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Raven Industries
P.O. Box 5107
Sioux Falls, SD 57117-5107
RAVEN
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OLD VALUES
OLD VALUES
OLD VALUES
OLD VALUES
NEW IDEAS
NEW IDEAS
NEW IDEAS
NEW IDEAS
5 0 Y E A R S O F I N N O VAT I O N5656
191956561919561919
RAVEN
RAVEN
06ANNUAL REPORT
ANNUAL REPORT
for the fi scal year ended January 31
for the fi scal year ended January 31
F i n a n c i a l
H i g h l
i g h t s
Dollars in thousands, except per-share data
For the years ended January 31
2006
2005
change
OPERATIONS
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$204,528
37,284
24,262
$168,086
27,862
17,891
PER SHARE
Net income – diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.32
0.28
4.67
$ 0.97
0.22(a)
3.67
PERFORMANCE
Operating income margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on beginning shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.2%
11.9%
24.9%
36.7%
16.6%
10.6%
21.3%
26.9%
Shares outstanding, year-end (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,072
17,999
(a) Excludes a special dividend of $.625 per share that was paid during the second quarter of fi scal 2005.
21.7%
33.8%
35.6%
36.1%
27.3%
27.2%
9.6%
12.3%
16.9%
36.4%
0.4%
NET SALES
(dollars in millions)
EARNINGS PER SHARE
(dollars)
SALES PER EMPLOYEE
(dollars in thousands)
200
150
100
50
0
1.40
1.05
0.70
0.35
0.00
240
180
120
60
0
2001
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
Table of Contents
Business Profi le ................................................... 1
Letter to Shareholders ......................................... 2
Operating Unit Results ....................................... 6
50 Year Anniversary ............................................ 14
Eleven-Year Summary ........................................ 16
Business Segments .............................................. 18
Financial Review and Analysis ........................... 19
Stock and Quarterly Performance ...................... 30
Management’s Report on Internal Control
over Financial Reporting .......................... 31
Financial Statements .......................................... 32
Report of Independent Registered
Public Accounting Firm ............................ 43
Directors, Offi cers and Senior Management ...... 44
Investor Information ................. Inside Back Cover
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
South 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
fi scal year ended January 31, 2006, which has been fi led 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 23, 2006, 9:00 a.m.
Ramkota Hotel and Conference Center
3200 W. Maple Avenue
Sioux Falls, SD
Raven Industries, Inc. is an Equal Employment Opportunity Em-
ployer with an approved affi rmative 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
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding
the future. Without limiting the foregoing, the words “anticipates,” “believes,” “expects,” “intends,” “may,” “plans” and similar expressions are intended to
identify forward-looking statements. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities
Litigation Reform Act. Although the Company believes that the expectations refl ected in such forward-looking statements are based on reasonable assump-
tions, there is no assurance that such assumptions are correct or that these expectations will be achieved. Such assumptions involve important risks and uncer-
tainties that could signifi cantly 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, as well as other
risks described in the Company’s 10-K under Item 1A. The foregoing list is not exhaustive and the company disclaims any obligation to subsequently revise any
forward-looking statements to refl ect events or circumstances after the date of such statements.
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We are developing distributors worldwide who can successfully sell and service our products. FCD is currently focused on
distribution in South America, Europe, Canada and Australia. International sales have grown from $3.5 million to
$6.7 million in the last three years and will become increasingly important to the success of this division.
New products continue to be the lifeblood in FCD. During the past year we spent $2.4 million in product development,
up 26% from the previous year and double three years ago. We introduced several new agricultural products including
a sub-decimeter accuracy tractor steering system; a digital map display to highlight the field being worked; and a new
injection pump for pumping farm chemicals in their undiluted form. Our injection system is gaining greater acceptance
for environmental, safety and cost reasons.
The Electronic Systems Division (ESD) showed dramatic improvement this past year. General Manager David
Bair and his staff provided strong leadership, improving all aspects of the business, resulting in a doubling of operating
income. ESD provides electronics manufacturing services to customers needing low-volume, high-mix production with
high levels of engineering and customer service support. By focusing on this strategy, we avoid direct competition with
cheap-labor, offshore suppliers.
Growing demand from Fortune 500 companies who seek the manufacturing capabilities of a reliable source plus our
continued investment in advanced manufacturing technology will drive growth. This is not a high-margin business, but
it’s a solid one that fits our overall corporate strategy.
Aerostar International struggled during the year. The U.S. Army contract for cargo parachutes ran out last year and
new contracts were delayed. We continue to be optimistic about long-term prospects for parachute orders, starting in the
third quarter of this year.
Aerostar, together with Southwest Research Institute and the U.S. Air Force Research Lab, successfully launched and flew a
powered stratospheric airship. The project is focused on developing near-space airships for inexpensive tactical communi-
cations, intelligence, surveillance and reconnaissance applications. This is part of Aerostar’s ongoing technology roadmap
to develop high-altitude, lighter-than-air-platforms for military and commercial use. Under the leadership of Mark West,
Aerostar continues its transition from low-tech sewn products to high-tech scientific balloons and aerostats, military
parachutes, and specialty outerwear for security forces.
Optimizing Long Term Value
Operational excellence and innovation continue to be the growth drivers at Raven.
Productivity Improvement
We measure productivity at Raven by dividing total sales by total employee compensation. That number is then compared to
the previous year’s productivity ratio. Our goal every year is to improve by 6%, or approximately twice the national average.
Page 3
RAVEN 2006 Annual Report
Only when every employee commits to continuous improvement and a “total quality – no waste” mentality can we be
confi dent that we are optimizing operating margins. We constantly assess all of our businesses to assure long-term value,
and prune low-growth, low-profi t product lines and markets. Our goal is to drop the weakest 10% each year.
We have pursued a Total Quality/Six Sigma program for 15 years and it is now part of our corporate DNA. Adherence to
these powerful tools has made us a better company, building higher quality products at a lower cost and becoming more
profi table. There is an unending supply of process and quality issues that can be improved upon.
Innovation
For Raven to grow, we must continue to innovate and execute at a higher level. I consider this to be one of my principal
responsibilities as CEO. Innovation at Raven is a culture. It fl ourishes in an environment of rigorous “give and take”
where all ideas are listened to. In a digital world where e-mail rules, the most productive discussions still take place
face-to-face. As we grow larger, this becomes more challenging. We work hard to tear down the walls that separate us
and keep us from engaging in robust dialogue.
Growth
Once a business is in a “lean” condition and margins and growth prospects are strong, we invest heavily in plant,
equipment, marketing and new product development.
Even in a slow growth environment, our goal is to increase earnings 15% a year on average. Each of our four business
units has a unique role to play in that growth. It starts with a business model that emphasizes niche markets and avoids
production based on cheap labor. We call this “China-proofi ng” the business and it is a strategy that has served us well.
This somewhat limits growth but it allows us to earn above-average returns on invested capital.
We don’t make a lot of acquisitions because there aren’t many good ones that would benefi t our shareholders, but we never
shy away from making an investment when it makes long-term sense. We have a disciplined approach to investing and only
commit resources to projects when we are convinced the opportunity is real and Raven has a high potential to succeed.
Cash Management
Our balance sheet is strong, with virtually no debt, allowing us to pursue a wide range of strategic options, while returning
cash to our shareholders. We will continue to raise the dividend, with a target of approximately 30% of earnings, and to
buy back our shares, although at a somewhat reduced rate.
Annual EPS Growth
Return on Equity
Return on Assets
Return on Sales
FY2006
FY2005
FY2004
FY2003
FY2002
36.1%
36.7%
24.9%
11.9%
29.3%
26.9%
21.3%
10.6%
25.0%
23.8%
18.2%
9.7%
29.0%
21.5%
15.9%
9.3%
50.0%
18.4%
13.3%
7.5%
Page 4
RAVEN 2006 Annual Report
Governance
Strong corporate governance is a real asset. We believe that a small but effective Board of Directors that is totally engaged
best serves our shareholders. The role of Raven’s Board is to oversee how management serves the interests of shareholders
and other corporate stakeholders. Our philosophy is to have all members of the Board, except the CEO, be independent
under the NASDAQ definition of independence. We also believe that splitting the functions of the Chairman of the Board
and the CEO best suits our current needs.
This Report is the second one covered by the Sarbanes-Oxley Act of 2002. While I never felt that Raven needed more
regulation to do the right thing, Section 404 of the Act has brought increased emphasis to process discipline and shows
our shareholders we are doing things right.
Tom Iacarella, Raven’s Chief Financial Officer, and his team do an outstanding job putting together our Annual Report.
We are proud to present the numbers and analyses in this Report and hope we have done it in a way that is meaningful
and easy to understand.
Old Values, New Ideas
Old Values, New Ideas refers to “our core” and “our competitive edge. ” Our core at Raven is performance with integrity.
When you are running a company for the long haul, these core values complement each other. Achieving results ethically
is fundamental to how we do business.
Our competitive edge – the highly focused, carefully structured approach to the marketplace – is the strong business model
and effective game plan that we execute every day. We play off our strengths and stay on target. We have profitable niche
market positions, a flow of innovative new products, expanding international markets, and a talented management team.
Leadership is the key differentiator in business. The people you have managing investments are more important than the
dollars invested. To ensure we have a strong group of future leaders moving through all levels of the company, Barb Ohme,
Vice President Administration, has us focused on a plan to hire well, sort out the best, then mentor and provide opportuni-
ties for personal development. We believe we’re growing the best group of leaders in Raven’s history.
Raven 2006 has been 50 years in the making. We’ve come a long way since our founders started the company in
February 1956. Those four men: Joseph Kaliszewski, J.R. Smith, Duwayne Thon and Paul (Ed) Yost left their jobs and
homes in Minnesota to follow their dream. My sincere gratitude to them and to all the dedicated men and women who
over the past 50 years helped build Raven into a great company.
They started with a dream and a vision. Our current 900 employees follow that heritage and tradition.
Ronald M. Moquist
President & CEO
March 29, 2006
Page 5
RAVEN 2006 Annual Report
FLOW CONTROLS SALES
(dollars in millions)
50
40
30
20
10
0
2001
2002
2003
2004
2005
2006
a five-layer line. A new laminator helped EFD manufacture additional disaster films so as to
meet the needs created by another violent hurricane season as well as grow its industrial and
construction markets.
Sales functions were restructured, separating new product sales from recurring orders for
our established products. The repositioning allows the division to continue to focus on
development of new films specifically tailored to the needs of its customers while providing
quick response to customer demand.
Prospects
Three new state-of-the-art extrusion lines will come on-line during the coming year.
Mono-line, three-layer and seven-layer extruders will expand the division’s product
capabilities. EFD capital spending is expected to exceed $13 million in this new fiscal year.
Other investments will include printers, winders, tables and robotic equipment. The division
recently purchased a new warehouse and will begin construction of a new extrusion tower
and manufacturing floor space. These investments will support the growth in the division
as it continues to diversify and develop its product offerings.
Electronic Systems Division
Electronic Systems Division (ESD) sales for the last fiscal year climbed 19% to $56 million
while operating profits almost doubled, reaching $8.9 million. The year started off strong,
with increases in business coming from several existing customers. This type of growth
allowed the division to bring startup costs under control as compared to the previous year.
ESD’s model of high-mix, low-volume manufacturing continues to be successful in a highly
competitive global industry.
The division expanded its utilization of the six-sigma methodology to improve processes;
recent efforts included upgrading Production Process Control and New Product Introduction
processes. ESD added a new customer in the fourth quarter of this past year. Lead-free
manufacturing techniques were successfully undertaken across the division as a result of
extensive design-of-experiments efforts by Engineering and Manufacturing personnel.
ENGINEERED FILMS
SALES
(dollars in millions)
80
60
40
20
0
2001
2002
2003
2004
2005
2006
ESD’s model of
high-mix, low-volume
manufacturing
continues to be
successful in a highly
competitive global
industry.
Page 8
RAVEN 2006 Annual Report
ELECTRONIC SYSTEMS
SALES
(dollars in millions)
60
45
30
15
0
ESD expects to be ready for lead-free manufacturing in the first quarter—well in advance of
the July 2006 deadline for products used in Europe.
Prospects
ESD is focused on improving customer relations and providing additional value-added
services in test, design, manufacturability-analysis and component-obsolescence tracking.
