þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended July 31, 2012 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
South Dakota (State of incorporation) | 46-0246171 (IRS Employer Identification No.) |
Large Accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
PAGE | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 4. Mine Safety Disclosures | |
(Dollars and shares in thousands, except per-share data) | July 31, 2012 | January 31, 2012 | July 31, 2011 | ||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 44,113 | $ | 25,842 | $ | 46,978 | |||||
Accounts receivable, net | 49,885 | 60,759 | 43,248 | ||||||||
Inventories | 50,389 | 54,756 | 50,249 | ||||||||
Deferred income taxes | 3,251 | 3,299 | 2,804 | ||||||||
Other current assets | 4,122 | 2,903 | 2,937 | ||||||||
Total current assets | 151,760 | 147,559 | 146,216 | ||||||||
Property, plant and equipment, net | 73,189 | 61,894 | 48,011 | ||||||||
Goodwill | 22,274 | 22,274 | 10,777 | ||||||||
Amortizable intangible assets, net | 8,971 | 9,412 | 1,816 | ||||||||
Other assets, net | 4,254 | 4,564 | 4,508 | ||||||||
TOTAL ASSETS | $ | 260,448 | $ | 245,703 | $ | 211,328 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 10,835 | $ | 16,162 | $ | 16,825 | |||||
Accrued liabilities | 23,971 | 22,993 | 14,887 | ||||||||
Customer advances | 1,111 | 1,491 | 2,258 | ||||||||
Total current liabilities | 35,917 | 40,646 | 33,970 | ||||||||
Other liabilities | 19,204 | 24,467 | 13,229 | ||||||||
Commitments and contingencies | |||||||||||
Shareholders' Equity | |||||||||||
Common stock, $1 par value, authorized shares 100,000; issued 65,196; 65,132; and 65,078, respectively | 65,196 | 32,566 | 32,539 | ||||||||
Paid in capital | 3,934 | 9,607 | 8,088 | ||||||||
Retained earnings | 191,397 | 193,650 | 177,783 | ||||||||
Accumulated other comprehensive loss | (1,931 | ) | (1,962 | ) | (919 | ) | |||||
Treasury stock at cost, 28,897 shares | (53,362 | ) | (53,362 | ) | (53,362 | ) | |||||
Total Raven Industries, Inc. shareholders' equity | 205,234 | 180,499 | 164,129 | ||||||||
Noncontrolling interest | 93 | 91 | — | ||||||||
Total shareholders' equity | 205,327 | 180,590 | 164,129 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 260,448 | $ | 245,703 | $ | 211,328 |
Three Months Ended | Six Months Ended | ||||||||||||||
(Dollars in thousands, except per-share data) | July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | |||||||||||
Net sales | $ | 101,674 | $ | 90,344 | $ | 219,589 | $ | 191,885 | |||||||
Cost of sales | 71,610 | 62,214 | 148,390 | 130,819 | |||||||||||
Gross profit | 30,064 | 28,130 | 71,199 | 61,066 | |||||||||||
Research and development expenses | 3,564 | 2,374 | 6,964 | 4,617 | |||||||||||
Selling, general and administrative expenses | 9,093 | 7,082 | 18,396 | 14,242 | |||||||||||
Operating income | 17,407 | 18,674 | 45,839 | 42,207 | |||||||||||
Other (expense), net | (96 | ) | (76 | ) | (148 | ) | (89 | ) | |||||||
Income before income taxes | 17,311 | 18,598 | 45,691 | 42,118 | |||||||||||
Income taxes | 5,743 | 6,137 | 15,100 | 13,941 | |||||||||||
Net income | 11,568 | 12,461 | 30,591 | 28,177 | |||||||||||
Net income attributable to the noncontrolling interest | 22 | — | 2 | — | |||||||||||
Net income attributable to Raven Industries, Inc. | $ | 11,546 | $ | 12,461 | $ | 30,589 | $ | 28,177 | |||||||
Net income per common share: | |||||||||||||||
─ Basic | $ | 0.32 | $ | 0.34 | $ | 0.84 | $ | 0.78 | |||||||
─ Diluted | $ | 0.32 | $ | 0.34 | $ | 0.84 | $ | 0.77 | |||||||
Cash dividends paid per common share | $ | 0.105 | $ | 0.09 | $ | 0.21 | $ | 0.18 | |||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 11,568 | $ | 12,461 | $ | 30,591 | $ | 28,177 | |||||||
Other comprehensive income, net of tax: | |||||||||||||||
