Raven Industries Inc. Annual Report 2010

FY2010 Annual Report · Raven Industries Inc.
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20
01

economy, you can  

“Even in a bad  

opportunities.”

ﬁnd good  

1

3

Y

R

A

U

N

A

J

D

E

D

N

E

R

A

E

Y

L

A

C

S

I

F

E

H

T

R

O

F

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R

O

P

E

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U

N

N

A

 
 
 
 
 
 
 
 
Finding Opportunity

Meeting our goal to “protect the core” last year led us to two 
courses of action. 

First, we optimized near-term results:

(cid:115)(cid:0)(cid:51)(cid:73)(cid:90)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0)(cid:82)(cid:69)(cid:86)(cid:69)(cid:78)(cid:85)(cid:69)(cid:83)
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Second, we supported initiatives for long-term growth:

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(cid:115)(cid:0)(cid:33)(cid:68)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:78)(cid:69)(cid:87)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:65)(cid:80)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:37)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:38)(cid:73)(cid:76)(cid:77)(cid:83)
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Inside this Report
(cid:44)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:48)(cid:82)(cid:79)(cid:108)(cid:76)(cid:69). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:50)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(cid:37)(cid:76)(cid:69)(cid:86)(cid:69)(cid:78)(cid:13)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:51)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89). . . . . . . . . . . . . . . . . . . . . . . . .16
(cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:51)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)  . . . . . . . . . . . . . . . . . . . . . . . .18
(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:33)(cid:78)(cid:65)(cid:76)(cid:89)(cid:83)(cid:73)(cid:83). . . . . . . . . . . . . . . . . . . . . . . . . .19
(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0)(cid:48)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69) . . . . . . . . . . . . . . . . . . . . . . .31
(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:7)(cid:83)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0)(cid:35)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:0) 
(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71) . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:50)(cid:69)(cid:71)(cid:73)(cid:83)(cid:84)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:48)(cid:85)(cid:66)(cid:76)(cid:73)(cid:67)(cid:0)(cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:38)(cid:73)(cid:82)(cid:77) . . . .46
(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Executive Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
(cid:41)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:79)(cid:82)(cid:0)(cid:41)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) . . . . . . . . . . . . . . . . . . . . .(cid:41)(cid:78)(cid:83)(cid:73)(cid:68)(cid:69)(cid:0)(cid:34)(cid:65)(cid:67)(cid:75)(cid:0)(cid:35)(cid:79)(cid:86)(cid:69)(cid:82)

Financial Highlights

Dollars in thousands, except per-share data 

Operations

For the years  
ended January 31

2010 

2009 

Change

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $237,782 

$279,913 

–15.1%

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

43,220 

28,574 

46,394 

30,770 

–6.8%

–7.1%

Per Share

Net income—diluted  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $      1.58 

$      1.70 

Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Book value  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Performance

Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Return on net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

Return on beginning shareholders’ equity  . . . . . . . . . . . . . . . . . .  

0.55 

7.38 

18.2% 

12.0% 

18.2% 

25.2% 

0.52(a) 
6.30 

–7.1%

5.8%

17.1%

16.6% 

11.0% 

9.6%

9.1%

21.1% 

–13.7%

26.0% 

–3.1%

Shares and stock units outstanding, year end (in thousands) . . . .  

18,051 

18,027 

0.1%

(a) Excludes a special dividend of $1.25 per share that was paid during the fourth quarter of ﬁscal 2009.

Net Sales
(dollars in millions)

Earnings Per Share
(diluted, in dollars)

Sales Per Employee
(dollars in thousands)

$279.9

$234.0

$237.8

$217.5

$204.5

$168.1

$0.97

$1.70

$1.58

$1.53

$242

$246

$252

$262

$256

$1.39

$1.32

$201

2005 

2006 

2007 

2008 

2009 

2010

2005 

2006 

2007 

2008 

2009 

2010

2005 

2006 

2007 

2008 

2009 

2010

The recession brought an end to ﬁve straight 
years of record revenues for Raven. Applied  
Technology and Engineered Films experienced 
lower sales, while revenues were ﬂat at  
Electronic Systems and Aerostar.

We held the decline in net earnings to 7% despite 
15% lower sales. This resulted from moving 
aggressively to cut costs and manage expenses, 
without sacriﬁcing investments in long-term 
growth opportunities.

The slight reduction in sales per employee reﬂected 
a 13% lower average headcount. Our employees 
worked hard to improve efﬁciency, productivity,  
quality and customer satisfaction.

1

 
 
 
 
 
To Our Shareholders, Employees and Customers

For the ﬁrst time since 2001, Raven did not have a record year.  
However, we performed at a high level in this environment, achiev-
ing solid proﬁtability and strong cash ﬂow.

We responded quickly and decisively to the rapidly changing  

conditions. Targeted pricing was implemented. We made cuts 

where needed and aggressively managed our costs. 
 Unfortunately, this included reducing our workforce  
from 1,100 to 900 employees. At the same time, opera-
tional efﬁciency and productivity improved throughout 
the company, as did quality and customer service. And we 
also found ways to invest in long-term growth when the 
opportunity arose.

Ronald M. Moquist
President & Chief Executive Ofﬁcer

Sound Performance in a Difﬁcult Year

Over the last 54 years, Raven has built a strong, diversiﬁed manufacturing base and is a leader in its niche markets. We do not depend 
on cheap labor or commodity-type products to be successful. Our business model is focused on driving high-margin sales and capital-
efﬁcient growth. This allowed us to perform better than most manufacturers last year. 

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(cid:202)

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Applied Technology Sales Down, Opportunities Up

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took a nosedive after two very proﬁtable years. High input costs, combined with lower commodity prices, reduced proﬁts for many 
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planter control device for precisely controlling seed population based on varying soil fertility in the ﬁeld. We also recently introduced 
a cellular-based, high accuracy RTK tractor steering system. This product dramatically reduces the cost of building RTK towers for 
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improve the ease of data collection, transmission, storage and analysis.

2

2 0 1 0   A N N U A L   R E P O R T    RAVEN

We are partnering with major new accounts including Deere & Co., Monsanto, Buhler Versatile (Canada/Russia) and  
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Acquisitions are not a critical part of our growth plan. But small, strategic investments—such as the Ranchview and SST deals 
we did last year—help to strengthen our product offering.

A key initiative last year was improving the quality and reliability of our products. Warranty costs in ATD dropped 35% and 
customer satisfaction greatly improved.

Engineered Films Faces Difﬁcult Markets

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Our primary markets—energy and construction—continued to suffer. Pit liners sold into the energy market declined 40%, and 
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Our strategy for the past three years has been to replace low-cost, low-margin commodity plastic sheeting with higher-margin 
custom engineered ﬁlms. Our efforts to date have not met expectations. Only 10% of our business has been converted to these 
highly engineered ﬁlms. The time and effort to execute the strategy was underestimated, but we remain committed. Much 
groundwork has been done, and we believe the conversion rate will start accelerating.  

We are planning for growth in EFD in the coming year, as the energy market improves and construction markets remain 
depressed. Good gains are expected in our geomembrane products for lining and capping landﬁlls, and for lining and covering 
water canals and reservoirs.

Electronic Systems Experiences Higher Proﬁt

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expanding our services to a small number of Fortune 500 companies in these primary markets:

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All three of these business segments performed at a high level and exceeded last year’s operating results. Our avionics busi-
ness started the year strong and then tapered off as commercial airlines began cancelling or delaying delivery schedules. This 
is a trend that will probably continue in the year ahead, but it is mitigated by the fact that 70% of our avionics business is 
military and aerospace.  

The demand for secure communication devices for government agencies increased during the year as hackers and spies 
compromised America’s communications networks. This business should continue to grow. We were concerned that our third 
market, bed controls, would suffer the most because of the housing crisis. However, sales were only slightly down and proﬁt 
margins improved.  

ESD provides a reliable income stream and access to advanced manufacturing technologies that beneﬁt our other product 
areas. Contract electronics manufacturing is about quality, cost, speed, customer service and engineering support. We do 
these things very well.

3

Aerostar Sees Greater Demand, Proﬁtability

Aerostar had a breakout year, as improved proﬁtability in military parachutes and growing demand for aerostats fueled 
operating income growth of 34%.

Parachutes provided a big boost to Aerostar’s operating income, as we completed the ﬁnal year of a three-year contract for 
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margins will suffer until we build up efﬁciencies.

Our growth strategy for the past two years has focused on tethered aerostat systems for persistent surveillance. We not 
only provide the helium-ﬁlled blimp, but also the mobile trailer equipped with winch, generator, ﬁber optics and surveillance 
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orders for tethered aerostats for deployment in Afghanistan, with more to come.

Aerostar has come a long way from the days when it was a hot air balloon and advertising blimp company. This operation is 
positioned for strong growth.

Continued Difﬁcult Economy

We don’t see the economy improving much in the coming year. Spending will remain soft as consumers increase their savings and 
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cially hard hit, shedding 5 million jobs in the last 10 years. Those jobs are the backbone of America’s middle class. Great countries 
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heart of our wealth creation. Don’t believe the cynics who say we can’t compete against cheap foreign labor. We can.  

Finding Good Opportunities in a Bad Economy

In this stagnant economic environment, Raven’s growth will come from taking market share, developing new products, and 
geographic expansion. Even in a bad economy, there are good opportunities.

We continue to see signiﬁcant opportunities in developing markets—including Eastern Europe, Russia and Brazil—as well as 
the developed markets of Canada, Europe and Australia. We will grow in these markets by aggressively investing in our sales 
and marketing infrastructure, as well as expanding our distributor networks.

Last year we held R&D investment steady in spite of the poor economy. This year we will get more aggressive, increasing 
investment by 14%. We will use our strong ﬁnancial base to make strategic investments and acquisitions in growth areas 
where Raven already has a market presence.

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Operating Excellence and Strong Balance Sheet

Cash has always been king at Raven. As I have said in past annual reports, cash is real: it can’t be manipulated. However, 
there is always a danger that too much cash becomes a safety net. When we accumulate more cash than we can effectively 
allocate to proﬁtable growth, we will give it back to our shareholders—either as a dividend or in the form of a stock buyback.

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4

2 0 1 0   A N N U A L   R E P O R T    RAVEN

Raven versus the S&P 500
(excluding dividends)

$35

30

25

20

15

10

5

0
  2000           2001            2002           2003           2004           2005             2006          2007            2008          2009          2010

Raven Industries, Inc.

S&P 500

If a person invested $2.40 in Raven stock or in the S&P 500 on January 31, 2000, 
10 years later the investment in Raven would have been worth $28.58, while the 
S&P would have been valued at $1.85.

Our ability to collect accounts receivable and avoid bad 
debt writeoffs was especially impressive. At a time when 
credit quality industry-wide has deteriorated, we had better 
collection turnover and fewer bad debts than the year 
before. Accounts receivable collections were cut from an 
average of 54 days to 52. 

Our sound risk management philosophy and strong cash 
position gives us a full range of strategic choices. We 
will continue to increase the dividend, take advantage of 
acquisition opportunities, and maintain a ﬂexible share 
repurchase program to balance our capital structure.

The quarterly dividend grew 8% to 14 cents per share in 
July 2009. On March 20, 2010, Raven’s Board of Directors 
approved the 24th annual increase in the company’s quarterly dividend, to 16 cents per share.

We have outperformed the S&P 500 Index in total shareholder return over the past 10 years, with Raven’s stock price growing 
1,091% versus the S&P losing 23%. We were named by Forbes Magazine for the fourth consecutive year as one of the “Best 
Small Companies in America.”

A Personal Perspective

Our goals over the past decade have been consistent and straightforward:

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I always believed that my job was to get the right people in the right slots; to give them the authority to run their businesses; 
to make sure they have the resources to succeed; and to constantly challenge them to achieve greater results.

I have been fortunate to have a Board of Directors who believed in the Raven vision and provided strong governance without 
micro-managing.

It has been an honor to lead this great company for 10 years. I had a top-notch management team that executed the plan and 
knew how to make money—in good years and bad. On August 20, 2010, I pass the baton to the next team of leaders,  
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Ronald M. Moquist 
President & CEO   
March 25, 2010

5

Business Proﬁ le

While diversiﬁ cation reduces Raven’s downside risk, each operation uses these strategies to increase its opportunities:  

•  Achieving a signiﬁ cant share in a niche market that offers proﬁ table expansion

•  Employing a business model that avoids labor-intensive commodity products—and offshore competition

•  Generating strong cash ﬂ ow to fund reinvestment and shareholder returns

•  Providing a high level of customer service, including consultative sales, materials management, strong quality 
  control and after-sales support

Operating Unit 

Products or Services 

     Markets/Product Uses

Applied 
Technology

Engineered 
Films

• Ag equipment guidance systems: Cruizer™ 
• Spray equipment rate controllers: SCS Series™, Sidekick™
• Precision agricultural product application, steering and data 

management systems: Viper Pro™, Envizio Pro™

• Ag equipment boom management and application systems: 

SmartBoom™, AccuBoom™, AutoBoom™

• Tractor steering systems:  SmarTrax™, SmartSteer™
• In-cab RTK correction signal transmission and high-speed 

Internet platform: Slingshot™

• Navigational guidance for ship pilots: Wheelhouse II™

• Extruded polyethylene ﬁ lm that can be formulated and 

tailored to a customer’s speciﬁ cations 

• String reinforced plastic (polyethylene) sheeting: 

DURA-SKRIM®

• Silage bunker covers that protect grain and animal feed: 

FeedFresh™

• Vapor & gas retarders/barriers to prevent moisture from 
migrating through concrete slabs or walls: VaporBlock®
• Concrete curing blankets that protect against cracking and 

excessive shrinking: Conkure™

• Domestic and international agricultural OEMs and 

sprayer manufacturers

• Agricultural equipment aftermarket
• Professional marine ship pilots

• Energy and geomembrane: oilﬁ eld pit liners, ﬂ oating 

covers, remediation liners and covers, landﬁ ll caps and 
interim covers, pond and canal linings

• Construction: temporary building enclosures, house 
wraps, disaster ﬁ lms, vapor retarders, gas barriers, 
concrete curing blankets

• Manufactured housing: transit enclosures, house wraps
• Industrial: multilayer packaging ﬁ lms, lamination ﬁ lms, 

containment tubing

• Agriculture: temporary grain covers, silage bunker covers, 

poultry house ceilings, waste disposal liners

Electronic  
Systems

• Contract manufacturing of low volume/high mix industrial 
products that stand up to harsh environments with great 
reliability

• Repair/warranty service management and product distribution
• High levels of engineering support and customer service

• Primarily Fortune 500 and industrial OEMs in 

North America

• End markets served by customers include controls and 

instrumentation, aerospace/aviation, secure communication, 
defense 

• High-altitude research balloons carrying scientiﬁ c payloads
• High-altitude airships that reach near-space (60,000-80,000 

feet) for communications, data relay, surveillance

• Tethered aerostats (blimps) for military, homeland security, 

scientiﬁ c use

• Military parachutes
• Clothing to protect from exposure to biochemicals, fuels and 

fumes, extreme cold water immersion
• Customized inﬂ atable military decoys

• U.S. and foreign governments
• U.S. and international military forces
• Homeland security
• NASA
• Scientiﬁ c agencies and universities

Aerostar 
International

6

Sales by Operating Unit

Income by Operating Unit

Applied Technology

Engineered Films

Electronic Systems

Aerostar

Competitive Strengths 

Milestones

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Solid brand recognition and distribution network
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control total input costs
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precision ag specialists

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blown ﬁ lm, lamination and conversion
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Superior target marketing
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customers
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Developed key alliances with other precision ag 
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(cid:41)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:80)(cid:69)(cid:78)(cid:69)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:38)(cid:73)(cid:76)(cid:76)(cid:69)(cid:68)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:7)(cid:83)(cid:0)(cid:65)(cid:71)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:0)
by teaming with SST, introducing Slingshot™ and 
acquiring Ranchview
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(cid:83)(cid:84)(cid:69)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:108)(cid:0)(cid:82)(cid:83)(cid:84)(cid:0)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:47)(cid:37)(cid:45)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:78)(cid:69)(cid:82)

(cid:115)(cid:0)

(cid:115)(cid:0)

(cid:115)(cid:0)

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(cid:17)(cid:9)(cid:0)(cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:83)(cid:80)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:72)(cid:73)(cid:71)(cid:72)(cid:76)(cid:89)(cid:0)(cid:69)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:108)(cid:0)(cid:76)(cid:77)(cid:83)(cid:0)
(cid:66)(cid:85)(cid:89)(cid:69)(cid:82)(cid:83)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:18)(cid:9)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:79)(cid:68)(cid:73)(cid:84)(cid:89)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)(cid:0)(cid:83)(cid:65)(cid:76)(cid:69)(cid:83)(cid:80)(cid:69)(cid:79)(cid:80)(cid:76)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)
distributors
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capabilities to produce higher quality products with 
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(cid:33)(cid:67)(cid:72)(cid:73)(cid:69)(cid:86)(cid:69)(cid:68)(cid:0)(cid:76)(cid:65)(cid:66)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:69)(cid:79)(cid:83)(cid:89)(cid:78)(cid:84)(cid:72)(cid:69)(cid:84)(cid:73)(cid:67)(cid:0)
(cid:33)(cid:67)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:41)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0)

(cid:115)(cid:0)
(cid:115)(cid:0)

(cid:115)(cid:0)
(cid:115)(cid:0)

(cid:115)(cid:0)

(cid:33)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:68)(cid:0)(cid:77)(cid:65)(cid:78)(cid:85)(cid:70)(cid:65)(cid:67)(cid:84)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)
(cid:38)(cid:85)(cid:76)(cid:76)(cid:13)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:82)(cid:26)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:68)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)
(cid:69)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0)(cid:77)(cid:65)(cid:78)(cid:85)(cid:70)(cid:65)(cid:67)(cid:84)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)
Close partnership with customers
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assemblies
(cid:41)(cid:51)(cid:47)(cid:0)(cid:25)(cid:16)(cid:16)(cid:17)(cid:26)(cid:18)(cid:16)(cid:16)(cid:16)(cid:0)(cid:67)(cid:69)(cid:82)(cid:84)(cid:73)(cid:108)(cid:0)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)

(cid:115)(cid:0)

(cid:115)(cid:0)
(cid:115)(cid:0)
(cid:115)(cid:0)

(cid:41)(cid:78)(cid:86)(cid:69)(cid:78)(cid:84)(cid:79)(cid:82)(cid:89)(cid:0)(cid:84)(cid:85)(cid:82)(cid:78)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:20)(cid:14)(cid:22)(cid:56)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:20)(cid:14)(cid:19)(cid:56)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)
total inventory investment dropped about $1 million
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(cid:33)(cid:80)(cid:80)(cid:82)(cid:79)(cid:65)(cid:67)(cid:72)(cid:69)(cid:68)(cid:0)(cid:71)(cid:79)(cid:65)(cid:76)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:25)(cid:16)(cid:5)(cid:0)(cid:79)(cid:78)(cid:13)(cid:84)(cid:73)(cid:77)(cid:69)(cid:0)(cid:68)(cid:69)(cid:76)(cid:73)(cid:86)(cid:69)(cid:82)(cid:89)
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(cid:115)(cid:0)
(cid:115)(cid:0)

(cid:115)(cid:0)

(cid:115)(cid:0)

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(cid:47)(cid:86)(cid:69)(cid:82)(cid:0)(cid:21)(cid:16)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:77)(cid:65)(cid:78)(cid:85)(cid:70)(cid:65)(cid:67)(cid:84)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)
stratospheric balloons
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(cid:79)(cid:70)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:65)(cid:76)(cid:84)(cid:89)(cid:0)(cid:70)(cid:65)(cid:66)(cid:82)(cid:73)(cid:67)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:108)(cid:0)(cid:76)(cid:77)(cid:83)
Can rapidly adapt tethered aerostats to customer 
needs and quickly produce them

(cid:115)(cid:0)
(cid:115)(cid:0)

(cid:115)(cid:0)

Reported record sales and operating proﬁ ts
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(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:69)(cid:0)(cid:52)(cid:13)(cid:17)(cid:17)(cid:0)(cid:80)(cid:65)(cid:82)(cid:65)(cid:67)(cid:72)(cid:85)(cid:84)(cid:69)(cid:83)
(cid:41)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:68)(cid:69)(cid:76)(cid:73)(cid:86)(cid:69)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:69)(cid:82)(cid:79)(cid:83)(cid:84)(cid:65)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:0)
(cid:104)(cid:80)(cid:69)(cid:82)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:0)(cid:83)(cid:85)(cid:82)(cid:86)(cid:69)(cid:73)(cid:76)(cid:76)(cid:65)(cid:78)(cid:67)(cid:69)(cid:118)(cid:0)(cid:78)(cid:69)(cid:69)(cid:68)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:33)(cid:70)(cid:71)(cid:72)(cid:65)(cid:78)(cid:73)(cid:83)(cid:84)(cid:65)(cid:78)(cid:0)

Applied Technology Sales
(dollars in millions)

$103.1

$86.2

$64.3

$47.5 $45.5

$40.7

2005 

2006 

2007 

2008 

2009 

2010

Engineered Films Sales
(dollars in millions)

$91.1

$85.3

$89.9

$82.8

$58.7

$63.8

2005 

2006 

2007 

2008 

2009 

2010

Electronic Systems Sales
(dollars in millions)

$66.3 $68.0

$62.0 $63.5

$56.2

$47.0

2005 

2006 

2007 

2008 

2009 

2010

Aerostar Sales
(dollars in millions)

$27.2 $27.2

$21.7

$18.0

$17.3

$14.7

2005 

2006 

2007 

2008 

2009 

2010

7

 
 
 
 
Applied Technology Division

Applied Technology’s 
information strategy is to 
provide a precision agriculture 
system for growers to turn ﬁeld 
data from their equipment into 
information they can use to 
improve productivity, efﬁciency 
and decision-making while 
reducing costs. 

