Raven's cash needs are seasonal, with working capital demands strongest in the
first quarter. As a result, the discussion of trends in operating cash flows
focuses on the primary drivers of year-over-year variability in working capital.
Cash and cash equivalents totaled $55.7 million at July 31, 2013, an increase of
$6.3 million from $49.4 million at January 31, 2013. The comparable balance one
year earlier was $44.1 million.
Raven has an uncollateralized credit agreement that provides a $10.5 million
line of credit and expires November 30, 2013. There is no outstanding balance
under the line of credit at July 31, 2013. The line of credit is reduced by
outstanding letters of credit totaling $0.9 million as of July 31, 2013.
Operating cash flows result primarily from cash received from customers, which
is offset by cash payments for inventories, services, employee compensation and
income taxes. Management evaluates working capital levels through the
computation of average days sales outstanding and inventory turnover. Average
days sales outstanding is a measure of the Company's efficiency in enforcing its
credit policy. The inventory turnover ratio is a metric used to evaluate the
effectiveness of inventory management, with further consideration given to
balancing the disadvantages of excess inventory with the risk of delayed
Cash provided by operating activities was $29.7 million for the first six months
of fiscal 2014 compared with $44.5 million in the first six months of fiscal
2013. The decrease in operating cash flows is the result of lower company
earnings, less cash generated by the change in accounts receivable balances and
an increase in cash consumed by inventory changes. These decreases were
partially offset by cash generated by the change in operating liabilities,
primarily driven by accounts payable.
Changes in inventory and accounts receivable consumed $1.2 million of cash in
the first six months of fiscal 2014 compared to generating $15.2 million one
year ago. The Company's inventory turnover rate declined slightly from the prior
year despite the higher raw materials inventory levels (trailing 12-month
inventory turn of 5.2X in fiscal 2014 versus 5.3X in fiscal 2013). Cash
collections continue to be efficient despite the increase in trailing 12 months
days sales outstanding of 51 days at July 31, 2013 compared to 48 days at
July 31, 2012.
Cash used in investing activities totaled $14.3 million in the first six months
of fiscal 2014 compared to $16.8 million in the first six months of fiscal 2013.
Year-to-date capital spending consisted primarily of expenditures to expand
Engineered Films' manufacturing capacity, facility expansion for Aerostar and
renovation of the Company's headquarters.
The Company continued its commitment to investment in its business for long-term
growth. In addition, management will evaluate strategic acquisitions that result
in expanded capabilities and solidify competitive advantages. Management
anticipates fiscal 2014 capital spending of approximately $30 million.