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Raven Industries Reports Second Quarter Fiscal 2018 Results

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Aug 23, 2017

Raven Industries Reports Second Quarter Fiscal 2018 Results

SIOUX FALLS, S.D., Aug. 23, 2017 (GLOBE NEWSWIRE) -- Raven Industries, Inc.(NASDAQ:RAVN) today reported financial results for the second quarter that ended July 31, 2017.

Noteworthy Items:

  • Consolidated net sales and operating income increased approximately 28 percent and 75 percent year-over-year, respectively, with all divisions achieving strong results;
  • Engineered Films sales increased 33.8% and division operating income increased 43.4%, driven by strong growth in the Geomembrane and Industrial markets;
  • Recently announced acquisition of Colorado Lining International, Inc. (CLI) positions Engineered Films for expanded vertical integration within the Geomembrane market;
  • During the second quarter, Aerostar was awarded a stratospheric balloon contract with a new customer, further broadening the customer base and continuing to build the momentum of the division's stratospheric balloon platform;
  • Applied Technology continued to invest aggressively in research and development and channel development for long-term growth.

Second Quarter Results:        
Net sales for the second quarter of fiscal 2018 were $86.6 million, up 28.1 percent versus the second quarter of fiscal 2017. All three divisions drove significant growth year-over-year in the second quarter.

Operating income for the second quarter of fiscal 2018 was $11.7 million versus operating income of $6.7 million in the second quarter of fiscal 2017, increasing 74.7 percent year-over-year. Operating margin increased 360 basis points year-over-year, from 9.9 percent of net sales to 13.5 percent of net sales. The significant improvement in profitability was principally driven by strong operating leverage on higher sales volume.  

Net income for the second quarter of fiscal 2018 was $8.2 million, or $0.23 per diluted share, versus net income of $4.5 million, or $0.12 per diluted share, in last year's second quarter. All three divisions made significant contributions to the substantial growth in diluted earnings per share.

Balance Sheet and Cash Flow:
At the end of the second quarter of fiscal 2018, cash and cash equivalents totaled $55.2 million, up $4.7 million versus the prior quarter.

Net working capital as a percentage of annualized net sales1 improved 300 basis points year-over-year, from 27.4 percent in the second quarter of last year to 24.4 percent in this year's second quarter. The decrease in net working capital percentage1 was the result of higher payables, as well as managing inventory and receivables efficiently with the substantial increase in sales versus the prior year.

Applied Technology Division:
Net sales for Applied Technology in the second quarter of fiscal 2018 were $28.4 million, up 25.4 percent versus the second quarter of fiscal 2017. New product sales, expanded OEM relationships, and higher sales of direct injection systems continued to drive growth year-over-year.

Division operating income was $6.6 million, up 28.3 percent versus the second quarter of fiscal 2017, driven primarily by higher sales volume and improved operating leverage. The division continues to see strong incremental margins on improved sales volume, as operating margin increased from 22.8 percent in the second quarter of last year to 23.3 percent in this year's second quarter.

Engineered Films Division:
Net sales for Engineered Films were $49.0 million, up 33.8 percent year-over-year. Volume, measured in pounds sold, increased 35.0 percent versus the prior year. Consistent with the past three quarters, the increase in sales was driven by markedly higher sales into the Geomembrane market, with the Industrial and Agriculture markets also significantly contributing to division growth versus the prior year. 

Operating income in the second quarter of fiscal 2018 was $9.6 million, up $2.9 million or 43.4 percent versus the second quarter of fiscal 2017. The year-over-year increase in operating income was principally driven by strong operating leverage and higher sales volume. Division operating margin increased 130 basis points year-over-year, from 18.2 percent to 19.5 percent, driven by improved capacity utilization and continued spending discipline.

Aerostar Division:
Net sales for Aerostar during the second quarter of fiscal 2018 were $9.4 million, up $1.0 million or 11.3 percent versus the second quarter of fiscal 2017. The year-over-year increase in sales was primarily driven by growth in the stratospheric balloon platform.

Operating income in the second quarter of fiscal 2018 was $1.4 million, versus an operating loss of $0.3 million in the previous year's second quarter. Adjustments in operating expenses while focusing on strategic research and development spending contributed to the improved financial performance.

Fiscal 2018 Outlook:
"We are very pleased with the progress made and performance achieved by all three divisions throughout the first half of the year," said Dan Rykhus, President and CEO. "The Company delivered strong growth in sales and operating income. Year-over-year comparisons are getting progressively more challenging and will continue to do so through the remainder the year. However, we believe we are on track to deliver meaningful growth in revenues and operating income in fiscal year 2018. We remain focused on innovation in our core products and outstanding service to our end-markets, while also making strategic acquisitions, such as CLI, to supplement our organic growth strategy."

Regulation G:
The information presented in this earnings release regarding earnings before interest, taxes, depreciation, and amortization (EBITDA) do not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the tables below.

