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Raven Industries Reports Fiscal 2014 Second-Quarter Results



Raven Industries Reports Fiscal 2014 Second-Quarter Results

SIOUX FALLS, S.D., Aug. 19, 2013 (GLOBE NEWSWIRE) -- Raven Industries, Inc.
(Nasdaq:RAVN) today reported sales and earnings for its fiscal 2014 second
quarter ended July 31, 2013.

Raven's second-quarter net income was $8.3 million, or $0.23 per diluted
share, versus year-earlier net income of $11.5 million, or $0.32 per diluted
share. For the second quarter, sales were $93.4 million, versus $101.7 million
in the prior-year second quarter. Sales rose modestly in the Engineered Films
division and were down slightly in Applied Technology. Reflecting the current
constraints on federal spending, Aerostar sales declined 23 percent.

For the six months, net income totaled $22.3 million, or $0.61 per diluted
share, versus $30.6 million, or $0.84 per diluted share, in fiscal 2013.
First-half sales were $197.1 million, down from last year's $219.6 million.
The company anticipates a better financial performance in the fiscal 2014
second half.

"As expected, the economic headwinds and near-term challenges we faced in the
fiscal first quarter, persisted in our second quarter," said Daniel A. Rykhus,
Raven's president and chief executive officer. "Raven continues to become a
more technology-focused company—centered on solving the specific great
challenges of hunger, security, energy independence and natural resource
preservation—transitioning from a company with a strong contract manufacturing
orientation.

"We are 100-percent committed to executing our strategy, generating profitable
revenue from our existing core markets while driving growth in closely
adjacent opportunities. Our pipeline of past investments in technology,
capacity and market expansions, offers plenty of growth and stability while
staying focused on markets and strategies that we understand."

Multi-layer Films for High-Value Agriculture Markets Drive Engineered Films
Growth

For the fiscal 2014 second quarter, sales in Engineered Films rose to $37.3
million from $36.8 million a year ago. Operating income decreased to $4.8
million, from $6.8 million in the year-ago quarter.

Said Rykhus, "Within this division, we're seeing strength in agricultural
barrier films, which had double-digit growth over the prior year—fueled by
sales of fumigation and silage films. This growth was substantially offset by
lower deliveries of geomembrane films which were particularly strong in the
second quarter a year ago, stemming from a reservoir project in Ohio. We are
encouraged by signs that the energy market is stabilizing. And within energy,
we actually posted a sequential sales increase from the fiscal 2014 first
quarter."

Operating income was constrained in the quarter due to substantially higher
resin costs compared to the prior year, combined with market conditions that
did not allow pass through, as well as lower manufacturing efficiencies due to
new line start-up costs. The company is working swiftly to address these
issues through process improvements, along with utilization of its reclaim
production line—which is designed to capture and recycle excess polymer
material from internal manufacturing processes.

"Despite a difficult environment, we continue to expect revenue growth for
Engineered Films for the full year. In the near term, we're capitalizing on
the opportunities with agricultural barrier films, working with our energy
market distribution partners to increase energy sales into the Bakken
formation, and growing sales for our new multi-layer geomembrane products that
help reduce the environmental effects of landfills," said Rykhus.

Aerostar Enhances Vista Research Sales and Announces Collaboration Effort With
Google

Aerostar's sales in the second quarter were $20.7 million versus $26.8 million
in the year-earlier quarter. The decrease was expected and primarily due to
reduced demand from U.S. government agency customers—specifically within
parachutes and to a lesser extent tethered aerostats—and the planned
transition away from avionics customers. Divisional operating income was $1.0
million, versus $2.3 million in fiscal 2013—primarily due to lower volume.

During the quarter, Raven announced that Google plans to use Aerostar-designed
and developed high-tech balloons as part of its new project for
balloon-powered Internet access, Project Loon. While the program is still in
its early stages, a successful trial took place in June involving 30 balloons
providing Internet connectivity to an area covering nearly 10,000 square
kilometers. For the remainder of fiscal 2014, Raven anticipates modest
revenues from the project with the possibility of significant revenue growth
in the first half of fiscal 2015, subject to continued success as Project Loon
progresses.

Within Aerostar, Vista Research continued to deliver strong sales, rising
approximately 20 percent, driven by support activities under existing
contracts for Vista's Smart Sensing Radar Systems. Over the past year Raven
has accelerated investments in advancing our radar technology through improved
designs, anti-tamper software, government certifications, ITAR compliance and
approvals, marketing and months-long tests and demonstration efforts.

Based on these efforts and successful field test performance results with the
Vista radar systems, Vista Research has been selected by a large U.S. prime
contractor as a preferred radar solution for future U.S. and export
opportunities. This has already resulted in the sale of multiple systems
through the new channel.

Said Rykhus, "Our involvement with Google is another example of Raven's
ability to pioneer leading-edge applications of our adaptable technology, and
if this unique collaboration effort overcomes a number of significant risk
factors it may constitute another breakout opportunity for which Aerostar has
positioned itself in recent years.