Matthew T. Burkhart 
Division Vice President and General Manager— 
Applied Technology Division

“

Facing a softer ag market, our focus turned to business development. We believe  
the next step in precision ag is to take information off of equipment in the ﬁeld, 
organize it, analyze it, and use it to improve decision-making. Investing in  
Slingshot, Ranchview and SST allows us to provide game-changing solutions for 
growers, offering us exciting potential for growth.

”

8

2 0 1 0   A N N U A L   R E P O R T    RAVEN

Making Opportunities

During the year, weakening farm income levels led growers and custom applicators to become cautious about equipment 
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materials and approach to each region, and we invested in sales staff and infrastructure in Canada and the former Soviet 
Republics—or Commonwealth of Independent States (CIS).

Created Next Generation Precision Ag Platform—Our new approach, called Slingshot™, provides a suite of components 
and services not found anywhere else. Equipment operators have an industrial-grade modem placed in their cab. The modem 
uses cellular technology provided through our Ranchview acquisition, which is more reliable and covers more area than 
competing traditional radio frequency equipment. This gives growers real-time, high-speed Internet access to services they 
need: 

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edge approach signiﬁcantly increases our long-term growth prospects.

Developed Alliances—Relationships were established with market leaders during the year: 

(cid:85)(cid:202)(cid:9)(cid:213)(cid:133)(cid:143)(cid:105)(cid:192)(cid:202)(cid:136)(cid:195)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:119)(cid:192)(cid:195)(cid:204)(cid:202)(cid:204)(cid:192)(cid:62)(cid:86)(cid:204)(cid:156)(cid:192)(cid:202)(cid:147)(cid:62)(cid:152)(cid:213)(cid:118)(cid:62)(cid:86)(cid:204)(cid:213)(cid:192)(cid:105)(cid:192)(cid:202)(cid:204)(cid:156)(cid:202)(cid:136)(cid:152)(cid:195)(cid:204)(cid:62)(cid:143)(cid:143)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:195)(cid:204)(cid:105)(cid:105)(cid:192)(cid:136)(cid:152)(cid:125)(cid:202)(cid:195)(cid:222)(cid:195)(cid:204)(cid:105)(cid:147)(cid:202)(cid:62)(cid:204)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:118)(cid:62)(cid:86)(cid:204)(cid:156)(cid:192)(cid:222)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:62)(cid:143)(cid:195)(cid:156)(cid:202)(cid:156)(cid:118)(cid:118)(cid:105)(cid:192)(cid:202)(cid:204)(cid:133)(cid:136)(cid:195)(cid:202)(cid:62)(cid:195)(cid:202)(cid:62)(cid:152)(cid:202)(cid:62)(cid:118)(cid:204)(cid:105)(cid:192)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)

addition.

(cid:85)(cid:202)(cid:12)(cid:105)(cid:105)(cid:192)(cid:105)(cid:202)(cid:69)(cid:202)(cid:10)(cid:156)(cid:176)(cid:202)(cid:136)(cid:195)(cid:202)(cid:96)(cid:136)(cid:195)(cid:204)(cid:192)(cid:136)(cid:76)(cid:213)(cid:204)(cid:136)(cid:152)(cid:125)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:62)(cid:171)(cid:171)(cid:143)(cid:136)(cid:86)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:156)(cid:143)(cid:202)(cid:195)(cid:156)(cid:143)(cid:213)(cid:204)(cid:136)(cid:156)(cid:152)(cid:195)(cid:202)(cid:204)(cid:133)(cid:192)(cid:156)(cid:213)(cid:125)(cid:133)(cid:202)(cid:136)(cid:204)(cid:195)(cid:202)(cid:62)(cid:118)(cid:204)(cid:105)(cid:192)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)(cid:86)(cid:133)(cid:62)(cid:152)(cid:152)(cid:105)(cid:143)(cid:176)
(cid:85)(cid:202)(cid:45)(cid:45)(cid:47)(cid:202)(cid:45)(cid:156)(cid:118)(cid:204)(cid:220)(cid:62)(cid:192)(cid:105)(cid:202)(cid:171)(cid:192)(cid:156)(cid:219)(cid:136)(cid:96)(cid:105)(cid:195)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:76)(cid:192)(cid:156)(cid:62)(cid:96)(cid:105)(cid:195)(cid:204)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:147)(cid:156)(cid:195)(cid:204)(cid:202)(cid:220)(cid:136)(cid:96)(cid:105)(cid:143)(cid:222)(cid:202)(cid:213)(cid:195)(cid:105)(cid:96)(cid:202)(cid:119)(cid:105)(cid:143)(cid:96)(cid:202)(cid:192)(cid:105)(cid:118)(cid:105)(cid:192)(cid:105)(cid:152)(cid:86)(cid:105)(cid:202)(cid:96)(cid:62)(cid:204)(cid:62)(cid:76)(cid:62)(cid:195)(cid:105)(cid:176)(cid:202)
(cid:85)(cid:202)(cid:45)(cid:105)(cid:105)(cid:96)(cid:202)(cid:21)(cid:62)(cid:220)(cid:142)(cid:202)(cid:136)(cid:152)(cid:86)(cid:156)(cid:192)(cid:171)(cid:156)(cid:192)(cid:62)(cid:204)(cid:105)(cid:195)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:171)(cid:192)(cid:156)(cid:96)(cid:213)(cid:86)(cid:204)(cid:93)(cid:202)(cid:195)(cid:105)(cid:86)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:20)(cid:42)(cid:45)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:156)(cid:143)(cid:195)(cid:202)(cid:136)(cid:152)(cid:204)(cid:156)(cid:202)(cid:136)(cid:204)(cid:195)(cid:202)(cid:62)(cid:136)(cid:192)(cid:195)(cid:105)(cid:105)(cid:96)(cid:105)(cid:192)(cid:195)(cid:93)(cid:202)(cid:133)(cid:105)(cid:143)(cid:171)(cid:136)(cid:152)(cid:125)(cid:202)(cid:213)(cid:195)(cid:202)(cid:136)(cid:152)(cid:86)(cid:192)(cid:105)(cid:62)(cid:195)(cid:105)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)(cid:171)(cid:105)(cid:152)(cid:105)(cid:204)(cid:192)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)

in Australia, Canada, the CIS, and Eastern Europe.

Improved Product Development—Three steps were taken to achieve this. We established a cross-functional quality 
improvement team, with the power to make process changes. We restructured our development approach to focus on product 
families. Testing was established as its own function, and we developed a more comprehensive and structured program. 
Leveraging Our Progress 

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Here is where we will invest to achieve this:

(cid:85)(cid:202)International growth: Our goal is to generate an increasing percentage of revenues from countries 

(cid:76)(cid:105)(cid:222)(cid:156)(cid:152)(cid:96)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:49)(cid:176)(cid:45)(cid:176)(cid:202)

(cid:85) Information strategy:(cid:202)(cid:55)(cid:105)(cid:202)(cid:220)(cid:136)(cid:143)(cid:143)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:136)(cid:152)(cid:213)(cid:105)(cid:202)(cid:204)(cid:156)(cid:202)(cid:62)(cid:96)(cid:96)(cid:202)(cid:152)(cid:105)(cid:220)(cid:202)(cid:118)(cid:213)(cid:152)(cid:86)(cid:204)(cid:136)(cid:156)(cid:152)(cid:195)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:118)(cid:213)(cid:192)(cid:204)(cid:133)(cid:105)(cid:192)(cid:202)(cid:136)(cid:152)(cid:204)(cid:105)(cid:125)(cid:192)(cid:62)(cid:204)(cid:105)(cid:202)(cid:45)(cid:45)(cid:47)(cid:189)(cid:195)(cid:202)(cid:1)(cid:125)(cid:56)(cid:202)(cid:96)(cid:62)(cid:204)(cid:62)(cid:76)(cid:62)(cid:195)(cid:105)(cid:202)(cid:195)(cid:156)(cid:118)(cid:204)(cid:220)(cid:62)(cid:192)(cid:105)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)

Slingshot, creating precision agriculture’s strongest value-added information management solution.

(cid:85) Acquisition and alliance strategy: We will deliver on the opportunities provided through our  

current agreements by integrating new technologies into our product line and reaching more growers  
around the globe.

Viper Pro™ ﬁeld computer

9

Engineered Films Division

One of the ﬁlms produced by this 
extruder is used for FeedFresh™. 
Dairy farmers were the original 
target for this silage cover, be-
cause fresher grain increased 
milk production. Our market now 
includes feed cattle, as university 
studies indicate these animals 
experience stronger, faster weight 
gains by eating grain protected by 
FeedFresh.

James D. Groninger 
Division Vice President and General Manager— 
Engineered Films Division

“ Last year, most of our cus t omers  w er e  i n   s ur vi val   m od e:   w a n ti n g 

t o   m i n i m i z e   t h e i r   r i s k   b y   d o i n g   w h a t   t h e y   h a d   a l w a y s   d o n e .   T h e y 
w e r e n ’ t   i n t e r e s t e d   i n   t r y i n g   a   n e w   h i g h e r   p e r f o r m a n c e   ﬁ l m — w h i c h 
i s   o u r   v a l u e   p r o p o s i t i o n .   T h i s   i s   c h a n g i n g ,   g i v i n g   u s   t h e   o p p o r t u n i t y 

t o   i n c r e a s e   o u r   s a l e s   a n d   p r o ﬁ t a b i l i t y .”

10

2 0 1 0   A N N U A L   R E P O R T    RAVEN

Finding Opportunity in a Tough Environment

Engineered Films’ markets faced dramatic contractions last year. Energy market sales were down almost 40%. Construction 
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ties for growth.

Increased Operating Efﬁciencies—This included the difﬁcult decision to cut our workforce by one-third before the year  
began. However, we stepped up employee training and leveraged capital investments made in prior years. As a result, a 
smaller number of people produced total pounds of ﬁlm that were only down 13% from a year ago, while still reducing scrap 
and rework costs. We also were able to buy resin at exceptional prices early in the year, strengthening our operating margin. 
These purchases will be difﬁcult to replicate, but we have the disciplines in place to continue seeking those opportunities. 

Strengthened Product Offerings—Our new Conkure™ wet curing blankets allow newly poured concrete to retain heat and 
moisture, protecting against cracking and shrinking. We believe this will become a signiﬁcant contributor for us in the next 
few years, following in the footsteps of FeedFresh™ silage covers and VaporBlock® underslab vapor retarders. 

We also installed a used cast extrusion line that we purchased at a favorable price. This allowed us to improve product quality 
and add new capabilities—such as creating a textured, reinforced geomembrane. In addition, we became an accredited lab 
under the Geosynthetic Accreditation Institute. This allows us to test and certify materials for our end users, rather than send-
ing these to a third party.

Customer-focused Sales Approach—We serve two types of customers with very different needs. To better reach and 
support them, we reorganized into two specialized sales groups. The technical sales force offers a solutions provider approach 
to those purchasing engineered ﬁlms. Our commodity product salespeople assist distribution ﬁrms, as well as engineers and 
speciﬁcation writers. This new system helps us create better customer relationships that should lead to higher sales.
Creating Opportunity 

Our goal is to ﬁnd ways to improve margins and develop opportunities for growth. A number of strategies already are in place 
to promote this.

(cid:85)(cid:202)More efﬁcient new product development: We are expanding our lab line capabilities so they can do faster testing of 

new resin chemistries as well as shorter trial runs. This allows us to reduce product development time, get newly  
designed products to customers much faster, and achieve this at a lower cost.

(cid:85)(cid:202)Active sales effort: In addition to a better focused sales force, with more targeted marketing materials, we will step up 

our participation in trade shows and do selective advertising this year to raise product awareness.

(cid:85)(cid:202)Increased market penetration: Sales momentum continues to build for our FeedFresh silage bunker covers and 
 VaporBlock vapor and gas barrier ﬁlms. We expect this will result in higher sales and greater market penetration. 

(cid:55)(cid:105)(cid:202)(cid:76)(cid:105)(cid:143)(cid:136)(cid:105)(cid:219)(cid:105)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:195)(cid:202)(cid:62)(cid:192)(cid:105)(cid:202)(cid:152)(cid:156)(cid:220)(cid:202)(cid:171)(cid:62)(cid:195)(cid:204)(cid:202)(cid:186)(cid:195)(cid:213)(cid:192)(cid:219)(cid:136)(cid:219)(cid:62)(cid:143)(cid:202)(cid:147)(cid:156)(cid:96)(cid:105)(cid:176)(cid:187)(cid:202)(cid:10)(cid:213)(cid:195)(cid:204)(cid:156)(cid:147)(cid:105)(cid:192)(cid:195)(cid:202)(cid:62)(cid:192)(cid:105)(cid:202)(cid:147)(cid:156)(cid:192)(cid:105)(cid:202)(cid:192)(cid:105)(cid:86)(cid:105)(cid:171)(cid:204)(cid:136)(cid:219)(cid:105)(cid:202)(cid:204)(cid:156)(cid:202)(cid:171)(cid:213)(cid:192)(cid:86)(cid:133)(cid:62)(cid:195)(cid:136)(cid:152)(cid:125)(cid:202)(cid:219)(cid:62)(cid:143)(cid:213)(cid:105)(cid:135)(cid:62)(cid:96)(cid:96)(cid:105)(cid:96)(cid:202)(cid:119)(cid:143)(cid:147)(cid:195)(cid:202)(cid:204)(cid:133)(cid:62)(cid:204)(cid:202)
offer additional capabilities at the same or a lower cost, or purchasing our commodity ﬁlms at competitive prices. We have the 
people and capabilities to capitalize on this situation, and see this as a transition year in 
which we make progress toward our goal of higher sales and proﬁtability.

FeedFresh™ silage cover

11

Electronic Systems Division

Electronic Systems 

builds a number of secure 

communication–related 

products for military and 

government use.

David R. Bair 
Division Vice President and General Manager— 
Electronic Systems Division

“

Serving diverse markets helped us create opportunities. Avionics was strong for much 
of the year—and with some help from secure communications, we more than offset the 
softness in industrial controls. We capitalized on these opportunities by keeping our 
cost structure low, which gave us very solid proﬁtability and a high level of cash ﬂow 
compared with others in our industry. 

”

12

2 0 1 0   A N N U A L   R E P O R T    RAVEN

Capitalizing on Operational Opportunities
Industrial controls was our ﬁrst market to be affected by the economic downturn two years ago. Accounting for about 14% of 
sales last year, it appears to have stabilized. Avionics has been a trailing market indicator. This was strong for the ﬁrst eight 
(cid:147)(cid:156)(cid:152)(cid:204)(cid:133)(cid:195)(cid:202)(cid:156)(cid:118)(cid:202)(cid:143)(cid:62)(cid:195)(cid:204)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:93)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:136)(cid:76)(cid:213)(cid:204)(cid:136)(cid:152)(cid:125)(cid:202)(cid:156)(cid:219)(cid:105)(cid:192)(cid:202)(cid:200)(cid:228)(cid:175)(cid:202)(cid:156)(cid:118)(cid:202)(cid:195)(cid:62)(cid:143)(cid:105)(cid:195)(cid:176)(cid:202)(cid:55)(cid:105)(cid:202)(cid:105)(cid:221)(cid:171)(cid:105)(cid:86)(cid:204)(cid:202)(cid:136)(cid:204)(cid:202)(cid:220)(cid:136)(cid:143)(cid:143)(cid:202)(cid:76)(cid:105)(cid:202)(cid:195)(cid:143)(cid:156)(cid:220)(cid:202)(cid:118)(cid:156)(cid:192)(cid:202)(cid:147)(cid:213)(cid:86)(cid:133)(cid:202)(cid:156)(cid:118)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:86)(cid:213)(cid:192)(cid:192)(cid:105)(cid:152)(cid:204)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:176)(cid:202)(cid:45)(cid:105)(cid:86)(cid:213)(cid:192)(cid:105)(cid:202)(cid:86)(cid:156)(cid:147)(cid:147)(cid:213)(cid:152)(cid:136)(cid:86)(cid:62)-
(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:136)(cid:195)(cid:202)(cid:62)(cid:118)(cid:118)(cid:105)(cid:86)(cid:204)(cid:105)(cid:96)(cid:202)(cid:76)(cid:222)(cid:202)(cid:147)(cid:136)(cid:143)(cid:136)(cid:204)(cid:62)(cid:192)(cid:222)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:125)(cid:156)(cid:219)(cid:105)(cid:192)(cid:152)(cid:147)(cid:105)(cid:152)(cid:204)(cid:202)(cid:195)(cid:171)(cid:105)(cid:152)(cid:96)(cid:136)(cid:152)(cid:125)(cid:176)(cid:202)(cid:22)(cid:204)(cid:202)(cid:147)(cid:62)(cid:96)(cid:105)(cid:202)(cid:213)(cid:171)(cid:202)(cid:62)(cid:76)(cid:156)(cid:213)(cid:204)(cid:202)(cid:211)(cid:228)(cid:175)(cid:202)(cid:156)(cid:118)(cid:202)(cid:192)(cid:105)(cid:219)(cid:105)(cid:152)(cid:213)(cid:105)(cid:195)(cid:176)

As a low volume/high mix manufacturer operating in a competitive market niche, we have never relied on sales growth to 
advance our business. Our goal is to run the operation so it generates a good level of proﬁt and cash ﬂow. That is what we 
achieved.

Improved Operating Performance—Several factors contributed to this. Special product builds in the ﬁrst half offered favor-
able margins. Consolidating operations into one facility reduced ﬁxed costs, as well as those associated with moving products 
between buildings. Then we employed Lean manufacturing techniques to improve operational efﬁciencies. We also reduced 
(cid:156)(cid:213)(cid:192)(cid:202)(cid:133)(cid:105)(cid:62)(cid:96)(cid:86)(cid:156)(cid:213)(cid:152)(cid:204)(cid:202)(cid:76)(cid:222)(cid:202)(cid:147)(cid:156)(cid:192)(cid:105)(cid:202)(cid:204)(cid:133)(cid:62)(cid:152)(cid:202)(cid:163)(cid:228)(cid:175)(cid:176)(cid:202)(cid:1)(cid:195)(cid:202)(cid:62)(cid:202)(cid:192)(cid:105)(cid:195)(cid:213)(cid:143)(cid:204)(cid:93)(cid:202)(cid:156)(cid:171)(cid:105)(cid:192)(cid:62)(cid:204)(cid:136)(cid:152)(cid:125)(cid:202)(cid:136)(cid:152)(cid:86)(cid:156)(cid:147)(cid:105)(cid:202)(cid:192)(cid:105)(cid:86)(cid:156)(cid:219)(cid:105)(cid:192)(cid:105)(cid:96)(cid:202)(cid:152)(cid:136)(cid:86)(cid:105)(cid:143)(cid:222)(cid:202)(cid:156)(cid:152)(cid:202)(cid:211)(cid:175)(cid:202)(cid:133)(cid:136)(cid:125)(cid:133)(cid:105)(cid:192)(cid:202)(cid:195)(cid:62)(cid:143)(cid:105)(cid:195)(cid:176)

(cid:55)(cid:105)(cid:202)(cid:147)(cid:156)(cid:219)(cid:105)(cid:96)(cid:202)(cid:118)(cid:156)(cid:192)(cid:220)(cid:62)(cid:192)(cid:96)(cid:202)(cid:156)(cid:152)(cid:202)(cid:105)(cid:219)(cid:105)(cid:192)(cid:222)(cid:202)(cid:156)(cid:76)(cid:141)(cid:105)(cid:86)(cid:204)(cid:136)(cid:219)(cid:105)(cid:202)(cid:195)(cid:105)(cid:204)(cid:202)(cid:118)(cid:156)(cid:192)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:176)(cid:202)(cid:34)(cid:152)(cid:135)(cid:204)(cid:136)(cid:147)(cid:105)(cid:202)(cid:96)(cid:105)(cid:143)(cid:136)(cid:219)(cid:105)(cid:192)(cid:222)(cid:202)(cid:136)(cid:147)(cid:171)(cid:192)(cid:156)(cid:219)(cid:105)(cid:96)(cid:202)(cid:195)(cid:136)(cid:125)(cid:152)(cid:136)(cid:119)(cid:86)(cid:62)(cid:152)(cid:204)(cid:143)(cid:222)(cid:93)(cid:202)(cid:152)(cid:105)(cid:62)(cid:192)(cid:143)(cid:222)(cid:202)(cid:192)(cid:105)(cid:62)(cid:86)(cid:133)(cid:136)(cid:152)(cid:125)(cid:202)(cid:153)(cid:228)(cid:175)(cid:176)(cid:202)(cid:47)(cid:133)(cid:136)(cid:195)(cid:202)
reﬂected our efforts to improve front-end processes, including engineering change orders and new product introductions. The 
idea is to prevent minor issues at the start of a process from snowballing into problems and costs later on.