Foreign currency translation | (68 | ) | 21 | (45 | ) | 160 | |||||||||
Postretirement benefits, net of income tax expense of $20, $7, $41 and $22, respectively | 38 | 12 | 76 | 41 | |||||||||||
Other comprehensive income, net of tax | (30 | ) | 33 | 31 | 201 | ||||||||||
Comprehensive income | 11,538 | 12,494 | 30,622 | 28,378 | |||||||||||
Comprehensive income attributable to noncontrolling interest | 22 | — | 2 | — | |||||||||||
Comprehensive income attributable to Raven Industries, Inc. | $ | 11,516 | $ | 12,494 | $ | 30,620 | $ | 28,378 |
Six Months Ended | |||||||
(Dollars in thousands) | July 31, 2012 | July 31, 2011 | |||||
OPERATING ACTIVITIES: | |||||||
Net income | $ | 30,591 | $ | 28,177 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 6,036 | 4,159 | |||||
Gain on acquisition-related contingent liability settlement | (508 | ) | — | ||||
Change in fair value of acquisition-related contingent consideration | 508 | (93 | ) | ||||
Earnings of equity investee | 57 | 27 | |||||
Deferred income taxes | (590 | ) | 1,352 | ||||
Share-based compensation expense | 1,570 | 984 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 10,798 | (3,192 | ) | ||||
Inventories | 4,368 | (6,546 | ) | ||||
Prepaid expense and other assets | (990 | ) | (932 | ) | |||
Operating liabilities | (7,407 | ) | 2,427 | ||||
Other operating activities, net | 29 | (100 | ) | ||||
Net cash provided by operating activities | 44,462 | 26,263 | |||||
INVESTING ACTIVITIES: | |||||||
Capital expenditures | (16,870 | ) | (11,000 | ) | |||
Sales of short-term investments | — | 1,000 | |||||
Other investing activities, net | 22 | (501 | ) | ||||
Net cash used in investing activities | (16,848 | ) | (10,501 | ) | |||
FINANCING ACTIVITIES: | |||||||
Dividends paid | (7,618 | ) | (6,509 | ) | |||
Payments of acquisition-related contingent liability | (1,867 | ) | — | ||||
Other financing activities, net | 163 | 62 | |||||
Net cash used in financing activities | (9,322 | ) | (6,447 | ) | |||
Effect of exchange rate changes on cash | (21 | ) | 100 | ||||
Net increase in cash and cash equivalents | 18,271 | 9,415 | |||||
Cash and cash equivalents at beginning of year | 25,842 | 37,563 | |||||
Cash and cash equivalents at end of year | $ | 44,113 | $ | 46,978 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | ||||||||||||
Numerator: | |||||||||||||||
Net income attributable to Raven Industries, Inc. | $ | 11,546 | $ | 12,461 | $ | 30,589 | $ | 28,177 | |||||||
Denominator: | |||||||||||||||
Weighted average common shares outstanding | 36,286 | 36,166 | 36,265 | 36,158 | |||||||||||
Weighted average stock units outstanding | 57 | 58 | 53 | 56 | |||||||||||
Denominator for basic calculation | 36,343 | 36,224 | 36,318 | 36,214 | |||||||||||
Weighted average common shares outstanding | 36,286 | 36,166 | 36,265 | 36,158 | |||||||||||
Weighted average stock units outstanding | 57 | 58 | 53 | 56 | |||||||||||
Dilutive impact of stock options and restricted stock units | 222 | 206 | 227 | 214 | |||||||||||
Denominator for diluted calculation | 36,565 | 36,430 | 36,545 | 36,428 | |||||||||||
Net income per share - basic | $ | 0.32 | $ | 0.34 | $ | 0.84 | $ | 0.78 | |||||||
Net income per share - diluted | $ | 0.32 | $ | 0.34 | $ | 0.84 | $ | 0.77 |
July 31, 2012 | January 31, 2012 | July 31, 2011 | ||||||||||
Accounts Receivable, net: | ||||||||||||
Trade accounts | $ | 50,055 | $ | 60,929 | $ | 43,510 | ||||||
Allowance for doubtful accounts | (170 | ) | (170 | ) | (262 | ) | ||||||
$ | 49,885 | $ | 60,759 | $ | 43,248 | |||||||
Inventories: | ||||||||||||
Finished goods | $ | 7,394 | $ | 7,094 | $ | 7,780 | ||||||
In process | 4,979 | 6,105 | 7,687 | |||||||||
Materials | 38,016 | 41,557 | 34,782 | |||||||||
