Raven Industries, Inc. (the Company; NASDAQ:RAVN) today
reported financial results for the second quarter that ended July
31, 2021.
Second Quarter Fiscal 2022 Noteworthy Items:
- Company entered into an agreement to be acquired by CNH
Industrial N.V. in an all-cash transaction that values the Company
at approximately $2.1 billion, or $58.00 per share;
- Consolidated net sales were $114.4 million, an increase of 34.3
percent versus the prior year;
- Company reported diluted earnings per share of $0.19, an
increase of 18.8 percent versus the prior year;
- Second quarter results included $4.9 million pre-tax and $3.8
million after-tax of acquisition related expenses, or $0.10 per
diluted share;
- Company invested $5.2 million pre-tax and $4.1 million
after-tax to advance Raven Autonomy™, or $0.11 per diluted
share;
- Net sales in Applied Technology increased 25.6 percent versus
the prior year, driven by growth in both the OEM and aftermarket
channels;
- Engineered Films' net sales increased 57.5 percent versus the
prior year as the division's end-markets continued their recovery
from the adverse effects of the global pandemic, leading to
year-over-year growth across all end-markets;
- Aerostar delivered year-over-year growth within its core
stratospheric and radar products, offset by the conclusion of Loon
activity and timing of aerostat sales;
- Aerostar acquired intellectual property and patents directly
related to stratospheric balloon technology, augmenting its
capabilities in autonomous constellations of high-altitude
balloons.
Second Quarter Results:
Consolidated net sales for the second quarter of fiscal 2022
were $114.4 million, up 34.3 percent versus the second quarter of
fiscal 2021. The year-over-year growth was driven by increased
sales in both Applied Technology and Engineered Films. In Applied
Technology, demand for its precision ag technology remained robust,
leading to strong year-over-year growth despite global supply chain
constraints. In Engineered Films, the division experienced growth
across all end-markets, led by construction, agriculture and
geomembrane (including the energy sub-market), as market conditions
continued to improve throughout the quarter. Aerostar's growth in
core stratospheric and radar platforms was offset by the conclusion
of Loon activity and a decrease in aerostat sales due to timing of
contracts.
Consolidated operating income for the second quarter of fiscal
2022 was $8.3 million, versus operating income of $6.1 million in
the second quarter of fiscal 2021. Included in the results for the
second quarter of fiscal 2022 was $5.2 million of investment in
research and development and selling expenses to advance Raven
Autonomy™, compared to $4.0 million in the prior year. The second
quarter of fiscal 2022 results also included $4.9 million of
expenses associated with the proposed acquisition by CNH Industrial
N.V. The Company generated significant year-over-year operating
income growth within its core businesses driven by increased sales
volume and corresponding operating leverage.
Net income for the second quarter of fiscal 2022 was $6.9
million, or $0.19 per diluted share, compared to $5.8 million, or
$0.16 per diluted share, in last year's second quarter. The
Company's strategic investment in Raven Autonomy™ reduced net
income attributable to Raven by $4.1 million, or $0.11 per diluted
share, in the second quarter of fiscal 2022 compared to $3.1
million, or $0.09 per diluted share, in the prior year. Expenses
related to the proposed acquisition by CNH Industrial reduced net
income attributable to Raven by $3.8 million, or $0.10 per diluted
share in the current year's second quarter.
Balance Sheet and Cash Flow:
At the end of the second quarter of fiscal 2022, cash and cash
equivalents totaled $13.1 million, decreasing $4.7 million versus
the previous quarter. The sequential decrease in cash was driven by
an increase in working capital needs as the Company fulfills
substantial demand in Applied Technology and Engineered Films.
Total liquidity3 at the end of the second quarter totaled $113.1
million.
Applied Technology Division:
Net sales for Applied Technology in the second quarter of fiscal
2022 were $44.6 million, increasing $9.1 million or 25.6 percent
versus the second quarter of the prior year. Demand across the
division's product portfolio remained very strong in the second
quarter as favorable ag market conditions continued. These market
conditions, combined with the division's industry-leading
technology portfolio, led to year-over-year revenue growth in both
the OEM and aftermarket channels.
Division operating income in the second quarter of fiscal 2022
was $8.5 million, up $2.0 million or 30.6 percent versus the second
quarter of fiscal 2021. Included in the results was investment in
research and development and selling expenses to advance Raven
Autonomy™ of $5.2 million on a pre-tax basis, an increase of $1.2
million versus the prior year. Division operating income in the
second quarter was adversely impacted by increased input costs
associated with challenging supply chain conditions and material
shortages.