These actions also contributed to higher productivity, which is measured as sales divided by the number of employees. We 
(cid:105)(cid:221)(cid:86)(cid:105)(cid:105)(cid:96)(cid:105)(cid:96)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:200)(cid:175)(cid:202)(cid:125)(cid:156)(cid:62)(cid:143)(cid:176)(cid:202)

We approached inventory management with renewed vigor—paying attention not only to how much we have and where it 
is, but why we have slow-moving inventory and what to do about it. As a result, we ended the year with inventory investment 
(cid:96)(cid:156)(cid:220)(cid:152)(cid:202)(cid:76)(cid:222)(cid:202)(cid:147)(cid:156)(cid:192)(cid:105)(cid:202)(cid:204)(cid:133)(cid:62)(cid:152)(cid:202)(cid:102)(cid:163)(cid:202)(cid:147)(cid:136)(cid:143)(cid:143)(cid:136)(cid:156)(cid:152)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:136)(cid:147)(cid:171)(cid:192)(cid:156)(cid:219)(cid:105)(cid:96)(cid:202)(cid:136)(cid:152)(cid:219)(cid:105)(cid:152)(cid:204)(cid:156)(cid:192)(cid:222)(cid:202)(cid:204)(cid:213)(cid:192)(cid:152)(cid:195)(cid:202)(cid:118)(cid:192)(cid:156)(cid:147)(cid:202)(cid:123)(cid:176)(cid:206)(cid:56)(cid:202)(cid:204)(cid:156)(cid:202)(cid:123)(cid:176)(cid:200)(cid:56)(cid:176)

Added a New Customer—This ﬁrm operates in the secure communications market, but also does business in other areas 
where we may be of assistance. We expect production to start later this year—with the timing dictated in part by government 
approvals—and that this could become a signiﬁcant customer for us. 
Further Improving Operations  

The biggest challenge we face in the current year will be supply chain issues. Lead times are getting longer for a number of 
components, whose manufacturers have not yet added staff and production to meet increased demand. In addition, electronic 
(cid:86)(cid:156)(cid:147)(cid:171)(cid:156)(cid:152)(cid:105)(cid:152)(cid:204)(cid:195)(cid:202)(cid:118)(cid:156)(cid:192)(cid:202)(cid:62)(cid:136)(cid:192)(cid:86)(cid:192)(cid:62)(cid:118)(cid:204)(cid:202)(cid:96)(cid:105)(cid:195)(cid:136)(cid:125)(cid:152)(cid:105)(cid:96)(cid:202)(cid:147)(cid:156)(cid:192)(cid:105)(cid:202)(cid:204)(cid:133)(cid:62)(cid:152)(cid:202)(cid:211)(cid:228)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:195)(cid:202)(cid:62)(cid:125)(cid:156)(cid:202)(cid:86)(cid:62)(cid:152)(cid:202)(cid:76)(cid:105)(cid:202)(cid:133)(cid:62)(cid:192)(cid:96)(cid:202)(cid:204)(cid:156)(cid:202)(cid:143)(cid:156)(cid:86)(cid:62)(cid:204)(cid:105)(cid:176)(cid:202)(cid:55)(cid:105)(cid:202)(cid:62)(cid:192)(cid:105)(cid:202)(cid:62)(cid:96)(cid:96)(cid:192)(cid:105)(cid:195)(cid:195)(cid:136)(cid:152)(cid:125)(cid:202)(cid:204)(cid:133)(cid:136)(cid:195)(cid:202)(cid:136)(cid:195)(cid:195)(cid:213)(cid:105)(cid:202)(cid:136)(cid:152)(cid:202)(cid:204)(cid:133)(cid:192)(cid:105)(cid:105)(cid:202)(cid:220)(cid:62)(cid:222)(cid:195)(cid:92)(cid:202) 
(cid:163)(cid:174)(cid:202)(cid:96)(cid:156)(cid:136)(cid:152)(cid:125)(cid:202)(cid:62)(cid:202)(cid:76)(cid:105)(cid:204)(cid:204)(cid:105)(cid:192)(cid:202)(cid:141)(cid:156)(cid:76)(cid:202)(cid:156)(cid:118)(cid:202)(cid:125)(cid:105)(cid:204)(cid:204)(cid:136)(cid:152)(cid:125)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:147)(cid:62)(cid:204)(cid:105)(cid:192)(cid:136)(cid:62)(cid:143)(cid:202)(cid:136)(cid:152)(cid:204)(cid:156)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:171)(cid:136)(cid:171)(cid:105)(cid:143)(cid:136)(cid:152)(cid:105)(cid:195)(cid:93)(cid:202)(cid:211)(cid:174)(cid:202)(cid:220)(cid:156)(cid:192)(cid:142)(cid:136)(cid:152)(cid:125)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)(cid:86)(cid:213)(cid:195)(cid:204)(cid:156)(cid:147)(cid:105)(cid:192)(cid:195)(cid:202)(cid:156)(cid:152)(cid:202)(cid:143)(cid:156)(cid:152)(cid:125)(cid:105)(cid:192)(cid:202)(cid:204)(cid:105)(cid:192)(cid:147)(cid:202)(cid:118)(cid:156)(cid:192)(cid:105)(cid:86)(cid:62)(cid:195)(cid:204)(cid:195)(cid:93)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202) 
3) partnering with vendors to hold critical parts in bonded inventory for us. 

Despite this operating environment, we continue to set aggressive performance goals:

(cid:85)(cid:202)Improve on-time delivery: (cid:34)(cid:213)(cid:192)(cid:202)(cid:152)(cid:105)(cid:220)(cid:202)(cid:125)(cid:156)(cid:62)(cid:143)(cid:202)(cid:136)(cid:195)(cid:202)(cid:153)(cid:110)(cid:175)(cid:176)
(cid:85)(cid:202)Increase inventory turns:(cid:202)(cid:55)(cid:105)(cid:202)(cid:133)(cid:62)(cid:219)(cid:105)(cid:202)(cid:62)(cid:152)(cid:202)(cid:156)(cid:76)(cid:141)(cid:105)(cid:86)(cid:204)(cid:136)(cid:219)(cid:105)(cid:202)(cid:156)(cid:118)(cid:202)(cid:120)(cid:56)(cid:176)
(cid:85)(cid:202)Maintain operating margins: This will be done in the face of relatively ﬂat sales.
(cid:85)(cid:202)Increase productivity: We plan to use Kaizen and Lean events to further streamline processes and 

boost efﬁciencies again this year.

(cid:55)(cid:105)(cid:202)(cid:62)(cid:143)(cid:195)(cid:156)(cid:202)(cid:133)(cid:62)(cid:219)(cid:105)(cid:202)(cid:204)(cid:220)(cid:156)(cid:202)(cid:156)(cid:204)(cid:133)(cid:105)(cid:192)(cid:202)(cid:156)(cid:171)(cid:105)(cid:192)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:62)(cid:143)(cid:202)(cid:125)(cid:156)(cid:62)(cid:143)(cid:195)(cid:92)(cid:202)(cid:163)(cid:174)(cid:202)(cid:204)(cid:156)(cid:202)(cid:62)(cid:96)(cid:96)(cid:202)(cid:62)(cid:152)(cid:156)(cid:204)(cid:133)(cid:105)(cid:192)(cid:202)(cid:86)(cid:213)(cid:195)(cid:204)(cid:156)(cid:147)(cid:105)(cid:192)(cid:93)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:211)(cid:174)(cid:202)(cid:204)(cid:156)(cid:202)(cid:192)(cid:105)(cid:86)(cid:105)(cid:136)(cid:219)(cid:105)(cid:202)(cid:1)(cid:45)(cid:153)(cid:163)(cid:228)(cid:228)(cid:202)(cid:86)(cid:105)(cid:192)(cid:204)(cid:136)(cid:119)(cid:86)(cid:62)-
(cid:204)(cid:136)(cid:156)(cid:152)(cid:112)(cid:204)(cid:133)(cid:105)(cid:202)(cid:62)(cid:105)(cid:192)(cid:156)(cid:195)(cid:171)(cid:62)(cid:86)(cid:105)(cid:202)(cid:105)(cid:181)(cid:213)(cid:136)(cid:219)(cid:62)(cid:143)(cid:105)(cid:152)(cid:204)(cid:202)(cid:156)(cid:118)(cid:202)(cid:22)(cid:45)(cid:34)(cid:202)(cid:153)(cid:228)(cid:228)(cid:228)(cid:202)(cid:86)(cid:105)(cid:192)(cid:204)(cid:136)(cid:119)(cid:86)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:93)(cid:202)(cid:220)(cid:133)(cid:136)(cid:86)(cid:133)(cid:202)(cid:62)(cid:96)(cid:96)(cid:195)(cid:202)(cid:204)(cid:156)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:86)(cid:192)(cid:105)(cid:96)(cid:136)(cid:76)(cid:136)(cid:143)(cid:136)(cid:204)(cid:222)(cid:202)(cid:136)(cid:152)(cid:202)(cid:204)(cid:133)(cid:136)(cid:195)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:176)

Secure communication component

13

Aerostar International    

Aerostar’s ability to create 

smaller and lighter tethered 

aerostats, which can be 

transported faster over  

difﬁcult terrain, should 

result in a strong increase in 

sales from this line com-

pared with last year. 

Mark L. West 
President— 
Aerostar International, Inc.

“

Aerostar was started with what were considered technologies from ‘old’ parts of Raven, 
such as high-speed sewing and sealing. We created opportunities by developing new 
products, including tethered aerostats, for markets that the company had never before 
served. And in the process, we are adding great new value to shareholders—in the near 
and long term.

”

14

2 0 1 0   A N N U A L   R E P O R T    RAVEN

Maximizing Opportunities

The federal government continues to fund the programs that contribute the bulk of Aerostar’s revenues, so we were not as 
affected by the economic downturn. This operation met most of its goals and ended the year with a number of new contracts.

Won a New Parachute Contract(cid:112)(cid:47)(cid:133)(cid:105)(cid:202)(cid:204)(cid:133)(cid:192)(cid:105)(cid:105)(cid:135)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:31)(cid:10)(cid:135)(cid:200)(cid:202)(cid:171)(cid:62)(cid:192)(cid:62)(cid:86)(cid:133)(cid:213)(cid:204)(cid:105)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:62)(cid:86)(cid:204)(cid:93)(cid:202)(cid:220)(cid:133)(cid:136)(cid:86)(cid:133)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:136)(cid:76)(cid:213)(cid:204)(cid:105)(cid:96)(cid:202)(cid:204)(cid:156)(cid:202)(cid:171)(cid:192)(cid:156)(cid:119)(cid:204)(cid:62)(cid:76)(cid:143)(cid:105)(cid:202)(cid:195)(cid:62)(cid:143)(cid:105)(cid:195)(cid:93)(cid:202)(cid:86)(cid:156)(cid:152)-
(cid:86)(cid:143)(cid:213)(cid:96)(cid:105)(cid:96)(cid:202)(cid:62)(cid:204)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:105)(cid:152)(cid:96)(cid:202)(cid:156)(cid:118)(cid:202)(cid:27)(cid:62)(cid:152)(cid:213)(cid:62)(cid:192)(cid:222)(cid:202)(cid:211)(cid:228)(cid:163)(cid:228)(cid:176)(cid:202)(cid:34)(cid:213)(cid:192)(cid:202)(cid:62)(cid:76)(cid:136)(cid:143)(cid:136)(cid:204)(cid:222)(cid:202)(cid:204)(cid:156)(cid:202)(cid:96)(cid:105)(cid:143)(cid:136)(cid:219)(cid:105)(cid:192)(cid:202)(cid:181)(cid:213)(cid:62)(cid:143)(cid:136)(cid:204)(cid:222)(cid:202)(cid:171)(cid:192)(cid:156)(cid:96)(cid:213)(cid:86)(cid:204)(cid:195)(cid:202)(cid:156)(cid:152)(cid:135)(cid:204)(cid:136)(cid:147)(cid:105)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:156)(cid:152)(cid:135)(cid:76)(cid:213)(cid:96)(cid:125)(cid:105)(cid:204)(cid:202)(cid:133)(cid:105)(cid:143)(cid:171)(cid:105)(cid:96)(cid:202)(cid:213)(cid:195)(cid:202)(cid:220)(cid:136)(cid:152)(cid:202)(cid:118)(cid:156)(cid:143)(cid:143)(cid:156)(cid:220)(cid:135)(cid:156)(cid:152)(cid:202)(cid:220)(cid:156)(cid:192)(cid:142)(cid:202)
(cid:118)(cid:156)(cid:192)(cid:202)(cid:47)(cid:135)(cid:163)(cid:163)(cid:202)(cid:171)(cid:62)(cid:192)(cid:62)(cid:86)(cid:133)(cid:213)(cid:204)(cid:105)(cid:195)(cid:176)(cid:202)(cid:47)(cid:133)(cid:136)(cid:195)(cid:202)(cid:119)(cid:219)(cid:105)(cid:135)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:62)(cid:86)(cid:204)(cid:202)(cid:195)(cid:133)(cid:156)(cid:213)(cid:143)(cid:96)(cid:202)(cid:125)(cid:105)(cid:152)(cid:105)(cid:192)(cid:62)(cid:204)(cid:105)(cid:202)(cid:62)(cid:171)(cid:171)(cid:192)(cid:156)(cid:221)(cid:136)(cid:147)(cid:62)(cid:204)(cid:105)(cid:143)(cid:222)(cid:202)(cid:102)(cid:200)(cid:228)(cid:202)(cid:147)(cid:136)(cid:143)(cid:143)(cid:136)(cid:156)(cid:152)(cid:202)(cid:136)(cid:152)(cid:202)(cid:204)(cid:156)(cid:204)(cid:62)(cid:143)(cid:202)(cid:192)(cid:105)(cid:219)(cid:105)(cid:152)(cid:213)(cid:105)(cid:195)(cid:176)(cid:202)(cid:22)(cid:204)(cid:202)(cid:192)(cid:105)(cid:171)(cid:192)(cid:105)(cid:195)(cid:105)(cid:152)(cid:204)(cid:195)(cid:202)(cid:62)(cid:76)(cid:156)(cid:213)(cid:204)(cid:202)(cid:62)(cid:202)
(cid:211)(cid:228)(cid:175)(cid:202)(cid:171)(cid:192)(cid:156)(cid:96)(cid:213)(cid:86)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:136)(cid:152)(cid:86)(cid:192)(cid:105)(cid:62)(cid:195)(cid:105)(cid:202)(cid:118)(cid:192)(cid:156)(cid:147)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:31)(cid:10)(cid:135)(cid:200)(cid:176)(cid:202)

Expanded High-altitude Research Balloon Program(cid:112)(cid:34)(cid:213)(cid:192)(cid:202)(cid:192)(cid:105)(cid:143)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:195)(cid:133)(cid:136)(cid:171)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)(cid:32)(cid:1)(cid:45)(cid:1)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:136)(cid:152)(cid:213)(cid:105)(cid:195)(cid:202)(cid:204)(cid:156)(cid:202)(cid:76)(cid:192)(cid:136)(cid:152)(cid:125)(cid:202)(cid:156)(cid:171)(cid:171)(cid:156)(cid:192)(cid:204)(cid:213)(cid:152)(cid:136)(cid:204)(cid:136)(cid:105)(cid:195)(cid:176)(cid:202)(cid:47)(cid:133)(cid:105)(cid:202)
(cid:62)(cid:125)(cid:105)(cid:152)(cid:86)(cid:222)(cid:202)(cid:192)(cid:105)(cid:147)(cid:62)(cid:136)(cid:152)(cid:195)(cid:202)(cid:86)(cid:156)(cid:147)(cid:147)(cid:136)(cid:204)(cid:204)(cid:105)(cid:96)(cid:202)(cid:204)(cid:156)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:192)(cid:105)(cid:195)(cid:105)(cid:62)(cid:192)(cid:86)(cid:133)(cid:202)(cid:76)(cid:62)(cid:143)(cid:143)(cid:156)(cid:156)(cid:152)(cid:202)(cid:171)(cid:192)(cid:156)(cid:125)(cid:192)(cid:62)(cid:147)(cid:93)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:220)(cid:105)(cid:202)(cid:105)(cid:221)(cid:171)(cid:105)(cid:86)(cid:204)(cid:202)(cid:204)(cid:133)(cid:105)(cid:195)(cid:105)(cid:202)(cid:195)(cid:62)(cid:143)(cid:105)(cid:195)(cid:202)(cid:220)(cid:136)(cid:143)(cid:143)(cid:202)(cid:136)(cid:152)(cid:86)(cid:192)(cid:105)(cid:62)(cid:195)(cid:105)(cid:202)(cid:62)(cid:125)(cid:62)(cid:136)(cid:152)(cid:202)(cid:136)(cid:152)(cid:202)(cid:119)(cid:195)(cid:86)(cid:62)(cid:143)(cid:202)(cid:211)(cid:228)(cid:163)(cid:163)(cid:176)(cid:202)(cid:22)(cid:152)(cid:202)
(cid:62)(cid:96)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:93)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:118)(cid:105)(cid:96)(cid:105)(cid:192)(cid:62)(cid:143)(cid:202)(cid:76)(cid:213)(cid:96)(cid:125)(cid:105)(cid:204)(cid:202)(cid:118)(cid:156)(cid:192)(cid:202)(cid:211)(cid:228)(cid:163)(cid:228)(cid:202)(cid:136)(cid:152)(cid:86)(cid:143)(cid:213)(cid:96)(cid:105)(cid:195)(cid:202)(cid:62)(cid:152)(cid:202)(cid:62)(cid:143)(cid:143)(cid:156)(cid:86)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:204)(cid:156)(cid:202)(cid:86)(cid:156)(cid:219)(cid:105)(cid:192)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:86)(cid:156)(cid:195)(cid:204)(cid:195)(cid:202)(cid:156)(cid:118)(cid:202)(cid:121)(cid:222)(cid:136)(cid:152)(cid:125)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:21)(cid:136)(cid:45)(cid:105)(cid:152)(cid:204)(cid:136)(cid:152)(cid:105)(cid:143)(cid:210)(cid:202)(cid:62)(cid:136)(cid:192)(cid:195)(cid:133)(cid:136)(cid:171)(cid:202)(cid:204)(cid:133)(cid:136)(cid:195)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:93)(cid:202)(cid:220)(cid:133)(cid:136)(cid:86)(cid:133)(cid:202)(cid:136)(cid:195)(cid:202)
planned for the spring.

Made Major Progress in Tethered Aerostats(cid:112)(cid:22)(cid:152)(cid:202)(cid:34)(cid:86)(cid:204)(cid:156)(cid:76)(cid:105)(cid:192)(cid:202)(cid:220)(cid:105)(cid:202)(cid:220)(cid:105)(cid:192)(cid:105)(cid:202)(cid:136)(cid:152)(cid:219)(cid:136)(cid:204)(cid:105)(cid:96)(cid:202)(cid:204)(cid:156)(cid:202)(cid:195)(cid:133)(cid:156)(cid:220)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:195)(cid:222)(cid:195)(cid:204)(cid:105)(cid:147)(cid:202)(cid:204)(cid:156)(cid:202)(cid:192)(cid:105)(cid:171)(cid:192)(cid:105)(cid:195)(cid:105)(cid:152)(cid:204)(cid:62)(cid:204)(cid:136)(cid:219)(cid:105)(cid:195)(cid:202)(cid:156)(cid:118)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:49)(cid:176)(cid:45)(cid:176)(cid:202)
military. We paired our equipment with a high performance video camera. As a result of their interest, we began shipments 
of tethered aerostats for use in Afghanistan late last year. We have expanded production capacity to support strong shipment 
levels throughout the current year. These aerostats will be used for surveillance and protection of our troops in forward operat-
ing bases in Afghanistan.

We also believe there will be interest from Homeland Security and disaster response agencies. In addition, we are working 
with major defense contractors to become their aerostat manufacturer of choice.

Strengthened Operating Income(cid:112)(cid:1)(cid:202)(cid:171)(cid:192)(cid:156)(cid:119)(cid:204)(cid:62)(cid:76)(cid:143)(cid:105)(cid:202)(cid:119)(cid:152)(cid:62)(cid:143)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:118)(cid:156)(cid:192)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:31)(cid:10)(cid:135)(cid:200)(cid:202)(cid:171)(cid:192)(cid:156)(cid:125)(cid:192)(cid:62)(cid:147)(cid:202)(cid:220)(cid:62)(cid:195)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:147)(cid:62)(cid:136)(cid:152)(cid:202)(cid:96)(cid:192)(cid:136)(cid:219)(cid:105)(cid:192)(cid:202)(cid:76)(cid:105)(cid:133)(cid:136)(cid:152)(cid:96)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:206)(cid:123)(cid:175)(cid:202)
increase in operating income on relatively ﬂat sales. Production start-up costs inherent in new contracts may hold proﬁts down 
(cid:136)(cid:152)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:86)(cid:213)(cid:192)(cid:192)(cid:105)(cid:152)(cid:204)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:176)(cid:202)(cid:21)(cid:156)(cid:220)(cid:105)(cid:219)(cid:105)(cid:192)(cid:93)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:143)(cid:105)(cid:195)(cid:195)(cid:156)(cid:152)(cid:195)(cid:202)(cid:143)(cid:105)(cid:62)(cid:192)(cid:152)(cid:105)(cid:96)(cid:202)(cid:136)(cid:152)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:31)(cid:10)(cid:135)(cid:200)(cid:202)(cid:171)(cid:192)(cid:156)(cid:125)(cid:192)(cid:62)(cid:147)(cid:202)(cid:195)(cid:133)(cid:156)(cid:213)(cid:143)(cid:96)(cid:202)(cid:133)(cid:105)(cid:143)(cid:171)(cid:202)(cid:213)(cid:195)(cid:202)(cid:204)(cid:156)(cid:202)(cid:192)(cid:105)(cid:62)(cid:86)(cid:133)(cid:202)(cid:171)(cid:192)(cid:156)(cid:119)(cid:204)(cid:62)(cid:76)(cid:136)(cid:143)(cid:136)(cid:204)(cid:222)(cid:202)(cid:147)(cid:213)(cid:86)(cid:133)(cid:202)(cid:195)(cid:156)(cid:156)(cid:152)(cid:105)(cid:192)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)
the T-11 contract.
Dramatic Growth Expected 

For a number of years we have been laying the groundwork for signiﬁcant revenue growth. Our current-year sales goal  
represents a nearly 50% increase. While operating income as a percentage of sales is expected to be lower, stronger revenues 
should drive total operating income higher. Here are the strategies we will use to support this expansion.

(cid:85)(cid:202)Efﬁcient T-11 start up: Our objective is to reach full production quickly—with a June target date—while minimizing 
start-up costs. This should be possible because we face only half of the system changes needed than when we began 
(cid:147)(cid:62)(cid:142)(cid:136)(cid:152)(cid:125)(cid:202)(cid:31)(cid:10)(cid:135)(cid:200)(cid:202)(cid:171)(cid:62)(cid:192)(cid:62)(cid:86)(cid:133)(cid:213)(cid:204)(cid:105)(cid:195)(cid:176)

(cid:85)(cid:202)Effective aerostat ramp up: We are increasing our manufacturing capacity, revamping our production facilities, and 
adding staff to keep up with the current workload as well as product development. This will be a major focus of our  
attention.

