Raven Industries, Inc. (the Company; NASDAQ:RAVN) today
reported financial results for the first quarter that ended April
30, 2020.
First Quarter Fiscal 2021 Noteworthy Items
- Economic decline from the pandemic adversely impacted sales in
all three operating divisions, with Engineered Films experiencing
the most significant impact given its exposure to heavily affected
end-markets;
- The health and well-being of the Company's team members is
being prioritized during this unprecedented time, with significant
measures being taken to enhance personal safety and increase social
distancing;
- Strong liquidity position enhanced during the first quarter, $2
million in positive cash flow generated;
- Net sales in Applied Technology increased versus the prior year
despite challenges arising from the pandemic;
- Engineered Films' net sales declined 25 percent with all
markets, except ag, experiencing a sharp decline in end-market
demand;
- Ownership of the remaining interest in DOT Technology Corp.
(DOT®) was accelerated, with the transaction expected to close in
the second quarter of fiscal 2021;
- Aerostar and Engineered Films started temporary production of
personal protective equipment (PPE) for medical personnel across
the country to assist front-line workers in caring for infected
patients.
First Quarter Results
Consolidated net sales for the first quarter of fiscal 2021 were
$86.5 million, down 11.9 percent versus the first quarter of fiscal
2020. All three operating divisions faced significant challenges
related to the pandemic throughout the last two months in the first
quarter, given our fiscal year-end, with the revenue shortfall
being driven mainly by a decline in Engineered Films along with
lower net sales in Aerostar. Despite the substantial global
economic challenges, Applied Technology achieved year-over-year
sales growth versus the first quarter of fiscal 2020 by leveraging
its industry-leading products and strong customer
relationships.
Consolidated operating income for the first quarter of fiscal
2021 was $3.9 million versus operating income of $15.1 million in
the first quarter of fiscal 2020, decreasing 74.0 percent
year-over-year. Included in the results for the first quarter of
fiscal 2021 was $3.8 million of expenses associated with Raven
Autonomy™. The year-over-year decrease in operating income was
driven principally by the investment in Raven Autonomy™, a
significant decline in operating leverage within Engineered Films
and delayed fulfillment of stratospheric platform contracts in
Aerostar stemming from the pandemic.
Net income attributable to Raven for the first quarter of fiscal
2021 was $4.0 million, or $0.11 per diluted share, versus $13.2
million, or $0.36 per diluted share, in last year's first quarter.
The investment in Raven Autonomy™ reduced net income attributable
to Raven by $2.9 million, or $0.08 per diluted share, in the first
quarter of fiscal 2021.
Balance Sheet and Cash Flow
At the end of the first quarter of fiscal 2021, cash and cash
equivalents totaled $72.6 million. During the first quarter, the
Company initiated a precautionary $50 million drawdown of its
revolving credit facility to increase cash on hand. In addition,
the Company generated positive cash flow during the quarter,
increasing cash sequentially versus the previous quarter by $2
million. The Company is placing a strong emphasis on enhancing cash
flow and reducing net working capital given the substantial
uncertainties brought about by the current economic environment.
Across all three operating divisions, the Company is taking
aggressive actions to reduce inventory levels, extend and optimize
payment terms, and manage customer credit terms and collections to
reduce accounts receivable. The Company is also delaying a
significant portion of planned capital expenditures until there is
more clarity on the duration and extent of this economic
downturn.
Applied Technology Division
Net sales for Applied Technology in the first quarter of fiscal
2021 were $42.0 million, up slightly versus the first quarter of
the prior year. Order activity remained strong for Applied
Technology's core products; however, the Company's enhanced safety
precautions temporarily reduced workforce availability and
precluded certain orders from being fulfilled during the first
quarter. The sales development for the division was relatively
strong, especially considering the current economic environment.
Increased sales to OEMs of new and existing products in the current
quarter greatly benefited the division.
Division operating income in the first quarter of fiscal 2021
was $8.9 million, down $4.3 million or 32.5 percent versus the
first quarter of fiscal 2020. The decline was primarily driven by
the division's strategic investment in Raven Autonomy™. This year's
first quarter results included $3.8 million of Raven Autonomy™
related expenses, primarily research and development investments to
drive the commercialization of its autonomous ag solutions.
Engineered Films Division
Net sales for Engineered Films in the first quarter of fiscal
2021 were $33.4 million, down $10.9 million or 24.6 percent
year-over-year. In the first quarter, the pandemic adversely
impacted most end-markets, with the largest impacts being
concentrated in the geomembrane (specifically in the energy
sub-market), construction and industrial markets. Historically weak
demand for oil, exacerbated by a worldwide over-supply situation,
drove West Texas Intermediate prices to lows not previously
realized and resulted in a 50 percent decline in rig counts within
the Permian Basin. The division's sales into this end-market
declined commensurately in the first quarter. Sales into the
industrial and construction markets declined approximately 20
percent versus the prior year; however, sales into the ag market
grew significantly due to increased market share for high-value
grain and silage covers.
