Raven Industries Reports Record Second Quarter Results

SIOUX FALLS, S.D., Aug. 25, 2010 (GLOBE NEWSWIRE) -- Raven Industries, Inc. (Nasdaq:RAVN) today announced record sales and earnings for the second quarter ended July 31, 2010. The company continues to experience growing demand in several of its end markets, including energy, precision agriculture, and military surveillance.

For the second quarter, sales increased 29 percent to $73.2 million from $56.6 million in the same period a year ago. The largest sales increases were reported by Engineered Films, and every operating unit showed some level of sales growth. Net income increased 35 percent to $8.4 million, or $0.46 per diluted share, compared with $6.2 million, or $0.34 per diluted share one year earlier. For the six months, sales reached $158.2 million, a 30 percent increase from the first half of the previous year. First-half net income of $21.3 million, or $1.18 per share, was 38 percent above the prior year's six-month results.

"Our earnings growth this quarter was driven by higher revenues, and not cost cutting," said Daniel A. Rykhus, chief executive officer. "The top-line growth was led by our Engineered Films Division, where activity in the energy markets remains strong. During the past quarter we continued to see more positive signs in our industrial and agricultural markets. Our record first half performance has provided a great platform for growth, even in this tough economic climate."

Double Digit Sales Growth at Applied Technology

Second quarter revenues for the Applied Technology Division increased 13 percent to $21.0 million compared with $18.6 million for the second quarter last year. Operating income was up 8 percent, to $5.5 million, compared with $5.1 million for the same period last year.

"Despite second quarter seasonality, this division continues to benefit from strong revenue growth in our core steering product lines," Rykhus said. "Raven is focused on high-accuracy steering solutions and information management services for a wide range of agricultural applications. Our precision ag platform turns real-time field information into cost savings and our newly expanded software suite continues to generate high levels of interest, particularly in the U.S. and Canada."

Volume Drives Gains at Engineered Films

In the second quarter, revenues in the Engineered Films Division increased 74 percent to $26.1 million versus $15.0 million for the second quarter last year. Operating earnings, at $5.5 million, improved 166 percent from the same period a year ago.

"The momentum continues in our primary markets," Rykhus stated. "In fact, we processed a record amount of material in the second quarter. This incremental volume, coupled with favorable margins, generated significant gains in operating income. In addition to strength in the energy market, demand from our agricultural and industrial markets for Engineered Films products increased substantially from the prior year. As we look at current order patterns we remain optimistic about the growth prospects for Engineered Films, although the high percentage gains in the first half should moderate in the second half."

Growth Continues at Aerostar

Aerostar's sales in the second quarter grew 58 percent to $9.2 million from $5.8 million in the previous year's second quarter. Operating income, at $1.3 million, increased 18 percent from $1.1 million versus a year earlier.

"As in the first quarter, aerostats fueled sales and income growth," Rykhus said. "We expect shipments will be strong again in the third quarter and we anticipate additional orders for delivery in the fourth quarter and into our next fiscal year.  Aerostar will continue to experience some quarter-to-quarter volatility as we take advantage of tethered aerostat development and deployment opportunities. The other factor affecting our profitability in the first half was the ramping up of the T-11 Army Airborne parachute contract to our targeted delivery levels. As a result, we're optimistic about Aerostar becoming an important contributor to our overall growth plan."

Less Favorable Mix at Electronic Systems

Sales in the second quarter for the Electronic Systems Division were $18.1 million versus $17.9 million for last year's second quarter, up 1 percent. Operating income declined 5 percent to $2.8 million, from $3.0 million in the year-ago quarter.

"A less favorable product mix impacted our margins compared to a year ago," Rykhus explained. "We're operating at a good level with an appropriate cost structure. We continue to bid on new projects. In the meantime, this division remains a good contributor to cash flow."

Healthy Balance Sheet and Cash Flows

At July 31, 2010, cash and investment balances were $53.6 million, up from $43.0 million a year ago. First half operating cash flows, although down as a result of working capital requirements, remain strong, at $19.8 million versus $34.3 million last year. Working capital levels reflected a higher level of sales activity. Accounts receivable increased to $34.7 million compared with $29.2 million at July 31, 2009.  Inventories were $45.2 million, up $15.7 million from the same quarter in the prior year. Accounts receivable days continue to trend favorably while inventory turns were slowed by resin purchase levels and delays in tethered aerostat shipments.

Raven announced a special dividend of $1.25 per share earlier this week. In this current fiscal year, the combination of the special dividend and regular quarterly dividends means that Raven will return approximately $34 million in cash to shareholders. Raven increased its regular quarterly dividend from $0.14 to $0.16 per share in the first quarter of this year.

On Track for a Record Year

Rykhus concluded, "We expect a record year at Raven through the continuation of current trends. This includes sales and profit growth in the second half, with moderation in the growth rate of Engineered Films. Since the fourth quarter of last year represented the beginning of our recovery, we anticipate comparisons to get tougher as the year progresses.

"While the economic environment remains volatile, we are gearing up for continued growth to take advantage of our market position and financial strength. In the first quarter we increased our annual capital spending forecast to a range of $12 million to $15 million. We have two priorities. The first is to allocate resources for growth opportunities in precision agriculture, persistent surveillance and barrier films. The second is to build out the business platform in key areas of R&D and business development."

About Raven Industries, Inc.

With strengths in engineering and technological innovation, Raven provides custom solutions including precision agriculture applications, high performance specialty films, aerostats for communications and surveillance, and electronic manufacturing services.

Conference Call Information

Raven has scheduled a conference call today at 3:00 p.m. Eastern Time to discuss its second quarter performance, and provide an outlook for the current year. Interested investors are invited to listen to the call by visiting the company's Web site at www.ravenind.com several minutes before the call to download the necessary software. In addition, a taped rebroadcast will be available beginning one hour after the call ends, and will continue through September 1, 2010. To access the rebroadcast, dial 877-870-5176 and enter this passcode: 2140620. A replay of the call will also be available at www.ravenind.com for 90 days.

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—any of which could adversely affect any of the company's product lines—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.