The division follows a model of adding one to two select clients each year. Efforts continue
to focus on improving operational excellence in the areas of manufacturing cycle time,
increasing inventory turns, and in making technical support processes more robust.
2001
2002
2003
2004
2005
2006
Aerostar
Aerostar sales and profits sagged as deliveries under its major military contract for cargo
parachutes wound down during the year and ended in October 2005. Sales of $18 million were
down 17% and operating income declined 41% to $2.1 million. No new parachute contracts
have been let with the military’s shift to total support of deployed ground forces. Additionally,
other high-tech military protective gear manufactured by Aerostar was overtaken by the need
for basic uniforms and body armor.
Aerostar nevertheless has continued developing streamlined manufacturing methods to set the
standard in parachute manufacturing. It also is building on its high-altitude, heavy-payload
parachute capability with added parachute-design capabilities.
Aerostar has fully integrated the scientific ballooning group, which was added to Aerostar
in May 2004. While the traditional high-altitude balloon market remains steady, emerging
markets in “Near Space”—above 50,000 feet—offer a nearly untapped environment for
long-distance communications, data relay, and intelligence gathering. Partnering with
Physical Science Lab and Southwest Research Institute has strengthened our prowess as
Emerging markets
in “Near Space”—
above 50,000
feet—offer a nearly
untapped
environment.
Page 10
RAVEN 2006 Annual Report
By this spring, Raven’s Electronic Systems Division expects to be shipping lead-free
electronics to Europe. The division beats the deadline that most products shipped to
Europe be lead-free beginning in July 2006.
the leading scientific balloon manufacturer in the world. Two significant tests were done in
November 2005. A powered airship was flown in the stratosphere—the HiSentinel, under
contract with the U.S. Army. This flight was the first step in developing platforms with
increased capabilities to meet ever-changing battlefield needs. A second test involved the use
of free-floating balloons for communications and/or intelligence gathering.
High-tech protective gear is another emerging market for Aerostar. Anti-exposure suits for
military fliers and tactical swimmers keep users dry and alive when exposed to extremely cold
water. Aerostar is now in the process of qualification to manufacture such suits, and we are
positioned to become a major supplier of these products for the military.
Prospects
Significant progress was made this year in development of new products and capabilities.
Because the U.S. Army has developed new parachute systems to replace all personnel
parachutes in inventory over the next seven years, the industry will go from nearly record
low production to levels significantly higher than traditional production. Aerostar also
continues to develop flight packages for military payloads operating in the harsh
environment of the stratosphere.
An underlying key to Aerostar’s exceptional quality and reputation for producing the industry’s
highest quality products is Aerostar’s ISO 9001-2000 certification. This standard has become a
cultural process for company employees across the various product families, and will continue
to serve Aerostar’s future growth and development.
AEROSTAR SALES
(dollars in millions)
30
20
10
0
2001
2002
2003
2004
2005
2006
Page 12
RAVEN 2006 Annual Report
5 0 Y e a r A n n i v e r s a r y
We were started by a
group of people with a
dream and a vision. They
have passed the torch to
the generations that came
after them. We proudly
follow that heritage and
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
tradition.
56
56565656
1956191956191919561919
56
19
19191919
19
19
The year was 1955 and what a year it was in American history.
Elvis Presley made his fi rst television appearance, and Rosa Parks was
arrested for refusing to give up her seat on a city bus. A little-known
restaurateur named Ray Kroc started the fast food chain, McDonalds, and
the theme park, Disneyland, opened its gates for the fi rst time. That same
year, the idea for another company was quietly beginning to take form,
fueled by the dreams of four forward-thinking men who worked at the
General Mills Aeronautical Research Laboratory. On the eve of 1956,
Richard (J.R.) Smith, Paul (Ed) Yost, Duwayne Thon and Joseph Kaliszewski
began meeting after hours to explore the idea of starting their own
company. It was an idea born of individual inspiration and cooperative
endeavor. These were practical, tough-minded businessmen — for which
building a business was simply the next logical step in their careers.
With the fi nancial backing of Cyrus
Hoigaard, a Minneapolis businessman,
Raven was launched in February 1956, and
quickly built a reputation as an innovative
manufacturer of scientifi c balloons. The
Air Force, Offi ce of Naval Research and
various universities began placing orders with Raven; the fl ight
services group provided customers with superior balloon launching
and recovery operations. These high-altitude balloons with
capsules carrying mice, monkeys and cosmic ray measuring
devices, extended our knowledge of space.
Business was stable, but not outstanding, for the fi rst year. With
sales of $95,000, Raven lost $13,000 that year, the only loss in the
history of the company.
Ed Owen became the company’s fi rst full-time president in 1961.
During his tenure, sales rose to a high of $12.3 million. In a news-
paper article on his retirement, Owen attributed “the growth, image
and reputation of the company to the many loyal Raven employees.”
1962
Raven is chosen by the National Center
for Atmospheric Research to manage the
National Scientifi c Balloon Flight Station
in Palestine, TX.
1966
Raven builds its fi rst satellite production
facility in Huron, SD to manufacture
parachutes.
1967
Raven introduces a heavy-lift balloon for
logging. Enters sportswear fi eld with the
manufacture of insulated snowmobile
clothing.
1971
Ed Owen retires and David A. Christensen
becomes President.
1986
Applied Technology Division is restructured,
creating Engineered Films and Aerostar.
1972
Raven declares its fi rst cash dividend.
Dividends per share have increased every
year since 1972, with only two exceptions.
1973
New plastic sheet material, RUFCO, is
introduced to the marketplace.
1980
Raven listed on the American Stock
Exchange.
Raven buys Glasstite, Inc. a manufacturer
of fi berglass pickup-truck toppers.
1987
Raven named one of the “Best Small
Companies in America” by Forbes
Magazine.
1990
Raven adopts Total Quality Management
(TQM).
1956
J.R. Smith, Ed Yost, Duwayne Thon and
Joseph Kaliszewski leave the employ
of General Mills, Inc. to form Raven
Industries, using capital they receive from
Cyrus Hoigaard.
1960
Raven invents the modern hot-air balloon
and also starts manufacturing fi berglass
tanks.
1961
Ed Owen becomes Raven’s fi rst full-time
President.
The Manchester Building in downtown
Sioux Falls is bought for $156,000 and
becomes corporate headquarters.
Page14
RAVEN 2006 Annual Report
5 0 Y e a r A n n i v e r s a r y
With Owen’s retirement, Dave Christensen was named President
of Raven Industries in 1971 and remained in that position until
2000. During his term, Raven was three times named by Forbes
Magazine as one of the “Best Small Companies in America.” Raven
reached an important goal in 1992 – $100 million in sales, a
major accomplishment since it represented a doubling of sales over
the previous fi ve years.
Ron Moquist became the third Chief Executive Offi cer of the com-
pany in 2000 and executed an aggressive strategy for success. The
“Shrink, Fix, Grow” strategy as it was called was designed to get
Raven Industries out of low-margin businesses like pickup-truck
toppers and focus on more profi table products such as high-tech
farm equipment. As a result, Raven was able to return more than
$64 million to shareholders through cash dividends and stock
repurchases from fi scal 2000 through 2005 while improving the
balance sheet and reducing debt.
Today Raven Industries has passed the $200 million revenue
threshold. With the company no longer dependent on labor-
intensive, commodity-type products, the business is focused on
growth. The company’s 900 employees take pride in celebrating
Raven’s 50th anniversary and salute the dedicated men and women
who came before them.
1991
Ag electronics product line is spun out of
the Electronic Systems Division, to create
a new division, Flow Controls.
1992
Raven reaches $100 million in sales
- represents a doubling of sales over the
previous fi ve years.
Begins trading on the Nasdaq Stock Market
as RAVN.
1995
Company purchases high-altitude
balloon manufacturing assets of Winzen
International of Texas.
1996
Raven introduces a new variable-rate
controller with global-positioning satellite
(GPS) technology for agricultural
applications.
2001
Flow Controls Division acquires GPS
technology leader Starlink, Incorporated.
Sportswear Division is merged into Aerostar.
1999
Glasstite, Inc. sold.
2000
David Christensen retires. Ronald Moquist
becomes chief executive of Raven.
Plastic Tank Division sold to Norwest Equity
Partners.
2002
Three-layer fi lm extruder built for
$4 million.
2004
Raven Precision Solutions Center opens.
0606
06
2005
Aerostar International successfully launches
and fl ies the second airship in history to
achieve powered fl ight in the stratosphere.
The fi rst one, which fl ew in 1970, was also
a Raven product.
2006
Raven announces fi fth year of consecutive
record profi ts with a 30% per year average
growth and reaches $200 million in sales.
Page15
RAVEN 2006 Annual Report
ELEVEN-YEAR FINANCIAL SUMMARY
Dollars in thousands, except per-share data
OPERATIONS FOR THE YEAR
Net sales
Ongoing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sold businesses(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income
Ongoing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sold businesses(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income % of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income % of beginning equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL POSITION
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt / total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory turnover (CGS / year-end inventory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS PROVIDED BY (USED IN)
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMMON STOCK DATA
Net income per share – basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock price range during year
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares outstanding, year-end (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shareholders, year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER DATA
Price / earnings ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales per employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the years ended January 31
2005
2006
$204,528
—
204,528
53,231
37,363
(79)
37,284
37,494
$ 24,262
11.9%
36.7%
$ 5,056
$ 71,345
20,050
$ 51,295
3.56
$ 25,602
106,157
9
$ 84,389
0.0%
5.4
$ 21,189
(11,435)
(6,946)
2,790
$ 1.34
1.32
0.28
4.67
$ 33.15
16.54
$ 31.60
18,072
9,263
23.9
819
$ 250
$ 43,619
$168,086
—
168,086
43,200
27,862
—
27,862
27,955
$ 17,891
10 .6%
26 .9%
$ 15,298(b)
$ 61,592
20,950
$ 40,642
2 .94
$ 19,964
88,509
—
$ 66,082
0 .0%
5 .4
$ 18,871
(7,631)
(19,063)
(7,823)
$ 0 .99
0 .97
0 .85(b)
3 .67
$ 26 .94
13 .08
$ 18 .38
17,999
6,269
18 .9
807
$ 208
$ 43,646
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.
Book value per share is computed by dividing total shareholders’ equity by the number of common shares outstanding.
