-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9w6NE+LCXyuMSq6tR4IGMrZo5/hbbmvUoMaNAhSu8jZgXX7+N+7fyudMwKLhPuP lmdG593x1OAidrVZSY63DA== 0000897101-98-000469.txt : 19980427 0000897101-98-000469.hdr.sgml : 19980427 ACCESSION NUMBER: 0000897101-98-000469 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980424 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAVEN INDUSTRIES INC CENTRAL INDEX KEY: 0000082166 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 460246171 STATE OF INCORPORATION: SD FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07982 FILM NUMBER: 98600343 BUSINESS ADDRESS: STREET 1: 205 E 6TH ST STREET 2: PO BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117 BUSINESS PHONE: 6053362750 MAIL ADDRESS: STREET 1: P O BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117-5107 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended January 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to __________________ Commission file number 0-3136 RAVEN INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) South Dakota 46-0246171 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 205 E. 6th Street, Sioux Falls, South Dakota 57117 - -------------------------------------------------------------------------------- (Address of principal offices)(Zip Code) Registrant's telephone number, including area code (605) 336-2750 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $1 par value -------------------------- (Title of each class) Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been sub ject to such filing requirements for the past ninety days. Yes __X__ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by nonaffiliates of the Registrant, based on the closing price of $21.00 per share as reported on the NASDAQ National Market System on April 15, 1998 was $90,311,277. Shares of common stock outstanding at April 15, 1998: 4,827,907. DOCUMENTS INCORPORATED BY REFERENCE The following table shows, except as otherwise noted, the location of information, required in this Form 10-K, in the registrant's Annual Report to Shareholders for the year ended January 31, 1998 and Proxy Statement for registrant's 1998 annual meeting, a defini tive copy of which was filed on April 16, 1998. All such information set forth under the heading "Reference" below is incorporated herein by reference. A copy of the registrant's Annual Report to Shareholders for the year ended January 31, 1998 is included in this report. PART I. ITEM IN FORM 10-K REFERENCE ------- ----------------- --------- Item 1. Business Business, pages 4-7, this document; Business Segments, page 3, and Sales by Markets, page 17, Annual Report to Shareholders Item 2. Properties Properties, pages 8-9, this document Item 3. Pending Legal Pending Legal Proceedings, Proceedings page 9, this document Item 4. Submission of Matters Submission of Matters to a to a Vote of Vote of Security Security Holders Holders, page 9, this document PART II. - --------- Item 5. Market for the Regis- Quarterly Summary, page 24, trant's Common Eleven-year Financial Equity and Related Summary, pages 18-19, Stockholder Matters and inside back cover, Annual Report to Shareholders Item 6. Selected Financial Data Eleven-Year Financial Summary, pages 18-19, Annual Report to Shareholders Item 7. Management's Discussion Financial Review and and Analysis of Analysis, pages 20-23, Financial Condition Annual Report to Share and Results of holders Operations DOCUMENTS INCORPORATED BY REFERENCE, Continued PART II. continued: -------- ITEM IN FORM 10-K REFERENCE ----------------- --------- Item 8. Financial Statements and Annual Report to Share- Supplementary Data holders, pages 25-36 Item 9. Changes in and Disagree- Changes in and Disagree- ments with Account- ments with Accountants ants on Accounting on Accounting and and Financial Financial Disclosure, Disclosure page 9, this document PART III. --------- Item 10. Directors of the Regis- Election of Directors and trant Executive Compensation, Proxy Statement Executive Officers of Executive Officers of the Registrant Registrant, page 10, this document and Other Matters, Proxy Statement Item 11. Executive Compensation Executive Compensation, Proxy Statement Item 12. Voting Securities and Ownership of Common Stock, Principal Holders Proxy Statement Thereof Item 13. Certain Relationships and Related Election of Directors, Transactions Proxy Statement ITEM IV. -------- Exhibits, Financial Item 14. Exhibits, Financial Statement Schedule Statement Schedule and Reports on Form and Reports on Form 8-K, pages 10-12, 8-K. this document. RAVEN INDUSTRIES, INC. FORM 10-K year ended January 31, 1998 Item 1. Business General Raven Industries, Inc. was incorporated in February 1956 under the laws of the State of South Dakota and began operations later that same year. The following terms - the company, Raven or the registrant - are intended to apply to Raven Industries, Inc. and its consolidated subsidiaries listed in Exhibit 21 to this report. Raven is headquartered in Sioux Falls, South Dakota, employing approximately 1,500 persons in nine states. The company began operations as a manufacturer of high-altitude research balloons. It has diversified over the years to supply specialized products for a number of markets, including industrial, recreation, agriculture, automotive and defense. Many of these product lines are an extension of technology and production methods developed in the original balloon business. The automotive product line was added via acquisition in fiscal 1987. Page 17 in the company's Annual Report to Shareholders, incorporated herein by reference, provides financial information regarding sales by markets. The company has three business segments: Electronics, Plastics and Sewn Products. Product lines have been grouped in these segments based on common technologies, production methods and raw materials. However, more than one business segment may serve the product markets identified above. Page 3 in the company's Annual Report to Shareholders, incorporated herein by reference, provides financial information concerning the three business segments. Business Segments Electronics - Historically, this segment provided a variety of assemblies and controls to the U.S. Department of Defense and other defense contractors. The company is expanding this segment's capabilities in contract electronics assembly for commercial customers to offset a decline in defense contracts. Assemblies manufactured by the Electronics segment include communication, computer and other products where high quality is critical. Flow control devices, used primarily for precision farming applications, are designed and produced within this business segment. These devices are also used for roadside and turf spraying. Management Item 1. Business, continued: Business Segments, continued: believes that acquisition of new technologies for height and depth control will expand the company's capabilities to support precision farming in future years. The segment also builds and installs automated control systems for use in feedmills. Contract electronics assembly sales are made in response to competitive bid requests by defense agencies or other contractors. The level and nature of competition vary with the type of product, but the company frequently competes with a number of assembly manufacturers on any given bid request. Home office personnel sell flow control devices directly to original equipment manufacturers (OEMs) and distributors. Company sales representatives sell automated systems directly to feedmills. All the product markets the company participates in are competitive, with customers having a number of suppliers to choose from. Plastics - Products in this segment include heavy-duty sheeting for industrial and agricultural applications; fiberglass, polyethylene and dual-laminate tanks for industrial and agricultural use; high altitude balloons for public and commercial research; and pickup-truck toppers sold in the small truck aftermarket. The company's capability to produce dual-laminate tankage resulted from the acquisition of Norcore Plastics in January 1997. The company sells plastic sheeting to distributors in each of the various markets it serves. The company extrudes a significant portion of the film converted for its commercial products and believes it is one of the largest sheeting converters in the United States. A number of suppliers of sheeting compete with Raven on both price and product availability. Home office personnel and manufacturer's representatives sell storage tanks to OEMs and through distributors. Competition comes not only from many other plastic tank manufacturers, but also from manufacturers using other materials (aluminum and steel). The company makes a number of custom fiberglass and dual-laminate products, but polyethylene tanks tend to be commodity products and subject to intense price competition. The company sells research balloons directly to public agencies (usually funded by NASA) or commercial users. Demand is small but stable. Raven is the largest balloon supplier for high-altitude research in the United States. Pickup-truck toppers are sold throughout the U.S., using a dealer network. The overall market for toppers has declined since the late 1980's as alternatives to pickups with toppers, primarily Item 1. Business, continued: Business Segments, continued: minivans and sport-utility vehicles, increased in popularity. The number of topper manufacturers has fallen but is still substantial. Sewn Products - This segment produces and sells outerwear for a variety of recreational activities, including skiing, hunting and fishing. The segment also manufactures sport balloons principally for