$ | 50,389 | $ | 54,756 | $ | 50,249 | |||||||
Property, plant and equipment, net: | ||||||||||||
Property, plant and equipment | $ | 145,433 | $ | 128,948 | $ | 111,518 | ||||||
Accumulated depreciation | (72,244 | ) | (67,054 | ) | (63,507 | ) | ||||||
$ | 73,189 | $ | 61,894 | $ | 48,011 | |||||||
Accrued liabilities: | ||||||||||||
Salaries and benefits | $ | 2,993 | $ | 4,297 | $ | 2,356 | ||||||
Vacation | 4,155 | 4,387 | 3,484 | |||||||||
401(k) contributions | 611 | 966 | 271 | |||||||||
Insurance obligations | 3,003 | 2,789 | 3,085 | |||||||||
Profit sharing | 612 | 1,244 | 536 | |||||||||
Warranties | 1,949 | 1,699 | 1,642 | |||||||||
Acquisition-related contingent consideration | 7,028 | 3,266 | 271 | |||||||||
Taxes - Accrued and withheld | 1,999 | 2,596 | 2,244 | |||||||||
Other | 1,621 | 1,749 | 998 | |||||||||
$ | 23,971 | $ | 22,993 | $ | 14,887 | |||||||
Other liabilities: | ||||||||||||
Postretirement benefits | $ | 7,520 | $ | 7,348 | $ | 5,880 | ||||||
Acquisition-related contingent consideration | 2,108 | 7,655 | 2,076 | |||||||||
Deferred income taxes | 3,919 | 4,518 | 517 | |||||||||
Uncertain tax positions | 5,657 | 4,946 | 4,756 | |||||||||
$ | 19,204 | $ | 24,467 | $ | 13,229 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | ||||||||||||
Service cost | $ | 47 | $ | 30 | $ | 94 | $ | 60 | |||||||
Interest cost | 84 | 84 | 168 | 168 | |||||||||||
Amortization of actuarial losses | 58 | 31 | 116 | 63 | |||||||||||
Net periodic benefit cost | $ | 189 | $ | 145 | $ | 378 | $ | 291 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | ||||||||||||
Beginning balance | $ | 1,792 | $ | 1,631 | $ | 1,699 | $ | 1,437 | |||||||
Accrual for warranties | 778 | 781 | 1,598 | 1,588 | |||||||||||
Settlements made (in cash or in kind) | (621 | ) | (770 | ) | (1,348 | ) | (1,383 | ) | |||||||
Ending balance | $ | 1,949 | $ | 1,642 | $ | 1,949 | $ | 1,642 |
Risk-free interest rate | 0.86 | % | |
Expected dividend yield | 1.33 | % | |
Expected volatility factor | 49.65 | % | |
Expected option term (in years) | 3.75 | ||
Weighted average grant date fair value | $ | 10.96 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | ||||||||||||
Net sales | |||||||||||||||
Applied Technology Division | $ | 40,071 | $ | 35,433 | $ | 93,812 | $ | 77,453 | |||||||
Engineered Films Division | 36,785 | 32,459 | 77,879 | 62,550 | |||||||||||
Aerostar Division | 26,845 | 23,245 | 52,480 | 53,953 | |||||||||||
Intersegment eliminations (a) | (2,027 | ) | (793 | ) | (4,582 | ) | (2,071 | ) | |||||||
Consolidated net sales | $ | 101,674 | $ | 90,344 | $ | 219,589 | $ | 191,885 | |||||||
Operating income (loss) | |||||||||||||||
Applied Technology Division | $ | 12,909 | $ | 13,236 | $ | 34,959 | $ | 29,403 | |||||||
Engineered Films Division | 6,819 | 5,284 | 15,998 | 9,413 | |||||||||||
Aerostar Division | 2,309 | 3,373 | 3,751 | 9,774 | |||||||||||
Intersegment eliminations (a) | 17 | 8 | (62 | ) | — | ||||||||||
Total reportable segment income | 22,054 | 21,901 | 54,646 | 48,590 | |||||||||||
Administrative and general expenses | (4,647 | ) | (3,227 | ) | (8,807 | ) | (6,383 | ) | |||||||
Consolidated operating income | $ | 17,407 | $ | 18,674 | $ | 45,839 | $ | 42,207 |
For the years ended January 31 | |||||||||||||||||||||||
2012 | 2011 | 2010 | |||||||||||||||||||||
Previously Reported | Revised | Previously Reported | Revised | Previously Reported | Revised | ||||||||||||||||||
APPLIED TECHNOLOGY DIVISION | |||||||||||||||||||||||
Sales | $ | 132,632 | $ | 145,261 | $ | 100,090 | $ | 107,910 | $ | 86,217 | $ | 94,005 | |||||||||||
Operating income | 45,358 | 49,750 | 31,135 | 33,197 | 25,722 | 27,538 | |||||||||||||||||
Assets | 69,977 | 73,872 | 52,669 | 55,740 | 51,029 | 54,007 | |||||||||||||||||