Engineered Films Division:
Net sales for Engineered Films in the second quarter of fiscal
2022 were $57.1 million, up $20.8 million or 57.5 percent
year-over-year. The division generated year-over-year sales growth
across all end-markets led by construction, agriculture and
geomembrane (including the energy sub-market). The year-over-year
growth was driven by improved market conditions as the global
economy continued its recovery from the prior year along with
intentional pricing actions implemented to offset rising input
costs.
Division operating income in the second quarter of fiscal 2022
was $12.4 million, up $7.9 million or 176.8 percent versus the
second quarter of fiscal 2021. The year-over-year increase was
driven by higher sales volume and corresponding positive operating
leverage.
Aerostar Division:
Net sales for Aerostar in the second quarter of fiscal 2022 were
$12.8 million, down $0.7 million or 5.0 percent versus the second
quarter of fiscal 2021. The division generated strong
year-over-year revenue growth for defense related stratospheric
balloon systems as it conducted multiple successful flight
campaigns for Department of Defense customers. This growth in
stratospheric balloon systems was offset by the conclusion of Loon
activity announced in the fourth quarter of fiscal 2021 and a
decrease in aerostat revenue due to timing of government
contracts.
Division operating income was $2.0 million in the second quarter
of fiscal 2022, up $0.2 million versus the second quarter of fiscal
2021. The year-over-year improvement in operating income was driven
by product mix and cost control measures.
Raven Industries Acquisition by CNH Industrial:
On June 20, 2021, the Company entered into a merger agreement
with CNH Industrial N.V. Under the terms of the agreement, CNH
Industrial will acquire 100% of the capital stock of Raven
Industries, Inc. for $58.00 per share, representing a $2.1 billion
enterprise value. Closing is expected to occur in the fourth
quarter of calendar 2021, subject to the satisfaction of customary
closing conditions, including approval of Raven shareholders and
receipt of regulatory approvals.
"Our Board and management team is excited about the partnership
with CNH Industrial," said Dan Rykhus, President and CEO. "This
partnership will further accelerate our ability to advance ag
technology while also maximizing shareholder value. The process of
completing the transaction is going well, and we remain on track to
close during the fourth quarter of the current year."
Year-to-Date Performance:
"I am very proud of our performance in the first half of fiscal
2022. Our team in Applied Technology has done an outstanding job
navigating significant supply chain challenges to drive
year-over-year revenue growth both domestically and internationally
through our OEM and aftermarket channels. In addition, we have
taken key steps in our Raven Autonomy™ strategy through advancing
the technology and commercializing the initial use case of the
OMNiDRIVE™ solution. In Engineered Films, volatility in resin
pricing has created challenges, but we have executed extremely well
in capitalizing on the economic rebound to drive substantial
revenue growth across all of our end-markets. In Aerostar, we
successfully executed multiple flight campaigns for our Department
of Defense customers as we continue to showcase the capabilities of
our industry-leading technology," concluded Rykhus.
Additional Information:
Per normal practices, the Company will not be hosting a
conference call in connection with quarterly earnings.
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) provides innovative, high-value
products and systems that solve great challenges throughout the
world. Raven is a leader in precision agriculture, high-performance
specialty films, and aerospace and defense solutions, and the
Company's groundbreaking work in autonomous systems is unlocking
new possibilities in areas like farming, national defense, and
scientific research. 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:
Certain statements contained in this report are "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, not past or historical events. Without limiting the
foregoing, the words "anticipates," "believes," "expects,"
"intends," "may," "plans," "should," "estimate," "predict,"
"project," "would," "will," "potential," and similar expressions
are intended to identify forward-looking statements. However, the
absence of these words or similar expressions does not mean that a
statement is not forward-looking. The Company intends that all
forward-looking statements be subject to the safe harbor provisions
of the Private Securities Litigation Reform Act.
