##### 



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. (PICTURE) Operating Unit Products Markets Competitive Strengths Flow Controls  Computerized control hardware  Agriculture
OEMs and sprayer  Market leader for and software for precision farming            manufacturers
ag sprayer controls · Leading developer of  Agricultural
equipment after  Strong brand recognition and GPS-based control systems            market distribution
network · Precision application of
pesticides,  Marine navigation  Wide range of
precision fertilizer and road de-icers            agricultural products
Engineered Films
 Rugged reinforced plastic  Manufactured housing and RVs Vertically integrated
sheeting . Temporary grain covers for            manufacturing capabilities
agriculture  Broad product line ·
Temporary building construction 
Superior target marketing enclosures  High productivity and ·
Pond lining and containment
for            low-cost structure oil exploration
Electronic Systems
 Electronics Manufacturing Primarily industrial OEMs in Advanced manufacturing,
Services (EMS)North Americatechnology
 Fortune 500 companies that Full-service provider, from
contract their low-volume,engineering and manufacturing
high-mix productionto customer service
 ISO 9001
Military cargo parachutes  US and foreign governments Reputation for innovation and
Government service uniforms  NASA            quality
High-altitude research balloons  Promotional and advertising * Solesourceinusfor scientific
Custom-shaped inflatables            markets, including Disney balloons
and Macys Best technology Raven2005 Annual Report                    page 1




---



##### 



Eleven-Year Financial Summary For the years ended January 31,Dollars in thousands, except per-share data
    
    2005
    
    
    2004
    
    
    2003OPERATIONS FOR THE YEARNet salesOngoing operations
    
    $
    168,086
    
    
    $
    142,727
    
    
    $
    119,589Sold businesses(a)
    
    
    
    
    
    
    
    
    
    
    1,314Total
    
    
    168,086
    
    
    
    142,727
    
    
    
    120,903Gross profit
    
    
    43,200
    
    
    
    33,759
    
    
    
    27,515Operating incomeOngoing operations
    
    
    27,862
    
    
    
    21,981
    
    
    
    16,861Sold businesses(a)
    
    
    
    
    
    
    (355
    )
    
    
    204Total
    
    
    27,862
    
    
    
    21,626
    
    
    
    17,065Income before income taxes
    
    
    27,955
    
    
    
    21,716
    
    
    
    17,254Net income
    
    $
    17,891
    
    
    $
    13,836
    
    
    $
    11,185Net income % of sales
    
    
    10.6
    %
    
    
    9.7
    %
    
    
    9.3
    %Net income % of beginning equity
    
    
    26.9
    %
    
    
    23.8
    %
    
    
    21.5
    %Cash dividends
    
    $
    15,298
    (b)
    
    $
    3,075
    
    
    $
    2,563FINANCIAL POSITIONCurrent assets
    
    $
    61,592
    
    
    $
    55,710
    
    
    $
    49,351Current liabilities
    
    
    20,950
    
    
    
    11,895
    
    
    
    13,167Working capital
    
    $
    40,642
    
    
    $
    43,815
    
    
    $
    36,184Current ratio
    
    
    2.94
    
    
    
    4.68
    
    
    
    3.75Property, plant and equipment
    
    $
    19,964
    
    
    $
    15,950
    
    
    $
    16,455Total assets
    
    
    88,509
    
    
    
    79,508
    
    
    
    72,816Long-term debt, less current portion
    
    
    
    
    
    
    57
    
    
    
    151Shareholders equity
    
    $
    66,082
    
    
    $
    66,471
    
    
    $
    58,236Long-term debt / total capitalization
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.3
    %Inventory turnover (CGS / year-end inventory)
    
    
    5.4
    
    
    
    6.5
    
    
    
    4.4CASH FLOWS PROVIDED BY (USED IN)Operating activities
    
    $
    18,871
    
    
    $
    19,732
    
    
    $
    12,735Investing activities
    
    
    (7,631
    )
    
    
    (4,352
    )
    
    
    (9,166
    )Financing activities
    
    
    (19,063
    )
    
    
    (6,155
    )
    
    
    (5,830
    )Increase (decrease) in cash and cash equivalents
    
    
    (7,823
    )
    
    
    9,225
    
    
    
    (2,261
    )COMMON STOCK DATANet income per share  basic
    
    $
    0.99
    
    
    $
    0.77
    
    
    $
    0.61Net income per share  diluted
    
    
    0.97
    
    
    
    0.75
    
    
    
    0.60Cash dividends per share
    
    
    0.85
    (b)
    
    
    0.17
    
    
    
    0.14Book value per share
    
    
    3.67
    
    
    
    3.68
    
    
    
    3.21Stock price range during yearHigh
    
    $
    26.94
    
    
    $
    15.23
    
    
    $
    9.20Low
    
    
    13.08
    
    
    
    7.56
    
    
    
    4.38Close
    
    $
    18.38
    
    
    $
    14.11
    
    
    $
    7.91Shares outstanding, year-end (in thousands)
    
    
    17,999
    
    
    
    18,041
    
    
    
    18,133Number of shareholders, year-end
    
    
    6,269
    
    
    
    3,560
    
    
    
    2,781OTHER DATAPrice / earnings ratio
    
    
    18.9
    
    
    
    18.8
    
    
    
    13.2Average number of employees
    
    
    807
    
    
    
    770
    
    
    
    758Sales per employee
    
    $
    208
    
    
    $
    185
    
    
    $
    160Backlog
    
    $
    43,646
    
    
    $
    47,120
    
    
    $
    42,826
 All per-share, shares outstanding and market price data reflect the October 2004 two-for-one
stock split, 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 a special dividend of $.625 per share that was paid during the second quarter
of fiscal 2005. page 14




---



##### 



For the years ended January 31,2002(h)
    
    
    2001(h)
    
    
    2000(h)
    
    
    1999(h)
    
    
    1998(h)
    
    
    1997(h)
    
    
    1996(h)
    
    
    1995(h)$
    112,018
    
    
    $
    113,360
    
    
    $
    107,862
    
    
    $
    108,408
    
    
    $
    104,489
    
    
    $
    101,869
    
    
    $
    84,379
    
    
    $
    87,4586,497
    
    
    
    19,498
    
    
    
    42,523
    
    
    
    46,798
    
    
    
    47,679
    
    
    
    39,576
    
    
    
    38,010
    
    
    
    35,889118,515
    
    
    
    132,858
    
    
    
    150,385
    
    
    
    155,206
    
    
    
    152,168
    
    
    
    141,445
    
    
    
    122,389
    
    
    
    123,34723,851
    
    
    
    21,123
    
    
    
    24,217
    
    
    
    24,441
    
    
    
    24,929
    
    
    
    25,287
    
    
    
    22,660
    
    
    
    23,96813,788
    
    
    
    7,417
    (c)
    
    
    7,971
    
    
    
    8,220
    
    
    
    9,555
    
    
    
    9,321
    
    
    
    7,692
    
    
    
    10,470(613
    )
    
    
    3,331
    (d)
    
    
    2,606
    (e)
    
    
    1,453
    
    
    
    1,007
    
    
    
    2,650
    
    
    
    1,869
    
    
    
    466
    (g)13,175
    
    
    
    10,748
    
    
    
    10,577
    
    
    
    9,673
    
    
    
    10,562
    
    
    
    11,971
    
    
    
    9,561
    
    
    
    10,93613,565
    
    
    
    10,924
    
    
    
    10,503
    
    
    
    9,649
    
    
    
    12,540
    (f)
    
    
    11,915
    
    
    
    9,566
    
    
    
    9,372$
    8,847
    
    
    $
    6,411
    (c)(d)
    
    $
    6,762
    (e)
    
    $
    6,182
    
    
    $
    8,062
    
    
    $
    7,688
    
    
    $
    6,197
    
    
    $
    6,088
    (g)7.5
    %
    
    
    4.8
    %
    
    
    4.5
    %
    
    
    4.0
    %
    
    
    5.3
    %
    
    
    5.4
    %
    
    
    5.1
    %
    
    
    4.9
    %18.4
    %
    
    
    11.8
    %
    
    
    10.9
    %
    
    
    10.0
    %
    
    
    14.2
    %
    
    
    15.6
    %
    
    
    13.6
    %
    
    
    14.8
    %$
    2,371
    
    
    $
    2,399
    
    
    $
    2,895
    
    
    $
    2,944
    
    
    $
    2,709
    
    
    $
    2,367
    
    
    $
    2,130
    
    
    $
    1,843$
    45,308
    
    
    $
    51,817
    
    
    $
    55,371
    
    
    $
    60,279
    
    
    $
    57,285
    
    
    $
    56,696
    
    
    $
    45,695
    
    
    $
    43,79513,810
    
    
    
    13,935
    
    
    
    14,702
    
    
    
    15,128
    
    
    
    17,816
    
    
    
    20,016
    
    
    
    14,771
    
    
    
    15,078$
    31,498
    
    
    $
    37,882
    
    
    $
    40,669
    
    
    $
    45,151
    
    
    $
    39,469
    
    
    $
    36,680
    
    
    $
    30,924
    
    
    $
    28,7173.28
    
    
    
    3.72
    
    
    
    3.77
    
    
    
    3.98
    
    
    
    3.22
    
    
    
    2.83
    
    
    
    3.09
    
    
    
    2.90$
    14,059
    
    
    $
    11,647
    
    
    $
    15,068
    
    
    $
    19,563
    
    
    $
    19,817
    
    
    $
    18,142
    
    
    $
    18,069
    
    
    $
    18,57067,836
    
    
    
    65,656
    
    
    
    74,047
    
    
    
    83,657
    
    
    
    82,066
    
    
    
    80,662
    
    
    
    67,553
    
    
    
    65,636280
    
    
    
    2,013
    
    
    
    3,024
    
    
    
    4,572
    
    
    
    1,128
    
    
    
    3,181
    
    
    
    2,816
    
    
    
    4,179$
    52,032
    
    
    $
    47,989
    
    
    $
    54,519
    
    
    $
    62,293
    
    
    $
    61,563
    
    
    $
    56,729
    
    
    $
    49,151
    
    
    $
    45,5260.5
    %
    
    
    4.0
    %
    
    
    5.3
    %
    
    
    6.8
    %
    
    
    1.8
    %
    
    
    5.3
    %
    
    
    5.4
    %
    
    
    8.4
    %5.0
    
    
    
    5.9
    
    
    
    5.2
    
    
    
    4.9
    
    
    
    4.8
    
    
    
    4.5
    
    
    
    4.1
    
    
    
    4.4$
    18,496
    
    
    $
    9,441
    
    
    $
    10,375
    
    
    $
    8,326
    
    
    $
    9,274
    
    
    $
    7,088
    
    
    $
    9,687
    
    
    $
    7,452(13,152
    )
    
    
    9,752
    
    
    
    6,323
    
    
    
    (3,127
    )
    
    
    (4,979
    )
    
