##### 



EXHIBIT 13 Business Profile Founded in 1956, Raven today is an industrial manufacturer with four operating units. The company has divested
lower-performing assets, simplified its product bases, and enhanced profitability (cash return on invested
capital) and shareholder valuea strategy of Improve, innovate, grow. Operating Unit Products
Markets Competitive Strengths Flow Controls c Computerized control c Agriculture
OEMs and c Market leader for hardware and software for sprayer manufacturers ag
sprayer controls precision farmingc Marine navigation c Strong brand recognition
c Leading developer of and distribution network GPS-based control c New
Precision Solutions(TM) systems product line c Precision application of
pesticides, fertilizer and road de-icers Engineered Films c Rugged reinforced
plastic c Manufactured housing c Vertically integrated sheeting and RVs
manufacturing capabilities cTemporary grain covers for c Broad product line
agriculture c Superior target marketing cTemporary building c High productivity
and low-construction enclosures cost structure cPond lining and containment for
oil exploration c High-altitude research c NASA c Sole source in US for balloons
c Universities scientific balloons c Worldwide reputation for leadership
Electronic Systems c Electronics Manufacturing c Primarily industrial OEMs c
Advanced manufacturing, Services (EMS) in North America technology cFortune 500
companies c Full-service provider, from that contract their low-engineering and
volume, high-mix manufacturing to customer production service c ISO 9001
Aerostar c Military cargo parachutes c US military, homelandc Reputation for
innovation c Government service defense and foreign and quality uniforms
governments c Best technology c Custom-shaped inflatables c Promotional and
advertising markets, including Disney and Macys (RAVEN 2004 ANNUAL REPORT TABLE) RAVEN 2004 Annual
Report  page 1




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##### 



Eleven-Year Financial Summary For the years ended January 31,Dollars in thousands, except per-share data
    
    2004
    
    2003
    
    2002OPERATIONS FOR THE YEARNet salesOngoing operations
    
    $
    142,727
    
    
    $
    119,589
    
    
    $
    112,018Sold businesses(a)
    
    
    
    
    
    
    1,314
    
    
    
    6,497Total
    
    
    142,727
    
    
    
    120,903
    
    
    
    118,515Gross profit
    
    
    33,759
    
    
    
    27,515
    
    
    
    23,851Operating incomeOngoing operations
    
    
    21,981
    
    
    
    16,861
    
    
    
    13,788Sold businesses(a)
    
    
    (355
    )
    
    
    204
    
    
    
    (613
    )Total
    
    
    21,626
    
    
    
    17,065
    
    
    
    13,175Income before income taxes
    
    
    21,716
    
    
    
    17,254
    
    
    
    13,565Net income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Net income % of sales
    
    
    9.7
    %
    
    
    9.3
    %
    
    
    7.5
    %Net income % of beginning equity
    
    
    23.8
    %
    
    
    21.5
    %
    
    
    18.4
    %Cash dividends
    
    $
    3,075
    
    
    $
    2,563
    
    
    $
    2,371FINANCIAL POSITIONCurrent assets
    
    $
    55,710
    
    
    $
    49,351
    
    
    $
    45,308Current liabilities
    
    
    11,895
    
    
    
    13,167
    
    
    
    13,810Working capital
    
    $
    43,815
    
    
    $
    36,184
    
    
    $
    31,498Current ratio
    
    
    4.68
    
    
    
    3.75
    
    
    
    3.28Property, plant and equipment
    
    $
    15,950
    
    
    $
    16,455
    
    
    $
    14,059Total assets
    
    
    79,508
    
    
    
    72,816
    
    
    
    67,836Long-term debt, less current portion
    
    
    57
    
    
    
    151
    
    
    
    280Shareholders equity
    
    $
    66,471
    
    
    $
    58,236
    
    
    $
    52,032Long-term debt / total capitalization
    
    
    0.1
    %
    
    
    0.3
    %
    
    
    0.5
    %Inventory turnover (CGS / year-end
inventory)
    
    
    6.5
    
    
    
    4.4
    
    
    
    5.0CASH FLOWS PROVIDED BY (USED IN)Operating activities
    
    $
    19,732
    
    
    $
    12,735
    
    
    $
    18,496Investing activities
    
    
    (4,352
    )
    
    
    (9,166
    )
    
    
    (13,152
    )Financing activities
    
    
    (6,155
    )
    
    
    (5,830
    )
    
    
    (8,539
    )Increase (decrease) in cash
    
    
    9,225
    
    
    
    (2,261
    )
    
    
    (3,195
    )COMMON STOCK DATANet income per-share  basic
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95Net income per-share  diluted
    
    
    1.50
    
    
    
    1.20
    
    
    
    0.93Cash dividends per-share
    
    
    0.34
    
    
    
    0.28
    
    
    
    0.25Book value per-share
    
    
    7.37
    
    
    
    6.42
    
    
    
    5.65Stock price range during yearHigh
    
    $
    30.45
    
    
    $
    18.40
    
    
    $
    11.75Low
    
    
    15.12
    
    
    
    8.75
    
    
    
    6.04Close
    
    $
    28.21
    
    
    $
    15.81
    
    
    $
    11.28Shares outstanding, year-end (in
thousands)
    
    
    9,021
    
    
    
    9,066
    
    
    
    9,212Number of shareholders, year-end
    
    
    3,560
    
    
    
    2,781
    
    
    
    2,387OTHER DATAPrice / earnings ratio
    
    
    18.8
    
    
    
    13.2
    
    
    
    12.1Average number of employees
    
    
    770
    
    
    
    758
    
    
    
    838Sales per employee
    
    $
    185
    
    
    $
    160
    
    
    $
    141Backlog
    
    $
    47,120
    
    
    $
    42,826
    
    
    $
    33,834
 All per-share, shares outstanding and market price data reflect the January
2003 two-for-one stock split and the July 2001 three-for-two stock split. All
other figures are as reported. Price / earnings ratio is determined as closing stock price divided by net
income per share-diluted.  (a)
    
    During the second quarter of fiscal 2003, the company sold its Beta Raven
Industrial Controls Division. In fiscal 2001, 2000 and 1996, the company sold
its Plastic Tank, Glasstite and Astoria businesses, respectively.(b)
    
    Includes $2.6 million of business repositioning charges, net of gains on
plant sales, primarily in Electronic Systems Division and Aerostar. page 14 RAVEN2004 Annual Report




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##### 



For the years ended January 31,2001(g)
    
    2000(g)
    
    1999(g)
    
    1998(g)
    
    1997(g)
    
    1996(g)
    
    1995(g)
    
    1994(g)$
    113,360
    
    
    $
    107,862
    
    
    $
    108,408
    
    
    $
    104,489
    
    
    $
    101,869
    
    
    $
    84,379
    
    
    $
    87,458
    
    
    $
    88,60819,498
    
    
    
    42,523
    
    
    
    46,798
    
    
    
    47,679
    
    
    
    39,576
    
    
    
    38,010
    
    
    
    35,889
    
    
    
    34,279132,858
    
    
    
    150,385
    
    
    
    155,206
    
    
    
    152,168
    
    
    
    141,445
    
    
    
    122,389
    
    
    
    123,347
    
    
    
    122,88721,123
    
    
    
    24,217
    
    
    
    24,441
    
    
    
    24,929
    
    
    
    25,287
    
    
    
    22,660
    
    
    
    23,968
    
    
    
    23,5747,417
    (b)
    
    
    7,971
    
    
    
    8,220
    
    
    
    9,555
    
    
    
    9,321
    
    
    
    7,692
    
    
    
    10,470
    
    
    
    8,0543,331
    (c)
    
    
    2,606
    (d)
    
    
    1,453
    
    
    
    1,007
    
    
    
    2,650
    
    
    
    1,869
    
    
    
    466
    (f)
    
    
    2,38610,748
    
    
    
    10,577
    
    
    
    9,673
    
    
    
    10,562
    
    
    
    11,971
    
    
    
    9,561
    
    
    
    10,936
    
    
    
    10,44010,924
    
    
    
    10,503
    
    
    
    9,649
    
    
    
    12,540
    (e)
    
    
    11,915
    
    
    
    9,566
    
    
    
    9,372
    
    
    
    10,638$
    6,411
    (b)(c)
    
    $
    6,762
    (d)
    
    $
    6,182
    
    
    $
    8,062
    
    
    $
    7,688
    
    
    $
    6,197
    
    
    $
    6,088
    (f)
    
    $
    6,9544.8
    %
    
    
    4.5
    %
    
    
    4.0
    %
    
    
    5.3
    %
    
    
    5.4
    %
    
    
    5.1
    %
    
    
    4.9
    %
    
    
    5.7
    %11.8
    %
    
    
    10.9
    %
    
    
    10.0
    %
    
    
    14.2
    %
    
    
    15.6
    %
    
    
    13.6
    %
    
    
    14.8
    %
    
    
    19.6
    %$
    2,399
    
    
    $
    2,895
    
    
    $
    2,944
    
    
    $
    2,709
    
    
    $
    2,367
    
    
    $
    2,130
    
    
    $
    1,843
    
    
    $
    1,545$
    51,817
    
    
    $
    55,371
    
    
    $
    60,279
    
    
    $
    57,285
    
    
    $
    56,696
    
    
    $
    45,695
    
    
    $
    43,795
    
    
    $
    45,03713,935
    
    
    
    14,702
    
    
    
    15,128
    
    
    
    17,816
    
    
    
    20,016
    
    
    
    14,771
    
    
    
    15,078
    
    
    
    16,088$
    37,882
    
    
    $
    40,669
    
    
    $
    45,151
    
    
    $
    39,469
    
    
    $
    36,680
    
    
    $
    30,924
    
    
    $
    28,717
    
    
    $
    28,9493.72
    
    
    
    3.77
    
    
    
    3.98
    
    
    
    3.22
    
    
    
    2.83
    
    
    
    3.09
    
    
    
    2.90
    
    
    
    2.80$
    11,647
    
    
    $
    15,068
    
    
    $
    19,563
    
    
    $
    19,817
    
    
    $
    18,142
    
    
    $
    18,069
    
    
    $
    18,570
    
    
    $
    13,37165,656
    
    
    
    74,047
    
    
    
    83,657
    
    
    
    82,066
    
    
    
    80,662
    
    
    
    67,553
    
    
    
    65,636
    
    
    
    60,5972,013
    
    
    
    3,024
    
    
    
    4,572
    
    
    
    1,128
    
    
    
    3,181
    
    
    
    2,816
    
    
    
    4,179
    
    
    
    2,539$
    47,989
    
    
    $
    54,519
    
    
    $
    62,293
    
    
    $
    61,563
    
    
    $
    56,729
    
    
    $
    49,151
    
    
    $
    45,526
    
    
    $
    41,1004.0
    %
    
    
    5.3
    %
    
    
    6.8
    %
    
    
    1.8
    %
    
    
    5.3
    %
    
    
    5.4
    %
    
    
    8.4
    %
    
    
    5.8
    %5.9
    
    
    
    5.2
    
    
    
    4.9
    
    
    
    4.8
    
    
    
    4.5
    
    
    
    4.1
    
    
    
    4.4
    
    
    
    4.4$
    9,441
    
    
    $
    10,375
    
    
    $
    8,326
    
    
    $
    9,274
    
    
    $
    7,088
    
    
    $
    9,687
    
    
    $
    7,452
    
    
    $
    11,2579,752
    
    
    
    6,323
    
    
    
    (3,127
    )
    
    
    (4,979
    )
    
    
    (5,090
    )
    
    
    (4,158
    )
    
    
    (10,000
    )
    
    
    (5,908
    )(14,227
    )
    
    
    (16,326
    )
    
    
    (2,714
    )
    
    
    (4,884
    )
    
    
    (2,363
    )
    
    
    (4,029
    )
    
    
    406
    
    
    
    (2,042
    )4,966
    
    
    
    372
    
    
    
    2,485
    
    
    
    (589
    )
    
    
    (365
    )
    
    
    1,500
    
    
    
    (2,142
    )
    
    
    3,307$
    0.62
    
    
    $
    0.52
    
    
    $
    0.43
    
    
    $
    0.55
    
    
    $
    0.54
    
    
    $
    0.44
    
    
    $
    0.43
    
    
    $
    0.490.62
    
    
    
    0.52
    
    
    
    0.43
    
    
    
    0.55
    
    
    
    0.54
    
    
    
    0.43
    
    
    
    0.42
    
    
    
    0.480.23
    
    
    
    0.22
    
    
    
    0.21
    
    
    
    0.19
    
    
    
    0.17
    
    
    
    0.15
    
    
    
    0.13
    
    
    
    0.115.06
    
    
    
    4.64
    
    
    
    4.42
    
    
    
    4.25
    
    
    
    3.91
    
    
    
    3.47
    
    
    
    3.20
    
    
    
    2.92$
    6.95
    
    
    $
    6.08
    
    
    $
    7.58
    
    
    $
    8.58
    
    
    $
    7.83
    
    
    $
    6.92
    
    
    $
    8.17
    
    
    $
    7.833.75
    
    
    
