SIOUX FALLS, S.D. — Raven Industries (NASDAQ:RAVN) reported financial results for the fourth quarter that ended Jan. 31, 2017.

Noteworthy Items

  • Consolidated sales increased 30% year-over-year, driven by strength in both Applied Technology and Engineered Films
  • Consolidated operating income increased nearly $6 million, from $0.6 million in the fourth quarter of last year to $6.3 million in this year's fourth quarter, on significant operating leverage
  • Both Applied Technology, which includes the company’s agricultural products, and Engineered Films achieved sales growth of more than 35% in the fourth quarter and drove a nearly three-fold increase in division profit, doubling division operating margin year-over-year
  • Consolidated selling, general, and administrative expenses increased $1.9 million year-over-year, driven by higher incentive compensation accruals and expenses associated with the restatement process and remediation efforts
  • Net working capital, as a percentage of annualized net sales, decreased 900 basis points year-over-year, driven primarily by actions to reduce inventory and improve days payable outstanding
  • Cashflow continued to improve, with cashflow from operations increasing $1.1 million vs. the fourth quarter of last year

Fourth Quarter Results                                   

Net sales for the fourth quarter of fiscal 2017 were $68.9 million, up 30.5% vs. the fourth quarter of fiscal 2016. Applied Technology and Engineered Films both achieved significant growth year-over-year in the fourth quarter, increasing sales 40.4% and 35.8%, respectively. Aerostar fourth quarter sales declined 2.5% vs. the prior year.

Operating income for the fourth quarter of fiscal 2017 was $6.3 million vs. operating income of $0.6 million in the fourth quarter of fiscal 2016. Improved sales volume resulted in strong operating leverage and drove the significant increase in operating income year-over-year. Correspondingly, operating margin exhibited a noteworthy improvement, increasing from 1.1% in the fourth quarter of last year to 9.1% in this year's fourth quarter.  

Net income for the fourth quarter of fiscal 2017 was $4.4 million, or $0.12 per diluted share, vs. net income of $1.9 million, or $0.05 per diluted share, in last year's fourth quarter. The increase in earnings per share was driven primarily by the improved operating performance in both Applied Technology and Engineered Films.

Applied Technology Division Fourth Quarter Results

Net sales for Applied Technology in the fourth quarter of fiscal 2017 were $25.9 million, up 40.4% vs. the fourth quarter of fiscal 2016. Geographically, domestic sales were up 44% year-over-year and international sales were up 29.8% year-over-year. Consistent with the third quarter of fiscal 2017, sales growth for the division was driven by new product sales, expanded OEM relationships, and higher sales of direct injection systems.

Division operating income was $6.4 million, up 184.3% vs. the fourth quarter of fiscal 2016. The increase in operating income was driven primarily by increased operating leverage due to higher sales volume vs. the previous year. Operating margin for the division increased from 12.1% in the fourth quarter of the prior year to 24.6% in the fourth quarter of this year. The increase in operating margin was driven by strong incremental margins on improved sales.

Fiscal 2018 Outlook

"We are very pleased with the progress made and performance achieved throughout fiscal year 2017," said Dan Rykhus, President and CEO. "Both Applied Technology and Engineered Films continue to drive improved sales and profitability and Aerostar returned to profitability following several quarters of operating losses."

"For Applied Technology the ag market is expected to remain weak, but we will focus on capitalizing on our new products and strong relationships to drive additional market share gains. In addition, our direct injection system, which is industry leading technology, is poised for growth in fiscal year 2018. Rapid adoption of more complex spraying practices is leading to a significant increase in demand for this existing technology.