    
    (5,090
    )
    
    
    (4,158
    )
    
    
    (10,000
    )(8,539
    )
    
    
    (14,227
    )
    
    
    (16,326
    )
    
    
    (2,714
    )
    
    
    (4,884
    )
    
    
    (2,363
    )
    
    
    (4,029
    )
    
    
    406(3,195
    )
    
    
    4,966
    
    
    
    372
    
    
    
    2,485
    
    
    
    (589
    )
    
    
    (365
    )
    
    
    1,500
    
    
    
    (2,142
    )$
    0.48
    
    
    $
    0.31
    
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    0.28
    
    
    $
    0.27
    
    
    $
    0.22
    
    
    $
    0.220.47
    
    
    
    0.31
    
    
    
    0.26
    
    
    
    0.22
    
    
    
    0.28
    
    
    
    0.27
    
    
    
    0.22
    
    
    
    0.210.13
    
    
    
    0.12
    
    
    
    0.11
    
    
    
    0.10
    
    
    
    0.09
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.072.82
    
    
    
    2.53
    
    
    
    2.32
    
    
    
    2.21
    
    
    
    2.13
    
    
    
    1.96
    
    
    
    1.74
    
    
    
    1.60$
    5.88
    
    
    $
    3.48
    
    
    $
    3.04
    
    
    $
    3.79
    
    
    $

    4.29
    
    
    $
    3.92
    
    
    $
    3.46
    
    
    $
    4.083.02
    
    
    
    1.88
    
    
    
    2.25
    
    
    
    2.54
    
    
    
    3.27
    
    
    
    2.67
    
    
    
    2.58
    
    
    
    3.00$
    5.64
    
    
    $
    3.04
    
    
    $
    2.40
    
    
    $
    2.67
    
    
    $
    3.77
    
    
    $
    3.75
    
    
    $
    3.21
    
    
    $
    3.1318,424
    
    
    
    18,956
    
    
    
    23,496
    
    
    
    28,164
    
    
    
    28,944
    
    
    
    29,016
    
    
    
    28,296
    
    
    
    28,4102,387
    
    
    
    2,460
    
    
    
    2,749
    
    
    
    3,014
    
    
    
    3,221
    
    
    
    3,011
    
    
    
    3,190
    
    
    
    3,03112.1
    
    
    
    9.8
    
    
    
    9.2
    
    
    
    12.4
    
    
    
    13.7
    
    
    
    13.9
    
    
    
    14.9
    
    
    
    14.9838
    
    
    
    1,043
    
    
    
    1,320
    
    
    
    1,445
    
    
    
    1,511
    
    
    
    1,387
    
    
    
    1,368
    
    
    
    1,414$
    141
    
    
    $
    127
    
    
    $
    114
    
    
    $
    107
    
    
    $
    101
    
    
    $
    102
    
    
    $
    89
    
    
    $
    87$
    33,834
    
    
    $
    38,239
    
    
    $
    44,935
    
    
    $
    47,431
    
    
    $
    47,154
    
    
    $
    38,102
    
    
    $
    32,539
    
    
    $
    29,661
   (c)
    
    Includes $2.6 million of business repositioning charges, net of gains on plant sales,
primarily in Electronic Systems Division and Aerostar.(d)
    
    Includes the $3.1 million pretax gain ($1.4 million net of tax) on the sale of the
companys Plastic Tank Division.(e)
    
    Includes the $1.2 million pretax gain ($764,000 net of tax) on the sale of assets of
the companys Glasstite subsidiary.(f)
    
    Includes the $1.8 million pretax gain ($1.2 million net of tax) on sale of an
investment in an affiliate.(g)
    
    Includes $1.8 million of business repositioning charges at the companys Beta Raven
Industrial Controls Division.(h)
    
    Amounts for these years are unaudited. Raven2005 Annual Report                     page 15




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##### 



Business Segments For the years ended January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003
    
    

2002(j)
    
    

2001(j)
    
    
    2000(j)FLOW CONTROLS DIVISIONSales
    
    $
    40,726
    
    
    $
    35,059
    
    
    $
    28,496
    
    
    $
    23,178
    
    
    $
    16,758
    
    
    $
    13,520Operating income
    
    
    10,516
    (a)
    
    
    8,254
    
    
    
    6,897
    
    
    
    5,509
    (c)
    
    
    3,985
    
    
    
    2,873Assets
    
    
    23,701
    
    
    
    19,304
    
    
    
    21,483
    
    
    
    20,313
    
    
    
    9,578
    
    
    
    7,096Capital expenditures
    
    
    1,372
    
    
    
    341
    
    
    
    729
    
    
    
    677
    
    
    
    327
    
    
    
    202Depreciation & amortization
    
    
    876
    
    
    
    1,004
    
    
    
    948
    
    
    
    443
    
    
    
    353
    
    
    
    351ENGINEERED FILMS DIVISIONSales
    
    $
    58,657
    
    
    $
    42,636
    
    
    $
    35,096
    
    
    $
    35,796
    
    
    $
    35,403
    
    
    $
    30,868Operating income
    
    
    15,739
    
    
    
    10,563
    
    
    
    10,030
    
    
    
    8,257
    
    
    
    7,397
    
    
    
    6,274Assets
    
    
    25,181
    
    
    
    15,941
    
    
    
    17,244
    
    
    
    13,691
    
    
    
    11,520
    
    
    
    12,001Capital expenditures
    
    
    3,960
    
    
    
    712
    
    
    
    4,080
    
    
    
    3,178
    
    
    
    633
    
    
    
    764Depreciation & amortization
    
    
    1,403
    
    
    
    1,611
    
    
    
    1,475
    
    
    
    1,001
    
    
    
    946
    
    
    
    993ELECTRONIC SYSTEMS DIVISIONSales
    
    $
    47,049
    
    
    $
    44,307
    
    
    $
    38,589
    
    
    $
    32,289
    
    
    $
    32,039
    
    
    $
    30,176Operating income (loss)
    
    
    4,492
    
    
    
    5,797
    
    
    
    4,022
    
    
    
    2,264
    
    
    
    (542
    )(e)
    
    
    1,632Assets
    
    
    17,382
    
    
    
    14,975
    
    
    
    14,528
    
    
    
    13,910
    
    
    
    15,359
    
    
    
    18,846Capital expenditures
    
    
    1,201
    
    
    
    841
    
    
    
    395
    
    
    
    774
    
    
    
    1,492
    
    
    
    1,168Depreciation & amortization
    
    
    880
    
    
    
    850
    
    
    
    978
    
    
    
    1,101
    
    
    
    1,089
    
    
    
    1,032AEROSTARSales
    
    $
    21,654
    
    
    $
    20,725
    
    
    $
    17,408
    
    
    $
    20,755
    
    
    $
    29,160
    
    
    $
    33,298Operating income
    
    
    3,609
    
    
    
    3,092
    (b)
    
    
    1,012
    
    
    
    2,907
    (d)
    
    
    2,996
    
    
    
    3,282Assets
    
    
    7,492
    
    
    
    7,756
    
    
    
    7,032
    
    
    
    7,150
    
    
    
    8,872
    
    
    
    12,778Capital expenditures
    
    
    542
    
    
    
    1,130
    
    
    
    570
    
    
    
    256
    
    
    
    163
    
    
    
    145Depreciation & amortization
    
    
    389
    
    
    
    436
    
    
    
    374
    
    
    
    347
    
    
    
    367
    
    
    
    454SOLD BUSINESSES(h)Sales
    
    $
    
    
    
    $
    
    
    
    $
    1,314
    
    
    $
    6,497
    
    
    $
    19,498
    
    
    $
    42,523Operating income (loss)
    
    
    
    
    
    
    (355
    )
    
    
    204
    
    
    
    (613
    )
    
    
    3,331
    (f)
    
    
    2,606
    (g)Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,102
    
    
    
    4,805
    
    
    
    13,475Capital expenditures
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    52
    
    
    
    246
    
    
    
    1,172Depreciation & amortization
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    76
    
    
    
    718
    
    
    
    1,831REPORTABLE SEGMENTS TOTALSales
    
    $
    168,086
    
    
    $
    142,727
    
    
    $
    120,903
    
    
    $
    118,515
    
    
    $
    132,858
    
    
    $
    150,385Operating income
    
    
    34,356
    (a)
    
    
    27,351
    (b)
    
    
    22,165
    
    
    
    18,324
    (c,d)
    
    
    17,167
    (e,f)
    
    
    16,667
    (g)Assets
    
    
    73,756
    
    
    
    57,976
    
    
    
    60,287
    
    
    
    56,166
    
    
    
    50,134
    
    
    
    64,196Capital expenditures
    
    
    7,075
    
    
    
    3,024
    
    
    
    5,781
    
    
    
    4,937
    
    
    
    2,861
    
    
    
    3,451Depreciation & amortization
    
    
    3,548
    
    
    
    3,901
    
    
    
    3,795
    
    
    
    2,968
    
    
    
    3,473
    
    
    
    4,661CORPORATE & OTHER(i)Operating (loss)
    
    $
    (6,494
    )
    
    $
    (5,725
    )
    
    $
    (5,100
    )
    
    $
    (5,149
    )
    
    $
    (6,419
    )
    
    $
    (6,090
    )Assets
    
    
    14,753
    
    
    
    21,532
    
    
    
    12,529
    
    
    
    11,670
    
    
    
    15,522
    
    
    
    9,851Capital expenditures
    
    
    466
    
    
    
    306
    
    
    
    252
    
    
    
    157
    
    
    
    229
    
    
    
    188Depreciation & amortization
    
    
    293
    
    
    
    244
    
    
    
    171
    
    
    
    177
    
    
    
    194
    
    
    
    223TOTAL COMPANYSales
    
    $
    168,086
    
    
    $
    142,727
    
    
    $
    120,903
    
    
    $
    118,515
    
    
    $
    132,858
    
    
    $
    150,385Operating income
    
    
    27,862
    (a)
    
    
    21,626
    (b)
    
    
    17,065
    
    
    
    13,175
    (c,d)
    
    
    10,748
    (e,f)
    
    
    10,577
    (g)Assets
    
    
    88,509
    
    
    
    79,508
    
    
    
    72,816
    
    
    
    67,836
    
    
    
    65,656
    
    
    
    74,047Capital expenditures
    
    
    7,541
    
    
    
    3,330
    
    
    
    6,033
    
    
    
    5,094
    
    
    
    3,090
    
    
    
    3,639Depreciation & amortization
    
    
    3,841
    
    
    
    4,145
    
    
    
    3,966
    
    
    
    3,145
    
    
    
    3,667
    
    
    
    4,884
   (a)
    
    Includes a $1.3 million pretax writeoff of assets related to the Fluent Systems product
line (See Note 4).(b)
    
    Includes $182,000 of pretax gain on plant sale.(c)
    
    Includes a $550,000 in-process research and development charge related to the Starlink
acquisition.(d)
    