(a) In fiscal 2003, 2001, 2000 and 1996, the company sold its Beta Raven Industrial Controls, 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 16
RAVEN 2006 Annual Report
2004
$142,727
—
142,727
33,759
21,981
(355)
21,626
21,716
$ 13,836
9 .7%
23 .8%
$ 3,075
$ 55,710
11,895
$ 43,815
4 .68
$ 15,950
79,508
57
$ 66,471
0 .1%
6 .5
$ 19,732
(4,352)
(6,155)
9,225
$ 0 .77
0 .75
0 .17
3 .68
$ 15 .23
7 .56
$ 14 .11
18,041
3,560
18 .8
770
$ 185
$ 47,120
2003
2002
2001
2000
1999
1998
1997
1996
$119,589
1,314
120,903
27,515
16,861
204
17,065
17,254
$ 11,185
9 .3%
21 .5%
$112,018
6,497
118,515
23,851
13,788
(613)
13,175
13,565
$ 8,847
7 .5%
18 .4%
$113,360
19,498
132,858
21,123
7,417(c)
3,331(d)
10,748
10,924
$ 6,411(c)(d)
4 .8%
11 .8%
$ 2,563
$ 2,371
$ 2,399
$ 49,351
13,167
$ 36,184
3 .75
$ 16,455
72,816
151
$ 58,236
0 .3%
4 .4
$ 12,735
(9,166)
(5,830)
(2,261)
$ 0 .61
0 .60
0 .14
3 .21
$ 9 .20
4 .38
$ 7 .91
18,133
2,781
13 .2
758
$ 160
$ 42,826
$ 45,308
13,810
$ 31,498
3 .28
$ 14,059
67,836
280
$ 52,032
0 .5%
5 .0
$ 18,496
(13,152)
(8,539)
(3,195)
$ 0 .48
0 .47
0 .13
2 .82
$ 5 .88
3 .02
$ 5 .64
18,424
2,387
12 .1
838
$ 141
$ 33,834
$ 51,817
13,935
$ 37,882
3 .72
$ 11,647
65,656
2,013
$ 47,989
4 .0%
5 .9
$ 9,441
9,752
(14,227)
4,966
$ 0 .31
0 .31
0 .12
2 .53
$ 3 .48
1 .88
$ 3 .04
18,956
2,460
9 .8
1,043
$ 127
$ 38,239
$107,862
42,523
150,385
24,217
7,971
2,606(e)
10,577
10,503
$ 6,762(e)
4 .5%
10 .9%
$ 2,895
$ 55,371
14,702
$ 40,669
3 .77
$ 15,068
74,047
3,024
$ 54,519
5 .3%
5 .2
$ 10,375
6,323
(16,326)
372
$ 0 .26
0 .26
0 .11
2 .32
$ 3 .04
2 .25
$ 2 .40
23,496
2,749
9 .2
1,320
$ 114
$ 44,935
$108,408
46,798
155,206
24,441
8,220
1,453
9,673
9,649
$ 6,182
4 .0%
10 .0%
$104,489
47,679
152,168
24,929
9,555
1,007
10,562
12,540(f)
$ 8,062
5 .3%
14 .2%
$101,869
39,576
141,445
25,287
9,321
2,650
11,971
11,915
$ 7,688
5 .4%
15 .6%
$ 2,944
$ 2,709
$ 2,367
$ 60,279
15,128
$ 45,151
3 .98
$ 19,563
83,657
4,572
$ 62,293
6 .8%
4 .9
$ 8,326
(3,127)
(2,714)
2,485
$ 0 .22
0 .22
0 .10
2 .21
$ 3 .79
2 .54
$ 2 .67
28,164
3,014
12 .4
1,445
$ 107
$ 47,431
$ 57,285
17,816
$ 39,469
3 .22
$ 19,817
82,066
1,128
$ 61,563
1 .8%
4 .8
$ 9,274
(4,979)
(4,884)
(589)
$ 0 .28
0 .28
0 .09
2 .13
$ 4 .29
3 .27
$ 3 .77
28,944
3,221
13 .7
1,511
$ 101
$ 47,154
$ 56,696
20,016
$ 36,680
2 .83
$ 18,142
80,662
3,181
$ 56,729
5 .3%
4 .5
$ 7,088
(5,090)
(2,363)
(365)
$ 0 .27
0 .27
0 .08
1 .96
$ 3 .92
2 .67
$ 3 .75
29,016
3,011
13 .9
1,387
$ 102
$ 38,102
(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 the sale of an investment in an affiliate.
$ 84,379
38,010
122,389
22,660
7,692
1,869
9,561
9,566
$ 6,197
5 .1%
13 .6%
$ 2,130
$ 45,695
14,771
$ 30,924
3 .09
$ 18,069
67,553
2,816
$ 49,151
5 .4%
4 .1
$ 9,687
(4,158)
(4,029)
1,500
$ 0 .22
0 .22
0 .08
1 .74
$ 3 .46
2 .58
$ 3 .21
28,296
3,190
14 .9
1,368
$ 89
$ 32,539
Page 17
RAVEN 2006 Annual Report
BUSINESS SEGMENTS
Dollars in thousands
2006
2005
2004
2003
2002
2001
For the years ended January 31
FLOW CONTROLS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,506
13,586
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,047
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
938
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
1,085
ENGINEERED FILMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,794
19,907
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,512
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,359
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
2,436
ELECTRONIC SYSTEMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,219
8,916
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
20,191
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,612
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
871
AEROSTAR
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,009
2,133
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,837
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
359
REPORTABLE SEGMENTS TOTAL
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $204,528
44,542
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,587
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,088
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
4,751
CORPORATE & OTHER(a)
Sales from sold businesses . . . . . . . . . . . . . . . . . . . . . . . . $ —
(79)
Operating income (loss) from sold businesses . . . . . . . .
(7,179)
Operating (loss) from administrative expenses . . . . . . .
15,570
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
TOTAL COMPANY
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $204,528
37,284
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106,157
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,358
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,151
Depreciation & amortization . . . . . . . . . . . . . . . . . . . . .
$ 40,726
10,516(b)
23,701
1,372
876
$ 58,657
15,739
25,181
3,960
1,403
$ 47,049
4,492
17,382
1,201
880
$ 21,654
3,609
7,492
542
389
$ 35,059
8,254
19,304
341
1,004
$ 42,636
10,563
15,941
712
1,611
$ 44,307
5,797
14,975
841
850
$ 20,725
3,092(c)
7,756
1,130
436
$168,086
$142,727
34,356(b)
73,756
7,075
3,548
27,706(c)
57,976
3,024
3,901
$ —
—
(6,494)
14,753
466
293
$ —
(355)
(5,725)
21,532
306
244
$168,086
$142,727
27,862(b)
88,509
7,541
3,841
21,626(c)
79,508
3,330
4,145
$ 28,496
6,897
21,483
729
948
$ 35,096
10,030
17,244
4,080
1,475
$ 38,589
4,022
14,528
395
978
$ 17,408
1,012
7,032
570
374
$119,589
21,961
60,287
5,774
3,775
$ 1,314
204
(5,100)
12,529
259
191
$120,903
17,065
72,816
6,033
3,966
$ 23,178
5,509(d)
20,313
677
443
$ 35,796
8,257
13,691
3,178
1,001
$ 32,289
2,264
13,910
774
1,101
$ 20,755
2,907(e)
7,150
256
347
$ 16,758
3,985
9,578
327
353
$ 35,403
7,397
11,520
633
946
$ 32,039
(542)(f)
15,359
1,492
1,089
$ 29,160
2,996
8,872
163
367
$112,018
$113,360
18,937(d,e)
55,064
4,885
2,892
13,836(f)
45,329
2,615
2,755
$ 6,497
(613)
(5,149)
12,772
209
253
$ 19,498
3,331(g)
(6,419)
20,327
475
912
$118,515
$132,858
13,175(d,e)
67,836
5,094
3,145
10,748(f,g)
65,656
3,090
3,667
(a) Operating income from sold businesses includes administrative expenses directly attributable to the sold businesses. Assets are principally cash, investments, deferred taxes
and notes receivable.
(b) Includes a $1.3 million pretax writeoff of assets related to the Fluent Systems product line (See Note 5).
(c) Includes $182,000 of pretax gain on plant sale.
(d) Includes a $550,000 in-process research and development charge related to the Starlink acquisition.
(e) Includes $414,000 of pretax gains on plant sales.
(f) Includes $1.8 million of business repositioning charges in the Electronic Systems Division and $2.6 million for the total company.
(g) Includes a $3.1 million pretax gain on the sale of the company’s Plastic Tank Division.
Page 18
RAVEN 2006 Annual Report
FINANCIAL REVIEW AND ANALYSIS
RESULTS OF OPERATIONS
The following table presents comparative financial performance for the past three years:
Dollars in thousands, except per-share data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposition of businesses & assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$204,528
53,231
15,868
79
37,284
37,494
13,232
$ 24,262
$ 1.32
35.3%
EXECUTIVE SUMMARY
Raven Industries, Inc . 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 in
four business segments: Flow Controls, Engineered Films,
Electronic Systems and Aerostar .
Consolidated Operating Results
The company delivered record sales and profits in fiscal 2006,
exceeding fiscal 2005 record-setting results . Net income rose
to $24 .3 million, an increase of $6 .4 million, or 35 .6% over
last year’s results . Earnings per diluted share of $1 .32 topped
the prior fiscal year’s record of $ .97 by 36 .1% . Net sales reached
$204 .5 million, surpassing fiscal 2005 by $36 .4 million, or
21 .7% . The Engineered Films, Electronic Systems, and
Flow Controls segments all contributed to the company’s
sales and profit growth for fiscal 2006, with the higher sales
levels in each of these segments driving the increase in
company profits .
In fiscal 2006, the company increased its quarterly dividend
from 5 1/2 cents per share paid in fiscal 2005 to 7 cents per
share . During fiscal 2005, the company split its stock two-
for-one and paid a one-time special dividend of 62 1/2 cents
per share, which totaled $11 .3 million . Capital expenditures
2006
%
Sales
100.0
26.0
7.8
18.2
18.3
6.5
11.9
%
Change
+21.7
+23.2
+12.9
+33.8
+34.1
+31.5
+35.6
+36.1
– 1.9
For the years ended January 31
2005
%
Sales
100 .0
25 .7
8 .4
16 .6
16 .6
6 .0
10 .6
%
Change
+17 .8
+28 .0
+17 .5
+28 .8
+28 .7
+27 .7
+29 .3
+29 .3
– 0 .8
$168,086
43,200
14,056
1,282
27,862
27,955
10,064
$ 17,891
$ 0 .97
36 .0%
2004
%
Sales
100 .0
23 .7
8 .4
15 .2
15 .2
5 .5
9 .7
%
Change
+18 .1
+22 .7
+12 .5
+26 .7
+25 .9
+29 .8
+23 .7
+25 .0
+ 3 .1
$142,727
33,759
11,960
173
21,626
21,716
7,880
$ 13,836
$ 0 .75
36 .3%
totaled $10 .4 million for fiscal 2006 and were made primarily
in the company’s Engineered Films segment for additional
manufacturing capacity and facilities . Fiscal 2005 capital
spending totaled $7 .5 million and included increased
spending for additional capacity in the Engineered Films
segment . The company has planned for continued investment
in the expansion of Engineered Films manufacturing capacity
to exceed $13 million in fiscal 2007 . The company also
completed the strategic acquisition of Montgomery Industries,
Inc . in its Flow Controls segment at the beginning of
fiscal 2006 .
Management expects another year of record sales and
profits in fiscal 2007 . The additional Engineered Films
manufacturing capacity will enable the segment to satisfy
customer demand in the upcoming year . New product
introductions and continued demand for the company’s
precision agriculture products in the Flow Controls segment
are expected to aid in the company’s fiscal 2007 sales and
profit growth .
The following discussion highlights the consolidated operating
results . Operating results are more fully explained in the
segment discussions that follow .
Page 19
RAVEN 2006 Annual Report
Fiscal 2005 versus fiscal 2004
Fiscal 2005 net sales reached $168 .1 million, 17 .8% higher
than fiscal 2004, with all segments recording increases
over their fiscal 2004 revenue levels . Operating income
of $27 .9 million was $6 .2 million over the $21 .6 million
reported for fiscal 2004 . Profit gains were a result of significant
sales increases in the company’s higher-margin product
lines, including Flow Controls’ precision ag products and
Engineered Films’ plastic sheeting . In fiscal 2005, a strong
agricultural economy and new product introductions resulted
in a net sales increase of $5 .7 million, or 16 .2% for the Flow
Controls’ segment, with revenue reaching $40 .7 million .
Flow Controls’ 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 . 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 contract .
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 included an operating loss of $355,000 for
ongoing environmental and legal liabilities associated with
previously sold businesses .
FISCAL 2006 PERFORMANCE MEASURES
The company has set ambitious goals for achieving higher
growth, better returns on invested capital, and increased
shareholder value . The company’s net income as a percent
of net sales has steadily risen over the last several years . Net
income was 11 .9% of sales in fiscal 2006, which exceeded
fiscal 2005’s record of 10 .6% . Net income as a percent of
average assets was 24 .9% as compared to 21 .3% in fiscal 2005 .
As a percent of beginning equity, fiscal 2006 net income was
36 .7%, up almost 10 percentage points from fiscal 2005 .
2002
2006
2004
2005
2003
2001
Net income as % of
Net sales . . . . . . . . . . . .
Average assets . . . . . . . .
Beginning equity . . . . .
11.9%
24.9%
36.7%
10 .6%
21 .3%
26 .9%
9 .7%
18 .2%
23 .8%
9 .3%
15 .9%
21 .5%
7 .5%
13 .3%
18 .4%
4 .8%
9 .2%
11 .8%
Fiscal 2006 versus fiscal 2005
Net sales for the fiscal year ended January 31, 2006,
surpassed the $200 million mark, exceeding fiscal 2005
by $36 .4 million, or 21 .7% . The record fiscal 2006 sales
performance followed a strong fiscal 2005, which recorded
a 17 .8% increase over fiscal 2004 . The Flow Controls,
Engineered Films, and Electronic Systems segments reported
increased revenues over one year earlier, with the Engineered
Films segment posting the largest sales gain of $24 .1 million,
or 41 .1% to reach $82 .8 million . Fiscal 2006 revenue levels
topped the prior year in all of Engineered Films’ markets,
reflecting the segment’s additional manufacturing capacity,
high demand for oil and pond liners, and higher selling
prices due to increased resin costs . Flow Controls’ net sales
reached $47 .5 million, a 16 .6% increase over last year .