Capital expenditures | 11,408 | 11,971 | 1,769 | 1,947 | 941 | 1,092 | |||||||||||||||||
Depreciation and amortization | 2,351 | 2,571 | 2,238 | 2,483 | 1,677 | 1,863 | |||||||||||||||||
ENGINEERED FILMS DIVISION | |||||||||||||||||||||||
Sales | $ | 133,481 | $ | 133,481 | $ | 105,838 | $ | 105,838 | $ | 63,783 | $ | 63,783 | |||||||||||
Operating income (b) | 21,501 | 21,501 | 19,622 | 19,622 | 10,232 | 10,232 | |||||||||||||||||
Assets | 65,100 | 65,100 | 46,519 | 46,519 | 35,999 | 35,999 | |||||||||||||||||
Capital expenditures | 10,937 | 10,937 | 8,450 | 8,450 | 1,460 | 1,460 | |||||||||||||||||
Depreciation and amortization | 4,313 | 4,313 | 3,452 | 3,452 | 3,707 | 3,707 | |||||||||||||||||
AEROSTAR DIVISION | |||||||||||||||||||||||
Sales | $ | 52,351 | $ | 107,811 | $ | 48,787 | $ | 104,384 | $ | 27,244 | $ | 81,617 | |||||||||||
Operating income | 11,468 | 18,308 | 9,407 | 17,209 | 5,634 | 12,849 | |||||||||||||||||
Assets | 51,822 | 72,089 | 18,140 | 38,366 | 10,462 | 28,665 | |||||||||||||||||
Capital expenditures | 3,875 | 4,105 | 2,190 | 2,621 | 332 | 471 | |||||||||||||||||
Depreciation and amortization | 1,079 | 1,684 | 757 | 1,335 | 398 | 1,151 | |||||||||||||||||
ELECTRONIC SYSTEMS DIVISION | |||||||||||||||||||||||
Sales | $ | 71,744 | $ | — | $ | 65,852 | $ | — | $ | 63,525 | $ | — | |||||||||||
Operating income | 11,264 | — | 9,917 | — | 8,979 | — | |||||||||||||||||
Assets | 24,281 | — | 23,385 | — | 21,216 | — | |||||||||||||||||
Capital expenditures | 793 | — | 609 | — | 290 | — | |||||||||||||||||
Depreciation and amortization | 825 | — | 823 | — | 939 | — | |||||||||||||||||
INTERSEGMENT ELIMINATIONS | |||||||||||||||||||||||
Sales | |||||||||||||||||||||||
Engineered Films Division | $ | (193 | ) | $ | (193 | ) | $ | (307 | ) | $ | (307 | ) | $ | (210 | ) | $ | (210 | ) | |||||
Aerostar Division | (1 | ) | (4,389 | ) | (32 | ) | (2,891 | ) | (1 | ) | (1,382 | ) | |||||||||||
Electronic Systems Division | (8,503 | ) | — | (5,520 | ) | — | (2,776 | ) | — | ||||||||||||||
Applied Technology Division | — | (460 | ) | — | (226 | ) | — | (31 | ) | ||||||||||||||
Operating income | (220 | ) | (188 | ) | (94 | ) | (41 | ) | 60 | 8 | |||||||||||||
Assets | (405 | ) | (286 | ) | (186 | ) | (98 | ) | (92 | ) | (57 | ) | |||||||||||
REPORTABLE SEGMENTS TOTAL | |||||||||||||||||||||||
Sales | $ | 381,511 | $ | 381,511 | $ | 314,708 | $ | 314,708 | $ | 237,782 | $ | 237,782 | |||||||||||
Operating income (b) | 89,371 | 89,371 | 69,987 | 69,987 | 50,627 | 50,627 | |||||||||||||||||
Assets | 210,775 | 210,775 | 140,527 | 140,527 | 118,614 | 118,614 | |||||||||||||||||
Capital expenditures | 27,013 | 27,013 | 13,018 | 13,018 | 3,023 | 3,023 | |||||||||||||||||
Depreciation and amortization | 8,568 | 8,568 | 7,270 | 7,270 | 6,721 | 6,721 | |||||||||||||||||
CORPORATE & OTHER (a) | |||||||||||||||||||||||
Operating (loss) from administrative expenses | $ | (13,730 | ) | $ | (13,730 | ) | $ | (9,784 | ) | $ | (9,784 | ) | $ | (7,407 | ) | $ | (7,407 | ) | |||||
Assets | 34,928 | 34,928 | 47,233 | 47,233 | 51,695 | 51,695 | |||||||||||||||||
Capital expenditures | 2,002 | 2,002 | 954 | 954 | 279 | 279 | |||||||||||||||||
Depreciation and amortization | 700 | 700 | 361 | 361 | 387 | 387 | |||||||||||||||||
TOTAL COMPANY | |||||||||||||||||||||||
Sales | $ | 381,511 | $ | 381,511 | $ | 314,708 | $ | 314,708 | $ | 237,782 | $ | 237,782 | |||||||||||
Operating income (b) | 75,641 | 75,641 | 60,203 | 60,203 | 43,220 | 43,220 | |||||||||||||||||
Assets | 245,703 | 245,703 | 187,760 | 187,760 | 170,309 | 170,309 | |||||||||||||||||
Capital expenditures | 29,015 | 29,015 | 13,972 | 13,972 | 3,302 | 3,302 | |||||||||||||||||
Depreciation and amortization | 9,268 | 9,268 | 7,631 | 7,631 | 7,108 | 7,108 |