Conference Call Information:
The Company will host an investor conference call to discuss second quarter fiscal 2018 results tomorrow, Thursday, August 24, 2017, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). The conference call audio will be available to all interested parties via a simultaneous webcast that can be accessed through the Investor Relations section of the Company's website at http://investors.ravenind.com. Analysts and investors are invited to join the conference call by dialing: +1 (866) 393-0676. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event will be archived on the Company's website.

About Raven Industries, Inc.:
Raven Industries (NASDAQ:RAVN) is dedicated to providing innovative, high-value products and solutions that solve great challenges throughout the world. Raven is a leader in precision agriculture, high-performance specialty films, and lighter-than-air technologies. Since 1956, Raven has designed, produced, and delivered exceptional solutions, earning the company a reputation for innovation, product quality, high performance, and unmatched service. For more information, visit http://ravenind.com.

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. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act.

Generally, forward-looking statements can be identified by words such as "may," "will," "plan," "believe," "expect," "intend," "anticipate," "potential," "should," "estimate," "predict," "project," "would," and similar expressions, which are generally not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our future operating or financial performance or events, our strategy, goals, plans and projections regarding our financial position, our liquidity and capital resources, and our product development — are forward-looking statements.

Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements, because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain known risks, as described in the Company's 10K under Item 1A, and unknown risks and uncertainties that may cause actual results to differ materially from our Company's historical experience and our present expectations or projections.

 
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands, except earnings per share) (Unaudited)
 
  Three Months Ended July 31, Six Months Ended July 31,
  2017 2016 Fav (Un)
Change		 2017 2016 Fav (Un)
Change
Net sales $86,610  $67,598   28.1% $180,145  $135,958  32.5%
Cost of goods sold 60,097  48,683     121,676  96,926    
Gross profit 26,513  18,915  40.2% 58,469  39,032  49.8%
Gross profit percentage 30.6% 28.0%     32.5% 28.7%   
                       
Research and development expenses 4,256  3,915     8,236  8,324    
Selling, general and administrative expenses 10,557  8,304     20,055  15,962    
Long-lived asset impairment loss —  —     259  —    
Operating income 11,700  6,696  74.7% 29,919  14,746  102.9%
Operating income percentage 13.5% 9.9%    16.6% 10.8%   
                       
Other income (expense), net (63) (209)    $(293 ) $(306)   
Income before income taxes 11,637  6,487  79.4% 29,626  14,440  105.2%
               
Income tax expense  3,403  1,993     9,044  4,427    
Net income 8,234  4,494  83.2% 20,582  10,013  105.6%
               
Net income attributable to noncontrolling interest (1) (1)    (1) 1    
Net income attributable to Raven Industries $8,235  $4,495  83.2% $20,583  $10,012   105.6%
               
Net income per common share:              
- basic $0.23  $0.12  91.7% $0.57  $0.28  103.6%
- diluted $0.23  $0.12  91.7% $0.56  $0.28  100.0%
             
Weighted average common shares:            
- basic 36,205  36,207    36,192  36,311   
- diluted 36,554  36,250    36,515  36,362   
             


RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (Unaudited)
 
 July 31 January 31 July 31
 2017 2017 2016
ASSETS     
Cash, and cash equivalents$55,197  $50,648  $40,123 
Accounts receivable, net46,398  43,143  38,645 
Inventories50,844  42,336  45,502 
Other current assets3,670  2,689  4,958 
Total current assets156,109  138,816  129,228 
      
Property, plant and equipment, net105,723  106,324  110,706 
Goodwill and amortizable intangibles, net52,069  52,697  53,640 
Other assets, net3,295   3,672  3,783 
Total Assets$ 317,196  $301,509  $297,357 
      
LIABILITIES AND SHAREHOLDERS' EQUITY     
Accounts payable$12,597  $8,467  $10,076 
Accrued and other liabilities19,180  19,915  14,998 
Total current liabilities31,777  28,382  25,074 
      
Other liabilities12,348  13,696  13,827 
Shareholders' equity273,071  259,431   258,456 
Total Liabilities and Shareholders' Equity$317,196  $301,509  $297,357 
                    
Net Working Capital and Net Working Capital Percentage1
Accounts receivable, net $  46,398   $  43,143  $  38,645 
Plus:  Inventories    50,844      42,336     45,502 
Less: Accounts payable    12,597      8,467     10,076 
Net working capital1 $  84,645   $  77,012  $  74,071 
                    
Net working capital percentage1    24.4%     27.9%    27.4%


RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Unaudited)
 
 Six Months Ended July 31,
 2017 2016
Cash flows from operating activities:   
Net income$20,582  $10,013  
Adjustments to reconcile net income to net cash provided by operating  activities:   
Depreciation and amortization7,184  7,633 
Long-lived asset impairment loss259  — 
Other operating activities, net(8,164) 7,912 
Net cash provided by operating activities19,861  25,558 
    
Cash flows from investing activities:   
Capital expenditures(5,223) (2,168)
Proceeds from sale or maturity of investments250  250 
Purchases of investments(255) (500)
(Disbursements) proceeds from settlement of liabilities, sale of assets(344) 1,117 
Other investing activities, net(17) (339)
Net cash used in investing activities(5,589) (1,640)
    
