EXHIBIT 13
BUSINESS SEGMENTS RAVEN 2000 ANNUAL REPORT
For the years ended January 31
--------------------------------------------------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998 1997(d) 1996(d) 1995(d)
--------------------------------------------------------------------------
ELECTRONICS
Sales ............................... $ 48,930 $ 46,328 $ 45,947 $ 43,861 $ 32,962 $ 31,959
Operating income .................... 2,937 4,161 5,844 4,913 4,600 2,753(a)
Assets .............................. 27,224 25,972 25,599 23,251 19,204 16,912
Capital expenditures ................ 1,496 2,084 2,005 1,089 817 579
Depreciation & amortization ......... 1,548 1,446 1,345 1,298 1,099 895
PLASTICS
Sales ............................... $ 70,699 $ 70,845 $ 68,325 $ 59,158 $ 55,281 $ 48,971
Operating income .................... 7,073(b) 4,429 1,998 4,187 3,267 3,470
Assets .............................. 25,934 33,674 34,583 33,879 26,092 25,817
Capital expenditures ................ 1,988 2,151 3,869 2,540 2,973 6,394
Depreciation & amortization ......... 2,923 3,160 3,248 2,682 2,418 1,849
SEWN PRODUCTS
Sales ............................... $ 28,277 $ 35,625 $ 35,347 $ 36,422 $ 32,201 $ 40,790
Operating income .................... 567 1,083 2,720 2,871 1,694 2,913
Assets .............................. 11,378 14,547 14,157 14,990 13,934 16,384
Capital expenditures ................ 155 371 667 380 396 780
Depreciation & amortization ......... 413 527 544 586 725 838
CORPORATE & OTHER
Assets(c) ........................... $ 9,511 $ 9,464 $ 7,727 $ 8,542 $ 8,323 $ 6,523
TOTAL COMPANY
Sales ............................... $147,906 $152,798 $149,619 $139,441 $120,444 $121,720
Operating income .................... 10,577(b) 9,673 10,562 11,971 9,561 9,136(a)
Assets .............................. 74,047 83,657 82,066 80,662 67,553 65,636
Capital expenditures ................ 3,639 4,606 6,541 4,009 4,186 7,753
Depreciation & amortization ......... 4,884 5,133 5,137 4,566 4,242 3,582
- -------------------------------------------------------------------------------------------------------------------
(a) INCLUDES A $1.8 MILLION PRETAX CHARGE AT THE COMPANY'S BETA RAVEN
SUBSIDIARY.
(b) INCLUDES A $1.2 MILLION PRETAX GAIN ON THE SALE OF THE COMPANY'S GLASSTITE'S
BUSINESS (SEE NOTE 4).
(c) CORPORATE & OTHER ASSETS ARE PRINCIPALLY CASH, INVESTMENTS, DEFERRED TAXES
AND NOTES RECEIVABLE.
(d) AMOUNTS FOR 1997, 1996 AND 1995 ARE UNAUDITED.
PRODUCT LINES BY BUSINESS SEGMENT:
ELECTRONICS: Contract electronics manufacturing, Flow controls
precision-farming, Feedmill and bakery automation
PLASTICS: Sheeting, Storage/sprayer tanks, Research balloons, Pickup-truck
toppers (sold)
SEWN PRODUCTS: Performance outerwear, Sport balloons, Inflatables
9
SALES BY MARKET (UNAUDITED) RAVEN 2000 ANNUAL REPORT
For the years ended January 31
--------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
--------------------------------
INDUSTRIAL
Plastic sheeting ........................................... $ 12,279 $ 12,736 $ 11,647
Industrial tanks ........................................... 9,165 9,632 12,405
Electronics ................................................ 27,186 20,189 18,765
Research balloons .......................................... 5,021 3,873 3,150
Inflatables ................................................ 2,925 3,319 3,085
--------------------------------
$ 56,576 $ 49,749 $ 49,052
RECREATION
Performance outerwear ...................................... $ 23,286 $ 30,202 $ 29,803
Sport balloons ............................................. 2,066 2,104 2,459
--------------------------------
$ 25,352 $ 32,306 $ 32,262
AGRICULTURE
Flow controls precision-farming ............................ $ 13,520 $ 15,311 $ 16,852
Feedmill automation ........................................ 5,234 6,059 5,128
Storage/sprayer tanks ...................................... 9,055 9,740 9,869
Plastic sheeting ........................................... 1,852 1,730 1,251
--------------------------------
$ 29,661 $ 32,840 $ 33,100
CONSTRUCTION
Plastic sheeting ........................................... $ 15,670 $ 13,141 $ 11,396
DEFENSE
Electronics ................................................ $ 2,990 $ 4,769 $ 5,202
AUTOMOTIVE
Pickup-truck toppers ....................................... $ 17,657 $ 19,993 $ 18,607
TOTAL COMPANY SALES
Industrial ................................................. $ 56,576 $ 49,749 $ 49,052
Recreation ................................................. 25,352 32,306 32,262
Agriculture ................................................ 29,661 32,840 33,100
Construction ............................................... 15,670 13,141 11,396
Defense .................................................... 2,990 4,769 5,202
--------------------------------
Total sales of ongoing operations .......................... 130,249 132,805 131,012
Automotive (sold)(a) ....................................... 17,657 19,993 18,607
--------------------------------
Total ...................................................... $147,906 $152,798 $149,619
================================
- ------------------------------------------------------------------------------------------------
(a) DURING THE THIRD QUARTER OF FISCAL 2000, THE COMPANY SOLD ITS GLASSTITE
BUSINESS (SEE NOTE 4).
13
ELEVEN-YEAR FINANCIAL SUMMARY
For the years ended January 31,
-----------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA 2000 1999 1998
-----------------------------------------
OPERATIONS FOR YEAR
Net sales
Ongoing operations .............................................. $130,249 $132,805 $131,012
Automotive operations(d) ........................................ 17,657 19,993 18,607
Total ......................................................... 147,906 152,798 149,619
Gross profit ...................................................... 24,524 24,815 24,929
Operating income
Ongoing operations .............................................. 8,215 8,851 10,266
Automotive operations(d) ........................................ 2,362 822 296
Total ......................................................... 10,577(a) 9,673 10,562
Income before income taxes ........................................ 10,503(a) 9,649 12,540(b)
Net income ........................................................ $ 6,762(a) $ 6,182 $ 8,062(b)
Net income % of sales ............................................. 4.6% 4.0% 5.4%
Net income % of beginning equity .................................. 10.9% 10.0% 14.2%
Cash dividends .................................................... $ 2,895 $ 2,944 $ 2,709
FINANCIAL POSITION
Current assets .................................................... $ 55,371 $ 60,279 $ 57,285
Current liabilities ............................................... 14,702 15,128 17,816
Working capital ................................................... $ 40,669 $ 45,151 $ 39,469
Current ratio ..................................................... 3.77 3.98 3.22
Property, plant and equipment ..................................... $ 15,068 $ 19,563 $ 19,817
Total assets ...................................................... 74,047 83,657 82,066
Long-term debt .................................................... 3,024 4,572 1,128
Shareholders' equity .............................................. $ 54,519 $ 62,293 $ 61,563
Long-term debt / total capitalization ............................. 5.3% 6.8% 1.8%
Inventory turnover (CGS / year-end inventory) ..................... 5.0 4.9 4.8
CASH FLOWS PROVIDED BY (USED IN)
Operating activities .............................................. $ 10,375 $ 8,326 $ 9,274
Investing activities .............................................. 6,323 (3,127) (4,979)
Financing activities .............................................. (16,326) (2,714) (4,884)
Increase (decrease) in cash ....................................... 372 2,485 (589)
COMMON STOCK DATA
Net income per share -- basic ..................................... $ 1.55 $ 1.30 $ 1.66
Net income per share -- diluted ................................... 1.55 1.30 1.65
Cash dividends per share .......................................... 0.66 0.62 0.56
Book value per share .............................................. 13.92 13.27 12.76
Stock price range during year
High ............................................................ $ 18.25 $ 22.75 $ 25.75
Low ............................................................. $ 13.50 $ 15.25 $ 19.63
Shares outstanding, year-end (in thousands) ....................... 3,916 4,694 4,824
Number of shareholders, year-end .................................. 2,749 3,014 3,221
OTHER DATA
EBITDA ............................................................ $ 15,461 $ 14,806 $ 15,699
EBITDA % of sales ................................................. 10.5% 9.7% 10.5%
Average number of employees ....................................... 1,320 1,445 1,511
Sales per employee ................................................ $ 112 $ 106 $ 99
Backlog ........................................................... $ 44,935 $ 47,431 $ 47,154
- --------------------------------------------------------------------------------------------------------------
ALL PER SHARE, SHARES OUTSTANDING AND MARKET PRICE DATA REFLECT THE OCTOBER 1992
THREE-FOR-TWO AND THE JULY 1989 TWO-FOR-ONE STOCK SPLITS. ALL OTHER FIGURES ARE
AS REPORTED. EBITDA IS DETERMINED AS OPERATING INCOME PLUS DEPRECIATION AND
AMORTIZATION.