• | Consolidated net sales, gross margins, operating income, operating margins, net income and earnings per share |
• | Cash flow from operations and shareholder returns |
• | Return on sales, assets and equity |
• | Segment net sales, gross profit, gross margins, operating income and operating margins |
• | Expand in market segments that have strong prospects for growth and above-average profit margins. |
• | Compete on quality, service, innovation and peak performance. |
• | Reinvest cash generated from operations to fuel growth. Capital is allocated aggressively when the prospects are high for above-average risk-adjusted returns on capital. If the Company accumulates cash in excess of investment opportunities for above-average risk-adjusted returns, it will be returned to shareholders. |
• | Make corporate responsibility a top priority. |
• | Continue to increase the quarterly dividend on an annual basis. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
(dollars in thousands, except per-share data) | July 31, 2012 | July 31, 2011 | % Change | July 31, 2012 | July 31, 2011 | % Change | |||||||||||||||
Net sales | $ | 101,674 | $ | 90,344 | 13 | % | $ | 219,589 | $ | 191,855 | 14 | % | |||||||||
Gross profit | 30,064 | 28,130 | 7 | % | 71,199 | 61,066 | 17 | % | |||||||||||||
Gross margins(a) | 29.6 | % | 31.1 | % | 32.4 | % | 31.8 | % | |||||||||||||
Operating income | $ | 17,407 | $ | 18,674 | (7 | )% | $ | 45,839 | $ | 42,207 | 9 | % | |||||||||
Operating margins | 17.1 | % | 20.7 | % | 20.9 | % | 22.0 | % | |||||||||||||
Net income attributable to Raven Industries, Inc. | $ | 11,546 | $ | 12,461 | (7 | )% | $ | 30,589 | $ | 28,177 | 9 | % | |||||||||
Diluted earnings per share | $ | 0.32 | $ | 0.34 | $ | 0.84 | $ | 0.77 | |||||||||||||
Operating cash flow | $ | 44,462 | $ | 26,263 | |||||||||||||||||
Cash dividends | $ | 7,618 | $ | 6,509 |
(a) | The Company's gross and operating margins may not be comparable to industry peers due to the diversity of its operations and variability in the classification of expenses across industries in which the Company operates. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
(dollars in thousands) | July 31, 2012 | July 31, 2011 | $ Change | % Change | July 31, 2012 | July 31, 2011 | $ Change | % Change | |||||||||||||||||||||
Net sales | $ | 40,071 | $ | 35,433 | $ | 4,638 | 13 | % | $ | 93,812 | $ | 77,453 | $ | 16,359 | 21 | % | |||||||||||||
Gross profit | 17,926 | 17,213 | 713 | 4 | % | 45,249 | 37,321 | 7,928 | 21 | % | |||||||||||||||||||
Gross margins | 44.7 | % | 48.6 | % | 48.2 | % | 48.2 | % | |||||||||||||||||||||
Operating income | 12,909 | 13,236 | (327 | ) | (2 | )% | 34,959 | 29,403 | 5,556 | 19 | % | ||||||||||||||||||
Operating margins | 32.2 | % | 37.4 | % | 37.3 | % | 38.0 | % |
• | Market conditions. Global market fundamentals were healthy as population and income growth in emerging economies have increased demand for food. Domestically, the market conditions are still strong, tempered by the ongoing drought conditions. These factors have resulted in higher crop prices and wider acceptance of precision agriculture as a sound investment for maximizing yields and controlling input costs. |
• | Sales volume. The favorable net sales comparisons for the second quarter and year-to-date results reflect strong sales growth across the majority of the division's product offerings, including application controls, field computers, guidance and steering products and boom controls. The Company continues to cultivate and deepen relationships with key original equipment manufacturing (OEM) partners, which expands market share and extends Raven's technology to a broader range of customers. |