Increased demand for the segment’s standard sprayer control
systems and sales of automatic boom height control systems
(“Autoboom™”), which was acquired during the year as
part of the Montgomery Industries, Inc . acquisition, boosted
revenue levels for the fiscal year . Electronic Systems reported
a 19 .5% increase in annual sales due to increased demand
from its existing customer base . Aerostar’s net sales of
$18 .0 million fell short of last year’s twelve-month period by
$3 .6 million due primarily to an expected cargo parachute
revenue decrease and lower uniform contract sales .
For the year ended January 31, 2006, operating income rose to
$37 .3 million, a 33 .8% increase over one year earlier . Higher
sales levels in the company’s Flow Controls and Engineered
Films segments drove the profit growth, with the Electronic
Systems segment contributing to the increase in company
profits through higher sales and increased manufacturing
efficiencies on existing customer contracts . Flow Controls’
operating income of $13 .6 million was $3 .1 million, or 29 .2%
higher than the previous fiscal year . Fiscal 2006 operating
income of $19 .9 million reported in the Engineered Films
segment rose $4 .2 million, while Electronic Systems’ operating
income of $8 .9 million almost doubled that of the previous
year . Aerostar operating income of $2 .1 million fell short of the
prior year by $1 .5 million, or 40 .9%, and reflects the segment’s
lack of a follow-on military parachute order in fiscal 2006 .
Page 20
RAVEN 2006 Annual Report
SEGMENT ANALYSIS
SALES AND OPERATING INCOME BY SEGMENT
2004
2006
2005
Dollars in thousands
amount
%
change
%
change
amount
amount
%
change
SALES
Flow Controls . . . . . . . $ 47,506 +16.6
82,794 +41.1
Engineered Films . . . .
56,219 +19.5
Electronic Systems . . .
–16.8
Aerostar . . . . . . . . . . .
18,009
Total . . . . . . . . . . . . . . $204,528 +21.7
$ 40,726 +16 .2
58,657 +37 .6
+6 .2
47,049
+4 .5
21,654
$168,086 +17 .8
$ 35,059 +23 .0
42,636 +21 .5
44,307 +14 .8
20,725 +19 .1
$142,727 +18 .1
2006
2005
2004
Dollars in thousands
amount
OPERATING INCOME (LOSS)
Flow Controls . . . . . . . $ 13,586
Engineered Films . . . .
19,907
Electronic Systems . . .
8,916
Aerostar . . . . . . . . . . .
2,133
(79)
Sold businesses . . . . . .
Corporate expenses . .
(7,179)
Total . . . . . . . . . . . . . . $ 37,284
%
sales
28.6
24.0
15.9
11.8
18.2
amount
%
sales
amount
$ 10,516
15,739
4,492
3,609
—
(6,494)
$ 27,862
25 .8
26 .8
9 .5
16 .7
16 .6
$ 8,254
10,563
5,797
3,092
(355)
(5,725)
$ 21,626
%
sales
23 .5
24 .8
13 .1
14 .9
15 .2
FLOW CONTROLS
The Flow Controls Division (FCD), including Raven Canada,
provides electronic and Global Positioning System (GPS)
products for the precision agriculture, marine navigation and
other niche markets .
Fiscal 2006 versus fiscal 2005
Net sales in fiscal 2006 were $47 .5 million, up 16 .6%, or
$6 .8 million over fiscal 2005 levels . The segment’s standard
sprayer control systems and the acquired Autoboom™
product line accounted for the majority of the sales growth
on a fiscal year-to-date basis . Sprayer control system sales
were up from one year earlier due to increased original
equipment manufacturer orders, while acceptance of the
Autoboom™ product line also generated revenue growth .
As a percentage of net sales, gross profit margins improved
slightly to 37 .0% from the 36 .7% reported for the prior
year’s comparable period due to the impact of the increased
sales level on fixed costs . Fiscal 2006 fourth-quarter sales,
hampered by a weakening agricultural economy, increased
only 3 .6% to $10 .2 million while operating income rose 36 .0%
to $2 .7 million . The higher operating income level was a
result of reduced spending levels and lower warranty expense
in the current year’s fourth quarter . Fiscal 2006 operating
48
Net Sales
(dollars in millions)
FLOW CONTROLS
Operating
Income
(dollars in millions)
income of $13 .6 million increased $3 .1 million, or 29 .2% as
compared to the year ended January 31, 2005 . Included in the
prior year’s operating income is a $1 .3 million pretax write-off
of assets related to the segment’s fiscal 2004 Fluent Systems
acquisition . Excluding the write-off, fiscal 2006 operating
income increased $1 .8 million, or 15 .2% . The fiscal 2006
operating income increase over fiscal 2005, excluding the
Fluent write-off, reflects
the segment’s higher
sales level, tempered
by increases in product
development and
distribution investments .
Fiscal 2006 selling
expenses were
$3 .9 million, a $784,000,
or 25 .1%, increase over
fiscal 2005 . Higher
selling expenses related
to the segment’s precision
agriculture distribution
plan and expenses
incurred to leverage
the segment’s product
offerings in Canada contributed to the fiscal 2006 selling
expense increase .
2004 2005 2006
2004 2005 2006
12
24
36
12
16
0
0
8
4
Fiscal 2005 versus fiscal 2004
Fiscal 2005 net sales reached $40 .7 million, an increase of
16 .2% over fiscal 2004 despite the decrease of $6 .0 million
in sales recorded one year earlier under a special order for
chemical injection systems . An improved farm economy, new
product sales, and an increase in market share contributed to
the fiscal 2005 revenue growth . Increased sales volume and
value-engineering activities were the main contributors to a
gross profit margin increase from 30 .4% of net sales in fiscal
2004 to 36 .7% in fiscal 2005 . 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
write-off of Fluent Systems assets, which were acquired in
December 2003 . Fiscal 2005 selling expenses rose $729,000, or
30 .4%, due to increased investment in the segment’s precision
agriculture distribution plan .
Page 21
RAVEN 2006 Annual Report
estimated to be 12 – 16%. Fiscal 2006 fourth-quarter sales as
compared to the prior year’s fourth quarter increased 45.5%,
resulting in additional operating income of $1.6 million.
As with the fiscal year, the pit lining segment posted the largest
sales increase for the quarter and disaster film sales were
up $1.2 million. Fiscal 2006 operating income climbed to
$19.9 million, increasing 26.5% over the prior year. The
positive profit impact of the higher sales level was partially
offset by higher resin costs, as reflected in the current fiscal
year’s gross profit as a percent of sales, which fell from 31.4%
in fiscal 2005 to 27.6% for fiscal 2006. Selling expenses rose
10.5% during fiscal 2006, reaching $2.9 million mainly due
to increased personnel costs to support the segment’s higher
sales level.
Fiscal 2005 versus fiscal 2004
The segment’s net sales exceeded fiscal 2004 net sales by
$16.0 million, or 37.6%, to reach $58.7 million. Disaster film
sales of $9.4 million boosted the sales level for fiscal 2005
together with 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. Increased selling expenses,
which rose $461,000, or 21.3%, due to higher personnel
and advertising expenses partially offset the profit impact of
the segment’s higher sales level. Gross profit as a percentage
of net sales increased from 30.0% to 31.4%. The fiscal 2005
gross profit rate reflects favorable plant utilization due to
the higher sales level that was partially offset by higher raw
material costs.
Prospects
Management expects that continued capital investment in the
upcoming year will enable EFD to sustain its revenue growth
above 15%, with additional manufacturing capacity for its
current products as well as the ability to develop and produce
new products. Volatility in resin prices could impact product
selling prices as well as gross profit rates in fiscal 2007. A drop
in disaster film sales could negatively impact the segment.
Prospects
FCD continues to focus on gaining market share, domestically
and internationally, in the precision agriculture market.
New product offerings, together with reaching international
markets in Europe, South America, and Australia, is expected
to help offset weakness in the North American agricultural
market. These efforts are also expected to increase selling
expense in fiscal 2007. The company expects revenue growth
in the upcoming fiscal year to be under 10%.
ENGINEERED FILMS
The Engineered Films Division (EFD) produces rugged
reinforced plastic sheeting for industrial, construction,
manufactured housing and agriculture applications.
80
Net Sales
(dollars in millions)
ENGINEERED FILMS
Operating
Income
(dollars in millions)
Fiscal 2006 versus fiscal 2005
A strong sales performance in fiscal 2006 resulted in revenues
rising to $82.8 million, an increase of 41.1% over fiscal 2005.
All of EFD’s market segments achieved higher sales levels in
fiscal 2006, with the pit and pond lining segment posting the
largest revenue growth of $7.9 million, or 60.1%. Increased
oil drilling activity due to high oil prices throughout the year
boosted sales volume for
this particular market
category. Engineered
Films also reported
significant sales growth in
its agricultural, industrial
and construction markets.
Fiscal 2006 disaster film
sales of $11.4 million
were $2.0 million, or
21.6%, higher than fiscal
2005. EFD’s additional
manufacturing capacity
that was brought online
during the latter part
of fiscal 2005 and the
beginning of fiscal 2006
2004 2005 2006
2004 2005 2006
15
10
20
40
60
20
0
5
0
enabled the division to fulfill increased customer demand.
Increased product pricing resulting from higher raw material
prices also positively impacted the overall sales level for fiscal
2006. The increase in the segment’s fiscal 2006 sales resulting
from higher product pricing due to increased resin costs is
Page 22
RAVEN 2006 Annual Report
ELECTRONIC SYSTEMS
The Electronic Systems Division (ESD) is a total-solutions
provider of electronics manufacturing services, primarily to
North American original equipment manufacturers.
Fiscal 2006 versus fiscal 2005
ESD ended fiscal 2006 with sales of $56.2 million, up from
fiscal 2005 by $9.2 million, or 19.5%. The fiscal 2006 sales
growth was due to increased deliveries to long-term customers
on existing contracts. This segment sought to improve gross
ELECTRONIC SYSTEMS
Net Sales
(dollars in millions)
Operating
Income
(dollars in millions)
60
40
20
0
9
6
3
0
2004 2005 2006
2004 2005 2006
profit rates by increasing
manufacturing
efficiencies in fiscal 2006
and successfully attained
that goal. Fiscal 2006
operating income of
$8.9 million almost
doubled that of the
prior year, reflecting
the increased sales level
and better operational
execution on current
contracts, which contrasts
to fiscal 2005’s start-
up inefficiencies and
customer-driven delays.
As a percentage of sales,
the gross profit rate climbed to 17.4% as compared to fiscal
2005’s gross profit rate of 11.3%. Fiscal 2006 selling expenses
of $885,000 were up 7.5% compared to fiscal 2005.
Fiscal 2005 versus fiscal 2004
Electronic Systems increased sales 6.2%, or $2.7 million
over fiscal 2004 to reach $47.0 million. 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. 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 segment’s
start-up costs related to new contracts.
Prospects
ESD is expected to build on its revenue growth achieved in
fiscal 2006 with increases coming from existing accounts and
the addition of one or two new customers. Fiscal 2007 sales
growth for this segment is targeted to reach the 15-20% range.
ESD will continue to strive for operational excellence in all
of its manufacturing areas in order to maintain its level of
fiscal 2006 profitability; however, a higher percentage of
new business is expected to reduce gross profits as a percent
of sales.
AEROSTAR
The Aerostar segment manufactures military cargo
parachutes, government service uniforms, custom-shaped
inflatable products, and high-altitude balloons for government
and commercial research.
4
18
24
AEROSTAR
Net Sales
(dollars in millions)
Operating
Income
(dollars in millions)
Fiscal 2006 versus fiscal 2005
Fiscal 2006 net sales dropped to $18.0 million from the
fiscal 2005 sales level of $21.7 million, with the majority
of the decrease due to lower military parachute shipments.
New government contracts for parachute products were not
obtained in fiscal 2006
and Aerostar faced
lower sales levels and
under-utilization of
plant capacity. Partially
offsetting the decline
in parachute sales and
lower contract uniform
deliveries was an increase
in high-altitude research
balloon revenue. For
the full year, operating
income of $2.1 million
was $1.5 million behind
the prior fiscal year. An
increase in high-altitude
research balloon profits
due to the higher sales level was offset by lower parachute
product and uniform contract profits. As a percentage of sales,
gross profits decreased from 21.1% for fiscal 2005 to 16.9% for
the current fiscal year. Selling expenses of $910,000 were down
slightly in fiscal 2006, decreasing $40,000 from the prior year.