recreational use. Another major product is large inflatable devices, which enjoy a number of uses, such as parade floats and advertising media. Recreational outerwear is sold both to retailers through an independent sales representative network, and by home office personnel to catalog retailers. There are many outerwear manufacturers in the U.S. and abroad, and considerable competition exists. The company competes successfully in the medium-to-higher priced range of the market where specialty fabrics such as Gore-Tex(R) are involved, emphasizing quality, service and manufacturing expertise. The segment sells balloons through a dealer network. Raven is the originator of modern hot-air ballooning and continues to be a leader in design and technical expertise. The company believes it has approximately 40 percent of the U.S. hot-air balloon market, although others are able to compete with lower-cost products. Inflatables are sold directly to corporate customers and are subject to varying levels of competition. Generally, the more customized the product, the greater the company's market share. Major Customer Information No customer accounted for more than 10 percent of consolidated sales in fiscal 1998. However, the company sells sewn products to several large customers. In fiscal 1998, the top five customers in the Sewn Products segment accounted for more than two-thirds of the sales in that segment. Although the loss of these accounts would adversely affect profitability, the company believes that, over the long term, addition of new customers and sales growth from existing customers would replace any lost sales. Seasonality/Working Capital Requirements Some seasonality in demand exists for the company's outerwear products, many of which are built in spring/summer for summer/fall delivery. Most of these sales carry net thirty day terms, although some winter-dated terms are available. Sales to the agricultural market (flow controls, plastic tanks) also experience some seasonality, building in the fall for winter/spring delivery. Certain sales to agricultural customers offer spring dating terms Item 1. Business, continued: Seasonality/Working Capital Requirements Continued: for late fall and early winter shipments. The resulting fluctuations in inventory and accounts receivable balances may require and have required seasonal short-term financing. Raw Materials The company obtains a wide variety of materials from numerous vendors. Principal materials include numerous electronic components for the Electronics segment; various plastic resins for the Plastics segment; and fabric for the Sewn Products segment. The company has not experienced any significant shortages or other problems in purchasing raw materials to date, and alternative sources of supply are generally available. However, predicting future material shortages and their impact on Raven is not possible. Patents The company owns a number of patents. However, Raven does not believe that its business as a whole is materially dependent on any one patent or related group of patents. It believes the successful manufacture and sale of its products generally depend more upon its technical expertise and manufacturing skills. Research and Development The business segments noted above conduct ongoing research and development efforts. Most of the company's research and development expenditures are directed toward new products in the Electronics and Plastics segments. Total company research and development costs are disclosed in Note 1 to the consolidated financial statements located on page 29 of the Annual Report to Shareholders, incorporated herein by reference. Environmental Matters Raven believes that it is in compliance in all material respects with applicable federal, state and local environmental laws and regulations. Expenditures relating to compliance for operating facilities incurred in the past and anticipated in the future have not significantly affected capital expenditures, earnings or competitive position. Backlog As of February 1, 1998, the company's backlog of firm orders totaled $47.2 million. Comparable backlog amounts as of February 1, 1997 and 1996 were $38.1 million and $32.5 million, respectively. Approximately $4 million of the February 1, 1998 backlog is not scheduled for shipment by January 31, 1999. Item 2. Properties
Square Business Location Feet Use Segments - -------- ---- --- -------- Sioux Falls, SD 150,000 Corporate office and Corporate and electronics manufacturing Other Electronics 73,300 Storage tank Plastics manufacturing 68,400 Sewn products warehouse Sewn Products 62,300 Plastic sheeting Plastics manufacturing 59,000 Plastic sheeting and hot- Plastics air balloon manufacturing Sewn Products 31,400 Storage tank Plastics manufacturing 27,000 Offices and material Sewn Products handling facility 25,300 Inflatable manufacturing Sewn Products 24,000 Prototype manufacturing Electronics 10,200 Machine Shop Corporate and Other 6,200 Training/meeting center Corporate and Other Dunnell, MN 81,500 Pickup-truck topper Plastics manufacturing Eloy, AZ 51,600 Pickup-truck topper Plastics manufacturing Albertville, AL 49,600 Storage tank Plastics manufacturing Tacoma, WA *46,650 Storage tank Plastics manufacturing Sulphur Springs, TX *45,400 Research balloon Plastics manufacturing Springfield, OH 30,000 Plastic sheeting Plastics manufacturing
Square Business Location Feet Use Segments - -------- ---- --- -------- Huron, SD 24,100 Sewing plant Sewn Products Washington Court 21,500 Storage tank Plastics House, OH manufacturing St. Louis, MO 21,000 Electronics manufacturing Electronics Gordo, AL *20,000 Feedmill automation Electronics equipment manufacturing Beresford, SD 20,000 Sewing plant Sewn Products Madison, SD 20,000 Sewing plant Sewn Products DeSmet, SD 15,000 Sewing plant Sewn Products Salem, SD 15,000 Sewing plant Sewn Products Parkston, SD 14,000 Sewing plant Sewn Products
* Leased short-term Most of the company's manufacturing plants also serve as distribution centers and contain offices for sales, engineering and manufacturing support staff. The company believes that its properties are, in all material respects, in good condition and are adequate to meet existing production needs. The company owns 6.95 acres of undeveloped land adjacent to the other company property in Sioux Falls which is available for expansion. Item 3. Pending Legal Proceedings There are no pending legal proceedings wherein the claim for damages exceeds 10% of the registrant's current assets. Item 4. Submission of Matters to a Vote of Security Holders There was no matter submitted during the fourth quarter to a vote of security holders. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 10. Executive Officers of the Registrant Name Age Position Period Served ---- --- -------- ------------- David A. Christensen 63 President and Chief April 1971 to present Executive Officer Gary L. Conradi 58 Vice President, January 1980 to present Corporate Services Ronald M. Moquist 52 Executive Vice January 1979 to present President Arnold J. Thue 59 Vice President, January 1980 to present Finance, Secretary and Treasurer Each of the above named individuals serves at the pleasure of the Board of Directors. Each serves on a year-to-year basis. Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K (a) Consolidated Financial Statements and Schedule 1. Incorporated by reference from the attached 1998 Annual Report to Shareholders: Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Accountants 2. Included in Part II: Report of Independent Accountants on Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts The following schedules are omitted for the reason that they are not applicable or are not required: I, III and IV. (b) Reports on Form 8-K There were no reports filed on Form 8-K during the fourth quarter ended January 31, 1998. Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K, continued: (c) Exhibits filed Exhibit Number Description ------ ----------- 3(a) Articles of Incorporation of Raven Industries, Inc. and all amendments thereto.* 3(b) By-Laws of Raven Industries, Inc.* 3(c) Extract of Shareholders Resolution adopted on April 7, 1962 with respect to the by-laws of Raven Industries, Inc.* 4(a) Rights Agreement dated as of March 16, 1989 between Raven Industries, Inc. and Norwest Bank Minnesota, National Association (incorporated by reference to Exhibit 1 to the Company's Report on Form 8-K dated March 16, 1989). 10(a) Change in Control Agreement between Raven Industries, Inc. and David A. Christensen dated as of March 17, 1989.* 10(b) Change in Control Agreement between Raven Industries, Inc. and Gary L. Conradi dated as of March 17, 1989.* 10(c) Change in Control Agreement between Raven Industries, Inc. and Ronald M. Moquist dated as of March 17, 1989.* 10(d) Change in Control Agreement between Raven Industries, Inc. and Arnold J. Thue dated as of March 17, 1989.* 10(f) The Raven Industries, Inc. Health and Survivor Benefit Plan.* 10(g) The Raven Industries, Inc. Post-Retirement Health and Survivor Benefit Plan.* 10(h) Deferred Compensation Plan between Raven Industries, Inc. and David A. Christensen dated as of June 1, 1986.* 10(i) Trust Agreement between Raven Industries, Inc. and Norwest Bank South Dakota, N.A. dated April 26, 1989.* 10(n) Form of Incentive Stock Option Agreements.* Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K, continued: Exhibit Number Description ------ ----------- 10(o) Form of Nonqualified Stock Option Agreements.* 10(p) Form of Amendment Agreement relating to outstanding Incentive Stock Options.* 10(q) Raven Industries, Inc. 1990 Stock Option Plan adopted January 30, 1990 (incorporated by reference to Exhibit A to the Company's definitive Proxy Statement filed April 25, 1990). 