• | International sales. For the three-month period, international sales totaled $11.9 million, increasing 23% from a year ago and represents 30% of segment revenue compared to 27% in the prior year three-month period. International sales of $25.8 million in the first six months of fiscal 2013 rose $5.0 million year-over-year and accounted for 27% of segment revenue for both six month periods. Products delivered to Canada, South America, Eastern Europe and South Africa generated the majority of the international sales growth. |
• | Gross margins. Gross margins of 44.7% declined for the three months ended July 31, 2012 from 48.6% for the three months ended July 31, 2011 due to higher sales volume of lower-margin products. Year-over-year comparative gross margins for the six-month periods remained consistent at 48.2%. Higher sales volume drove the increase in gross profit. Gross margins were also positively impacted for the six-month periods of fiscal 2013 due to the early buyout of the Ranchview acquisition related contingent liability (See Note 5 in Item 1, Part 1 of this Quarterly Report on Form 10-Q). |
• | Operating expenses. Second quarter operating expenses as a percentage of net sales was 12.5%, up from 11.2% in the prior year's second quarter. Year-to-date operating expenses as a percentage of net sales was 11.0% compared to 10.2% for fiscal 2012. The increase in both periods was due to the division's investment in research and development (R&D) expenses. For the second quarter fiscal 2013, R&D cost as a percentage of net sales was 6.1% compared to 4.9% in the prior three-month period. R&D cost as compared to net sales in the first six months of fiscal 2013 was 5.0% compared to 4.2% in the first six months of the prior year. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
(dollars in thousands) | July 31, 2012 | July 31, 2011 | $ Change | % Change | July 31, 2012 | July 31, 2011 | $ Change | % Change | |||||||||||||||||||||
Net sales | $ | 36,785 | $ | 32,459 | $ | 4,326 | 13 | % | $ | 77,879 | $ | 62,550 | $ | 15,329 | 25 | % | |||||||||||||
Gross profit | 8,242 | 6,211 | 2,031 | 33 | % | 18,771 | 11,451 | 7,320 | 64 | % | |||||||||||||||||||
Gross margins | 22.4 | % | 19.1 | % | 24.1 | % | 18.3 | % | |||||||||||||||||||||
Operating income | 6,819 | 5,284 | 1,535 | 29 | % | 15,998 | 9,413 | 6,585 | 70 | % | |||||||||||||||||||
Operating margins | 18.5 | % | 16.3 | % | 20.5 | % | 15.0 | % |
• | Market conditions. Economic growth in emerging markets continued to support higher oil prices, and in turn, increased related drilling activity and demand for pit liners in the energy market. The geomembrane market reported higher sales for the quarter and six-month periods as environmental and water conservation projects have increased demand for the division's containment liners. |
• | Sales volume and selling prices. Sales growth for the second quarter and first half of fiscal 2013 was predominately driven by increased demand. Sales volume, as measured by pounds shipped, was up 11% for second quarter and 15% for the fiscal 2013 six-month period due to stronger demand combined with additional extrusion capacity, which went into production in the fourth quarter of last fiscal year. Selling prices for the three and six months ended July 31, 2012 were up approximately 2-3% and 8-9%, respectively, compared to the prior-year periods. |
• | Gross margin increase. For the three and six-month periods, margins improved 3.3 and 5.8 percentage points, respectively, from the prior comparative periods due to improved operating efficiencies, positive operating leverage and a more favorable price versus material spread. Material cost as a percentage of sales was 61% for the six months ended July 2012 compared with 66% for the same prior year period. |