    Includes $414,000 of pretax gains on plant sales.(e)
    
    Includes $1.8 million of business repositioning charges in the Electronic Systems
Division and $2.6 million for the total company.(f)
    
    Includes a $3.1 million pretax gain on the sale of the companys Plastic Tank Division.(g)
    
    Includes a $1.2 million pretax gain on the sale of the companys Glasstite business.(h)
    
    Operating income for sold businesses includes administrative expenses directly
attributable to the sold businesses.(i)
    
    Operating loss consists of administrative expenses  assets are principally cash,
investments, deferred taxes and notes receivable.(j)
    
    Amounts for 2002, 2001 and 2000 are unaudited. page 16




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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 312005
    
    
    2004
    
    
    2003%
    
    
    %
    
    
    
    
    
    
    %
    
    
    %
    
    
    
    
    
    
    %
    
    
    %Dollars in thousands, except per-share data
    
    
    
    
    
    Sales
    
    
    Change
    
    
    
    
    
    
    Sales
    
    
    Change
    
    
    
    
    
    
    Sales
    
    
    ChangeNet sales
    
    $
    168,086
    
    
    
    100.0
    
    
    
    +17.8
    
    
    $
    142,727
    
    
    
    100.0
    
    
    
    +18.1
    
    
    $
    120,903
    
    
    
    100.0
    
    
    
    + 2.0Gross profit
    
    
    43,200
    
    
    
    25.7
    
    
    
    +28.0
    
    
    
    33,759
    
    
    
    23.7
    
    
    
    +22.7
    
    
    
    27,515
    
    
    
    22.8
    
    
    
    +15.4Operating expenses
    
    
    14,056
    
    
    
    8.4
    
    
    
    +17.5
    
    
    
    11,960
    
    
    
    8.4
    
    
    
    +12.5
    
    
    
    10,629
    
    
    
    8.8
    
    
    
     3.7Loss (gain) on disposition of businesses
and assets
    
    
    1,282
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    (179
    )Operating income
    
    
    27,862
    
    
    
    16.6
    
    
    
    +28.8
    
    
    
    21,626
    
    
    
    15.2
    
    
    
    +26.7
    
    
    
    17,065
    
    
    
    14.1
    
    
    
    +29.5Income before income taxes
    
    
    27,955
    
    
    
    16.6
    
    
    
    +28.7
    
    
    
    21,716
    
    
    
    15.2
    
    
    
    +25.9
    
    
    
    17,254
    
    
    
    14.3
    
    
    
    +27.2Income taxes
    
    
    10,064
    
    
    
    6.0
    
    
    
    +27.7
    
    
    
    7,880
    
    
    
    5.5
    
    
    
    +29.8
    
    
    
    6,069
    
    
    
    5.0
    
    
    
    +28.6Net income
    
    $
    17,891
    
    
    
    10.6
    
    
    
    +29.3
    
    
    $
    13,836
    
    
    
    9.7
    
    
    
    +23.7
    
    
    $
    11,185
    
    
    
    9.3
    
    
    
    +26.4Net income per share  diluted
    
    $
    0.97
    
    
    
    
    
    
    
    +29.3
    
    
    $
    0.75
    
    
    
    
    
    
    
    +25.0
    
    
    $
    0.60
    
    
    
    
    
    
    
    +28.8Effective income tax rate
    
    
    36.0
    %
    
    
    
    
    
    
     0.8
    
    
    
    36.3
    %
    
    
    
    
    
    
    + 3.1
    
    
    
    35.2
    %
    
    
    
    
    
    
    + 1.1
 EXECUTIVE SUMMARY Consolidated Operating Results Fiscal 2005 was another record-breaking year for the company, exceeding fiscal 2004 record-setting
results with $17.9 million in net income and $0.97 of earnings per diluted share. This represents
growth in net income and diluted earnings per share of 29.3%. Net sales reached a record $168.1
million, surpassing fiscal 2004 by $25.4 million, or 17.8%. Driving the income and sales increases
were strong performances in the companys Engineered Films and Flow Controls segments. Results for
fiscal 2004 were also a record, with net income of $13.8 million, or $0.75 per diluted share. During fiscal 2005, the company split its stock two-for-one and paid dividends of 22 cents per
share, adjusted for the stock split, or 5 1/2 cents per quarter. A
one-time special dividend of 62 1/2 cents per share, which totaled
$11.3 million, was also distributed to shareholders. In fiscal 2004, the company increased its
quarterly dividend from 3 1/2 cents to 4 1/2 cents per share. Capital expenditures totaled $7.5 million for fiscal 2005, which was
significantly higher than the $3.3 million spent in fiscal 2004. Fiscal 2005 capital spending in
the Engineered Films segment to increase extrusion capacity totaled almost $4.0 million. Management has planned for another year of double-digit profit growth, based on continuing
agricultural demand for precision agriculture products and carryover demand for plastic sheeting,
with another year of record sales and profits in fiscal 2006. 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 fiscal 2003 and fiscal
2004, which are more fully explained under Divestitures and Repositioning Activities. The
companys high-altitude research balloon operation, formerly in the Engineered Films segment, is
included with Aerostar results as a result of a change in the companys organizational structure.
Prior year results have been reclassified to reflect this change. Fiscal 2005 versus fiscal 2004 Net sales of $168.1 million were 17.8% higher than fiscal 2004, with all segments recording
increases over their fiscal 2004 revenue levels. Operating income rose $6.2 million, reaching $27.9
million. Profit gains were a result of significant sales increases in the companys higher-margin
product lines. Flow Controls net sales of $40.7 million were $5.7 million, or 16.2% ahead of
fiscal 2004, due to the strong agricultural economy and new product introductions while operating
income rose 27.4% to $10.5 million. Engineered Films posted the largest revenue gain, increasing
net sales by 37.6%, or $16.0 million. The severe hurricane season resulted in disaster film sales
of $9.1 million in fiscal 2005. This segment also recorded the largest operating income gain of
$5.2 million, a 49.0% increase over fiscal 2004 results. Electronic Systems net sales of $47.0
million were $2.7 million higher than fiscal 2004, although the increase in revenue did not result
in positive profit growth. Electronic Systems operating income decreased $1.3 million from the
prior year due to unfavorable product mix and start-up issues with a new customer. Aerostar
recorded a modest net sales increase over fiscal 2004 of 4.5%, while operating income of $3.6
million rose 16.7%. Fiscal 2004 results include an operating loss of $355,000 for ongoing
environmental and legal liabilities associated with previously sold businesses. Raven2005 Annual Report                     page 17




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##### 



Fiscal 2004 versus fiscal 2003 Net sales of $142.7 million and operating income of $21.6 million represented 18.1% and 26.7%
growth over fiscal 2003. All segments achieved sales growth over fiscal 2003 and gains in operating
income were a result of increased gross profits in all the segments. An increase in special-order
chemical injection system sales and new product sales drove Flow Controls sales up to $35.1
million, a $6.6 million sales jump. Operating income in this segment reached $8.3 million.
Engineered Films sales of $42.6 million were up 21.5% over fiscal 2003, but material pricing
pressures kept operating income relatively flat at $10.6 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 executed a strong turnaround
in fiscal 2004, increasing sales from $17.4 million to $20.7 million, and increasing operating
income by $2.1 million to $3.1 million, largely due to a US Army cargo parachute contract. Fiscal
2004 results include an operating loss of $355,000 for ongoing environmental and legal liabilities
associated with previously sold businesses. Fiscal 2003 results include $1.3 million in net sales
and $204,000 of operating income related to operations of Sold Businesses. FISCAL 2005 PERFORMANCE MEASURES The companys net income as a percent of net sales has steadily risen over the last five years,
reaching 10.6% for fiscal 2005. In terms of average assets, net income was 21.3%. This highlights
the companys effective use of its assets to generate income. Finally, as a percent of beginning
equity for fiscal 2005, net income improved to 26.9%, generating shareholder value. 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net income as % ofNet sales
    
    
    10.6
    %
    
    
    9.7
    %
    
    
    9.3
    %
    
    
    7.5
    %
    
    
    4.8
    %
    
    
    4.5
    %Average assets
    
    
    21.3
    %
    
    
    18.2
    %
    
    
    15.9
    %
    
    
    13.3
    %
    
    
    9.2
    %
    
    
    8.6
    %Beginning equity
    
    
    26.9
    %
    
    
    23.8
    %
    
    
    21.5
    %
    
    
    18.4
    %
    
    
    11.8
    %
    
    
    10.9
    %
 DIVESTITURES AND OTHER REPOSITIONING ACTIVITIES During fiscal 2004 and 2003, the company 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. 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. page 18




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##### 



SEGMENT ANALYSIS SALES AND OPERATING INCOME BY SEGMENT 2005
    
    
    2004
    
    
    2003%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Dollars in thousands
    
    amount
    
    
    change
    
    
    amount
    
    
    change
    
    
    amount
    
    
    changeSALESFlow Controls
    
    $
    40,726
    
    
    
    +16.2
    
    
    $
    35,059
    
    
    
    +23.0
    
    
    $
    28,496
    
    
    
    +22.9Engineered Films
    
    
    58,657
    
    
    
    +37.6
    
    
    
    42,636
    
    
    
    +21.5
    
    
    
    35,096
    
    
    
    12.9Electronic Systems
    
    
    47,049
    
    
    
    + 6.2
    
    
    
    44,307
    
    
    
    +14.8
    
    
    
    38,589
    
    
    
    +19.5Aerostar
    
    
    21,654
    
    
    
    + 4.5
    
    
    
    20,725
    
    
    
    +19.1
    
    
    
    17,408
    
    
    
    +7.0Total ongoing
    
    
    168,086
    
    
    
    +17.8
    
    
    
    142,727
    
    
    
    +19.3
    
    
    
    119,589
    
    
    
    +6.8Sold businesses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    79.8Total
    
    $
    168,086
    
    
    
    +17.8
    
    
    $
    142,727
    
    
    
    +18.1
    
    
    $
    120,903
    
    
    
    +2.0
 2005
    
    
    2004
    
    
    2003%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Dollars in thousands
    
    amount
    
    
    sales
    
    
    amount
    
    
    sales
    
    
    amount
    
    
    salesOPERATING INCOME (LOSS)Flow Controls
    
    $
    10,516
    
    
    
    25.8
    
    
    $
    8,254
    
    
    
    23.5
    
    
    $
    6,897
    
    
    
    24.2Engineered Films
    
    
    15,739
    
    
    
    26.8
    
    
    
    10,563
    
    
    
    24.8
    
    
    
    10,030
    
    
    
    28.6Electronic Systems
    
    
    4,492
    
    
    
    9.5
    
    
    
    5,797
    
    
    
    13.1
    
    
    
    4,022
    
    
    
    10.4Aerostar
    
    
    3,609
    
    
    
    16.7
    
    
    