13 1998 Annual Report to Shareholders (only those portions specifically incorporated herein by refer ence shall be deemed filed with the Commission). 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 27 Financial Data Schedule (for S.E.C. only). * Incorporated by reference to corresponding Exhibit Number of the Company's Form 10-K for the year ended January 31, 1989. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RAVEN INDUSTRIES, INC. (Registrant) April 24, 1998 By: /S/ David A. Christensen - ----------------------- ------------------------------------- Date David A. Christensen President (Principal Executive Officer and Director) Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. April 24, 1998 By: /S/ David A. Christensen - ----------------------- ------------------------------------- Date David A. Christensen President (Principal Executive Officer and Director) April 24, 1998 /S/ Arnold J. Thue - ----------------------- ------------------------------------- Date Arnold J. Thue Vice President, Finance, Secretary and Treasurer (Principal Financial and Accounting Officer) Directors: April 24, 1998 /S/ Conrad J. Hoigaard - ----------------------- ------------------------------------- Date Conrad J. Hoigaard April 24, 1998 /S/ John C. Skoglund - ----------------------- ------------------------------------- Date John C. Skoglund April 24, 1998 /S/ Mark E. Griffin - ----------------------- ------------------------------------- Date Mark E. Griffin April 24, 1998 /S/ Kevin T. Kirby - ----------------------- ------------------------------------- Date Kevin T. Kirby April 24, 1998 /S/ Anthony W. Bour - ----------------------- ------------------------------------- Date Anthony W. Bour April 24, 1998 /S/ Thomas S. Everist - ----------------------- ------------------------------------- Date Thomas S. Everist REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of Raven Industries, Inc.: Our report on the consolidated financial statements of Raven Industries, Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from page 36 of the 1998 Annual Report to Shareholders of Raven Industries, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14.(a)2. on page 10 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Minneapolis, Minnesota March 6, 1998 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended January 31, 1998, 1997 and 1996 (Dollars in thousands) ----------
Column A Column B Column C Column D Column E -------- ---------- ---------------------------- ----------- -------- Additions ---------------------------- Balance at Charged to Charged to Deductions Beginning Costs and Other From Balance at Description of Year Expenses Accounts Reserves(1) End of Year ----------- ------- -------- -------- ----------- ----------- Deducted in the balance sheet from the asset to which it applies: Allowance for doubtful accounts: Year ended January 31, 1998 $340 $193 None $143 $390 ==== ==== ==== ==== Year ended January 31, 1997 $340 $ 88 None $ 88 $340 ==== ==== ==== ==== Year ended January 31, 1996 $350 $ 68 None $ 78 $340 ==== ==== ==== ====
Note: (1) Represents uncollectible accounts receivable written off during the year, net of recoveries. EX-13 2 1998 ANNUAL REPORT
BUSINESS SEGMENTS for the years ended January 31, --------------------------------------------------------------------- (dollars in thousands) 1998 1997 1996 1995 1994 1993 ================================================================================================================== ELECTRONICS Sales $ 45,947 $ 43,861 $ 32,962 $ 31,959 $ 35,771 $ 34,538 Operating income 5,844 4,913 4,600 2,753(a) 4,529 5,146 Identifiable assets 25,599 23,251 19,204 16,912 18,838 19,082 Capital expenditures 2,002 1,071 807 552 985 953 Depreciation & amortization 1,326 1,273 1,077 872 804 712 PLASTICS Sales $ 68,325 $ 59,158 $ 55,281 $ 48,971 $ 40,386 $ 36,070 Operating income 1,998 4,187 3,267 3,470 2,815 2,625 Identifiable assets 34,583 33,879 26,092 25,817 16,796 13,769 Capital expenditures 3,869 2,539 2,973 6,387 3,587 1,305 Depreciation & amortization 3,243 2,678 2,414 1,845 1,263 1,245 SEWN PRODUCTS Sales $ 35,347 $ 36,422 $ 32,201 $ 40,790 $ 45,311 $ 40,606 Operating income 2,720 2,871 1,694 2,913 3,096 1,375 Identifiable assets 14,157 14,990 13,934 16,384 16,510 17,760 Capital expenditures 667 379 396 765 1,141 888 Depreciation & amortization 541 583 719 832 803 683 CORPORATE & OTHER Identifiable assets $ 8,251 $ 8,542 $ 8,323 $ 6,523 $ 8,453 $ 4,202 Capital expenditures 3 20 10 49 71 13 Depreciation & amortization 27 32 32 33 27 23 TOTAL COMPANY Sales $149,619 $139,441 $120,444 $121,720 $121,468 $111,214 Operating income 10,562 11,971 9,561 9,136(a) 10,440 9,146 Identifiable assets 82,590 80,662 67,553 65,636 60,597 54,813 Capital expenditures 6,541 4,009 4,186 7,753 5,784 3,159 Depreciation & amortization 5,137 4,566 4,242 3,582 2,897 2,663
(a) INCLUDES A $1.8 MILLION CHARGE AT THE COMPANY'S BETA RAVEN SUBSIDIARY. 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 SEWN PRODUCTS ... performance outerwear ... sport balloons ... inflatables RAVEN INDUSTRIES 1998 ANNUAL REPORT...3 SALES BY MARKETS for the years ended January 31 ------------------------------ (dollars in thousands) 1998 1997 1996 ================================================================== INDUSTRIAL Plastic sheeting $ 23,043 $ 21,276 $ 19,225 Industrial tanks 12,405 7,070 6,566 Electronics 18,765 16,574 11,391 Research balloons 3,150 3,268 2,776 Inflatables 3,085 3,515 3,169 -------- -------- -------- $ 60,448 $ 51,703 $ 43,127 RECREATION Performance outerwear $ 29,803 $ 29,901 $ 26,426 Sport balloons 2,459 2,790 2,454 -------- -------- -------- $ 32,262 $ 32,691 $ 28,880 AGRICULTURE Flow controls-precision farming $ 16,852 $ 16,689 $ 13,467 Feedmill automation 5,128 5,039 4,181 Storage/sprayer tanks 9,869 8,632 9,271 Plastic sheeting 1,251 1,255 1,653 -------- -------- -------- $ 33,100 $ 31,615 $ 28,572 AUTOMOTIVE Pickup-truck toppers $ 18,607 $ 17,657 $ 15,402 Other 388 -------- -------- -------- $ 18,607 $ 17,657 $ 15,790 DEFENSE Electronics $ 5,202 $ 5,559 $ 3,922 Other 216 153 -------- -------- -------- $ 5,202 $ 5,775 $ 4,075 TOTAL COMPANY SALES Industrial $ 60,448 $ 51,703 $ 43,127 Recreation 32,262 32,691 28,880 Agriculture 33,100 31,615 28,572 Automotive 18,607 17,657 15,790 Defense 5,202 5,775 4,075 -------- -------- -------- Total $149,619 $139,441 $120,444 ======== ======== ======== RAVEN INDUSTRIES 1998 ANNUAL REPORT...17 ELEVEN-YEAR FINANCIAL SUMMARY
------------------------------------------------------ (dollars in thousands, except per-share data) 1998 1997 1996 1995 ====================================================================================================== OPERATIONS FOR YEAR Net sales..................................... $ 149,619 $ 139,441 $ 120,444 $ 121,720 Gross profit.................................. 24,929 25,287 22,660 23,968 Operating income.............................. 10,562 11,971 9,561 9,136(b) Income before income taxes.................... 12,540(a) 11,915 9,566 9,372 Net income.................................... 8,062 7,688 6,197 6,088 Net income % of sales......................... 5.4% 5.5% 5.1% 5.0% Net income % of beginning equity.............. 14.2% 15.6% 13.6% 14.8% Cash dividends................................ $ 2,709 $ 2,367 $ 2,130 $ 1,843 FINANCIAL POSITION Current assets................................ $ 57,831 $ 56,696 $ 45,695 $ 43,795 Current liabilities........................... 19,375 20,016 14,771 15,078 Working capital............................... 38,456 36,680 30,924 28,717 Current ratio................................. 2.98 2.83 3.09 2.90 Property, plant and equipment................. 19,817 18,142 18,069 18,570 Total assets.................................. 82,590 80,662 67,553 65,636 Long-term debt................................ 1,128 3,181 2,816 4,179 Shareholders' equity.......................... 61,563 56,729 49,151 45,526 Long-term debt/total capitalization........... 1.8% 5.3% 5.4% 8.4% Inventory turnover (CGS/year-end inventory)... 4.8 4.5 4.1 4.4 CASH FLOWS PROVIDED BY (USED IN) Operating activities.......................... $ 9,274 $ 7,088 $ 9,687 $ 7,452 Investing activities.......................... (4,979) (5,090) (4,158) (10,000) Financing activities.......................... (4,884) (2,363) (4,029) 406 Increase (decrease) in cash................... (589) (365) 1,500 (2,142) COMMON STOCK DATA Net income per share--basic................... $ 1.66 $ 1.62 $ 1.31 $ 1.29 Net income per share--diluted................. 1.65 1.61 1.30 1.27 Cash dividends per share...................... 0.56 0.50 0.45 0.39 Book value per share.......................... 12.76 11.73 10.42 9.62 Stock price range during year High...................................... $ 25.75 $ 23.50 $ 20.75 $ 24.50 Low....................................... $ 19.63 $ 16.00 $ 15.50 $ 18.00 Shares outstanding, year-end (in thousands)... 4,825 4,836 4,716 4,735 Number of shareholders, year-end.............. 3,221 3,011 3,190 3,031 OTHER DATA Average number of employees................... 1,511 1,387 1,368 1,414 Sales per employee............................ $ 99 $ 101 $ 88 $ 86 Backlog $ 47,154 $ 38,102 $ 32,539 $ 29,661
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. (a) INCLUDES THE $1.8 MILLION GAIN ON SALE OF AN INVESTMENT IN AN AFFILIATE (SEE NOTE 5). (b) INCLUDES A $1.8 MILLION CHARGE AT THE COMPANY'S BETA RAVEN SUBSIDIARY. RAVEN INDUSTRIES 1998 ANNUAL REPORT...18 [WIDE TABLE CONTINUED]