    4.50
    
    
    
    5.08
    
    
    
    6.54
    
    
    
    5.33
    
    
    
    5.17
    
    
    
    6.00
    
    
    
    6.00$
    6.08
    
    
    $
    4.79
    
    
    $
    5.33
    
    
    $
    7.54
    
    
    $
    7.50
    
    
    $
    6.42
    
    
    $
    6.25
    
    
    $
    6.679,478
    
    
    
    11,748
    
    
    
    14,082
    
    
    
    14,472
    
    
    
    14,508
    
    
    
    14,148
    
    
    
    14,205
    
    
    
    14,0822,460
    
    
    
    2,749
    
    
    
    3,014
    
    
    
    3,221
    
    
    
    3,011
    
    
    
    3,190
    
    
    
    3,031
    
    
    
    3,1739.8
    
    
    
    9.2
    
    
    
    12.4
    
    
    
    13.7
    
    
    
    13.9
    
    
    
    14.9
    
    
    
    14.9
    
    
    
    13.91,043
    
    
    
    1,320
    
    
    
    1,445
    
    
    
    1,511
    
    
    
    1,387
    
    
    
    1,368
    
    
    
    1,414
    
    
    
    1,435$
    127
    
    
    $
    114
    
    
    $
    107
    
    
    $
    101
    
    
    $
    102
    
    
    $
    89
    
    
    $
    87
    
    
    $
    86$
    38,239
    
    
    $
    44,935
    
    
    $
    47,431
    
    
    $
    47,154
    
    
    $
    38,102
    
    
    $
    32,539
    
    
    $
    29,661
    
    
    $
    36,403
  (c)
    
    Includes the $3.1 million pretax gain ($1.4 million net of
tax) on the sale of the companys Plastic Tank Division.(d)
    
    Includes the $1.2 million pretax gain ($764,000 net of tax) on
the sale of assets of the companys Glasstite subsidiary.(e)
    
    Includes the $1.8 million pretax gain ($1.2 million net of tax)
on sale of an investment in an affiliate.(f)
    
    Includes $1.8 million of business repositioning charges at the companys
Beta Raven Industrial Controls Division.(g)
    
    Amounts for these years are unaudited. RAVEN2004 Annual Report page 15




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##### 



Business Segments For the years ended January 31Dollars in thousands
    
    2004
    
    2003
    
    2002
    
    2001(i)
    
    2000(i)
    
    1999(i)FLOW CONTROLS DIVISIONSales
    
    $
    35,059
    
    
    $
    28,496
    
    
    $
    23,178
    
    
    $
    16,758
    
    
    $
    13,520
    
    
    $
    15,311Operating income
    
    
    8,254
    
    
    
    6,897
    
    
    
    5,509
    (b)
    
    
    3,985
    
    
    
    2,873
    
    
    
    2,810Assets
    
    
    19,304
    
    
    
    21,483
    
    
    
    20,313
    
    
    
    9,578
    
    
    
    7,096
    
    
    
    8,553Capital expenditures
    
    
    341
    
    
    
    729
    
    
    
    677
    
    
    
    327
    
    
    
    202
    
    
    
    501Depreciation & amortization
    
    
    1,004
    
    
    
    948
    
    
    
    443
    
    
    
    353
    
    
    
    351
    
    
    
    329ENGINEERED FILMS DIVISIONSales
    
    $
    46,408
    
    
    $
    39,975
    
    
    $
    40,280
    
    
    $
    40,004
    
    
    $
    35,889
    
    
    $
    32,514Operating income
    
    
    11,701
    
    
    
    11,447
    
    
    
    9,886
    
    
    
    8,810
    
    
    
    7,464
    
    
    
    5,836Assets
    
    
    18,108
    
    
    
    18,507
    
    
    
    14,847
    
    
    
    13,031
    
    
    
    13,472
    
    
    
    13,177Capital expenditures
    
    
    1,707
    
    
    
    4,111
    
    
    
    3,182
    
    
    
    674
    
    
    
    792
    
    
    
    566Depreciation & amortization
    
    
    1,664
    
    
    
    1,495
    
    
    
    1,085
    
    
    
    1,033
    
    
    
    1,075
    
    
    
    1,136ELECTRONIC SYSTEMS DIVISIONSales
    
    $
    44,307
    
    
    $
    38,589
    
    
    $
    32,289
    
    
    $
    32,039
    
    
    $
    30,176
    
    
    $
    24,958Operating income (loss)
    
    
    5,797
    
    
    
    4,022
    
    
    
    2,264
    
    
    
    (542
    )(d)
    
    
    1,632
    
    
    
    2,322Assets
    
    
    14,975
    
    
    
    14,528
    
    
    
    13,910
    
    
    
    15,359
    
    
    
    18,846
    
    
    
    15,591Capital expenditures
    
    
    841
    
    
    
    395
    
    
    
    774
    
    
    
    1,492
    
    
    
    1,168
    
    
    
    1,399Depreciation & amortization
    
    
    850
    
    
    
    978
    
    
    
    1,101
    
    
    
    1,089
    
    
    
    1,032
    
    
    
    959AEROSTARSales
    
    $
    16,953
    
    
    $
    12,529
    
    
    $
    16,271
    
    
    $
    24,559
    
    
    $
    28,277
    
    
    $
    35,625Operating income (loss)
    
    
    1,954
    (a)
    
    
    (405
    )
    
    
    1,278
    (c)
    
    
    1,583
    
    
    
    2,092
    
    
    
    2,724Assets
    
    
    5,589
    
    
    
    5,769
    
    
    
    5,994
    
    
    
    7,361
    
    
    
    11,307
    
    
    
    14,446Capital expenditures
    
    
    135
    
    
    
    539
    
    
    
    252
    
    
    
    122
    
    
    
    117
    
    
    
    308Depreciation & amortization
    
    
    383
    
    
    
    354
    
    
    
    263
    
    
    
    280
    
    
    
    372
    
    
    
    464SOLD BUSINESSES(g)Sales
    
    $
    
    
    
    $
    1,314
    
    
    $
    6,497
    
    
    $
    19,498
    
    
    $
    42,523
    
    
    $
    46,798Operating income (loss)
    
    
    (355
    )
    
    
    204
    
    
    
    (613
    )
    
    
    3,331
    (e)
    
    
    2,606
    (f)
    
    
    1,453Assets
    
    
    
    
    
    
    
    
    
    
    1,102
    
    
    
    4,805
    
    
    
    13,475
    
    
    
    22,048Capital expenditures
    
    
    
    
    
    
    7
    
    
    
    52
    
    
    
    246
    
    
    
    1,172
    
    
    
    1,585Depreciation & amortization
    
    
    
    
    
    
    20
    
    
    
    76
    
    
    
    718
    
    
    
    1,831
    
    
    
    2,004REPORTABLE SEGMENTS TOTALSales
    
    $
    142,727
    
    
    $
    120,903
    
    
    $
    118,515
    
    
    $
    132,858
    
    
    $
    150,385
    
    
    $
    155,206Operating income
    
    
    27,351
    (a)
    
    
    22,165
    
    
    
    18,324
    (b,c )
    
    
    17,167
    (d,e)
    
    
    16,667
    (f)
    
    
    15,145Assets
    
    
    57,976
    
    
    
    60,287
    
    
    
    56,166
    
    
    
    50,134
    
    
    
    64,196
    
    
    
    73,815Capital expenditures
    
    
    3,024
    
    
    
    5,781
    
    
    
    4,937
    
    
    
    2,861
    
    
    
    3,451
    
    
    
    4,359Depreciation & amortization
    
    
    3,901
    
    
    
    3,795
    
    
    
    2,968
    
    
    
    3,473
    
    
    
    4,661
    
    
    
    4,892CORPORATE & OTHER(h)Operating (loss)
    
    $
    (5,725
    )
    
    $
    (5,100
    )
    
    $
    (5,149
    )
    
    $
    (6,419
    )
    
    $
    (6,090
    )
    
    $
    (5,472
    )Assets
    
    
    21,532
    
    
    
    12,529
    
    
    
    11,670
    
    
    
    15,522
    
    
    
    9,851
    
    
    
    9,842Capital expenditures
    
    
    306
    
    
    
    252
    
    
    
    157
    
    
    
    229
    
    
    
    188
    
    
    
    247Depreciation & amortization
    
    
    244
    
    
    
    171
    
    
    
    177
    
    
    
    194
    
    
    
    223
    
    
    
    241TOTAL COMPANYSales
    
    $
    142,727
    
    
    $
    120,903
    
    
    $
    118,515
    
    
    $
    132,858
    
    
    $
    150,385
    
    
    $
    155,206Operating income
    
    
    21,626
    (a)
    
    
    17,065
    
    
    
    13,175
    (b,c)
    
    
    10,748
    (b,c)
    
    
    10,577
    (f)
    
    
    9,673Assets
    
    
    79,508
    
    
    
    72,816
    
    
    
    67,836
    
    
    
    65,656
    
    
    
    74,047
    
    
    
    83,657Capital expenditures
    
    
    3,330
    
    
    
    6,033
    
    
    
    5,094
    
    
    
    3,090
    
    
    
    3,639
    
    
    
    4,606Depreciation & amortization
    
    
    4,145
    
    
    
    3,966
    
    
    
    3,145
    
    
    
    3,667
    
    
    
    4,884
    
    
    
    5,133
  (a)
    
    Includes $182,000 of pretax gain on plant sale.(b)
    
    Includes a $550,000 in-process research and development
charge, related to the Starlink acquisition.(c)
    
    Includes $414,000 of pretax gains on plant sales.(d)
    
    Includes $1.8 million of business repositioning charges in the
Electronic Systems Division and $2.6 million for the total company.(e)
    
    Includes a $3.1 million pretax gain on the sale of the companys
Plastic Tank Division.(f)
    
    Includes a $1.2 million pretax gain on the sale of the companys Glasstite
business.(g)
    
    Operating income for sold businesses includes administrative expenses
directly attributable to the sold businesses.(h)
    
    Operating loss consists of administrative expenses  assets are
principally cash, investments, deferred taxes and notes receivable.(i)
    
    Amounts for 2001, 2000 and 1999 are unaudited. page 16 RAVEN2004 Annual Report




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##### 



Financial Review and
Analysis RESULTS OF OPERATIONS The following table presents comparative financial performance for the past
three years: For the years ended January 312004
    
    2003
    
    2002%
    
    %
    
    
    
    
    
    %
    
    %
    
    
    
    
    
    %
    
    %Dollars in thousands, except per-share data
    
    
    
    Sales
    
    Change
    
    
    
    Sales
    
    Change
    
    
    
    Sales
    
    ChangeNet sales
    
    $
    142,727
    
    
    
    100.0
    
    
    
    +18.1
    
    
    $
    120,903
    
    
    
    100.0
    
    
    
    + 2.0
    
    
    $

    118,515
    
    
    
    100.0
    
    
    
    10.8Gross profit
    
    
    33,759
    
    
    
    23.7
    
    
    
    +22.7
    
    
    
    27,515
    
    
    
    22.8
    
    
    
    +15.4
    
    
    
    23,851
    
    
    
    20.1
    
    
    
    +12.9Operating expenses
    
    
    11,960
    
    
    
    8.4
    
    
    
    +12.5
    
    
    
    10,629
    
    
    
    8.8
    
    
    
     3.7
    
    
    
    11,043
    
    
    
    9.3
    
    
    
    20.5Loss (gain) on sale of businesses and assets
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    (179
    )
    
    
    
    
    
    
    
    
    
    
    (367
    )Operating income
    
    
    21,626
    
    
    
    15.2
    
    
    
    +26.7
    
    
    
    17,065
    
    
    
    14.1
    
    
    
    +29.5
    
    
    
    13,175
    
    
    
    11.1
    
    
    
    +22.6Income before income taxes
    
    
    21,716
    
    
    
    15.2
    
    
    
    +25.9
    
    
    
    17,254
    
    
    
    14.3
    
    
    
    +27.2
    
    
    
    13,565
    
    
    
    11.4
    
    
    
    +24.2Income taxes
    
    
    7,880
    
    
    
    5.5
    
    
    
    +29.8
    
    
    
    6,069
    
    
    
    5.0
    
    
    
    +28.6
    
    
    
    4,718
    
    
    
    4.0
    
    
    
    + 4.5Net income
    
    $
    13,836
    
    
    
    9.7
    
    
    
    +23.7
    
    
    $
    11,185
    
    
    
    9.3
    
    
    
    +26.4
    
    
    $
    8,847
    
    
    
    7.5
    
    
    
    +38.0Net income per-share  diluted
    
    $
    1.50
    
    
    
    
    
    
    
    +25.0
    
    
    $
    1.20
    
    
    
    
    
    
    
    +29.0
    
    
    $
    0.93
    
    
    
    
    
    
    
    +50.0Effective income tax rate
    
    
    36.3
    %
    
    
    
    
    
    
    + 3.1
    
    
    
    35.2
    %
    
    
    
    
    
    
    + 1.1
    
    
    
    34.8
    %
    
    
    
    
    