"Looking ahead to the rest of the year and beyond, we will continue to work to
compensate for government uncertainty by focusing on expanding our proprietary
technology opportunities, including advanced radar systems, high-altitude
balloons and aerostats to international markets. Over the past three years, we
have been allocating capital to these three breakout growth drivers, believing
that over the course of the next two to three years any one of these more
speculative, higher risk growth opportunities could double or triple the size
of the division, or any of them could deliver just enough revenue to cover
their cost of capital.

"As a diversified company, we consider this Aerostar role a benefit, believing
that Applied Technology and Engineered Films are well positioned to deliver
more incremental growth, and Aerostar gives us the potential for strong
upside, albeit with a higher risk of uncertainty."

Applied Technology: New Products to Drive Growth

For the second quarter, sales in Applied Technology were $39.1 million, versus
$40.1 million last year. Operating income was $11.9 million, compared to $12.9
million in the prior-year period. The decrease stemmed from lower sales amid
continued investments in research, marketing and product development to secure
future growth.

Said Rykhus, "Seasonally, the second quarter is the weakest from our Applied
Technology division, so comparisons can be challenging, but we're pleased that
demand appears to have stabilized and may be recovering. Also encouraging is
that OEM demand stayed strong for certain precision agricultural solutions,
specifically, Raven's advanced guided steering systems.

"Internationally, we continue to invest in growth for the long term. In
particular, we've heightened our focus on growing the South American markets.
We're doing so by working more closely with our strong OEM and aftermarket
customers in those geographies."

Within Applied Technology, Raven introduced three new products during the
second quarter:

  * Viper 4: Raven's next-generation field computer designed to be a simple,
    powerful and connected platform bringing the latest in computing
    technology.
  * SmarTrax MD: The first easily transferrable assisted steering system
    capable of up to RTK performance. Farmers looking for ways to upgrade
    their current equipment to increase efficiency can utilize SmarTrax MD
    across various machines on their farm.
  * Multi-Hybrid OmniRow: Raven's patent-pending planter technology that
    allows farmers to switch between different hybrids and seed spacing on the
    go.

Said Rykhus, "We help farmers feed the world's growing population by driving
innovation and new product development. And it's this innovation and
development that will fuel Raven's growth in the second half of fiscal 2014.
We're pleased with the progress we made in the second quarter. Now it's time
to leverage those investments and new products to drive sales."

Strong Cash Position

At July 31, 2013, cash and investment balances were $55.7 million, up from
$44.1 million a year ago. First half operating cash flows were $29.7 million,
down from $44.5 million in the prior year. Accounts receivable decreased to
$49.2 million, compared with $49.9 million at July 31, 2012. Inventories were
$54.4 million, up from $50.4 million one year earlier.

Business Development Pipeline to Fuel Growth

Concluded Rykhus, "For the third quarter, we see strength across all of our
divisions. Applied Technology will be driven by sales of our new products and
improving market conditions. Within Engineered Films, we'll leverage the
agriculture opportunity and move forward with new film capabilities serving
our construction, geomembrane and industrial segments. Aerostar will continue
to experience reduced demand from Raven's U.S. government customers, but we
have opportunities to substantially offset this by increasing Vista Research
and other proprietary product sales. We are reassigning resources within
Aerostar to support this transition.

"Looking ahead to the rest of the fiscal year, we have a strong balance sheet
and have created technological leadership in our chosen markets. This gives us
confidence for the long term, despite potentially volatile results as we
transition to a more technology-driven company. We continue to expect a
stronger second-half performance on a year-over-year comparative basis, but we
do not believe that will be enough to deliver profit growth for the full year.

"We will maintain an intense focus on executing our strategy and generating
profitable revenue from our existing core markets while driving growth in
closely adjacent opportunities. And we will remain true to the Raven business
model, exercising fiscal prudence and honoring our purpose of solving great
challenges."

Conference Call Information

Raven will host a conference call today, Monday, Aug. 19, 2013, 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 http://investors.ravenind.com/. 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 Monday, Aug. 26, 2013. To access the replay,
dial 1-855-859-2056 and enter conference ID: 25140774. A replay also will be
available on the company's website.

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 www.RavenInd.com 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, risks and uncertainties relating to development of new technologies
to satisfy customer requirements, possible development of competitive
technologies, ability to scale production of new products without negatively
impacting quality and cost, and ability to finance investment and working
capital needs for new development projects, 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.