(a) INCLUDES A $1.2 MILLION PRETAX GAIN ($764,000 NET OF TAX) ON THE SALE OF
ASSETS OF THE COMPANY'S GLASSTITE SUBSIDIARY (SEE NOTE 4).
(b) INCLUDES A $1.8 MILLION PRETAX GAIN($1.2 MILLION NET OF TAX) ON SALE OF AN
INVESTMENT IN AN AFFILIATE (SEE NOTE 4).
(c) INCLUDES A $1.8 MILLION PRETAX CHARGE ($1.2 MILLION NET OF TAX) AT THE
COMPANY'S BETA RAVEN SUBSIDIARY.
(d) DURING THE THIRD QUARTER OF FISCAL 2000, THE COMPANY SOLD ITS GLASSTITE
BUSINESS. IN ADDITION DURING FISCAL YEAR 1996, THE COMPANY SOLD ITS ASTORIA
BUSINESS.
14
RAVEN 2000 ANNUAL REPORT
For the years ended January 31,
- -------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------
$121,784 $104,654 $105,802 $108,751 $101,614 $ 93,113 $ 76,799 $ 81,291
17,657 15,790 15,918 12,717 9,600 7,496 8,703 9,682
139,441 120,444 121,720 121,468 111,214 100,609 85,502 90,973
25,287 22,660 23,968 23,574 21,048 19,109 17,685 18,177
11,330 9,523 7,953(c) 9,480 8,586 8,106 7,686 8,455
641 38 1,183 960 560 32 (375) (994)
11,971 9,561 9,136(c) 10,440 9,146 8,138 7,311 7,461
11,915 9,566 9,372(c) 10,638 9,182 8,067 7,071 6,831
$ 7,688 $ 6,197 $ 6,088(c) $ 6,954 $ 6,030 $ 5,306 $ 4,605 $ 4,235
5.5% 5.1% 5.0% 5.7% 5.4% 5.3% 5.4% 4.7%
15.6% 13.6% 14.8% 19.6% 19.7% 20.2% 20.2% 19.7%
$ 2,367 $ 2,130 $ 1,843 $ 1,545 $ 1,316 $ 1,165 $ 1,014 $ 849
$ 56,696 $ 45,695 $ 43,795 $ 45,037 $ 42,476 $ 34,798 $ 33,900 $ 30,570
20,016 14,771 15,078 16,088 15,253 11,284 12,147 11,247
$ 36,680 $ 30,924 $ 28,717 $ 28,949 $ 27,223 $ 23,514 $ 21,753 $ 19,323
2.83 3.09 2.90 2.80 2.78 3.08 2.79 2.72
$ 18,142 $ 18,069 $ 18,570 $ 13,371 $ 10,457 $ 9,947 $ 8,368 $ 7,163
80,662 67,553 65,636 60,597 54,813 46,528 44,103 39,547
3,181 2,816 4,179 2,539 3,224 3,676 4,679 4,966
$ 56,729 $ 49,151 $ 45,526 $ 41,100 $ 35,530 $ 30,601 $ 26,236 $ 22,802
5.3% 5.4% 8.4% 5.8% 8.3% 10.7% 15.1% 17.5%
4.5 4.1 4.4 4.4 3.8 4.2 3.4 4.1
$ 7,088 $ 9,687 $ 7,452 $ 11,257 $ 3,475 $ 7,489 $ 5,583 $ 2,404
(5,090) (4,158) (10,000) (5,908) (3,107) (3,886) (3,113) (1,308)
(2,363) (4,029) 406 (2,042) (1,659) (2,518) (2,071) (1,875)
(365) 1,500 (2,142) 3,307 (1,291) 1,085 399 (779)
$ 1.62 $ 1.31 $ 1.29 $ 1.48 $ 1.30 $ 1.15 $ 1.00 $ 0.90
1.61 1.30 1.27 1.45 1.27 1.13 0.98 0.87
0.50 0.45 0.39 0.33 0.28 0.25 0.22 0.18
11.73 10.42 9.62 8.76 7.60 6.63 5.77 5.01
$ 23.50 $ 20.75 $ 24.50 $ 23.50 $ 21.50 $ 15.83 $ 9.75 $ 10.00
$ 16.00 $ 15.50 $ 18.00 $ 18.00 $ 13.83 $ 8.00 $ 6.42 $ 5.33
4,836 4,716 4,735 4,694 4,676 4,629 4,559 4,554
3,011 3,190 3,031 3,173 3,147 2,775 2,526 1,898
$ 16,537 $ 13,803 $ 12,718 $ 13,337 $ 11,809 $ 10,675 $ 9,580 $ 10,238
11.9% 11.5% 10.4% 11.0% 10.6% 10.6% 11.2% 11.3%
1,387 1,368 1,414 1,435 1,316 1,252 1,141 1,234
$ 101 $ 88 $ 86 $ 85 $ 85 $ 80 $ 75 $ 74
$ 38,102 $ 32,539 $ 29,661 $ 36,403 $ 49,033 $ 48,200 $ 53,587 $ 42,078
- -------------------------------------------------------------------------------------------------------------
15
FINANCIAL REVIEW AND ANALYSIS
RESULTS OF OPERATIONS: MARGIN ANALYSIS
The following table presents comparative financial performance for the past
three years:
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended January 31
------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------------------
% % % % % %
IN THOUSANDS, EXCEPT PER-SHARE DATA Amount Sales Change Amount Sales Change Amount Sales Change
------------------------------------------------------------------------------------------
Net sales ........................... $147,906 100.0 -3.2 $152,798 100.0 +2.1 $149,619 100.0 +7.3
Gross profit ........................ 24,524 16.6 -1.2 24,815 16.2 -0.5 24,929 16.7 -1.4
Operating expenses .................. 15,133 10.2 -0.1 15,142 9.9 +5.4 14,367 9.6 +7.9
Gain on Glasstite sale .............. 1,186 0.8
Operating income .................... 10,577 7.2 +9.3 9,673 6.3 -8.4 10,562 7.1 -11.8
Income before income taxes .......... 10,503 7.1 +8.9 9,649 6.3 -23.1 12,540 8.4 +5.2
Income taxes ........................ 3,741 2.5 +7.9 3,467 2.3 -22.6 4,478 3.0 +5.9
Net income .......................... $ 6,762 4.6 +9.4 $ 6,182 4.0 -23.3 $ 8,062 5.4 +4.9
Net income per share
--diluted ......................... $ 1.55 +19.2 $ 1.30 -21.2 $ 1.65 +2.5
Effective income tax rate ........... 35.6% -0.8 35.9% +0.6 35.7% +0.9
- -----------------------------------------------------------------------------------------------------------------------------------
The company sold its Glasstite pickup-truck operation in the third quarter of
fiscal 2000. The following table presents ongoing business information excluding
Glasstite results:
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended January 31
------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------------------------------------
Ongoing Businesses Ongoing Businesses
-------------------------- -------------------------
As Glasstite % % As Glasstite % %
IN THOUSANDS Reported Related Amount Sales Change Reported Related Amount Sales Change
------------------------------------------------------------------------------------------------------
Net sales ................ $147,906 $ 17,657 $130,249 100.0 -1.9 $152,798 $ 19,993 $132,805 100.0 +1.4
Gross profit ............. 24,524 1,921 22,603 17.4 -1.1 24,815 1,957 22,858 17.2 -3.2
Operating expenses ....... 15,133 745 14,388 11.0 +2.7 15,142 1,135 14,007 10.5 +5.0
Gain on Glasstite sale ... 1,186 1,186
Operating income ......... $ 10,577 $ 2,362 $ 8,215 6.3 -7.2 $ 9,673 $ 822 $ 8,851 6.7 -13.4
- -----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
Sales in fiscal 2000 were $147.9 million. Net income was $6.8 million or $1.55
per share on a diluted basis. Fiscal 1999 net income was $6.2 million or $1.30
per share on a diluted basis. Fiscal 2000 showed a 19% increase in earnings per
share on $4.9 million fewer sales dollars. Results include a $1.2 million pretax
gain on the sale of the assets of the company's Glasstite subsidiary. Excluding
the sale of Glasstite and its sales and earnings as set forth above, sales
totaled $130.2 million compared to adjusted fiscal 1999 sales of $132.8 million.