for the years ended January 31, - ------------------------------------------------------------------------------------------------ 1994 1993 1992 1991 1990 1989 1988 ================================================================================================ $ 121,468 $ 111,214 $ 100,609 $ 85,502 $ 90,973 $ 77,563 $ 64,305 23,574 21,048 19,109 17,685 18,177 14,857 14,292 10,440 9,146 8,138 7,311 7,461 5,127 4,983 10,638 9,182 8,067 7,071 6,831 4,578 4,390 6,954 6,030 5,306 4,605 4,235 2,930 2,656 5.7% 5.4% 5.3% 5.4% 4.7% 3.8% 4.1% 19.6% 19.7% 20.2% 20.2% 19.7% 15.3% 15.5% $ 1,545 $ 1,316 $ 1,165 $ 1,014 $ 849 $ 732 $ 680 $ 45,037 $ 42,476 $ 34,798 $ 33,900 $ 30,570 $ 24,976 $ 21,795 16,088 15,253 11,284 12,147 11,247 9,633 8,799 28,949 27,223 23,514 21,753 19,323 15,342 12,997 2.80 2.78 3.08 2.79 2.72 2.59 2.48 13,371 10,457 9,947 8,368 7,163 8,702 9,672 60,597 54,813 46,528 44,103 39,547 35,892 33,920 2,539 3,224 3,676 4,679 4,966 4,115 5,254 41,100 35,530 30,601 26,236 22,802 21,448 19,170 5.8% 8.3% 10.7% 15.1% 17.5% 15.7% 20.9% 4.4 3.8 4.2 3.4 4.1 4.6 4.1 $ 11,257 $ 3,475 $ 7,489 $ 5,583 $ 2,404 $ 3,908 $ 4,108 (5,908) (3,107) (3,886) (3,113) (1,308) (1,331) (3,598) (2,042) (1,659) (2,518) (2,071) (1,875) (1,869) 274 3,307 (1,291) 1,085 399 (779) 708 784 $ 1.48 $ 1.30 $ 1.15 $ 1.00 $ 0.90 $ 0.61 $ 0.56 1.45 1.27 1.13 0.98 0.87 0.61 0.55 0.33 0.28 0.25 0.22 0.18 0.15 0.14 8.76 7.60 6.63 5.77 5.01 4.48 4.03 $ 23.50 $ 21.50 $ 15.83 $ 9.75 $ 10.00 $ 5.75 $ 7.09 $ 18.00 $ 13.83 $ 8.00 $ 6.42 $ 5.33 $ 4.37 $ 4.21 4,694 4,676 4,629 4,559 4,554 4,785 4,758 3,173 3,147 2,775 2,526 1,898 1,925 2,000 1,435 1,316 1,252 1,141 1,234 1,138 1,019 $ 85 $ 85 $ 80 $ 75 $ 74 $ 68 $ 63 $ 36,403 $ 49,033 $ 48,200 $ 53,587 $ 42,078 $ 33,436 $ 21,424
RAVEN INDUSTRIES 1998 ANNUAL REPORT...19 FINANCIAL REVIEW AND ANALYSIS RESULTS OF OPERATIONS...MARGIN ANALYSIS
for the years ended January 31, --------------------------------------------------------------------------------------------- 1998 1997 1996 --------------------------------------------------------------------------------------------- (in thousands, except per-share data) AMOUNT % SALES % CHANGE amount % sales % change amount % sales % change ==================================================================================================================================== Net sales.............................. $ 149,619 100.0 + 7.3 $ 139,441 100.0 + 15.8 $ 120,444 100.0 - 1.0 Gross profit........................... 24,929 16.7 - 1.4 25,287 18.1 + 11.6 22,660 18.8 - 5.5 Operating expenses..................... 14,367 9.6 + 7.9 13,316 9.5 + 1.7 13,099 10.9 + 0.5 Operating income....................... 10,562 7.1 - 11.8 11,971 8.6 + 25.2 9,561 7.9 + 4.7 Income before income taxes............. 12,540 8.4 + 5.2 11,915 8.5 + 24.6 9,566 7.9 + 2.1 Income taxes........................... 4,478 3.0 + 5.9 4,227 3.0 + 25.5 3,369 2.8 + 2.6 Net income............................. $ 8,062 5.4 + 4.9 $ 7,688 5.5 + 24.1 $ 6,197 5.1 + 1.8 Net income per share--diluted.......... $ 1.65 + 2.5 $ 1.61 + 23.8 $ 1.30 + 2.4 Effective income tax rate.............. 35.7% + 0.6 35.5% + 0.9 35.2% + 0.6
LONG-TERM PERFORMANCE Although the company recorded record sales and net income in fiscal 1998, operating income declined by almost 12%. Unfavorable operating results were due primarily to weakness in the Plastics business segment. Net income of $8.1 million, or $1.65 per share on a diluted basis, included a $1.8 million pretax gain on the sale of an investment in an affiliated company. Absent this gain, net income would have been $6.9 million or $1.41 per share, the third highest in company history. The Electronics segment generated higher sales and earnings in fiscal 1998 as a result of improvements in contract electronics manufacturing. Plastics segment sales increased because of the acquisition of Norcore Plastics, Inc., in January 1997, but weakness in the industrial marketplace reduced profitability. Sewn Products segment results were relatively flat when compared with fiscal 1997 levels. Strong operating cash flows, along with the sale of the 50% owned affiliate, reduced the company's debt to capitalization ratio below 2% at the end of fiscal 1998. The company also returned 14.2% on shareholders equity, and 5.4% on sales; increased its book value by 8.8% on a per share basis; paid a record per share dividend and continued to invest in its businesses.
for the years ended January 31, ------------------------------------------------------- 1998 1997 1996 1995 1994 1993 =========================================================================================== Net income as % of Sales........................ 5.4% 5.5% 5.1% 5.0% 5.7% 5.4% Average assets............... 9.9% 10.4% 9.3% 9.6% 12.1% 11.9% Beginning equity............. 14.2% 15.6% 13.6% 14.8% 19.6% 19.7%
RAVEN INDUSTRIES 1998 ANNUAL REPORT...20 FINANCIAL REVIEW AND ANALYSIS 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:
1998 1997 1996 ----------------------------------------------------------------------- (dollars in thousands) AMOUNT % CHANGE amount % change amount % change ======================================================================================================= SALES Electronics................... $ 45,947 + 4.8 $ 43,861 + 33.1 $ 32,962 + 3.1 Plastics...................... 68,325 +15.5 59,158 + 7.0 55,281 + 12.9 Sewn Products................. 35,347 - 3.0 36,422 + 13.1 32,201 - 21.1 --------- --------- --------- Total......................... $ 149,619 + 7.3 $ 139,441 + 15.8 $ 120,444 - 1.0 ========= ========= ========= AMOUNT % SALES amount % sales amount % sales ======================================================================================================= GROSS PROFITS Electronics................... $ 10,083 21.9 $ 8,617 19.6 $ 7,841 23.8 Plastics...................... 8,791 12.9 10,154 17.2 9,450 17.1 Sewn Products................. 6,055 17.1 6,516 17.9 5,369 16.7 --------- --------- --------- Total......................... $ 24,929 16.7 $ 25,287 18.1 $ 22,660 18.8 ========= ========= =========
ELECTRONICS SEGMENT FISCAL 1998 VERSUS FISCAL 1997 Sales in this segment were up 5% compared with fiscal 1997, reaching $45.9 million in fiscal 1998. Sales growth occurred in all of the segment's product categories, with the largest increase, $1.0 million, coming from the company's Electronic Systems division as a result of market growth in contract manufacturing. Sales of flow and position control devices for the agricultural market increased from $16.7 million in fiscal 1997 to $16.9 million in fiscal 1998 due primarily to higher selling prices. Delays in new product introductions slowed the solid growth experienced in prior years. At the company's Beta Raven subsidiary, sales of both feedmill automation and contract electronics manufacturing increased due to higher market demand and increased market share. Gross profit rates improved in this segment as a higher percentage of repeat business lessened the impact of start-up costs in contract electronics manufacturing. [BAR CHART] YEAR SALES GROSS PROFITS '96 32.962 7.841 '97 43.861 8.617 '98 45.947 10.083 ELECTRONICS SEGMENT (DOLLARS IN MILLIONS) FISCAL 1997 VERSUS FISCAL 1996 The company successfully broadened its commercial contract electronics offerings in fiscal 1997. Revenues from contract electronics assembly in the Raven Electronic Systems division doubled over fiscal 1996 levels and reached $18.0 million. Sales of flow and position control devices for precision farming applications increased from $13.5 to $16.7 million. Lower contract assembly revenues from the company's Beta Raven subsidiary partially offset these increases. The lower gross profit rate in fiscal 1997 was a result of the high rate of technological and customer start-up costs incurred with the introduction of new products and transformation from defense orientation to a commercial customer base. PROSPECTS An increased backlog in contract electronics manufacturing orders at the end of fiscal 1998 supports management's expectation for sales growth in this segment between 10-15% in the coming year. Sales growth in the flow and position control markets will depend on the farm economy in the United States and abroad and acceptance of new product initiatives in the marketplace. Gross profit rates are expected to be slightly lower in fiscal 1999 than in fiscal 1998 because sales growth is expected to be in relatively lower margin product lines. PLASTICS SEGMENT FISCAL 1998 VERSUS FISCAL 1997 Sales in the Plastics segment rose from $59.2 million in fiscal 1997 to $68.3 million in fiscal 1998 due primarily to the acquisition of Norcore Plastics, Inc., in January 1997. Norcore sales in fiscal 1998 were $6.3 million, nearly 30% below expectations due to a slowdown in the semiconductor industry. Storage tank revenues were $22.3 million in fiscal 1998 and $15.7 million in fiscal 1997. The company's industrial plastic tank operations all experienced unfavorable RAVEN INDUSTRIES 1998 ANNUAL REPORT...21 FINANCIAL REVIEW AND ANALYSIS [BAR CHART] YEAR SALES GROSS PROFITS '96 55.281 9.450 '97 59.158 10.154 '98 68.325 8.791 PLASTICS SEGMENT (DOLLARS IN MILLIONS) market conditions in the second half of fiscal 1998, depressing sales and gross margins. Sales of engineered films and research balloons were 6% higher in fiscal 1998 than in fiscal 1997, reaching $27.4 million. Entry into new markets, such as retail stores, expanded sales opportunities and offset generally lower selling prices for films. Pickup-truck topper sales increased by 5% due primarily to higher unit deliveries. Most of the decline in the gross profit rate resulted from the decline in plastic tank margins, but all product lines showed some reduction. FISCAL 1997 VERSUS FISCAL 1996 Continued growth in sales of engineered films in fiscal 1997 was central to the company's success in this business segment. Engineered