    3,092
    
    
    
    14.9
    
    
    
    1,012
    
    
    
    5.8Corporate expenses
    
    
    (6,494
    )
    
    
    
    
    
    
    (5,725
    )
    
    
    
    
    
    
    (5,100
    )Total ongoing
    
    
    27,862
    
    
    
    16.6
    
    
    
    21,981
    
    
    
    15.4
    
    
    
    16,861
    
    
    
    14.1Sold businesses
    
    
    
    
    
    
    
    
    
    
    (355
    )
    
    
    
    
    
    
    204Total
    
    $
    27,862
    
    
    
    16.6
    
    
    $
    21,626
    
    
    
    15.2
    
    
    $
    17,065
    
    
    
    14.1
 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.  (BAR CHART)
 Fiscal 2005 versus fiscal 2004 FCD increased sales 16.2% over fiscal 2004 to reach $40.7 million, despite the decrease of $6.0
million in sales recorded last year under a special order for chemical injection systems. Improved
farm incomes, new product sales, value-engineering activities, and an increase in market share
contributed to the fiscal 2005 revenue growth. As a percentage of net sales, gross profits
increased from 30.4% to 36.7%. Fiscal 2005 operating income of $10.5 million grew 27.4% due to the
higher sales level, high-margin product sales, and value engineering activities. The operating
income growth was tempered by a $1.3 million writeoff against inventory, fixed assets and
intangible assets from the segments December 2003 acquisition of Fluent Systems, LLC. Also,
selling expenses rose $729,000, or 30.4%, due to continued investment in the segments precision
agriculture distribution plan. 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.
   Prospects FCD continues to focus on gaining market share in the precision agriculture market; developing new,
innovative products; and improving its existing products through value-engineering efforts. New
product growth will be aided by the February 2005 acquisition of a Canadian company that has
developed an automatic boom height control system and market expansion into international markets,
particularly South America. These factors are expected to contribute to revenue growth in the
15-20% range in the upcoming year. Raven2005 Annual Report                     page 19




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##### 



ENGINEERED FILMS The Engineered Films Division (EFD) produces rugged reinforced plastic sheeting for industrial,
construction, manufactured housing and agriculture applications.  (BAR CHART)
 Fiscal 2005 versus fiscal 2004 Fiscal 2005 net sales of $58.7 million surpassed fiscal 2004 net sales by $16.0 million, or 37.6%.
As a result of the severe hurricane season, disaster film sales of $9.1 million, including $5.0
million of fourth-quarter shipments, boosted the sales level for the current fiscal year. The
segment also recorded fiscal 2005 net sales gains in the pit lining, manufactured housing, and
agricultural markets. Fiscal 2005 operating income climbed to $15.7 million, a $5.2 million, or
49.0%, increase over fiscal 2004 results. The profit impact of the higher sales level was partially
offset by increased selling expenses, which rose $461,000, or 21.3%, due to higher personnel and
advertising expenses. As a percentage of net sales, gross profits increased from 30.0% to 31.4%.
The fiscal 2005 gross profit rate reflects favorable plant utilization due to the higher sales
level that has been partially offset by higher raw material costs experienced by EFD in the current
fiscal year. Fiscal 2004 versus fiscal 2003 The segments net sales exceeded fiscal 2003 net sales by $7.5 million to reach $42.6 million.
Fiscal year 2004 saw an upturn in pit-lining, industrial-market and vapor-barrier sales.
Construction sales remained steady and agriculture sales increased. Despite the sales growth, gross
profits increased only 6.7%. Combined with a $231,000, or 12.0%, increase in selling expenses, operating income increased
$533,000. Selling expenses grew as a result of additional sales personnel as the division worked to
expand its new product sales and
market penetration. As a
percentage of net sales,
gross profits declined from
34.2% to 30.0%, reflecting
the fluctuation in raw
material costs between
the years.
   Prospects Additional extrusion capacity, which will be brought online at the beginning of fiscal 2006, will
enable EFD to continue its revenue growth in the markets it currently serves as well as open new
market possibilities. Absent reorders for hurricane film, sales growth could fall to the 5% range
in fiscal 2006. Volatility in resin prices could impact gross profit rates, although the segment
adjusts selling prices whenever possible to pass along the raw material cost increases. ELECTRONIC SYSTEMS The Electronic Systems Division (ESD) is a total-solutions provider of electronics manufacturing
services, primarily to North American original equipment manufacturers.  (BAR CHART)
 Fiscal 2005 versus fiscal 2004 Electronic Systems net sales for fiscal 2005 reached $47.0 million, an increase of $2.7 million,
or 6.2% over fiscal 2004 net sales.
Operating income fell
behind fiscal 2004 results,
decreasing by $1.3 million.
Fiscal 2005 net sales were
positively impacted by shipments made to a new
customer, although low
profit margins due to high
start-up costs did not result
in a corresponding increase
in operating income.
Slightly higher personnel
costs in fiscal 2005
accounted for selling
expenses increasing 6.9%
to $823,000. As a percentage of sales, gross profits declined to 11.3% as compared to 14.8% for fiscal 2004, reflecting the
start-up costs. Fiscal 2004 versus fiscal 2003 Segment 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. 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. The improvement was a result of production efficiencies and better
capacity utilization.
   page 20




---



##### 



Prospects ESDs business model of providing low-volume, high-mix contract manufacturing services continues to
serve the segment well, although increased manufacturing efficiencies will be sought in fiscal
2006. The segment will continue to focus on reducing cycle time in all areas of manufacturing and
looks for sales growth in the 10% range for fiscal 2006, with profit margins moving toward fiscal
2004 levels. AEROSTAR The Aerostar segment manufactures military cargo parachutes, government service uniforms,
custom-shaped inflatable products, and high-altitude balloons for public and commercial research.  (BAR CHART)
 Fiscal 2005 versus fiscal 2004 Aerostars fiscal 2005 net sales of $21.7 million were $929,000, or 4.5%, above fiscal 2004 net
sales. Sales growth in parachute products, military decoys, and uniforms were partially offset by
declines in the segments sales of hot-air balloons, commercial inflatable products, and
high-altitude research balloons. Fourth-quarter sales of $4.0 million were down 16.0% from the
prior year. The lower fourth-quarter sales reflect a reduced shipping schedule for Army cargo
parachutes and resulted in a $97,000 fourth-quarter operating loss. For the full year, fiscal 2005
operating income increased $517,000, or 16.7%, over fiscal 2004 results due to relatively high
profitability realized on the parachute products and military decoys. As a percentage of sales,
gross profit increased from 18.1% for fiscal 2004 to 21.1% for the current fiscal year. Selling
expenses rose to $950,000 in fiscal 2005, an increase of $117,000, or 14.0%. Most of the selling
expense increase was due to an increased emphasis on attaining government contract business. Fiscal 2004 versus fiscal 2003 Aerostar had a strong turnaround in fiscal 2004, pulling net sales up 19.1% over fiscal 2003
results to $20.7 million. Shipments under the US Army cargo parachute contract secured in fiscal
2003 increased $6.0 million, which offset the loss in sales from discontinued outerwear lines,
lower advertising-inflatables sales, and a decrease in research balloon sales of $1.1 million.
Operating income of $3.1 million displayed a similarly strong turnaround
as compared to operating income of $1.0 million 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.
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 11.7% to
18.1%, 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.
   Prospects The first half of fiscal 2006 will reflect substantially lower parachute shipments as compared to
the first six months of fiscal 2005. Interest in high-altitude research balloon projects is
increasing and may partially offset these losses. Fiscal 2006 results will depend on obtaining new
government contracts where Aerostar can leverage its capacity and
experience. Aerostar targets overall sales growth in the 5-10% range in
the coming fiscal year. Raven2005 Annual Report                     page 21




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##### 



(BAR CHART)
 EXPENSES, INCOME TAXES AND OTHER Corporate expenses increased 13.4% over fiscal 2004 to $6.5 million for fiscal 2005. Higher
professional service fees accounted for nearly half of the $769,000 increase, with the remaining
increase due to higher personnel costs. As a percentage of sales, corporate expenses were 3.9% of
net sales for fiscal
2005 as compared to fiscal 2004s
4.0% of net sales. Fiscal 2004 corporate expenses of $5.7 million increased 12.3% over fiscal 2003.
Personnel costs accounted for
nearly half of the growth, a result of additional staff and increased compensation and insurance
expenses. Fiscal 2005 interest expense of $35,000 decreased $36,000 from fiscal 2004 and consisted
of interest on capital leases and deferred acquisition
payments from the Starlink and System Integrators acquisitions.
No borrowings were made in fiscal 2005. For fiscal 2004, interest expense increased slightly from
$63,000 in fiscal 2003 to $70,000. In addition to interest incurred on the companys capital leases
and deferred acquisition payments during fiscal 2004, interest expense was recorded on payments
related to a previously accrued tax dispute settlement. Fiscal 2005 other income of $128,000
declined from $160,000 in fiscal 2004. The main component of other income is interest income, which
was reduced in fiscal 2005 due to lower cash levels that resulted from the $11.3 million special
dividend payout in May 2004. Fiscal 2005s effective income tax rate of 36.0% was slightly lower
than the 36.3% effective rate for fiscal 2004. Fiscal 2004s tax rate of 36.3% was higher than the
35.2% effective rate for fiscal 2003 due to state income taxes, higher nondeductible expenses, and
the impact of graduated rates.
   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
    
    2005
    
    
    2004
    
    
    2003Operating activities
    
    $
    18,871
    
    
    $
    19,732
    
    
    $
    12,735Investing activities
    
    
    (7,631
    )
    
    
    (4,352
    )
    
    
    (9,166
    )Financing activities
    
    
    (19,063
    )
    
    
    (6,155
    )
    
    
    (5,830
    )
 OPERATING ACTIVITIES AND CASH POSITION The companys cash flow from operations totaled $51.3 million over the past three years compared to
net income of $42.9 million over the same period. Cash flow from operations in fiscal 2005 totaled
$18.9 million, an $861,000 decrease as compared to cash inflows in fiscal 2004. The rise in net
income and higher accounts payable balances at fiscal 2005 year-end were offset by higher accounts
receivable and inventory levels. Fiscal 2005 net income was $4.1 million higher than fiscal 2004
while accounts payable increased by $6.6 million due to the higher inventory levels and to the
extenstion of payment terms on certain vendor invoices. Fiscal 2005s ending accounts receivable
balance was $25.4 million, an increase of nearly $7.0 million from fiscal 2004. Accounts receivable
balances for the companys Engineered Films and Flow Controls segments were substantially higher at
fiscal 2005 year-end as compared to their fiscal 2004 year-ending balances due to higher sales
levels. Fiscal 2005 inventory levels in Engineered Films, Electronic Systems, and Flow Controls
were up as compared to January 31, 2004, with Engineered Films accounting for over half of the
increase. Fiscal 2004 operating cash flows were $19.7 million as compared to cash flows of $12.7
million for fiscal 2003. The rise in net income and cash generated from inventory reductions were
the main drivers for the fiscal 2004 increase in operating cash flows as compared to fiscal 2003. Cash, cash equivalents and short-term investments totaled $9.6 million at January 31, 2005, which
represents an $8.8 million decrease from one year earlier. Higher working capital requirements,
increased capital expenditures, and the $11.3 million special dividend have generated the decline
in available cash at fiscal 2005 year-end. 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. The company utilized its short-term credit facility to fund the Flow
Controls Canadian acquisition in February 2005, borrowing
$3.0 million against its line of credit. page 22