Adjusted operating income for fiscal 2000 was $8.2 million, compared to
operating income of $8.9 million in fiscal 1999. Fiscal 2000 included an
$800,000 pretax inventory change related to third-quarter actions by the new
managers of Raven operating units who were repositioning certain elements of the
company's business. The company took two important steps toward repositioning
its business during fiscal 2000. These were the disposing of a non-strategic
business and reducing its underperforming assets.
16
RAVEN 2000 ANNUAL REPORT
For the fourth quarter of fiscal 2000, unusually warm weather affected
outerwear apparel sales while a continuing recession in agriculture and the loss
of sales from Glasstite operations caused 21 percent lower sales and a 22
percent drop in net income. Earnings per diluted share for the final quarter was
down 9 percent to 31 cents from 34 cents for the previous year.
The company is divesting itself of assets that do not provide a strong
return, and management is focusing its core businesses on improved
profitability. In fiscal 2000, the company's return was 10.9 % on beginning
stockholders' equity and 4.6% on sales. The company also increased its book
value by 4.9 % on a per share basis, repurchased 780,604 shares of its common
stock for a total cost of $11.9 million, paid record dividends, and con-tinued
to invest in its ongoing business. For fiscal 2000 the company's long-term debt
to total capitalization ratio was 5.3%.
- ------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-----------------------------------------------------------
Net income as % of
Sales .................................... 4.6% 4.0% 5.4% 5.5% 5.1% 5.0%
Average assets ........................... 8.6% 7.4% 9.9% 10.4% 9.3% 9.6%
Beginning equity ......................... 10.9% 10.0% 14.2% 15.6% 13.6% 14.8%
- ------------------------------------------------------------------------------------------------------------
SEGMENT ANALYSIS
The following table summarizes sales and gross profits in the company's three
business segments for each of the past three fiscal years:
- -------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS amount % change amount % change amount % change
---------------------------------------------------------------------
SALES
Electronics ........................ $ 48,930 +5.6 $ 46,328 +0.8 $ 45,947 +4.8
Plastics ........................... 70,699 -0.2 70,845 +3.7 68,325 +15.5
Sewn Products ...................... 28,277 -20.6 35,625 +0.8 35,347 -3.0
-------- -------- --------
Total .............................. $147,906 -3.2 $152,798 +2.1 $149,619 +7.3
======== ======== ========
- -------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS amount % sales amount % sales amount % sales
---------------------------------------------------------------------
GROSS PROFIT
Electronics ........................ $ 7,836 16.0 $ 8,657 18.7 $ 10,083 21.9
Plastics ........................... 12,996 18.4 11,600 16.4 8,791 12.9
Sewn Products ...................... 3,692 13.1 4,558 12.8 6,055 17.1
-------- -------- --------
Total .............................. $ 24,524 16.6 $ 24,815 16.2 $ 24,929 16.7
======== ======== ========
- -------------------------------------------------------------------------------------------------------------
ELECTRONICS SEGMENT
FISCAL 2000 VERSUS FISCAL 1999
Sales for this segment were up $2.6 million when compared to fiscal 1999,
reaching $48.9 million in fiscal 2000. Deliveries in contract manufacturing from
the Electronic Systems Division were up $5.3 million for fiscal 2000, ending the
year at $24.1 million. Fiscal 2000 sales of Beta Raven's feedmill systems and
subcontract assemblies were $11.3 million, down from the $12.2 million for
fiscal 1999. Sales of precision-farming control devices declined by $1.8 million
to $13.5 million. The persistent poor farm economy continues to affect sales in
both of these product lines. The fiscal 2000 gross margin on feedmill automation
systems was about even with last year.
17
FINANCIAL REVIEW AND ANALYSIS
Gross margin rates on precision farming control devices in fiscal 2000 were up
from fiscal 1999. Cost-control measures worked in the face of declining sales.
Contract manufacturing gross margins declined due to the number of new modules
in its product mix resulting in startup costs and lower yield rates. The results
also reflect the impact of a third-quarter $300,000 inventory charge described
above. Operating income for the segment was $2.9 million, down from $4.2 million
in fiscal 1999.
FISCAL 1999 VERSUS FISCAL 1998
Sales for this segment were up slightly when compared to fiscal 1998, reaching
$46.3 million in fiscal 1999. Due to increased market share, fiscal 1999 sales
of Beta Raven feedmill systems and subcontract assemblies rose to $12.2 million,
up from $10.1 million in fiscal 1998. Sales of precision-farming control devices
declined by $1.5 million to $15.3 million. The primary agricultural markets were
hard hit by a poor farm economy. Contract manufacturing deliveries ended the
year at $18.8 million, down $200,000 from fiscal 1998. Customer delays in the
delivery of certain contracts kept this product line from exceeding fiscal 1998
sales figures. Operating income for the segment was $4.2 million, down from $5.8
million in fiscal 1998. Gross margin rates on precision-farming control devices
in fiscal 1999 were down from fiscal 1998. This resulted from lower volumes and
a poor performance in the precision depth-control product line. Contract
manufacturing margins were affected by delivery delays, and new contract startup
costs. Feedmill automation systems generated higher gross margin rates in fiscal
1999 than in fiscal 1998, due to better utilization of resources resulting from
increased sales volume.
PROSPECTS
Continued expansion of contract electronics manufacturing is expected to lead to
sales growth of 10% or more in fiscal 2001. The agricultural market remains
weak, and sales growth of precision-farming devices will depend upon improved
commodity prices. A concerted effort to improve yield rates on the manufacturing
processes and to lower startup costs associated with new customers is expected
to lead to improved gross profit rates in the Electronics segment.
ELECTRONICS SEGMENT
SALES GROSS PROFITS
DOLLARS IN MILLIONS DOLLARS IN MILLIONS
[BAR CHART] [BAR CHART]
98 - 45.947 98 - 10.083
99 - 46.328 99 - 8.657
00 - 48.930 00 - 7.836
PLASTICS SEGMENT
FISCAL 2000 VERSUS FISCAL 1999
Sales in this segment were down slightly from $70.8 million in fiscal 1999 to
$70.7 million in fiscal 2000. The engineered films product line sales were $34.8
million, an increase of $3.3 million over the $31.5 million in fiscal 1999. The
plastic storage tank product line sales were $18.2 million, $1.2 million below
the $19.4 million generated in fiscal 1999. The continuing weak agricultural and
semiconductor markets had a negative effect on the product line sales. The
assets of the company's Glasstite subsidiary were sold in the third quarter. The
$1.2 million gain generated from this sale is included in this segment's
operating income which totaled $7.1 million. During the fourth quarter of fiscal
2000 the company revised estimates of costs to be incurred related to the sale,
increasing operating income by $220,000. For fiscal 2000, excluding the sale of
Glasstite and its associated sales and earnings, this segment would have had
sales of $53.0 million with an operating income of $4.7 million. Making the same
adjustment for fiscal 1999 would result in $50.9 million in sales and $3.6
million in operating income. The gross margin for the plastic storage tank
product line was adversely affected by a third-quarter $250,000 inventory charge
due to the new operating manager repositioning the business. A strong
performance in the engineered films product line, through increased market share
and favorable material costs, contributed to the performance of the Plastics
segment.
PLASTICS SEGMENT
SALES GROSS PROFITS
DOLLARS IN MILLIONS DOLLARS IN MILLIONS
[BAR CHART] [BAR CHART]
98 - 68.325 98 - 8.791
99 - 70.845 99 - 11.600
00 - 70.699 00 - 12.996
18
RAVEN 2000 ANNUAL REPORT
FISCAL 1999 VERSUS FISCAL 1998
Sales in the Plastics segment rose from $68.3 million in fiscal 1998 to $70.8
million in fiscal 1999. The engineered films product line generated a $4.0
million increase in sales over the fiscal 1998's $27.5 million. Included in
fiscal 1999 sales was $2.5 million of construction film shipped to various
storm-devastated areas. Plastic storage tank sales of $19.4 million were $3.1
million below fiscal 1998. The primary factor responsible for the reduction in
sales was a weak semiconductor market that affected the dual-laminate tank
product line. Sales in the pickup-truck topper product line increased by over 7%
due primarily to higher unit deliveries. Even though sales of agricultural tanks
held steady, gross margins were down due to the poor farm economy. This, in
conjunction with low volume in dual-laminate tanks, accounted for lower gross
margins on plastics storage tanks. Overall, the Plastics segment generated gross
margins of 16.4% compared to 12.9% for fiscal 1998. This increase was due to
strong performances in the company's engineered films and pickup-truck topper
operations as a result of better utilization of capacity due to increased sales
volume.
