Financial Releases

Raven Industries Reports Fiscal 2013 Second-Quarter Results

August 21, 2012 at 12:00 AM EDT

SIOUX FALLS, S.D., Aug. 21, 2012 (GLOBE NEWSWIRE) -- Raven Industries, Inc. (Nasdaq:RAVN) today reported sales and earnings for its fiscal 2013 second quarter ended July 31, 2012.

The top-line trends Raven saw in the 2013 fiscal first quarter continued in the second quarter, with sales rising 13 percent to $101.7 million, from the previous year's second-quarter record of $90.3 million. Revenue growth was driven by strength in the Engineered Films and Applied Technology Divisions along with the addition of Vista Research revenues in Aerostar.

Raven's second-quarter net income was $11.5 million, or $0.32 per diluted share, versus fiscal 2012 second-quarter net income of $12.5 million, or $0.34 per diluted share. The 7 percent decrease stemmed from continued volatility in the company's Aerostar Division. All earnings-per-share amounts have been adjusted to reflect a two-for-one stock split effective July 25, 2012.

For the six months, sales reached $219.6 million, a 14 percent increase from last year's $191.9 million. First-half net income grew 9 percent to $30.6 million, or $0.84 per diluted share, from $28.2 million, or $0.77 per diluted share, in fiscal 2012.

"We continue to benefit from favorable market dynamics in agriculture and energy—and we're leveraging these trends to drive revenue gains in our Engineered Films and Applied Technology Divisions," said Daniel A. Rykhus, president and chief executive officer. "Sales in these divisions continued at a record pace in the second quarter. Even though a difficult federal spending environment persisted, negatively impacting Aerostar's performance, we delivered a strong first half. The ability to do so once again highlights Raven's diversified model."

Engineered Films Delivers Record Sales

For the second quarter, Raven's Engineered Films Division posted sales of $36.8 million, a 13 percent increase from $32.5 million in the fiscal 2012 second quarter. Operating income rose 29 percent to $6.8 million, from $5.3 million in the prior-year period. Both sales and operating income were at record levels for the second quarter of the year.

Said Rykhus, "We continue to see solid, sustainable growth in the energy and agricultural markets. Deliveries of geomembrane films for environmental protection were particularly strong in the second quarter, stemming from a reservoir project in Ohio. We anticipate that geomembrane films will be a rising part of our market mix for this division, due to the critical need to protect water and other environmental resources.

"Within Engineered Films we're enhancing margins and profitability through improved operating efficiencies and a more aggressive pricing strategy. While plant utilization rates continue to rise according to plan, we do have extrusion capacity to further grow this business—which we intend to do through R&D investments in new growth opportunities as well as enhancements to our existing product line," Rykhus concluded.

Strength Abroad Drives Applied Technology

Sales in the company's Applied Technology Division grew 13 percent to $40.1 million, versus $35.4 million last year—a second-quarter record. Operating income was down 2 percent, to $12.9 million from $13.2 million. The bottom-line decrease was due to relatively higher sales of lower-margin products and higher investment in research, marketing and product development.

As previously disclosed, Raven realigned its Electronic Systems Division in the quarter. Approximately 75 percent of Electronic Systems' sales went to Aerostar in the fiscal second quarter and the balance to Applied Technology. All sales and operating income amounts reflect the realignment.

Said Rykhus, "International sales remained strong in the second fiscal quarter, particularly in Brazil and Canada, and comprised 27 percent of the division's revenues. As nations evolve their agricultural practices, they're rapidly adopting Raven's advanced guided steering systems that enhance farm yields and reduce operating costs. Domestically, we remain in a strong agricultural market, tempered by the ongoing drought conditions. Sales of guided steering systems, field computers and, in particular, application controls, reflect that strength."

The company continues to cultivate and deepen relationships with key OEM partners—which expands market share and extends Raven's technology to a broader range of manufacturers. During the second quarter, Raven introduced SmarTrax 6, the newest version of Applied Technology's autosteering package. SmarTrax 6 continues to improve on line steering performance and simplifies calibration. Steering kits for SmarTrax 6 will work on more than 300 tractors and machine models.

Noted Rykhus, "We're committed to further product development in fiscal 2013. We recently held the Raven Innovation Summit at the Innovation Campus near Baltic, SD—our recently expanded research center dedicated to precision agriculture. In addition to sharing our latest product advances with customers, we were able to get their feedback and input. This kind of information is invaluable as we work to develop next-generation products."

Volatility Continues to Impact Aerostar Growth

Aerostar's sales in the second quarter were $26.8 million versus $23.2 million in the previous year's second quarter, a 15 percent gain. Most of the increase came from the addition of Vista Research revenues and an increase in Electronic Systems' sales. Vista Research was acquired in January 2012. Aerostat sales declined $3.3 million, reducing overall second quarter profitability for this division. The division reported 32 percent lower operating income of $2.3 million, versus $3.4 million a year earlier.

