | |||||||||||||
| Beta Raven | 56 | (207 | ) | (716 | ) | (258 | ) | ||||||||||
| Businesses sold and for sale | (42 | ) | 3,245 | 278 | 4,015 | ||||||||||||
| Sub-total | 5,097 | 5,119 | 14,330 | 12,858 | |||||||||||||
| Administrative and general expenses | (1,335 | ) | (1,543 | ) | (4,254 | ) | (4,832 | ) | |||||||||
| Total company | $ | 3,762 | $ | 3,576 | $ | 10,076 | $ | 8,026 | |||||||||
PART I — FINANCIAL INFORMATIONRAVEN 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 | ||||||
| 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 | ||||||||||||||||||||||||
| (Dollars in thousands) | Division | Beta Raven, Inc. | ||||||||||||||||||||||
| As Reported | Revised | As Reported | Revised | |||||||||||||||||||||
| 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 | ||||||||||||||||||||
| 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. recording a pretax gain of $3.1 million in the quarter ended October 31, 2000. The sale did not include the company’s plant in Tacoma, |
| The gain on sale of businesses and assets of |
| 6. | The company incurred approximately $351,000 of inventory write-downs and other costs of goods sold in the |
| 7. | During the quarter ended July 31, 2001, the company repaid the remaining $2.0 million of its long-term debt originally due in equal installments in June 2002 and June 2003. |
| 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 |
| 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 |
Page 8
PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| $400,000 outstanding under this line of credit and the interest rate on these borrowings was |
Page 8
PART I — FINANCIAL INFORMATIONRAVEN 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 was June 25, 2001, with the shares distributed on July 13, 2001. Earnings-per-share calculations and average shares outstanding |
| 9. |
| FAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16),Business |
| FAS 142 supercedes APB 17,Intangible |
| FAS 143 establishes accounting standards | ||
| FAS 144 establishes accounting and reporting standards for the | ||
| The company is in the process of analyzing the impacts of | ||
| 10. | Effective December 5, 2001 the company acquired the assets of two companies, Starlink, Incorporated (Starlink) and System Integrators, Inc. (System Integrators). | |
| Starlink was acquired for approximately $8 million cash. In addition, the company assumed approximately $800,000 of liabilities. Starlink is a developer and manufacturer of Global Positioning Satellite (GPS) technology located in Austin, Texas and will be integrated into the company’s Flow Controls Division. Sales for the year ended December 31, 2000 were $4.7 million. | ||
| System Integrators, an electronic manufacturing services (EMS) provider, was acquired for approximately $1.4 million cash and the assumption of approximately $600,000 of debt. In addition, the company assumed approximately $500,000 of other liabilities. Operations of System Integrators will be combined into the company’s Electronic Systems Division’s Missouri location. System Integrators sales were approximately $4.0 million for the year ended December 31, 2000. |
Page 9
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 $17.6$16.8 million at JulyOctober 31, 2001 compared with $2.0$11.9 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 $13.3$14.5 million decreased $7.0$4.8 million from JulyOctober 31, 2000 due primarily to lower sales activity at Aerostar and the saleceasing of production during October 2001 at the Plastic Tank division in August 2000 and lower Aerostar sales volume.company’s Tacoma plant. Inventory levels of $17.7$18.6 million decreased $9.6$1.8 million from JulyOctober 31, 2000 due primarily to lower sales levels in Aerostar’s specialty apparel products, inventory reduction efforts in the Electronic Systems Division and the sale of the Plastic Tank division.products. At JulyOctober 31, 2001, the company retained a $5.0 million line of credit and it’s Aerostar subsidiary retained an unused balance of $1.0$1.6 million on its $2.0 million seasonal line of credit. Long-term debt, including the current portion, at July 31, 2001 was $13,000 compared to $3.0 million the prior year. During the quarter ended July 31, 2001, the company repaid $2.0 millionsubstantially all of its long-term debt originally due in June 2002 and June 2003. The company’s capital resources continue to be sufficient to fund all its activities.activities, including financing the acquisitions noted in note 10 to the consolidated financial statements.