PROSPECTS
The Plastics segment sales will decrease in fiscal 2001 due to the Glasstite
subsidiary sale. Of the product lines remaining, it is management's expectation
that sales will increase less than 10% in fiscal 2001. Engineered films and
plastic storage tank product lines are expected to show a sales increase due to
an increased market share, with the majority of the increase expected in the
plastic storage tank product line. Management expects lower gross margins on the
engineered films product line due to higher resin prices. The plastic storage
tank product line's gross margin rates are expected to increase in fiscal 2001
due to better utilization of labor and equipment in the dual-laminate product
line.
SEWN PRODUCTS SEGMENT
FISCAL 2000 VERSUS FISCAL 1999
Sales of $28.3 million for the Sewn Products segment were down $7.3 million
compared to $35.6 million for fiscal 1999. Performance outerwear sales decreased
from $30.2 million in fiscal 1999 to $23.3 million in fiscal 2000, a difference
of $6.9 million. The decrease in sales of performance outerwear was due
primarily to the loss of sales to foreign competition. The sales for the hot-air
balloon and inflatable display product lines decreased $432,000 to $5.0 million
due to lower customer demand. Gross profit rates for the Sewn Products segment
increased slightly due to cost controls in the performance outerwear product
line. In fiscal 2000 the operating income for the Sewn Products segment was
$567,000 compared to $1.1 million for fiscal 1999. This result reflects a
third-quarter $250,000 inventory charge due to the new operating manager
repositioning the business.
SEWN PRODUCTS SEGMENT
SALES GROSS PROFITS
DOLLARS IN MILLIONS DOLLARS IN MILLIONS
[BAR CHART] [BAR CHART]
98 - 35.347 98 - 6.055
99 - 35.625 99 - 4.558
00 - 28.277 00 - 3.692
FISCAL 1999 VERSUS FISCAL 1998
Sales were $35.6 million in the Sewn Products segment in fiscal 1999, less than
1% more than fiscal 1998. Sales of performance outerwear increased by $400,000
to end fiscal 1999 at $30.2 million. Sales of hot-air balloons and inflatable
displays declined due to lower demand. The change in the Sewn Products segment's
gross profit rate, from 17% in fiscal 1998 to 13% in fiscal 1999, was due
primarily to increased competitive pressures in the contract sewing product line
along with significant style-changeover costs.
PROSPECTS
Management is projecting a further sales decline of less than 10% in the Sewn
Products segment for fiscal 2001. Competitive pressures in the performance
outerwear product line should account for most of this decline. This
19
FINANCIAL REVIEW AND ANALYSIS
pressure is evidenced by a significant portion of the performance outerwear
business moving offshore in fiscal 2000. Management expects to push for higher
gross margin business and improve plant utilization in fiscal 2001. The new
management in performance outerwear has sold its proprietary skiwear line to
reduce inventory, lower accounts receivable levels, and improve cash return on
investment. The hot-air balloon and inflatable display product lines are
projected to show a sales increase due to increased customer demand.
EXPENSES, INCOME TAXES, AND OTHER
FISCAL 2000 VERSUS FISCAL 1999
Selling expense decreased by 7% in fiscal 2000 when compared with fiscal 1999
levels, due primarily to lower sales for the product lines which pay
commissions. Administration expense was up 9%, due primarily to higher bad debt
expense, costs associated with restructuring and higher benefit costs. Interest
expense was down from fiscal 1999 by $56,000 due to lower borrowing levels. The
company's effective income tax rate was essentially unchanged in fiscal 2000.
FISCAL 1999 VERSUS FISCAL 1998
Selling expenses increased by 4% in fiscal 1999 when compared with fiscal 1998
levels, basically the same rate as salary increases. Administration expense was
up 7% to $6.6 million in fiscal 1999 compared to $6.2 million in fiscal 1998.
Administration expense was higher due primarily to salary increases and
settlement of a legal issue. Interest expense was up from 1998 by $151,000 due
to higher borrowing levels. In fiscal 1999 "other income" was $450,000, which
included interest income on a note related to the sale of an affiliated company
in January 1998. The company's effective income tax rate did not change
significantly.
PROSPECTS
For fiscal 2001 management has taken actions to hold operating expenses steady
as a percentage of sales when compared to fiscal 2000. Interest expense should
decline slightly as total borrowing is reduced. The company's effective income
tax rate is not expected to materially change in fiscal 2001.
ANALYSIS OF FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES
The following table summarizes cash provided by (used in) the company's business
activities for the past three fiscal years:
- --------------------------------------------------------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
-------------------------------
Operating activities.......................... $ 10,375 $ 8,326 $ 9,274
Investing activities.......................... 6,323 (3,127) (4,979)
Financing activities.......................... (16,326) (2,714) (4,884)
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
The company's cash flow from operations totaled $28.0 million over the past
three years, compared with net income of $21.0 million over the same period.
Accounts receivable levels decreased in fiscal 2000 due to lower fourth-quarter
sales, particularly to the agricultural markets. Working capital requirements
are projected to decline in proportion to the lower sales volume in fiscal 2001.
20
RAVEN 2000 ANNUAL REPORT
INVESTING ACTIVITIES
In October 1999, the company sold the assets of its Glasstite subsidiary,
receiving $8.7 million of cash. In December 1999, the company received the final
payment of $1.2 million from the sale of its investment in an affiliated
company. Capital expenditures totaled $3.6 million in fiscal 2000, $967,000 less
than the prior year. Capital expenditures in fiscal 2000 ran $1.2 million less
than depreciation and amortization. Expenditures, which were in support of
expected growth, were divided between the Electronics segment at $1.5 million
and the Plastics segment at $2.0 million. Capital spending is expected to exceed
depreciation and amortization by at least $1.0 million in fiscal 2001. This is
mainly in support of expected expansion in the engineered films product line.
FINANCING ACTIVITIES AND CREDIT LINES
The company increased its dividend on a per share basis for the thirteenth
consecutive year. Cash was also used to repurchase 780,604 shares of company
stock at an average price of $15.22. As of January 31, 2000, the company could
repurchase an additional 209,591 shares of its common stock under the November
1999, 500,000 share authorization from the Board of Directors. Shares were
repurchased to return additional cash to the shareholders and increase the
leverage of the company's balance sheet. The company may repurchase additional
shares, depending on its own internal cash requirements. The Board of Directors
authorized an additional 500,000 share repurchase in March 2000.
The company uses its short-term line of credit to finance its seasonal
borrowing needs. Maximum borrowing under the company's line of credit was $5.0
million during fiscal 2000 and the average daily borrowing was $721,000.
Short-term borrowing required for fiscal 2001 should be kept at a minimum
because of the company's opening cash balance and reduced seasonal working
capital requirements in its Sewn Products segment. The skiwear business, now
sold, required extended dating of accounts receivable for products shipped in
the summer months. Management believes its existing credit facility and cash
provided by operations will be sufficient to fund its requirements in the coming
fiscal year.
CAPITAL STRUCTURE AND LONG-TERM FINANCING
The company's long-term debt to total capitalization ratio was 5.3% at January
31, 2000. Refer to Note 7 to the consolidated financial statements for the types
and sources of long term debt. The company required no additional long term
financing during fiscal 2000. The terms of the long-term loan secured in fiscal
1999 call for repayment over five years at $1.0 million per year ending in 2003.
Interest is at a fixed 7.25%, payable quarterly, during the life of the loan.
The company's solid financial condition and capacity to assume
additional financing, if needed, provide the company a strategic advantage over
many of its competitors. Management has the capacity to, and will, leverage the
company to acquire businesses that fit its strategic direction. Additional cash
for acquisition purposes could also be raised by using proceeds from a
disposition. In the opinion of management, the company is well-positioned to
take on new opportunities in its core businesses with emphasis on those that
build on the company's strengths of customer service and manufacturing.