• | Operating expenses. Second quarter operating expenses as a percentage of net sales was 3.9% compared to 2.9% in the prior three month period. R&D expense increased $0.3 million and higher marketing and business development cost outpaced the 13% increase in net sales. Year-to-date operating expenses of $2.8 million were up $0.8 million, or 36%, over the prior year due to higher spending. As with the quarter, year-to-date operating expenses as a percentage of net sales was up to 3.6% compared to 3.3% in the prior six months. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
(dollars in thousands) | July 31, 2012 | July 31, 2011 | $ Change | % Change | July 31, 2012 | July 31, 2011 | $ Change | % Change | |||||||||||||||||||||
Net sales | $ | 26,845 | $ | 23,245 | $ | 3,600 | 15 | % | $ | 52,480 | $ | 53,953 | $ | (1,473 | ) | (3 | )% | ||||||||||||
Gross profit | 3,879 | 4,698 | (819 | ) | (17 | )% | 7,241 | 12,294 | (5,053 | ) | (41 | )% | |||||||||||||||||
Gross margins | 14.4 | % | 20.2 | % | 13.8 | % | 22.8 | % | |||||||||||||||||||||
Operating income | 2,309 | 3,373 | (1,064 | ) | (32 | )% | 3,751 | 9,774 | (6,023 | ) | (62 | )% | |||||||||||||||||
Operating margins | 8.6 | % | 14.5 | % | 7.1 | % | 18.1 | % |
• | Sales volumes. Net sales for the second quarter of $26.8 million, increased $3.6 million, or 15%, compared to $23.2 million in the prior year second quarter. Higher parachute and protective wear sales, additional research balloon sales, additional electronic manufacturing services sales and Vista net sales of $3.3 million were partially offset by a decrease |
• | Gross margin decline. The change in product mix negatively impacted gross margins in both periods. Gross margins declined 5.8 and 11.0 percentage points for the three and six-month periods. Last year's margins were favorably impacted by higher-margin aerostat sales. Aerostat sales accounted for roughly 16% and 20% of net sales in the prior year periods compared to approximately 1% in the comparable fiscal 2013 quarterly and year-to-date periods. |
• | Operating expenses. Second quarter operating expenses of $1.6 million, or 5.8% of net sales, increased slightly from 5.7% of net sales in the second quarter of fiscal 2012. First half operating expenses of $3.5 million, or 6.7% of net sales, were up from 4.7% one year earlier. Current year operating expenses primarily reflect increased investment in research and development to support next generation aerostat and Vista radar technology. |
Three Months Ended | Six Months Ended | ||||||||||||||
(dollars in thousands) | July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | |||||||||||
Administrative expenses | $ | 4,647 | $ | 3,227 | $ | 8,807 | $ | 6,383 | |||||||
Administrative expenses as a % of sales | 4.6 | % | 3.6 | % | 4.0 | % | 3.3 | % | |||||||
Other (expense), net | $ | (96 | ) | $ | (76 | ) | $ | (148 | ) | $ | (89 | ) | |||
Effective tax rate | 33.2 | % | 33.0 | % | 33.0 | % | 33.1 | % |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
Exhibit Number | Description | ||
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | XBRL Taxonomy Extenstion Label Linkbase | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | ||
RAVEN INDUSTRIES, INC. | ||||
/s/ Thomas Iacarella | ||||
Thomas Iacarella | ||||
Vice President and CFO, Secretary and Treasurer (Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Raven Industries, Inc. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or others performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting. |
Dated: August 31, 2012 | /s/ Daniel A. Rykhus |
Daniel A. Rykhus | |
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Raven Industries, Inc. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or others performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting. |