Division operating income in the first quarter of fiscal 2021
was $1.6 million, down $4.8 million or 74.7 percent versus the
first quarter of fiscal 2020. Lower sales volume and resulting
negative operating leverage put significant pressure on the
profitability of the division in the first quarter. In addition,
given the current economic environment and the impact this has had
on certain customers, the division increased its accounts
receivable reserves compared to the first quarter of the prior
year. The division continues to monitor its customer credit
situations closely, particularly within the geomembrane market
(specifically in the energy sub-market).
Aerostar Division
Net sales for Aerostar in the first quarter of fiscal 2021 were
$11.2 million, down $1.0 million or 8.5 percent versus the first
quarter of fiscal 2020. The decline in net sales was driven by
lower stratospheric platform revenue as Department of Defense
travel restrictions prevented the execution on certain contracts.
The division expects travel restrictions to be temporary, but the
timing of contract delivery could continue to be pushed out if
travel restrictions remain in place for an extended period of time.
Despite these challenges, the backlog and underlying fundamental
demand remains very strong for the division's radar and
stratospheric product platforms and technical services.
Additionally, the division is expected to complete the fulfillment
of its current aerostat contract during this fiscal year. This is
expected to generate an additional $7 million in sales through the
rest of this fiscal year.
Division operating income in the first quarter of fiscal 2021
was $0.3 million, down $1.7 million or 85.3 percent versus the
first quarter of fiscal 2020. The year-over-year decline was driven
by delayed stratospheric platform contract fulfillment due to
pandemic-related travel restrictions and a strategic increase in
research and development expenses to advance product and service
capabilities in both radar systems and stratospheric platforms. The
capabilities being developed are very unique and position the
division for strong future growth.
Update on Strategic Platforms for Growth
In Raven Autonomy™, the ownership of the remaining interest in
DOT Technology Corp. was accelerated in the first quarter of fiscal
2021. This transaction is expected to close in June and will
further streamline the development of autonomous technology within
Applied Technology. In addition, the Company is actively advancing
the perception, path planning and AutoCart® technology purchased
with the acquisition of Smart Ag and will be launching an
autonomous grain cart solution in fiscal 2021 in advance of the
fall harvest. The Company expects strong market acceptance for
AutoCart® and is continuing to develop system capabilities for
additional use cases and future international expansion. The
Company remains committed to sustaining its significant investment
in Raven Autonomy™ in fiscal 2021 and beyond, despite the economic
environment, due to its confidence in the substantial market
potential that exists for autonomous ag solutions.
The Company is confident in the long-term prospects for Raven
Composites™ as a strategic platform for growth; however, further
investment is being temporarily delayed given the current
environment. As economic conditions improve, the Company will begin
its planned, aggressive investments to drive Engineered Films to
become an industry leader in the reinforced composites market.
Supplemental Raven Autonomy™ Financial Information
Raven Autonomy™ is a key strategic investment platform that was
launched in the fourth quarter of fiscal 2020. Raven Autonomy™ is
expected to operate at a loss for the next two years as products
are developed and commercialized. The Company strongly believes in
the long-term potential from Raven Autonomy™ to be a tremendous
growth opportunity. The financial impact of Raven Autonomy™ in the
first quarter of fiscal 2021 was as follows:
First Quarter Fiscal 2021
Financial Impact of Raven Autonomy™
(dollars in millions, except
per share amounts)
Increase (Decrease)
Net sales
$
0.6
Gross profit
(0.2
)
Applied Technology Operating income
(3.8
)
Consolidated Operating income
(3.8
)
Consolidated EBITDA2
(3.7
)
Net income attributable to Raven
Industries, Inc.
(2.9
)
Net income per common share - Diluted
$
(0.08
)
Fiscal 2021 Outlook
"I am very proud of the resiliency and innovative spirit of our
team members during these unprecedented times," said Dan Rykhus,
President and CEO. "By adapting to different working conditions and
solving challenges every day, our team members have done an
outstanding job carrying out the values our company is built
upon.
"In responding to the pandemic, we identified four strategic
priorities for our company:
- Upholding the Raven Way;
- Emphasizing cash flow and liquidity;
- Protecting the core business; and
- Continuing to aggressively invest in Raven Autonomy™.
"With respect to upholding the Raven Way, we are prioritizing
the health and well-being of our team members through consistent
and transparent communications, modifying our policies to encourage
remote work, establishing options for team members to take a leave
of absence when necessary and adjusting our production processes to
enhance social distancing. Additionally, we have shown our
commitment to saving and protecting lives through the production of
personal protective equipment for front-line medical personnel. We
are very proud of how our team members responded when the need to
help arose.