21
STOCK AND QUARTERLY PERFORMANCE
WEEKLY CLOSING STOCK PRICE, VOLUME & P/E
[PLOT POINTS CHART]
CLOSING
DATE PRICE VOLUME P/E
02/05/99 15 7/8 17,800 12.21
02/12/99 15 1/4 6,700 11.73
02/19/99 14 3/4 37,100 11.35
02/26/99 14 5/8 21,100 11.25
03/05/99 14 3/4 21,100 11.35
03/12/99 14 1/4 25,300 10.96
03/19/99 14 1/8 39,300 10.86
03/26/99 14 21,600 10.76
04/02/99 13 11/16 64,500 10.52
04/09/99 14 55,700 10.76
04/16/99 14 1/8 63,800 10.86
04/23/99 14 93,600 10.00
04/30/99 14 77,800 10.00
05/07/99 14 5/8 50,700 10.44
05/14/99 15 1/2 34,400 11.07
05/21/99 15 3/4 25,700 11.25
05/28/99 15 15/16 20,300 11.38
06/04/99 15 3/4 20,300 11.25
06/11/99 16 20,400 11.43
06/18/99 16 1/16 14,900 11.47
06/25/99 16 34,300 11.43
07/02/99 16 1/4 13,400 11.60
07/09/99 17 7/8 11,000 12.77
07/16/99 17 24,200 12.14
07/23/99 16 5/8 10,880 11.15
07/30/99 16 5/8 15,500 11.15
08/06/99 16 1/4 12,000 10.90
09/13/99 16 5/8 17,600 11.15
08/20/99 17 38,900 11.40
08/27/99 17 5/8 58,400 11.82
09/03/99 17 13/16 78,400 11.95
09/10/99 17 78,400 11.40
09/17/99 16 5/16 29,300 10.94
09/24/99 15 3/4 34,300 10.57
10/01/99 14 6/16 35,000 10.57
10/08/99 14 1/16 50,900 9.43
10/15/99 13 1/2 17,200 9.06
10/22/99 14 9/16 38,000 9.39
10/29/99 15 1/2 39,700 10.00
11/05/99 15 1/2 359,600 9.83
11/12/99 15 1/4 32,000 9.83
11/19/99 15 1/8 25,600 9.75
11/26/99 14 1/4 35,300 9.19
12/03/99 14 5/8 47,500 9.43
12/10/99 14 5/8 38,800 9.43
12/17/99 14 5/8 38,800 9.43
12/24/99 14 5/8 42,600 9.43
12/31/99 14 3/4 29,500 9.51
01/07/00 14 1/2 26,400 9.51
01/14/00 14 5/32 9,800 9.35
01/21/00 14 1/4 800 9.35
01/28/00 14 3/8 7,900 9.37
QUARTERLY INFORMATION (UNAUDITED)
Net income Common stock
DOLLARS IN THOUSANDS, Net Gross Operating Pretax Net per-share(a) market price Dividends
EXCEPT PER-SHARE DATA Sales Profit Income Income Income Basic Diluted High Low Per Share
------------------------------------------------------------------------------------------------------------
FISCAL 2000
FIRST QUARTER ..... $ 34,495 $ 6,011 $ 2,258 $ 2,252 $ 1,439 $ 0.31 $ 0.31 $ 16.50 $ 13.50 $ 0.16
SECOND QUARTER .... 36,965 6,588 2,803 2,842 1,816 0.40 0.40 18.25 13.88 0.16
THIRD QUARTER ..... 44,971 6,485 3,589(b) 3,527(b) 2,254(b) 0.52 0.52 18.00 13.50 0.17
FOURTH QUARTER .... 31,475 5,440 1,927(b) 1,882(b) 1,253(b) 0.31 0.31 16.00 13.63 0.17
------------------------------------------------------------------------------------------------------------
TOTAL YEAR ........ $147,906 $24,524 $10,577 $10,503 $ 6,762 $ 1.55 $ 1.55 $ 18.25 $ 13.50 $ 0.66
============================================================================================================
FISCAL 1999
First Quarter ..... $ 32,162 $ 5,420 $ 1,606 $ 1,601 $ 1,024 $ 0.21 $ 0.21 $ 22.75 $ 19.25 $ 0.15
Second Quarter .... 36,208 6,033 2,383 2,341 1,502 0.31 0.31 20.38 19.00 0.15
Third Quarter ..... 44,787 7,041 3,197 3,202 2,053 0.44 0.44 19.38 15.63 0.16
Fourth Quarter .... 39,641 6,321 2,487 2,505 1,603 0.34 0.34 18.00 15.25 0.16
------------------------------------------------------------------------------------------------------------
Total Year ........ $152,798 $24,815 $ 9,673 $ 9,649 $ 6,182 $ 1.30 $ 1.30 $ 22.75 $ 15.25 $ 0.62
============================================================================================================
FISCAL 1998
First Quarter ..... $ 35,666 $ 6,827 $ 3,288 $ 3,334 $ 2,134 $ 0.44 $ 0.44 $ 24.00 $ 21.75 $ 0.13
Second Quarter .... 34,075 6,075 2,407 2,476 1,602 0.33 0.33 24.50 22.38 0.13
Third Quarter ..... 41,321 6,113 2,505 2,548 1,641 0.34 0.33 25.75 22.50 0.15
Fourth Quarter .... 38,557 5,914 2,362 4,182(c) 2,685(c) 0.55 0.55 23.75 19.63 0.15
------------------------------------------------------------------------------------------------------------
Total Year ........ $149,619 $24,929 $10,562 $12,540 $ 8,062 $ 1.66 $ 1.65 $ 25.75 $ 19.63 $ 0.56
============================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
(a) NET INCOME PER SHARE IS COMPUTED DISCRETELY BY QUARTER AND MAY NOT ADD TO
THE FULL YEAR.
(b) INCLUDES A $966,000 THIRD QUARTER PRETAX GAIN ($619,000 NET OF TAX) AND A
$220,000 FOURTH QUARTER PRETAX GAIN ($142,000 NET OF TAX) ON THE SALE OF THE
COMPANY'S GLASSTITE BUSINESS (SEE NOTE 4).
(c) INCLUDES A $1.8 MILLION PRETAX GAIN ($1.2 MILLION NET OF TAX) ON SALE OF AN
INVESTMENT IN AN AFFILIATE (SEE NOTE 4).
22
CONSOLIDATED BALANCE SHEET RAVEN 2000 ANNUAL REPORT
As of January 31
-----------------------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998
-----------------------------
ASSETS
Current assets
Cash and cash equivalents ................................................ $ 5,707 $ 5,335 $ 2,850
Accounts and note receivable, net ........................................ 22,717 27,399 26,973
Inventories, net ......................................................... 24,462 25,978 25,816
Deferred income taxes .................................................... 1,919 1,150 1,140
Prepaid expenses and other current assets ................................ 566 417 506
-----------------------------
Total current assets ................................................. 55,371 60,279 57,285
Property, plant and equipment, net ......................................... 15,068 19,563 19,817
Note receivable, less current portion ...................................... 1,259
Other assets, net .......................................................... 3,608 3,815 3,705
-----------------------------
Total assets ......................................................... $74,047 $83,657 $82,066
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ........................................ $ 1,044 $ 1,060 $ 1,765
Accounts payable ......................................................... 5,320 5,993 7,480
Accrued liabilities ...................................................... 7,721 7,581 7,768
Customer advances ........................................................ 617 494 803
-----------------------------
Total current liabilities ............................................ 14,702 15,128 17,816
Long-term debt, less current portion ....................................... 3,024 4,572 1,128
Other liabilities, primarily compensation and benefits ..................... 1,802 1,664 1,559
Commitments and contingencies
Stockholders' equity ....................................................... 54,519 62,293 61,563
-----------------------------
Common shares, par value $1.00
Authorized--100,000,000
Outstanding--2000: 3,916,107; 1999: 4,694,086; 1998: 4,824,429
Total liabilities and stockholders' equity ........................... $74,047 $83,657 $82,066
=============================
- -------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
23
CONSOLIDATED STATEMENT OF INCOME
As of January 31
-------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998
-------------------------------------
Net sales ........................................................ $ 147,906 $ 152,798 $ 149,619
Cost of goods sold ............................................... 123,382 127,983 124,690
-------------------------------------
Gross profit ................................................... 24,524 24,815 24,929
Selling expenses ................................................. 7,866 8,502 8,149
Administrative expenses .......................................... 7,267 6,640 6,218
Gain on sale of Glasstite ........................................ (1,186)
-------------------------------------
Operating income ............................................... 10,577 9,673 10,562
Interest expense ................................................. (418) (474) (323)
Gain on sale of investment in affiliate .......................... 1,794
Other income, net ................................................ 344 450 507
-------------------------------------
Income before income taxes ..................................... 10,503 9,649 12,540
Income taxes ..................................................... 3,741 3,467 4,478
-------------------------------------
Net income ..................................................... $ 6,762 $ 6,182 $ 8,062
=====================================
Net income per common share:
-- basic ..................................... $ 1.55 $ 1.30 $ 1.66
=====================================
-- diluted ................................... $ 1.55 $ 1.30 $ 1.65
=====================================
- -----------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
24
CONSOLIDATED STATEMENTS OF RAVEN 2000 ANNUAL REPORT
STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
Common Paid-in Treasury stock Retained
DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA Stock Capital Shares Cost Earnings Total
--------------------------------------------------------------------------