Film division sales were $25.8 million, up 9% over fiscal 1996. Fiscal 1996 sales included emergency demand for hurricane film. Sales of high-altitude research balloons and pickup-truck toppers increased by 18% and 15%, respectively. Weakness in agricultural markets reduced sales of plastic tanks by 4%. Higher sales combined with improved operations at one of the company's pickup-truck topper plants increased gross profits in fiscal 1997, compared with fiscal 1996. PROSPECTS The gross profit reduction experienced in the second half of fiscal 1998 is expected to continue into the first half of fiscal 1999. For the full year, management expects that gross profit percentages will partially recover, but remain below the level of fiscal 1997 and 1996. Recent negotiations with suppliers will result in lower raw material costs. With gross profit rate improvement established as the primary objective for this segment in fiscal 1999, sales growth in the 5-10% range is expected. SEWN PRODUCTS SEGMENT FISCAL 1998 VERSUS FISCAL 1997 Sales were $35.3 million in this segment in fiscal 1998; a 3% decline from the prior fiscal year. Sales of performance outerwear were essentially unchanged, at $29.8 million, while sales of hot-air balloons and inflatable displays declined due to lower demand. The change in the gross profit rate, from 18% in fiscal 1997 to 17% in fiscal 1998 was due primarily to lower sales of relatively higher margin products. FISCAL 1997 VERSUS FISCAL 1996 Sales of $36.4 million in fiscal 1997 were 13% higher than in fiscal 1996 as a result of improved market conditions for outerwear sales to catalog merchandisers and increased sales of severe weather uniforms. Sales of inflatable display products and hot-air balloons also increased. Raven branded skiwear and western wear sales declined. Higher sales and production levels improved plant efficiencies and aided the recovery of the gross profit rate. [BAR CHART] YEAR SALES GROSS PROFITS '96 32.201 5.369 '97 36.422 6.516 '98 35.347 6.055 SEWN PRODUCTS SEGMENT (DOLLARS IN MILLIONS) PROSPECTS Management believes the limited growth strategy currently employed in its Sewn Products businesses will deliver consistent and predictable profits. Management believes these businesses do have sufficient resources to respond to opportunities as they arise. Increased order backlog at January 31, 1998 indicates an opportunity for sales growth in excess of 5% in fiscal 1999. If sales do increase, gross profits are expected to rise commensurately. EXPENSES, INCOME TAXES AND OTHER FISCAL 1998 VERSUS FISCAL 1997 Selling expenses increased by 13% in fiscal 1998 when compared with fiscal 1997 levels. Increased selling effort to penetrate new markets in the Plastics and Electronics segments contributed to the increase. Administrative and interest expenses were relatively unchanged. Other income included improved results at the company's 50% owned affiliate, which was sold in January 1998 for $3.8 million, generating a pretax gain of $1.8 million. The company's effective income tax rate rose from 35.5% to 35.7% as the goodwill amortization associated with the Norcore merger was not deductible for federal income tax purposes. FISCAL 1997 VERSUS FISCAL 1996 Selling and administrative costs increased by 1.7% over fiscal 1996 levels. As a percent of sales, they were reduced to 9.5% from 10.9% one year earlier. Selling expenses did not increase over the prior year as a result of declines in commissionable sales and lower promotional expenses. Administrative expenses did increase by 3.9% as a result of higher compensation expenses. Interest expense declined RAVEN INDUSTRIES 1998 ANNUAL REPORT...22 FINANCIAL REVIEW AND ANALYSIS due to lower borrowing levels. The company's effective income tax rate increased from 35.2% in fiscal 1996 to 35.5% in fiscal 1997 due primarily to the taxation of income over $10 million at a higher federal rate. PROSPECTS Operating expenses are expected to remain relatively constant as a percentage of sales in fiscal 1999. Interest costs should decline as total borrowings are reduced. The company's effective income tax rate is expected to rise slightly, to the 36% range. OTHER The company reports its business segments according to Statement of Financial Accounting Standards No. 14. A new Statement, affecting the company for its fiscal 1999 year-end reporting, will require changes in the reporting of segment information. Management has not yet determined the impact of the new Statement on its financial reporting, but expects additional detail concerning its business operations to be disclosed. 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) 1998 1997 1996 =========================================================================== Operating activities............... $ 9,274 $ 7,088 $ 9,687 Investing activities............... (4,979) (5,090) (4,158) Financing activities............... (4,884) (2,363) (4,029) Increase (decrease) in cash........ $ (589) $ (365) $ 1,500 OPERATING ACTIVITIES The company's cash flow from operations totaled $26.0 million over the past three years, compared with net income of $21.9 million over the same period. Accounts receivable and inventory levels increased slightly in fiscal 1998 due to higher sales. Working capital requirements are projected to grow along with revenues in fiscal 1999. INVESTING ACTIVITIES The company sold its investment in an affiliated company in January 1998 for $3.8 million. Cash proceeds were $1.3 million and the remainder was in the form of a note receivable in fiscal 1999 and 2000. Capital expenditures totaled $6.5 million in fiscal 1998, $2.5 million higher than the prior year and $1.4 million more than depreciation and amortization. Over one-half of the expenditures in fiscal 1998 were in support of continued growth in the Plastics segment. Capital spending is expected to exceed depreciation and amortization by approximately $1 million in fiscal 1999. FINANCING ACTIVITIES AND CREDIT LINES The company increased its dividend, on a per share basis, for the eleventh consecutive year. Cash was also used to repurchase 34,000 shares of company stock at an average price of $20.96 per share and repay $1.7 million of long-term debt. The company uses its short-term line of credit to finance its seasonal borrowing needs. Maximum borrowings under the company's line of credit were $2.0 million during fiscal 1998 and average daily borrowings were less than $300,000. Higher levels of short-term borrowing may be required during fiscal 1999 because of the company's lower opening cash balance and anticipation of higher working capital requirements. Management believes its existing credit facility will be sufficient to fund these requirements in the coming fiscal year. CAPITAL STRUCTURE AND LONG-TERM FINANCING The company's long-term debt to total capitalization ratio was 1.8% at January 31, 1998. Refer to Note 8 to the consolidated financial statements for types and sources of long-term debt. Although no new long-term borrowing is planned for fiscal 1999, additional borrowings may be required if management repurchases any of the 466,000 additional shares of Raven stock remaining under the authorization by the board of directors. 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. 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 quality manufacturing. RAVEN INDUSTRIES 1998 annual report...23 STOCK AND QUARTERLY PERFORMANCE WEEKLY STOCK PRICE, VOLUME AND P/E [PLOT POINTS CHART] DATE P/E PRICE VOLUME 2/07 14.596 23 1/2 17,200.0 2/14 14.441 23 1/4 8,300.0 2/21 13.820 22 1/4 9,300.0 2/28 13.509 21 3/4 13,700.0 3/07 13.742 22 1/8 23,800.0 3/14 13.665 22 67,500.0 3/21 14.596 23 1/2 21,500.0 3/28 14.596 23 1/2 13,300.0 4/04 14.286 23 33,800 4/11 14.441 23 1/4 33,200 4/18 14.441 23 1/4 15,900 4/25 14.441 23 1/4 16,300 5/02 13.772 23 13,800 5/09 13.698 22 7/8 24,500 5/16 13.922 23 1/4 29,000 5/23 14.072 23 1/2 29,500 5/30 14.222 23 3/4 13,500 6/06 14.222 23 3/4 8,000 6/13 13.997 23 3/8 6,600 6/20 14.147 23 5/8 10,700 6/27 14.521 24 1/4 14,600 7/04 14.596 24 3/8 11,500 7/11 14.521 24 1/4 10,900 7/18 14.371 24 12,400 7/25 14.371 24 4,700 8/01 14.559 24 3/4 26,100 8/08 14.412 24 1/2 17,000 8/15 15.147 25 3/4 33,200 8/22 14.853 25 1/4 17,100 8/29 14.706 25 19,300 9/05 14.118 24 24,800 9/12 14.412 24 1/2 6,900 9/19 14.265 24 1/4 10,700 9/26 14.559 24 3/4 46,700 10/03 14.265 24 1/4 45,100 10/10 14.706 25 32,400 10/17 14.191 24 1/8 87,000 10/24 13.382 22 3/4 40,400 10/31 14.516 22 1/2 26,300 11/07 15.161 23 1/2 9,300 11/14 14.677 22 3/4 53,100 11/21 12.661 19 5/8 67,600 11/28 13.347 20 11/16 23,800 12/05 13.629 21 1/8 91,000 12/12 13.548 21 81,400 12/19 13.871 21 1/2 14,100 12/26 14.194 22 9,000 1/02 13.790 21 3/8 22,800 1/09 13.790 21 3/8 13,100 1/16 14.355 22 1/4 14,600 1/23 14.274 22 1/8 21,600 1/30 13.630 22 5/8 15,700 QUARTERLY SUMMARY (UNAUDITED)