RESULTS OF OPERATIONS
Reported sales of $28.2$28.8 million for the quarter ended JulyOctober 31, 2001 compared to $33.2$35.2 million in the secondthird quarter of last year. Sales from the Plastic Tank Divisiondivision (contained in the “Businesses sold and for sale” segment) for the three and sixnine month periods ended JulyOctober 31, 2001 were $1.0$214,000 and $3.1$3.3 million, respectively, compared to the prior year’s three and sixnine month sales of $5.8$2.4 and $11.6$14.0 million, respectively. The reported sales decreases for the quarter ended October 31, 2001 were primarily due to the Plastic Tank Divisiondivision and the Aerostar segment. These decreases were partially offset by increasesan increase in the Electronic Systems and Engineered Films divisions.Flow Controls segment. Reported year-to-date sales for the first half of fiscal 2002 of $59.1$87.9 million compared to $65.3sales of $100.6 million reported in the same period of fiscal 2001. The decrease in sales from sold businesses of $8.6$10.7 million wasand the decrease in sales volume at Aerostar were offset by increases in the Electronic Systems, Flow Controls and Engineered Films divisions.segments. Reported operating income of $3.0$3.8 million for the secondthird quarter and $6.3$10.1 million infor the first six-months of FY 2002nine months ended October 31, 2001 were $1.2$186,000 and $2.1 million above the second quarterthree and $1.9 million above the first six-months of fiscal 2001.nine months ended October 31, 2000, respectively. The impact of lower sales was offset by a higher percentage of products shipped with relatively stronger grossstrong profit rates. In addition, lower selling,margins in the Engineered Films and Flow Controls segments. 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 secondthird quarter were $2.6$2.7 million compared to $3.2$3.3 million in the previous secondthird quarter. The decrease is primarily due to staff reductions and lower bad debt expense. The company reported a $3.1 million pretax gain on the sale of most of theits Plastic Tank division and related staff reductions.during last year’s third quarter. 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. The company’s income tax rate in the prior year reflects the write-off of $1.8 million of non-deductible goodwill. Earnings per share, on a diluted basis, infor the second quarterthree and first half of fiscal 2002nine month periods ended October 31, 2001 were 43 cents$.53 and 90 cents$1.43 per share, respectively, compared to 23 cents in$.34 and $.85 for the second quarter and 52 cents in the first half of fiscal 2001.same periods one year earlier. Total average weighted diluted shares outstanding for the quarter ended JulyOctober 31, 2001 were 4.7 million compared to 5.24.9 million in the previous year’s secondthird quarter. For the nine months ended October 31, 2001 and October 31, 2000, average weighted diluted shares outstanding were 4.7 million and 5.3 million, respectively. The lower shares outstanding were primarily a result of the company’s treasury share repurchases.
The results for the quarter and six-monthsnine-months ended JulyOctober 31, 2001 and October 31, 2000 include nonrecurring items that the company does not believe are relevant to future operations or cash flows. Therefore, the company has segregated its ongoing operations in the tables below. October 31, 2000 ongoing operation data has been restated to reflect the change in segment reporting made in the fourth quarter of fiscal 2001. The discussion of operating results following the tables is focused on the results of ongoing operations exclusive of these items.
Ongoing operation results exclude the results of the company’s Plastic Tank division (both sold and held for sale).division. The gain on sale of businesses and assets of $345,000$399,000 (relating primarily to the sale of Aerostar’s distribution warehouse) and other nonrecurring restructuring costs of $333,000 (relating primarily to Beta Raven’s first-quarter charge for the closing of it’s
Page 10
PART I —FINANCIAL— FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
to Beta Raven’s first-quarter charge for the closing of it’s Alabama plant) were also excluded from ongoing operation results. There were no such gains, losses or nonrecurring itemsIn the prior year, ongoing operation results excluded a $3.1 million gain on the sale of the company’s Plastic Tank division. The ongoing operation results for the three and nine month periods ended October 31, 2000 also exclude nonrecurring charges of $2.2 million to reposition the customer base in its electronics businesses and record severance costs for personnel in two sewing plants which closed in the fourth quarter or six months ended July 31, 2000.of fiscal 2001.