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##### 



(BAR CHART)
 INVESTING ACTIVITIES The company used $7.6 million of cash for investing activities in fiscal 2005 versus $4.4 million
for fiscal 2004. Fiscal 2005 capital expenditures of $7.5 million increased by $4.2 million from
fiscal 2004, with over half of the investment being made in the Engineered Films segment for
additional extrusion capacity. A $650,000 investment was made during fiscal 2005 in an
unconsolidated real estate affiliate and $1.0 million of short-term investments were liquidated.
Fiscal 2004 cash used in investing
activities included the acquisition
of Fluent Systems, LLC for
$1.0 million and the purchase of a
formerly leased Aerostar facility
for $1.0 million. Short-term investments of $4.0 million were purchased in fiscal 2003 with excess
cash. Fiscal 2006 capital expenditures are planned to reach $10 million  primarily for additional
Engineered Films capacity.
   FINANCING ACTIVITIES Fiscal 2005 cash used in financing activities increased significantly to $19.1 million as compared
to $6.2 million expended in fiscal 2004. The increase in cash used was due primarily to the $11.3
million special dividend paid in May 2004. The companys main financing activities continue to be
the payment of dividends and the repurchase of company stock. The company increased its quarterly
dividend on a per-share basis for the eighteenth consecutive year. Dividends, excluding the special
62 1/2 cent dividend, increased 29.4% over fiscal 2004, and
purchases of 186,500 treasury shares at an average price of $18.87 were made during the year. In
fiscal 2004, 288,350 shares were repurchased at an average price of $10.64 while 502,460 shares at
an average price of $6.62 were repurchased in fiscal 2003. No borrowings were made in fiscal 2005. The remaining debt of the company consists of capital
leases assumed in the acquisition of Starlink that are scheduled to be repaid in fiscal 2006. The
company utilized its short-term credit facility early in fiscal 2006, borrowing in February 2005 to
fund its Flow Controls acquisition. Contractual obligations consist of capital leases and non-cancelable operating leases for
facilities and equipment, and unconditional purchase obligations primarily for raw materials.
Letters of credit have been issued for workers 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 companys 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. In fiscal
2005, the company entered into an agreement to purchase for $1.8 million a building to be used in
the Engineered Films segment. The agreement required an earnest payment of $25,000 at signing with
the remainder due upon closing, on or before May 1, 2006. A summary of the obligations and
commitments at January 31, 2005, for the next five years is shown below. FY 2007-
    
    
    FY 2009-Dollars in thousands
    
    Total
    
    
    FY 2006
    
    
    FY 2008
    
    
    FY 2010Contractual Obligations:Line of credit(a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital leases
    
    
    61
    
    
    
    61
    
    
    
    
    
    
    
    Operating leases
    
    
    562
    
    
    
    222
    
    
    
    329
    
    
    
    11Unconditional purchase
obligations
    
    
    16,952
    
    
    
    16,952
    
    
    
    
    
    
    
    Real estate purchase agreement
    
    
    1,775
    
    
    
    1,775
    
    
    
    
    
    
    
    19,350
    
    
    
    19,010
    
    
    
    329
    
    
    
    11Other Commercial Commitments:Letters of credit
    
    
    2,032
    
    
    
    2,032
    
    
    
    
    
    
    
    $
    21,382
    
    
    $
    21,042
    
    
    $
    329
    
    
    $
    11
   (a)
    
    $7.0 million line bears interest at 5.25% as of January 31, 2005, and expires May 2005. 
 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 2006 are forecast in the $10 million range, with over half
of these expenditures supporting Engineered Films with extrusion equipment and facilities capacity.
The company intends to return approximately 30% of its earnings to shareholders in the form of
dividends. 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. Although the cash generated
from operations and the availability of cash under existing credit facilities is anticipated to be
sufficient to fund these initiatives, the company has explored long-term debt financing. Raven2005 Annual Report                     page 23




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##### 



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. These policies are
discussed immediately below because a fluctuation in actual results versus expected results could
materially affect our operating results and because the policies require significant judgments and
estimates to be made. Our accounting related to these policies is initially based on our best
estimates at the time of original entry in our accounting records. Adjustments are periodically
recorded when our actual experience differs from the expected experience underlying the estimates.
These adjustments could be material if our experience were to change significantly in a short
period of time. 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.  (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 In November 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 151, Inventory
Costs  An Amendment of ARB No. 43, Chapter 4.SFAS No. 151 amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). In addition, SFAS No. 151
requires that allocation of fixed-production overheads to the costs of conversion be based on the
normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The company believes
that it is currently in compliance with SFAS No. 151 and does not expect adoption of this revised
statement to have a significant effect on consolidated results of operations or financial position. page 24




---



##### 



(BAR CHART)
 In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 153,
Exchanges of Nonmonetary Assets  An Amendment of APB Opinion No. 29.This statement amends APB
Opinion No. 29 and is based on the principle that exchanges of nonmonetary assets should be
measured on the fair value of the assets exchanged. SFAS 153 is effective for nonmonetary exchanges
occurring in fiscal periods beginning after June 15, 2005. The adoption of this statement will not
have a significant effect on the consolidated results of operations
or financial position. In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (Revised
2004), Share-Based Payment,or SFAS No. 123R, which is a revision of SFAS No. 123. SFAS No. 123R
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,and amends SFAS No. 95,
Statement of Cash Flows.SFAS No. 123R requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values. SFAS No. 123R is
effective for the company beginning July 1, 2005. The company began expensing stock options in
fiscal 2003 utilizing the modified prospective method and does not expect adoption of this revised
statement will have a significant effect on consolidated results of operations or financial
position.
   RECENTLY PASSED LEGISLATION On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the Act). The
Act provides a deduction for income from qualified domestic production activities, which will be
phased in from 2005 through 2010. In return, the Act also provides for a two-year phaseout of the
existing extraterritorial income exclusion (ETI) for foreign sales that was viewed to be
inconsistent with international trade protocols by the European Union. The company expects the net
effect of the phaseout of the ETI and the phase-in of this new deduction to result in a decrease in
the effective tax rate for fiscal years 2006 and 2007 of less than one percentage point, based on
current earnings levels. In the long term, the company expects that the new deduction will result
in a decrease of the annual effective tax rate by up to an additional two percentage points based
on current earnings levels. Under the guidance in FASB Staff Position No. FSP 109-1,
Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of 2004,the deduction
will be treated as a special deduction as described in FASB Statement No. 109. As such, the
special deduction has no effect on deferred tax assets and liabilities existing at the enactment
date. Rather, the impact of this deduction will be reported in the period in which the deduction is
claimed on our tax return. Raven2005 Annual Report                     page 25




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##### 



Monthly Closing Stock Price and Volume (BAR CHART) Quarterly Information (Unaudited) Net Income
    
    
    Common Stock
    
    
    CashDollars in thousands,
    
    Net
    
    
    Gross
    
    
    Operating
    
    
    Pretax
    
    
    Net
    
    
    Per Share(a)(b)
    
    
    Market Price(b)
    
    
    Dividendsexcept per-share data
    
    Sales
    
    
    Profit
    
    
    Income
    
    
    Income
    
    
    Income
    
    
    Basic
    
    
    Diluted
    
    
    High
    
    
    Low
    
    
    Per Share(b)FISCAL 2005First Quarter
    
    $
    38,408
    
    
    $
    11,678
    
    
    $
    8,451
    
    
    $
    8,475
    
    
    $
    5,415
    
    
    $
    0.30
    
    
    $
    0.29
    
    
    $
    17.17
    
    
    $
    13.65
    
    
    $
    0.055Second Quarter
    
    
    37,077
    
    
    
    8,759
    
    
    
    5,651
    
    
    
    5,677
    
    
    
    3,642
    
    
    
    0.20
    
    
    
    0.20
    
    
    
    19.43
    
    
    
    13.08
    
    
    
    0.680
    (c)Third Quarter
    
    
    48,597
    
    
    
    12,962
    
    
    
    8,099
    (d)
    
    
    8,115
    (d)
    
    
    5,194
    (d)
    
    
    0.29
    
    
    
    0.28
    
    
    
    23.89
    
    
    
    17.41
    

    
    
    0.055Fourth Quarter
    
    
    44,004
    
    
    
    9,801
    
    
    
    5,661
    
    
    
    5,688
    
    
    
    3,640
    
    
    
    0.20
    
    
    
    0.20
    
    
    
    26.94
    
    
    
    17.05
    
    
    
    0.055Total Year
    
    $
    168,086
    
    
    $
    43,200
    
    
    $
    27,862
    
    
    $
    27,955
    
    
    $
    17,891
    
    
    $
    0.99
    
    
    $
    0.97
    
    
    $
    26.94
    
    
    $
    13.08
    
    
    $
    0.845FISCAL 2004First Quarter
    
    $
    36,942
    
    
    $
    9,437
    
    
    $
    6,544
    
    
    $
    6,556
    
    
    $
    4,183
    
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    9.50
    
    
    $
    7.56
    
    
    $
    0.040Second Quarter
    
    
    36,110
    
    
    
    7,811
    
    
    
    4,937
    
    
    
    4,976
    
    
    
    3,163
    
    
    
    0.17
    
    
    
    0.17
    
    
    
    11.00
    
    
    
    7.90
    
    
    
    0.040Third Quarter
    
    
    36,081
    
    
    
    9,219
    
    
    
    6,121
    
    
    
    6,126
    
    
    
    3,902
    
    
    
    0.22
    
    
    
    0.21
    
    
    
    13.73
    
    
    
    10.62
    
    
    
    0.045Fourth Quarter
    
    
    33,594
    
    
    
    7,292
    
    
    
    4,024
    
    
    
    4,058
    
    
    
    2,588
    
    
    
    0.14
    
    
    
    0.14
    
    
    
    15.23
    
    
    
    11.89
    
    
    
    0.045Total Year
    
    $
    142,727
    
    
    $
    33,759
    
    
    $
    21,626
    
    
    $
    21,716
    
    
    $
    13,836
    
    
    $
    0.77
    
    
    $
    0.75
    
    
    $
    15.23
    
    
    $
    7.56
    
    
    $
    0.170FISCAL 2003First Quarter
    
    $
    30,974
    
    
    $
    8,150
    
    
    $
    5,304
    
    
    $
    5,320
    
    
    $
    3,458
    
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    6.09
    
    
    $
    4.38
    
    
    $
    0.035Second Quarter
    
    
    29,692
    
    
    