Although the Company believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions
when made, there is no assurance that such assumptions are correct
or that these expectations will be achieved. Assumptions involve
important risks and uncertainties that could significantly affect
results in the future. This includes the risk of the occurrence of
any event, change, or other circumstance that could delay or
prevent closing of the proposed transaction, or the merger, or give
rise to the termination of the Agreement and Plan of Merger between
the Company and CNH Industrial N.V. In addition, other risks and
uncertainties include, but are not limited to, those relating to
weather conditions, which could affect sales and profitability in
some of the Company's primary markets, such as agriculture and
construction and oil and gas drilling; or changes in raw material
availability, commodity prices, competition, technology or
relationships with the Company's largest customers, risks and
uncertainties relating to the impacts of the COVID-19 pandemic,
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, risks of operating in foreign markets, risks relating to
acquisitions, including risks of integration or unanticipated
liabilities or contingencies, and ability to finance investment and
net working capital needs for new development projects, any of
which could adversely impact any of the Company's product lines,
risks of litigation, as well as other risks described in Item 1A.,
Risk Factors, of the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 2021. The foregoing list is not
exhaustive and the Company disclaims any obligation to subsequently
revise any forward-looking statements to reflect events or
circumstances after the date of such statements. Past financial
performance may not be a reliable indicator of future performance
and historical trends should not be used to anticipate results or
trends in future periods.
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,
2021
2020
Fav (Un) Change
2021
2020
Fav (Un) Change
Net sales
$
114,426
$
85,179
34.3
%
$
226,912
$
171,675
32.2
%
Cost of sales
72,257
55,047
144,757
113,076
Gross profit
42,169
30,132
39.9
%
82,155
58,599
40.2
%
Gross profit percentage
36.9
%
35.4
%
36.2
%
34.1
%
Research and development expenses
12,465
10,808
23,927
21,313
Selling, general, and administrative
expenses
21,370
13,181
38,321
27,204
Operating income
8,334
6,143
35.7
%
19,907
10,082
97.5
%
Operating income percentage
7.3
%
7.2
%
8.8
%
5.9
%
Other income (expense), net
(276
)
377
(246
)
(91
)
Income before income taxes
8,058
6,520
23.6
%
19,661
9,991
96.8
%
Income tax expense
1,205
701
3,188
223
Net income
6,853
5,819
17.8
%
16,473
9,768
68.6
%
Net loss attributable to the
noncontrolling interest
—
—
—
(98
)
Net income attributable to Raven
Industries, Inc.
$
6,853
$
5,819
17.8
%
$
16,473
$
9,866
67.0
%
Net income per common share:
- Basic
$
0.19
$
0.16
18.8
%
$
0.46
$
0.27
70.4
%
- Diluted
$
0.19
$
0.16
18.8
%
$
0.45
$
0.27
66.7
%
Weighted average common shares:
- Basic
36,086
35,996
36,061
35,962
- Diluted
36,470
36,082
36,447
36,079
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
July 31
January 31
July 31
2021
2021
2020
ASSETS
Cash and cash equivalents
$
13,077
$
32,938
$
15,813
Accounts receivable, net
70,591
48,669
53,032
Inventories, net
75,692
52,703
51,302
Other current assets
8,550
5,776
5,814
Total current assets
167,910
140,086
125,961
Property, plant and equipment, net
108,883
106,007
104,937
Goodwill
108,574
107,677
105,703
Intangible assets, net
47,470
44,585
44,175
Other assets
11,395
11,016
11,001
TOTAL ASSETS
$
444,232
$
409,371
$
391,777
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable
$
21,588
$
18,639
$
17,960
Accrued and other liabilities
44,261
33,399
23,435
Total current liabilities
65,849
52,038
41,395
Long-term debt
2,849
1,981
378
Other liabilities
23,010
23,997
32,453
Total liabilities
91,708
78,016
74,226
Shareholders' equity
352,524
331,355
317,551
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
444,232
$
409,371
$
391,777
Net Working Capital and Net
Working Capital Percentage1
Accounts receivable, net
$
70,591
$
48,669
$
53,032
Plus: Inventories, net
75,692
52,703
51,302
Less: Accounts payable
21,588
18,639
17,960
Net working capital1
$