2004 2005 2006
2004 2005 2006
12
6
0
3
1
0
2
Page 23
RAVEN 2006 Annual Report
EXPENSES, INCOME TAXES AND OTHER
Corporate expenses increased 10 .5% over fiscal 2005 reaching
$7 .2 million for fiscal 2006 . Higher personnel costs, increased
investment in information technologies, and a higher level
of corporate giving accounted for the $685,000 fiscal 2006
increase . As a percentage of sales, corporate expenses were
3 .5% of net sales for fiscal 2006 as compared to fiscal 2005’s
3 .9% of net sales . Fiscal 2005 corporate expenses of
$6 .5 million increased 13 .4% over fiscal 2004 . Higher
professional service fees and increased personnel costs
contributed to the $769,000 increase .
15
18
NET OPERATING MARGIN
(percent)
Fiscal 2006 interest expense of $35,000 was even with fiscal
2005 and consisted of interest on short-term borrowings and
capital leases . Seasonal short-term borrowings of $4 .5 million
were required during the first
quarter of fiscal 2006, but
were repaid by April 30, 2005 .
No borrowings were made
in fiscal 2005 . Fiscal 2006
other income of $245,000
increased from $128,000
in fiscal 2005 . The main
component of other income
is interest income, which
increased in fiscal 2006
due to higher interest rates
received on the company’s
cash balances and short-term
investments . Fiscal 2006’s
effective income tax rate of
35 .3% decreased from fiscal
2005’s effective rate of 36 .0% and was one percentage point
lower than the fiscal 2004 rate of 36 .3%, reflecting the impact
of the U .S . Federal tax deduction for income attributable to
manufacturing activities .
2006
2004
2005
2001
2002
2003
12
6
0
3
9
Fiscal 2005 versus fiscal 2004
Fiscal 2005 net sales of $21 .7 million increased $929,000,
or 4 .5%, above fiscal 2004 net sales due to sales growth in
parachute products, military decoys, and uniforms . Partially
offsetting these increases were 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 . Fiscal 2005 operating income was up
$517,000, or 16 .7%, from fiscal 2004 results due to relatively
high profitability realized on the parachute products and
military decoys . Gross profit as a percentage of sales increased
from 18 .1% for fiscal 2004 to 21 .1% for fiscal 2005 . 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 .
Prospects
Fiscal 2007 revenue growth will depend on obtaining new
government and uniform contracts where Aerostar can
leverage its capacity and experience . If a new military
parachute order is obtained, Aerostar would not expect any
material impact on sales and profits until the second half of
fiscal 2007 . Aerostar results are expected to be down through
the first half of the year .
DIVESTITURES AND OTHER REPOSITIONING
ACTIVITIES
Fiscal 2004 divestiture activities included the sale 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 and legal
issues related to previously sold businesses, as estimated by
the company and its advisors . During fiscal 2006, a $79,000
pretax loss was incurred from increased liabilities for these
environmental issues .
Page 24
RAVEN 2006 Annual Report
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes cash provided by (used in)
the company’s business activities for the past three fiscal years:
Dollars in thousands
2004
2006
2005
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,189
(11,435)
(6,946)
$18,871
(7,631)
(19,063)
$19,732
(4,352)
(6,155)
OPERATING ACTIVITIES AND CASH POSITION
The company’s cash flow from operations totaled
$59 .8 million over the past three years compared to net
income of $56 .0 million over the same period . Net cash
provided by operating activities in fiscal 2006 totaled
$21 .2 million, a $2 .3 million increase as compared to
operating cash inflows in fiscal 2005 . The cash impact of
the company’s strong earnings performance and higher
accrued liabilities at fiscal 2006 year-end were tempered by
higher accounts receivable and inventory levels and a lower
accounts payable balance . Fiscal 2006 net income was
$6 .4 million higher than fiscal 2005 while accrued operating
liability balances increased by $3 .0 million . Fiscal 2006’s
ending accounts receivable balance was $29 .3 million, an
operating increase of $3 .8 million from fiscal 2005 . Accounts
receivable balances for the company’s Engineered Films,
Flow Controls, and Electronic Systems segments were higher at
fiscal 2006 year-end as compared to their fiscal 2005
year-ending balances due to higher sales levels . The fiscal
2006 ending inventory balance of $27 .8 million exceeded
fiscal 2005 by $4 .5 million . In support of higher delivery levels,
January 31, 2006 inventory balances in Engineered Films,
Electronic Systems, and Flow Controls were up as compared
to one year earlier, with Engineered Films accounting for over
half of the increase . Fiscal 2005 operating cash flows were
$18 .9 million as compared to cash flows of $19 .7 million for
fiscal 2004 . Fiscal 2005 net income was $4 .1 million higher
than fiscal 2004 while accounts payable increased by
$6 .6 million due to higher inventory levels and to the
extension of payment terms on certain vendor invoices .
Cash, cash equivalents and short-term investments
totaled $11 .4 million at January 31, 2006, an increase of
$1 .8 million from one year earlier . The higher company
earnings helped finance the fiscal 2006 increase in working
capital requirements, additional capital expenditures, and
the Flow Controls’ Canadian acquisition in February 2005 .
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 and
to help with short-term seasonal cash needs during the first
quarter of fiscal 2006 . All of these short-term borrowings were
repaid by April 30, 2005 .
15
20
CASH FLOWS FROM
OPERATIONS
(dollars in millions)
INVESTING ACTIVITIES
Net cash used in investing activities in fiscal 2006 totaled
$11 .4 million versus $7 .6 million in fiscal 2005 . Fiscal 2006
capital expenditures of $10 .4 million increased by
$2 .8 million from fiscal 2005, with $7 .4 million being
invested in the Engineered Films segment for additional
manufacturing capacity
and facilities . In February
2005, the company acquired
substantially all of the assets
of Montgomery Industries,
Inc . for $2 .7 million in cash .
A quarterly payment of six
percent of Montgomery product
sales was contained in the asset
purchase agreement of which
$149,000 was paid in fiscal
2006 . A $650,000 investment in
an unconsolidated real estate
affiliate was sold in fiscal 2006,
resulting in no material gain or
loss on the sale and $1 .0 million
of short-term investments were
liquidated . The company used $7 .6 million of cash
for investing activities in fiscal 2005 versus $4 .4 million
one year earlier . Fiscal 2005 investing activities included
$7 .5 million of capital expenditures, $1 .0 million of
short-term investment sales, and the $650,000 real estate
investment . The company plans to continue its capital
investment in additional Engineered Films capacity, with fiscal
2007 capital expenditures expected to reach $13 million for
this segment . Total company capital expenditures are planned
to be over $17 million in fiscal 2007 .
2006
2002
2005
2003
2004
2001
10
0
5
Page 25
RAVEN 2006 Annual Report
FINANCING ACTIVITIES
Net cash used in financing activities in fiscal 2006 of
$6 .9 million decreased $12 .1 million from the $19 .1 million
used in fiscal 2005 . The decrease in cash used was due
primarily to the $11 .3 million special dividend paid in fiscal
2005 and lower treasury stock purchases in fiscal 2006 as
compared to fiscal 2005 . 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 nineteenth
consecutive year . Fiscal 2006 quarterly dividend payments of
7 cents per share increased 27 .3%, excluding the special
62 1/2 cent dividend paid in fiscal 2005 . Purchases of 67,800
treasury shares were made during fiscal 2006 at an average
share price of $24 .91 . In fiscal 2005, 186,500 treasury shares
were purchased at an average price of $18 .87, while 288,350
shares were repurchased at an average price of $10 .64 during
fiscal 2004 .
Short-term borrowings on the company’s line of credit facility
totaled $4 .5 million for fiscal 2006 . These borrowings were
used for seasonal cash needs and to fund the Montgomery
Industries, Inc . acquisition . The borrowings were repaid by
April 30, 2005, and there were no borrowings outstanding as
of January 31, 2006 . The debt of the company consists of a
capital lease utilized by the Raven Canada operation and is
scheduled to be repaid by fiscal 2008 .
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 February 1, 2006, the company purchased
the building for $1 .8 million . A summary of the obligations
and commitments at January 31, 2006, and for the next five
years is shown below .
Dollars in thousands
Contractual Obligations:
Line of credit(a) . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . .
Unconditional purchase obligations(b) . .
Real estate purchase agreement . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Commercial Commitments:
Letters of credit . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
FY 2007
FY 2008-
FY 2009
FY 2010-
FY 2011
$ —
16
557
29,293
1,756
31,622
$ —
7
272
29,293
1,756
31,328
2,032
$33,654
2,032
$33,360
$ —
9
279
—
—
288
—
$288
$ —
—
6
—
—
6
—
$ 6
(a) $8.0 million line bears interest at 7.25% as of January 31, 2006, and expires
June 2006. The line of credit is reduced by outstanding letters of credit.
(b) Unconditional purchase obligations include $5.2 million for Engineered Films
capital equipment investments.
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 2007 are planned to be over
$17 million, with $13 million 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, although at
a somewhat reduced level, as a means to return additional
cash to shareholders and increase the leverage of the
company’s balance sheet . Cash generated from operations
and the availability of cash under existing credit facilities is
anticipated to be sufficient to fund these initiatives .
Page 26
RAVEN 2006 Annual Report
CRITICAL ACCOUNTING POLICIES AND
NEW ACCOUNTING STANDARDS
CRITICAL ACCOUNTING POLICIES
Critical accounting policies for the company are those policies
that require the application of judgment when valuing assets
and liabilities on the company’s balance sheet . These policies
are discussed below because a fluctuation in actual results
versus expected results could materially affect the company’s
operating results and because the policies require significant
judgments and estimates to be made . Accounting related to
these policies is initially based on best estimates at the time
of original entry in the accounting records . Adjustments are
periodically recorded when our actual experience differs
from the expected experience underlying the estimates . These
adjustments could be material if 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 .
Inventories
The company’s most significant accounting judgment is
determining inventory value at the lower of cost or market .
The company estimates inventory reserves on a quarterly basis .
Typically, when a product reaches the end of its life cycle,
inventory value declines slowly or the product has alternative
uses . Management uses its 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 . When
ESD customers authorize inventory purchases, especially of
long lead-time items, they are required to take delivery of
unused 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
management will have in controlling inventory risk and
mitigating the impact of obsolescence when it does occur .
Warranty
Estimated warranty liability costs are based upon historical
warranty costs and average time elapsed between purchases
and returns for each business segment . Warranty issues that
are unusual in nature are accrued for individually .
Allowance for Doubtful Accounts
Determining the level of the allowance for doubtful accounts
requires management’s best estimate of the amount of
probable credit losses based on historical write-off experience
by segment and an estimate of the collectibility of any known
problem accounts . Factors
which are considered beyond
historical experience include
the length of time the
receivables are outstanding,
the current business climate,
and the customer’s current
financial condition .
RETURN ON
AVERAGE ASSETS
(percent)
24
16
0
8
Revenue Recognition
The company recognizes
and records revenue when
there is persuasive evidence
of an arrangement, delivery
has occurred, the sales
price is determinable, and
collectibility is reasonably
assured . Revenue is typically
recognized at time of shipment because sales terms are FOB
shipping point . Estimated returns, allowances or warranty
charges are recognized upon shipment of a product . The
company sells directly to customers or distributors who incur
the expense and commitment for any post-sale obligations
beyond stated warranty terms .
2006
2005
2002
2004
2003
2001
Page 27
RAVEN 2006 Annual Report
Self-insurance Reserves
The company purchases insurance with deductibles for
product liability; general insurance, including aviation
product liability; and workers’ compensation . Third party
insurance is carried for what is believed to be the major
portion of potential exposure . The company has established
accruals for potential uninsured claims, including estimated
costs and legal fees . Management considers these accruals
adequate, although a substantial change in the number
and/or severity of claims would result in materially
different amounts .