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,
                                         Fav                           Fav
                                         (Unfav)                       (Unfav)
                    2013      2012       Change  2013       2012       Change
Net sales            $ 93,421  $ 101,674 (8)%     $ 197,101  $ 219,589 (10)%
Cost of goods sold   66,686    71,610             135,450    148,390    
Gross profit         26,735    30,064    (11)%    61,651     71,199    (13)%
                                                                        
Research and
development          3,989     3,564              8,225      6,964      
expenses
Selling, general
and administrative   10,178    9,093              19,924     18,396     
expenses
Operating income     12,568    17,407    (28)%    33,502     45,839    (27)%
                                                                        
Other (expense),     (219)     (96)               (417)      (148)      
net
Income before        12,349    17,311    (29)%    33,085     45,691    (28)%
income taxes
                                                                        
Income taxes         4,012     5,743              10,754     15,100     
Net income           8,337     11,568    (28)%    22,331     30,591    (27)%
                                                                        
Net income (loss)
attributable to      4         22                 (5)        2          
noncontrolling
interest
                                                                        
Net income
attributable to      $ 8,333   $ 11,546  (28)%    $ 22,336   $ 30,589  (27)%
Raven Industries,
Inc.
                                                                        
Net income per                                                          
common share:  
 -basic             $0.23     $0.32      (28)%   $0.61      $0.84      (27)%
 -diluted           $0.23     $0.32      (28)%   $0.61      $0.84      (27)%
                                                                        
Weighted average                                                        
common shares:  
 -basic             36,446    36,343             36,420     36,318      
 -diluted           36,610    36,565             36,600     36,545      
                                                                        

                                                                        
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY SEGMENT
(Dollars in thousands) (Unaudited) 
                                                                        
                  Three Months Ended July 31,    Six Months Ended July 31,
                                       Fav                             Fav
                                       (Unfav)                         (Unfav)
                  2013      2012       Change    2013       2012       Change
Net sales                                                               
Applied            $ 39,091  $ 40,071  (2)%       $ 90,272   $ 93,812  (4)%
Technology
Engineered Films   37,264    36,785    1 %        71,757     77,879    (8)%
Aerostar           20,722    26,845    (23)%      42,437     52,480    (19)%
Intersegment      (3,656)   (2,027)              (7,365)    (4,582)     
eliminations
Total Company      $ 93,421  $ 101,674 (8)%       $ 197,101  $ 219,589 (10)%
                                                                        
Operating income                                                        
Applied            $ 11,870  $ 12,909  (8)%       $ 31,027   $ 34,959  (11)%
Technology
Engineered Films   4,770     6,819     (30)%      9,524      15,998    (40)%
Aerostar           964       2,309     (58)%      2,770      3,751     (26)%
Intersegment      (17)       17                  (38)        (62)       
eliminations
Total segment      $ 17,587  $ 22,054             $ 43,283   $ 54,646   
income
Corporate         (5,019)   (4,647)    (8)%      (9,781)    (8,807)    (11)%
expenses
Total Company      $ 12,568  $ 17,407  (28)%      $ 33,502   $ 45,839  (27)%
                                                                        

RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In thousands) (Unaudited)
                                                            
                                     July 31    January 31 July 31
                                     2013       2013       2012
ASSETS                                                      
Cash and cash equivalents             $ 55,717   $ 49,353   $ 44,113
Accounts receivable, net              49,199     56,303     49,885
Inventories                           54,362     46,189     50,389
Other current assets                  6,484      4,903      7,373
Total current assets                  165,762    156,748    151,760
                                                            
Property, plant and equipment, net    90,265     81,238     73,189
Other assets, net                     34,779     35,224     35,499
                                      $ 290,806  $ 273,210  $ 260,448
                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                        
Accounts payable                      $ 18,259   $ 14,438   $ 10,835
Accrued and other liabilities         16,270     18,623     25,082
Total current liabilities             34,529     33,061     35,917
                                                            
Other liabilities                     18,963     18,702     19,204
Shareholders' equity                  237,314    221,447    205,327
                                      $ 290,806  $ 273,210  $ 260,448
                                                            

                                                                   
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Dollars in thousands) (Unaudited)
                                                                   
                                                     Six Months Ended July 31,
                                                     2013         2012
Cash flows from operating activities:                              
Net income                                            $ 22,331     $ 30,591
Adjustments to reconcile net income to net cash                    
provided by operating activities:
Depreciation and amortization                         6,653        6,036
Other operating activities, net                       753          7,835
Net cash provided by operating activities             29,737       44,462
                                                                   
Cash flows from investing activities:                              
Capital expenditures                                  (13,746)     (16,870)
Other investing activities, net                       (534)        22
Net cash used in investing activities                 (14,280)     (16,848)
                                                                   
Cash flows from financing activities:                              
Dividends paid                                        (8,727)      (7,618)
Other financing activities, net                       (308)        (1,704)
Net cash used in financing activities                 (9,035)      (9,322)
                                                                   
Effect of exchange rate changes on cash               (58)         (21)
                                                                   
Net increase in cash and cash equivalents             6,364        18,271
Cash and cash equivalents at beginning of period      49,353       25,842
Cash and cash equivalents at end of period            $ 55,717     $ 44,113
                                                                   

CONTACT: At the Company:
         Tom Iacarella, Vice President and CFO
         605-336-2750
         Thomas.Iacarella@ravenind.com
        
         At Padilla Speer Beardsley:
         Matt Sullivan
         612-455-1700
         msullivan@padillaspeer.com
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