Cash flows from financing activities:   
Dividends paid(9,384) (9,428)
Payments for common shares repurchased—  (7,702)
Payment of acquisition-related contingent liabilities(320) (282)
Other financing activities, net(299) (256)
Net cash used in financing activities(10,003) (17,668)
    
Effect of exchange rate changes on cash280  91 
    
Net increase (decrease) in cash and cash equivalents4,549  6,341 
Cash and cash equivalents at beginning of period50,648  33,782 
Cash and cash equivalents at end of period$55,197  $40,123 
        


RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY SEGMENT
(Dollars in thousands) (Unaudited)
 
  Three Months Ended July 31, Six Months Ended July 31,
  2017 2016 Fav (Un)
Change		 2017 2016 Fav (Un)
Change
Net sales            
Applied Technology $28,424  $22,668  25.4% $68,914  $54,124  27.3%
Engineered Films 49,028  36,656  33.8% 92,583  65,756  40.8%
Aerostar 9,369  8,415  11.3% 18,975   16,310  16.3%
Intersegment eliminations (211) (141)    (327) (232)   
Total Company $86,610  $67,598  28.1% $180,145  $135,958  32.5%
               
Operating income (loss)              
Applied Technology $6,637  $5,172  28.3% $ 20,090  $13,865  44.9%
Engineered Films 9,551   6,659  43.4% 18,271  10,537  73.4%
Aerostar 1,388  (251) 653.0% 2,806  (429) 754.1%
Intersegment eliminations 11  —      9  (5)   
Total segment income $17,587  $11,580  51.9% $ 41,176  $23,968  71.8%
Corporate expenses (5,887) (4,884) (20.5)% (11,257) (9,222) (22.1)%
Total Company $11,700  $6,696  74.7% $29,919  $14,746  102.9%
               
Operating income (loss) percentages              
Applied Technology 23.3% 22.8%  50bps 29.2% 25.6% 360bps
Engineered Films 19.5%  18.2% 130bps 19.7% 16.0% 370bps
Aerostar 14.8% (3.0)% 1780bps 14.8% (2.6)% 1740bps
Total Company 13.5%  9.9% 360bps 16.6% 10.8%  580bps
             


RAVEN INDUSTRIES, INC.
EBITDA REGULATION G RECONCILIATION2
(Dollars in thousands) (Unaudited)
 
  Three Months Ended July 31, Six Months Ended July 31,
      Fav (Un)     Fav (Un)
Segments 2017 2016 Change 2017 2016 Change
Applied Technology            
Reported operating income $6,637  $5,172  28.3% $20,090  $13,865  44.9%
Plus: Depreciation and amortization 822  956  (14.0)% 1,652  1,908  (13.4)%
ATD EBITDA $7,459  $6,128  21.7% $21,742  $15,773  37.8%
ATD EBITDA % of Net Sales 26.2% 27.0%    31.5% 29.1%   
                       
Engineered Films                       
Reported operating income $9,551  $6,659  43.4% $18,271  $10,537  73.4%
Plus: Depreciation and amortization 2,099  2,173  (3.4)% 4,165  4,230  (1.5)%
EFD EBITDA $11,650  $8,832  31.9% $22,436   $14,767  51.9%
EFD EBITDA % of Net Sales 23.8% 24.1%    24.2% 22.5%   
                       
Aerostar                       
Reported operating income (loss) $1,388  $(251) 653.0% $ 2,806  $(429) 754.1%
Plus: Depreciation and amortization 344  418  (17.7)% 761  837  (9.1)%
Aerostar EBITDA $1,732  $167  937.1% $3,567  $408  774.3%
Aerostar EBITDA % of Net Sales 18.5% 2.0%    18.8% 2.5%   
                        
Consolidated Raven                      
Net Income $8,235  $4,495  83.2% $20,583  $10,012  105.6%
Interest expense (income), net 47  76     115  148    
Income tax expense 3,403  1,993     9,044  4,427     
Depreciation and amortization 3,570  3,871     7,184  7,633    
EBITDA $15,255  $10,435  46.2% $36,926  $22,220  66.2%
EBITDA % of Net Sales 17.6% 15.4%   20.5% 16.3 %  

____________________________

1 Net working capital is a defined as accounts receivable (net) plus inventories less accounts payable. Net working capital percentage is defined as net working capital divided by four times quarterly sales.

2  EBITDA is a non-GAAP financial measure defined on a consolidated basis as net income/(loss) attributable to Raven Industries, Inc., plus income taxes, plus depreciation and amortization expense, plus interest expense (net). On a segment basis, it is defined as operating income plus depreciation expense and amortization expense. EBITDA margin is defined as EBITDA divided by net sales.

Contact Information:

Bo Larsen

Investor Relations Director

Raven Industries, Inc.

+1 (605) 336-2750

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Source: Raven Industries, Inc.

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