Raven Industries Reports Strong Fourth Quarter Fiscal 2018 Results

SIOUX FALLS, S.D., March 06, 2018 (GLOBE NEWSWIRE) -- Raven Industries, Inc. (NASDAQ:RAVN) today reported financial results for the fourth quarter that ended January 31, 2018.

Noteworthy Items:
• Consolidated net sales increased nearly 40 percent year-over-year, with all three divisions driving double-digit growth;

• Diluted earnings per share increased 92 percent year-over-year, driven by significant operating leverage within Engineered Films;

• Engineered Films continued to assist in hurricane recovery efforts, delivering $15.8 million of hurricane recovery film during the fourth quarter;

• Applied Technology continued to drive growth despite lackluster market conditions, achieving sales growth of 18 percent year-over-year;

• Aerostar's stratospheric balloon platform drove divisional sales growth of approximately 12 percent year-over-year.

Fourth Quarter Results:
Net sales for the fourth quarter of fiscal 2018 were $95.8 million, up 39.0 percent versus the fourth quarter of fiscal 2017. Each division achieved double-digit sales growth in the fourth quarter, with Engineered Films achieving growth of more than 60 percent year-over-year. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International, Inc. (CLI), which occurred in the third quarter of fiscal 2018, contributed sales of $15.8 million and $7.9 million, respectively.

Operating income for the fourth quarter of fiscal 2018 was $11.4 million versus operating income of $6.3 million in the fourth quarter of fiscal 2017, increasing 81.9 percent year-over-year. Operating margin increased 280 basis points year-over-year, from 9.1 percent of net sales to 11.9 percent of net sales. The significant improvement in profitability was principally driven by Engineered Films' improved margins and leverage of corporate expenses over significantly higher sales.

Net income for the fourth quarter of fiscal 2018 was $8.4 million, or $0.23 per diluted share, versus net income of $4.4 million, or $0.12 per diluted share, in last year's fourth quarter.

Included in this year's fourth quarter financial results were costs related to the Company's Project Atlas initiative to replace its existing enterprise resource planning platform of $0.6 million ($0.4 million after-tax, or $0.01 per diluted share).

Fiscal Year 2018 Results:
Net sales for fiscal year 2018 were $377.3 million, up 36.0 percent versus fiscal year 2017. All divisions experienced significant increases in sales during the year, with Engineered Films achieving growth of more than 50 percent year-over-year. Delivery of hurricane recovery film to support relief efforts and the acquisition of CLI contributed sales of $24.2 million and $13.1 million, respectively. Excluding CLI and hurricane recovery film, net sales for Engineered Films in fiscal 2018 were $176.0 million, up 26.7 percent year-over-year.

Operating income for fiscal year 2018 was $59.2 million, up 108.2 percent, versus $28.4 million in fiscal 2017. Net income for fiscal year 2018 was $41.0 million, or $1.13 per diluted share, versus net income of $20.2 million, or $0.56 per diluted share, in fiscal year 2017.

Tax Reform:
The U.S. Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017 and reduces the U.S. federal statutory tax rate to 21 percent effective January 1, 2018. The TCJA caused the Company’s fiscal 2018 U.S. federal statutory tax rate to be reduced by 1.2 percentage points, benefiting fiscal year 2018 net income by approximately $0.7 million. The Company expects its fiscal year 2019 effective tax rate to be approximately 21 percent, excluding discrete items. For fiscal year 2018, applying this new rate to the full year would have reduced tax expense by an additional $5 million as compared to reported results. The Company expects to re-invest its future tax savings back into the business to fund long-term growth initiatives and to train and develop our team members.

Balance Sheet and Cash Flow:
At the end of the fourth quarter of fiscal 2018, cash and cash equivalents totaled $40.5 million, up $3.7 million versus the prior quarter. Continued strength in operating cash flows drove the increase in cash versus the prior quarter.

Net working capital1 as a percentage of annualized net sales decreased 160 basis points year-over-year, from 27.9 percent in the fourth quarter of last year to 26.3 percent in this year’s fourth 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 fourth quarter of fiscal 2018 were $30.5 million, up $4.6 million versus the fourth quarter of fiscal 2017. Geographically, domestic sales were up 21.1 percent year-over-year, and international sales were up 6.2 percent year-over-year. Despite continued lackluster market dynamics, the division continues to drive sales growth through successfully introducing new products and building on key OEM relationships.

Division operating income in the fourth quarter of fiscal 2018 was $5.8 million, down $0.6 million or 8.7 percent versus the fourth quarter of fiscal 2017. The division continues to invest in research and development activities to position itself for incremental new product sales and market share gains in future years.

During the fourth quarter of fiscal 2018, the division settled two outstanding legal matters on a confidential basis, including the Capstan Ag Systems, Inc. patent infringement litigation.

Engineered Films Division:
Net sales for Engineered Films were $55.6 million, up 61.0 percent year-over-year. The increase in net sales was driven by organic growth in the geomembrane and industrial markets, as well as delivery of recovery film to support hurricane relief efforts and the acquisition of CLI, which contributed $15.8 million and $7.9 million, respectively.