    
    15.8
 EXECUTIVE SUMMARY Consolidated Operating Results Company performance reached new highs in fiscal 2004,
surpassing fiscal 2003s record-setting results with
$13.8 million in net income and $1.50 of earnings per
diluted share. This represents growth in net income
and diluted earnings per share of $2.6 million and

$0.30, respectively. All the divisions performed
better than the prior fiscal year, both at the sales
and operating income levels. Sales increased as a
result of new product introductions and market share
gains. Results for fiscal 2003 were also a record,
with net income increasing $2.3 million, to $11.2
million, or $1.20 per diluted share. During fiscal 2004, the board of directors elected to
increase dividends twice, from 7 cents per share to 8
cents effective for the first- and second-quarter
payments, and to 9 cents in August for the third and
fourth quarters. On March 9, 2004, the quarterly
dividend was increased again, to 11 cents per share,
helping to meet the 30% dividend payout target the
company had previously set. A special dividend of
$1.25 per share was also declared, payable in May
2004, which will total approximately $11 million. In
fiscal 2003, the company split the stock two-for-one,
and increased dividends from 6.5 cents to 7.0 cents
per share. Capital expenditures totaled over $3.0
million for fiscal 2004, after spending $6.0 million
in fiscal 2003, principally for construction of an
extrusion line and additional warehouse space for the
Engineered Films segment. Fiscal 2005 capital
expenditures are anticipated to exceed $10 million,
with over half of that directed towards new extrusion
technology and warehouse capacity for Engineered
Films. Management has planned for fiscal 2005 to be another
year of double-digit sales and profit growth, with
earnings for the first half relatively flat. The flat
earnings are anticipated because the Flow Controls
segment will not see a repeat of the special
chemical-injection systems sale that totaled $6.0
million in the first half of fiscal 2004. The following discussion highlights the consolidated
operating results. Results at the divisional and
subsidiary level are more fully explained in the
segment discussions that follow. In addition, the
company has undertaken divestitures and repositioning
activities in the past three fiscal years which are
more fully explained under Divestitures and
Repositioning Activities. Fiscal 2004 versus fiscal 2003 The companys net sales of $142.7 million topped
fiscal 2003 net sales of $120.9 million by $21.8
million. This 18.1% increase is a result of all the
divisions achieving sales growth over fiscal 2003.
Operating income grew 26.7% to $21.6 million as a
result of increased gross profits in all the
divisions. Flow Controls boasted a $6.6 million sales
increase to $35.1 million on increased special-order
chemical injection system sales and new product sales
and its operating income reached $8.3 million.
Engineered Films sales of $46.4 million were up 16.1%
over fiscal 2003, but material pricing pressures kept
operating income relatively flat at $11.7 million.
Electronic Systems increased sales 14.8% to $44.3
million while growing operating income to $5.8
million, or 44.1%, from a selective customer base
generating new and expanded orders. Aerostar effected
a strong turnaround, increasing sales from $12.5
million to $17.0 million, and moving from an
operating loss position in fiscal 2003 to operating
income RAVEN2004 Annual Report page 17




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##### 



of $2.0 million in fiscal 2004, largely due to a US
Army cargo parachute contract. Fiscal 2003 results
also included $1.3 million in net sales and $204,000
of operating income related to operations of Sold
Businesses. Fiscal 2004 results include no sales and
an operating loss of $355,000 for ongoing
environmental and legal liabilities associated with
previously sold businesses. Fiscal 2003 versus fiscal 2002 Net sales of $120.9 million and operating income of
$17.1 million represented 2.0% and 29.5% growth over
fiscal 2002. Flow Controls had a solid year with a
$5.3 million increase in net sales and $1.4 million
growth in operating income, principally as a result
of the Starlink acquisition. Engineered Films sales
were flat at $40.0 million, but strong gross profits
resulted in a 15.8% increase in operating income to
$11.4 million. Electronic Systems had the largest
increase in sales, up $6.3 million to $38.6 million
while operating income climbed 77.7% to $4.0 million,
due in part to the System Integrators acquisition and
operating efficiencies. Aerostars net sales were
negatively impacted by the withdrawal from the
cold-weather outer-wear business, declining $3.7
million to $12.5 million, which, along with dropping
gross profits, resulted in an operating loss of
$405,000 compared to income of $1.3 million for
fiscal 2002. Sold businesses net sales dropped $5.2
million to $1.3 million and contributed $204,000 of
operating income. FISCAL 2004 PERFORMANCE MEASURES The companys net income was 9.7% of net sales for
fiscal 2004. In terms of average assets, net income
was 18.2%. This highlights the companys effective
use of its assets to generate income. Finally, as a
percent of beginning equity for fiscal 2004, net
income was 23.8%, underscoring the value generated
for shareholders. 2004
    
    2003
    
    2002
    
    2001
    
    2000
    
    1999Net income as % ofNet sales
    
    
    9.7
    %
    
    
    9.3
    %
    
    
    7.5
    %
    
    
    4.8
    %
    
    
    4.5
    %
    
    
    4.0
    %Average assets
    
    
    18.2
    %
    
    
    15.9
    %
    
    
    13.3
    %
    
    
    9.2
    %
    
    
    8.6
    %
    
    
    7.4
    %Beginning equity
    
    
    23.8
    %
    
    
    21.5
    %
    
    
    18.4
    %
    
    
    11.8
    %
    
    
    10.9
    %
    
    
    10.0
    %
 DIVESTITURES AND OTHER REPOSITIONING ACTIVITIES Over the past three years, the company has closed
and downsized business units that did not provide
proper returns on investment.While the company will
continue to review the utilization of invested
capital, management believes this activity was
substantially completed in fiscal 2003. Fiscal 2004 Activities Fiscal 2004 divestiture activities were limited to
the sale, by the companys Aerostar subsidiary, of a
sewing plant closed in fiscal 2003. The sale of that
plant and its related equipment resulted in cash
proceeds of $196,000 and a pretax gain of $182,000.
This gain was offset by a $355,000 loss from
increased liabilities for environmental or legal
issues related to previously sold businesses, as
estimated by the company and its advisors. Fiscal 2003 Activities During fiscal 2003, the former Beta Raven Industrial
Controls Division was sold. A pretax gain of $104,000
and $577,000 of cash proceeds were realized on the
completion of the disposal of that subsidiary. An
Aerostar sewing plant was closed during the third
quarter as well. The remainder of the pretax net gain
of $179,000 related to the collection of a previously
discounted note receivable, net of increased
anticipated costs from ongoing environmental and
legal liabilities from previously sold businesses. Fiscal 2002 Activities In fiscal 2002, the company recorded a net pretax
gain of $367,000 related to the sale of its former
Sportswear Division warehouse and the closure of its
remaining Plastic Tank Division operations in Tacoma,
Washington. The company also incurred $249,000 of
pretax charges to reposition the Industrial Controls
Division of Beta Raven, including the closing of its
Alabama plant. This charge was included in cost of
goods sold in the Sold Businesses segment. page 18 RAVEN2004 Annual Report




---



##### 



Sold Businesses Fiscal 2003 net sales from Sold Businesses of $1.3
million were entirely composed of Beta Raven
Industrial Controls Division operations. Operating
income totaled $204,000 which included $179,000 of
gains on asset sales. Net sales from Sold Businesses
in fiscal 2002 were $6.5 million with $3.0 million
from Beta Raven and $3.5 million from the Plastic
Tank Division. Operating losses were $613,000 with
$47,000 of losses on asset sales. RESULTS OF OPERATIONS
SALES AND OPERATING INCOME BY SEGMENT 2004
    
    2003
    
    2002%
    
    
    
    
    
    %
    
    
    
    
    
    %Dollars in thousands
    
    amount
    
    change
    
    amount
    
    change
    
    amount
    
    changeSALESFlow Controls
    
    $
    35,059
    
    
    
    +23.0
    
    
    $
    28,496
    
    
    
    +22.9
    
    
    $
    23,178
    
    
    
    +38.3Engineered Films
    
    
    46,408
    
    
    
    +16.1
    
    
    
    39,975
    
    
    
     0.8
    
    
    
    40,280
    
    
    
    + 0.7Electronic Systems
    
    
    44,307
    
    
    
    + 14.8
    
    
    
    38,589
    
    
    
    +19.5
    
    
    
    32,289
    
    
    
    + 0.8Aerostar
    
    
    16,953
    
    
    
    +35.3
    
    
    
    12,529
    
    
    
    23.0
    
    
    
    16,271
    
    
    
    33.7Total ongoing
    
    
    142,727
    
    
    
    +19.3
    
    
    
    119,589
    
    
    
    + 6.8
    
    
    
    112,018
    
    
    
     1.2Sold businesses
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    79.8
    
    
    
    6,497
    
    
    
    66.7Total
    
    $
    142,727
    
    
    
    +18.1
    
    
    $
    120,903
    
    
    
    + 2.0
    
    
    $
    118,515
    
    
    
    10.8
 2004
    
    2003
    
    2002%
    
    
    
    
    
    %
    
    
    
    
    
    %Dollars in thousands
    
    amount
    
    sales
    
    amount
    
    sales
    
    amount
    
    salesOPERATING INCOME (LOSS)Flow Controls
    
    $
    8,254
    
    
    
    23.5
    
    
    $
    6,897
    
    
    
    24.2
    
    
    $
    5,509
    
    
    
    23.8Engineered Films
    
    
    11,701
    
    
    
    25.2
    
    
    
    11,447
    
    
    
    28.6
    
    
    
    9,886
    
    
    
    24.5Electronic Systems
    
    
    5,797
    
    
    
    13.1
    
    
    
    4,022
    
    
    
    10.4
    
    
    
    2,264
    
    
    
    7.0Aerostar
    
    
    1,954
    
    
    
    11.5
    
    
    
    (405
    )
    
    
    (3.2
    )
    
    
    1,278
    
    
    
    7.9Corporate
expenses
    
    
    (5,725
    )
    
    
    
    
    
    
    (5,100
    )
    
    
    
    
    
    
    (5,149
    )Total ongoing
    
    
    21,981
    
    
    
    15.4
    
    
    
    16,861
    
    
    
    14.1
    
    
    
    13,788
    
    
    
    12.3Sold businesses
    
    
    (355
    )
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    (613
    )Total
    
    $
    21,626
    
    
    
    15.2
    
    
    $
    17,065
    
    
    
    14.1
    
    
    $
    13,175
    
    
    
    11.1
 FLOW CONTROLS
 The Flow Controls Division (FCD) provides electronic
speed and Global Positioning System (GPS)-based,
location-compensated application-control products for
the agriculture, marine navigation and other niche
markets.  (FLOW CONTROL BAR CHART)
 Fiscal 2004 versus fiscal 2003 Net sales of $35.1 million grew 23.0% from fiscal
2003 net sales of $28.5 million. Shipments of $6.0
million under a special order for chemical injection
systems during the first half of fiscal 2004 were
$2.8 million higher than fiscal 2003 shipments. The
divisions precision agriculture distribution plan,
comprised of new product introductions, improvements
on existing products and an expanded customer base,
helped drive the remaining growth. Operating income
of $8.3 million surpassed fiscal 2003 operating
income by
$1.4 million. Higher sales levels
in turn produced increased gross
profits, but were partially offset
by a $678,000, or 39.5%, increase in
selling expenses. As a percentage
of net sales, gross profits were
30.4% as compared to 29.8% for
fiscal 2003. Selling expenses rose
sharply from personnel and
advertising costs associated with
the new precision agriculture
distribution plan.
Additionally, fiscal 2003 bad debt expense was
favorable due to the collection of a receivable for
which an allowance had previously been established. Fiscal 2003 versus fiscal 2002 Fiscal 2003 net sales growth of $5.3 million over
fiscal 2002 net sales was propelled mainly by the
Starlink acquisition and new product sales. The
increase also resulted in higher gross profits, which
grew $1.4 million, and combined with a slight
decrease in expenses, resulted in operating income of
$6.9 million. Selling expenses increased with
additional advertising, travel and consulting costs,
mostly offset by a credit for bad debt expense due to
collection. Gross profits as a percentage of net
sales for fiscal 2003 were 29.8%. The fiscal 2002
gross profit percentage was 30.5%, negatively
impacted 2.4 percentage
   RAVEN 19