(cid:85)(cid:202)Successful airship ﬂight: We expect this will lead to advances in product development and create 

interest among potential partners and customers.

Military parachutes 

15

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(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income

Ongoing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sold businesses(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income as % of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income as % 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 / average inventory)(b) . . . . . . . . . . . . . . . . . . .
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 and stock units 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
2009

2010

2008

$237,782
—
237,782
67,852

43,220
—
43,220
43,322
$ 28,574

12.0%
25.2%

$

9,911

$117,747
25,960
$ 91,787
4.54
$ 33,029
170,309
—
$133,251

0.0%
5.3

$ 47,643
(13,396)
(9,867)
24,417

$

$

$

1.58
1.58
0.55
7.38

33.18
15.37
28.58
18,051
7,767

18.1
930
$
256
$ 74,718

$279,913
—
279,913
73,448

46,394
—
46,394
46,901
$ 30,770

11.0%
26.0%
$ 31,884(c)

$ 98,073
23,322
$ 74,751
4.21
$ 35,880
144,415
—
$113,556

0.0%
5.2

$ 39,037
(7,000)
(36,969)
(5,005)

$

1.71
1.70
1.77(c)
6.30

$ 47.82
20.60
$ 21.81
18,027
8,268

12.8
1,070
$
262
$ 80,361

$233,957
—
233,957
63,676

41,145
—
41,145
42,224
$ 27,802

11.9%
28.3%

$ 7,966

$100,869
22,108
$ 78,761
4.56
$ 35,743
147,861
—
$118,275

0.0%
5.3

$ 27,151
(4,433)
(8,270)
14,489

$

1.54
1.53
0.44
6.52

$ 45.85
26.20
$ 30.02
18,130
8,700

19.6
930
$
252
$ 66,628

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 and stock units outstanding.
(a) In fiscal 2003, 2001 and 2000, the company sold its Beta Raven Industrial Controls, Plastic Tank, and Glasstite businesses, respectively.
(b) All years reflect the reclassification of R&D expense from cost of goods sold. (See Note 1.)
(c) Includes special dividends of $1.25 per share in fiscal 2009 and $.625 per share in fiscal 2005.

16

2 0 1 0 A N N U A L R E P O R T RAVEN

2007

2006

2005

2004

2003

2002

2001

2000

$217,529
—
217,529
57,540

38,302
—
38,302
38,835
$ 25,441

$204,528
—
204,528
55,714

37,284
—
37,284
37,494
$ 24,262

$168,086
—
168,086
45,212

27,862
—
27,862
27,955
$ 17,891

$142,727
—
142,727
35,488

21,981
(355)
21,626
21,716
$ 13,836

$119,589
1,314
120,903
28,828

16,861
204
17,065
17,254
$ 11,185

$112,018
6,497
118,515
25,340

13,788
(613)
13,175
13,565
$ 8,847

11.7%
30.1%

11.9%
36.7%

$ 6,507

$ 5,056

10.6%
26.9%
$ 15,298(c)

9.7%
23.8%

9.3%
21.5%

7.5%
18.4%

$ 3,075

$ 2,563

$ 2,371

$ 2,399

$ 73,219
16,464
$ 56,755
4.45
$ 36,264
119,764
—
$ 98,268

$ 71,345
20,050
$ 51,295
3.56
$ 25,602
106,157
9
$ 84,389

$ 61,592
20,950
$ 40,642
2.94
$ 19,964
88,509
—
$ 66,082

$ 55,710
11,895
$ 43,815
4.68
$ 15,950
79,508
57
$ 66,471

$ 49,351
13,167
$ 36,184
3.75
$ 16,455
72,816
151
$ 58,236

$ 45,308
13,810
$ 31,498
3.28
$ 14,059
67,836
280
$ 52,032

$ 51,817
13,935
$ 37,882
3.72
$ 11,647
65,656
2,013
$ 47,989

$113,360
19,498
132,858
21,740

7,417(d)
3,331(e)
10,748
10,924
$ 6,411(d)(e)

4.8%
11.8%

$107,862
42,523
150,385
24,853

7,971
2,606(f)
10,577
10,503
$ 6,762(f)
4.5%
10.9%

$ 2,895

$ 55,371
14,702
$ 40,669
3.77
$ 15,068
74,047
3,024
$ 54,519

0.0%
5.4

0.0%
5.9

0.0%
5.8

0.1%
6.1

0.3%
4.8

0.5%
5.1

4.0%
4.5

5.3%
3.8

$ 26,313
(18,664)
(10,277)
(2,626)

$

1.41
1.39
0.36
5.45

$ 42.70
25.46
$ 28.43
18,044
8,992

20.5
884
$
246
$ 44,237

$ 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
845
$
242
$ 43,619

$ 18,871
(7,631)
(19,063)
(7,823)

$

0.99
0.97
0.85(c)
3.67

$ 26.94
13.08
$ 18.38
17,999
6,269

18.9
835
$
201
$ 43,646

$ 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
787
$
181
$ 47,120

$ 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
784
$
154
$ 42,826

$ 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
858
$
138
$ 33,834

$ 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
1,082
$
123
$ 38,239

$ 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
1,369
$
110
$ 44,935

(d) Includes $2.6 million of business repositioning charges, net of gains on plant sales, primarily in Electronic Systems and Aerostar.
(e) Includes the $3.1 million pretax gain ($1.4 million net of tax) on the sale of the company’s Plastic Tank Division.
(f) Includes the $1.2 million pretax gain ($764,000 net of tax) on the sale of assets of the company’s Glasstite subsidiary.

2 0 1 0 A N N U A L R E P O R T RAVEN

17

Business Segments

2010

Dollars in thousands
APPLIED TECHNOLOGY DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,217
25,722
Operating income. . . . . . . . . . . . . . . . . . . . . .
51,029
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
941
Capital expenditures . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
1,677
ENGINEERED FILMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,783
10,232
Operating income. . . . . . . . . . . . . . . . . . . . . .
35,999
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,460
Capital expenditures . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
3,707
ELECTRONIC SYSTEMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,525
8,979
Operating income. . . . . . . . . . . . . . . . . . . . . .
21,216
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
290
Capital expenditures. . . . . . . . . . . . . . . . . . . .
939
Depreciation and amortization . . . . . . . . . . . .
AEROSTAR
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,244
5,634
Operating income. . . . . . . . . . . . . . . . . . . . . .
10,462
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
332
Capital expenditures. . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
398
INTERSEGMENT ELIMINATIONS
Sales

(210)
(2,776)
(1)
60
(92)

Engineered Films Division . . . . . . . . . . . . . . $
Electronic Systems Division . . . . . . . . . . . . .
Aerostar . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income. . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPORTABLE SEGMENTS TOTAL
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $237,782
50,627
Operating income. . . . . . . . . . . . . . . . . . . . . .
118,614
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,023
Capital expenditures. . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
6,721
CORPORATE & OTHER
Operating (loss) from administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,407)
51,695
279
387

Assets(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures. . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
TOTAL COMPANY
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $237,782
43,220
Operating income. . . . . . . . . . . . . . . . . . . . . .
170,309
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,302
Capital expenditures. . . . . . . . . . . . . . . . . . . .
7,108
Depreciation and amortization . . . . . . . . . . . .

(a) Assets are principally cash, investments, deferred taxes and other receivables.
(b) Includes a $1.3 million pretax writeoff of assets related to the Fluent Systems product line.

18

2 0 1 0 A N N U A L R E P O R T RAVEN

For the years ended January 31

2009

2008

2007

2006

2005

$103,098
33,884
48,881
2,674
1,383

$ 89,858
10,919
35,862
3,120
4,303

$ 61,983
5,926
26,847
1,399
1,159

$ 27,186
4,219
8,744
383
444

$

(210)
(1,977)
(25)
(52)
(152)

$279,913
54,896
120,182
7,576
7,289

$ 64,291
19,102
36,938
1,008
1,125

$ 85,316
17,739
43,688
4,012
4,046

$ 67,987
10,365
25,865
1,077
1,237

$ 17,290
1,506
9,941
156
499

$ 45,515
10,111
27,629
577
1,142

$ 91,082
23,440
41,988
13,266
2,887

$ 66,278
10,850
25,175
1,357
1,086

$ 14,654
707
8,161
812
375

$ 47,506
13,586
30,047
938
1,085

$ 82,794
19,907
33,512
7,359
2,436

$ 56,219
8,916
20,191
1,612
871

$ 18,009
2,133
6,837
179
359

$ 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

$

$

(533)
(378)
(16)
(100)
(100)

— $
—
—
—
—

— $
—
—
—
—

—
—
—
—
—

$233,957
48,612
116,332
6,253
6,907

$217,529
45,108
102,953
16,012
5,490

$204,528
44,542
90,587
10,088
4,751

$168,086

34,356(b)
73,756
7,075
3,548

$ (8,502)
24,233
425
469

$ (7,467)
31,529
382
437

$ (6,806)
16,811
510
395

$ (7,258)
15,570
270
400

$ (6,494)
14,753
466
293

$279,913
46,394
144,415
8,001
7,758

$233,957
41,145
147,861
6,635
7,344

$217,529
38,302
119,764
16,522
5,885

$204,528
37,284
106,157
10,358
5,151

$168,086

27,862(b)
88,509
7,541
3,841

Financial Review and Analysis

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to enhance overall financial
disclosure. It provides management’s analysis of the primary drivers of year-over-year changes in key financial statement elements, business
segment results and the impact of accounting principles on the company’s financial statements.

This discussion should be read in conjunction with the company’s January 31, 2010 financial statements and the accompanying notes.

The MD&A is organized as follows:

(cid:77) (cid:28)(cid:73)(cid:54)(cid:52)(cid:70)(cid:69)(cid:58)(cid:71)(cid:54) (cid:42)(cid:70)(cid:62)(cid:62)(cid:50)(cid:67)(cid:74)
(cid:77) (cid:41)(cid:54)(cid:68)(cid:70)(cid:61)(cid:69)(cid:68) (cid:64)(cid:55) (cid:38)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:68)(cid:79)(cid:42)(cid:54)(cid:56)(cid:62)(cid:54)(cid:63)(cid:69) (cid:24)(cid:63)(cid:50)(cid:61)(cid:74)(cid:68)(cid:58)(cid:68)
(cid:77) (cid:38)(cid:70)(cid:69)(cid:61)(cid:64)(cid:64)(cid:60)
(cid:77) (cid:35)(cid:58)(cid:66)(cid:70)(cid:58)(cid:53)(cid:58)(cid:69)(cid:74) (cid:50)(cid:63)(cid:53) (cid:26)(cid:50)(cid:65)(cid:58)(cid:69)(cid:50)(cid:61) (cid:41)(cid:54)(cid:68)(cid:64)(cid:70)(cid:67)(cid:52)(cid:54)(cid:68)
(cid:77) (cid:38)(cid:55)(cid:55)(cid:9)(cid:51)(cid:50)(cid:61)(cid:50)(cid:63)(cid:52)(cid:54) (cid:42)(cid:57)(cid:54)(cid:54)(cid:69) (cid:24)(cid:67)(cid:67)(cid:50)(cid:63)(cid:56)(cid:54)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68) (cid:50)(cid:63)(cid:53) (cid:26)(cid:64)(cid:63)(cid:69)(cid:67)(cid:50)(cid:52)(cid:69)(cid:70)(cid:50)(cid:61) (cid:38)(cid:51)(cid:61)(cid:58)(cid:56)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:68)
(cid:77) (cid:26)(cid:67)(cid:58)(cid:69)(cid:58)(cid:52)(cid:50)(cid:61) (cid:24)(cid:52)(cid:52)(cid:64)(cid:70)(cid:63)(cid:69)(cid:58)(cid:63)(cid:56) (cid:28)(cid:68)(cid:69)(cid:58)(cid:62)(cid:50)(cid:69)(cid:54)(cid:68)
(cid:77) (cid:37)(cid:54)(cid:72) (cid:24)(cid:52)(cid:52)(cid:64)(cid:70)(cid:63)(cid:69)(cid:58)(cid:63)(cid:56) (cid:42)(cid:69)(cid:50)(cid:63)(cid:53)(cid:50)(cid:67)(cid:53)(cid:68)

Reclassification of Research and Development Expenses
(cid:41)(cid:54)(cid:68)(cid:54)(cid:50)(cid:67)(cid:52)(cid:57) (cid:50)(cid:63)(cid:53) (cid:53)(cid:54)(cid:71)(cid:54)(cid:61)(cid:64)(cid:65)(cid:62)(cid:54)(cid:63)(cid:69) (cid:6)(cid:41)(cid:4)(cid:27)(cid:7) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68) (cid:58)(cid:63)(cid:52)(cid:61)(cid:70)(cid:53)(cid:54) (cid:52)(cid:64)(cid:68)(cid:69)(cid:68) (cid:67)(cid:54)(cid:61)(cid:50)(cid:69)(cid:54)(cid:53) (cid:69)(cid:64) (cid:65)(cid:67)(cid:64)(cid:53)(cid:70)(cid:52)(cid:69) (cid:53)(cid:54)(cid:71)(cid:54)(cid:61)(cid:64)(cid:65)(cid:62)(cid:54)(cid:63)(cid:69) (cid:50)(cid:63)(cid:53) (cid:68)(cid:58)(cid:56)(cid:63)(cid:58)(cid:55)(cid:58)(cid:52)(cid:50)(cid:63)(cid:69) (cid:54)(cid:63)(cid:57)(cid:50)(cid:63)(cid:52)(cid:54)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68) (cid:64)(cid:55) (cid:54)(cid:73)(cid:58)(cid:68)(cid:69)(cid:58)(cid:63)(cid:56) (cid:65)(cid:67)(cid:64)(cid:53)(cid:70)(cid:52)(cid:69)(cid:68)(cid:10)
(cid:25)(cid:54)(cid:56)(cid:58)(cid:63)(cid:63)(cid:58)(cid:63)(cid:56) (cid:58)(cid:63) (cid:55)(cid:58)(cid:68)(cid:52)(cid:50)(cid:61) (cid:14)(cid:12)(cid:13)(cid:12)(cid:8) (cid:56)(cid:67)(cid:64)(cid:68)(cid:68) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68) (cid:72)(cid:54)(cid:67)(cid:54) (cid:50)(cid:55)(cid:55)(cid:54)(cid:52)(cid:69)(cid:54)(cid:53) (cid:51)(cid:74) (cid:69)(cid:57)(cid:54) (cid:67)(cid:54)(cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:58)(cid:55)(cid:58)(cid:52)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63) (cid:64)(cid:55) (cid:41)(cid:4)(cid:27) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68)(cid:8) (cid:67)(cid:54)(cid:62)(cid:64)(cid:71)(cid:58)(cid:63)(cid:56) (cid:69)(cid:57)(cid:54)(cid:62) (cid:55)(cid:67)(cid:64)(cid:62) (cid:52)(cid:64)(cid:68)(cid:69) (cid:64)(cid:55) (cid:56)(cid:64)(cid:64)(cid:53)(cid:68) (cid:68)(cid:64)(cid:61)(cid:53) (cid:69)(cid:64) (cid:50) (cid:68)(cid:54)(cid:65)(cid:50)(cid:67)(cid:50)(cid:69)(cid:54)
item below gross profit. As a result, the Applied Technology Division’s gross margins were recomputed and adjusted from 40.2% to 45.2% for fiscal
(cid:14)(cid:12)(cid:12)(cid:21)(cid:8) (cid:50)(cid:63)(cid:53) (cid:15)(cid:19)(cid:10)(cid:21)(cid:3) (cid:69)(cid:64) (cid:16)(cid:16)(cid:10)(cid:17)(cid:3) (cid:55)(cid:64)(cid:67) (cid:55)(cid:58)(cid:68)(cid:52)(cid:50)(cid:61) (cid:14)(cid:12)(cid:12)(cid:20)(cid:10) (cid:43)(cid:57)(cid:54) (cid:58)(cid:62)(cid:65)(cid:50)(cid:52)(cid:69) (cid:64)(cid:55) (cid:69)(cid:57)(cid:54) (cid:67)(cid:54)(cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:58)(cid:55)(cid:58)(cid:52)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63) (cid:64)(cid:55) (cid:41)(cid:4)(cid:27) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68) (cid:64)(cid:63) (cid:56)(cid:67)(cid:64)(cid:68)(cid:68) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68) (cid:72)(cid:50)(cid:68) (cid:63)(cid:64)(cid:69) (cid:68)(cid:58)(cid:56)(cid:63)(cid:58)(cid:55)(cid:58)(cid:52)(cid:50)(cid:63)(cid:69) (cid:55)(cid:64)(cid:67) (cid:69)(cid:57)(cid:54)
(cid:52)(cid:64)(cid:62)(cid:65)(cid:50)(cid:63)(cid:74)(cid:5)(cid:68) (cid:64)(cid:69)(cid:57)(cid:54)(cid:67) (cid:68)(cid:54)(cid:56)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)(cid:10) (cid:24)(cid:53)(cid:53)(cid:58)(cid:69)(cid:58)(cid:64)(cid:63)(cid:50)(cid:61)(cid:61)(cid:74)(cid:8) (cid:41)(cid:4)(cid:27) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68) (cid:69)(cid:57)(cid:50)(cid:69) (cid:72)(cid:54)(cid:67)(cid:54) (cid:65)(cid:67)(cid:54)(cid:71)(cid:58)(cid:64)(cid:70)(cid:68)(cid:61)(cid:74) (cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:58)(cid:55)(cid:58)(cid:54)(cid:53) (cid:50)(cid:68) (cid:68)(cid:54)(cid:61)(cid:61)(cid:58)(cid:63)(cid:56)(cid:8) (cid:56)(cid:54)(cid:63)(cid:54)(cid:67)(cid:50)(cid:61) (cid:50)(cid:63)(cid:53) (cid:50)(cid:53)(cid:62)(cid:58)(cid:63)(cid:58)(cid:68)(cid:69)(cid:67)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68) (cid:72)(cid:54)(cid:67)(cid:54) (cid:50)(cid:61)(cid:68)(cid:64)
(cid:67)(cid:54)(cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:58)(cid:55)(cid:58)(cid:54)(cid:53) (cid:69)(cid:64) (cid:69)(cid:57)(cid:54) (cid:68)(cid:54)(cid:65)(cid:50)(cid:67)(cid:50)(cid:69)(cid:54) (cid:41)(cid:4)(cid:27) (cid:54)(cid:73)(cid:65)(cid:54)(cid:63)(cid:68)(cid:54)(cid:68) (cid:61)(cid:58)(cid:63)(cid:54)(cid:10) (cid:43)(cid:57)(cid:54) (cid:67)(cid:54)(cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:58)(cid:55)(cid:58)(cid:52)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:68) (cid:57)(cid:50)(cid:53) (cid:63)(cid:64) (cid:50)(cid:55)(cid:55)(cid:54)(cid:52)(cid:69) (cid:64)(cid:63) (cid:50)(cid:63)(cid:74) (cid:68)(cid:54)(cid:56)(cid:62)(cid:54)(cid:63)(cid:69)(cid:5)(cid:68) (cid:65)(cid:67)(cid:54)(cid:71)(cid:58)(cid:64)(cid:70)(cid:68)(cid:61)(cid:74) (cid:67)(cid:54)(cid:65)(cid:64)(cid:67)(cid:69)(cid:54)(cid:53) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:63)(cid:56) (cid:58)(cid:63)(cid:52)(cid:64)(cid:62)(cid:54) (cid:64)(cid:67)
consolidated operating income.