Operating income in the fourth quarter of fiscal 2018 was $11.9 million, up $6.6 million or 125.2 percent versus the fourth quarter of fiscal 2017. The year-over-year increase in operating income was principally driven by strong operating leverage on higher sales volume. Division operating margin increased 620 basis points year-over-year, from 15.3 percent to 21.5 percent, driven by operational efficiency gains developed throughout the year and higher sales volume improving capacity utilization.

Aerostar Division:
Net sales for Aerostar during the fourth quarter of fiscal 2018 were $9.8 million, up $1.0 million or 11.8 percent versus the fourth quarter of fiscal 2017. This increase in net sales was primarily driven by growth in the stratospheric balloon platform.

Division profit was down slightly due to unfavorable mix and contract timing. The current quarter results were not consistent with previous quarters or the Company's long-term expectations.

Fiscal 2019 Outlook:
“We are very pleased with the performance achieved by all three operating divisions throughout fiscal 2018,” said Dan Rykhus, President and CEO. “Consolidated net sales were $377 million, and all three divisions achieved double-digit sales growth.

“In fiscal 2018, Applied Technology achieved strong results in the face of challenging agricultural market conditions. We expect to continue to drive growth, and will continue to strategically fund several long-term investments. Subsequent to the end of the fourth quarter, the division launched a strategic initiative to grow its local presence in Brazil and drive organic growth in Latin America in order to better capitalize on one of the largest agricultural markets in the world.

“Engineered Films demonstrated impressive operational discipline and sustained high plant utilization throughout the year. The division grew sales by approximately $75 million year-over-year, and prior investments in acquisitions and manufacturing capacity drove strong growth in every market served. The division continues to see opportunities for growth and is investing in additional capacity in fiscal 2019. As for hurricane recovery efforts, the delivery of recovery film will result in sales of approximately $9 million in the first quarter and then return to significantly reduced levels consistent with prior years.

“During the year, Aerostar improved its financial performance and achieved consistency and stability in its results. The division continues to sharpen its focus on the stratospheric balloon platform and has divested of a few non-strategic portions of its business during and subsequent to the end of fiscal 2018. Strong performance on existing programs is driving confidence for continued growth with Aerostar’s stratospheric balloon platform.

“Raven Industries is well positioned as we enter fiscal 2019 because of the actions taken and investments made to preserve and strengthen our core business. Furthermore, we are evaluating strategic acquisitions and will continue to invest in additional manufacturing capacity and technology development to enhance our core product lines. Our goal remains to generate 10 percent annualized earnings growth over the long-term, excluding unusual and generally non-recurring items.”

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 fourth quarter fiscal 2018 results tomorrow, Wednesday, March 7, 2018, 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.

Contact Information:
Bo Larsen
Investor Relations Director
Raven Industries, Inc.
+1 (605) 336-2750

Source: Raven Industries, Inc.

(Dollars and shares in thousands, except earnings per share) (Unaudited)
Three Months Ended January 31, Twelve Months Ended January 31,
2017 Fav (Un)
2018 2017 Fav (Un)
Net sales$95,823 $68,915 39.0% $377,317 $277,395 36.0%
Cost of goods sold66,060 49,596 255,752 199,205
Gross profit29,763 19,319 54.1% 121,565 78,190 55.5%
Gross profit percentage31.1% 28.0% 32.2% 28.2%
Research and development expenses4,617 3,837 16,936 16,312
Selling, general and administrative expenses13,724 9,204 45,200 33,378
Long-lived asset impairment loss 259 87
Operating income11,422 6,278 81.9% 59,170 28,413 108.2%
Operating income percentage11.9% 9.1% 15.7% 10.2%
Other income (expense), net143 19 (184) (560)
Income before income taxes11,565 6,297 83.7% 58,986 27,853 111.8%
Income tax expense3,125 1,859 17,967 7,661
Net income8,440 4,438 90.2% 41,019 20,192 103.1%
Net (loss) income attributable to noncontrolling interest(1) (3) 1
Net income attributable to Raven Industries$8,441 $4,438 90.2% $41,022 $20,191 103.2%
Net income per common share:
- basic$0.24 $0.12 100.0% $1.14 $0.56 103.6%
- diluted$0.23 $0.12 91.7% $1.13 $0.56 101.8%
Weighted average common shares:
- basic35,877 36,175 36,050 36,242
- diluted36,334 36,387 36,450 36,372

(Dollars in thousands) (Unaudited)
January 31 January 31
2018 2017
Cash and cash equivalents$40,535 $50,648
Accounts receivable, net58,532 43,143
Inventories55,351 42,336
Other current assets5,861 2,689
Total current assets160,279 138,816
Property, plant and equipment, net106,280 106,324
Goodwill and amortizable intangibles, net57,294 52,697
Other assets, net2,950 3,672
Total Assets$326,803 $301,509
Accounts payable$13,106 $8,467
Accrued and other liabilities23,836 19,915
Total current liabilities36,942 28,382
Other liabilities13,795 13,696
Shareholders' equity276,066 259,431
Total Liabilities and Shareholders' Equity$326,803 $301,509