The following table presents ongoing operation information for the three-month and six-monthnine-month periods ended JulyOctober 31, 2001 and JulyOctober 31, 2000:
| (Dollars in thousands) | THREE MONTHS ENDED 10/31/2001 | THREE MONTHS ENDED 10/31/2000 | ||||||||||||||||||||||
| As Reported | Adjust- ments | Ongoing Business | As Reported | Adjust- ments | Ongoing Business | |||||||||||||||||||
| Net sales | $ | 28,780 | $ | 214 | $ | 28,566 | $ | 35,209 | $ | 2,385 | $ | 32,824 | ||||||||||||
| Gross profit | 6,391 | (65 | ) | 6,456 | 3,735 | (1,814 | ) | 5,549 | ||||||||||||||||
| Operating expenses | 2,683 | 27 | 2,656 | 3,295 | 277 | 3,018 | ||||||||||||||||||
| Gain on sale of businesses and assets | 54 | 54 | — | 3,136 | 3,136 | — | ||||||||||||||||||
| Operating income | 3,762 | (38 | ) | 3,800 | 3,576 | 1,045 | 2,531 | |||||||||||||||||
| Other (income) expense | (117 | ) | — | (117 | ) | (16 | ) | — | (16 | ) | ||||||||||||||
| Net income before taxes | 3,879 | (38 | ) | 3,917 | 3,592 | 1,045 | 2,547 | |||||||||||||||||
| Income taxes | 1,369 | (13 | ) | 1,382 | 1,929 | 1,020 | 909 | |||||||||||||||||
| Net income | $ | 2,510 | $ | (25 | ) | $ | 2,535 | $ | 1,663 | $ | 25 | $ | 1,638 | |||||||||||
| NINE MONTHS ENDED 10/31/2001 | NINE MONTHS ENDED 10/31/2000 | |||||||||||||||||||||||
| As Reported | Adjust- ments | Ongoing Business | As Reported | Adjust- ments | Ongoing Business | |||||||||||||||||||
| Net sales | $ | 87,909 | $ | 3,274 | $ | 84,635 | $ | 100,556 | $ | 14,015 | $ | 86,541 | ||||||||||||
| Gross profit | 17,929 | 60 | 17,869 | 14,966 | (165 | ) | 15,131 | |||||||||||||||||
| Operating expenses | 8,252 | 100 | 8,152 | 10,076 | 1,156 | 8,920 | ||||||||||||||||||
| Gain on sale of businesses and assets | 399 | 399 | — | 3,136 | 3,136 | — | ||||||||||||||||||
| Operating income | 10,076 | 359 | 9,717 | 8,026 | 1,815 | 6,211 | ||||||||||||||||||
| Other (income) expense | (375 | ) | — | (375 | ) | (19 | ) | (3 | ) | (16 | ) | |||||||||||||
| Net income before taxes | 10,451 | 359 | 10,092 | 8,045 | 1,818 | 6,227 | ||||||||||||||||||
| Income taxes | 3,689 | 127 | 3,562 | 3,532 | 1,309 | 2,223 | ||||||||||||||||||
| Net income | $ | 6,762 | $ | 232 | $ | 6,530 | $ | 4,513 | $ | 509 | $ | 4,004 | ||||||||||||
| (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 | ||||||||
| Gross profit | 5,299 | 28 | 5,271 | 5,073 | 803 | 4,270 | ||||||||||||||
| Operating expenses | 2,624 | (12 | ) | 2,636 | 3,222 | 394 | 2,828 | |||||||||||||
| Gain on sale of businesses | ||||||||||||||||||||
| and assets | 345 | 345 | – | – | – | – | ||||||||||||||
| Operating income | 3,020 | 385 | 2,635 | 1,851 | 409 | 1,442 | ||||||||||||||
| Other (income) expense | (137 | ) | – | (137 | ) | 19 | (3 | ) | 22 | |||||||||||
| Net income before taxes | 3,157 | 385 | 2,772 | 1,832 | 412 | 1,420 | ||||||||||||||
| Income taxes | 1,114 | 135 | 979 | 659 | 152 | 507 | ||||||||||||||
| Net income | $ | 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— FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a table of ongoing operation results by segment:
ONGOING OPERATIONSSALES AND OPERATING INCOME BY SEGMENT
| (dollars in thousands) | THREE MONTHS ENDED JULY 31 | SIX MONTHS ENDED JULY 31 | ||||||||||||||||||
| 2001 | 2000 | Percent Change | 2001 | 2000 | Percent Change | |||||||||||||||
| NET SALES: | ||||||||||||||||||||