    5,996
    
    
    
    3,532
    
    
    
    3,569
    
    
    
    2,320
    
    
    
    0.13
    
    
    
    0.12
    
    
    
    7.22
    
    
    
    5.38
    
    
    
    0.035Third Quarter
    
    
    31,423
    
    
    
    7,332
    
    
    
    4,872
    
    
    
    4,939
    
    
    
    3,210
    
    
    
    0.18
    
    
    
    0.17
    
    
    
    7.00
    
    
    
    5.83
    
    
    
    0.035Fourth Quarter
    
    
    28,814
    
    
    
    6,037
    
    
    
    3,357
    
    
    
    3,426
    
    
    
    2,197
    
    
    
    0.12
    
    
    
    0.12
    
    
    
    9.20
    
    
    
    6.70
    
    
    
    0.035Total Year
    
    $
    120,903
    
    
    $
    27,515
    
    
    $
    17,065
    
    
    $
    17,254
    
    
    $
    11,185
    
    
    $
    0.61
    
    
    $
    0.60
    
    
    $
    9.20
    
    
    $
    4.38
    
    
    $
    0.140
   (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 October 2004 and January 2003
two-for-one stock splits.(c)
    
    A special dividend of $.625 per share was paid during the second quarter of fiscal
2005.(d)
    
    Includes a pretax $1.3 million ($845,000 net of tax) writeoff of assets related to the
Fluent Systems product line (See Note 4). page 26




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##### 



Managements Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over
financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our
internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. Management has assessed our internal control over financial reporting in relation to criteria
described in Internal Control  Integrated Framework,issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment using those criteria, we
concluded that, as of January 31, 2005, our internal control over financial reporting was
effective. Our managements assessment of the effectiveness of our internal control over financial reporting
as of January 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which appears on page 39 of this Annual Report. -s- Ronald M. Moquist
    
    -s- Thomas IacarellaRonald M. Moquist
    
    Thomas IacarellaPresident & Chief Executive Officer
    
    Vice President & Chief Financial OfficerMarch 24, 2005
 Raven2005 Annual Report                     page 27




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##### 



Consolidated Balance Sheets As of January 31Dollars in thousands, except per-share data
    
    2005
    
    
    2004
    
    
    2003ASSETSCurrent assetsCash and cash equivalents
    
    $
    6,619
    
    
    $
    14,442
    
    
    $
    5,217Short-term investments
    
    
    3,000
    
    
    
    4,000
    
    
    
    4,000Accounts receivable, net
    
    
    25,370
    
    
    
    18,454
    
    
    
    16,468Inventories, net
    
    
    23,315
    
    
    
    16,763
    
    
    
    21,366Deferred income taxes
    
    
    1,465
    
    
    
    1,313
    
    
    
    1,493Prepaid expenses and other current assets
    
    
    1,823
    
    
    
    738
    
    
    
    807Total current assets
    
    
    61,592
    
    
    
    55,710
    
    
    
    49,351Property, plant and equipment, net
    
    
    19,964
    
    
    
    15,950
    
    
    
    16,455Goodwill
    
    
    5,933
    
    
    
    6,776
    
    
    
    5,933Other assets, net
    
    
    1,020
    
    
    
    1,072
    
    
    
    1,077Total assets
    
    $
    88,509
    
    
    $
    79,508
    
    
    $
    72,816LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    57
    
    
    $
    72
    
    
    $
    119Accounts payable
    
    
    10,322
    
    
    
    3,666
    
    
    
    5,291Accrued liabilities
    
    
    9,716
    
    
    
    7,784
    
    
    
    7,157Customer advances
    
    
    855
    
    
    
    373
    
    
    
    600Total current liabilities
    
    
    20,950
    
    
    
    11,895
    
    
    
    13,167Long-term debt, less current portion
    
    
    
    
    
    
    57
    
    
    
    151Other liabilities, primarily compensation and benefits
    
    
    1,477
    
    
    
    1,085
    
    
    
    1,262Commitments and contingenciesShareholders equity
    
    
    66,082
    
    
    
    66,471
    
    
    
    58,236Common shares, par value $1.00 per shareAuthorized  100,000,000Outstanding  2005: 17,999,468; 2004: 18,041,088(9,020,544 pre-split); 2003: 18,132,724
(9,066,362 pre-split)Total liabilities and shareholders equity
    
    $
    88,509
    
    
    $
    79,508
    
    
    $
    72,816
 The accompanying notes are an integral part of the consolidated financial statements. page 28




---



##### 



Consolidated Statements of Income For the years ended January 31Dollars in thousands, except per-share data
    
    2005
    
    
    2004
    
    
    2003Net sales
    
    $
    168,086
    
    
    $
    142,727
    
    
    $
    120,903Cost of goods sold
    
    
    124,886
    
    
    
    108,968
    
    
    
    93,388Gross profit
    
    
    43,200
    
    
    
    33,759
    
    
    
    27,515Selling, general and administrative expenses
    
    
    14,056
    
    
    
    11,960
    
    
    
    10,629Loss (gain) on disposition of businesses and
assets, net
    
    
    1,282
    
    
    
    173
    
    
    
    (179
    )Operating income
    
    
    27,862
    
    
    
    21,626
    
    
    
    17,065Interest expense
    
    
    35
    
    
    
    70
    
    
    
    63Other income, net
    
    
    (128
    )
    
    
    (160
    )
    
    
    (252
    )Income before income taxes
    
    
    27,955
    
    
    
    21,716
    
    
    
    17,254Income taxes
    
    
    10,064
    
    
    
    7,880
    
    
    
    6,069Net income
    
    $
    17,891
    
    
    $
    13,836
    
    
    $
    11,185Net income per common share basic
    
    $
    0.99
    
    
    $
    0.77
    
    
    $
    0.61 diluted
    
    $
    0.97
    
    
    $
    0.75
    
    
    $
    0.60
 The accompanying notes are an integral part of the consolidated financial statements. Raven2005 Annual Report                     page 29




---



##### 



Consolidated Statements of Shareholders Equity
and Comprehensive Income $1 ParCommon
    
    
    Paid-in
    
    
    Treasury stock
    
    
    RetainedDollars in thousands, except per-share data
    
    Stock
    
    
    Capital
    
    
    Shares
    
    
    Cost
    
    
    Earnings
    
    
    TotalBalance 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 ($.140 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 ($.170 per share)(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    66,471Net and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,891
    
    
    
    17,891Cash dividends ($.220 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,971
    )
    
    
    (3,971
    )Cash dividend  Special ($.625 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,327
    )
    
    
    (11,327
    )Two-for-one stock split
    
    
    15,954
    
    
    
    (411
    )
    
    
    (6,933,443
    )
    
    
    
    
    
    
    (15,543
    )
    
    
    Purchase of stock
    
    
    
    
    
    
    
    
    
    
    (186,500
    )
    
    
    (3,519
    )
    
    
    
    
    
    
    (3,519
    )Purchase and retirement of stock
    
    
    (40
    )
    
    
    (646
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (686
    )Employees stock options exercised
    
    
    185
    
    
    
    327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512Stock compensation expense
    
    
    
    
    
    
    309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309Tax benefit from exercise of stock options
    
    
    
    
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402Balance January 31, 2005
    
    $
    32,053
    
    
    $
    765
    
    
    
    (14,053,386
    )
    
    $
    (41,700
    )
    
    $
    74,964
    
    
    $
    66,082
   (a)
    
    Reflects the January 2003 and October 2004 two-for-one stock splits. The accompanying notes are an integral part of the consolidated financial statements. page 30




---



##### 



Consolidated Statements of Cash Flows For the years ended January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income
    
    $
    17,891
    
    
    $
    13,836
    
    
    $
    11,185Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    3,410
    
    
    
    3,674
    
    
    
    3,541Amortization
    
    
    431
    
    
    
    471
    
    
    
    425Provision for losses on accounts receivable, net of recoveries
    
    
    34
    
    
    
    67
    
    
    
    (100
    )(Gain) loss on disposition of businesses and assets
    
    
    1,282
    
    
    
    173
    
    
    
    (179
    )Deferred income taxes
    
    
    (31
    )
    
    
    254
    
    
    
    1,157Stock compensation expense
    
    
    309
    
    
    
    282
    
    
    
    174Change in operating assets and liabilities, net of effects from the acquisition
and sale of businesses
    
    
    (4,669
    )
    
    
    850
    
    
    
    (3,470
    )Other operating activities, net
    
    
    214
    
    
    
    125
    
    
    
    2Net cash provided by operating activities
    
    
    18,871
    
    
    
    19,732
    
    
    
    12,735Cash flows from investing activitiesCapital expenditures
    
    
    (7,541
    )
    
    
    (3,330
    )
    
    
    (6,033
    )Purchase of short-term investments
    
    
    (3,000
    )
    
    
    (4,000
    )
    
    
    (5,000
    )Sale of short-term investments
    
    
    4,000
    
    
    
    4,000
    
    
    
    1,000Acquisition of businesses
    
    
    (414
    )
    
    
    (1,038
    )
    
    
    (57
    )Sales of businesses and assets, net of cash sold
    
    
    
    
    
    
    257
    
    
    
    927Investment in unconsolidated affiliate
    
    
    (650
    )
    
    
    
    
    
    
    Other investing activities, net
    
    
    (26
    )
    
    
    (241
    )
    
    
    (3
    )Net cash used in investing activities
    
    
    (7,631
    )
    
    
    (4,352
    )
    
    
    (9,166
    )Cash flows from financing activitiesProceeds from borrowing under line of credit
    
    
    
    
    
    
    
    
    
    
    1,025Repayment on borrowing under line of credit
    
    
    
    
    
    
    
    
    
    
    (1,025
    )Long-term debt principal payments
    
    
    (72
    )
    
    
    (141
    )
    
    
    (131
    )Dividends paid
    
    
    (15,298
    )
    
    
    (3,075
    )
    
    
    (2,563
    )Purchase of treasury stock
    
    
    (3,519
    )
    
    
    (3,068
    )
    
    
    (3,324
    )Other financing activities, net
    
    
    (174
    )
    
    
    129
    
    
    
    188Net cash used in financing activities
    
    
    (19,063
    )
    
    
    (6,155
    )
    
    
    (5,830
    )Net increase (decrease) in cash and cash equivalents
    
    
    (7,823
    )
    
    
    9,225
    
    
    
    (2,261
    )Cash and cash equivalents at beginning of year
    
    
    14,442
    
    
    
    5,217
    
    
    
    7,478Cash and cash equivalents at end of year
    
    $
    6,619
    
    
    $
    14,442
    
    
    $
    5,217
 The accompanying notes are an integral part of the consolidated financial statements. Raven2005 Annual Report                     page 31