"From a liquidity perspective, we are heightening our emphasis
on cash flow and working capital management. We took aggressive
actions to put processes in place to reduce our inventory while
also adjusting terms for accounts receivable and accounts payable
with the goal of minimizing net working capital across all of our
operating divisions. We also took a close look at our planned
capital expenditures and reduced the projected spending by more
than $30 million for the fiscal year. These targeted actions will
assist in maintaining our strong liquidity position.
"We are committed to protecting our core to ensure the long-term
success of our company, which we are balancing with active measures
to reduce spending and preserve cash. Challenges will continue in
the coming quarters, but we will not take actions that sacrifice
the fundamentals of our business. We have maintained our highly
talented team and have had success in taking advantage of our
diverse portfolio by adjusting resources across our divisions to
areas where demand is higher. In addition, spending reductions have
been concentrated in less strategic, discretionary expenses within
Raven. During the quarter, we increased our investment in research
and development and remain committed to delivering industry-leading
products and services to our customers.
"On Raven Autonomy™, we are fully committed and very encouraged
with this strategic initiative. This is the most significant growth
investment the Company has ever made. We are enthusiastic about the
tremendous growth potential of autonomous agriculture solutions and
our ability to win in this marketplace. We have a technological
advantage today, and we are going to continue to aggressively
invest to further this advantage. Our strong balance sheet position
is a clear competitive edge in this current economic
environment.
"Fiscal 2021 has brought, and will continue to bring forward,
unique challenges, but I am confident in our ability to execute on
our four strategic priorities while ensuring the health and
well-being of our team members. We continue to expect a relatively
strong year within Applied Technology, with year-over-year revenue
growth from new products. However, low commodity prices, declines
in ethanol production and an anticipated tightening of ag lending
is expected to limit the division's growth during the remainder of
fiscal 2021. Engineered Films will face obstacles as the pandemic
has substantial impacts within the division's end-markets,
especially in the energy sub-market. Despite the challenges
Engineered Films faces, I am convinced our talented team members
will continue to meet the needs of our customers and set the
foundation for long-term growth. We expect Aerostar to be stable
year-over-year, even with the related challenges in the first
quarter, and I am excited about the division's prospects and its
significant breakout potential. Overall, with conditions constantly
changing, the length and duration of this economic slowdown is
still uncertain, but we are well prepared to respond to the
challenges we will face. The fundamentals of our company remain
very strong, and I have great confidence in our long-term success,"
concluded Rykhus.
Regulation G
The information presented in this earnings release regarding
consolidated and segment 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. Additionally, 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.
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 April
30,
2020
2019
Fav (Un) Change
Net sales
$
86,496
$
98,178
(11.9)
%
Cost of sales
58,029
63,112
Gross profit
28,467
35,066
(18.8)
%
Gross profit percentage
32.9
%
35.7
%
Research and development expenses
10,505
7,271
Selling, general, and administrative
expenses
14,023
12,674
Operating income
3,939
15,121
(74.0)
%
Operating income percentage
4.6
%
15.4
%
Other income (expense), net
(468
)
(69
)
Income before income taxes
3,471
15,052
(76.9)
%
Income tax expense (benefit)
(478
)
1,842
Net income
3,949
13,210
(70.1)
%
Net income (loss) attributable to the
noncontrolling interest
(98
)
—
Net income attributable to Raven
Industries, Inc.