Goodwill and Long-lived Asset Impairment
The company periodically assesses goodwill and other long-
lived assets for impairment, or more frequently if events or
changes in circumstances indicate that an asset might be
impaired, using fair value measurement techniques . For
goodwill, the company performs impairment reviews annually
by reporting units, which are the company’s reportable
segments except for Aerostar’s high-altitude research balloon
operation, which is evaluated independently from Aerostar’s
other operations . 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
NEW ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards
Board, or FASB, issued SFAS No . 123 (Revised 2004),
Share-Based Payment, or SFAS No . 123(R), which is a
revision of SFAS No . 123 . SFAS No . 123(R) supersedes
APB Opinion No . 25, Accounting for Stock Issued to
Employees, and amends SFAS No . 95, Statement of Cash
Flows. SFAS No . 123(R) 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 . 123(R) is effective for the company beginning
February 1, 2006 . 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 . Beginning February 1, 2006, the company
will change its cash flow presentation in accordance with SFAS
123(R) which requires the cash flows from the tax benefits
resulting from tax deductions in excess of the compensation
cost recognized for those options (excess tax benefits) to be
classified as financing cash flows, instead of operating cash
flows . The company expects to provide certain disclosures
required by SFAS 123(R) but are not required by SFAS 123,
beginning in the first quarter of fiscal 2007 .
projected future cash flows,
including timing and the
risks inherent in future cash
flows, perpetual growth
rates and determination
of appropriate market
comparables .
BOOK VALUE
PER SHARE
(dollars)
5
4
3
2
1
0
2001
2002
2003
2004
2005
2006
Page 28
RAVEN 2006 Annual Report
In May 2005, the FASB issued FASB Statement No . 154,
Accounting Changes and Error Corrections. This new
standard replaces APB Opinion No . 20, Accounting Changes,
and FASB Statement No . 3, Reporting Accounting Changes
in Interim Financial Statements. Among other changes,
Statement 154 requires that a voluntary change in accounting
principle be applied retrospectively with all prior period
financial statements presented on the new accounting
principle, unless it is impracticable to do so . The new standard
is effective for accounting changes and correction of errors
made in fiscal years beginning after December 15, 2005 .
The adoption of this statement is not expected to have an
effect on the company’s consolidated results of operations or
financial position .
In June 2005, the FASB Emerging Issues Task Force (EITF)
reached a final consensus on EITF 05-6, Determining
the Amortization Period for Leasehold Improvements.
EITF 05-6 addresses the determination of the amortization
period for leasehold improvements in operating leases that are
either (a) purchased subsequent to the inception of the lease
or (b) acquired in a business combination . The provisions of
EITF 05-6 are effective for periods beginning after June 30,
2005, and are not expected to have an effect on the company’s
consolidated results of operations or financial position .
Page 29
RAVEN 2006 Annual Report
MONTHLY CLOSING STOCK PRICE AND VOLUME
e
c
i
r
P
e
m
u
l
o
V
QUARTERLY INFORMATION (UNAUDITED)
Dollars in thousands,
except per-share data
FISCAL 2006
First Quarter . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . .
Total Year . . . . . . . . . . . . . . . . .
FISCAL 2005
First Quarter . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . .
Total Year . . . . . . . . . . . . . . . . . . .
FISCAL 2004
First Quarter . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . .
Total Year . . . . . . . . . . . . . . . . . . .
Net
Sales
Gross
Profit
Operating
Income
Pretax
Income
Net
Income
Net Income
Per Share(a)(b)
Diluted
Basic
Common Stock
Market Price(b)
Low
High
Cash
Dividends
Per Share(b)
$ 50,704
45,304
54,135
54,385
$204,528
$15,161
10,882
14,213
12,975
$53,231
$11,136
7,299
10,568
8,281
$37,284
$11,098
7,391
10,635
8,370
$37,494
$7,157
4,774
6,869
5,462
$24,262
$0.40
0.26
0.38
0.30
$1.34
$0.39
0.26
0.37
0.30
$1.32
$22.28
27.78
31.99
33.15
$33.15
$16.54
18.68
21.75
26.75
$16.54
$0.070
0.070
0.070
0.070
$0.280
$ 38,408
37,077
48,597
44,004
$ 168,086
$ 36,942
36,110
36,081
33,594
$ 142,727
$ 11,678
8,759
12,962
9,801
$ 43,200
$ 9,437
7,811
9,219
7,292
$ 33,759
$ 8,451
5,651
8,099(d)
5,661
$ 27,862
$ 8,475
5,677
8,115(d)
5,688
$ 27,955
$ 5,415
3,642
5,194(d)
3,640
$ 17,891
$ 0 .30
0 .20
0 .29
0 .20
$ 0 .99
$ 6,544
4,937
6,121
4,024
$ 21,626
$ 6,556
4,976
6,126
4,058
$ 21,716
$ 4,183
3,163
3,902
2,588
$ 13,836
$ 0 .23
0 .17
0 .22
0 .14
$ 0 .77
$ 0 .29
0 .20
0 .28
0 .20
$ 0 .97
$ 0 .23
0 .17
0 .21
0 .14
$ 0 .75
$ 17 .17
19 .43
23 .89
26 .94
$ 26 .94
$ 9 .50
11 .00
13 .73
15 .23
$ 15 .23
$ 13 .65
13 .08
17 .41
17 .05
$ 13 .08
$ 7 .56
7 .90
10 .62
11 .89
$ 7 .56
$ 0 .055
0 .680(c)
0 .055
0 .055
$ 0 .845
$ 0 .040
0 .040
0 .045
0 .045
$ 0 .170
(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 two-for-one stock split.
(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 5).
Page 30
RAVEN 2006 Annual Report
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, 2006, 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, 2006 has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page 43 of this
Annual Report .
Ronald M . Moquist
President & Chief Executive Officer
March 23, 2006
Thomas Iacarella
Vice President & Chief Financial Officer
Page 31
RAVEN 2006 Annual Report
CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except per-share data
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,409
2,000
29,290
27,819
1,746
1,081
71,345
25,602
6,401
2,809
$106,157
$ 7
8,179
11,147
717
20,050
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities, primarily compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
1,709
Commitments and contingencies
As of January 31
2006
2005
2004
$ 6,619
3,000
25,370
23,315
1,465
1,823
61,592
19,964
5,933
1,020
$88,509
$ 57
10,322
9,716
855
20,950
—
1,477
$14,442
4,000
18,454
16,763
1,313
738
55,710
15,950
6,776
1,072
$79,508
$ 72
3,666
7,784
373
11,895
57
1,085
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares, par value $1 .00 per share
84,389
66,082
66,471
Authorized – 100,000,000
Outstanding – 2006: 18,072,369; 2005: 17,999,468
2004: 18,041,088 (9,020,544 pre-split)
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$106,157
$88,509
$79,508
The accompanying notes are an integral part of the consolidated financial statements.
Page 32
RAVEN 2006 Annual Report
CONSOLIDATED STATEMENTS OF INCOME
Dollars in thousands, except per-share data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006
$204,528
151,297
2005
$168,086
124,886
2004
$142,727
108,968
For the years ended January 31
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,231
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposition of businesses and assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,868
79
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,284
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
(245)
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,494
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,232
43,200
14,056
1,282
27,862
35
(128)
27,955
10,064
33,759
11,960
173
21,626
70
(160)
21,716
7,880
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24,262
$ 17,891
$ 13,836
Net income per common share
– basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.34
$ 1.32
$ 0 .99
$ 0 .97
$ 0 .77
$ 0 .75
The accompanying notes are an integral part of the consolidated financial statements.
Page 33
RAVEN 2006 Annual Report
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Dollars in thousands, except per-share data
Balance January 31, 2003 . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends ($ .170 per share)(a) . . . . . . . . . .
Purchase of stock . . . . . . . . . . . . . . . . . . . . . . . .
Purchase and retirement of stock . . . . . . . . . . .
Employees’ stock options exercised . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . .
Tax benefit from exercise of stock options . . . . .
Balance January 31, 2004 . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends ($ .220 per share) . . . . . . . . . . .
Cash dividend – Special ($ .625 per share) . . . .
Two-for-one stock split . . . . . . . . . . . . . . . . . . . .
Purchase of stock . . . . . . . . . . . . . . . . . . . . . . . .
Purchase and retirement of stock . . . . . . . . . . .
Employees’ stock options exercised . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . .
Tax benefit from exercise of stock options . . . . .
Balance January 31, 2005 . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in cumulative foreign
currency translation adjustment . . . . . . . . .
Cash dividends ($ .280 per share) . . . . . . . . . . .
Purchase of stock . . . . . . . . . . . . . . . . . . . . . . . .
Purchase and retirement of stock . . . . . . . . . . .
Employees’ stock options exercised . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . .
Tax benefit from exercise of stock options . . . . .
Balance January 31, 2006 . . . . . . . . . . . . . . .
$1 Par
Common
Stock
$ 15,856
Paid-in
Capital
$ 340
Accumulated
Other
Treasury stock
Retained Comprehensive
Shares
Earnings
Cost
(6,789,268) $ (35,113) $ 77,153
Income
$—
Total
$ 58,236
—
—
—
(39)
137
—
—
15,954
—
—
—
15,954
—
(40)
185
—
—
32,053
—
—
—
(804)
435
282
531
784
—
—
—
(411)
—
(646)
327
309
402
765
—
—
(144,175)
—
—
—
—
(6,933,443)
—
—
—
(6,933,443)
(186,500)
—
—
—
—
(14,053,386)
—
—
(3,068)
—
—
—
—
(38,181)
—
—
—
—
(3,519)
—
—
—
—
(41,700)
13,836
(3,075)
—
—
—
—
—
87,914
17,891
(3,971)
(11,327)
(15,543)
—
—
—
—
—
74,964
—
—
—
—
24,262
—
—
—
(27)
168
—
—
—
(5,056)
—
—
—
—
—
$32,194 $1,401 (14,121,186) $(43,389) $94,170
—
—
(67,800)
—
—
—
—
—
—
(1,689)
—
—
—
—
—
—
—
(689)
410
485
430
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13,836
(3,075)
(3,068)
(843)
572
282
531
66,471
17,891
(3,971)
(11,327)
—
(3,519)
(686)
512
309
402
66,082
24,262
13
—
—
—
—
—
—
$13
13
(5,056)
(1,689)
(716)
578
485
430
$84,389
(a) Reflects the October 2004 two-for-one stock split.
The accompanying notes are an integral part of the consolidated financial statements.
Page 34
RAVEN 2006 Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 31
2005
2006
2004
$24,262
$17,891
$13,836
Dollars in thousands
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for losses on accounts receivable, net of recoveries . . . . . . . . . . . . . . . . . . . .
Loss on disposition of businesses and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in operating assets and liabilities, net of effects from acquisition and
4,684
467
78
79
(809)
485
disposition of businesses and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,086)
29
21,189
Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of businesses and assets, net of cash sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of (investment in) unconsolidated affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from borrowing under line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment on borrowing under line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,358)
(4,500)
5,500
(2,828)
—
650
101
(11,435)
4,500
(4,500)
(63)
(5,056)
(1,689)
(138)
(6,946)
3,410
431
34
1,282
(31)
309
(4,669)
214
18,871
(7,541)
(3,000)
4,000
(414)
—
(650)
(26)
(7,631)
—
—
(72)
(15,298)
(3,519)
(174)
(19,063)
3,674
471
67
173
254
282
850
125
19,732
(3,330)
(4,000)
4,000
(1,038)
257
—
(241)
(4,352)
—
—
(141)
(3,075)
(3,068)
129
(6,155)
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18)
—
—
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,790
6,619
$ 9,409
(7,823)
14,442
$ 6,619
9,225
5,217
$14,442
The accompanying notes are an integral part of the consolidated financial statements.
Page 35
RAVEN 2006 Annual Report
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant
Accounting Policies
BASIS OF PRESENTATION AND PRINCIPLES
OF CONSOLIDATION
The consolidated financial statements include the accounts of
Raven Industries, Inc . and its wholly owned subsidiaries (the
“company”) . The company is an industrial manufacturer providing
a variety of products to customers within the industrial, agricultural,
construction and military/aerospace markets, primarily in North
America . The company operates three divisions (Flow Controls,
Engineered Films and Electronic Systems) in addition to two wholly
owned subsidiaries, Aerostar International, Inc . (Aerostar) and
Raven Industries Canada, Inc . (Raven Canada) . All significant
intercompany balances and transactions have been eliminated
in consolidation . The company sold its 50% ownership in
Zip City Partners, LLC in fiscal 2006 . The equity method was
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 .