| Electronic Systems | $ | 8,886 | $ | 7,364 | 21 | % | $ | 16,245 | $ | 15,015 | 8 | % | ||||||||
| Flow Controls | 2,858 | 2,818 | 1 | % | 10,752 | 8,287 | 30 | % | ||||||||||||
| Engineered Films | 10,837 | 10,141 | 7 | % | 20,217 | 18,865 | 7 | % | ||||||||||||
| Aerostar | 4,053 | 6,309 | -36 | % | 7,567 | 9,767 | -23 | % | ||||||||||||
| Beta Raven | 475 | 782 | -39 | % | 1,288 | 1,783 | -28 | % | ||||||||||||
| Total company | $ | 27,109 | $ | 27,414 | -1 | % | $ | 56,069 | $ | 53,717 | 4 | % | ||||||||
| 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
Page 12
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
| THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||
| (dollars in thousands) | OCTOBER 31 | OCTOBER 31 | ||||||||||||||||||||||
| 2001 | 2000 | Percent Change | 2001 | 2000 | Percent Change | |||||||||||||||||||
| NET SALES: | ||||||||||||||||||||||||
| Electronic Systems | $ | 6,737 | $ | 7,650 | -12 | % | $ | 22,982 | $ | 22,665 | 1 | % | ||||||||||||
| Flow Controls | 5,099 | 4,077 | 25 | % | 15,851 | 12,364 | 28 | % | ||||||||||||||||
| Engineered Films | 10,562 | 11,128 | -5 | % | 30,779 | 29,993 | 3 | % | ||||||||||||||||
| Aerostar | 5,240 | 9,225 | -43 | % | 12,807 | 18,992 | -33 | % | ||||||||||||||||
| Beta Raven | 928 | 744 | 25 | % | 2,216 | 2,527 | -12 | % | ||||||||||||||||
| Total company | $ | 28,566 | $ | 32,824 | -13 | % | $ | 84,635 | $ | 86,541 | -2 | % | ||||||||||||
| OPERATING INCOME (LOSS): | ||||||||||||||||||||||||
| Electronic Systems | $ | 508 | $ | (163 | ) | 412 | % | $ | 1,397 | $ | 142 | 884 | % | |||||||||||
| Flow Controls | 1,423 | 809 | 76 | % | 4,016 | 2,938 | 37 | % | ||||||||||||||||
| Engineered Films | 2,822 | 2,642 | 7 | % | 7,956 | 6,817 | 17 | % | ||||||||||||||||
| Aerostar | 326 | 909 | -64 | % | 967 | 1,320 | -27 | % | ||||||||||||||||
| Beta Raven | 56 | (123 | ) | 146 | % | (365 | ) | (174 | ) | -110 | % | |||||||||||||
| Administrative and general expenses | (1,335 | ) | (1,543 | ) | 13 | % | (4,254 | ) | (4,832 | ) | 12 | % | ||||||||||||
| Total company | $ | 3,800 | $ | 2,531 | 50 | % | $ | 9,717 | $ | 6,211 | 56 | % | ||||||||||||
Sales from ongoing operations were $28.6 million for the quarter ended October 31, 2001, a decrease of $4.3 million from the previous third quarter sales. The decrease in sales was primarily due to the downsizing of the company’s Aerostar segment. Current fiscal year-to-date ongoing operation sales were $84.6 million versus $86.5 million for the same period in the first halfprevious fiscal year. Sales increases in the Flow Controls and Engineered Films segments were offset by a decrease in the Aerostar segment. Operating income from ongoing operations for the third quarter was $3.8 million compared to $2.5 million in the previous third quarter. Ongoing operating income for the nine months ended October 31, 2001 was $9.7 million, an increase of fiscal 2002 was $889,000 compared with $305,000$3.5 million from the previous year. OperatingThe increases in operating income for both the threequarter and six-months improved as a resultnine-month periods were primarily due to the impact of increased sales and production efficiencies following the repositioning effortsincreases in the prior year.
Flow Controls segment and strong margin performance in the Engineered Films segment. Ongoing operating income for both the quarter and year-to-date was favorably impacted by lower administrative and general expenses.