"Our Aerostar Division has breakout potential, but it also is subject to significant variability due to federal spending. That's what we saw in the first fiscal quarter, and again in the second, as lack of aerostat orders impacted potential top-line gains," said Rykhus. "We continue to manage the short-term responsibly, carefully monitoring discretionary spending, staffing levels and R&D. At the same time we're developing opportunities to add stability and mitigate volatility in the business, and ultimately drive longer-term growth.

"To that end, I'm pleased to report that we've had some recent success. At the end of the second quarter, Vista Research signed a $6 million contract with the US government to support and further explore applications of Vista's radar technology. We're also working with Vista on a number of other initiatives that would broaden our customer base. We see significant future potential with Vista, both here and overseas as we work to sell into new markets."

Strong Cash Position Despite Increased Investments

At July 31, 2012, cash and investment balances were $44.1 million, down from $47.0 million a year ago. Increases in capital expenditures and the $12 million payment to acquire Vista Research, Inc., in the fourth quarter last year were partially offset by cash flows from operations. Accounts receivable increased to $49.9 million compared with $43.2 million at July 31, 2011. Inventories were $50.4 million, essentially unchanged from $50.2 million one year earlier. Average accounts receivable days outstanding remained consistent year-over-year while inventory turns declined slightly. First-half operating cash flows increased to $44.5 million from $26.3 million in the prior year.

Responsibly Managing the Short Term, Focused on Longer-term Opportunities

Said Rykhus, "We remain steadfast in our commitment: helping customers solve great challenges—hunger, safety, environmental protection and energy independence. As customer needs evolve and market dynamics vary, we embrace change, and have the flexibility to shift our operational focus and innovative drive to succeed as a business.

"Looking ahead, we continue to see positive trends in Applied Technology and, in particular, Engineered Films. For the near-term, Aerostar will continue to be impacted by order variability. We're looking to mitigate that with new customer initiatives that will expand the use of persistent surveillance technologies to border and other non-military applications. Given the company's year-to-date performance and challenging near-term outlook, reaching our long-term earnings growth target of 10-15 percent will be difficult in the current year, but not impossible. We continue to believe that we can reach our target longer term."

Concluded Rykhus, "With mostly favorable market dynamics anticipated, we are focused on leveraging our market position, technology and differentiated products to build sales and income. Moreover, we're continuing to invest for the long term, expanding both our base of fixed assets and portfolio of product lines."

Conference Call Information

Raven will host a conference call today, Tuesday, August 21, 2012, at 9:00 a.m. Central Time to discuss second-quarter performance. Analysts and investors are invited to join the conference call by dialing: 1-866-393-0676. Alternatively, the live call can be accessed through the Investor Relations section of the company's website at Please log on to the website at least 15 minutes early to register on the Events & Presentations page, and download and install any necessary audio software.

A replay of the conference call will be available two hours after the call ends through 11:59 p.m. CT on Tuesday, August 28, 2012. To access the replay, dial 1-855-859-2056 and enter conference ID: 78751693. A replay also will remain available on the company's website for 90 days following the call.

About Raven Industries, Inc.

Since 1956, Raven Industries has designed and manufactured high-quality, high-value technical products. Raven is publicly traded on NASDAQ (RAVN) and has earned an international reputation for innovation, product quality, high performance and unmatched service. With strengths in engineering, manufacturing, and technological innovation, Raven serves the precision agriculture, high performance specialty films, aerospace, and electronic manufacturing services markets. Visit for more information.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. Without limiting the foregoing, the words "anticipates," "believes," "expects," "intends," "may," "plans," and similar expressions are intended to identify forward-looking statements. The company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act. Although management believes that the expectations reflected in forward-looking statements are based on reasonable assumptions, there is no assurance these assumptions are correct or that these expectations will be achieved. Assumptions involve important risks and uncertainties that could significantly affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions and commodity prices, which could affect sales and profitability in some of the company's primary markets, such as agriculture, construction and oil and gas drilling; or changes in competition, raw material availability, technology or relationships with the company's largest customers—any of which could adversely affect any of the company's product lines—as well as other risks described in the company's 10-K under Item 1A. This list is not exhaustive, and the company does not have an obligation to revise any forward-looking statements to reflect events or circumstances after the date these statements are made.