---



##### 



points due to a $550,000 write-off of acquired
research and development costs. The margin decline
from fiscal 2002 to fiscal 2003 is due to higher
fixed costs which increased as a result of the
Starlink acquisition, whose operations concentrate
heavily on research and development. Prospects The division will continue to emphasize its precision
agriculture distribution and marketing plans. FCD is
committed to continued focus on improving current
products, developing new solutions, and broadening
the dealer network. Gaining more market share in the
precision agriculture arena will be challenging as
competition continues to increase and may cause
pricing and margin pressures. The lack of a new
chemical injection system special order leaves a
substantial gap to fill, and will be particularly
evident in the first half of fiscal 2005. The
improving farm economy in the United States, and
continued success of our precision agriculture
initiative, may be sufficient to overcome this
first-half shortfall by the end of fiscal 2005. The
division remains strong and a key component of the
companys overall success. ENGINEERED FILMS The Engineered Films Division (EFD) produces rugged
reinforced plastic sheeting for industrial,
construction, manufactured housing and agriculture
applications and high altitude balloons for public
and commercial research.  (ENGINEERED FILMS BAR CHART)
 Fiscal 2004 versus fiscal 2003 The divisions net sales exceeded fiscal 2003 net
sales by $6.4 million to reach $46.4 million. The
current fiscal year
saw an upturn in pit-lining,
industrial-market sales, and
vapor-barrier sales. A new
extrusion line added late in
fiscal 2003 is operating according
to plan, at approximately
one-third capacity, and the
expanded product offerings account
for a large percentage of the
overall sales increase. Research balloon sales dropped $1.1 million (22.7%)
while construction sales remained steady and
agriculture sales increased. Despite the sales
growth, gross profits increased only 3.9%. Combined
with a $237,000, or 11.9%, increase in selling
expenses, operating income increased only $254,000.
Selling expenses grew as a result of additional sales
personnel as the division works to expand its new
product sales and market penetration. As a percentage
of net sales, gross profits declined from 33.7% to
30.1%. This reflects the fluctuation in raw material
costs between the years, although the division
adjusts selling prices whenever possible to pass
along the increases. Fiscal 2003 versus fiscal 2002 EFDs fiscal 2003 net sales of $40.0 million were
$305,000 below fiscal 2002 net sales. The markets for
pit lining were depressed by reduced oil and gas
exploration, while landfill and manufactured housing
demand were also below fiscal 2002. Research balloon
sales increased 8.8%, and combined with continued
strength in the industrial and construction markets,
helped to offset some of the shortfall. Operating
income of $11.4 million grew $1.6 million over fiscal
2002, a result of low raw material costs that helped
drive up gross profits. As a percentage of sales,
gross profits increased from 29.1% to 33.7% on lower
costs. Partially offsetting that growth was a 13.1%
increase in selling expenses, or $231,000, due to
higher personnel costs and product improvement
expenses.
  Prospects EFD continues to develop new products to fully
utilize its extrusion capacity. New products
typically carry lower gross profit margins during
their introduction into the market-place; however,
margins should rise as the products mature and
capacity is utilized. Volatility in resin prices can
also impact gross profit rates. The division expects
to see sales increase in the 10% range with operating
income rising along with revenues. Management
continues to invest in this division with new
extrusion technology and warehouse capacity, still in
the planning stage, scheduled to come on-line late in
fiscal 2005 or early in fiscal 2006. page 20 RAVEN2004 Annual Report




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##### 



ELECTRONIC SYSTEMS The Electronic Systems Division (ESD) is a
total-solutions provider of electronics manufacturing
services, primarily to North American original
equipment manufacturers.  (ELECTRONIC SYSTEMS BAR CHART)
 Fiscal 2004 versus fiscal 2003 Division net sales rose 14.8%, or $5.7 million, to
$44.3 million over fiscal 2003 net sales. Increased
demand for our customers products fueled the
increase. The division strives to maintain a small
but profitable, efficient and
selective customer base, and works
with these customers to obtain
order renewals and new orders as
older orders end. Operating income
increased $1.8 million over fiscal
2003 operating income of $4.0
million. Gross profit growth was
the main contributor, as selling
expenses remained relatively flat.
Gross profit margins improved from
12.4% in fiscal 2003 to 14.8% in
2004. ESDs
fourth quarter gross profit rate of 13.8% reflected
start-up costs related to new customers. The
improvement for the full year is a result of
production efficiencies and better capacity
utilization. Fiscal 2003 versus fiscal 2002 ESD increased sales 19.5% over fiscal 2002 to reach
$38.6 million. Much of the growth is attributable to
customers retained from the System Integrators
acquisition of December 2001, and sales from the
former Beta Raven electronics manufacturing services
operations folded into ESD during fiscal 2002.
Government contract sales were lower than fiscal
2002, partially offsetting the growth. Operating
income for the division reached $4.0 million versus
operating income of $2.3 million for fiscal 2002. The
growth is attributable to an increase in gross
profits, countered by a $126,000 (20.2%) increase in
selling expenses.
   Selling expenses increased from higher personnel
costs. Bad debt expense in fiscal 2002 was favorably
impacted by a $92,000 bad debt that was recovered. As a
percentage of net sales, gross profits improved from
8.7% to 12.4%. Higher sales, continued focus on
improving efficiencies, better utilization rates and
a better customer base drove the increase. Prospects The division has built solid relationships with its
customer base that should continue to provide growth
opportunities throughout fiscal 2005. Overall, the
division looks for growth in excess of 10% for fiscal
2005, with increases coming from existing accounts
and the addition of one or two new customers. Better
utilization of capacity and efficiency improvements
are expected to increase operating income at a faster
pace.  (AEROSTAR BAR CHART)
 AEROSTAR The Aerostar segment manufactures military cargo
parachutes, government service uniforms and
custom-shaped inflatable products. Fiscal 2004 versus fiscal 2003 Aerostar had a strong turnaround in fiscal 2004,
pulling net sales up 35.3% over fiscal 2003
results, to $17.0 million. Shipments under the US
Army cargo parachute contract secured in fiscal
2003 increased $6.0 million, offsetting the loss
in sales from discontinued outerwear lines and
lower advertising-inflatables sales. Operating
income of $2.0 million displayed a
similarly strong turnaround as
compared to a $405,000 loss in
fiscal 2003, driven by gross profit
increases and selling expense
decreases. The restructuring that
the subsidiary has undergone in the
past three fiscal years has
resulted in the elimination of
cold-weather outerwear business and
a diminished focus on hot-air
balloon sales.
   RAVEN2004 Annual Report page 21




---



##### 



Operating income includes a $182,000 gain on the sale
of a sewing plant closed in fiscal 2003. Gross
profits increased as a percentage of sales from 4.5%
to 15.0%, largely on the strength of the cargo
parachute contract and improved margins on other sewn
and sealed products. Fiscal 2003 profits were also
depressed by $306,000 of inventory obsolescence
charges on hot air balloon and apparel operations and
start-up costs incurred for parachute manufacturing. Fiscal 2003 versus fiscal 2002 Fiscal 2003 net sales dropped $3.7 million from the
fiscal 2002 net sales level of $16.3 million. The
withdrawal from the cold-weather outerwear market was
responsible for most of the decline. Hot-air balloon
sales were lower and inflatable display purchases
were depressed by lower advertising spending by
customers. Operating losses reached $405,000, down
from an operating income level of $1.3 million in
fiscal 2002. A decrease in gross profits drove most of
the decline, along with the inclusion in fiscal 2002
operating income of a $414,000 gain on the sale of a
building. As a percentage of sales, gross profits
declined to 4.5% compared to 11.9% for fiscal 2002.
Besides the lower sales levels, inventory
obsolescence charges, parachute contract start-up
costs and increased product liability costs
negatively impacted gross profits. Prospects Aerostar has positioned itself for further growth in
fiscal 2005. Its current backlog position indicates
sales growth in the 10% range. Additional sales
growth should improve plant utilization and
productivity, driving operating income even higher.
New orders secured for parachutes and inflatable
military decoys provide a basis for continuing
optimism as Aerostar solidifies its product strategy.  (NET OPERATING MARGIN BAR CHART)
 EXPENSES, INCOME TAXES AND OTHER Corporate expenses increased 12.3% over fiscal 2003
to $5.7 million for fiscal 2004. Personnel costs
accounted for nearly half of the growth, a result of
additional staff and increased compensation and
insurance expenses. As a
percentage of sales, expenses declined slightly.
Expenses were relatively flat in fiscal 2003 as
compared to fiscal 2002, declining $49,000. Interest
expense increased slightly from $63,000 in fiscal
2003 to $70,000 for fiscal 2004. The companys main
expense was interest on capital leases and deferred
acquisition
payments from the Starlink and System
Integrators acquisitions as no
borrowings were made in fiscal 2004.
In addition, interest expense was
incurred on payments related to a
previously accrued tax dispute
settlement. Between fiscal 2002 and
fiscal 2003, interest expense declined
$66,000 due to reduced debt levels
from the prepayment of notes. Other
income declined from $519,000 for
fiscal 2002 to $252,000 and $160,000
in fiscal 2003 and 2004, respectively.
The main component of
other income is interest income which has suffered
from low interest rates despite increased cash and
investments, particularly between fiscal 2002 and
2003. Fiscal 2004s effective income tax rate of
36.3% was higher than the 35.2% effective rate for
fiscal 2003 due to state income taxes and higher
nondeductible expenses. The impact
of graduated rates also declined due to the higher
taxable income. Similar factors impacted the growth
from 34.8% in fiscal 2002 to 35.2% in fiscal 2003.
   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
    
    2004
    
    2003
    
    2002Operating activities
    
    $
    19,732
    
    
    $
    12,735
    
    
    $
    18,496Investing activities
    
    
    (4,352
    )
    
    
    (9,166
    )
    
    
    (13,152
    )Financing activities
    
    
    (6,155
    )
    
    
    (5,830
    )
    
    
    (8,539
    )
 page 22 RAVEN2004 Annual Report




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##### 



(CASH FLOWS FROM OPERATIONS BAR CHART)
 OPERATING ACTIVITIES AND CASH POSITION Cash flow from operations totaled $19.7 million, a
$7.0 million increase over inflows in fiscal 2003.
The rise in net income and cash generated from
inventory reductions were the main drivers. Flow
Controls inventory levels in particular were higher
at January 31, 2003, in anticipation of shipments for
special order chemical-injection systems shipped in
the first half of fiscal 2004. Engineered Films
inventories at January 31, 2003, were also higher to
take advantage of favorable raw material costs.
Accounts receivable increased from January 31, 2003,
balances, particularly within Electronic Systems from
fourth-quarter shipments and higher sales levels in
Engineered Films. Accounts payable shifted from a net
cash inflow in fiscal 2003 to a cash use of $1.6
million for fiscal 2004 due to the decline in
inventory and through efforts to take advantage of
discounts. Fiscal 2003 operating cash flows were
$12.7 million as compared to cash
flows of $18.5 million for fiscal
2002. Net income was higher, but the
growth was offset by a decrease in cash
flows from inventory and accounts
receivable. Included in fiscal 2002
cash flows was the liquidation of
accounts receivable and inventory from
the closed Plastic Tank Division. In
addition, fiscal 2003 inventory levels
were higher in preparation for the
chemical-injection systems order and
to take advantage of lower material
costs.
   Cash, cash equivalents and short-term investments
totaled $18.4 million at January 31, 2004. This is
double the balance of $9.2 million on January 31,
2003, which itself
was 22.7% higher than the $7.5 million at January 31,
2002. Increased earnings, minimal capital
expenditures and lower inventory levels have
generated the growth in available cash. The company
expects that cash and short-term investments,
combined with continued positive operating cash
flows, will continue to be sufficient to fund
day-to-day operations and approximately $11 million
of special dividends in May 2004. INVESTING ACTIVITIES The company used $4.4 million of cash for investing
activities in fiscal 2004 versus $9.2 million for
fiscal 2003. The company acquired Fluent Systems, LLC
for $1.0 million and purchased a formerly leased
Engineered Films segment facility for $1.0 million in
fiscal 2004. The remaining expenditures represent
ongoing capital improvements, partially reduced by
proceeds from the sale of an Aerostar sewing plant.
Cash used for investing activities in fiscal 2003
decreased $4.0 million as compared to cash used of
$13.2 million in fiscal 2002. While no business
acquisitions were completed during fiscal 2003 as in
fiscal 2002 when Starlink and System Integrators were
purchased, the Engineered Films Division completed
construction of a $4.4 million extrusion line and

additional warehouse space. Short-term investments of
$4.0 million were purchased in 2003 with excess cash. FINANCING ACTIVITIES Cash used in financing activities of $6.2 million was
relatively flat compared to $5.8 million expended in
fiscal 2003. The companys main financing activities
continue to be the payment of dividends and the
repurchase of company stock. Fiscal 2002 financing
activities included $3.0 million in prepayment of a
long-term note. The dividend was increased 21.4% over
fiscal 2003, and purchases of 144,175 shares at an
average price of $21.28 were made during the year. In
fiscal 2003, 251,230 shares
were repurchased at an average price of $13.23, while
346,618 shares at an average price of $8.22 were
repurchased in RAVEN2004 Annual Report page 23