---



##### 



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. The company has a 50% ownership investment in Zip City Partners, LLC. The equity
method is used to account for this investment. 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. 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, 2005 range from
1.55% to 2.4%. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The
allowance for doubtful accounts is the companys best estimate of the amount of problable credit
losses based on historical write-off experience by segment and an estimate of the collectibility of
any known problem accounts. 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
Machinery and equipment
    
    7 to 39 years
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 The company recognizes the excess cost of an acquired entity over the net amount assigned to assets
acquired, including intangible assets with indefinite lives, and liabilities assumed, as goodwill.
Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis
during the fourth quarter, and between annual tests whenever there is an impairment indicated. Fair
values are estimated based on future cash flows and are compared with the corresponding carrying
value of the related asset. 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. page 32




---



##### 



INSURANCE OBLIGATIONS The company employs insurance policies covering workers compensation and general liability costs.
Liabilities are accrued related to claims filed and estimates for claims incurred but not reported.
To the extent these obligations will be reimbursed by insurance, the expected reimbursement is
included as a component of other current assets. 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. Estimated returns, allowances or warranty charges are
recognized upon shipment of a product. The company does not typically require collateral from its
customers. Shipping and handling costs are classified as a component of cost of goods sold. WARRANTIES Accruals necessary for product warranties are estimated based upon historical warranty costs and
average time elapsed between purchases and returns for each division. Any warranty issues that are
unusual in nature are accrued individually. RESEARCH AND DEVELOPMENT Research and development expenditures of $2.0 million in fiscal 2005, $1.7 million in fiscal 2004,
and $1.3 million in fiscal 2003 were charged to cost of goods
sold in the year incurred. Expenditures are principally composed of labor and material costs. STOCK-BASED COMPENSATION The company records 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. 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 two-for-one stock splits effected in the form of a 100% stock dividend on
October 15, 2004, and January 15, 2003. All per-share information reflects the effect of these
stock splits. NEW ACCOUNTING STANDARDS In November 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 151, Inventory
Costs  An Amendment of ARB No. 43, Chapter 4.SFAS No. 151 amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). In addition, SFAS No. 151
requires that allocation of fixed-production overheads to the costs of conversion be based on the
normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The company believes
that it is currently in compliance with SFAS No. 151 and does not expect adoption of this revised
statement to have a significant effect on consolidated results of operations or financial position. Raven2005 Annual Report                     page 33




---



##### 



Notes to Financial Statements (continued) In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 153,
Exchanges of Nonmonetary Assets An Amendment of APB Opinion No. 29.This statement amends APB
Opinion No. 29 and is based on the principle that exchanges of nonmonetary assets should be
measured on the fair value of the assets exchanged. SFAS 153 is effective for nonmonetary exchanges
occurring in fiscal periods beginning after June 15, 2005. The adoption of this statement will not
have a significant effect on the consolidated results of operations
or financial position. In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (Revised
2004), Share-Based Payment,or SFAS No. 123R, which is a revision of SFAS No. 123. SFAS No. 123R
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,and amends SFAS No. 95,
Statement of Cash Flows.SFAS No. 123R requires all share-based payments to employees, including
grants of employee stock options to be recognized in the income statement based on their fair
values. SFAS No. 123R is effective for the company beginning July 1, 2005. The company began
expensing stock options in fiscal 2003 utilizing the modified prospective method and does not
expect adoption of this revised statement will have a significant effect on consolidated results of
operations or financial position. RECENTLY PASSED LEGISLATION On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the Act). The
Act provides a deduction for income from qualified domestic production activities, which will be
phased in from 2005 through 2010. In return, the Act also provides for a two-year phaseout of the
existing extraterritorial income exclusion (ETI) for foreign sales that was viewed to be
inconsistent with international trade protocols by the European Union. Under the guidance in FASB Staff Position No. FSP 109-1,
Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of 2004,the deduction
will be treated as a special deduction as described in FASB Statement No. 109. As such, the
special deduction has no effect on deferred tax assets and liabilities existing at the enactment
date. Rather, the impact of this deduction will be reported in the period in which the deduction is
claimed on our tax return. Note 2. Selected Balance Sheet Information Following are the components of selected balance sheet items: As of January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Accounts receivable, net:Trade accounts
    
    $
    25,635
    
    
    $
    18,719
    
    
    $
    16,708Allowance for doubtful accounts
    
    
    (265
    )
    
    
    (265
    )
    
    
    (240
    )$
    25,370
    
    
    $
    18,454
    
    
    $
    16,468Inventories, net:Finished goods
    
    $
    3,538
    
    
    $
    2,500
    
    
    $
    5,290In process
    
    
    2,820
    
    
    
    2,120
    
    
    
    2,275Materials
    
    
    16,957
    
    
    
    12,143
    
    
    
    13,801$
    23,315
    
    
    $
    16,763
    
    
    $
    21,366Property, plant and equipment, net:Land
    
    $
    1,084
    
    
    $
    1,110
    
    
    $
    1,091Building and improvements
    
    
    15,184
    
    
    
    13,049
    
    
    
    12,154Machinery and equipment
    
    
    36,486
    
    
    
    32,479
    
    
    
    32,248Accumulated depreciation
    
    
    (32,790
    )
    
    
    (30,688
    )
    
    
    (29,038
    )$
    19,964
    
    
    $
    15,950
    
    
    $
    16,455Other assets, net:Amortizable assets:Purchased technology
    
    $
    1,080
    
    
    $
    1,250
    
    
    $
    1,080Other intangibles
    
    
    946
    
    
    
    1,136
    
    
    
    884Accumulated amortization
    
    
    (1,831
    )
    
    
    (1,494
    )
    
    
    (1,027
    )195
    
    
    
    892
    
    
    
    937Investment in unconsolidated
affiliate
    
    
    650
    
    
    
    
    
    
    
    Other, net
    
    
    175
    
    
    
    180
    
    
    
    140$
    1,020
    
    
    $
    1,072
    
    
    $
    1,077Accrued liabilities:Salaries and benefits
    
    $
    1,992
    
    
    $
    1,875
    
    
    $
    1,766Vacation
    
    
    1,852
    
    
    
    1,638
    
    
    
    1,627401(k) contributions
    
    
    980
    
    
    
    906
    
    
    
    782Insurance obligations
    
    
    1,541
    
    
    
    524
    
    
    
    1,045Income taxes
    
    
    567
    
    
    
    267
    
    
    
    276Profit sharing
    
    
    900
    
    
    
    544
    
    
    
    406Deferred acquisition payments
    
    
    
    
    
    
    389
    
    
    
    Other
    
    
    1,884
    
    
    
    1,641
    
    
    
    1,255$
    9,716
    
    
    $
    7,784
    
    
    $
    7,157
 Note 3. Supplemental Cash Flow Information For the years ended January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Changes in operating assets and
liabilities,
net of effects from the purchase and sale
of businesses:Accounts receivable
    
    $
    (6,950
    )
    
    $
    (2,072
    )
    
    $
    (304
    )Inventories
    
    
    (6,704
    )
    
    
    4,603
    
    
    
    (2,671
    )Prepaid expenses and other assets
    
    
    150
    
    
    
    (16
    )
    
    
    15Accounts payable
    
    
    6,576
    
    
    
    (1,625
    )
    
    
    560Accrued and other liabilities
    
    
    1,777
    
    
    
    187
    
    
    
    (1,153
    )Customer advances
    
    
    482
    
    
    
    (227
    )
    
    
    83$
    (4,669
    )
    
    $
    850
    
    
    $
    (3,470
    )Cash paid during the year for:Interest
    
    $
    77
    
    
    $
    50
    
    
    $
    44Income taxes
    
    
    9,596
    
    
    
    7,014
    
    
    
    4,852
 Cash flows from investing activities in fiscal 2005 include $409,000 of payments related to
acquisitions that were deferred under their respective purchase agreements. page 34




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##### 



Note 4. Fluent Systems 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 had developed a wireless liquid level monitoring system used with anhydrous
ammonia tanks. Of the purchase price, $79,000 was assigned to equipment, $195,000 was assigned to
intangible assets, $19,000 to current liabilities assumed and $848,000 to goodwill, which is fully
deductible for tax purposes. The operation was assigned to the Flow Controls segment. Pro forma
earnings are not presented due to the immateriality of the acquisition to the consolidated
operations. The results of operations were included in the consolidated financial statements from the date of
acquisition. In the third quarter of fiscal 2005, Flow Controls decided to abandon the Fluent
Systems product line resulting in a $1.3 million pretax writeoff of inventory, equipment,
intangible assets and goodwill. 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, 2005, the company had an undiscounted
accrual remaining of $145,000 for environmental monitoring and clean-up costs of sold operations. 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. Note 6. Goodwill and Other Intangibles Goodwill The changes in the carrying amount of goodwill by reporting segment are shown below: Flow
    
    
    Engineered
    
    
    ElectronicDollars in thousands
    
    Controls
    
    
    Films
    
    
    Systems
    
    
    Aerostar
    
    
    TotalBalance at January 31, 2002
    
    $
    4,947
    
    
    $
    96
    
    
    $
    356
    
    
    $
    464
    
    
    $
    5,863Purchase price adjustments
    
    
    (7
    )
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    70Balance at January 31, 2003
    
    
    4,940
    
    
    
    96
    
    
    
    433
    
    
    
    464
    
    
    
    5,933Goodwill acquired during year
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843Balance at January 31, 2004
    
    
    5,783
    
    
    
    96
    
    
    
    433
    
    
    
    464
    
    
    
    6,776Adjustment
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Writeoff of Fluent Systems
    
    
    (848
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (848
    )Balance at January 31, 2005
    
    $
    4,940
    
    
    $
    96
    
    
    $
    433
    
    
    $
    464
    
    
    $
    5,933
 Intangible Assets Estimated future amortization expense based on the current carrying value of amortizable intangible
assets for fiscal periods 2006 through 2010 is $79,000, $62,000, $6,000, $5,000, and $4,000,
respectively. 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 $836,000, $817,000 and $715,000 for fiscal 2005,
2004 and 2003, 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: As of January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Beginning balance
    
    $
    1,212
    
    
    $
    1,102
    
    
    $
    969Employer expense
    
    
    391
    
    
    
    316
    
    
    
    306Retiree benefits paid
    
    
    (156
    )
    
    
    (206
    )
    
    
    (173
    )Ending balance
    
    
    1,447
    
    
    
    1,212
    
    
    
    1,102Current portion
    
    
    (180
    )
    
    
    (200
    )
    
    
    (150
    )Long-term portion
    
    $
    1,267
    
    
    $
    1,012
    
    
    $
    952Discount rate
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    8.0
    %Wage inflation rate
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    4.0
    %Medical inflation
rate
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    7.0
    %
 The accumulated benefit obligation based upon the rates noted in the table above was
approximately $2.7 million, $2.4 million and $2.2 million at January 31, 2005, 2004 and 2003,
respectively. No material fluctuations in retiree benefits are expected in future years. Raven2005 Annual Report                     page 35