Balance January 31, 1997 ...................... $ 5,188 $ 2,673 (352,403) $ (2,910) $ 51,778 $ 56,729
Net and comprehensive income .................. 8,062 8,062
Cash dividends ($.56 per share) ............... (2,709) (2,709)
Purchase of stock ............................. (34,000) (713) (713)
Purchase and retirement of stock .............. (33) (771) (804)
Employees' stock options exercised ............ 56 742 798
Tax benefit from exercise of stock options .... 200 200
--------------------------------------------------------------------------
Balance January 31, 1998 ...................... 5,211 2,844 (386,403) (3,623) 57,131 61,563
Net and comprehensive income .................. 6,182 6,182
Cash dividends ($.62 per share) ............... (2,944) (2,944)
Purchase of stock ............................. (135,000) (2,608) (2,608)
Purchase and retirement of stock .............. (53) (982) (1,035)
Employees' stock options exercised ............ 57 1,078 1,135
--------------------------------------------------------------------------
Balance January 31, 1999 ...................... 5,215 2,940 (521,403) (6,231) 60,369 62,293
Net and comprehensive income .................. 6,762 6,762
Cash dividends ($.66 per share) ............... (2,895) (2,895)
Purchase of stock ............................. (780,604) (11,881) (11,881)
Purchase and retirement of stock .............. (5) (65) (70)
Employees' stock options exercised ............ 5 79 84
Employee stock grant .......................... 3 35 38
Stock option cash bonus forfeitures, net of tax 188 188
--------------------------------------------------------------------------
BALANCE JANUARY 31, 2000 ...................... $ 5,218 $ 3,177 (1,302,007) $(18,112) $ 64,236 $ 54,519
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
25
CONSOLIDATED STATEMENT OF CASH FLOWS
As of January 31
----------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------
Cash flows from operating activities
Net income ............................................................. $ 6,762 $ 6,182 $ 8,062
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ........................................ 4,884 5,133 5,137
Provision for losses on accounts receivable .......................... 362 135 193
Gain on sale of Glasstite ............................................ (1,186)
Deferred income taxes ................................................ (1,019) (553) 166
Equity in earnings of affiliate, net of dividends .................... (204)
Gain on sale of investment of affiliate .............................. (1,794)
Change in operating assets and liabilities, net of effects from
the sale of Glasstite .............................................. 478 (2,502) (2,264)
Other operating activities, net ...................................... 94 (69) (22)
----------------------------------
Net cash provided by operating activities .............................. 10,375 8,326 9,274
Cash flows from investing activities
Capital expenditures ................................................... (3,639) (4,606) (6,541)
Sale of Glasstite assets, net of cash sold of $135 ..................... 8,682
Proceeds on sale of investment in affiliate ............................ 1,250 1,250 1,300
Other investing activities, net ........................................ 30 229 262
----------------------------------
Net cash provided by (used in) investing activities .................... 6,323 (3,127) (4,979)
Cash flows from financing activities
Proceeds from borrowing under line of credit ........................... 6,000 4,000 2,000
Repayment on borrowing under line of credit ............................ (6,000) (4,000) (2,000)
Long-term debt principal payments ...................................... (1,564) (2,262) (1,656)
Proceeds from issuance of long-term debt ............................... 5,000
Net proceeds from exercise of stock options ............................ 14 100 194
Dividends paid ......................................................... (2,895) (2,944) (2,709)
Purchase of treasury stock ............................................. (11,881) (2,608) (713)
----------------------------------
Net cash used in financing activities .................................. (16,326) (2,714) (4,884)
----------------------------------
Net increase (decrease) in cash and cash equivalents ..................... 372 2,485 (589)
Cash and cash equivalents at beginning of year ........................... 5,335 2,850 3,439
----------------------------------
Cash and cash equivalents at end of year ................................. $ 5,707 $ 5,335 $ 2,850
==================================
- ----------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
26
NOTES TO FINANCIAL STATEMENTS RAVEN 2000 ANNUAL REPORT
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Raven Industries,
Inc. ("Raven") and its wholly owned subsidiaries (the "company"), Aerostar
International, Inc. ("Aerostar"); Beta Raven Inc. ("Beta"); and Glasstite, Inc.
(sold in October 1999)("Glasstite"). All intercompany balances and transactions
have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the company's financial statements requires management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Cash and cash
equivalent balances are principally concentrated in a money market fund with
Norwest Bank, Minnesota, N.A.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market, with cost determined on
the first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depre-ciated over the
estimated useful lives of the assets using accelerated methods. The estimated
useful lives used for computing depreciation are as follows:
Buildings and improvements...................................... 7 to 39 years
Machinery and equipment......................................... 3 to 7 years
Maintenance and repairs are charged to expense in the year incurred and renewals
and betterments are capitalized. The cost and related accumulated depreciation
of assets sold or disposed of are removed from the accounts and the resulting
gain or loss is reflected in operations.
INTANGIBLE ASSETS
Intangible assets are primarily comprised of goodwill and patents which are
recorded at cost net of accumulated amortization. Amortization is computed on a
straight-line basis over estimated useful lives ranging from 5 to 20 years. The
company periodically assesses the recoverability of long lived and intangible
assets based upon anticipated future earnings and operating cash flows.
INSURANCE OBLIGATIONS
The company employs large deductible insurance policies covering workers
compensation, employee healthcare and general liability costs. Costs are accrued
related to these policies based on claims filed and estimates for claims
incurred but not reported.
CONTINGENCIES
The company is involved as a defendant in lawsuits, claims or disputes arising
in the normal course of business. An estimated loss on these matters is charged
to operations when it is probable that an asset has been impaired or a liability
has been incurred, and the amount of the loss can be reasonably estimated. The
settlement of such claims cannot be determined at this time. Management believes
that any liability resulting from these claims will be substantially mitigated
by insurance coverage. Accordingly, management does not believe the ultimate
outcome of these matters will be significant to its results of operations,
financial position or cash flows.
RESEARCH AND DEVELOPMENT
Research and development expenditures of $636,000 in fiscal 2000, $608,000 in
fiscal 1999 and $660,000 in fiscal 1998 were charged to cost of goods sold in
the year incurred.
27
NOTES TO FINANCIAL STATEMENTS
STOCK-BASED COMPENSATION
The company records compensation expense related to its stock-based compensation
plan using the intrinsic value method.
INCOME TAXES
Deferred income taxes reflect temporary differences between assets and
liabilities reported on the company's balance sheet and their tax basis. These
differences are measured using enacted tax laws and statutory tax rates
applicable to the peri-ods when the temporary differences will impact taxable
income. Deferred tax assets are reduced by a valuation allowance to reflect
realizable value, when necessary. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and liabilities,
adjusted for any change in deferred taxes related to the expiration of certain
stock options.
REVENUE RECOGNITION
The company recognizes revenue only after shipment of a product. The company
does not typically require collateral from its customers.
RECLASSIFICATION
Certain balance sheet reclassifications have been made for fiscal years 1998 and
1999 to conform to the fiscal 2000 presentation. These reclassifications had no
impact on stockholders' equity or the company's results of operations.