---



##### 



fiscal 2002. On March 9, 2004, the company announced
that in addition to a 22% increase in the regular
quarterly dividend (from 9 cents to 11 cents per
share) a special one-time dividend of $1.25 per share
will be paid May 20, 2004. Based on current shares
outstanding, the one-time dividend will total
approximately $11 million. The company anticipates
paying this dividend with existing cash and
short-term investments. No short-term borrowings were made in fiscal 2004.
The remaining debt of the company consists of
capital leases assumed in the acquisition of
Starlink and System Integrators which are scheduled
to be repaid by fiscal 2006. Contractual obligations consist of capital leases and
non-cancelable operating leases for facilities and
equipment, deferred acquisition payments related to
the Starlink, System Integrators and Fluent Systems
acquisitions and unconditional purchase obligations
primarily for raw materials. The letters of credit
have been issued for workers compensation insurance
obligations that remain from the period of
self-insurance (February 1, 2001, and prior). In the
event the bank chooses not to renew the line of
credit, the letters of credit would cease and
alternative methods of support for the insurance
obligations would be necessary that would be more
expensive and require additional cash outlays. The
company believes the chances of such an event are
remote. A summary of the obligations and commitments
at January 31, 2004, for the next five years is
presented in the following table. FY 2006-
    
    FY 2008-Dollars in thousands
    
    Total
    
    FY 2005
    
    FY 2007
    
    FY 2009Contractual Obligations:Line of credit(a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital leases
    
    
    142
    
    
    
    81
    
    
    
    61
    
    
    
    Deferred acquisition
obligations
    
    
    409
    
    
    
    409
    
    
    
    
    
    
    
    Operating leases
    
    
    688
    
    
    
    220
    
    
    
    331
    
    
    
    137Unconditional purchase
obligations
    
    
    17,464
    
    
    
    17,464
    
    
    
    
    
    
    
    18,703
    
    
    
    18,174
    
    
    
    392
    
    
    
    137Other Commercial Commitments:Letters of credit
    
    
    1,682
    
    
    
    1,682
    
    
    
    
    
    
    
    $
    20,385
    
    
    $
    19,856
    
    
    $
    392
    
    
    $
    137(a) $7.0 million line bears interest at 4.00% and expires July 2004.
  (RETURN ON AVERAGE ASSETS BAR CHART)
 CAPITAL REQUIREMENTS The company maintains an excellent financial
condition and capacity for growth. Management
continues to look for opportunities to expand its
core businesses through acquisitions or internal
growth. The company has the capacity to
assume additional financing and will
do so if the appropriate strategic
opportunity presents itself. Capital
expenditures for fiscal 2005 are
budgeted to exceed $10 million. Over
half of these expenditures will be to
support the Engineered Films Division
with new extrusion technology and
warehouse capacity. Stock repurchases
are anticipated to continue as a means
to return additional cash to
shareholders and increase the leverage
of the companys balance sheet. As
noted in the financing
section, a one-time dividend of approximately $11
million will also be paid in May 2004. The cash
generated from operations and the availability under
existing credit facilities is anticipated to be
sufficient to fund these initiatives.
   page 24 RAVEN2004 Annual Report




---



##### 



CRITICAL ACCOUNTING POLICIES AND NEW ACCOUNTING
STANDARDS CRITICAL ACCOUNTING POLICIES Critical accounting policies for the company are
those policies that require the application of
judgment when valuing assets and liabilities on the
companys balance sheet. The company, other than
utilizing operating leases, does not enter into off
balance sheet financing or derivatives. The companys
most difficult accounting decision is determining
inventory value at the lower of cost or market.
Typically, when a product reaches the end of its life
cycle, inventory value declines slowly or the product
has alternative uses. Management uses its
computerized manufacturing resources planning data to
help determine if inventory is slow moving or has
become obsolete due to an engineering change. The
company closely reviews items that have balances in
excess of the prior years requirements or that have
been dropped from production requirements. Despite
these reviews, technological or strategic decisions,
made by management or the companys customers, may
result in unexpected excess material. In the
Electronic Systems Division, the company typically
has recourse to customers for obsolete or excess
material. Under terms of the contract, the customers
may have to take delivery of the material or
compensate the company accordingly. In every
operating unit of the company, management must manage
obsolete inventory risk. The accounting judgment
ultimately made is an evaluation of the success that
division management will have in controlling
inventory risk and mitigating the impact of
obsolescence when it does occur.  (BOOK VALUE PER SHARE BAR CHART)
 Determining the level of the allowance for doubtful
accounts, warranty and self-insurance accruals
represent managements best estimate of future
events. Historical levels of activity or assistance
from advisors may be used in certain circumstances,
but knowledge of the current financial climate or the
impact of a new product on these accruals always
tempers evaluation of the historical data. The company periodically assesses
goodwill and other intangible assets
for impairment, at the segment level,
using fair value measurement
techniques. Estimates of fair value
are primarily determined using
discounted cash flows, market
comparisons and recent transactions.
These valuation methodologies use
significant estimates and assumptions,
which include projected future cash
flows, including timing and the risks
inherent in future cash flows,
perpetual growth rates and
determination of appropriate market comparables.
   NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board has released
several Staff Positions, Interpretations and revised
Standards in the latter portion of fiscal 2004. The
company has reviewed the issues covered by these
pronouncements, and has determined their impacts to
be minimal, and in most cases, not applicable to the
company. CHANGES IN SECURITIES LAWS AND REGULATIONS The Sarbanes-Oxley Act of 2002 (the Act) that
became law in July 2002 requires changes in some of
the companys corporate governance and securities
disclosure or compliance practices. The company is
presently preparing for its required compliance
on January 31, 2005, with Section 404 of the Act, and
managements assertions concerning financial
reporting controls. This process is time-consuming
and costly and involves significant interpretation of
proposed requirements. The company believes that
while it will be challenging, it will ultimately
comply with the requirements. RAVEN2004 Annual Report page 25




---



##### 



Monthly Closing Stock Price and Volume (CLOSING STOCK PRICE AND VOLUME BAR CHART) Quarterly Information (Unaudited) Net Income
    
    Common StockDollars in thousands,
    
    Net
    
    Gross
    
    Operating
    
    Pretax
    
    Net
    
    Per Share(a)(b)
    
    Market Price(b)
    
    CashDividendsexcept per-share data
    
    Sales
    
    Profit
    
    Income
    
    Income
    
    Income
    
    Basic
    
    Diluted
    
    High
    
    Low
    
    Per Share(b)FISCAL 2004First Quarter
    
    $
    36,942
    
    
    $
    9,437
    
    
    $
    6,544
    
    
    $
    6,556
    
    
    $
    4,183
    
    
    $
    0.46
    
    
    $
    0.45
    
    
    $
    19.00
    
    
    $
    15.12
    
    
    $
    0.080Second Quarter
    
    
    36,110
    
    
    
    7,811
    
    
    
    4,937
    
    
    
    4,976
    
    
    
    3,163
    
    
    
    0.35
    
    
    
    0.34
    
    
    
    22.00
    
    
    
    15.80
    
    
    
    0.080Third Quarter
    
    
    36,081
    
    
    
    9,219
    
    
    
    6,121
    
    
    
    6,126
    
    
    
    3,902
    
    
    
    0.43
    
    
    
    0.42
    
    
    
    27.46
    
    
    
    21.24
    
    
    
    0.090Fourth Quarter
    
    
    33,594
    
    
    
    7,292
    
    
    
    4,024
    
    
    
    4,058
    
    
    
    2,588
    
    
    
    0.29
    
    
    
    0.28
    
    
    
    30.45
    
    
    
    23.77
    
    
    
    0.090Total Year
    
    $
    142,727
    
    
    $
    33,759
    
    
    $
    21,626
    
    
    $
    21,716
    
    
    $
    13,836
    
    
    $
    1.53
    
    
    $
    1.50
    
    
    $
    30.45
    
    
    $
    15.12
    
    
    $
    0.340FISCAL 2003First Quarter
    
    $
    30,974
    
    
    $
    8,150
    
    
    $
    5,304
    
    
    $
    5,320
    
    
    $
    3,458
    
    
    $
    0.38
    
    
    $
    0.37
    
    
    $
    12.18
    
    
    $
    8.75
    
    
    $
    0.070Second Quarter
    
    
    29,692
    
    
    
    5,996
    
    
    
    3,532
    
    
    
    3,569
    
    
    
    2,320
    
    
    
    0.25
    
    
    
    0.25
    
    
    
    14.43
    
    
    
    10.75
    
    
    
    0.070Third Quarter
    
    
    31,423
    
    
    
    7,332
    
    
    
    4,872
    
    
    
    4,939
    
    
    
    3,210
    
    
    
    0.35
    
    
    
    0.34
    
    
    
    14.00
    
    
    
    11.65
    
    
    
    0.070Fourth Quarter
    
    
    28,814
    
    
    
    6,037
    
    
    
    3,357
    
    
    
    3,426
    
    
    
    2,197
    
    
    
    0.24
    
    
    
    0.24
    
    
    
    18.40
    
    
    
    13.40
    
    
    
    0.070Total Year
    
    $
    120,903
    
    
    $
    27,515
    
    
    $
    17,065
    
    
    $
    17,254
    
    
    $
    11,185
    
    
    $
    1.22
    
    
    $
    1.20
    
    
    $
    18.40
    
    
    $
    8.75
    
    
    $
    0.280FISCAL 2002First Quarter
    
    $
    30,972
    
    
    $
    6,239
    
    
    $
    3,294
    
    
    $
    3,415
    
    
    $
    2,209
    
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    6.42
    
    
    $
    6.04
    
    
    $
    0.060Second Quarter
    
    
    28,157
    
    
    
    5,299
    
    
    
    3,020
    
    
    
    3,157
    
    
    
    2,043
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    9.09
    
    
    
    6.34
    
    
    
    0.065Third Quarter
    
    
    28,780
    
    
    
    6,391
    
    
    
    3,762
    
    
    
    3,879
    
    
    
    2,510
    
    
    
    0.27
    
    
    
    0.27
    
    
    
    9.06
    
    
    
    7.23
    
    
    
    0.065Fourth Quarter
    
    
    30,606
    
    
    
    5,922
    
    
    
    3,099
    
    
    
    3,114
    
    
    
    2,085
    
    
    
    0.23
    
    
    
    0.22
    
    
    
    11.75
    
    
    
    8.55
    
    
    
    0.065Total Year
    
    $
    118,515
    
    
    $
    23,851
    
    
    $
    13,175
    
    
    $
    13,565
    
    
    $
    8,847
    
    
    $
    0.95
    
    
    $
    0.93
    
    
    $
    11.75
    
    
    $
    6.04
    
    
    $
    0.255
  (a)
    
    Net income per share is computed discretely by quarter and may not add to
the full year.(b)
    
    All per-share and market price data reflect the January 2003 two-for-one
stock split and the July 2001 three-for-two stock split. page 26 RAVEN2004 Annual Report




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##### 



Consolidated Balance Sheets As of January 31Dollars in thousands, except per-share data
    
    2004
    
    2003
    
    2002ASSETSCurrent assetsCash and cash equivalents
    
    $
    14,442
    
    
    $
    5,217
    
    
    $
    7,478Short-term investments
    
    
    4,000
    
    
    
    4,000
    
    
    
    Accounts receivable, net
    
    
    18,454
    
    
    
    16,468
    
    
    
    16,427Inventories, net
    
    
    16,763
    
    
    
    21,366
    
    
    
    19,082Deferred income taxes
    
    
    1,313
    
    
    
    1,493
    
    
    
    1,927Prepaid expenses and other current assets
    
    
    738
    
    
    
    807
    
    
    
    394Total current assets
    
    
    55,710
    
    
    
    49,351
    
    
    
    45,308Property, plant and equipment, net
    
    
    15,950
    
    
    
    16,455
    
    
    
    14,059Goodwill
    
    
    6,776
    
    
    
    5,933
    
    
    
    5,863Other assets, net
    
    
    1,072
    
    
    
    1,077
    
    
    
    2,606Total assets
    
    $
    79,508
    
    
    $
    72,816
    
    
    $
    67,836LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    72
    
    
    $
    119
    
    
    $
    127Accounts payable
    
    
    3,666
    
    
    
    5,291
    
    
    
    4,801Accrued liabilities
    
    
    7,784
    
    
    
    7,157
    
    
    
    8,179Customer advances
    
    
    373
    
    
    
    600
    
    
    
    703Total current liabilities
    
    
    11,895
    
    
    
    13,167
    
    
    
    13,810Long-term debt, less current portion
    
    
    57
    
    
    
    151
    
    
    
    280Other liabilities, primarily compensation and benefits
    
    
    1,085
    
    
    
    1,262
    
    
    
    1,714Commitments and contingenciesShareholders equity
    
    
    66,471
    
    
    
    58,236
    
    
    
    52,032Common shares, par value $1.00 per shareAuthorized  100,000,000Outstanding  2004: 9,020,544; 2003: 9,066,362;2002: 9,211,138 (4,605,569 pre-split)Total liabilities and shareholders equity
    
    $
    79,508
    
    
    $
    72,816
    
    
    $
    67,836
 The accompanying notes are an integral part of the consolidated financial
statements. RAVEN2004 Annual Report page 27




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##### 



Consolidated Statements of Income For the years endedJanuary 31Dollars in thousands, except per-share data
    
    2004
    
    2003
    
    2002Net sales
    
    $
    142,727
    
    
    $
    120,903
    
    
    $
    118,515Cost of goods sold
    
    
    108,968
    
    
    
    93,388
    
    
    
    94,664Gross profit
    
    
    33,759
    
    
    