Net Working Capital and Net Working Capital Percentage1
Accounts receivable, net$58,532 $43,143
Plus: Inventories55,351 42,336
Less: Accounts payable13,106 8,467
Net working capital1$100,777 $77,012
Annualized net sales$383,292 $275,660
Net working capital percentage26.3% 27.9%

(Dollars in thousands) (Unaudited)
Twelve Months Ended January 31,
Cash flows from operating activities:
Net income$41,019 $20,192
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization14,802 15,436
Long-lived asset impairment loss259 87
Other operating activities, net(11,119) 12,921
Net cash provided by operating activities44,961 48,636
Cash flows from investing activities:
Capital expenditures(12,011) (4,796)
Payments related to business acquisitions(13,267)
Proceeds from sale or maturity of investments250 250
Purchases of investments(273) (750)
(Disbursements) proceeds from settlement of liabilities, sale of assets(333) 1,188
Other investing activities, net(41) (534)
Net cash used in investing activities(25,675) (4,642)
Cash flows from financing activities:
Dividends paid(18,685) (18,839)
Payments for common shares repurchased(10,000) (7,702)
Payment of acquisition-related contingent liabilities(408) (354)
Other financing activities, net(628) (256)
Net cash used in financing activities(29,721) (27,151)
Effect of exchange rate changes on cash322 23
Net increase (decrease) in cash and cash equivalents(10,113) 16,866
Cash and cash equivalents at beginning of period50,648 33,782
Cash and cash equivalents at end of period$40,535 $50,648

(Dollars in thousands) (Unaudited)

Three Months Ended January 31, Twelve Months Ended January 31,
2018 2017 Fav (Un)
2018 2017 Fav (Un)
Net sales
Applied Technology $30,455 $25,890 17.6% $124,688 $105,217 18.5%
Engineered Films 55,607 34,548 61.0% 213,298 138,855 53.6%
Aerostar 9,837 8,800 11.8% 39,915 34,113 17.0%
Intersegment eliminations (76) (323) (584) (790)
Total Company $95,823 $68,915 39.0% $377,317 $277,395 36.0%
Operating income (loss)
Applied Technology $5,810 $6,363 (8.7)% $31,257 $26,643 17.3%
Engineered Films 11,938 5,300 125.2% 47,324 22,966 106.1%
Aerostar (43) 244 (117.6)% 4,122 (1,560) 364.2%
Intersegment eliminations 23 9 20 (12)
Total segment income $17,728 $11,916 48.8% $82,723 $48,037 72.2%
Corporate expenses (6,306) (5,638) (11.8)% (23,553) (19,624) (20.0)%
Total Company $11,422 $6,278 81.9% $59,170 $28,413 108.2%
Operating income (loss) percentages
Applied Technology 19.1% 24.6% (550)bps 25.1% 25.3% (20)bps
Engineered Films 21.5% 15.3% 620bps 22.2% 16.5% 570bps
Aerostar (0.4)% 2.8% (320)bps 10.3% (4.6)% 1,490bps
Total Company 11.9% 9.1% 280bps 15.7% 10.2% 550bps

(Dollars in thousands) (Unaudited)

Three Months Ended January 31, Twelve Months Ended January 31,
Segments2018 2017 Fav (Un)
2018 2017 Fav (Un)
Applied Technology
Reported operating income$5,810 $6,363 (8.7)% $31,257 $26,643 17.3%
Plus: Depreciation and amortization841 971 (13.4)% 3,365 3,828 (12.1)%
ATD EBITDA$6,651 $7,334 (9.3)% $34,622 $30,471 13.6%
ATD EBITDA % of Net Sales21.8% 28.3% 27.8% 29.0%
Engineered Films
Reported operating income$11,938 $5,300 125.2% $47,324 $22,966 106.1%
Plus: Depreciation and amortization2,337 2,149 8.7% 8,761 8,580 2.1%
EFD EBITDA$14,275 $7,449 91.6% $56,085 $31,546 77.8%
EFD EBITDA % of Net Sales25.7% 21.6% 26.3% 22.7%
Reported operating income (loss)$(43) $244 (117.6)% $4,122 $(1,560) 364.2%
Plus: Depreciation and amortization274 462 (40.7)% 1,386 1,720 (19.4)%
Aerostar EBITDA$231 $706 (67.3)% $5,508 $160 3,342.5%
Aerostar EBITDA % of Net Sales2.3% 8.0% 13.8% 0.5%
Consolidated Raven
Net income$8,441 $4,438 90.2% $41,022 $20,191 103.2%
Interest expense (income), net49 105 188 330
Income tax expense3,125 1,859 17,967 7,661
Depreciation and amortization3,817 3,910 14,802 15,436
EBITDA$15,432 $10,312 49.7% $73,979 $43,618 69.6%
EBITDA % of Net Sales16.1% 15.0% 19.6% 15.7%


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 for each respective period.

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.

Source:Raven Industries, Inc.