net income common stock per share(a) market price (dollars in thousands, net gross operating pretax net ----------------- ----------------- dividends except per-share data) sales profit income income income basic diluted high low per share ==================================================================================================================================== FISCAL 1998 FIRST QUARTER......... $ 35,666 $ 6,827 $ 3,288 $ 3,334 $ 2,134 $ 0.44 $ 0.44 $ 24.00 $ 21.75 $ 0.130 SECOND QUARTER........ 34,075 6,075 2,407 2,476 1,602 0.33 0.33 24.50 22.38 0.130 THIRD QUARTER......... 41,321 6,113 2,505 2,548 1,641 0.34 0.33 25.75 22.50 0.150 FOURTH QUARTER........ 38,557 5,914 2,362 4,182(b) 2,685 0.56 0.55 23.75 19.63 0.150 ------------------------------------------------------------------------------ ------- TOTAL YEAR............ $ 149,619 $ 24,929 $ 10,562 $ 12,540 $ 8,062 $ 1.66 $ 1.65 $ 25.75 $ 19.63 $ 0.560 ============================================================================== ======= FISCAL 1997 First Quarter......... $ 30,875 $ 6,086 $ 2,826 $ 2,797 $ 1,808 $ 0.38 $ 0.38 $ 18.75 $ 16.00 $ 0.120 Second Quarter........ 31,270 5,398 2,215 2,191 1,409 0.30 0.30 22.00 16.00 0.120 Third Quarter......... 38,943 7,055 3,598 3,571 2,303 0.49 0.48 22.75 18.25 0.130 Fourth Quarter........ 38,353 6,748 3,332 3,356 2,168 0.45 0.45 23.50 20.88 0.130 ------------------------------------------------------------------------------ ------- Total Year............ $ 139,441 $ 25,287 $ 11,971 $ 11,915 $ 7,688 $ 1.62 $ 1.61 $ 23.50 $ 16.00 $ 0.500 ============================================================================== ======= FISCAL 1996 First Quarter......... $ 27,787 $ 5,776 $ 2,404 $ 2,380 $ 1,535 $ 0.32 $ 0.32 $ 20.50 $ 17.25 $ 0.105 Second Quarter........ 27,253 4,795 1,675 1,732 1,117 0.24 0.23 20.75 19.50 0.105 Third Quarter......... 35,560 6,400 3,115 3,057 1,972 0.42 0.41 20.50 17.50 0.120 Fourth Quarter........ 29,844 5,689 2,367 2,397 1,573 0.34 0.34 19.25 15.50 0.120 ------------------------------------------------------------------------------ ------- Total Year............ $ 120,444 $ 22,660 $ 9,561 $ 9,566 $ 6,197 $ 1.31 $ 1.30 $ 20.75 $ 15.50 $ 0.450 ============================================================================== =======
(a) NET INCOME PER SHARE IS COMPUTED DISCRETELY BY QUARTER AND MAY NOT ADD TO THE FULL YEAR COMPUTATION DUE TO ROUNDING. (b) INCLUDES THE $1.8 MILLION GAIN ON SALE OF AN INVESTMENT IN AN AFFILIATE (SEE NOTE 5). RAVEN INDUSTRIES 1998 ANNUAL REPORT...24 CONSOLIDATED BALANCE SHEETS
as of January 31 --------------------------------- (dollars in thousands) 1998 1997 1996 ========================================================================================================== ASSETS Current assets Cash and cash equivalents ..................................... $ 2,850 $ 3,439 $ 3,804 Accounts and note receivable, net ............................. 26,973 25,637 16,002 Inventories ................................................... 25,816 25,125 23,897 Deferred income taxes ......................................... 1,686 2,064 1,579 Prepaid expenses and other current assets ..................... 506 431 413 --------------------------------- Total current assets ...................................... 57,831 56,696 45,695 Property, plant and equipment, net ................................ 19,817 18,142 18,069 Note receivable, less current portion ............................. 1,259 Other assets, net ................................................. 3,683 5,824 3,789 --------------------------------- Total assets .............................................. $82,590 $80,662 $67,553 --------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt ............................. $ 1,765 $ 1,366 $ 813 Accounts payable .............................................. 7,480 7,849 4,651 Accrued liabilities ........................................... 9,327 10,197 8,309 Customer advances ............................................. 803 604 998 --------------------------------- Total current liabilities ................................. 19,375 20,016 14,771 Long-term debt, less current portion .............................. 1,128 3,181 2,816 Deferred income taxes ............................................. 524 736 815 Stockholders' equity .............................................. 61,563 56,729 49,151 --------------------------------- Common shares- Authorized--100,000,000 Outstanding--1998: 4,824,429; 1997: 4,835,558; 1996: 4,715,976 Total liabilities and stockholders' equity .................... $82,590 $80,662 $67,553 =================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. RAVEN INDUSTRIES 1998 annual report...25 CONSOLIDATED STATEMENTS OF INCOME
for the years ended January 31 ----------------------------------------- (dollars in thousands, except per-share data) 1998 1997 1996 ========================================================================================== Net sales ................................. $ 149,619 $ 139,441 $ 120,444 Cost of goods sold ........................ 124,690 114,154 97,784 ----------------------------------------- Gross profit .......................... 24,929 25,287 22,660 Operating expenses Selling ............................... 8,149 7,211 7,223 Administrative ........................ 6,218 6,105 5,876 ----------------------------------------- Operating income .................. 10,562 11,971 9,561 Interest expense ...................... (323) (310) (375) Gain on sale of investment in affiliate 1,794 Other income, net ..................... 507 254 380 ----------------------------------------- Income before income taxes ............ 12,540 11,915 9,566 Income taxes .............................. 4,478 4,227 3,369 ----------------------------------------- Net income ............................ $ 8,062 $ 7,688 $ 6,197 ========================================= Net income per common share: --basic ................................ $ 1.66 $ 1.62 1.31 ========================================= --diluted .............................. $ 1.65 $ 1.61 1.30 =========================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. RAVEN INDUSTRIES 1998 ANNUAL REPORT..26 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
$1 par treasury stock common paid-in ------------------- retained (dollars in thousands, except per-share data) stock capital shares at cost earnings total ================================================================================================================================ Balance, January 31, 1995.................... $ 5,050 $ 420 (315,903) $ (2,334) $ 42,390 $ 45,526 Net income................................... 6,197 6,197 Cash dividends ($.45 per share).............. (2,130) (2,130) Purchase of stock for treasury............... (36,500) (576) (576) Purchase and retirement of stock............. (9) (172) (181) Employees' stock options exercised........... 27 180 207 Tax benefit from exercise of stock options... 108 108 -------------------------------------------------------------------------------- Balance January 31, 1996..................... 5,068 536 (352,403) (2,910) 46,457 49,151 Net income................................... 7,688 7,688 Cash dividends ($.50 per share).............. (2,367) (2,367) Shares issued for acquisition................ 94 1,956 2,050 Purchase and retirement of stock............. (30) (624) (654) Employees' stock options exercised........... 56 618 674 Tax benefit from exercise of stock options... 187 187 -------------------------------------------------------------------------------- Balance January 31, 1997..................... 5,188 2,673 (352,403) (2,910) 51,778 56,729 Net income................................... 8,062 8,062 Cash dividends ($.56 per share).............. (2,709) (2,709) Purchase of stock for treasury............... (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 ================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. RAVEN INDUSTRIES 1998 ANNUAL REPORT...27
consolidated statements of cash flows for the years ended January 31 ------------------------------ (dollars in thousands) 1998 1997 1996 ==================================================================================================================================== Cash flows from operating activities Net income .................................................................................. $ 8,062 $ 7,688 $ 6,197 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................................................... 5,137 4,566 4,242 Provision for losses on accounts receivable ............................................. 193 88 86 Deferred income taxes ................................................................... 166 (514) (203) Equity in earnings of affiliate, net of dividends ....................................... (204) (6) (105) Gain on sale of investment in affiliate ................................................. (1,794) Change in operating assets and liabilities, net of effects from acquisition of businesses (2,254) (4,808) (525) Other operating activities, net ......................................................... (32) 74 (5) ------------------------------- Net cash provided by operating activities ................................................... 9,274 7,088 9,687 Cash flows from investing activities Capital expenditures ........................................................................ (6,541) (4,009) (4,186) Sale of investment in affiliate ............................................................. 1,300 Acquisition of businesses ................................................................... (1,105) (510) Other investing activities, net ............................................................. 262 24 538 ------------------------------- Net cash used in investing activities ....................................................... (4,979) (5,090) (4,158) Cash flows from financing activities Issuance of short-term debt ................................................................. 2,000 4,500 Payment of short-term debt .................................................................. (2,000) (4,500) Retire debt of acquired business ............................................................ (890) Long-term debt principal payments ........................................................... (1,656) (813) (1,457) Proceeds from issuance of long-term debt .................................................... 1,500 Net proceeds from exercise of stock options ................................................. 