Components of consolidated operating income for the fiscal years ended January 31, 2009 and 2008, as originally reported and as reclassified,
were as follows:

Dollars in thousands

For the year ended
January 31, 2009

For the year ended
January 31, 2008

As
reported

As
reclassified

As
reported

As
reclassified

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$279,913
212,032

$279,913
206,465

$233,957
174,809

$233,957
170,281

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67,881

24.3%
—
21,487

73,448

26.2%
5,848
21,206

59,148

25.3%
—
18,003

63,676

27.2%
4,925
17,606

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,394

$ 46,394

$ 41,145

$ 41,145

EXECUTIVE SUMMARY
Raven Industries, Inc. is an industrial manufacturer providing a variety of products to customers within the industrial, agricultural, construction and
(cid:62)(cid:58)(cid:61)(cid:58)(cid:69)(cid:50)(cid:67)(cid:74)(cid:11)(cid:50)(cid:54)(cid:67)(cid:64)(cid:68)(cid:65)(cid:50)(cid:52)(cid:54) (cid:62)(cid:50)(cid:67)(cid:60)(cid:54)(cid:69)(cid:68)(cid:8) (cid:65)(cid:67)(cid:58)(cid:62)(cid:50)(cid:67)(cid:58)(cid:61)(cid:74) (cid:58)(cid:63) (cid:37)(cid:64)(cid:67)(cid:69)(cid:57) (cid:24)(cid:62)(cid:54)(cid:67)(cid:58)(cid:52)(cid:50)(cid:10) (cid:43)(cid:57)(cid:54) (cid:52)(cid:64)(cid:62)(cid:65)(cid:50)(cid:63)(cid:74) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:54)(cid:68) (cid:58)(cid:63) (cid:55)(cid:64)(cid:70)(cid:67) (cid:51)(cid:70)(cid:68)(cid:58)(cid:63)(cid:54)(cid:68)(cid:68) (cid:68)(cid:54)(cid:56)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)(cid:22) (cid:24)(cid:65)(cid:65)(cid:61)(cid:58)(cid:54)(cid:53) (cid:43)(cid:54)(cid:52)(cid:57)(cid:63)(cid:64)(cid:61)(cid:64)(cid:56)(cid:74) (cid:6)(cid:55)(cid:64)(cid:67)(cid:62)(cid:54)(cid:67)(cid:61)(cid:74) (cid:29)(cid:61)(cid:64)(cid:72)
(cid:26)(cid:64)(cid:63)(cid:69)(cid:67)(cid:64)(cid:61)(cid:68)(cid:7)(cid:8) (cid:28)(cid:63)(cid:56)(cid:58)(cid:63)(cid:54)(cid:54)(cid:67)(cid:54)(cid:53) (cid:29)(cid:58)(cid:61)(cid:62)(cid:68)(cid:8) (cid:28)(cid:61)(cid:54)(cid:52)(cid:69)(cid:67)(cid:64)(cid:63)(cid:58)(cid:52) (cid:42)(cid:74)(cid:68)(cid:69)(cid:54)(cid:62)(cid:68) (cid:50)(cid:63)(cid:53) (cid:24)(cid:54)(cid:67)(cid:64)(cid:68)(cid:69)(cid:50)(cid:67)(cid:10)

Management uses a number of metrics to assess the company’s performance:

(cid:77) (cid:26)(cid:64)(cid:63)(cid:68)(cid:64)(cid:61)(cid:58)(cid:53)(cid:50)(cid:69)(cid:54)(cid:53) (cid:63)(cid:54)(cid:69) (cid:68)(cid:50)(cid:61)(cid:54)(cid:68)(cid:8) (cid:56)(cid:67)(cid:64)(cid:68)(cid:68) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68)(cid:8) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:63)(cid:56) (cid:58)(cid:63)(cid:52)(cid:64)(cid:62)(cid:54)(cid:8) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:63)(cid:56) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68)(cid:8) (cid:63)(cid:54)(cid:69) (cid:58)(cid:63)(cid:52)(cid:64)(cid:62)(cid:54) (cid:50)(cid:63)(cid:53) (cid:54)(cid:50)(cid:67)(cid:63)(cid:58)(cid:63)(cid:56)(cid:68) (cid:65)(cid:54)(cid:67) (cid:68)(cid:57)(cid:50)(cid:67)(cid:54)
(cid:77) (cid:26)(cid:50)(cid:68)(cid:57) (cid:55)(cid:61)(cid:64)(cid:72) (cid:55)(cid:67)(cid:64)(cid:62) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:68) (cid:50)(cid:63)(cid:53) (cid:65)(cid:50)(cid:74)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68) (cid:69)(cid:64) (cid:68)(cid:57)(cid:50)(cid:67)(cid:54)(cid:57)(cid:64)(cid:61)(cid:53)(cid:54)(cid:67)(cid:68)
(cid:77) (cid:41)(cid:54)(cid:69)(cid:70)(cid:67)(cid:63) (cid:64)(cid:63) (cid:68)(cid:50)(cid:61)(cid:54)(cid:68)(cid:8) (cid:50)(cid:68)(cid:68)(cid:54)(cid:69)(cid:68) (cid:50)(cid:63)(cid:53) (cid:54)(cid:66)(cid:70)(cid:58)(cid:69)(cid:74)
(cid:77) (cid:42)(cid:54)(cid:56)(cid:62)(cid:54)(cid:63)(cid:69) (cid:63)(cid:54)(cid:69) (cid:68)(cid:50)(cid:61)(cid:54)(cid:68)(cid:8) (cid:56)(cid:67)(cid:64)(cid:68)(cid:68) (cid:65)(cid:67)(cid:64)(cid:55)(cid:58)(cid:69)(cid:8) (cid:56)(cid:67)(cid:64)(cid:68)(cid:68) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68)(cid:8) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:63)(cid:56) (cid:58)(cid:63)(cid:52)(cid:64)(cid:62)(cid:54) (cid:50)(cid:63)(cid:53) (cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:63)(cid:56) (cid:62)(cid:50)(cid:67)(cid:56)(cid:58)(cid:63)(cid:68)

2 0 1 0 (cid:24) (cid:37) (cid:37) (cid:44) (cid:24) (cid:35) (cid:41) (cid:28) (cid:39) (cid:38) (cid:41) (cid:43) RAVEN

19

Financial Review and Analysis (continued)

The following discussion highlights the consolidated operating results. Segment operating results are more fully explained in the Results of
Operations—Segment Analysis section.

Financial highlights for fiscal years ended January 31,

Dollars in thousands, except per share data

2010

%
change

2009

%
change

2008

Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $237,782
Gross margins(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,220
Operating margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,574
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.58
(a) The company’s gross margins may not be comparable to industry peers due to variability in the classification of expenses across industries in which the company operates.

(7)% $ 30,770
1.70
(7)% $

11% $ 27,802
1.53
11% $

(15)% $279,913

13% $ 41,145

20% $233,957

(7)% $ 46,394

28.5%

18.2%

26.2%

16.6%

27.2%

17.6%

Cash Flow and Payments to Shareholders
Cash flow from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,643

Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Common stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,911
—

Cash returned to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

9,911

$ 39,037

$ 31,884
5,180

$ 37,064

$ 27,151

$ 7,966
592

$ 8,558

Performance Measures
Return on net sales (net income / net sales) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average assets (net income / average assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on beginning equity (net income / beginning equity)

12.0%
18.2%
25.2%

11.0%
21.1%
26.0%

11.9%
20.8%
28.3%

Results of Operations—Fiscal 2010 versus Fiscal 2009
The slump in global economic activity that began negatively affecting the company’s financial results in the last quarter of fiscal 2009 continued
through fiscal 2010. During the second half of fiscal 2010, global economies began to show signs of a recovery from the unprecedented volatility
and disruption. However, there is substantial uncertainty as to the strength and sustainability of the economic recovery.

The 15% decrease in net sales is the result of year-over-year sales declines in Applied Technology (16%) and Engineered Films (29%). Electronic Systems
and Aerostar sales were relatively flat year-over-year. Expectations of lower farm income and economic uncertainty caused growers and custom spray
applicators to defer purchases, which negatively affected substantially all of Applied Technology’s product categories. The impact of the weak economy on
Engineered Films’ largest markets resulted in year-over-year declines of energy market sales (40%) and construction market sales (25%). Electronic
Systems sales were up 2% year-over-year, reflecting increased deliveries of avionics and secure communication electronics to meet rising demand from
government agencies and the aerospace market, which was partially offset by a smaller customer base. Aerostar sales were flat compared with last year,
as increased deliveries of MC-6 Army parachutes, aerostats and research balloons were offset by decreased deliveries of protective wear.

Applied Technology operating margins contracted year-over-year, reflecting the negative impact of lower sales on operating leverage. However,
disciplined margin management, operational efficiencies and higher productivity brought improved operating margins for Engineered Films,
Electronic Systems and Aerostar. Consequently, the 7% year-over-year decrease in operating income was less severe than the 15% drop in sales.

While fourth quarter revenues of $55.8 million were down 7%, net income grew 25% from the fourth quarter of fiscal 2009. Applied Technology
quarterly sales fell 12%, resulting from the negative impact of lower farm income and economic uncertainty. Electronic Systems fourth quarter
sales declined 14% due to lower sales of secure communication electronics, reflecting lower demand from government agencies, and slower
avionics deliveries, as commercial airlines began cancelling or delaying delivery schedules. Aerostar’s quarterly sales dropped 12%, as fiscal 2009
fourth quarter results included nearly $3 million of MC-6 parachute deliveries that were delayed from the prior quarter due to contract
modifications. Engineered Films fourth quarter sales rose 15% due to increased business activity and higher energy prices, as growth in emerging
markets drove oil prices to levels adequate to support an increase in drilling activity. This resulted in a 40% increase in fourth quarter sales of pit
and pond lining films to the oil and gas exploration markets from the prior year.

Fourth quarter net income of $5.8 million rose 25% year-over-year. Disciplined margin management at Engineered Films led to $2.4 million of
operating income versus an operating loss of $178,000 in the fourth quarter of fiscal 2009. Management responded quickly and decisively to the
freefall in business activity experienced in the fourth quarter of fiscal 2009 by tightly managing expenses and decreasing headcount—necessary
steps to align the division with the weak business environment.

20

2 0 1 0 A N N U A L R E P O R T RAVEN

Results of Operations—Fiscal 2009 versus Fiscal 2008
In fiscal 2009, the company posted record sales, operating income, net income, diluted earnings per share and operating cash flow. The results
were fueled by a strong agricultural market and new product introductions in the Applied Technology segment and, to a lesser extent, shipments
under government contracts at Aerostar. The 20% increase in net sales was the result of year-over-year sales growth in Applied Technology (60%),
Aerostar (57%) and Engineered Films (5%). The 13% rise in operating income was primarily the result of sales growth and positive operating
leverage generated by Applied Technology. The increase in operating income fell short of the growth in sales as a result of negative operating
leverage at Electronic Systems, when sales volume slipped due to the loss of a customer and the weak economy. In addition, Engineered Films
margins contracted as competitive pricing pressures created by the slowdown in construction activity prevented the pass-through of increased
plastic resin costs.

Strategic Investments
In November 2009, the company made two significant investments. These enhanced Applied Technology’s information strategy of providing a
comprehensive precision agriculture system to improve productivity and efficiency by transforming field data into knowledge.

Site-Specific Technology Development Group, Inc. (SST)
The company acquired a 20% interest in SST, a privately held agricultural software development and information services provider, for $5.0 million.
Raven and SST are strategically aligned to provide customers with simple, more efficient ways to move and manage information in the precision
agriculture market.

Ranchview, Inc. (Ranchview)
The company purchased substantially all of the assets of Ranchview, Inc., a privately held Canadian start-up company for $1.5 million cash and
contingent consideration valued at $2.3 million. Raven has agreed to pay additional consideration on a quarterly basis of 6% on future sales of
Ranchview products, up to a maximum payment of $4.0 million. Ranchview developed products that use cellular networks instead of traditional
radio systems that are typically used to deliver RTK (Real Time Kinematic) corrections to GPS enabled equipment.

Cash Flow and Payments to Shareholders
Raven continues to generate strong operating cash flows, hitting a record $47.6 million in fiscal 2010 due to company earnings and lower accounts
receivable and inventory levels. Working capital levels reflected both lower business activity and improved management of working capital.

During fiscal 2010, $9.9 million was returned to shareholders through quarterly dividends. The quarterly cash dividend increased from 13 cents per
share to 14 cents per share beginning in the second quarter. This represents the 23rd consecutive increase in the annual dividend (excluding special
dividends).

During fiscal 2009, $37.1 million was returned to shareholders through stock repurchases, quarterly dividends and a special dividend of
$22.5 million paid in November 2008.

Performance Measures
Despite challenging economic conditions, the company continues to generate solid returns on net sales, average assets and beginning equity,
which are important gauges of Raven’s ability to efficiently produce profits. Raven generated a record 12% return on sales in fiscal 2010. Improved
operating efficiencies and cost containment overcame the negative impact of weak market conditions on the company’s net sales and earnings.

2 0 1 0 A N N U A L R E P O R T RAVEN

21

Financial Review and Analysis (continued)

RESULTS OF OPERATIONS—SEGMENT ANALYSIS

Applied Technology
Applied Technology provides electronic and Global Positioning System (GPS) products designed to reduce operating costs and improve yields for the
agriculture market.

Financial highlights for fiscal years ended January 31,

Dollars in thousands

Applied Technology

2010

%
change

2009

%
change

2008

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $86,217
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,889
Gross margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,722
Operating margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29.8%

43.9%

(16)% $103,098
46,591
(19)%

60% $64,291
28,640
63%

45.2%

44.5%

(24)% $ 33,884

77% $19,102

32.9%

29.7%

APPLIED TECHNOLOGY

Net Sales
(dollars in millions)

Operating
Income
(dollars in millions)

$103.1

$33.9

$86.2

$25.7

$64.3

$19.1

Fiscal 2010 net sales of $86.2 million decreased $16.9 million (16%) and operating income of $25.7 million
was down $8.2 million (24%) versus fiscal 2009. Lower sales and operating income were due primarily to a
decrease in sales volume partially offset by modest selling price increases.

Fiscal 2010 fourth quarter net sales of $17.3 million were off $2.4 million (12%) and operating income of
$4.1 million fell $1.1 million (21%).

2008 2009 2010

2008 2009 2010

A number of factors contributed to the drop in full-year and fourth quarter comparative results:

(cid:77) Economic uncertainty.

The government’s calendar 2009 farm income forecast was significantly lower than 2008 actual levels. Farm
production costs declined from prior-year levels; however, they were outpaced by the decline in crop prices. Expectations of lower farm
income and economic uncertainty led growers and custom spray applicators to defer purchases. These factors had a negative impact on
substantially all of the segment’s product categories.

(cid:77) New product sales.

Products that enable entry into new markets, have new applications, or are customized are included in the new
product sales category for 24 months from their release date. Fiscal 2010 new product sales decreased from a year ago, reflecting the
highly successful fiscal 2009 launches of innovative field computers.

(cid:77) International sales.

International sales of $17.1 million fell $1.7 million (9%) year-over-year. Net sales outside the U.S. accounted for
20% of segment sales in fiscal 2010 versus 18% in fiscal 2009. Declines in some markets were partially offset by expansion into regions
not previously served.

(cid:77) Negative operating leverage. Gross margins of 43.9% in fiscal 2010 fell from 45.2% in fiscal 2009. Selling expenses in the latest year
were $7.0 million, or 8.1% of net sales, compared with $7.5 million, or 7.3% of net sales, for fiscal 2009. The change in profits and selling
expenses as a percentage of sales reflected the negative impact of falling sales on operating leverage.

(cid:77) Research and development.

R&D expenses of $5.2 million were flat between the two years; however, they increased as a percentage of
net sales—6.0% for fiscal 2010 versus 5.0% for fiscal 2009. Focused investments in R&D are critical to product development, which will
support future growth and competitive position in the marketplace.

Fiscal 2009 net sales of $103.1 million increased $38.8 million (60%) and operating income of $33.9 million grew $14.8 million (77%) over fiscal
2008. The increase in sales and operating income was due primarily to higher sales volume and modest selling price increases.

These factors contributed to higher sales volume and strong operating results:

(cid:77) Healthy global farm fundamentals.

Commodity prices were strong through the first nine months of the year but fell from their highs.
However, agricultural market fundamentals remained strong and continued to influence growers’ capital investment decisions, increasing
demand for Applied Technology precision agriculture equipment.

(cid:77) Investments in select global markets.

International sales rose to 18% of segment sales in fiscal 2009 compared with 16% in fiscal 2008,

an increase of $8.7 million.

(cid:77) Increased acceptance of precision agriculture. Double-digit year-over-year sales growth was achieved for all product categories
(standard, precision, steering and AutoboomTM). This reflected strong customer demand for flagship sprayer products as well as newer
products such as the CruizerTM—a simple and affordable guidance system targeted at new entrants to the precision agriculture market.

22

2 0 1 0 A N N U A L R E P O R T RAVEN

 
(cid:77) Positive operating leverage. Gross margins of 45.2% in fiscal 2009 compared favorably to fiscal 2008 gross margins of 44.5%. Fiscal
2009 selling expenses were $7.5 million, or 7.3% of net sales, compared with fiscal 2008 selling expenses of $5.3 million, or 8.2% of net
sales. These improvements came from positive operating leverage generated through increased sales volume.

Engineered Films
Engineered Films produces rugged reinforced plastic sheeting for industrial, construction, geomembrane and agricultural applications.

Financial highlights for fiscal years ended January 31,

Dollars in thousands

Engineered Films

2010

%
change

2009

%
change

2008

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,783
13,013
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,232
Operating margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.0%

20.4%

(29)% $89,858
(10)% 14,502

5% $85,316
(32)% 21,236

16.1%

24.9%

(6)% $10,919

(38)% $17,739

12.2%

20.8%

Fiscal 2010 net sales of $63.8 million decreased $26.1 million (29%) while operating income of $10.2 million
was off $687,000 (6%) versus fiscal 2009. Lower sales and operating income reflected falling sales volume
and selling prices.

The year-over-year change was driven primarily by the following factors:

ENGINEERED FILMS

Net Sales
(dollars in millions)

Operating
Income
(dollars in millions)

$89.9

$17.7

$85.3

$63.8

$10.9

$10.2

(cid:77) Depressed markets. Dysfunctional credit markets and plunging asset values resulted in weak
economic activity. Energy prices plunged as a result of the reduction in economic activity, leading to
the decline in the oil and gas exploration market throughout the majority of the year. Similarly, as the
flow of credit slowed and economic uncertainty rose, the commercial construction markets suffered. Agricultural commodity prices also fell
sharply, resulting in a softening of the agricultural market. The impact of the recession was felt across all of the division’s markets, with
sales to the two largest markets—energy and construction—decreasing approximately 40% and 25%, respectively.

2008 2009 2010

2008 2009 2010

(cid:77) Sales volume and selling prices.

Selling prices decreased approximately 16% and sales volume, as measured by pounds shipped, fell
17% year-over-year. These negative trends reflected market disruptions, competitive pricing pressures stemming from excess industry
capacity and lower resin costs due to relatively low natural gas prices.

(cid:77) Cost containment. Management responded quickly and decisively to the freefall in business activity experienced in the fourth quarter of
fiscal 2009. The necessary steps were taken to align the division with the weak business environment, by tightly managing expenses and
decreasing headcount.

(cid:77) Margin preservation.

Poor economic conditions, volatile material costs and competitive pricing pressures squeezed margins. However,
the impact of these factors was more than offset by opportune purchases of prime grade resin and cost containments. Consequently, gross
margins increased from 16.1% to 20.4%.

(cid:77) Selling expenses.

Selling expenses increased to 3.8% of sales from 3.6% in the prior year. Selling expenses of $2.4 million decreased

25% year-over-year, through reductions in personnel and promotional expenses. However, this lagged the 29% drop in sales.

Fiscal 2010 fourth quarter net sales of $16.7 million increased $2.2 million (15%) from the fourth quarter of fiscal 2009. In addition, the segment
posted fourth quarter fiscal 2010 operating income of $2.4 million compared with an operating loss of $178,000 in the fourth quarter of fiscal 2009.

Fiscal 2010 fourth quarter results were affected by the following:

(cid:77) Market stabilization.

Sales and profit comparisons were favorable, as fourth quarter fiscal 2009 financial results were deeply affected by

the freefall in business activity.

(cid:77) Sales volume. Higher sales for the quarter were largely volume driven. Greater business activity and growth in emerging markets drove
oil prices to levels adequate to support an increase in drilling activity. As a result, fourth quarter sales of pit and pond lining films to the oil
and gas exploration markets rose 40% as distributors replenished inventory levels.

(cid:77) Margin expansion. Gross margins increased from 3.6% for last year’s fourth quarter to 18.5%. Last year’s margins were negatively

affected by a sudden decrease in sales volume on a relatively high-cost base and high-cost inventory.

2 0 1 0 A N N U A L R E P O R T RAVEN

23

Financial Review and Analysis (continued)

Fiscal 2009 net sales of $89.9 million increased $4.5 million (5%) while operating income of $10.9 million fell $6.8 million (38%) versus fiscal 2008.

Fiscal 2009 results were driven by these trends:

(cid:77) Sales volume and selling prices. Sales increased due to higher volume coupled with a modest increase in selling prices. Strong sales of
pit and pond lining films to the oil and gas market and higher agriculture sales were partially offset by a decline in sales to the
manufactured housing market.

(cid:77) Margin contraction. Depressed margins reflected volatile material costs, increased price competition and poor economic conditions.
Competitive pricing pressures—especially in the construction market—hindered the ability to pass on higher resin costs. This meant
production costs outpaced increases in selling prices. Gross margins decreased from 24.9% in fiscal 2008 to 16.1% in fiscal 2009.

(cid:77) Selling expenses.

Fiscal 2009 selling expenses of $3.2 million were relatively flat year-over-year.

Electronic Systems
Electronic Systems is a total-solutions provider of electronics manufacturing services, primarily to North American original equipment
manufacturers.

Financial highlights for fiscal years ended January 31,

Dollars in thousands

Electronic Systems

2010

%
change

2009

%
change

2008

ELECTRONIC SYSTEMS

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,525
10,258
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,979
Operating margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.1%

16.1%

2% $61,983
7,218
42%
11.6%

(9)% $67,987
(38)% 11,557

17.0%

52% $ 5,926

(43)% $10,365

9.6%

15.2%

Net Sales
(dollars in millions)

$68.0

$62.0 $63.5

Operating
Income
(dollars in millions)

$10.4

$9.0

$5.9

Fiscal 2010 net sales of $63.5 million increased $1.5 million (2%) and operating income of $9.0 million grew
$3.1 million (52%) from fiscal 2009.

Fiscal 2010 full-year comparative results reflected the following:

(cid:77) Growth from existing customers.

The 2% rise in sales was attributable to higher deliveries of
avionics (10%) and secure communication electronics (20%) to meet increased demand from
government agencies and the aerospace market, partially offset by a smaller customer base.

(cid:77) Margin expansion. Gross margins expanded as a result of positive operating leverage produced
through increased sales to existing customers, favorable product mix and cost controls—such as
headcount reductions and facility consolidation.

2008 2009 2010

2008 2009 2010

(cid:77) Selling expenses.

Selling expenses of $1.2 million (1.8% of sales) were consistent with the prior year.

Fiscal 2010 fourth quarter net sales of $13.8 million fell $2.3 million (14%) and operating income of $2.0 million decreased $288,000 (13%) from
fourth quarter fiscal 2009.

Fiscal 2010 fourth quarter comparative results reflected the following:

(cid:77) Secure communication electronics and avionics.

Fourth quarter sales declined 14% due to lower sales of secure communication
electronics, reflecting lower demand from government agencies, and slower avionics deliveries, as commercial airlines began cancelling or
delaying delivery schedules. Approximately 70% of avionics sales are related to military aircraft, which mitigate the negative impact of
disruptions on commercial deliveries.