NOTE 2. SELECTED BALANCE SHEET INFORMATION
Following are the components of selected balance sheet items:
- -------------------------------------------------------------------------------
As of January 31
----------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------
Accounts and note receivable, net:
Trade accounts .......................... $ 23,117 $ 26,336 $ 26,113
Current portion of note and
interest receivable ..................... 1,463 1,250
Allowance for doubtful accounts ......... (400) (400) (390)
----------------------------------
$ 22,717 $ 27,399 $ 26,973
==================================
Inventories, net:
Finished goods .......................... $ 3,205 $ 4,055 $ 4,133
In process .............................. 4,997 3,662 3,882
Materials ............................... 16,260 18,261 17,801
----------------------------------
$ 24,462 $ 25,978 $ 25,816
==================================
Property, plant, and equipment, net:
Land .................................... $ 1,150 $ 1,265 $ 1,265
Building and improvements ............... 12,526 15,429 14,742
Machinery and equipment ................. 35,273 40,582 37,798
Accumulated depreciation ................ (33,881) (37,713) (33,988)
----------------------------------
$ 15,068 $ 19,563 $ 19,817
==================================
Other assets, net:
Intangible assets, primarily goodwill ... $ 4,415 $ 4,459 $ 4,441
Accumulated amortization ................ (1,594) (1,362) (994)
----------------------------------
2,821 3,097 3,447
Deferred income taxes ................... 714 565 22
Other, net .............................. 73 153 236
----------------------------------
$ 3,608 $ 3,815 $ 3,705
==================================
Accrued liabilities:
Profit sharing and 401(k) contribution .. $ 957 $ 973 $ 1,255
Vacation ................................ 1,944 1,979 1,941
Salaries and benefits ................... 1,319 909 848
Insurance obligations ................... 2,250 1,921 2,247
Other ................................... 1,251 1,799 1,477
----------------------------------
$ 7,721 $ 7,581 $ 7,768
==================================
- -------------------------------------------------------------------------------
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------------------------------------------
For the years ended January 31
----------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------
Changes in operating assets and liabilities,
net of effects from the sale of Glasstite:
Accounts and interest receivable ........ $ 1,070 $ (551) $ (289)
Inventories ............................. (236) (162) (727)
Prepaid expenses and other current assets (172) 89 (76)
Accounts payable ........................ (375) (1,487) (369)
Accrued and other liabilities ........... 68 (82) (1,003)
Customer advances ....................... 123 (309) 200
----------------------------------
$ 478 $ (2,502) $ (2,264)
==================================
Cash paid during the year for:
Interest ................................ $ 427 $ 450 $ 335
Income taxes ............................ 5,186 4,276 4,227
- -------------------------------------------------------------------------------
NOTE 4. DIVESTITURES
In January 1998, the company sold its 50 percent equity investment in a
corporation engaged in the manufacture of injection-molded plastic products for
$3.8 million and
28
RAVEN 2000 ANNUAL REPORT
recognized a pretax gain of $1.8 million. The company had accounted for this
investment using the equity method. Under the sale agreement, the company
received cash of $1.3 million in fiscal 1998 and an 8.5% interest-bearing note
for the remaining $2.5 million. The first installment of principal only was
received in December 1998 and the balance, including interest, was received in
December 1999.
During fiscal 2000, the company sold its Glasstite business, resulting in a
pretax gain of $1.2 million. The company received approximately $8.7 million of
cash and incurred direct costs related to the sale, primarily legal costs, of
approximately $230,000. Assets sold primarily related to property, plant and
equipment (approximately $3.5 million), accounts receivable (approximately $2.5
million), inventories (approximately $1.7 million) and cash (approximately
$135,000). The purchaser assumed certain liabilities, primarily related to
employee wages and benefits (approximately $200,000) and accounts payable
(approximately $300,000). For certain receivables of Glasstite that were sold,
the purchaser will pay the company when it collects such receivables and, as of
January 31, 2000, the company had a receivable recorded of approximately
$270,000 related to this matter. In addition, at January 31, 2000, the company
had approximately $150,000 accrued for certain environmental clean-up costs
related to the Glasstite facility, reflecting the company's best estimate of
costs that it will incur until the environmental matter is resolved.
NOTE 5. BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION
The company's three reportable segments (Electronics, Plastics and Sewn
Products) were defined by their common technologies, production processes and
inventories. These segments are consistent with the company's management
reporting structure as required by Statement of Financial Accounting Standards
(SFAS) No.131, Disclosures about Segments of an Enterprise and Related
Information. The company's customers (distributors or original equipment
manufacturers) provide opportunities for each segment to serve various markets.
Distribution methods are similar across and within segments. No customer
accounted for more than 10% of consolidated sales or receivables in any fiscal
year presented. Segment and market information is presented on pages 9 and 13 of
the annual report.
NOTE 6. QUARTERLY INFORMATION (UNAUDITED)
The company's quarterly information is presented on page 22.
NOTE 7. FINANCING ARRANGEMENTS
Long-term debt consisted of the following:
- -------------------------------------------------------------------------------
As of January 31
----------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------
Notes payable in installments through
fiscal 2004 with interest at 7.25% ... $ 4,000 $ 5,500 $ 2,560
Other long term debt ................... 68 132 333
----------------------------------
Total long-term debt ................. 4,068 5,632 2,893
Current portion ...................... (1,044) (1,060) (1,765)
----------------------------------
$ 3,024 $ 4,572 $ 1,128
==================================
- -------------------------------------------------------------------------------
Certain long-term debt is collateralized by land, buildings and equipment having
an aggregate net book value at January 31, 2000, of $750,000. Norwest Bank South
Dakota N.A. provides the company's uncollateralized notes payable and line of
credit. One member of the company's board of directors is also on the board of
directors of Wells Fargo & Co., the parent company of Norwest Bank South Dakota
N.A.
The company believes the fair market value of its long-term debt approximates
its carrying value based on quoted market prices for similar debt. Long-term
debt at January 31, 2000, will be repaid approximately $1.0 million per year
through fiscal 2004.
The company had a $5.0 million uncollaterlized line of credit available as of
January 31, 2000; no borrowings were outstanding as of that date. This line of
credit contains certain restrictive covenants that, among other things, require
the company to maintain certain levels of net worth and working capital.
Borrowings on this line bear interest as of January 31, 2000, 1999 and 1998 at
8.00%, 7.25%, and 8.50%, respectively. The weighted average interest rates for
borrowing under short-term credit lines in fiscal 2000, 1999 and 1998 were 7.7%,
8.4% and 8.5%, respectively.
29
NOTES TO FINANCIAL STATEMENTS
The company leases certain transportation, equipment and facilities under
operating leases. Total rent expense under these leases were $977,000,
$1,014,000 and $802,000 in fiscal 2000, 1999 and 1998, respectively.
NOTE 8. STOCK OPTIONS
Officers and key employees of the company have been granted options to purchase
stock under the company's 1990 Stock Option Plan ("Plan"). The Plan,
administered by the board of directors, allows for a fixed cash bonus when
options are exercised and may grant either incentive or non-qualified options
with terms not to exceed ten years. The Plan expired by its terms in January
2000, resulting in the expiration of the remaining 109,942 shares available for
grant. Options are granted with exercise prices not less than market value at
the date of grant. These stock options vest over a four-year period and expire
after five years. Compensation expense related to the Plan's cash bonus feature
was $383,000, $387,000 and $383,000 in fiscal 2000, 1999 and 1998, respectively.
Options granted in 2000 do not include a fixed cash bonus. The board of
directors approved, with adoption subject to shareholders' approval at the
company's next Annual Meeting of Shareholders, the 2000 Stock Option and
Compensation Plan ("2000 Plan"), in which 250,000 shares are reserved for grant.
The 2000 Plan will allow the company to issue options under terms similar to the
prior plan.
During fiscal 2000, certain options containing the cash bonus feature expired.
Accordingly, the company reduced its accrued liabilities and associated deferred
tax asset by approximately $289,000 and $101,000, respectively, and
correspondingly increased additional paid-in-capital by approximately $188,000.
As allowed under the SFAS No. 123, Accounting for Stock-Based Compensation, the
company has elected to continue to use the intrinsic value method to recognize
compensation expense for stock-based compensation. If compensation expense had
been recognized in accordance with the fair value method, the company's net
income and net income per share would have been as follows:
- -----------------------------------------------------------------------------------
For the years ended January 31
----------------------------------------------------------
2000 1999 1998
----------------------------------------------------------
as pro as pro as pro
reported forma reported forma reported forma
----------------------------------------------------------
Net income
(IN THOUSANDS) ...... $6,762 $6,744 $6,182 $6,055 $8,062 $7,904
Net income per share:
-- basic ............ $ 1.55 $ 1.54 $ 1.30 $ 1.27 $ 1.66 $ 1.63
-- diluted .......... $ 1.55 $ 1.54 $ 1.30 $ 1.26 $ 1.65 $ 1.61
- -----------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: Dividend
yield of 2.5-4.8%; expected volatility of 20-25%; risk-free interest rate of
4.5-6.2%; and expected lives of 4.5 years. The weighted average grant date fair
value of each option granted, including the cash bonus, was $2.23, $5.29 and
$7.98 in fiscal 2000, 1999 and 1998, respectively.