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##### 



Notes to Financial Statements (continued) Note 8. Warranties Changes in the warranty accrual were as follows: As of January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Beginning balance
    
    $
    263
    
    
    $
    156
    
    
    $
    248Accrual for warranties
    
    
    932
    
    
    
    863
    
    
    
    584Settlements made (in
cash or in kind)
    
    
    (743
    )
    
    
    (756
    )
    
    
    (576
    )Sale of businesses
    
    
    
    
    
    
    
    
    
    
    (100
    )Ending balance
    
    $
    452
    
    
    $
    263
    
    
    $
    156
 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 312005
    
    
    2004
    
    
    2003Tax 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
    
    
    
    0.9
    
    
    
    0.4Nondeductible stock option expense
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.3Impact of graduated rates
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Other, net
    
    
    (0.2
    )
    
    
    0.1
    
    
    
    0.136.0
    %
    
    
    36.3
    %
    
    
    35.2
    %
 Significant components of the companys income tax provision are as follows: For the years endedJanuary 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Income taxes:Currently payable
    
    $
    10,095
    
    
    $
    7,626
    
    
    $
    4,912Deferred
    
    
    (31
    )
    
    
    254
    
    
    
    1,157$
    10,064
    
    
    $
    7,880
    
    
    $
    6,069
 Significant components of the
companys deferred tax assets and liabilities are as follows: As of January 31Dollars in thousands
    
    2005
    
    
    2004
    
    
    2003Current deferred tax assets:Accounts receivable
    
    $
    93
    
    
    $
    93
    
    
    $
    84Inventory valuation
    
    
    237
    
    
    
    182
    
    
    
    194Accrued vacation
    
    
    591
    
    
    
    532
    
    
    
    508Insurance obligations
    
    
    161
    
    
    
    183
    
    
    
    369Other accrued liabilities
    
    
    383
    
    
    
    323
    
    
    
    3381,465
    
    
    
    1,313
    
    
    
    1,493Non-current deferred tax assets
(liabilities):Accrued compensation and benefits
    
    
    443
    
    
    
    354
    
    
    
    333Depreciation and amortization
    
    
    (771
    )
    
    
    (502
    )
    
    
    (380
    )Other
    
    
    118
    
    
    
    75
    
    
    
    53(210
    )
    
    
    (73
    )
    
    
    6Net deferred tax asset
    
    $
    1,255
    
    
    $
    1,240
    
    
    $
    1,499
 Note 10. Financing Arrangements Raven has an uncollateralized credit agreement providing a line of credit of $7.0 million which
expires in May 2005. Letters of credit totaling $2.0 million have been issued under the line,
primarily to support self-insured workers compensation bonding requirements. No borrowings were
outstanding as of January 31, 2005, 2004 or 2003, and $5.0 million was available at January 31,
2005. 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, 2005, 2004 and 2003 at 5.25%, 4.00% and 4.25%, respectively. The
weighted-average interest rate for borrowing under the short-term credit line in fiscal 2003 was
4.6%. There were no borrowings under the credit line in fiscal years 2005 or 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. The company leases certain transportation, equipment and facilities under operating leases. Total
rent and lease expense was $305,000, $355,000 and $446,000 in fiscal 2005, 2004 and 2003,
respectively. Future minimum lease payments under non-cancelable operating leases for fiscal
periods 2006 to 2010 are $222,000, $185,000, $144,000, $6,000, and $5,000 with all leases scheduled
to expire by fiscal 2010. page 36




---



##### 



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 either incentive or non-qualified options with terms not to exceed ten
years. There are 655,700 shares of the companys common stock reserved for future option grants
under the plan at January 31, 2005. 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. 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. Stock compensation expense for fiscal years 2005, 2004
and 2003 was $309,000, $282,000 and $174,000, respectively. The weighted average grant date fair value of each option granted was $5.91, $4.11 and $1.89 in
fiscal 2005, 2004 and 2003, respectively. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following weighted average
assumptions by grant year. For the years ended January 312005
    
    
    2004
    
    
    2003Risk-free interest rate
    
    
    3.51
    %
    
    
    3.02
    %
    
    
    3.02
    %Expected dividend yield
    
    
    1.07
    %
    
    
    1.33
    %
    
    
    2.00
    %Expected volatility factor
    
    
    34.92
    %
    
    
    35.89
    %
    
    
    33.57
    %Expected option term (in years)
    
    
    4.5
    
    
    
    4.5
    
    
    
    4.5
 Information regarding option activity is as follows: For the years ended January 312005
    
    
    2004
    
    
    2003weighted
    
    
    
    
    
    
    weighted
    
    
    
    
    
    
    weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exercise
    
    
    
    
    
    
    exerciseoptions
    
    
    price
    
    
    options
    
    
    price
    
    
    options
    
    
    priceOutstanding
at beginning
of year
    
    
    723,676
    
    
    $
    5.89
    
    
    
    872,112
    
    
    $
    3.72
    
    
    
    1,102,608
    
    
    $
    3.05Granted
    
    
    86,600
    
    
    
    22.00
    
    
    
    129,000
    
    
    
    13.50
    
    
    
    152,800
    
    
    
    7.00Exercised
    
    
    (184,600
    )
    
    
    2.77
    
    
    
    (274,436
    )
    
    
    2.61
    
    
    
    (353,892
    )
    
    
    3.09Forfeited
    
    
    (13,500
    )
    
    
    9.79
    
    
    
    (3,000
    )
    
    
    2.65
    
    
    
    (29,404
    )
    
    
    3.14Outstanding at
end of year
    
    
    612,176
    
    
    $
    9.02
    
    
    
    723,676
    
    
    $
    5.89
    
    
    
    872,112
    
    
    $
    3.72Options
exercisable at
end of year
    
    
    323,076
    
    
    $
    5.27
    
    
    
    326,608
    
    
    $
    3.57
    
    
    
    414,146
    
    
    $
    2.78
 The following table contains information about stock options outstanding at January 31, 2005: RemainingExercise
    
    
    Contractual
    
    Number
    
    NumberPrice
    
    
    Life (Years)
    
    Outstanding
    
    Exercisable$
    2.67
    
    
    
    0.75
    
    
    
    106,876
    
    
    
    106,8764.38
    
    
    
    1.75
    
    
    
    149,400
    
    
    
    112,0507.00
    
    
    
    2.75
    
    
    
    147,300
    
    
    
    73,65013.50
    
    
    
    3.75
    
    
    
    122,000
    
    
    
    30,50022.00
    
    
    
    4.75
    
    
    
    86,600
    
    
    
    612,176
    
    
    
    323,076
 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 October 15, 2004, and January 15, 2003, two-for-one stock splits. 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 2005, 2004 and 2003, 21,650, 32,250 and 38,200 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
    
    2005
    
    
    2004
    
    
    2003Net income
    
    $
    17,891
    
    
    $
    13,836
    
    
    $
    11,185Weighted-average common shares
outstanding
    
    
    18,066,223
    
    
    
    18,081,712
    
    
    
    18,302,930Dilutive impact of stock options
    
    
    344,104
    
    
    
    407,868
    
    
    
    392,720Weighted-average common and
common-equivalent shares
outstanding
    
    
    18,410,327
    
    
    
    18,489,580
    
    
    
    18,695,650Net income per common share: basic
    
    $
    0.99
    
    
    $
    0.77
    
    
    $
    0.61 diluted
    
    $
    0.97
    
    
    $
    0.75
    
    
    $
    0.60
 Raven2005 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. The Industrial Controls Division of Beta
Raven, sold in fiscal 2003, is included under the caption Sold Businesses. During fiscal 2005,
the companys high-altitude research balloon operation, formerly in the Engineered Films segment,
moved under the management of Aerostar. As a result of this change in the companys organizational
structure, the financial results of those operations have been included in Aerostars segment
disclosures. 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 segments 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. No customer accounted for more than 10% of the companys consolidated sales or accounts receivable
in fiscal 2005 or 2004. 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. The company had sales of $11.0 million for the year ended January 31, 2005, to countries outside
the United States, primarily to Canada. Sales were included in the Flow Controls, Engineered Films,
Electronic Systems and Aerostar segments totaling $5.0 million, $621,000, $4.8 million and
$474,000, respectively. Market and segment information for 2005, 2004 and 2003 is presented on pages 1 and 16 of this
annual report. Note 14. Commitment to Purchase Engineered Films Facility In fiscal 2005, the company entered into an agreement to purchase for $1.8 million a building to be
used in the Engineered Films segment. The agreement required an earnest payment of $25,000 at
signing with the remainder due upon closing, on or before May 1, 2006. Note 15. Subsequent Event On February 17, 2005, the company entered into a purchase agreement to buy substantially all of the
assets of Montgomery Industries, Inc., a privately held Canadian corporation, for $2.8 million in
cash plus the assumption of certain liabilities and a quarterly payment of six percent on future
sales of Montgomery products up to a maximum of $1.825 million. Montgomery has developed and sold an automatic boom height control system under the name Autoboom
for agricultural sprayers designed to successfully maintain optimum boom height in uneven terrain
without compromising the speed with which the sprayer can be operated. This operation will be
combined into the companys Flow Controls segment. Note 16. Quarterly Information (Unaudited) The companys quarterly information is presented on page 26. page 38




---



##### 



Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Raven Industries, Inc: We have completed an integrated audit of Raven Industries, Inc.s 2005 consolidated financial
statements and of its internal control over financial reporting as of January 31, 2005, and audits
of its 2004 and 2003 consolidated financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are
presented below. Consolidated financial statements 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. and its
subsidiaries at January 31, 2005 and 2004, and the results of their operations and their cash flows
for each of the three years in the period ended January 31, 2005 in conformity with accounting
principles generally accepted in the United States of America. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit of financial statements
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 financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion. Internal control over financial reporting Also, in our opinion, managements assessment, included in Managements Report on Internal Control
over Financial Reporting appearing on page 27 of the 2005 Annual Report to Shareholders, that the
Company maintained effective internal control over financial reporting as of January 31, 2005 based
on criteria established in Internal Control  Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material
respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of January 31, 2005,
based on criteria established in Internal Control  Integrated Frameworkissued by the COSO. The
Companys management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express opinions on managements assessment and on the effectiveness of
the Companys internal control over financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. An audit of internal control over financial
reporting includes obtaining an understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating the design and operating effectiveness
of internal control, and performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. (PRICEWATERHOUSECOOPERS LLP) PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 24, 2005
 Raven2005 Annual Report                     page 39




---



##### 



Investor Information  Independent Registered Public
Accounting Firm 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, 2005,
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, 2005, 9:00 a.m.
Washington Pavilion of Arts and Science
301 S. Main Avenue
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, raw 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