Dated: August 31, 2012 | /s/ Thomas Iacarella |
Thomas Iacarella | |
Vice President and Chief Financial Officer |
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Raven Industries, Inc. |
Dated: August 31, 2012 | /s/ Daniel A. Rykhus |
Daniel A. Rykhus | |
President and Chief Executive Officer |
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Raven Industries, Inc. |
Dated: August 31, 2012 | /s/ Thomas Iacarella |
Thomas Iacarella | |
Vice President and Chief Financial Officer | |
Warranties (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jul. 31, 2012
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Jul. 31, 2011
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Jul. 31, 2012
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Jul. 31, 2011
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Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Beginning balance | $ 1,792 | $ 1,631 | $ 1,699 | $ 1,437 |
Accrual for warranties | 778 | 781 | 1,598 | 1,588 |
Settlements made (in cash or in kind) | (621) | (770) | (1,348) | (1,383) |
Ending balance | $ 1,949 | $ 1,642 | $ 1,949 | $ 1,642 |
Segment Reporting (Tables)
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Jul. 31, 2012
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business segment net sales and operating income results | Business segment net sales and operating income results are as follows:
(a) Intersegment sales were primarily from Aerostar to Applied Technology. |
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Reconciliation of revised segment sales, operating income, assets, capital expenditures and depreciation and amortization | The following tables show revised segment sales, operating income, assets, capital expenditures and depreciation and amortization for the fiscal years ended January 31, 2012, 2011 and 2010:
(a) Assets are principally cash, investments, deferred taxes, and other receivables. (b) The year ended January 31, 2011 includes a $451 pre-tax gain on disposition of assets. |
Share Based Compensation Weighted average assumptions by grant year (Details) (USD $)
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3 Months Ended |
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Apr. 30, 2012
number
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Share-based Compensation [Abstract] | |
Risk-free interest rate | 0.86% |
Expected dividend yield | 1.33% |
Expected volatility factor | 49.65% |
Expected option term (in years) | 3.75 |
Weighted average grant date fair value | $ 10.96 |
Net Income per Share
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Jul. 31, 2012
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Net Income Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income per Share | NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted average common shares and stock units outstanding. 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), stock units and restricted stock units outstanding. Performance share awards are included in the diluted calculation based upon what would be issued if the end of the most recent reporting period was the end of the term of the award. Certain outstanding options and restricted stock units were excluded from the diluted net income per-share calculations because their effect would have been anti-dilutive under the treasury stock method. For the three and six-month periods ended July 31, 2012, 393 and 352 options and restricted stock units were excluded, respectively. For the three and six-month periods ended July 31, 2011, 272 and 272 options were excluded, respectively. The computation of earnings per share is presented below:
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