    27,515
    
    
    
    23,851Selling, general and administrative expenses
    
    
    11,960
    
    
    
    10,629
    
    
    
    11,043Loss (gain) on sales of businesses and assets, net
    
    
    173
    
    
    
    (179
    )
    
    
    (367
    )Operating income
    
    
    21,626
    
    
    
    17,065
    
    
    
    13,175Interest expense
    
    
    70
    
    
    
    63
    
    
    
    129Other income, net
    
    
    (160
    )
    
    
    (252
    )
    
    
    (519
    )Income before income taxes
    
    
    21,716
    
    
    
    17,254
    
    
    
    13,565Income taxes
    
    
    7,880
    
    
    
    6,069
    
    
    
    4,718Net income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Net income per common share basic
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95 diluted
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.93
 The accompanying notes are an integral part of the consolidated financial
statements. page 28  RAVEN 2004 Annual Report




---



##### 



Consolidated Statements of Shareholders Equity and Comprehensive
Income Treasury stockCommon
    
    Paid-in
    
    
    
    RetainedDollars in thousands, except per-share data
    
    Stock
    
    Capital
    
    Shares
    
    Cost
    
    Earnings
    
    TotalBalance January 31, 2001
    
    $
    5,223
    
    
    $
    3,459
    
    
    
    (2,063,807
    )
    
    $
    (28,941
    )
    
    $
    68,248
    
    
    $
    47,989Net and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,847
    
    
    
    8,847Cash dividends ($.255 per share)(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,371
    )
    
    
    (2,371
    )Three-for-two stock split
    
    
    2,612
    
    
    
    (2,614
    )
    
    
    (1,031,903
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Purchase of stock
    
    
    
    
    
    
    
    
    
    
    (173,309
    )
    
    
    (2,848
    )
    
    
    
    
    
    
    (2,848
    )Purchase and retirement of stock
    
    
    (70
    )
    
    
    (1,134
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,204
    )Employees stock options exercised
    
    
    110
    
    
    
    1,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,488Tax benefit from exercise of stock options
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133Balance January 31, 2002
    
    
    7,875
    
    
    
    1,222
    
    
    
    (3,269,019
    )
    
    
    (31,789
    )
    
    
    74,724
    
    
    
    52,032SFAS 123 adoption adjustment
    
    
    
    
    
    
    478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478Net and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,185
    
    
    
    11,185Cash dividends ($.280 per share)(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,563
    )
    
    
    (2,563
    )Two-for-one stock split
    
    
    7,875
    
    
    
    (1,682
    )
    
    
    (3,269,019
    )
    
    
    
    
    
    
    (6,193
    )
    
    
    Purchase of stock
    
    
    
    
    
    
    
    
    
    
    (251,230
    )
    
    
    (3,324
    )
    
    
    
    
    
    
    (3,324
    )Purchase and retirement of stock
    
    
    (70
    )
    
    
    (835
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (905
    )Employees stock options exercised
    
    
    176
    
    
    
    917
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,093Stock compensation expense
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Tax benefit from exercise of stock options
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Balance January 31, 2003
    
    
    15,856
    
    
    
    340
    
    
    
    (6,789,268
    )
    
    
    (35,113
    )
    
    
    77,153
    
    
    
    58,236Net and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,836
    
    
    
    13,836Cash dividends ($.340 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,075
    )
    
    
    (3,075
    )Purchase of stock
    
    
    
    
    
    
    
    
    
    
    (144,175
    )
    
    
    (3,068
    )
    
    
    
    
    
    
    (3,068
    )Purchase and retirement of stock
    
    
    (39
    )
    
    
    (804
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (843
    )Employees stock options exercised
    
    
    137
    
    
    
    435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    572Stock compensation expense
    
    
    
    
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282Tax benefit from exercise of stock options
    
    
    
    
    
    
    531
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    531Balance January 31, 2004
    
    $
    15,954
    
    
    $
    784
    
    
    
    (6,933,443
    )
    
    $
    (38,181
    )
    
    $
    87,914
    
    
    $
    66,471
 (a) Reflects the July 2001 three-for-two stock split and January 2003
two-for-one stock split. The accompanying notes are an integral part of the consolidated financial
statements. RAVEN2004 Annual Report page  29




---



##### 



Consolidated Statements of Cash Flows For the years endedJanuary 31Dollars in thousands
    
    2004
    
    2003
    
    2002Cash flows from operating activitiesNet income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation
    
    
    3,674
    
    
    
    3,541
    
    
    
    2,975Amortization
    
    
    471
    
    
    
    425
    
    
    
    170Acquired in-process research and development charge
    
    
    
    
    
    
    
    
    
    
    550Provision for losses on accounts receivable, net of recoveries
    
    
    67
    
    
    
    (100
    )
    
    
    126(Gain) loss on sales of businesses and assets
    
    
    173
    
    
    
    (179
    )
    
    
    (367
    )Deferred income taxes
    
    
    254
    
    
    
    1,157
    
    
    
    586Stock compensation expense
    
    
    282
    
    
    
    174
    
    
    
    76Change in operating assets and liabilities, net of effects from the
acquisition and sale of businesses
    
    
    850
    
    
    
    (3,470
    )
    
    
    5,453Other operating activities, net
    
    
    125
    
    
    
    2
    
    
    
    80Net cash provided by operating activities
    
    
    19,732
    
    
    
    12,735
    
    
    
    18,496Cash flows from investing activitiesCapital expenditures
    
    
    (3,330
    )
    
    
    (6,033
    )
    
    
    (5,094
    )Purchase of short-term investments
    
    
    (4,000
    )
    
    
    (5,000
    )
    
    
    Sale of short-term investments
    
    
    4,000
    
    
    
    1,000
    
    
    
    Acquisition of businesses
    
    
    (1,038
    )
    
    
    (57
    )
    
    
    (8,735
    )Sales of businesses and assets, net of cash sold
    
    
    257
    
    
    
    927
    
    
    
    677Other investing activities, net
    
    
    (241
    )
    
    
    (3
    )
    
    
    Net cash used in investing activities
    
    
    (4,352
    )
    
    
    (9,166
    )
    
    
    (13,152
    )Cash flows from financing activitiesProceeds from borrowing under line of credit
    
    
    
    
    
    
    1,025
    
    
    
    1,470Repayment on borrowing under line of credit
    
    
    
    
    
    
    (1,025
    )
    
    
    (1,470
    )Long-term debt principal payments
    
    
    (141
    )
    
    
    (131
    )
    
    
    (3,602
    )Net proceeds from exercise of stock options
    
    
    129
    
    
    
    188
    
    
    
    284Dividends paid
    
    
    (3,075
    )
    
    
    (2,563
    )
    
    
    (2,371
    )Purchase of treasury stock
    
    
    (3,068
    )
    
    
    (3,324
    )
    
    
    (2,848
    )Other financing activities, net
    
    
    
    
    
    
    
    
    
    
    (2
    )Net cash used in financing activities
    
    
    (6,155
    )
    
    
    (5,830
    )
    
    
    (8,539
    )Net increase (decrease) in cash and cash equivalents
    
    
    9,225
    
    
    
    (2,261
    )
    
    
    (3,195
    )Cash and cash equivalents at beginning of year
    
    
    5,217
    
    
    
    7,478
    
    
    
    10,673Cash and cash equivalents at end of year
    
    $
    14,442
    
    
    $
    5,217
    
    
    $
    7,478
 The accompanying notes are an integral part of the consolidated financial
statements. page 30  RAVEN2004 Annual Report




---



##### 



Notes to Financial Statements Note 1. Summary of Significant Accounting Policies BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION The consolidated financial statements include the
accounts of Raven Industries, Inc. and its wholly owned
subsidiaries (the company). The company is an
industrial manufacturer providing a variety of products
to customers within the industrial, agricultural,
construction and military/aerospace markets primarily
in North America. The company operates three divisions
(Flow Controls, Engineered Films and Electronic
Systems) in addition to a wholly owned subsidiary,
Aerostar International, Inc. (Aerostar). All significant
intercompany balances and transactions have been
eliminated in consolidation. USE OF ESTIMATES The preparation of the companys financial statements
in conformity with accounting principles generally
accepted in the United States of America 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
checking and savings accounts with Wells Fargo Bank
N.A. SHORT-TERM INVESTMENTS The investments consist of fully insured certificates
of deposit with varying maturities, all less than 12
months from the balance sheet date. Rates on the
deposits at January 31, 2004, range from 1.3% to
1.6%. INVENTORY VALUATION Inventories are stated at the lower of cost or market,
with cost determined on the first-in, first-out basis.
Market value encompasses consideration of all business
factors including price, contract terms and usefulness. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and
are depreciated over the estimated useful lives of the
assets using accelerated methods. The estimated useful
lives used for computing depreciation are as follows: Buildings and improvements
    
    
    7 to 39 yearsMachinery and equipment
    
    
    3 to 7 years
 Maintenance and repairs are charged to expense in the
year incurred and renewals and betterments are
capitalized. The cost and related accumulated
depreciation of assets sold or disposed of are
removed from the accounts and the resulting gain or
loss is reflected in operations. INTANGIBLE ASSETS Intangible assets, primarily comprised of technologies
acquired through acquisition, are recorded at cost net
of accumulated amortization. Amortization is computed
on a straight-line basis over estimated useful lives ranging from 3
to 20 years. The straight-line method of amortization
reflects an appropriate allocation of the cost of the
intangible assets to earnings in each reporting
period. GOODWILL Goodwill related to acquisitions completed prior to
June 30, 2001, was previously amortized over lives
ranging from 15 to 20 years. As required by Statement
of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, amortization
ceased on February 1, 2002, and no goodwill resulting
from acquisitions after June 30, 2001, has been
amortized. Goodwill is instead evaluated in terms of
its fair value at least annually and any impairment
recognized at that time. LONG-LIVED ASSETS The company periodically assesses the recoverability
of long-lived and intangible assets using fair value
measurement techniques, where fair value is calculated
based upon anticipated future earnings and
undiscounted operating cash flows. If the fair value
is less than the carrying amount of the asset, an
impairment loss is recognized to the extent the
carrying value exceeds the fair value of the asset. RAVEN2004 Annual Report page 31




---



##### 



Notes to Financial Statements (continued) INSURANCE OBLIGATIONS The company employs deductible insurance policies
covering workers compensation and general liability
costs. Costs are accrued related to the risk retained
under these policies based on claims filed and
estimates for claims incurred but not reported. In
addition, accruals are maintained to cover the
companys partial self-insurance status for workers
compensation prior to February 1, 2001. CONTINGENCIES The company is involved as a defendant in lawsuits,
claims or disputes arising in the normal course of
business. An estimate of the loss on these matters is
charged to operations when it is probable that an
asset has been impaired or a liability has been
incurred, and the amount of the loss can be reasonably
estimated. The settlement of such claims cannot be
determined at this time; however, management believes
that any liability resulting from these claims will be
substantially mitigated by insurance coverage.
Accordingly, management does not believe that the
ultimate outcome of these matters will be significant
to its results of operations, financial position or
cash flows. REVENUE RECOGNITION The company recognizes revenue and records revenues
upon shipment of products. The company sells directly
to customers or distributors who incur the expense
and commitment for any post-sale obligations beyond
stated warranty terms. Any returns, allowances or
warranty charges are recognized after shipment of a
product. The company does not typically require
collateral from its customers. Shipping and handling
costs are classified as a cost of goods sold
component. RESEARCH AND DEVELOPMENT Research and development expenditures of $1.7 million
in fiscal 2004, $1.3 million in fiscal 2003, and $1.4
million in fiscal 2002 were charged to cost of goods
sold in the year incurred. Expenditures are
principally composed of labor and material costs.
Fiscal 2002 expenditures include the $550,000 acquired
research and development charge related to the
acquisition of Starlink. STOCK-BASED COMPENSATION In fiscal 2003, the company began recording
compensation expense related to its stock-based
compensation plan using the fair value method
permitted by SFAS No. 123, Accounting for Stock-Based
Compensation under the modified prospective method
outlined by SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. Fiscal 2002s
compensation expense was measured under the intrinsic
value method. INCOME TAXES Income tax expense is the tax payable for the period
and the change during the period in deferred tax
assets and liabilities and reserves. Judgmental
reserves are maintained for income tax audits and
other tax issues. Deferred income taxes reflect
temporary differences between assets and liabilities
reported on the companys balance sheet and their tax
bases. 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. STOCK SPLITS The company completed a two-for-one stock split
effected in the form of a 100% stock dividend on
January 15, 2003. Previously, the company completed a
three-for-two stock split effected in the form of a
50% stock dividend on July 13, 2001. All per-share
information reflects the effect of these stock splits. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board has released
several Staff Positions, Interpretations and revised
Standards in the latter portion of fiscal 2004. The
company has reviewed the issues covered by these
pronouncements, and has determined their impacts to be
minimal, and in most cases, not applicable to the
company. page 32 RAVEN2004 Annual Report




---



##### 



Note 2. Selected Balance Sheet Information Following are the components of selected balance sheet items: As of January 31Dollars in thousands
    