FOREIGN CURRENCY
The Canadian dollar is considered the functional currency of
the Canadian operations . The balance sheet of the Canadian
subsidiary is translated into U .S . dollars at period-end exchange
rates, while the statement of income is translated at average rates .
Adjustments resulting from financial statement translations are
included as cumulative translation adjustments in accumulated
other comprehensive income (loss) within shareholders’ equity .
Foreign currency transaction gains or losses are recognized in the
period incurred and are included in other income (expense) in the
Consolidated Statements of Income .
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 .
Page 36
RAVEN 2006 Annual Report
SHORT-TERM INVESTMENTS
The investments consist of certificates of deposit with varying
maturities, all less than 12 months from the balance sheet date .
Rates on the deposits at January 31, 2006, are 4 .10% .
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 probable 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 and are presented 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 and liabilities assumed,
as goodwill . Goodwill is 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 .
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 . Additional accruals are
made for any significant, discrete warranty issues .
RESEARCH AND DEVELOPMENT
Research and development expenditures of $2 .5 million in fiscal
2006, $2 .0 million in fiscal 2005, and $1 .7 million in fiscal 2004
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 . 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 is treated as a “special
deduction .” As such, the special deduction has no effect on deferred
tax assets and liabilities . Rather, the impact of this deduction is
reported in the period in which the deduction is claimed on the
company’s tax return .
STOCK SPLITS
The company completed a two-for-one stock split effected in the
form of a 100% stock dividend on October 15, 2004 . All share and
per-share information reflects the effect of this stock split .
Page 37
RAVEN 2006 Annual Report
NOTES TO FINANCIAL STATEMENTS (continued)
Note 2. Selected Balance Sheet Information
Following are the components of selected balance sheet items:
As of January 31
2005
2004
2006
Dollars in thousands
Accounts receivable, net:
Trade accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,547
(257)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,290
Inventories, net:
Allowance for doubtful accounts . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,504
In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,652
20,663
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,819
Property, plant and equipment, net:
Building and improvements . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,084
16,662
43,256
(35,400)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,602
Other assets, net:
Amortizable assets:
Purchased technology . . . . . . . . . . . . . . . . . . . . . . $ 3,380
1,265
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,300)
Accumulated amortization . . . . . . . . . . . . . . . . . .
2,345
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Investment in unconsolidated affiliate . . . . . . . . .
318
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
146
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,809
Accrued liabilities:
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . $ 2,167
2,119
Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,049
401(k) contributions . . . . . . . . . . . . . . . . . . . . . . .
1,632
Insurance obligations . . . . . . . . . . . . . . . . . . . . . .
808
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,168
Profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
569
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,635
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,147
$25,635
(265)
$25,370
$18,719
(265)
$18,454
$ 3,538
2,820
16,957
$23,315
$ 2,500
2,120
12,143
$16,763
$ 1,084
15,184
36,486
(32,790)
$19,964
$ 1,110
13,049
32,479
(30,688)
$15,950
$ 1,080
946
(1,831)
195
650
—
175
$ 1,020
$ 1,992
1,852
980
1,541
567
900
452
1,432
$ 9,716
$ 1,250
1,136
(1,494)
892
—
—
180
$ 1,072
$ 1,875
1,638
906
524
267
544
263
1,767
$ 7,784
NEW ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards Board,
or FASB, issued SFAS No . 123 (Revised 2004), Share-Based
Payment, or SFAS No . 123(R), which is a revision of SFAS No . 123 .
SFAS No . 123(R) supersedes APB Opinion No . 25, Accounting for
Stock Issued to Employees, and amends SFAS No . 95, Statement
of Cash Flows. SFAS No . 123(R) 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 . 123(R) is effective for the company beginning
February 1, 2006 . 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 .
Beginning February 1, 2006, the company will change its cash
flow presentation in accordance with SFAS 123(R) which requires
the cash flows from the tax benefits resulting from tax deductions
in excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows, instead
of operating cash flows . The company expects to provide certain
disclosures required by SFAS 123(R) but are not required by
SFAS 123, beginning in the first quarter of fiscal 2007 .
In May 2005, the FASB issued FASB Statement No . 154, Accounting
Changes and Error Corrections. This new standard replaces
APB Opinion No . 20, Accounting Changes, and FASB Statement
No . 3, Reporting Accounting Changes in Interim Financial
Statements. Among other changes, Statement 154 requires that a
voluntary change in accounting principle be applied retrospectively
with all prior period financial statements presented on the new
accounting principle, unless it is impracticable to do so . The new
standard is effective for accounting changes and correction of
errors made in fiscal years beginning after December 15, 2005 . The
adoption of this statement is not expected to have an effect on the
company’s consolidated results of operations or financial position .
In June 2005, the FASB Emerging Issues Task Force (EITF) reached
a final consensus on EITF 05-6, Determining the Amortization
Period for Leasehold Improvements. EITF 05-6 addresses
the determination of the amortization period for leasehold
improvements in operating leases that are either (a) purchased
subsequent to the inception of the lease or (b) acquired in a
business combination . The provisions of EITF 05-6 are effective for
periods beginning after June 30, 2005, and are not expected to have
an effect on the company’s consolidated results of operations or
financial position .
Page 38
RAVEN 2006 Annual Report
Note 3. Supplemental Cash Flow Information
Dollars in thousands
Changes in operating assets and liabilities, net of
effects from the acquisition and sale of businesses:
For the years ended January 31
2004
2005
2006
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . $(3,821)
(4,356)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(103)
Prepaid expenses and other assets . . . . . . . . . . .
(2,688)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .
3,021
Accrued and other liabilities . . . . . . . . . . . . . . . .
(139)
Customer advances . . . . . . . . . . . . . . . . . . . . . . .
$(8,086)
$(6,950)
(6,704)
150
6,576
1,777
482
$(4,669)
$(2,072)
4,603
(16)
(1,625)
187
(227)
850
$
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,806
$
77
$ 9,596
$
50
$ 7,014
Note 4. Montgomery Industries Acquisition
On February 17, 2005, the company acquired substantially all
of the assets of Montgomery Industries, Inc ., a privately held
Canadian corporation, for $2 .7 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 payment 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 . Of the purchase price,
$289,000 was allocated to current assets, $82,000 was allocated
to property, plant and equipment, $2 .560 million was allocated to
amortizable intangible assets (to be amortized over approximately
seven years), $539,000 to current liabilities assumed and $285,000
to goodwill, which is deductible for tax purposes .
For the year ended January 31, 2006, the earn-out on the sales of
Montgomery products was $183,000, which was recorded as an
increase in goodwill .
The operation is a component of the Flow Controls segment . The
results of operations for the acquired business have been included in
the consolidated financial statements since the date of acquisition .
Pro forma earnings are not presented due to the immateriality of the
effect of the acquisition to the company’s consolidated operations .
Note 5. 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 was 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
effect of the acquisition to the company’s 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 6. Divestitures and
Other Repositioning Activities
A $79,000 pretax loss was incurred during fiscal 2006 from increased
liabilities for environmental issues related to the company’s fiscal
2000 sale of its Glasstite subsidiary . 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 estimated liabilities for environmental and legal
issues related to previously sold operations . At January 31, 2006, the
company had an undiscounted accrual remaining of $151,000 for
environmental monitoring and clean-up costs of sold operations .
Note 7. Goodwill and Other Intangibles
Goodwill
The changes in the carrying amount of goodwill by reporting
segment are shown below:
Dollars in thousands
Balance at January 31, 2003 . . . . . . .
Goodwill acquired during year . .
Balance at January 31, 2004 . . . . . . .
Adjustment . . . . . . . . . . . . . . . . . .
Writeoff of Fluent Systems . . . . . .
Balance at January 31, 2005 . . . . . . .
Goodwill acquired during year . .
Acquisition earn-outs . . . . . . . . . .
Flow
Controls
$4,940
5,783
Engineered Electronic
Systems
$433
—
433
—
—
433
—
—
$433
Films
$96
843 —
96
5 —
(848) —
96
4,940
285 —
183 —
$96
Aerostar
$464
—
464
—
—
464
—
—
$464
Total
$5,933
843
6,776
5
(848)
5,933
285
183
$6,401
Balance at January 31, 2006 . . $5,408
Intangible Assets
Estimated future amortization expense based on the current
carrying value of amortizable intangible assets for fiscal periods
2007 through 2011 is $433,000, $377,000, $366,000, $365,000 and
$351,000, respectively .
Page 39
RAVEN 2006 Annual Report
NOTES TO FINANCIAL STATEMENTS (continued)
Note 8. 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 $892,000, $836,000 and $817,000 for
fiscal 2006, 2005 and 2004, 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 accumulated benefit obligation for these benefits is
shown below:
For the years ended January 31
Dollars in thousands
2004
2005
2006
$2,235
$2,607
Benefit obligation at beginning of year . . . . . . . . . . . . . . . $2,722
36
58
80
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162
186
259
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
380
27
2,014
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(206)
(156)
(147)
Retiree benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,607
2,722
4,928
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . .
(1,395)
(1,275)
Less: unrecognized actuarial losses . . . . . . . . . . . . . . . . . . .
(3,045)
$1,212
$1,447
Ending liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,883
The liability and expense reflected in the balance sheet and income
statement are as follows:
For the years ended January 31
Dollars in thousands
2004
2005
2006
$1,102
$1,212
Beginning liability balance . . . . . . . . . . . . . . . . . . . . . . . . . $1,447
316
391
583
Employer expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(206)
(156)
(147)
Retiree benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,212
1,447
1,883
Ending liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . .
(200)
(180)
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(174)
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,709
$1,012
$1,267
Assumptions used:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wage inflation rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.75%
4.00%
7 .00%
4 .00%
7 .00%
4 .00%
The discount rate is based on matching rates of return on high-
quality fixed-income investments with the timing and amount
of expected benefit payments . No material fluctuations in retiree
benefit payments are expected in future years .
The assumed health care cost trend rate for fiscal 2006 was 9 .39% as
compared to 7 .00% assumed for fiscal 2005 and 2004 . The impact of
a one-percentage-point change in assumed health care rates would
not be significant to the company’s income statement or balance
sheet . The rate to which the fiscal 2006 health care cost trend rate is
assumed to decline to is 4 .25%, which is the ultimate trend rate . The
fiscal year that the rate reaches the ultimate trend rate is expected to
be fiscal 2026 .
Page 40
RAVEN 2006 Annual Report
Note 9. Warranties
Changes in the warranty accrual were as follows:
Dollars in thousands
2006
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $452
958
Accrual for warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(841)
Settlements made (in cash or in kind) . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $569
As of January 31
2005
$263
932
(743)
$452
2004
$156
863
(756)
$263
Note 10. Income Taxes
The reconciliation of income tax computed at the federal statutory
rate to the company’s effective income tax rate is as follows:
Tax at U .S . federal statutory rate . . . . . . . . . . . . . . . . . . . . . . .
State and local income taxes, net of U .S . federal benefit . . . .
Tax deduction on qualified production activities . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the years ended
January 31
2005
35 .0%
0 .9
—
0 .1
36 .0%
2006
35.0%
1.1
(1.0)
0.2
35.3%
2004
35 .0%
0 .9
—
0 .4
36 .3%
Significant components of the company’s income tax provision are
as follows:
Dollars in thousands
Income taxes:
Currently payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,041
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(809)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,232
$10,095
(31)
$10,064
$7,626
254
$7,880
For the years ended January 31
2004
2006
2005
Significant components of the company’s deferred tax assets and
liabilities are as follows:
Dollars in thousands
Current deferred tax assets:
As of January 31
2005
2006
2004
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88
220
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
680
Accrued vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
282
Insurance obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
476
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,746
Non-current deferred tax assets (liabilities):
$ 93
237
591
161
383
1,465
$ 93
182
532
183
323
1,313
598
Accrued compensation and benefits . . . . . . . . . . . . . . .
(439)
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
159
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
318
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,064
443
(771)
118
(210)
$1,255
354
(502)
75
(73)
$1,240
Pre-tax book income for the U .S . companies was $37,380,000 and
$114,000 for the Canadian subsidiary . As of January 31, 2006,
undistributed earnings of the Canadian subsidiary were considered
to have been reinvested indefinitely and, accordingly, the company
has not provided United States income taxes on such earnings .