194 207 134 Dividends paid .............................................................................. (2,709) (2,367) (2,130) Purchase of treasury stock .................................................................. (713) (576) ------------------------------- Net cash used in financing activities ....................................................... (4,884) (2,363) (4,029) ------------------------------- Net increase (decrease) in cash and cash equivalents ............................................ (589) (365) 1,500 Cash and cash equivalents at beginning of year .................................................. 3,439 3,804 2,304 ------------------------------- Cash and cash equivalents at end of year ........................................................ $ 2,850 $ 3,439 $ 3,804 ===============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. RAVEN INDUSTRIES 1998 ANNUAL REPORT...28 NOTES TO FINANCIAL STATEMENTS 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. ("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 mutual fund with Norwest Advantage Funds, an affiliate of 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 is stated at cost and is depreciated over the estimated useful life of the asset 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 income. 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. INSURANCE OBLIGATIONS The company employs large deductible insurance policies covering workers compensation, employee health care and general liability costs. Costs are accrued up to the limits of these policies based on claims filed and estimates for claims incurred but not reported. CONTINGENCIES The company may from time to time be involved as a defendant in lawsuits, claims or disputes in the normal course of business. An estimated loss is charged to operations when it is probable that an asset has been impaired or a liability incurred and the amount of the loss can be reasonably estimated. RESEARCH AND DEVELOPMENT Research and development expenditures of $660,000 in fiscal 1998, $678,000 in fiscal 1997, and $619,000 in fiscal 1996 were charged to cost of goods sold in the year incurred. STOCK OPTIONS The company records compensation expense related to its stock option 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 periods 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. RAVEN INDUSTRIES 1998 ANNUAL REPORT...29 NOTES TO FINANCIAL STATEMENTS NOTE 2...SELECTED BALANCE SHEET INFORMATION Following are the components of selected balance sheet items: as of January 31 ----------------------------------- (dollars in thousands) 1998 1997 1996 ================================================================================ Accounts and note receivable, net: Trade accounts ....................... $ 26,113 $ 25,977 $ 16,342 Current portion of note receivable ... 1,250 Allowance for doubtful accounts ...... (390) (340) (340) ---------------------------------- Total ............................ $ 26,973 $ 25,637 $ 16,002 ================================== Inventories: Finished goods ....................... $ 4,133 $ 4,275 $ 5,236 In process ........................... 3,882 4,574 5,344 Materials ............................ 17,801 16,276 13,317 ---------------------------------- Total ............................ $ 25,816 $ 25,125 $ 23,897 ================================== Property, plant, and equipment: Land ................................. $ 1,265 $ 1,185 $ 1,185 Building and improvements ............ 14,742 13,988 13,285 Machinery and equipment .............. 37,798 33,142 30,550 ---------------------------------- 53,805 48,315 45,020 Accumulated depreciation ............. (33,988) (30,173) (26,951) ---------------------------------- Total ............................ $ 19,817 $ 18,142 $ 18,069 ================================== Other assets, net: Intangible assets, net of amortization $ 3,447 $ 3,732 $ 1,746 Investment in affiliate .............. 1,802 1,796 Other non-current assets ............. 236 290 247 ---------------------------------- Total ............................ $ 3,683 $ 5,824 $ 3,789 ================================== Accrued liabilities: Profit sharing ....................... $ 1,255 $ 1,654 $ 1,324 Vacations ............................ 1,941 1,786 1,622 Salaries and wages ................... 2,407 2,514 2,427 Insurance obligations ................ 2,247 2,070 1,502 Other ................................ 1,477 2,173 1,434 ---------------------------------- Total ............................ $ 9,327 $ 10,197 $ 8,309 ================================== RAVEN INDUSTRIES 1998 ANNUAL REPORT...30 NOTES TO FINANCIAL STATEMENTS NOTE 3...SUPPLEMENTAL CASH FLOW INFORMATION for the years ended January 31 -------------------------------- (dollars in thousands) 1998 1997 1996 ================================================================================ Changes in operating assets and liabilities: Accounts receivable ..................... $ (279) $(8,112) $ 1,504 Inventories ............................. (727) (393) (1,785) Prepaid expenses and other current assets (76) 53 (31) Accounts payable ........................ (369) 2,450 (784) Accrued liabilities ..................... (1,003) 1,588 118 Customer advances ....................... 200 (394) 453 -------------------------------- $(2,254) $(4,808) $ (525) ================================ Cash paid during the year for: Interest ................................ $ 335 $ 309 $ 395 Income taxes ............................ 4,227 4,201 3,761 NOTE 4...ACQUISITIONS In January 1997, the company acquired all the outstanding shares of Norcore Plastics, Inc., a manufacturer of large industrial storage tanks utilizing "dual laminate" technology. Consideration paid included $1.1 million of cash and the issuance of 93,701 shares of common stock. Raven acquired assets of $3.0 million and assumed liabilities of $2.1 million in connection with the merger. In fiscal 1996 the company acquired certain assets of another company for $510,000. Both acquisitions were accounted for as purchases. The cost in excess of net tangible assets acquired resulted in goodwill of $2.7 million. The consolidated financial statements include the results of operations of these businesses subsequent to the acquisition dates. NOTE 5...SALE OF INVESTMENT IN AFFILIATE 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 recognized a pre-tax gain of $1.8 million. The company had accounted for this investment using the equity method. Under the Stock Redemption 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. This note receivable will be collected in two installments; one principal payment in fiscal 1999 and the balance, including interest, in fiscal 2000. NOTE 6...BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION The company operates in three reportable business segments consisting of Electronics, Plastics and Sewn Products. Segment information can be found on page 3, along with a description of product lines included in each segment. No customer accounted for more than 10% of consolidated sales in any fiscal year presented. RAVEN INDUSTRIES 1998 ANNUAL REPORT...31 NOTES TO FINANCIAL STATEMENTS NOTE 7...QUARTERLY DATA (UNAUDITED) Quarterly net sales, gross profit, net income and net income per share data are presented on page 24. NOTE 8...FINANCING ARRANGEMENTS Long-term debt consisted of the following:
as of January 31 -------------------------------- (dollars in thousands) 1998 1997 1996 =========================================================================================================================== Norwest bank notes payable in installments through 2001 with interest at the prime rate $ 2,560 $ 3,620 $ 2,680 Contracts, notes and mortgages payable in installments through 2003 with interest from 3.0% to 14.0% .................................................. 212 762 740 Industrial revenue bonds payable in installments through 2001 with interest at 83% of the prime rate ............................................ 121 165 209 -------------------------------- Total long-term debt .......................................................... 2,893 4,547 3,629 Current portion ............................................................... (1,765) (1,366) (813) -------------------------------- $ 1,128 $ 3,181 $ 2,816 ================================