    2004
    
    2003
    
    2002Accounts receivable, net:Trade accounts
    
    $
    18,719
    
    
    $
    16,708
    
    
    $
    16,737Allowance for doubtful accounts
    
    
    (265
    )
    
    
    (240
    )
    

    
    (310
    )$
    18,454
    
    
    $
    16,468
    
    
    $
    16,427Inventories, net:Finished goods
    
    $
    2,500
    
    
    $
    5,290
    
    
    $
    4,509In process
    
    
    2,120
    
    
    
    2,275
    
    
    
    1,732Materials
    
    
    12,143
    
    
    
    13,801
    
    
    
    12,841$
    16,763
    
    
    $
    21,366
    
    
    $
    19,082Property, plant and equipment, net:Land
    
    $
    1,110
    
    
    $
    1,091
    
    
    $
    1,091Building and improvements
    
    
    13,049
    
    
    
    12,154
    
    
    
    10,614Machinery and equipment
    
    
    32,479
    
    
    
    32,248
    
    
    
    29,219Accumulated depreciation
    
    
    (30,688
    )
    
    
    (29,038
    )
    
    
    (26,865
    )$
    15,950
    
    
    $
    16,455
    
    
    $
    14,059Other assets, net:Amortizable assets:Purchased technology
    
    $
    1,250
    
    
    $
    1,080
    
    
    $
    1,080Other intangibles
    
    
    1,136
    
    
    
    884
    
    
    
    1,116Accumulated amortization
    
    
    (1,494
    )
    
    
    (1,027
    )
    
    
    (705
    )892
    
    
    
    937
    
    
    
    1,491Deferred income taxes
    
    
    
    
    
    
    6
    
    
    
    696Deposits
    
    
    96
    
    
    
    96
    
    
    
    112Other, net
    
    
    84
    
    
    
    38
    
    
    
    307$
    1,072
    
    
    $
    1,077
    
    
    $
    2,606Accrued liabilities:Salaries and benefits
    
    $
    1,875
    
    
    $
    1,766
    
    
    $
    2,109Vacation
    
    
    1,638
    
    
    
    1,627
    
    
    
    1,731401(k) contributions
    
    
    906
    
    
    
    782
    
    
    
    825Self-insurance obligations
    
    
    524
    
    
    
    1,045
    
    
    
    1,627Income taxes
    
    
    267
    
    
    
    276
    
    
    
    144Profit sharing
    
    
    544
    
    
    
    406
    
    
    
    284Deferred acquisition payments
    
    
    389
    
    
    
    
    
    
    
    Other
    
    
    1,641
    
    
    
    1,255
    
    
    
    1,459$
    7,784
    
    
    $
    7,157
    
    
    $
    8,179
 Note 3. Supplemental Cash Flow Information For the years ended January 31Dollars in thousands
    
    2004
    
    2003
    
    2002Changes in operating assets and liabilities,
net of effects from the purchase and
sale of businesses:Accounts receivable
    
    $
    (2,072
    )
    
    $
    (304
    )
    
    $
    4,510Inventories
    
    
    4,603
    
    
    
    (2,671
    )
    
    
    1,506Prepaid expenses and other assets
    
    
    (16
    )
    
    
    15
    
    
    
    386Accounts payable
    
    
    (1,625
    )
    
    
    560
    
    
    
    681Accrued and other liabilities
    
    
    187
    
    
    
    (1,153
    )
    
    
    (1,299
    )Customer advances
    
    
    (227
    )
    
    
    83
    
    
    
    (331
    )$
    850
    
    
    $
    (3,470
    )
    
    $
    5,453Cash paid during the year for:Interest
    
    $
    50
    
    
    $
    44
    
    
    $
    149Income taxes
    
    
    7,014
    
    
    
    4,852
    
    
    
    3,923
 Note 4. Acquisitions On December 19, 2003, the company acquired
substantially all of the assets of Fluent Systems, LLC
for $1.0 million in cash and a payment deferred until
December 2004, which was valued at $60,000. This
start-up company has developed a wireless liquid level
monitoring system used with anhydrous ammonia tanks.
Of the purchase price, $79,000 was assigned to
property, plant and equipment, $195,000 was assigned
to intangible
assets, $19,000 to current liabilities assumed and
$843,000 to goodwill,
which is fully deductible for tax purposes. The
operation was assigned to the Flow Controls segment. The company acquired the operating assets and assumed
certain liabilities of Starlink, Incorporated and
System Integrators, Inc. on December 5, 2001. Starlink
provides GPS-based guidance systems for the
agriculture and marine markets. The purchase price of
Starlink was $7.9 million, including $7.5 million of
cash and a $287,000 payment deferred until December
2004. System Integrators is an electronics
manufacturing services (EMS) provider and has been
combined into the companys Electronic Systems
Division. The adjusted purchase price was $1.2 million
including a $61,000 deferred payment due December
2004. RAVEN2004 Annual Report page 33




---



##### 



Notes to Financial Statements (continued) The results of operations for acquired businesses have
been included in the consolidated financial statements
since the date of acquisition. Pro forma earnings are
not presented due to the immateriality of the
acquisitions to the consolidated operations. Note 5. Divestitures and Other
Repositioning Activities Fiscal 2004 divestiture activities were limited to the
sale by the companys Aerostar subsidiary of a sewing
plant closed in fiscal 2003. The sale of that plant
and its related equipment resulted in cash proceeds of
$196,000 and a pretax gain of $182,000. This gain was
offset by a $355,000 loss from increased liabilities
for environmental or legal issues related to
previously sold operations, as estimated by the
company and its advisors. At January 31, 2004, the
company had an undiscounted accrual remaining of
$228,000 for environmental monitoring and clean-up
costs. During fiscal 2003, the former Beta Raven Industrial
Controls Division was sold. A pretax gain of $104,000
and $577,000 of cash proceeds were realized on the
completion of the disposal of that subsidiary. An
Aerostar sewing plant was closed during the third
quarter as well. The remainder of the pretax net gain
of $179,000 related to the collection of a previously
discounted note receivable, net of increased
anticipated costs from ongoing liabilities from
previously sold businesses. In fiscal 2002, the company recorded a net pretax gain
of $367,000 related to the sale of its former
Sportswear Division warehouse and the closure of its
remaining Plastic Tank Division operations in Tacoma,
Washington. The company also incurred $249,000 of
pretax charges to reposition the Industrial Controls
Division of Beta Raven, including the closing of its
Alabama plant. This charge was included in cost of
goods sold in the Sold Businesses segment. Note 6. Goodwill and Other Intangibles Goodwill and other intangibles are accounted for under
SFAS No. 142 as adopted February 1, 2002 (first day of
fiscal 2003) for all previously acquired or internally
developed intangibles and goodwill, and as of June 30,
2001 for any acquisitions completed after that date.
Under the Statement, amortization of goodwill and any
indefinite-lived intangibles ceased, and are instead
tested at least annually, on a fair value basis, for
impairment. Excluding goodwill amortization expense and related
taxes, net income and net income per share would have
been as follows: For the years ended January 31Dollars in thousands except per-share amounts
    
    2004
    
    2003
    
    2002Net Income:As reported
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Goodwill amortization, net of taxes
    
    
    
    
    
    
    
    
    
    
    61As adjusted
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,908Basic net income per-share:As reported
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95Goodwill amortization, net of taxes
    
    
    
    
    
    
    
    
    
    
    0.01As adjusted
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.96Diluted net income per-share:As reported
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.93Goodwill amortization, net of taxes
    
    
    
    
    
    
    
    
    
    
    0.01As adjusted
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.94
 The changes in the carrying amount of goodwill by
reporting segment are shown below: Flow
    
    Engineered
    
    ElectronicDollars in thousands
    
    Controls
    
    Films
    
    Systems
    
    TotalBalance at January 31, 2001
    
    $
    
    
    
    $
    642
    
    
    $
    
    
    
    $
    642Goodwill acquired during year
    
    
    4,947
    
    
    
    
    
    
    
    356
    
    
    
    5,303Amortization
    
    
    
    
    
    
    (82
    )
    
    
    
    
    
    
    (82
    )Balance at January 31, 2002
    
    
    4,947
    
    
    
    560
    
    
    
    356
    
    
    
    5,863Purchase price adjustments
    
    
    (7
    )
    
    
    
    
    
    
    77
    
    
    
    70Balance at January 31, 2003
    
    
    4,940
    
    
    
    560
    
    
    
    433
    
    
    
    5,933Goodwill acquired during year
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    843Balance at January 31, 2004
    
    $
    5,783
    
    
    $
    560
    
    
    $
    433
    
    
    $
    6,776
 Estimated future amortization expense based on the
current carrying value of amortizable intangible
assets for fiscal periods 2005 through 2009 is
$445,000, $145,000, $128,000, $73,000, and $34,000,
respectively. page 34 RAVEN2004 Annual Report




---



##### 



Note 7. Employee Retirement Benefits The company has a 401(k) plan covering substantially
all employees and contributed 3% of qualified
payroll. The companys contribution expense was
$817,000, $715,000 and $727,000 for fiscal 2004,
2003 and 2002, respectively. In addition, the company provides postretirement
medical and other benefits to senior executive
officers and senior managers. The company accounts for
these benefits in accordance with SFAS No. 106,
Accounting for Postretirement Benefits Other Than
Pensions. There are no assets held for the plans and
any obligations are covered through the companys
operating cash and investments. The liability and
expense reflected in the balance sheet and income
statement are as follows: For the years endedJanuary 31Dollars in thousands
    
    2004
    
    2003
    
    2002Beginning balance
    
    $
    1,102
    
    
    $
    969
    
    
    $
    654Employer expense
    
    
    316
    
    
    
    306
    
    
    
    482Retiree benefits paid
    
    
    (206
    )
    
    
    (173
    )
    
    
    (167
    )Ending balance
    
    
    1,212
    
    
    
    1,102
    
    
    
    969Current portion
    
    
    (200
    )
    
    
    (150
    )
    
    
    (150
    )Long-term portion
    
    $
    1,012
    
    
    $
    952
    
    
    $
    819Discount rate
    
    
    7.0
    %
    
    
    8.0
    %
    
    
    8.0
    %Wage inflation rate
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    4.0
    %Medical inflation rate
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    6.0
    %
 The accumulated benefit obligation based upon the
rates noted in the table above was approximately $2.4
million, $2.2 million and $2.3 million at January 31,
2004, 2003 and 2002, respectively. No material
fluctuations in retiree benefits are expected in
future years. Note 8. Warranties Accruals necessary for product warranties are
estimated based upon historical warranty costs and
average time elapsed between purchase and returns for
each division. Any warranty issues that are unusual in
nature are accrued individually. Changes in the
warranty reserve were as follows: For the years endedJanuary 31Dollars in thousands
    
    2004
    
    2003
    
    2002Beginning balance
    
    $
    156
    
    
    $
    248
    
    
    $
    199Accrual for warranties
    
    
    863
    
    
    
    584
    
    
    
    525Settlements made (in cash or in kind)
    
    
    (756
    )
    
    
    (576
    )
    
    
    (476
    )Sale of businesses
    
    
    
    
    
    
    (100
    )
    
    
    Ending balance
    
    $
    263
    
    
    $
    156
    
    
    $
    248
 Note 9. Income Taxes The reconciliation of income tax computed at the
federal statutory rate to the companys effective
income tax rate is as follows: For the years endedJanuary 312004
    
    2003
    
    2002Tax at U.S. federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local income taxes, net of
U.S. federal benefit
    
    
    0.9
    
    
    
    0.4
    
    
    
    0.2Nondeductible stock option expense
    
    
    0.3
    
    
    
    0.3
    
    
    
    Impact of graduated rates
    
    
    
    
    
    
    (0.6
    )
    
    
    (0.7
    )Other, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.336.3
    %
    
    
    35.2
    %
    
    
    34.8
    %
 Significant components of the companys income tax
provision are as follows: For the years endedJanuary 31Dollars in thousands
    
    2004
    
    2003
    
    2002Income taxes:Currently payable
    
    $
    7,626
    
    
    $
    4,912
    
    
    $
    4,132Deferred
    
    
    254
    
    
    
    1,157
    
    
    
    586$
    7,880
    
    
    $
    6,069
    
    
    $
    4,718
 Significant components of the companys deferred tax assets and liabilities are as follows: As of January 31Dollars in thousands
    
    2004
    
    2003
    
    2002Current deferred tax assets:Accounts receivable
    
    $
    93
    
    
    $
    84
    
    
    $
    109Inventory valuation
    
    
    182
    
    
    
    194
    
    
    
    271Accrued vacation
    
    
    532
    
    
    
    508
    
    
    
    525Insurance obligations
    
    
    183
    
    
    
    369
    
    
    
    549Other accrued liabilities
    
    
    323
    
    
    
    338
    
    
    
    4731,313
    
    
    
    1,493
    
    
    
    1,927Non-current deferred tax assets (liabilities):Accrued compensation and benefits
    
    
    354
    
    
    
    333
    
    
    