Fiscal 2009 net sales of $62.0 million decreased $6.0 million (9%) and operating income of $5.9 million declined $4.4 million (43%) from fiscal 2008.

The following factors affected fiscal 2009 full-year comparative results:

(cid:77) Slower consumer spending. Hand-held bed control shipments were negatively affected by lower consumer spending on non-essential

home-related products, reflecting the influence of financial uncertainty on consumer sentiment and a soft construction market.

(cid:77) Loss of a customer.

Fiscal 2008 results included $7 million of sales to a former customer (which was acquired) and a profitable non-

repeat close-out order.

24

2 0 1 0 A N N U A L R E P O R T RAVEN

(cid:77) Increased sales of avionics. Strong sales of avionics partially offset the negative impact of the factors mentioned earlier.

(cid:77) Negative operating leverage. Gross margins suffered from negative operating leverage on lower sales and a less favorable product mix. Fiscal
2009 third and fourth quarter operating expenses were reduced by consolidating manufacturing space, which led to improved gross margins in
the second half of the year.

(cid:77) Selling expenses.

Selling expenses of $1.1 million (1.7% of sales) were consistent with the prior year.

Aerostar
Aerostar manufactures military parachutes, protective wear, custom-shaped inflatable products and high-altitude and tethered aerostats for
government and commercial research.

Financial highlights for fiscal years ended January 31,

Dollars in thousands

Aerostar

2010

%
change

2009

%
change

2008

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,244
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,632
Gross margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,634
Operating margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20.7%

24.3%

0% $27,186
5,189
28%
19.1%

57% $17,290
2,343
121%
13.6%

34% $ 4,219

180% $ 1,506

15.5%

8.7%

AEROSTAR

Net Sales
(dollars in millions)

Operating
Income
(dollars in millions)

$27.2 $27.2

$5.6

$17.3

$4.2

Fiscal 2010 net sales of $27.2 million were flat and operating income of $5.6 million grew $1.4 million (34%)
over fiscal 2009.

Fiscal 2010 fourth quarter net sales of $8.9 million decreased $1.3 million (12%) and operating income of
$2.1 million increased $299,000 (17%) versus fiscal 2009.

$1.5

Fiscal 2010 fourth quarter and full-year comparative results were primarily attributable to the following:

(cid:77) Sales volumes.

Flat year-over-year sales reflected increased deliveries of MC-6 Army parachutes,

aerostats and research balloons, which were offset by decreased deliveries of protective wear due to the completion of a large contract in
January 2009. Fourth quarter sales dropped 12% as fiscal 2009 fourth quarter results included nearly $3 million of MC-6 parachute
deliveries that were delayed from the prior quarter due to contract modifications.

2008 2009 2010

2008 2009 2010

(cid:77) Margin expansion.

The improvement in gross and operating margins came from increased parachute manufacturing efficiencies. Final
production runs and deliveries of the MC-6 parachute contract were made at the end of fiscal 2010. Fiscal 2010 was the most profitable
year for the program, primarily due to the higher efficiency level attained.

(cid:77) Selling expenses.

Selling expenses of $800,000 (2.9% of sales) were consistent with the prior year.

Fiscal 2009 net sales of $27.2 million increased $9.9 million (57%) and operating income of $4.2 million grew $2.7 million (180%) over fiscal 2008.

Fiscal 2009 comparative results were primarily affected by the following items:

(cid:77) Government contracts.

Shipments of protective wear and MC-6 parachutes increased year-over-year. Deliveries under the $20.7 million

MC-6 Army parachute and $6.5 million protective wear contracts began in the fourth quarter of fiscal 2008.

(cid:77) Positive operating leverage. Gross margins of 19.1% in fiscal 2009 compared favorably with gross margins of 13.6% in fiscal 2008,

bolstered by increased MC-6 Army parachute and protective wear shipments.

(cid:77) Selling expenses.

Fiscal 2009 selling expenses of 3.1% of net sales compared favorably with 4.1% of net sales in fiscal 2008. Selling

expenses of $856,000 increased 22% year-over-year; however, the increase lagged the 57% rise in sales.

2 0 1 0 A N N U A L R E P O R T RAVEN

25

Financial Review and Analysis (continued)

Corporate Expenses (administrative expenses, income taxes and interest income and other, net)

Dollars in thousands

2010

2009

2008

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,407
Administrative expenses as a % of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 102
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1%

$8,502

$7,467

3.0%

3.2%

$ 507

$1,079

34.0% 34.4%

34.2%

NET OPERATING MARGIN
(percent)

18.2%

17.6% 17.6%

18.2%

16.6%

16.6%

Administrative expenses declined 13% in fiscal 2010 compared with fiscal 2009, driven by headcount
reductions and lower incentive compensation and legal expenses. Administrative expenses increased 14% in
fiscal 2009 compared with fiscal 2008, as a result of higher compensation and professional service expense.

“Interest income and other, net” consists mainly of interest income, bank fees and foreign currency
transaction gain or loss. The year-over-year declines of $405,000 in fiscal 2010 and $572,000 in fiscal
2009 were attributable primarily to a decrease in interest income due to lower interest rates.

Effective tax rates for the three years presented were favorably affected by the U.S. federal tax deduction
from income attributable to manufacturing activities.

2005 2006 2007 2008 2009 2010

OUTLOOK
Management expects to be challenged by a difficult operating environment in fiscal 2011, due to high unemployment, weak residential and
consumer construction and continued de-leveraging of consumer and corporate balance sheets. Despite this subdued economic outlook,
management anticipates near-term growth through market share gains, new products and geographic expansion. Long-term growth will be driven
by 1) research and development, 2) capital investment in new products and technologies, 3) strategic investments to augment existing products and
markets and 4) continued expansion of the company’s global reach. The successful execution of the company’s fiscal 2010 strategy of preserving
and generating cash and tightly managing costs has strengthened the company’s core businesses.

Applied Technology
Management anticipates fiscal 2011 sales growth to be in the 10% range. New product sales—including those developed through the Ranchview
acquisition—and international market growth are expected to offset weakness in the domestic agriculture market.

Global opportunities continue, due to rising global demand for food, heightened environmental concerns and broadening recognition of precision
agriculture as a modest capital investment with rapid returns. Applied Technology continues to see significant opportunities in developing
markets—such as Eastern Europe, Russia and Brazil—and developed markets—such as Canada, Europe and Australia.

Previous investments in product development and global expansion, along with the recent investments in SST and Ranchview, position Applied
Technology as a premier total precision solutions provider (GPS steering devices, planting and spraying controls, data collection, transmission,
storage and analysis). In addition, the division will benefit from the continued focus on “ease of use” and product “localization.”

Engineered Films
Engineered Films financial results have been affected by global economic weakness and associated declines in oil and gas consumption and
construction activity. However, the prompt re-alignment of the cost structure with market conditions has strengthened the division’s position for
fiscal 2011.

Fiscal 2011 revenue growth is targeted in the 10% range on a constant dollar basis. The volatile pricing environment could materially affect actual
sales levels. Management anticipates increased sales of geomembrane products for lining and capping landfills, water canals and reservoirs. In
addition, Engineered Films continues to develop new products, and market innovative products such as FeedFreshTM silage covers and VaporBlock
PlusTM radon barriers. Ultimately, Engineered Films growth is dependent on the reversal of the severe economic contraction, particularly in the oil
and gas drilling and construction markets.

Electronic Systems
In fiscal 2011, management anticipates Electronic Systems to maintain a good level of profit and cash flow on relatively flat sales. Lower avionics
revenues are expected to be substantially offset by higher sales of secure communications and controls.

Aerostar
Management believes revenue growth of 50% or more can be achieved by Aerostar in the coming year. The three-year MC-6 parachute contract,
completed at the end of fiscal 2010, will be replaced by deliveries on the T-11 parachute contract in fiscal 2011. In addition, Aerostar’s growth

26

2 0 1 0 A N N U A L R E P O R T RAVEN

strategy, which focused on tethered aerostat systems for use in persistent surveillance by the military, is beginning to generate significant sales
orders. More than $7 million in orders were received in the fourth quarter of fiscal 2010. Aerostar will continue to capitalize on opportunities in the
tethered aerostat market throughout fiscal 2011 and expects significant growth in this product line. The profit impact of higher sales is expected to
be partially offset by start-up costs on new contracts.

Corporate and other
Administrative costs in fiscal 2011 are expected to approach fiscal 2009 levels due to higher compensation costs. The increase in the U.S.
manufacturer’s tax deduction should reduce the company’s effective income tax rate by approximately one percentage point, although this could be
offset if the research and development income tax credit is not renewed in the U.S.

LIQUIDITY AND CAPITAL RESOURCES
The company’s liquidity and capital resources are strong despite the global economic recession. Management focuses on the current cash balance
and operating cash flows in considering liquidity, as operating cash flows have historically been Raven’s primary source of liquidity. Management
expects that current cash, combined with the generation of positive operating cash flows, will be enough to fund the company’s operating, investing
and financing activities.

Raven’s cash needs are seasonal, with working capital demands strongest in the first quarter. As a result, the discussion of trends in operating cash
flows focuses on the primary drivers of year-over-year variability in working capital.

Cash, cash equivalents and short-term investments totaled $43.7 million at January 31, 2010, a $27.4 million increase from $16.3 million on the
same date in 2009. In November 2008, the company paid a special cash dividend of $22.5 million.

In addition, Raven has an uncollateralized credit agreement that provides an $8.0 million line of credit. The credit line is expected to be renewed
during fiscal 2011, as the maturity date on the current line of credit is September 1, 2010.

Operating Activities
Operating cash flows result primarily from cash received from customers, which is offset by cash payments for inventories, services and employee
compensation. Management evaluates working capital levels through the computation of average day’s sales outstanding and inventory turnover.
Average day’s sales outstanding is a measure of the company’s efficiency in enforcing its credit policy. The inventory turnover ratio is a metric used
to evaluate the effectiveness of inventory management, with further consideration given to balancing the disadvantages of excess inventory with
the risk of delayed customer deliveries.

Cash provided by operating activities was $47.6 million in fiscal 2010 compared with $39.0 million in fiscal 2009. The increase in operating cash
flows is the result of favorable variability in working capital needs, partially offset by lower company earnings.

Reductions in inventory and accounts receivable have combined to generate $7.9 million in cash versus cash consumed of $4.2 million in fiscal
2009. Lower business levels, disciplined inventory management (inventory turnover of 5.3X in fiscal 2010 versus 5.2X in fiscal 2009) and improved
cash collections (average day’s sales outstanding of 52 days in fiscal 2010 versus 54 days in fiscal 2009) resulted in strong operating cash flows.
Additionally, year-over-year variability in accounts payable generated $2.9 million in cash, as compared with $963,000 in fiscal 2009, due to more
favorable payment terms. This favorable cash impact was partially offset by a decrease in accrued liabilities, which reflected lower compensation
accruals and the acceleration of a $1.1 million cash contribution to the employee 401(k) plan, due to a change in the plan design. Fiscal 2010 bad
debt recoveries of $183,000 compared favorably to prior-year expense of $629,000, reflecting lower sales and more stable economic conditions—
particularly as it related to the company’s international exposure.

Fiscal 2009 cash provided by operating activities was $39.0 million, an increase of $11.9 million from $27.2 million in fiscal 2008. The improvement
in fiscal 2009 operating cash flows versus one year earlier was due primarily to company earnings, lower inventory levels and a higher accounts
payable balance. Inventory declined to $36.0 million in fiscal 2009 from $36.5 million in fiscal 2008. Lower Engineered Films inventories were
partially offset by higher levels at Applied Technology. Accounts payable at January 31, 2009, of $9.4 million was up 13% from one year earlier,
reflecting more favorable payment terms. Partially offsetting these cash flow improvements was cash consumed to finance higher accounts
receivable. Accounts receivable rose from $36.5 million in fiscal 2008 to $40.3 million at January 31, 2009, with Applied Technology sales growth
and seasonal payment terms offered to the agricultural market accounting for the majority of the increase. Fiscal 2009 bad debt expense of
$629,000 was up $538,000 from the prior year. This reflected specific customer receivable writeoffs, as well as additional reserves for increased
international exposure.

2 0 1 0 A N N U A L R E P O R T RAVEN

27

Financial Review and Analysis (continued)

Investing Activities
Cash used in investing activities totaled $13.4 million in fiscal 2010, $7.0 million in fiscal 2009 and
$4.4 million in fiscal 2008. The fiscal 2010 increase of $6.4 million reflected a $4.5 million increase in net
purchases of short-term investments and $6.5 million of cash outlays for the SST and Ranchview
investments, partially offset by a $4.7 million decrease in capital expenditures.

Additional cash consumed between fiscal 2009 and 2008 was due primarily to higher capital expenditures to
support the increased manufacturing requirements of Applied Technology.

Management anticipates fiscal 2011 capital spending of roughly $8 million.

Financing Activities
Cash used in financing activities is primarily for dividend payments and repurchases of common stock.

Financing activities consumed cash of $9.9 million in fiscal 2010 compared with $37.0 million in fiscal 2009
and $8.3 million in fiscal 2008.

CASH FLOWS FROM
OPERATIONS
(dollars in millions)

$47.6

$39.0

$26.3 $27.2

$21.2

$18.9

The quarterly cash dividend was increased by 8 percent to 14 cents per share in the second quarter of fiscal
2010. Quarterly dividends of $9.9 million, or 55 cents per share, were paid in the current year compared with $9.4 million, or 52 cents per share, in
fiscal 2009. In addition, a special dividend of $1.25 per share was paid in November 2008. The $22.5 million special dividend was in response to
Raven’s strong cash position and commitment to return excess cash to shareholders. Treasury stock purchases totaled $5.2 million for fiscal 2009.
No treasury stock purchases were made in fiscal 2010, as the share repurchase program was suspended in July 2008.

2005 2006 2007 2008 2009 2010

The change between fiscal 2009 and 2008 financing activity cash flows was the result of an increase in quarterly dividends, stock repurchases and
the fiscal 2009 special dividend. Repurchases of the company’s common stock totaled $5.2 million (161,100 shares) in fiscal 2009 in contrast to
$592,000 (20,150 shares) in fiscal 2008. The fiscal 2009 quarterly dividend of 13 cents per share increased from 11 cents per share one year earlier.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
As of January 31, 2010, the company is obligated to make cash payments in connection with its non-cancelable operating leases for facilities and
equipment and unconditional purchase obligations—primarily for raw materials—in the amounts listed below. The company has no off-balance
sheet debt or other unrecorded obligations other than the items noted in the following table. In addition to the commitments noted there, standby
letters of credit totaling $1.3 million have been issued, primarily to support self-insured workers compensation bonding requirements. 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, would be more expensive and would require additional cash outlays. Management believes the chances of this are
remote. A summary of the obligations and commitments at January 31, 2010, and for the next five years is shown below.

Dollars in thousands

Contractual Obligations:
Line of credit(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unconditional purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less
than
1 year

1-3
years

3-5
years

More
than
5 years

Total

$ — $ — $ — $ — $ —
—
4,156
—
—

304
5,512
42,359
—

234
229
42,359
—

70
528
—
—

—
599
—
—

RETURN ON AVERAGE
ASSETS
(percent)

24.9%

21.3%

22.5%

20.8%21.1%

18.2%

(a) $8.0 million line bears interest at 4.0% as of January 31, 2010, and expires September 2010. The line of credit is reduced

by outstanding letters of credit totaling $1.3 million.

(b) The total liability for uncertain tax positions at January 31, 2010, was $3.5 million. The company is not able to reasonably

estimate the timing of future payments relating to non-current tax benefits.

$48,175

$42,822

$598

$599

$4,156

CRITICAL ACCOUNTING ESTIMATES
Critical accounting policies are those 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 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 the
company’s actual experience differs from the expected experience underlying the estimates. These adjustments could be material if experience

2005 2006 2007 2008 2009 2010

28

2 0 1 0 A N N U A L R E P O R T RAVEN

were to change significantly in a short period of time. The company does not enter into derivatives or other financial instruments for trading or
speculative purposes. However, Raven has used derivative financial instruments to manage the economic impact of fluctuations in currency
exchange rates on transactions that are denominated in currency other than its functional currency, which is the U.S. dollar. The use of these
financial instruments had no material effect on the company’s financial condition, results of operations or cash flows.

Inventories
Raven’s most significant accounting judgment is determining inventory value at the lower of cost or market.
The company estimates inventory valuation each quarter. Typically, when a product reaches the end of its life
cycle, inventory value declines slowly or the product has alternative uses. Management uses its manufac-
turing 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 Raven’s customers may result in unexpected excess material.
Electronic Systems typically has recourse to customers for obsolete or excess material. When Electronic
Systems customers authorize inventory purchases—especially with long lead-time items—they are required
to take delivery of unused material or compensate the company accordingly. In every Raven operating unit,
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.

BOOK VALUE PER SHARE
(dollars)

$7.38

$6.52

$6.30

$5.45

$4.67

$3.67

Warranties
Estimated warranty liability costs are based on 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.

2005 2006 2007 2008 2009 2010

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 writeoff experience by segment and an estimate of the collectibility of any known problem accounts. Factors that 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.

Revenue Recognition
The company recognizes and records revenue when products are shipped because there is persuasive evidence of an arrangement, the sales price
is determinable, collectibility is reasonably assured and delivery has occurred. Estimated returns, sales allowances or warranty charges are
recognized upon shipment of a product. The company sells directly to customers or distributors that incur the expense and commitment for any post-
sale obligations beyond stated warranty terms.

Goodwill
Management assesses goodwill for impairment annually—or more frequently if events or changes in circumstances indicate that an asset might be
impaired—using fair value measurement techniques. For goodwill, Raven performs impairment reviews by reporting units. Reporting units are the
company’s reportable segments, except that Aerostar’s goodwill is related specifically to its high-altitude research balloon operation and is
accordingly evaluated independently from Aerostar’s other operations.

In the first step of goodwill impairment testing, the corporate discount rate is calculated so that the discounted cash flows are equal to Raven’s net
enterprise value. The corporate discount rate is then increased when evaluating any individual reporting unit due to any additional risk factors
inherent within the unit versus the corporation as a whole. A discounted cash flow analysis is then completed for the reporting unit using the
adjusted discount rate. The discounted cash flow assumptions primarily include forecasted sales and costs and the discount rate. Management
evaluates the merits of each significant assumption used to determine the fair value of the reporting unit.

The estimated fair value of the reporting unit is then compared with its net assets. If the estimated fair value of the reporting unit is less than the
net assets of the reporting unit, an impairment loss is possible and a more refined measurement of the impairment loss would take place. This is the
second step of the goodwill impairment testing, in which management may use market comparisons and recent transactions to assign the fair value
of the reporting unit to all of the assets and liabilities of that unit. The valuation methodologies in both steps of goodwill impairment testing use
significant estimates and assumptions, which include projected future cash flows (including timing and the risks inherent in future cash flows),
perpetual growth rates and determination of appropriate market comparables.

2 0 1 0 A N N U A L R E P O R T RAVEN

29

Financial Review and Analysis (continued)

Based on the analysis performed during the fourth quarter of fiscal 2010, the fair values of each of the company’s reporting units were in excess of
their carrying values by more than 60%; therefore, no impairment indicators were noted through the step one impairment analysis, and a step two
analysis was not considered necessary.

Long-lived Assets
For long-lived assets—including intangibles; investments in affiliates; and property, plant and equipment—management tests for recoverability
whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. Property, plant and equipment are
depreciated over the estimated lives of the assets using accelerated methods, which reduces the likelihood of an impairment loss. Management
periodically discusses any significant changes in the utilization of long-lived assets, which may result from—but are not limited to—an adverse
change in the asset’s physical condition or a significant adverse change in the business climate. For purposes of recognition and measurement of an
impairment loss, a long-lived asset is grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. An impairment loss is recognized when the carrying amount of an asset exceeds the
estimated undiscounted cash flows used in determining its fair value.

Uncertain Tax Positions
Accounting for tax positions requires judgments, including estimating reserves for uncertainties associated with the interpretation of income tax
laws and regulations and the resolution of tax positions with tax authorities after discussions and negotiations. The ultimate outcome of these
matters could result in material favorable or unfavorable adjustments to the consolidated financial statements.

NEW ACCOUNTING STANDARDS
In June 2009, the Financial Accounting Standards Board (FASB) issued the Accounting Standards Codification (Codification), which became the
single source of authoritative generally accepted accounting principles (GAAP) in the United States, other than rules and interpretive releases
issued by the Securities and Exchange Commission (SEC). The Codification is a reorganization of current GAAP into a topical format that eliminates
the current GAAP hierarchy and instead establishes two levels of guidance: authoritative and non-authoritative. All non-grandfathered, non-SEC
accounting literature that is not included in the Codification became non-authoritative. The company adopted the Codification in the third quarter of
fiscal 2010, which resulted in no changes to the content of the company’s financial statements or disclosures.

At the beginning of fiscal 2010, the company adopted FASB guidance that amends required disclosures about derivative instruments and hedging
activities. This guidance requires enhanced disclosures about (a) how and why derivative instruments are used; (b) how derivative instruments and
related hedged items are accounted for; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial
performance and cash flows. The adoption of this guidance had no impact on the company’s consolidated results of operations, financial condition
or cash flows.

At the beginning of fiscal 2010, the company adopted FASB guidance that amends the factors that should be considered in developing renewal or
extension assumptions used in determining the useful life of recognized intangible assets and apply to (1) intangible assets that are acquired
individually or with a group of other assets and (2) intangible assets acquired in both business combinations and asset acquisitions. Entities
estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements
or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. The adoption
of this guidance had no impact on the company’s consolidated results of operations, financial condition or cash flows.