(Dollars and shares in thousands, except earnings per share) (Unaudited)
 Three Months Ended July 31,Six Months Ended July 31,
      Fav (Unfav)     Fav (Unfav)
 2012 2011 Change2012 2011 Change
Net sales $ 101,674  $ 90,344 13 % $ 219,589  $ 191,885 14 %
Cost of goods sold 71,610  62,214   148,390  130,819  
Gross profit 30,064  28,130 7 % 71,199  61,066 17 %
Research and development expenses 3,564  2,374   6,964  4,617  
Selling, general and administrative expenses 9,093  7,082   18,396  14,242  
Operating income 17,407  18,674 (7)% 45,839  42,207 9 %
Other (expense), net (96)  (76)   (148)  (89)  
Income before income taxes 17,311  18,598 (7)% 45,691  42,118 8 %
Income taxes 5,743  6,137   15,100  13,941  
Net income 11,568  12,461 (7)% 30,591  28,177 9 %
Net income attributable to noncontrolling interest 22  --   2  --  
Net income attributable to Raven Industries, Inc. $ 11,546  $ 12,461 (7)% $ 30,589  $ 28,177 9 %
Net income per common share: (a)            
 -basic$0.32 $0.34 (6)%$0.84 $0.78 8 %
 -diluted$0.32 $0.34 (6)%$0.84 $0.77 9 %
Weighted average common shares: (a)            
 -basic36,343 36,224  36,318 36,214  
 -diluted36,565 36,430  36,545 36,428  
(a) All weighted average shares and earnings per share amounts have been adjusted to reflect the two-for-one stock split effective July 25, 2012.
(Dollars in thousands) (Unaudited) 
 Three Months Ended July 31,Six Months Ended July 31,
      Fav (Unfav)     Fav (Unfav)
 2012 2011 Change2012 2011 Change
Net sales (a)            
Applied Technology $ 40,071  $ 35,433 13 % $ 93,812  $ 77,453 21 %
Engineered Films 36,785  32,459 13 % 77,879  62,550 25 %
Aerostar 26,845  23,245 15 % 52,480  53,953 (3)%
Intersegment eliminations(2,027) (793)  (4,582) (2,071)  
Total company $ 101,674  $ 90,344 13 % $ 219,589  $ 191,885 14 %
Operating income (loss) (a)            
Applied Technology $ 12,909  $ 13,236 (2)% $ 34,959  $ 29,403 19 %
Engineered Films 6,819  5,284 29 % 15,998  9,413 70 %
Aerostar 2,309  3,373 (32)% 3,751  9,774 (62)%
Intersegment eliminations17  8  (62)  --   
Total segment income $ 22,054  $ 21,901   $ 54,646  $ 48,590  
Corporate expenses(4,647) (3,227) (44)%(8,807) (6,383) (38)%
Total company $ 17,407  $ 18,674 (7)% $ 45,839  $ 42,207 9 %
(a) Effective June 1, 2012 the Company realigned the assets and team members of its Electronic Systems Division and deployed them into the Company's Aerostar and Applied Technology Divisions. The segment information presented for the three months and six months ended July 31, 2012 and 2011 reflect this realignment.
(Dollars In thousands) (Unaudited)
 July 31 January 31 July 31
 2012 2012 2011
Cash and cash equivalents $ 44,113  $ 25,842  $ 46,978
Accounts receivable, net 49,885  60,759  43,248
Inventories 50,389  54,756  50,249
Other current assets 7,373  6,202  5,741
Total current assets 151,760  147,559  146,216
Property, plant and equipment, net 73,189  61,894  48,011
Other assets, net 35,499  36,250  17,101
  $ 260,448  $ 245,703  $ 211,328
Accounts payable $ 10,835  $ 16,162  $ 16,825
Accrued and other liabilities 25,082  24,484  17,145
Total current liabilities 35,917  40,646  33,970
Other liabilities 19,204  24,467  13,229
Shareholders' equity 205,327  180,590  164,129
  $ 260,448  $ 245,703  $ 211,328
(Dollars in thousands) (Unaudited)  
 Six Months Ended July 31,  
 2012 2011  
Cash flows from operating activities:      
Net income $ 30,591  $ 28,177  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 6,036  4,159  
Other operating activities, net 7,835  (6,073)  
Net cash provided by operating activities 44,462  26,263  
Cash flows from investing activities:      
Capital expenditures (16,870)  (11,000)  
Other investing activities, net 22  499  
Net cash used in investing activities (16,848)  (10,501)  
Cash flows from financing activities:      
Dividends paid (7,618)  (6,509)  
Other financing activities, net (1,704)  62  
Net cash used in financing activities (9,322)  (6,447)  
Effect of exchange rate changes on cash (21)  100  
Net increase in cash and cash equivalents 18,271  9,415  
Cash and cash equivalents at beginning of period 25,842  37,563  
Cash and cash equivalents at end of period $ 44,113  $ 46,978  
CONTACT: At the Company:

         Tom Iacarella, Vice President and CFO



         At Padilla Speer Beardsley:

         Matt Sullivan