Certain long-term debt is collateralized by land, buildings and equipment having an aggregate depreciated cost at January 31, 1998 of $1.4 million. Norwest Bank South Dakota, N.A. (Norwest) provides the company's unsecured notes payable and unsecured line of credit. Two members of the company's board of directors are also on the board of directors of Norwest. The company had a $5.0 million unsecured line of credit available as of January 31, 1998; no borrowings were outstanding as of that date. Borrowings on the line bear interest at rates approximating the prime rate. The prime rates at January 31, 1998, 1997, and 1996 were 8.5%, 8.25%, and 8.5%, respectively. In fiscal 1997, there were no borrowings under the credit line. The weighted average interest rates under short-term credit lines in fiscal 1998 and 1996 were 8.5% and 8.9%, respectively. The company leases certain transportation and other equipment and facilities under operating leases. Total rent expense under these leases was $802,000, $445,000 and $483,000 in fiscal 1998, 1997 and 1996, respectively. NOTE 9...SHARE PURCHASE RIGHTS PLAN The company has a Share Purchase Rights Plan designed to protect the interests of its stockholders by preventing a potential acquiror from gaining control of the company without offering a fair price to all stockholders. Under the Plan, each stockholder has one Right for each share of the company's common stock owned. Each Right entitles the stockholder to purchase from the company one share of the company's common stock for a specified price. The Rights are not exercisable or transferable apart from the common stock until ten days after a person or group has acquired 20% or more, or makes a tender offer for 30% or more, of the company's outstanding common stock. The Rights expire in March 1999 and are redeemable by the company at $0.01 per Right prior to the date upon which they become exercisable, and in certain limited circumstances following such date. NOTE 10...STOCK OPTIONS Officers and key employees of the company have been granted options to purchase stock under the 1990 Stock Option Plan. The plan, administered by the Board of Directors, allows for a cash bonus when options are exercised and may grant either incentive stock options or non-qualified options with terms not to exceed ten years. The plan reserves RAVEN INDUSTRIES 1998 ANNUAL REPORT...32 NOTES TO FINANCIAL STATEMENTS 121,727 shares of the company's common stock at January 31, 1998. Options have been granted at prices not less than market value at the date of grant, vest over a four-year period and expire after five years. Compensation expense related to the cash bonus was $383,000, $343,000 and $298,000 in fiscal 1998, 1997, and 1996, respectively. In accordance with Statement of Financial Accounting Standards No. 123, the company has elected to continue to use the intrinsic value method to recognize compensation expense for stock options. 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:
for the years ended January 31 -------------------------------------------------------------------------- 1998 1997 1996 -------------------------------------------------------------------------- AS REPORTED PRO FORMA as reported pro forma as reported pro forma ======================================================================================================= Net income (in thousands) $ 8,062 $ 7,904 $ 7,688 $ 7,573 $ 6,197 $ 6,172 Net income per share: --basic .............. $ 1.66 $ 1.63 $ 1.62 $ 1.60 $ 1.31 $ 1.30 --diluted ............ $ 1.65 $ 1.61 $ 1.61 $ 1.59 $ 1.30 $ 1.29
The pro forma information above only includes stock options granted after fiscal 1995. Pro forma compensation expense under the fair value method may increase over the next few years as additional option grants are considered. 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 2.5-3.0%; expected volatility of 25%; risk-free interest rate of 5.8-5.9%; and expected lives of 4.5 years. The fair value of each option granted, including the cash bonus, was $7.30 in fiscal 1996, $8.75 in fiscal 1997 and $7.98 in fiscal 1998. Information regarding option activity follows:
for the years ended January 31 ---------------------------------------------------------------------------- 1998 1997 1996 ---------------------------------------------------------------------------- WEIGHTED weighted weighted AVERAGE average average EXERCISE exercise exercise SHARES PRICE shares price shares price ==================================================================================================================== Outstanding at beginning of year 287,750 $ 18.35 280,292 $ 16.50 247,581 $ 15.17 Granted ........................ 68,900 20.00 65,100 21.00 60,000 17.87 Exercised ...................... (55,650) 14.32 (55,642) 12.11 (27,289) 7.57 Forfeited ...................... (2,500) 19.30 (2,000) 18.51 ------- ------- ------- Outstanding at end of year ..... 298,500 19.47 287,750 18.35 280,292 16.50 ======= ======= ======= Options exercisable at year-end 138,775 $ 19.14 135,400 $ 17.05 134,329 $ 14.65
The following table contains information about stock options outstanding at January 31, 1998: remaining exercise contractual number number price life (years) outstanding exercisable ============================================================================= $ 20.00 0.75 51,700 51,700 18.25 1.75 56,500 42,375 17.87 2.75 57,400 28,700 21.00 3.75 64,000 16,000 20.00 4.75 68,900 -- -------------------------------- 298,500 138,775 ================================ RAVEN INDUSTRIES 1998 ANNUAL REPORT...33 NOTES TO FINANCIAL STATEMENTS NOTE 11...EMPLOYEE RETIREMENT PLAN The company has a profit sharing plan covering substantially all employees. Contributions to the profit sharing plan, 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 contribution to the plan was $1,255,000, $1,654,000, $1,324,000, for fiscal 1998, 1997 and 1996, respectively. NOTE 12...INCOME TAXES Significant components of the company's income tax provision are as follows: for the years ended January 31 - -------------------------------------------------------------------------------- (dollars in thousands) 1998 1997 1996 ================================================================================ Income taxes Currently payable ......................... $ 4,312 $ 4,741 $ 3,572 Deferred .................................. 166 (514) (203) ------------------------------ $ 4,478 $ 4,227 $ 3,369 ============================== Significant components of the company's deferred tax assets and liabilities are as follows: as of January 31 ------------------------------ (dollars in thousands) 1998 1997 1996 ================================================================================ Current deferred tax assets (liabilities): Accounts receivable ....................... $ (137) $ 119 $ 119 Installment sale of investment in affiliate (365) Inventory valuation methods ............... 335 256 107 Accrued vacations ......................... 513 478 429 Insurance obligations ..................... 779 718 491 Other accrued liabilities ................. 561 493 433 ------------------------------ Total ................................. 1,686 2,064 1,579 ------------------------------ Non-current deferred tax assets (liabilities): Installment sale of investment in affiliate (510) Carrying value of investment in affiliate . (626) (622) Depreciation methods ...................... (14) (76) (83) Safe-harbor lease ......................... (34) (110) ------------------------------ Total ................................. (524) (736) (815) ------------------------------ Net deferred tax asset ........................ $ 1,162 $ 1,328 $ 764 ============================== The company's effective tax rate was 35.7%, 35.5%, and 35.2%, in fiscal 1998, 1997, and 1996, 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. RAVEN INDUSTRIES 1998 ANNUAL REPORT...34 NOTES TO FINANCIAL STATEMENTS NOTE 13...NET INCOME PER SHARE COMPUTATION Basic net income per share is computed by dividing net income by 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 weighted average common and common equivalent shares outstanding, which includes the dilutive effect of shares issuable upon exercise of employee stock options (net of shares assumed purchased with the option proceeds). Details of the computation are presented below:
for the years ended January 31 -------------------------------------- (dollars in thousands, except per-share data) 1998 1997 1996 ================================================================================================= Net income ............................................ $ 8,062 $ 7,688 $ 6,197 ====================================== Average common shares outstanding ..................... 4,842,622 4,738,511 4,735,223 Dilutive impact of stock options ...................... 48,778 36,649 46,962 -------------------------------------- Average common and common equivalent shares outstanding 4,891,400 4,775,160 4,782,185 ====================================== Net income per share: --basic ............................................ $ 1.66 $ 1.62 $ 1.31 ====================================== --diluted .......................................... $ 1.65 $ 1.61 $ 1.30 ======================================
RAVEN INDUSTRIES 1998 ANNUAL REPORT...35 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF RAVEN INDUSTRIES, INC. We have audited the accompanying consolidated balance sheets of Raven Industries, Inc. and subsidiaries as of January 31, 1998, 1997, and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended January 31,1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Raven Industries, Inc. and subsidiaries as of January 31, 1998, 1997, and 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 31, 1998, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. Minneapolis, Minnesota March 6, 1998 RAVEN INDUSTRIES 1998 ANNUAL REPORT...36 EX-21 3 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT ---------- Name of Subsidiary State of Incorporation ------------------ ---------------------- Aerostar International, Inc. South Dakota Beta Raven Inc. Missouri Glasstite, Inc. Minnesota EX-23 4 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------- We consent to the incorporation by reference in the Registration Statement of Raven Industries, Inc. on Form S-8 (Registration No. 33-38614) of our reports dated March 6, 1998, on our audits of the consolidated financial statements and financial statement schedule of Raven Industries, Inc. as of January 31, 1998, 1997 and 1996, and for the years ended January 31, 1998, 1997 and 1996, which reports are included or incorporated by reference in this Form 10-K. COOPERS & LYBRAND L.L.P. Minneapolis, Minnesota April 24, 1998 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS JAN-31-1998 JAN-31-1998 2,850 0 27,363 390 25,816 57,831 53,805 33,988 82,590 19,375 1,128 0 0 5,211 56,352 82,590 149,619 149,619 124,690 124,690 0 0 323 12,540 4,478 8,062 0 0 0 8,062 1.66 1.65
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