Note 11. Financing Arrangements
The company has an uncollateralized credit agreement providing
a line of credit of $8 .0 million with a maturity date of June 1, 2006
bearing interest at 0 .25% under the prime rate . 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, 2006, 2005 or
2004, and $6 .0 million was available at January 31, 2006 . 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, 2006, 2005 and 2004 at 7 .25%, 5 .25% and 4 .00%,
respectively . The weighted-average interest rate for borrowing under
the short-term credit line in fiscal 2006 was 5 .63% . There were no
borrowings under the credit line in fiscal years 2005 or 2004 . The
debt of the company consists of a capital lease utilized by the Raven
Canada operation and is scheduled to be repaid by fiscal 2008 .
Wells Fargo Bank, N .A . provides the company’s line of credit and
holds the company’s cash and cash equivalents . 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 vehicles, equipment and facilities
under operating leases . Total rent and lease expense was $381,000,
$305,000, and $355,000 in fiscal 2006, 2005 and 2004, respectively .
Future minimum lease payments under non-cancelable operating
leases for fiscal periods 2007 to 2010 are $272,000, $228,000,
$51,000, and $6,000 with all leases scheduled to expire by
fiscal 2010 .
Note 12. 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 580,500
shares of the company’s common stock reserved for future option
grants under the plan at January 31, 2006 . 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 .
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 .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . .
Expected volatility factor . . . . . . . . . . . . . . . . .
Expected option term (in years) . . . . . . . . . . .
For the years ended January 31
2006
4.36%
0.90%
39.25%
4.25
2005
3 .51%
1 .07%
34 .92%
4 .50
2004
3 .02%
1 .33%
35 .89%
4 .50
Weighted average grant date fair value . . . . . . $ 10.90
Stock compensation expense . . . . . . . . . . . . . . $485,000
$ 5 .91
$309,000
$ 4 .11
$282,000
Information regarding option activity is as follows:
For the years ended January 31
2005
2006
2004
weighted
average
exercise
price
weighted
average
exercise
price
options
weighted
average
exercise
price
options
options
Outstanding at beginning
of year . . . . . . . . . . 612,176 $ 9.02
31.05
3.44
(1,300) 17.93
Granted . . . . . . . . . . .
76,500
Exercised . . . . . . . . . . (167,962)
Forfeited . . . . . . . . . . .
Outstanding at
723,676
86,600
(184,600)
(13,500)
$ 5 .89
22 .00
2 .77
9 .79
872,112
129,000
(274,436)
(3,000)
$ 3 .72
13 .50
2 .61
2 .65
end of year . . . . . . 519,414 $14.05
612,176
$ 9 .02
723,676
$ 5 .89
Options exercisable
at end of year . . . . 282,383 $ 8.66
323,076
$ 5 .27
326,608
$ 3 .57
The following table contains information about stock options
outstanding at January 31, 2006:
Exercise
Price
$ 4 .38
7 .00
13 .50
22 .00
31 .05
Remaining
Contractual
Life (Years)
0 .75
1 .75
2 .75
3 .75
4 .75
Number
Outstanding
91,489
146,075
120,000
85,350
76,500
519,414
Number
Exercisable
91,489
109,556
60,000
21,338
—
282,383
Page 41
RAVEN 2006 Annual Report
NOTES TO FINANCIAL STATEMENTS (continued)
Note 13. 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, two-for-one stock split . Diluted net income
per share is computed by dividing net income by the weighted-
average common and common-equivalent shares outstanding,
which includes the shares issuable upon exercise of employee stock
options, net of shares assumed purchased with the option proceeds .
Certain outstanding options were excluded from the diluted net
income per-share calculations because their exercise prices were
greater than the average market price of the company’s common
stock during those periods . For fiscal 2006, 2005 and 2004, 19,125,
21,650, and 32,250 options, respectively, were excluded from the
diluted net income per-share calculation . Details of the computation
are presented below .
For the years ended January 31
Dollars in thousands, except per-share amounts
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,262
Weighted-average common
2006
shares outstanding . . . . . . . . . . . . . . . . . . . 18,055,439
259,104
Dilutive impact of stock options . . . . . . . . . . .
Weighted-average common and
common-equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 18,314,543
Net income per common share:
— basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.34
— diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.32
2005
$ 17,891
2004
$ 13,836
18,066,223
344,104
18,081,712
407,868
18,410,327
18,489,580
$ 0 .99
$ 0 .77
$ 0 .97
$ 0 .75
Note 14. Comprehensive Income
Pursuant to the provisions of SFAS No . 130, Reporting
Comprehensive Income, comprehensive income includes all
changes to shareholders’ equity during a period, except those
resulting from investment by and distributions to shareholders .
Components of comprehensive income for the company include net
income and changes in foreign currency translation adjustments .
Total comprehensive income was as follows:
Dollars in thousands
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,262
13
Foreign currency translation adjustments . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . $24,275
2006
As of January 31
2005
$17,891
—
$17,891
2004
$13,836
—
$13,836
Note 15. 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 the
three Raven divisions, each with a Divisional Vice President, and
its Aerostar subsidiary . Raven Canada is consolidated with the
Flow Controls Division .
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 2006, 2005
or 2004 .
The company had sales of $16 .8 million for the year ended January
31, 2006, to countries outside the United States, primarily to
Canada . These sales were included in the Flow Controls, Engineered
Films, Electronic Systems and Aerostar segments and totaled
$6 .7 million, $1 .3 million, $8 .0 million and $779,000, respectively .
Market and segment information for 2006, 2005 and 2004 is
presented on pages 1 and 18 of this annual report .
Note 16. Subsequent Event
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 February 1, 2006,
the company purchased the building for $1 .8 million .
Note 17. Quarterly Information (Unaudited)
The company’s quarterly information is presented on page 30 .
Page 42
RAVEN 2006 Annual Report
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Raven Industries, Inc:
We have completed integrated audits of Raven Industries, Inc .’s 2006 and 2005 consolidated financial statements and of its internal control over financial
reporting as of January 31, 2006, and an audit of its 2004 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, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2006
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 31
of the 2006 Annual Report to Shareholders, that the Company maintained effective internal control over financial reporting as of January 31, 2006 based
on criteria established in Internal Control - Integrated Framework issued 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, 2006, based on criteria established in Internal Control - Integrated Framework
issued 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
Minneapolis, Minnesota
March 23, 2006
Page 43
RAVEN 2006 Annual Report
B O A R D O F D I R E C T O R S
Anthony W. Bour
President & Chief
Executive Offi cer,
Showplace Wood
Products, Inc.,
Sioux Falls, SD;
Director since: 1995
Ronald M. Moquist
President & Chief
Executive Offi cer,
Raven Industries, Inc.,
Sioux Falls, SD;
Director since: 1999
Conrad J. Hoigaard
Chairman of
the Board,
Raven Industries, Inc.;
Chairman of the Board,
Hoigaard’s Inc.,
Minneapolis, MN;
Director since: 1976
David A. Christensen
Former President &
Chief Executive Offi cer,
Raven Industries, Inc.,
Sioux Falls, SD;
Director since: 1971
Mark E. Griffi n
President & Chief Executive Offi cer,
Lewis Drugs, Inc.,
Sioux Falls, SD;
Director since: 1987
Cynthia H. Milligan
Dean,
College of Business Administration,
University of Nebraska, Lincoln,
Lincoln, NE;
Director since: 2001
Thomas S. Everist
President,
The Everist Company,
Sioux Falls, SD;
Director since: 1996
The Raven Board held four regular meetings and one special meeting in Fiscal Year 2006.
In April 2005, it increased the quarterly dividend for the 19th consecutive year.
Audit Committee
Thomas S. Everist, Chair
Anthony W. Bour
Cynthia H. Milligan
The Audit Committee held two meetings to review
the activities and independence of Raven’s external
auditors. It also reviewed the auditor’s fi ndings
regarding Raven’s fi nancial reporting process,
related internal and disclosure controls and
compliance with applicable standards.
Personnel and Compensation Committee
David A. Christensen, Chair
Mark E. Griffi n
Conrad J. Hoigaard
The Personnel and Compensation Committee
held two meetings to review and approve executive
compensation plans, policies and practices, and key
succession plans.
Governance Committee
Cynthia H. Milligan, Chair
Anthony W. Bour
David A. Christensen
Thomas S. Everist
Mark E. Griffi n
Conrad J. Hoigaard
The Governance Committee held two meetings
to review corporate bylaws, corporate governance
standards, and assess the Board’s effectiveness.
This Committee is responsible for the Board
nomination process.
Senior Executive Offi cers
Ronald M. Moquist
Thomas Iacarella
President & Chief Executive Offi cer, Age: 60, Service 30 years
Vice President & Chief Financial Offi cer, Age: 52, Service 14 years
Senior Management
David R. Bair
James D. Groninger
Barbara K. Ohme
Daniel A. Rykhus
Mark L. West
Page 44
RAVEN 2006 Annual Report
Division Vice President & General Manager–Electronic Systems Division, Age: 49, Service 7 years
Division Vice President & General Manager–Engineered Films Division, Age: 47, Service 19 years
Vice President–Administration, Age: 58, Service 18 years
Executive Vice President, General Manager–Flow Controls Division, Age: 41, Service 16 years
President–Aerostar International, Inc., Age: 52, Service 24 years
F i n a n c i a l
H i g h l
i g h t s
Dollars in thousands, except per-share data
For the years ended January 31
2006
2005
change
OPERATIONS
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$204,528
37,284
24,262
$168,086
27,862
17,891
PER SHARE
Net income – diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.32
0.28
4.67
$ 0.97
0.22(a)
3.67
PERFORMANCE
Operating income margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on beginning shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.2%
11.9%
24.9%
36.7%
16.6%
10.6%
21.3%
26.9%
Shares outstanding, year-end (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,072
17,999
(a) Excludes a special dividend of $.625 per share that was paid during the second quarter of fi scal 2005.
21.7%
33.8%
35.6%
36.1%
27.3%
27.2%
9.6%
12.3%
16.9%
36.4%
0.4%
NET SALES
(dollars in millions)
EARNINGS PER SHARE
(dollars)
SALES PER EMPLOYEE
(dollars in thousands)
200
150
100
50
0
1.40
1.05
0.70
0.35
0.00
240
180
120
60
0
2001
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
Table of Contents
Business Profi le ................................................... 1
Letter to Shareholders ......................................... 2
Operating Unit Results ....................................... 6
50 Year Anniversary ............................................ 14
Eleven-Year Summary ........................................ 16
Business Segments .............................................. 18
Financial Review and Analysis ........................... 19
Stock and Quarterly Performance ...................... 30
Management’s Report on Internal Control
over Financial Reporting .......................... 31
Financial Statements .......................................... 32
Report of Independent Registered
Public Accounting Firm ............................ 43
Directors, Offi cers and Senior Management ...... 44
Investor Information ................. Inside Back Cover
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
South 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
fi scal year ended January 31, 2006, which has been fi led 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 23, 2006, 9:00 a.m.
Ramkota Hotel and Conference Center
3200 W. Maple Avenue
Sioux Falls, SD
Raven Industries, Inc. is an Equal Employment Opportunity Em-
ployer with an approved affi rmative 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
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding
the future. Without limiting the foregoing, the words “anticipates,” “believes,” “expects,” “intends,” “may,” “plans” and similar expressions are intended to
identify forward-looking statements. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities
Litigation Reform Act. Although the Company believes that the expectations refl ected in such forward-looking statements are based on reasonable assump-
tions, there is no assurance that such assumptions are correct or that these expectations will be achieved. Such assumptions involve important risks and uncer-
tainties that could signifi cantly 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, as well as other
risks described in the Company’s 10-K under Item 1A. The foregoing list is not exhaustive and the company disclaims any obligation to subsequently revise any
forward-looking statements to refl ect events or circumstances after the date of such statements.
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Raven Industries
P.O. Box 5107
Sioux Falls, SD 57117-5107
RAVEN
8
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OLD VALUES
OLD VALUES
OLD VALUES
OLD VALUES
NEW IDEAS
NEW IDEAS
NEW IDEAS
NEW IDEAS
5 0 Y E A R S O F I N N O VAT I O N5656
191956561919561919
RAVEN
RAVEN
06ANNUAL REPORT
ANNUAL REPORT
for the fi scal year ended January 31
for the fi scal year ended January 31