Information regarding option activity follows:
- ----------------------------------------------------------------------------------------
For the years ended January 31
------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------
weighted weighted weighted
average average average
exercise exercise exercise
options price options price options price
- ----------------------------------------------------------------------------------------
Outstanding
at beginning
of year ......... 276,200 $ 18.79 298,500 $ 19.47 287,750 $ 18.35
Granted ........... 32,900 14.25 46,400 15.88 68,900 20.00
Exercised ......... (5,000) 18.25 (57,185) 19.85 (55,650) 14.32
Forfeited ......... (56,000) 18.37 (11,515) 19.64 (2,500) 19.30
------- ------- ------
Outstanding
at end
of year ......... 248,100 18.29 276,200 18.79 298,500 19.47
======= ======= =======
Options exercisable
at year-end ..... 137,725 $ 19.17 138,100 $ 18.94 138,775 $ 19.14
- ----------------------------------------------------------------------------------------
The following table contains information about stock options outstanding at
January 31, 2000:
- ---------------------------------------------------------------------------------------
Remaining
Exercise Contractual Number Number
Price Life (Years) Outstanding Exercisable
- ---------------------------------------------------------------------------------------
$17.87 0.75 53,100 53,100
21.00 1.75 58,100 43,575
20.00 2.75 60,200 30,100
15.88 3.75 43,800 10,950
14.25 4.75 32,900 --
---------------------------
248,100 137,725
===========================
- ---------------------------------------------------------------------------------------
30
RAVEN 2000 ANNUAL REPORT
NOTE 9. EMPLOYEE RETIREMENT BENEFITS
The company has a profit sharing and 401(k) plan covering substantially all
employees. Profit sharing contributions, not to exceed 15% of total eligible
compensation, are made by Raven and each subsidiary at the discretion of each
entity's board of directors. The company's 401(k) contributions, initiated on
January 1, 1999, are 3% of qualified payroll. The company's contribution expense
was $889,000, $973,000 and $1,255,000 for fiscal 2000, 1999 and 1998,
respectively.
In addition, the company provides postretirement medical and other benefits to
officers and certain employees. The company accounts for these benefits in
accordance with SFAS No. 106, Accounting for Postretirement Benefits Other Than
Pensions. The accumulated benefit obligation was approximately $1.6 million at
January 31, 2000. Annual expense related to these benefits is approximately
$400,000.
NOTE 10. INCOME TAXES
Significant components of the company's income tax provision are as follows:
- -------------------------------------------------------------------------------
For the years ended January 31
----------------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------------
Income taxes
Currently payable ............. $ 4,760 $ 4,020 $ 4,312
Deferred ...................... (1,019) 553 166
----------------------------------------
$ 3,741 $ 3,467 $ 4,478
========================================
- -------------------------------------------------------------------------------
Significant components of the company's deferred tax assets and liabilities are
as follows:
- -------------------------------------------------------------------------------
As of January 31
--------------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
--------------------------------------
Current deferred tax assets
(liabilities):
Accounts receivable ............. $ 56 $ 27 $ (137)
Installment sale of investment in
affiliate ..................... (436) (365)
Inventory valuation ............. 347 395 335
Accrued vacation ................ 472 522 513
Insurance obligations ........... 783 629 779
Other accrued liabilities ....... 261 13 15
--------------------------------------
1,919 1,150 1,140
--------------------------------------
Non-current deferred tax assets
(liabilities):
Accrued compensation and benefits 631 582 546
Depreciation and amortization ... 83 (17) (14)
Installment sale of investment
in affiliate .................. (510)
--------------------------------------
714 565 22
--------------------------------------
Net deferred tax asset ............ $ 2,633 $ 1,715 $ 1,162
======================================
- -------------------------------------------------------------------------------
The company's effective tax rate was 35.6%, 35.9% and 35.7% in fiscal 2000, 1999
and 1998, respectively. The tax rate varies from the statutory rate of 35% due
primarily to the effect of state income taxes and non-deductible expenses,
partially offset by the impact of graduated income tax rates.
NOTE 11. NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the weighted
average common shares outstanding. Common shares outstanding represent common
shares issued less shares purchased and held in treasury. Diluted net income per
share is computed by dividing net income by the weighted average common and
common equivalent shares outstanding, which includes the shares issuable upon
exercise of employee stock options, net of shares assumed purchased with the
option proceeds. Certain outstanding options were excluded from the diluted
earnings per share calculations because their exercise prices were greater than
the average market price of the company's common stock during those periods. For
fiscal 2000, 212,500 options were excluded from the diluted earnings per share
calculation. Details of the computation are presented below.
- -------------------------------------------------------------------------------
For the years ended January 31
--------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER-SHARE
DATA 2000 1999 1998
--------------------------------------
Net income ......................... $ 6,762 $ 6,182 $ 8,062
======================================
Weighted average common
shares outstanding ............... 4,371,505 4,751,367 4,842,622
Dilutive impact of stock options ... 542 5,496 48,778
--------------------------------------
Weighted average common and common
equivalent shares outstanding .... 4,372,047 4,756,863 4,891,400
======================================
Net income per common share:
-- basic ......................... $ 1.55 $ 1.30 $ 1.66
======================================
-- diluted ....................... $ 1.55 $ 1.30 $ 1.65
======================================
- -------------------------------------------------------------------------------
31
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF RAVEN INDUSTRIES, INC.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of Raven Industries, Inc. as of January 31, 2000, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years in
the period ended January 31, 2000, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of Raven Industries, Inc.'s management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 11, 2000
32
CORPORATE & INVESTOR INFORMATION RAVEN 2000 ANNUAL REPORT
DIRECTORS & OFFICERS
DIRECTORS
CONRAD J. HOIGAARD(2),(3) CHAIRMAN OF THE BOARD, Raven Industries, Inc.;
CHAIRMAN OF THE BOARD, Hoigaard's Inc., Minneapolis,
MN; Age: 63
DAVID A. CHRISTENSEN(3) PRESIDENT & CHIEF EXECUTIVE OFFICER, Raven
Industries, Inc., Sioux Falls, SD; Age: 65
ANTHONY W. BOUR(1) PRESIDENT & CHIEF EXECUTIVE OFFICER, Showplace Wood
Products, Inc., Harrisburg, SD; Age: 62
THOMAS S. EVERIST(1) PRESIDENT, L.G. Everist, Sioux Falls, SD; Age: 50
MARK E. GRIFFIN(2) PRESIDENT & CHIEF EXECUTIVE OFFICER, Lewis Drugs,
Inc., Sioux Falls, SD; Age: 49
KEVIN T. KIRBY(1) PRESIDENT, Kirby Investment Corp., Sioux Falls, SD;
Age 45
RONALD M. MOQUIST EXECUTIVE VICE PRESIDENT, Raven Industries, Inc.,
Sioux Falls, SD; Age: 54
(1)Audit Committee (2)Compensation Committee
(3)Executive Committee
OFFICERS
DAVID A. CHRISTENSEN PRESIDENT & CHIEF EXECUTIVE OFFICER, Age: 65, Service
37 years
GARY L. CONRADI VICE PRESIDENT, ADMINISTRATION, Age: 60, Service 33
years
THOMAS IACARELLA VICE PRESIDENT, FINANCE, SECRETARY & TREASURER, Age:
46, Service 8 years
RONALD M. MOQUIST EXECUTIVE VICE PRESIDENT, Age: 54, Service 24 years
INVESTOR INFORMATION
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
Minneapolis, MN
STOCK TRANSFER AGENT & REGISTRAR
NORWEST BANK, MINNESOTA N.A.
161 N. Concord Exchange
P.O. Box 64854
S. St. Paul, MN 55164-0854
Phone: 1-800-468-9716
NORWEST TRUST COMPANY
New York, NY
FORM 10-K
Upon written request, Raven Industries, Inc.'s form 10-K for the fiscal year
ended January 31, 2000, which has been filed with the Securities and Exchange
Commission, is available free of charge.
DIRECT INQUIRES TO:
RAVEN INDUSTRIES, INC.
Attention: Vice President, Finance
P.O. Box 5107
Sioux Falls, SD 57117-5107
STOCK QUOTATIONS
Listed on the Nasdaq Stock Market--RAVN
ANNUAL MEETING
May 24, 2000, 9:00 a.m.
Ramkota Inn
Hwy 38 & I-29
Sioux Falls, SD
Raven Industries, Inc. is an Equal Employment Opportunity Employer with an
approved affirmative action plan.
DIVIDEND REINVESTMENT PLAN
Raven Industries sponsors a Dividend Reinvestment Plan whereby shareholders can
purchase additional Raven common stock without the payment of any brokerage
commission or fees. For more information on how you can take advantage of this
plan, contact your broker, our stock transfer agent or write: Vice President,
Finance; P.O. Box 5107, Sioux Falls, SD 57117-5107