$
4,047
$
13,210
(69.4)
%
Net income per common share:
- Basic
$
0.11
$
0.37
(70.3)
%
- Diluted
$
0.11
$
0.36
(69.4)
%
Weighted average common shares:
- Basic
35,928
36,067
- Diluted
36,066
36,393
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
April 30
January 31
April 30
2020
2020
2019
ASSETS
Cash and cash equivalents
$
72,581
$
20,707
$
61,370
Accounts receivable, net
60,336
62,552
67,792
Inventories, net
57,101
53,899
58,042
Other current assets
6,268
5,436
7,263
Total current assets
196,286
142,594
194,467
Property, plant and equipment, net
102,061
100,850
105,236
Goodwill
104,608
106,509
50,845
Intangible assets, net
43,826
46,217
15,978
Other assets
11,552
7,087
7,624
TOTAL ASSETS
$
458,333
$
403,257
$
374,150
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable
$
20,392
$
14,893
$
16,179
Accrued and other liabilities
24,042
23,030
22,276
Redeemable noncontrolling interest
payable
17,172
—
—
Total current liabilities
61,606
37,923
38,455
Long-term debt
50,364
225
—
Other liabilities
33,939
29,161
23,012
Total liabilities
145,909
67,309
61,467
Redeemable noncontrolling interest
—
21,302
—
Shareholders' equity
312,424
314,646
312,683
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
458,333
$
403,257
$
374,150
Net Working Capital and Net
Working Capital Percentage1
Accounts receivable, net
$
60,336
$
62,552
$
67,792
Plus: Inventories, net
57,101
53,899
58,042
Less: Accounts payable
20,392
14,893
16,179
Net working capital1
$
97,045
$
101,558
$
109,655
Annualized net sales
$
345,984
$
343,044
$
392,712
Net working capital percentage1
28.0
%
29.6
%
27.9
%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended April
30,
2020
2019
Cash flows from operating activities:
Net income
$
3,949
$
13,210
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
4,176
4,082
Other operating activities, net
3,726
(8,530
)
Net cash provided by operating
activities
11,851
8,762
Cash flows from investing activities:
Capital expenditures
(4,434
)
(1,570
)
Purchases of investments
(98
)
(843
)
Proceeds from sale of assets
251
—
Other investing activities, net
(9
)
(28
)
Net cash used in investing activities
(4,290
)
(2,441
)
Cash flows from financing activities:
Dividends paid
(4,658
)
(4,682
)
Payments for common shares repurchased
—
(2,281
)
Proceeds from debt
50,150
—
Payment of acquisition-related
contingent liabilities
—
(620
)
Other financing activities,
net
(844
)
(3,082
)
Net cash provided by (used in)
financing activities
44,648
(10,665
)
Effect of exchange rate changes
on cash
(335
)
(73
)
Net increase (decrease) in cash
and cash equivalents
51,874
(4,417
)
Cash and cash equivalents at
beginning of period
20,707
65,787
Cash and cash equivalents at end
of period
$
72,581
$
61,370
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY
SEGMENT
(Dollars in thousands)
(Unaudited)
Three Months Ended April
30,
2020
2019
Fav (Un) Change
Net sales
Applied Technology
$
42,007
$
41,725
0.7%
Engineered Films
33,398
44,292
(24.6)%
Aerostar
11,151
12,190
(8.5)%
Intersegment eliminations
(60
)
(29
)
Consolidated net sales
$
86,496
$
98,178
(11.9)%
Operating income
Applied Technology
$
8,939
$
13,236
(32.5)%
Engineered Films
1,607
6,363
(74.7)%
Aerostar
293
1,996
(85.3)%
Intersegment eliminations
40
1
Total segment income
$
10,879
$
21,596
(49.6)%
Corporate expenses
(6,940
)
(6,475
)
(7.2)%
Consolidated operating income
$
3,939
$
15,121
(74.0)%
Operating income percentages
Applied Technology
21.3
%
31.7
%
(1040)bps
Engineered Films
4.8
%
14.4
%
(960)bps
Aerostar
2.6
%
16.4
%
(1,380)bps
Consolidated operating income
4.6
%
15.4
%
(1080)bps
RAVEN INDUSTRIES, INC.
EBITDA REGULATION G
RECONCILIATION2
(Dollars in thousands)
(Unaudited)
Three Months Ended April
30,
Fav (Un)
2020
2019
Change
Applied Technology
Reported Operating income
$
8,939
$
13,236
(32.5
)%
Plus: Depreciation and amortization
1,100
1,028
7.0
%
ATD EBITDA
$
10,039
$
14,264
(29.6
)%
ATD EBITDA % of Net Sales
23.9
%
34.2
%
Engineered Films
Reported Operating income
$
1,607
$
6,363
(74.7
)%
Plus: Depreciation and amortization
2,412
2,297
5.0
%
EFD EBITDA
$
4,019
$
8,660
(53.6
)%
EFD EBITDA % of Net Sales
12.0
%
19.6
%
Aerostar
Reported Operating income
$
293
$
1,996
(85.3
)%
Plus: Depreciation and amortization
239
221
8.1
%
Aerostar EBITDA
$
532
$
2,217
(76.0
)%
Aerostar EBITDA % of Net Sales
4.8
%
18.2
%
Consolidated
Net income attributable to Raven
Industries Inc.
$
4,047
$
13,210
(69.4
)%
Interest (income) expense, net
144
(230
)
Income tax expense (benefit)
(478
)
1,842
Plus: Depreciation and amortization
4,176
4,082
Consolidated EBITDA
$
7,889
$
18,904
(58.3
)%
Consolidated EBITDA % of Net Sales
9.1
%
19.3
%
____________________________
1
Net working capital is defined as accounts
receivable, (net) plus inventories, (net) less accounts payable.
Net working capital percentage is defined as net working capital
divided by four times quarterly sales for each respective
period.
2
EBITDA is a non-GAAP financial measure
defined on a consolidated basis as net income attributable to Raven
Industries, Inc., plus income taxes, plus depreciation and
amortization expense, plus interest (income) 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200519005968/en/
Jared Stearns Investor Relations Manager Raven Industries, Inc.
+1 (605) 336-2750
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