Electronic Systems third quarter sales of $2.9decreased to $6.7 million for the second quarter were slightly above the $2.8from $7.7 million in the same period last year. Six-monthYear-to-date sales of $10.8were $23.0 million, up slightly from the previous year’s $22.7 million. Third quarter sales were up 30% from $8.3 million in the first half of fiscal 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. Secondnegatively impacted by customer design delays on major new contracts. Third quarter operating income increased to $508,000 from an $163,000 loss the prior year. Operating income for the nine months ended October 31, 2001 was $216,000, below$1.4 million compared to $142,000 the $463,000previous year. As a result of this segment’s repositioning efforts in the previous year’s second quarter. Operatingprior year, operating income infor the first six monthsthree and nine month periods reflected improved production efficiencies and better material management.
Page 12
PART I — FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Flow Controls sales of $2.6 million was 22% above the $2.1$5.1 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 Films sales of $10.8 million for the secondthird quarter were $696,000 ahead of the $10.1$1.0 million saleshigher than in the same period last year. Six-monthNine-month sales of $20.2$15.9 million were up 28% from $12.4 million in the first nine months of fiscal 2001. Strong demand for new products accounted for the sales increase. Third quarter operating income was $1.4 million, an increase of $614,000 from the previous year’s third quarter. The increased sales volume and improved production efficiencies favorably affected operating income in the third quarter and the nine months. Operating income of $4.0 million in the first nine months was 37% above the $2.9 million for the first nine months of fiscal 2001.
Engineered Films sales of $10.6 million were down 5% in the third quarter due to mild weather conditions, which affected construction film sales. Nine-month sales of $30.8 million were $786,000 ahead of the first six monthsame period in fiscal 2001. Increasedthe previous year as a result of increased demand for pit-liners inpit liners for the oil exploration market and foreign research balloons more than offset a decline in manufactured housing market sales. Second quarterballoons. Quarterly operating income ofincreased to $2.8 million was 18% abovecompared to $2.6 million recorded for the $2.4 million generated inquarter ended October 31, 2000. Favorable material pricing offset the second quarternegative profit impact of fiscal 2001.lower sales. Operating income for the first halfnine months of fiscal 2002 of $5.1$8.0 million was 23%17% over the $4.2$6.8 million in the same period last year. OperatingYear-to-date operating income benefited fromhas been impacted by favorable material pricing, increased sales that led to favorable manufacturing efficiencies, and a higher-margin product mix.
Aerostar secondthird quarter sales of $4.1$5.2 million were $2.3$4.0 million below last year’s secondthird quarter. Sales for the first sixnine months of $7.6$12.8 million were $2.2$6.2 million below the same period the previous year. The lower sales volume in the current fiscal year reflects the closing of two sewing plants in November 2000. Operating income of $432,000$326,000 in the third quarter was slightly abovebelow the prior year’s secondthird quarter income of $419,000.$909,000. Operating income in the first sixnine months was $641,000$967,000 and was 56% above27% below the $411,000$1.3 million of income in the first halfnine months 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 a2001 due to lower sales base.levels. The backlog for sewn products at JulyOctober 31, 2001 remains significantly lower than one year earlier.
Beta Raven sales in the secondthird quarter of $475,000$928,000 were belowabove the $782,000$744,000 recorded in the previous year’s secondthird quarter. Six-monthNine-month sales of $1.3$2.2 million were $495,00012% below the first sixnine months of last fiscal year. The secondThird quarter operating lossincome of $241,000$56,000 was unfavorablefavorable to the $137,000$123,000 operating loss the previous secondthird quarter. Operating losses for the sixnine months were $421,000$365,000 and compared unfavorably to the $51,000$174,000 loss in the first halfnine months 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 secondearnings for the third quarter and an outstanding first half in termsnine months reflect the continued repositioning of revenue and earnings.the company away from lower-margin businesses. Management expects ongoing earnings in the second half will enjoy gains over year-earlier results, however, the increases will not be as strong as gainsfourth quarter to meet or exceed earnings recorded in the first half over the previous year’s comparable period. The Aerostar subsidiary virtually always has its strongestfourth quarter by maintaining improved margins.
NEW ACCOUNTING STANDARDS
New accounting standards are discussed 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 duefootnote 9 to the strong demand for plastic films and higher margins in the Electronic Systems division.consolidated financial statements.
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PART I —FINANCIAL— 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 statements 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.
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PART II — 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
Item 5. Other Information: None
Item 6. (a) Exhibits Filed: None
| (b) | Reports on Form 8-K: |
SIGNATURES
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 & Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) |
Date: September 7,December 13, 2001
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