In June 2009, the FASB amended its guidance on accounting for variable interest entities. This guidance alters the approach to determining the
primary beneficiary of a variable interest entity, and requires companies to more frequently assess whether they must consolidate variable interest
entities. The guidance is effective for the first annual reporting period beginning after November 15, 2009, and for interim periods within that first
annual reporting period. The adoption of this guidance on February 1, 2010, is not expected to have a material impact on the company’s
consolidated results of operations, financial condition or cash flows.

In October 2009, the FASB issued guidance on the accounting for multiple-deliverable revenue arrangements. This guidance establishes a selling
price hierarchy for determining the selling price of a deliverable; eliminates the residual method of allocation and requires arrangement
consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and requires a vendor to
determine its best estimate of selling price in a manner consistent with that used to determine the selling price of the deliverable on a stand-alone
basis. This guidance also expands the required disclosures related to a vendor’s multiple-deliverable revenue arrangements. The guidance is
effective beginning February 1, 2011, with early adoption permitted. The company has adopted the new guidance prospectively from the beginning
of the fiscal year and determined that there is no material impact on its consolidated results of operations, financial condition, cash flows or
disclosures, as the company had no significant multiple-deliverable arrangements during or at the end of the fiscal year.

30

2 0 1 0 A N N U A L R E P O R T RAVEN

Monthly Closing Stock Price and Volume

40

30

e
c
i
r
P

20

10

0

Feb09  Mar09  Apr09  May09 

Jun09 

Jul09  Aug09  Sep09  Oct09  Nov09  Dec09 

Jan10

Shares Traded (in thousands)  

Closing Stock Price (in dollars) 

Quarterly Information (Unaudited)

e
m
u
l
o
V

3000

1500

0

Net
Sales

Dollars in thousands,
except per-share data
FISCAL 2010
First Quarter . . . . . . . $ 65,222
56,586
Second Quarter . . . . .
60,158
Third Quarter . . . . . . .
Fourth Quarter . . . . . .
55,816
Total Year . . . . . . . . . $237,782

FISCAL 2009
First Quarter . . . . . . . . .
Second Quarter
. . . . . . .
Third Quarter . . . . . . . . .
Fourth Quarter . . . . . . . .
Total Year . . . . . . . . . . .

FISCAL 2008
First Quarter . . . . . . . . .
. . . . . . .
Second Quarter
Third Quarter . . . . . . . . .
Fourth Quarter . . . . . . . .
Total Year . . . . . . . . . . .

$ 75,166
69,278
75,538
59,931
$ 279,913

$ 58,103
55,653
61,842
58,359
$ 233,957

Gross Profit
As
Reclassified(a)

As
Reported

Operating
Income

Pretax
Income

Net
Income

Net Income
Per Share(b)
Basic Diluted

Common Stock
Market Price
High
Low

Cash
Dividends
Per Share

$18,970
13,821
15,510
14,034
$62,335

$ 22,015
15,786
18,001
12,079
$ 67,881

$ 17,374
13,407
15,299
13,068
$ 59,148

$20,428
15,112
16,918
15,394
$67,852

$ 23,288
17,197
19,564
13,399
$ 73,448

$ 18,400
14,445
16,504
14,327
$ 63,676

$14,113
9,306
11,119
8,682
$43,220

$ 16,641
10,312
12,371
7,070
$ 46,394

$ 12,838
8,543
10,940
8,824
$ 41,145

9,411
11,116
8,681

$14,114 $ 9,231 $0.51
0.34
0.40
0.32
$43,322 $28,574 $1.58

6,204
7,293
5,846

$ 16,759
10,488
12,548
7,106
$ 46,901

$ 13,025
8,857
11,254
9,088
$ 42,224

$ 10,882
6,815
8,385
4,688
$ 30,770

$ 8,540
5,843
7,398
6,021
$ 27,802

$ 0.60
0.38
0.47
0.26
$ 1.71

$ 0.47
0.32
0.41
0.33
$ 1.54

$0.51
0.34
0.40
0.32
$1.58

$ 0.60
0.38
0.46
0.26
$ 1.70

$ 0.47
0.32
0.41
0.33
$ 1.53

$24.65 $15.37
23.99
31.00
24.47
32.43
33.18
24.04
$33.18 $15.37

$ 32.80
39.50
47.82
33.24
$ 47.82

$ 30.84
39.36
45.85
42.75
$ 45.85

$ 25.94
29.46
25.79
20.60
$ 20.60

$ 26.20
28.39
33.42
27.57
$ 26.20

$0.13
0.14
0.14
0.14
$0.55

$ 0.13
0.13
0.13
1.38(c)
$ 1.77

$ 0.11
0.11
0.11
0.11
$ 0.44

(a) All quarters reflect the reclassification of R&D expense from cost of goods sold. (See Note 1.)
(b) Net income per share is computed discretely by quarter and may not add to the full year.
(c) A special dividend of $1.25 per share was paid during the fourth quarter of fiscal 2009.

2 0 1 0 A N N U A L R E P O R T RAVEN

31

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, 2010, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of January 31, 2010, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report, which appears on page 46 of this Annual Report.

Ronald M. Moquist
President & Chief Executive Officer

March 31, 2010

Thomas Iacarella
Vice President & Chief Financial Officer

32

2 0 1 0 A N N U A L R E P O R T RAVEN

Consolidated Balance Sheets

Dollars in thousands, except per-share data
ASSETS
Current assets

2010

As of January 31
2009

2008

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,684
3,000
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,327
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,475
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,471
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,790
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117,747
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,029
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,699
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,834
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,309

$ 16,267
—
40,278
35,977
2,542
3,009
98,073

35,880
7,450
3,012
$144,415

$ 21,272
1,500
36,538
36,529
2,075
2,955
100,869

35,743
6,902
4,347
$147,861

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,398
12,256
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,306
Customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,960
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,433
13,281
608
23,322

$ 8,374
12,804
930
22,108

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,098

7,537

7,478

Commitments and contingencies

Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133,251

113,556

118,275

Common shares, par value $1.00 per share
Authorized—100,000,000
Outstanding—2010: 18,029,733; 2009: 18,012,251
2008: 18,120,513

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . $170,309

$144,415

$147,861

The accompanying notes are an integral part of the consolidated financial statements.

2 0 1 0 A N N U A L R E P O R T RAVEN

33

Consolidated Statements of Income

Dollars in thousands, except per-share data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $237,782

2010

For the years ended January 31
2009
$279,913

2008
$233,957

Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

169,930

206,465

170,281

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67,852

Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,843

Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

18,789

Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,220

73,448

5,848

21,206

46,394

63,676

4,925

17,606

41,145

Interest income and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(102)

(507)

(1,079)

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,322

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,748

46,901

16,131

42,224

14,422

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,574

$ 30,770

$ 27,802

Net income per common share:

—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.58

1.58

$

$

1.71

1.70

$

$

1.54

1.53

The accompanying notes are an integral part of the consolidated financial statements.

34

2 0 1 0 A N N U A L R E P O R T RAVEN

Consolidated Statements of Shareholders’
Equity and Comprehensive Income

Dollars in thousands, except per-share data
Balance January 31, 2007. . . . . . . . . . . $ 32,307

$1 Par
common
stock

Paid-in
capital

Treasury stock

Shares

Cost

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Total

$ 2,341

(14,267,433) $ (47,590) $ 113,103

$ (1,893)

$ 98,268

Net income . . . . . . . . . . . . . . . . . . .
Postretirement benefits,

net of $84 income tax . . . . . . . . .
Foreign currency translation . . . . . . . .
Total comprehensive income . . . . . . .
Change in accounting for

uncertain tax positions . . . . . . . . .
Dividends ($.44 per share)
. . . . . . . .
Purchase of stock . . . . . . . . . . . . . . .
Stock surrendered upon exercise

of stock options . . . . . . . . . . . . . .
Employees’ stock options exercised. . .
Share-based compensation . . . . . . . .
Tax benefit from exercise

—

—
—

—
—
—

—

—
—

—
4
—

(47)
148
—

(1,462)
1,170
904

—

—
—

—
—
(20,150)

—
—
—

—

—
—

—
—
(592)

—
—
—

27,802

—
—

(716)
(7,970)
—

—
—
—

of stock options . . . . . . . . . . . . . .
Balance January 31, 2008. . . . . . . . . . .

—
32,408

479
3,436

—
(14,287,583)

—
(48,182)

—
132,219

Net income . . . . . . . . . . . . . . . . . . .
Postretirement benefits,

net of $375 income tax . . . . . . . .
Foreign currency translation . . . . . . . .
Total comprehensive income . . . . . . .
Dividends ($.52 per share)
. . . . . . . .
Dividends (special–$1.25 per share) . .
Purchase of stock . . . . . . . . . . . . . . .
Stock surrendered upon exercise

of stock options . . . . . . . . . . . . . .
Employees’ stock options exercised. . .
Share-based compensation . . . . . . . .
Tax benefit from exercise

—

—
—

—
—
—

—

—
—

7
18
—

—

—
—

—

—
—

30,770

—
—

—
—
(161,100)

—
—
(5,180)

(9,381)
(22,528)
—

(34)
83
4

(1,258)
1,176
1,024

—
—
—

—
—
—

—
—
—

of stock options . . . . . . . . . . . . . .
Balance January 31, 2009. . . . . . . . . . .

—
32,461

128
4,531

—
(14,448,683)

—
(53,362)

—
131,080

Net income . . . . . . . . . . . . . . . . . . .
Postretirement benefits,

net of ($122) income tax . . . . . . .
Foreign currency translation . . . . . . . .
Total comprehensive income . . . . . . .
Dividends ($.55 per share)
. . . . . . . .
Stock surrendered upon exercise

of stock options . . . . . . . . . . . . . .
Employees’ stock options exercised. . .
Share-based compensation . . . . . . . .
Tax cost from exercise

—

—
—

—

—

—
—

11

(51)
65
3

(1,319)
1,374
1,031

—

—
—

—

—
—
—

—

—
—

—

—
—
—

28,574

—
—

(9,922)

—
—
—

of stock options . . . . . . . . . . . . . .

—
Balance January 31, 2010. . . . . . . . $32,478 $5,604 (14,448,683) $(53,362) $149,732

(24)

—

—

—

—

156
131

—
—
—

—
—
—

—
(1,606)

—

698
(246)

—
—
—

—
—
—

—
(1,154)

—

(226)
179

—

—
—
—

27,802

156
131
28,089

(716)
(7,966)
(592)

(1,509)
1,318
904

479
118,275

30,770

698
(246)
31,222
(9,374)
(22,510)
(5,180)

(1,292)
1,259
1,028

128
113,556

28,574

(226)
179
28,527
(9,911)

(1,370)
1,439
1,034

—
$(1,201)

(24)
$133,251

The accompanying notes are an integral part of the consolidated financial statements.

2 0 1 0 A N N U A L R E P O R T RAVEN

35

Consolidated Statements of Cash Flows

Dollars in thousands
Cash flows from operating activities:

For the years ended January 31
2009

2010

2008

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,574
Adjustments to reconcile net income to net cash provided

$ 30,770

$27,802

by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of acquisition-related contingent consideration . . . . . . .
Provision for losses on accounts receivable, net of recoveries . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in operating assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from investing activities:

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments related to business acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:

Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,611
497
94
(183)
95
1,034
10,935
(14)
47,643

(3,302)
(3,500)
500
(5,000)
(2,000)
(94)
(13,396)

(9,911)
—
—
44

(9,867)

7,345
413
—
629
216
1,028
(1,346)
(18)
39,037

(8,001)
(2,100)
3,600
—
(488)
(11)
(7,000)

(31,884)
(5,180)
128
(33)

(36,969)

6,944
400
—
91
(779)
904
(8,187)
(24)
27,151

(6,635)
(3,100)
5,600
—
(269)
(29)
(4,433)

(7,966)
(592)
479
(191)

(8,270)

Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

(73)

41

24,417
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
16,267
. . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,684

(5,005)
21,272
$ 16,267

14,489
6,783
$21,272

The accompanying notes are an integral part of the consolidated financial statements.

36

2 0 1 0 A N N U A L R E P O R T RAVEN

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 or
Raven). 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. Raven operates three divisions (Applied Technology [for-
merly known as Flow Controls], Engineered Films and Electronic
Systems) in addition to three wholly owned subsidiaries: Aerostar
International, Inc. (Aerostar); Raven Industries Canada, Inc. (Raven
Canada); and Raven Industries GmbH (Raven GmbH). All significant
intercompany balances and transactions have been eliminated in
consolidation.

Certain amounts in the prior years’ consolidated financial state-
ments have been reclassified to conform to the current year
presentation. In the past, research and development expense was
included in cost of goods sold and selling, general and administra-
tive expenses on the face of the Consolidated Statements of
Income. For the current year’s Consolidated Statements of Income
“research and development expenses” is a separate line item.

INVESTMENT IN AFFILIATE
An affiliate investment over which the company has significant
influence, but neither a controlling interest nor a majority interest
in the risks or rewards of the investee, is accounted for using the
equity method. The investment balance is included in “other
assets, net.” The company considers whether the value of any of
its equity method investments has been impaired whenever
adverse events or changes in circumstances indicate that recorded
values may not be recoverable. If the company considered any
such decline to be other than temporary (based on various factors,
including historical financial results, product development activities
and the overall health of the affiliate’s industry), a write-down
would be recorded.

USE OF ESTIMATES
Preparing the financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make certain estimates and assumptions.
These 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 company’s subsidiaries that operate outside the United States
use the local currency as their functional currency. The functional
currency is translated into U.S. dollars for balance sheet accounts
using the period-end exchange rates and average exchange rates
for the statement of income. Adjustments resulting from financial

statement translations are included as foreign currency 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
“interest income and other, net” in the Consolidated Statements of
Income.

CASH AND CASH EQUIVALENTS
The company considers all highly liquid debt instruments with
original maturities of three or fewer months to be cash equiva-
lents. Cash and cash equivalent balances are principally concen-
trated in checking, money market and savings accounts with Wells
Fargo Bank; Wells Fargo Brokerage Services, LLC. and Merrill
Lynch & Co. (Bank of America).

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.
This is based on historical writeoff 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 encom-
passes consideration of all business factors including price, con-
tract terms and usefulness.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreci-
ated over the estimated useful lives of the assets using acceler-
ated methods. The estimated useful lives used for computing
depreciation are as follows:

Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing equipment by segment

Applied Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Films . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aerostar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .

Furniture, fixtures, office equipment and other

15 - 39 years

3 - 5 years
5 - 12 years
3 - 5 years
3 - 5 years
3 - 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.

The company capitalizes certain costs incurred in connection with
developing or obtaining internal-use software in accordance with
the accounting guidance for such costs. Capitalized software costs
totaled $855,000 in fiscal 2010 and $297,000 in fiscal 2009. There
were no capitalized software costs in fiscal 2008. The costs are
included in “property, plant and equipment, net” on the Consoli-
dated Balance Sheets. Software costs that do not meet capitaliza-
tion criteria are expensed as incurred. There was no amortization

2 0 1 0 A N N U A L R E P O R T RAVEN

37

Notes to Financial Statements (continued)

probable that an asset has been impaired or a liability has been
incurred, and the amount of the loss can be reasonably estimated.
While the settlement of any claims cannot be determined at this
time, management believes that any liability resulting from these
claims will be substantially covered by insurance. Accordingly,
management does not believe that the ultimate outcome of these
matters will have a significant impact on its results of operations,
financial position or cash flows.

REVENUE RECOGNITION
Raven recognizes revenue when products are shipped because
there is persuasive evidence of an arrangement, the sales price is
determinable, collectability is reasonably assured and delivery has
occurred. The company sells directly to customers or distributors
who incur the expense and commitment for any post-sale obliga-
tions beyond stated warranty terms. Estimated returns, sales
allowances or warranty charges are recognized upon shipment of
a product. Shipping and handling costs are classified as a compo-
nent of “cost of goods sold.”

OPERATING EXPENSES
The primary types of operating expenses are classified in the
income statement as follows:

Cost of goods sold

Direct material costs
Material acquisition and
handling costs
Direct labor
Factory overhead
including depreciation
Inventory obsolescence
Product warranties

Research and
development expenses

Selling, general and
administrative expenses

Personnel costs
Professional service fees
Material and supplies
Facility allocation

Personnel costs
Professional service fees
Advertising
Promotions
Information technology

equipment depreciation

Office supplies

Research and development expenses include costs related to
product development and significant enhancements of existing
products. Gross margins were affected by the reclassification of
research and development expenses out of cost of goods sold to a
separate item below gross profit. Additionally, R&D expenses that
were previously classified as selling, general and administrative
expenses were also reclassified to the separate R&D expenses
line. The reclassification had no affect on any segment’s previously
reported operating income or consolidated operating income.

expense related to capitalized software in fiscal 2010, 2009 or
2008, and future amortization expense will be included in
depreciation.

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
Raven recognizes goodwill as the excess cost of an acquired entity
over the net amount assigned to assets acquired and liabilities
assumed. For business combinations prior to February 1, 2009,
earn-out payments to sellers are added to goodwill when payable
under the terms of the purchase agreement. For business combina-
tions after February 1, 2009, earn-out payments are accrued at fair
value as of the purchase date, and payments reduce the accrual
without affecting goodwill. Any change in the fair value of the
contingent consideration after the acquisition date is recognized in
the statements of income. Goodwill is tested for impairment on an
annual basis during the fourth quarter and between annual tests
whenever there is an impairment indicated. Impairment tests of
goodwill are performed at the reporting unit level. Fair values are
estimated based on discounted cash flows and are compared with
the corresponding carrying value of the reporting unit. If the fair
value of the reporting unit is less than the carrying amount, the
amount of the impairment loss must be measured and then
recognized to the extent the carrying value exceeds the implied
fair value.

LONG-LIVED ASSETS
The company periodically assesses the recoverability of long-lived
and intangible assets. An impairment loss is recognized when the
carrying amount of an asset exceeds the estimated undiscounted
cash flows used in determining the fair value of the assets. The
amount of the impairment loss to be recorded is calculated by the
excess of the asset’s carrying value over its fair value.

INSURANCE OBLIGATIONS
Raven employs insurance policies to cover 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 insurance policy benefit 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

38

2 0 1 0 A N N U A L R E P O R T RAVEN

Components of consolidated operating income for the fiscal years
ended January 31, 2009 and 2008, as originally reported and as
reclassified, were as follows:

became non-authoritative. The company adopted the Codification
in the third quarter of fiscal 2010, which resulted in no changes to
the content of the company’s financial statements or disclosures.

For the year ended
January 31, 2009

For the year ended
January 31, 2008

As
reported

As
reclassified

As
reported

As
reclassified

Dollars in thousands

Net sales . . . . . . . . . . . .
Cost of goods sold . . . . . .

$279,913
212,032

$279,913
206,465

$233,957
174,809

$233,957
170,281

Gross profit. . . . . . . . . . .
Gross margins . . . . . . . . .
Research and development

67,881

24.3%

73,448

26.2%

59,148

25.3%

63,676

27.2%

expenses . . . . . . . . . . .

—

5,848

—

4,925

Selling, general and

administrative expenses . .

21,487

21,206

18,003

17,606

Operating income . . . . .

$ 46,394

$ 46,394

$ 41,145

$ 41,145

The company’s gross margins may not be comparable to industry
peers due to variability in the classification of these expenses
across the industries in which the company operates.

WARRANTIES
Accruals necessary for product warranties are estimated based on
historical warranty costs and average time elapsed between
purchases and returns for each division. Additional accruals are
made for any significant, discrete warranty issues.

SHARE-BASED COMPENSATION
The company records compensation expense related to its share-
based compensation plans using the fair value method.

INCOME TAXES
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 affect taxable income. Deferred tax
assets are reduced by a valuation allowance to reflect realizable
value, when necessary. Accruals are maintained for uncertain tax
positions.

NEW ACCOUNTING STANDARDS
In June 2009, the Financial Accounting Standards Board (FASB)
issued the Accounting Standards Codification (Codification), which
became the single source of authoritative generally accepted
accounting principles (GAAP) in the United States, other than rules
and interpretive releases issued by the Securities and Exchange
Commission (SEC). The Codification is a reorganization of current
GAAP into a topical format that eliminates the current GAAP
hierarchy and instead establishes two levels of guidance: authori-
tative and non-authoritative. All non-grandfathered, non-SEC
accounting literature that is not included in the Codification

At the beginning of fiscal 2010, the company adopted FASB guidance
that amends required disclosures about derivative instruments and
hedging activities. This guidance requires enhanced disclosures about
(a) how and why derivative instruments are used; (b) how derivative
instruments and related hedged items are accounted for; and (c) how
derivative instruments and related hedged items affect an entity’s
financial position, financial performance and cash flows. The adoption
of this guidance had no impact on the company’s consolidated results
of operations, financial condition or cash flows.

At the beginning of fiscal 2010, the company adopted FASB
guidance that amends the factors that should be considered in
developing renewal or extension assumptions used in determining
the useful life of recognized intangible assets and apply to
(1) intangible assets that are acquired individually or with a group
of other assets and (2) intangible assets acquired in both business
combinations and asset acquisitions. Entities estimating the useful
life of a recognized intangible asset must consider their historical
experience in renewing or extending similar arrangements or, in
the absence of historical experience, must consider assumptions
that market participants would use about renewal or extension.
The adoption of this guidance had no impact on the company’s
consolidated results of operations, financial condition or cash
flows.

In June 2009, the FASB amended its guidance on accounting for
variable interest entities. This guidance alters the approach to
determining the primary beneficiary of a variable interest entity,
and requires companies to more frequently assess whether they
must consolidate variable interest entities. The guidance is effec-
tive for the first annual reporting period beginning after Novem-
ber 15, 2009, and for interim periods within that first annual
reporting period. The adoption of this guidance on February 1,
2010, is not expected to have a material impact on the company’s
consolidated results of operations, financial condition or cash
flows.