    417Depreciation and amortization
    
    
    (502
    )
    
    
    (380
    )
    
    
    244Other
    
    
    75
    
    
    
    53
    
    
    
    35(73
    )
    
    
    6
    
    
    
    696Net deferred tax asset
    
    $
    1,240
    
    
    $
    1,499
    
    
    $
    2,623
 RAVEN2004 Annual Report page 35




---



##### 



Notes to Financial Statements (continued) Note 10. Financing Arrangements Raven has an uncollateralized credit agreement
providing a line of credit of $7.0 million which
expires in July 2004. Letters of credit totaling $1.7
million have been issued under the line, primarily to
support self-insured workers compensation bonding
requirements. No borrowings were outstanding as of
January 31, 2004, 2003 or 2002, and $5.3 million was
available at January 31, 2004. The credit agreement
contains certain restrictive covenants that, among
other things, require maintenance of certain levels of
net worth and working capital. Borrowings on the
credit line bore interest as of January 31, 2004, 2003
and 2002, at 4.00%, 4.25% and 4.75%, respectively. The
weighted-average interest rates for borrowing under
the short-term credit lines in fiscal 2003 and 2002
were 4.6% and 6.3%. There were no borrowings under the
credit line in fiscal 2004. Wells Fargo Bank N.A. provides the companys line of
credit. One member of the companys board of
directors is also on the board of directors of Wells
Fargo & Co., the parent company of Wells Fargo Bank
N.A. In connection with its fiscal 2002 acquisitions, the
company assumed $412,000 of capital lease obligations.
The capital lease obligations expire through 2006,
with annual payments of $72,000 and $57,000 due in
fiscal 2005 and 2006. The company believes the fair
value of its long-term debt approximates its carrying
value based on quoted market prices for similar debt. The company leases certain transportation, equipment
and facilities under operating leases. Total rent and
lease expense was $355,000, $446,000 and $575,000 in
fiscal 2004, 2003 and 2002, respectively. Future
minimum lease payments under non-cancelable operating
leases for fiscal periods 2005 to 2008 are $220,000,
$177,000, $154,000, and $137,000 with all leases
scheduled to expire by fiscal 2008. Note 11. Stock Options Senior officers and key employees of the company have
been granted options to purchase stock under the
companys 2000 Stock Option and Compensation Plan
(Plan). The Plan, administered by the board of
directors, allows for a fixed cash bonus when options
are exercised and may grant either incentive or
non-qualified options with terms not to exceed ten
years. There are 364,400 shares of the Companys
common stock reserved for issue under the plan at
January 31, 2004. Options are granted with exercise
prices not less than market value at the date of
grant. These stock options vest over a four-year
period and expire after five years. Options granted
after fiscal 1999 do not include a fixed cash bonus. Prior to fiscal year 2003, the company accounted for
the Plan under the recognition and measurement
provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, which utilized the
intrinsic value method to recognize compensation
expense. Compensation expense related to the Plans
cash bonus feature was $76,000 in fiscal 2002.
Effective February 1, 2002, the company adopted the
fair value recognition provisions of SFAS No. 123
Accounting for Stock-Based Compensation. Under the
modified prospective method of adoption selected by
the company pursuant to the provisions of SFAS No.
148, Accounting for Stock-Based
Compensation-Transition and Disclosure, compensation
cost recognized in fiscal year 2003 is the same as
that which would have been recognized had the
recognition provisions of SFAS No. 123 been applied
from its original effective date. Results for
the prior years have not been restated. The following
table illustrates the effect on net income and net
income per share if the fair
value based method had been applied to all outstanding
and unvested awards in each period. page 36 RAVEN2004 Annual Report




---



##### 



For the years ended January 31Dollars in thousands,except per-share amounts
    
    2004
    
    2003
    
    2002Net income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects
    
    
    
    
    
    
    
    
    
    
    50Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    
    
    
    
    
    
    
    
    (95
    )Pro forma net income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,802Net income per share:Basic  as reported
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95Basic  pro forma
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95Diluted  as reported
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.93Diluted  pro forma
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.93
 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 1.3-4.8%; expected volatility of 26-36%;
risk-free interest rate of 3.0-6.2%; and expected
lives of 4.5 years. The weighted average grant date
fair value of each option granted was $8.22, $3.77 and
$2.17 in fiscal 2004, 2003 and 2002, respectively. Compensation expense is recognized
ratably over the four-year vesting period. Expense for fiscal years 2004 and 2003 was
$282,000 and $174,000, respectively. Information regarding option activity follows: For the years ended January 312004
    
    2003
    
    2002weighted
    
    
    
    
    
    weighted
    
    
    
    
    
    weightedaverage
    
    
    
    
    
    average
    
    
    
    
    
    averageexercise
    
    
    
    
    
    exercise
    
    
    
    
    
    exerciseoptions
    
    price
    
    options
    
    price
    
    options
    
    priceOutstanding
at beginning
of year
    
    
    436,056
    
    
    $
    7.43
    
    
    
    551,304
    
    
    $
    6.09
    
    
    
    701,250
    
    
    $
    5.98Granted
    
    
    64,500
    
    
    
    27.00
    
    
    
    76,400
    
    
    
    14.00
    
    
    
    88,400
    
    
    
    8.75Exercised
    
    
    (137,218
    )
    
    
    5.21
    
    
    
    (176,946
    )
    
    
    6.18
    
    
    
    (219,672
    )
    
    
    6.77Forfeited
    
    
    (1,500
    )
    
    
    5.29
    
    
    
    (14,702
    )
    
    
    6.27
    
    
    
    (18,674
    )
    
    
    6.23Outstanding
at end
of year
    
    
    361,838
    
    
    $
    11.77
    
    
    
    436,056
    
    
    $
    7.43
    
    
    
    551,304
    
    
    $
    6.09Options
exercisable at
year-end
    
    
    163,304
    
    
    $
    7.13
    
    
    
    207,073
    
    
    $
    5.55
    
    
    
    282,322
    
    
    $
    5.83
 The following table contains information about
stock options outstanding at January 31, 2004: RemainingExercise
    
    Contractual
    
    Number
    
    NumberPrice
    
    Life (Years)
    
    Outstanding
    
    Exercisable$
    4.75
    
    
    
    0.75
    
    
    
    28,050
    
    
    
    28,0505.33
    
    
    
    1.75
    
    
    
    108,838
    
    
    
    74,1298.75
    
    
    
    2.75
    
    
    
    84,050
    
    
    
    42,02514.00
    
    
    
    3.75
    
    
    
    76,400
    
    
    
    19,10027.00
    
    
    
    4.75
    
    
    
    64,500
    
    
    
    361,838
    
    
    
    163,304
 Note 12. Net Income Per Share Basic net income per share is computed by dividing net
income by the weighted-average common shares
outstanding. Common shares outstanding represent
common shares issued less shares purchased and held in
treasury. Share and per-share data in the net income
per-share computation have been restated to reflect
the January 15, 2003 two-for-one stock split and the
July 13, 2001 three-for-two stock split. Diluted net
income per-share is computed by dividing net income by
the weighted-average common and common equivalent
shares outstanding, which includes the shares issuable
upon exercise of employee stock options, net of shares
assumed purchased with the option proceeds. Certain
outstanding options were excluded from the diluted net
income per-share calculations because their exercise
prices were greater than the average market price of
the companys common stock during those periods. For
fiscal 2004, 2003 and 2002, 16,125, 19,100 and 22,100
options, respectively, were excluded from the diluted
net income per-share calculation. Details of the
computation are presented below. For the years ended January 31Dollars in thousands, except per-share amounts
    
    2004
    
    2003
    
    2002Net income
    
    $
    13,836
    
    
    $
    11,185
    
    
    $
    8,847Weighted-average common shares
outstanding
    
    
    9,040,856
    
    
    
    9,151,465
    
    
    
    9,310,590Dilutive impact of stock options
    
    
    203,934
    
    
    
    196,360
    
    
    
    181,004Weighted-average common and
common-equivalent shares
outstanding
    
    
    9,244,790
    
    
    
    9,347,825
    
    
    
    9,491,594Net income per common share: basic
    
    $
    1.53
    
    
    $
    1.22
    
    
    $
    0.95 diluted
    
    $
    1.50
    
    
    $
    1.20
    
    
    $
    0.93
 RAVEN2004 Annual Report page 37




---



##### 



Notes
to Financial Statements (continued) Note 13. Business Segments and Major Customer
Information The companys reportable segments are defined by their
common technologies, production processes and
inventories. These segments reflect the organization
of the company into three Raven divisions, each with a
Divisional Vice President, and one subsidiary. In the
second quarter of fiscal 2002, the electronics
manufacturing services operation of Beta Raven was
combined with the Electronic Systems segment. The
Industrial Controls Division of Beta Raven, sold in
fiscal 2003, is included under the caption Sold
Businesses. The company measures the performance of
its segments based on their operating income exclusive
of administrative and general expenses. The accounting
policies of the operating segment are the same as
those described in Note 1, Summary of Significant
Accounting Policies. Other income, interest expense
and income taxes are not allocated to individual
operating segments, and assets not identifiable to an
individual segment are included as corporate assets.
Segment information is reported consistent with the
companys management reporting structure as required
by SFAS No. 131 Disclosures about Segments of an
Enterprise and Related Information. In fiscal 2003,
one customer in the Electronic Systems segment
accounted for $12.9 million, or 10.7%, of the
companys consolidated sales, although no customer
accounted for more than 10% of accounts receivable. No
customers accounted for more than 10% of the companys
consolidated sales or accounts receivable in any of
the other years presented. The company had sales of $9.2 million for the year
ended January 31, 2004, to countries outside the
United States, primarily to Canada. Sales were
included in the Flow Controls, Engineered Films,
Electronic Systems and Aerostar segments totaling $3.5
million, $1.1 million, $4.1 million and $492,000,
respectively. Market and segment information is presented on pages
1 and 16 of this annual report. Note 14. Subsequent Event The company announced on March 9, 2004, that it would
pay a special one-time dividend of $1.25 per share on
May 20, 2004. Based on current shares outstanding,
the one-time dividend will total approximately $11
million. Note 15. Quarterly Information (Unaudited) The companys quarterly information is presented on
page 26. page 38 RAVEN2004 Annual Report




---



##### 



Report of Independent Auditors To the Board of Directors and Shareholders of Raven Industries, Inc.: In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders equity and comprehensive
income and of cash flows present fairly, in all material respects, the
financial position of Raven Industries, Inc. as of January 31, 2004, 2003 and
2002, and the results of its operations and its cash flow for each of the three
years in the period ended January 31, 2004, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of Raven Industries, Inc.s management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
presentation. We believe that our audits provide a reasonable basis for our
opinion. (PRICEWATERHOUSECOOPERS LLP)
Minneapolis Minnesota
March 8, 2004 RAVEN2004 Annual Report page 39




---



##### 



Investor Information Independent Auditors PricewaterhouseCoopers LLP
Minneapolis, MN Stock Transfer Agent & Registrar Wells Fargo Bank, N.A.
161 N. Concord Exchange
P.O. Box 64854
S. St. Paul, MN 55164-0854 
Phone: 1-800-468-9716 Form 10-K Upon written request, Raven Industries, Inc.s
form 10-K for the fiscal year ended January 31,
2004, which has been filed with the Securities
and Exchange Commission, is available free of
charge. Direct inquires to:Raven Industries, Inc.
Attention: Investor Relations 
P.O. Box 5107 
Sioux Falls, SD 57117-5107
Phone: 605-336-2750 Raven Website www.ravenind.com Stock Quotations Listed on the Nasdaq Stock MarketRAVN Annual Meeting May 26, 2004, 9:00 a.m. 
Ramkota Inn
Hwy 38 & I-29 
Sioux Falls, SD Raven Industries, Inc. is an Equal
Employment Opportunity Employer with an
approved affirmative action plan. Dividend Reinvestment Plan Raven Industries, Inc. sponsors a Dividend
Reinvestment Plan whereby shareholders can
purchase additional Raven common stock without
the payment of any brokerage commission or fees.
For more information on how you can take
advantage of this plan, contact your broker, our
stock transfer agent or write: Investor
Relations; P.O. Box 5107, Sioux Falls, SD
57117-5107 SIC Codes: 3672,3081, 3829 FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act provides a safe harbor for
forward-looking statements. Certain information included in this Annual Report
and other materials filed or to be filed by the company with the Securities
and Exchange Commission (as well as information
included in statements made or to be made by the company) contains statements
that are forward-looking. Although the company believes that the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, there is no assurance that such expectations will be achieved.
Such assumptions involve important risks and uncertainties that could
significantly affect results in the future. These risks and uncertainties
include, but are not limited to, those relating to weather conditions, which
could affect certain of the companys primary markets, such as agriculture and
construction, or changes in competition, material availability, technology or
relationships with the companys largest customers, any of which could
adversely impact any of the companys product lines. The foregoing list is not
exhaustive and the company disclaims any obligation to subsequently revise any
forward-looking statements to reflect events or circumstances after the date
of such statements. Design: Creative Design Board, Chicago, IL