124,695
$
82,733
$
86,374
Annualized net sales
$
457,704
$
320,308
$
340,716
Net working capital percentage1
27.2
%
25.8
%
25.4
%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended July
31,
2021
2020
Cash flows from operating activities:
Net income
$
16,473
$
9,768
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
9,100
8,478
Other operating activities, net
(30,686
)
12,338
Net cash provided by (used in) operating
activities
(5,113
)
30,584
Cash flows from investing activities:
Capital expenditures
(10,044
)
(7,783
)
Proceeds from sale or maturities of
investments
83
336
Purchases of investments
(733
)
(146
)
Proceeds from sale of assets
263
251
Other investing activities, net
(3,784
)
24
Net cash used in investing activities
(14,215
)
(7,318
)
Cash flows from financing activities:
Dividends paid
—
(9,318
)
Proceeds from debt
10,815
50,150
Repayments of debt
(10,000
)
(50,000
)
Payments for redeemable noncontrolling
interest
—
(17,853
)
Other financing activities, net
(1,300
)
(959
)
Net cash used in financing activities
(485
)
(27,980
)
Effect of exchange rate changes on
cash
(48
)
(180
)
Net (decrease) in cash and cash
equivalents
(19,861
)
(4,894
)
Cash and cash equivalents at beginning of
period
32,938
20,707
Cash and cash equivalents at end of
period
$
13,077
$
15,813
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY
SEGMENT
(Dollars in thousands)
(Unaudited)
Three Months Ended July
31,
Six Months Ended July
31,
2021
2020
Fav (Un) Change
2021
2020
Fav (Un) Change
Net sales
Applied Technology
$
44,601
$
35,502
25.6
%
$
99,469
$
77,509
28.3
%
Engineered Films
57,087
36,252
57.5
%
105,852
69,650
52.0
%
Aerostar
12,787
13,465
(5.0
)%
21,674
24,616
(12.0
)%
Intersegment eliminations
(49
)
(40
)
(83
)
(100
)
Consolidated net sales
$
114,426
$
85,179
34.3
%
$
226,912
$
171,675
32.2
%
Operating income
Applied Technology
$
8,505
$
6,511
30.6
%
$
21,692
$
15,450
40.4
%
Engineered Films
12,357
4,465
176.8
%
19,124
6,072
215.0
%
Aerostar
1,962
1,751
12.1
%
2,551
2,044
24.8
%
Intersegment eliminations
5
11
(2
)
51
Total segment income
$
22,829
$
12,738
79.2
%
$
43,365
$
23,617
83.6
%
Corporate expenses
(14,495
)
(6,595
)
(119.8
)%
(23,458
)
(13,535
)
(73.3
)%
Consolidated operating income
$
8,334
$
6,143
35.7
%
$
19,907
$
10,082
97.5
%
Operating income percentages
Applied Technology
19.1
%
18.3
%
80bps
21.8
%
19.9
%
190bps
Engineered Films
21.6
%
12.3
%
930bps
18.1
%
8.7
%
940bps
Aerostar
15.3
%
13.0
%
230bps
11.8
%
8.3
%
350bps
Consolidated operating income
7.3
%
7.2
%
10bps
8.8
%
5.9
%
290bps
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)
2021
2020
Change
2021
2020
Change
Applied Technology
Reported Operating income
$
8,505
$
6,511
30.6
%
$
21,692
$
15,450
40.4
%
Plus: Depreciation and amortization
1,535
1,221
25.7
%
3,001
2,321
29.3
%
ATD EBITDA
$
10,040
$
7,732
29.8
%
$
24,693
$
17,771
39.0
%
ATD EBITDA % of Net Sales
22.5
%
21.8
%
24.8
%
22.9
%
Engineered Films
Reported Operating income
$
12,357
$
4,465
176.8
%
$
19,124
$
6,072
215.0
%
Plus: Depreciation and amortization
2,457
2,424
1.4
%
4,916
4,836
1.7
%
EFD EBITDA
$
14,814
$
6,889
115.0
%
$
24,040
$
10,908
120.4
%
EFD EBITDA % of Net Sales
25.9
%
19.0
%
22.7
%
15.7
%
Aerostar
Reported Operating income
$
1,962
$
1,751
12.1
%
$
2,551
$
2,044
24.8
%
Plus: Depreciation and amortization
261
248
5.2
%
488
487
0.2
%
Aerostar EBITDA
$
2,223
$
1,999
11.2
%
$
3,039
$
2,531
20.1
%
Aerostar EBITDA % of Net Sales
17.4
%
14.8
%
14.0
%
10.3
%
Consolidated
Net income attributable to Raven
Industries Inc.
$
6,853
$
5,819
17.8
%
$
16,473
$
9,866
67.0
%
Interest (income) expense, net
(15
)
136
79
280
Income tax expense
1,205
701
3,188
223
Plus: Depreciation and amortization
4,589
4,302
9,100
8,478
Consolidated EBITDA
$
12,632
$
10,958
15.3
%
$
28,840
$
18,847
53.0
%
Consolidated EBITDA % of Net Sales
11.0
%
12.9
%
12.7
%
11.0
%
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 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.
3 Total liquidity is defined as Cash and
cash equivalents plus the available balance on the Company's
revolving credit facility.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210825005774/en/
Jared Stearns Investor Relations Manager Raven Industries, Inc.
+1 (605) 336-2750
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