In October 2009, the FASB issued guidance on the accounting for
multiple-deliverable revenue arrangements. This guidance estab-
lishes a selling price hierarchy for determining the selling price of a
deliverable; eliminates the residual method of allocation and
requires arrangement consideration be allocated at the inception of
the arrangement to all deliverables using the relative selling price
method; and requires a vendor to determine its best estimate of
selling price in a manner consistent with that used to determine the
selling price of the deliverable on a stand-alone basis. This guidance
also expands the required disclosures related to a vendor’s multiple-
deliverable revenue arrangements. The guidance is effective begin-
ning February 1, 2011, with early adoption permitted. The company
has adopted the new guidance prospectively from the beginning of

2 0 1 0 A N N U A L R E P O R T RAVEN

39

Notes to Financial Statements (continued)

the fiscal year and determined that there is no material impact on
its consolidated results of operations, financial condition, cash flows
or disclosures, as the company had no significant multiple-deliver-
able arrangements during or at the end of the fiscal year.

Note 2. Selected Balance Sheet Information

Following are the components of selected balance sheet items:

Dollars in thousands

As of January 31

2010

2009

2008

Accounts receivable, net:
Trade accounts . . . . . . . . . . . . . . . . . . . . $ 34,624 $ 40,891
(613)
Allowance for doubtful accounts . . . . . . . . . .

(297)

$ 36,831
(293)

$ 34,327 $ 40,278

$ 36,538

Inventories:
Finished goods . . . . . . . . . . . . . . . . . . . . $ 6,283 $ 6,062
3,258
In process . . . . . . . . . . . . . . . . . . . . . . .
26,657
Materials . . . . . . . . . . . . . . . . . . . . . . . .

4,172
24,020

$ 4,975
3,631
27,923

$ 34,475 $ 35,977

$ 36,529

Other current assets:
Insurance policy benefit . . . . . . . . . . . . . . . $ 2,300 $ 2,119
890
Prepaid expenses and other . . . . . . . . . . . . .

490

$ 2,549
406

$ 2,790 $ 3,009

$ 2,955

Property, plant and equipment, net:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,227 $ 1,227
22,593
Buildings and improvements . . . . . . . . . . . .
62,504
Machinery and equipment . . . . . . . . . . . . . .
(50,444)
Accumulated depreciation . . . . . . . . . . . . . .

22,973
64,119
(55,290)

$ 1,227
21,523
57,563
(44,570)

$ 33,029 $ 35,880

$ 35,743

Other assets, net:
Amortizable assets:

Purchased technology . . . . . . . . . . . . . . . $ 3,200 $ 2,300
1,314
Other intangibles . . . . . . . . . . . . . . . . .
(2,143)
Accumulated amortization . . . . . . . . . . . .

1,633
(2,648)

$ 2,300
1,172
(1,740)

Investment in affiliate . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Other, net

2,185
5,010
1,580
59

1,471
—
1,482
59

1,732
—
2,540
75

$ 8,834 $ 3,012

$ 4,347

Accrued liabilities:
Salaries and benefits . . . . . . . . . . . . . . . . . $ 1,148 $ 1,891
2,581
Vacation . . . . . . . . . . . . . . . . . . . . . . . .
1,333
401(k) contributions . . . . . . . . . . . . . . . . .
3,615
Insurance obligations . . . . . . . . . . . . . . . . .
436
Profit sharing . . . . . . . . . . . . . . . . . . . . .
1,004
Warranties . . . . . . . . . . . . . . . . . . . . . . .
1,266
Taxes—accrued and withheld . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
1,155

2,693
180
3,959
217
1,259
1,574
1,226

$ 2,109
2,415
1,184
4,010
490
684
1,061
851

$ 12,256 $ 13,281

$ 12,804

Other liabilities:
Postretirement benefits . . . . . . . . . . . . . . . . $ 5,283 $ 4,637
—
Acquisition-related contingent consideration . . .
2,900
Uncertain tax positions. . . . . . . . . . . . . . . .

2,301
3,514

$ 5,246
—
2,232

$ 11,098 $ 7,537

$ 7,478

40

2 0 1 0 A N N U A L R E P O R T RAVEN

Note 3. Accumulated Other Comprehensive Income
(Loss)
Other comprehensive income refers to revenue, expenses, gains
and losses that under U.S. generally accepted accounting princi-
ples are recorded as an element of shareholders’ equity but are
excluded from net income. The components of accumulated other
comprehensive income (loss) are shown below:

As of January 31

Dollars in thousands
Foreign currency translation. . . . . . . . . . . . . . $
Post-retirement benefits . . . . . . . . . . . . . . . .

2010

56
(1,257)

2009
$ (123)
(1,031)

2008
123
(1,729)

$

Total accumulated other comprehensive loss . . . $(1,201)

$(1,154)

$(1,606)

Note 4. Supplemental Cash Flow Information

Dollars in thousands

For the years ended January 31

2010

2009

2008

Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . $ 6,325
1,552
Inventories . . . . . . . . . . . . . . . . . . . . . . .
(49)
Prepaid expenses and other assets . . . . . . . .
2,934
Accounts payable . . . . . . . . . . . . . . . . . . .
(520)
Accrued and other liabilities . . . . . . . . . . . .
693
Customer advances . . . . . . . . . . . . . . . . .
$10,935

$ (4,603)
447
(35)
963
2,194
(312)
$ (1,346)

$ (5,216)
(8,403)
218
2,437
2,648
129
$ (8,187)

Cash paid during the year for income taxes . . . $13,816

$15,072

$14,068

Note 5. Acquisition of and Investments
in Businesses and Technologies
In November 2009, the company acquired a 20% interest in
Site-Specific Technology Development Group, Inc. (SST) for
$5.0 million. SST is a privately held agricultural software develop-
ment and information services provider. Raven and SST are strate-
gically aligned to provide customers with simple, more efficient
ways to move and manage information in the precision agriculture
market. As of January 31, 2010, the company’s investment balance
is included in “other assets, net” on the Consolidated Balance
Sheets. The company accounts for its interest in SST using the
equity method of accounting. At January 31, 2010, the carrying
value of the investment in SST exceeded the company’s share of
the underlying net assets of SST by $5.0 million. A portion of the
excess relates to $1.1 million of technology-related assets that are
amortized over a seven-year period. The remainder of the excess
is attributable to goodwill.

In November 2009, the company purchased substantially all of the
assets of Ranchview, Inc., a privately held Canadian corporation
for $1.5 million cash and contingent consideration valued at
$2.3 million. Raven has agreed to pay additional consideration on
a quarterly basis of 6% on future sales of Ranchview products, up
to a maximum payment of $4 million. Any change in the fair value
of the contingent consideration after the acquisition date will be
recognized in the statements of income. Ranchview, a start-up

company, developed products that use cellular networks instead of
the traditional radio systems that are typically used to deliver RTK
(Real Time Kinematic) corrections to GPS enabled equipment. RTK
corrections improve the accuracy of GPS equipment. The network
can also be used to provide high-speed Internet access.

The allocation of the purchase price is summarized below:

Dollars in thousands
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Existing technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,734
900
175

Raven’s contribution expense was $1,085,000, $1,158,000 and
$1,020,000 for fiscal 2010, 2009 and 2008, respectively.

In addition, the company provides postretirement medical and
other benefits to senior executive officers and senior managers.
There are no assets held for the plans and any obligations are
covered through operating cash and investments.

The accumulated benefit obligation for these benefits is shown
below:

For the years ended January 31

2010

2009

2008

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,809

Dollars in thousands

The goodwill associated with Ranchview is deductible for tax
purposes. Purchased identifiable intangible assets are amortized
on a straight-line basis over their respected useful lives. The
estimated useful life is six years for existing technology and five
to seven years for the remaining intangibles.

The results of operations of Ranchview for periods prior to the
company’s acquisition were not material to the company’s Consol-
idated Statements of Income and, accordingly, pro forma results of
operations have not been presented. This operation has been
combined into the Applied Technology Division.

Note 6. 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, 2007 . . . . . .
Acquisition earn-outs . . . . . . . . . . .
Balance at January 31, 2008 . . . . . .
Acquisition earn-outs . . . . . . . . . . .
Balance at January 31, 2009 . . . . . .
Goodwill acquired during the year . . .
Acquisition earn-outs . . . . . . . . . . .
Balance at January 31, 2010 . . .

Applied
Technology

Engineered
Films

Electronic
Systems Aerostar

Total

$ 5,611

5,909

$96
298 —
96
548 —
96
6,457
2,734 —
515 —
$96

$9,706

$ 433
—
433
—
433
—
—

$ 464 $ 6,604
298
—
6,902
464
548
—
7,450
464
— 2,734
515
—
$433 $464 $10,699

Intangible Assets
Estimated future amortization expense based on the current carry-
ing value of amortizable intangible assets for fiscal periods 2011
through 2015 is $610,000, $581,000, $225,000, $219,000 and
$187,000, respectively.

Note 7. Employee Retirement Benefits
The company has a 401(k) plan covering substantially all employ-
ees. Prior to January 1, 2010, the company contributed 3% of
qualified payroll. Starting January 1, 2010, the company began
matching employee contributions up to a maximum of 4% of pay.

Benefit obligation at beginning of year
Service cost . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss and assumption changes . .

. . . . . . $4,840
55
332
476

$5,447
67
361
(847)

$5,213
90
307
(2)

Total recognized in net and other comprehensive
income . . . . . . . . . . . . . . . . . . . . . . . .

Retiree benefits paid . . . . . . . . . . . . . . . . .

863

(191)

(419)

(188)

395

(161)

Benefit obligation at end of year . . . . . . . . . . $5,512

$4,840

$5,447

The liability and expense reflected in the balance sheet and
income statement were as follows:

For the years ended January 31

Dollars in thousands

2010

2009

Beginning liability balance . . . . . . . . . . . . . . $4,840
515
Employer expense . . . . . . . . . . . . . . . . . . .
348
Other comprehensive (income) loss . . . . . . . .

$ 5,447
654
(1,073)

Total recognized in net and other

comprehensive income . . . . . . . . . . . . . .

863

Retiree benefits paid . . . . . . . . . . . . . . . . .

(191)

Ending liability balance. . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . .

5,512
(229)

(419)

(188)

4,840
(203)

2008

$5,213
635
(240)

395

(161)

5,447
(201)

Long-term portion . . . . . . . . . . . . . . . . . . . $5,283

$ 4,637

$5,246

Assumptions used:
Discount rate . . . . . . . . . . . . . . . . . . . . .
Wage inflation rate . . . . . . . . . . . . . . . . . .

6.00%
3.00%

7.00%
3.00%

6.75%
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 2010 was
9.51% compared with 8.97% and 10.38% for fiscal 2009 and
2008. The impact of a one-percentage-point change in assumed
health care rates would not be significant to the company’s income
statement and would affect the ending liability balance by approx-
imately $800,000. The rate to which the fiscal 2010 health care
cost trend rate is assumed to decline is 4.50%, which is the
ultimate trend rate. The fiscal year that the rate reaches the
ultimate trend rate is expected to be fiscal 2030.

2 0 1 0 A N N U A L R E P O R T RAVEN

41

Notes to Financial Statements (continued)

Note 8. Warranties
Changes in the warranty accrual were as follows:

Significant components of the company’s deferred tax assets and
liabilities were as follows:

Dollars in thousands

2010

2009

2008

Dollars in thousands

As of January 31

As of January 31

2010

2009

2008

Beginning balance . . . . . . . . . . . . . . . . . . . $ 1,004
2,426
Accrual for warranties . . . . . . . . . . . . . . . . .
(2,171)
. . . . . . .
Settlements made (in cash or in kind)

$

684
2,760
(2,440)

$

397
1,390
(1,103)

Ending balance . . . . . . . . . . . . . . . . . . . . . $ 1,259

$ 1,004

$

684

Note 9. Income Taxes
The reconciliation of income tax computed at the federal statutory
rate to the company’s effective income tax rate was as follows:

Tax at U.S. federal statutory rate . . . . . . . . . . .
State and local income taxes, net of U.S. federal

benefit. . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit on qualified production activities . . .
Tax credit for research activities . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended January 31

2010

2009

2008

35.0%

35.0%

35.0%

1.3
(2.1)
(0.7)
0.5

1.5
(2.0)
(0.7)
0.6

1.5
(2.1)
(0.7)
0.5

34.0%

34.4%

34.2%

Significant components of the company’s income tax provision
were as follows:

Dollars in thousands

For the years ended January 31

2010

2009

2008

Income taxes:
Currently payable . . . . . . . . . . . . . . . . . . . $14,653
95
Deferred . . . . . . . . . . . . . . . . . . . . . . . .

$15,915
216

$15,201
(779)

$14,748

$16,131

$14,422

Deferred Tax Assets
Deferred income taxes reflect the net effects of temporary differ-
ences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.

42

2 0 1 0 A N N U A L R E P O R T RAVEN

Current deferred tax assets:
Accounts receivable . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . .
Accrued vacation . . . . . . . . . . . . . . . . . . .
Insurance obligations . . . . . . . . . . . . . . . .
Warranty obligations. . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . .

103
344
857
553
441
173

$

211
408
840
489
352
242

Non-current deferred tax assets (liabilities):
Postretirement benefits . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .

2,471

2,542

1,849
(1,970)
1,180
521

1,580

1,623
(1,556)
969
446

1,482

$ 105
271
781
456
225
237

2,075

1,836
(478)
741
441

2,540

Net deferred tax asset. . . . . . . . . . . . . . . . $ 4,051

$ 4,024

$4,615

Pre-tax book income for the U.S. companies was $42.8 million and
was $569,000 for the Canadian subsidiary. As of January 31, 2010,
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.

Uncertain Tax Positions
Effective February 1, 2007, Raven adopted new guidance for
accounting for unrecognized tax benefits. Upon adoption, the
company reported a net $716,000 increase in the liability for
unrecognized tax benefits, which was recorded as a reduction to
the February 1, 2007 beginning retained earnings balance.

A summary of the activity related to the gross unrecognized tax
benefits (excluding interest and penalties) is as follows:

Dollars in thousands

Gross unrecognized tax benefits at beginning of

For the years ended January 31

2010

2009

2008

year . . . . . . . . . . . . . . . . . . . . . . . . . . $2,269

$1,793

$1,328

Increases in tax positions related to the current

year . . . . . . . . . . . . . . . . . . . . . . . . . .

463

Decreases as a result of a lapse in applicable

statute of limitations . . . . . . . . . . . . . . . .

(76)

Gross unrecognized tax benefits at end of

539

(63)

465

—

year . . . . . . . . . . . . . . . . . . . . . . . . . . $2,656

$2,269

$1,793

During the fiscal year ended January 31, 2010, the only change to
uncertain tax positions related to prior years resulted from the
lapse of a statute of limitations. The company does not expect any
significant change in the amount of unrecognized tax benefits in
the next fiscal year.

The total unrecognized tax benefits that, if recognized, would
affect the company’s effective tax rate were $1.7 million, $1.5 mil-
lion and $1.2 million as of January 31, 2010, January 31, 2009,
and January 31, 2008, respectively.

The company recognizes interest and penalties accrued related to
unrecognized tax benefits in income tax expense. At January 31,
2010, January 31, 2009, and January 31, 2008, accrued interest
and penalties were $858,000, $631,000 and $439,000, respectively.

The company files tax returns, including returns for its subsidiaries,
with various federal, state and local jurisdictions. Uncertain tax
positions are related to tax years that remain subject to examination.
As of January 31, 2010, federal tax returns filed in the U.S., Canada
and Switzerland for fiscal years ended January 31, 2007 - 2009
remain subject to examination by federal tax authorities. In state and
local jurisdictions, tax returns for fiscal years ended January 31,
2004 - 2009 remain subject to examination by state and local tax
authorities.

Note 10. Financing Arrangements
Raven has an uncollateralized credit agreement providing a line of
credit of $8.0 million with a maturity date of September 1, 2010,
bearing interest at the prime rate with a minimum rate of 4.00%.
Letters of credit totaling $1.3 million have been issued under the
line, primarily to support self-insured workers’ compensation bonding
requirements. No borrowings were outstanding as of January 31,
2010, 2009 or 2008, and $6.7 million was available at January 31,
2010. There have been no borrowings under the credit line in the
last three fiscal years.

Wells Fargo Bank, N.A. provides Raven’s line of credit and holds
the majority of its 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
$328,000, $353,000 and $268,000 in fiscal 2010, 2009 and 2008,
respectively. Future minimum lease payments under non-cancelable
operating leases for fiscal periods 2011 to 2013 are $234,000,
$48,000 and $22,000, respectively, with all leases scheduled to
expire during fiscal 2013.

Note 11. Share-based Compensation
At January 31, 2010, Raven had two shareholder approved share-
based compensation plans, which are described below. The com-
pensation cost for these plans was $1,034,000, $1,028,000 and
$904,000 in fiscal 2010, 2009 and 2008, respectively. The related
income tax benefit recorded in the income statement was
$184,000, $200,000 and $154,000 for fiscal 2010, 2009 and 2008,
respectively. Compensation cost capitalized as part of inventory is
not significant.

2000 Stock Option and Compensation Plan
The 2000 Stock Option and Compensation Plan is administered by
the Personnel and Compensation Committee of the board of
directors and allows for stock awards and incentive or non-qualified
options with terms not to exceed 10 years. Fiscal 2010 compensa-
tion cost included $144,000 of expense recognized as a result of a

4,800 share stock award. Fiscal 2009 compensation cost included
$135,000 of expense recognized as a result of a 5,500 share stock
award. There were 255,025 shares of the company’s common stock
reserved for future stock awards and stock option grants under the
plan at January 31, 2010. Options are granted with exercise prices
not less than market value at the date of grant. The stock options
vest over a four-year period and expire after five years. Options
contain retirement and change in control provisions that may
accelerate the vesting period. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option
pricing model. The company uses historical data to estimate option
exercise and employee termination within the valuation model.

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model, with the
following weighted average assumptions by grant year:

For the years ended January 31

2010

2009

2008

Risk-free interest rate . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . .
Expected volatility factor . . . . . . . . . . . . . . .
Expected option term (in years) . . . . . . . . . . .
4.50
Weighted average grant date fair value . . . . . . $11.28

2.03%
1.73%

1.64%
2.12%
49.69% 46.32%

4.25
$ 8.08

3.07%
1.28%
40.62%
4.25
$11.45

Option activity for the year ended January 31, 2010, was as
follows:

Weighted
average
exercise
price

Aggregate
intrinsic
value
(in thousands)

Number
of options

Weighted
average
remaining
contractual
term
(years)

Outstanding at beginning of
year . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . .
Exercised . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . .

Outstanding at end of

382,975
81,200
(65,225)
(2,400)

$27.93
30.05
22.06
27.24

year . . . . . . . . . . . . . .

396,550

$29.33

$428

Options exercisable at end of
year . . . . . . . . . . . . . .

187,963

$29.96

$129

2.85

1.83

The intrinsic value of a stock award is the amount by which the
fair value of the underlying stock exceeds the exercise price of the
award. The total intrinsic value of options exercised was $314,000,
$1.9 million and $3.5 million during the years ended January 31,
2010, 2009, and 2008, respectively. As of January 31, 2010, the
total compensation cost for non-vested awards not yet recognized
in the company’s statements of income was $1.5 million, net of
the effect of estimated forfeitures. This amount is expected to be
recognized over a weighted average period of 2.62 years.

2 0 1 0 A N N U A L R E P O R T RAVEN

43

Notes to Financial Statements (continued)

Deferred Stock Compensation Plan for Directors
The Deferred Stock Compensation Plan for Directors of Raven
Industries, Inc. is administered by the Governance Committee of
the board of directors. Under the plan, a stock unit is the right to
receive one share of the company’s common stock as deferred
compensation, to be distributed from an account established by
the company in the name of the non-employee director. Stock units
have the same value as a share of common stock but cannot be
sold. Stock units are a component of the company’s equity. The
plan reserves 50,000 common shares for the conversion of stock
units into common stock after directors retire from the board.

Stock units granted under this plan vest immediately and are
expensed at the date of grant. Stock units are also accumulated if
a director elects to defer the annual retainer paid for board
service. When dividends are paid on the company’s common
shares, stock units are added to the directors’ balances and a
corresponding amount is removed from retained earnings. The
intrinsic value of a stock unit is the fair value of the underlying
shares.

Outstanding stock units for the year ended January 31, 2010, were
as follows:

Outstanding at beginning of year . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred retainers . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Converted into common shares . . . . . . . . . . . . . . . . . .

Number
of units

15,107
4,996
714
409
—

Outstanding at end of year

. . . . . . . . . . . . . . . . . . . .

21,226

Weighted
average
price

$21.81
28.02
28.02
26.44
—

$28.58

Note 12. Net Income per Share
Basic net income per share is computed by dividing net income by
the weighted-average common shares and stock units outstanding.
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) and stock units outstanding. Certain outstand-
ing options were excluded from the diluted net income per-share
calculations because their effect would have been anti-dilutive, as
their exercise prices were greater than the average market price
of the company’s common stock during those periods. For fiscal
2010, 2009 and 2008, 338,081, 167,942 and 90,338 options,

44

2 0 1 0 A N N U A L R E P O R T RAVEN

respectively, were excluded from the diluted net income per-share
calculation. Details of the computation are presented below:

For the years ended January 31

2010

2009

2008

28,574

$

30,770

$

27,802

Numerator:
Net income (in thousands). . . . . $

Denominator:
Weighted average common

shares outstanding . . . . . . . .

18,020,552

18,031,020

18,099,600

Weighted average stock units

outstanding . . . . . . . . . . . .

19,580

13,451

8,580

Denominator for basic

calculation . . . . . . . . . . . . .

18,040,132

18,044,471

18,108,180

Weighted average common

shares outstanding . . . . . . . .

18,020,552

18,031,020

18,099,600

Weighted average stock units

outstanding . . . . . . . . . . . .
Dilutive impact of stock options. .

Denominator for diluted

19,580
3,304

13,451
35,771

8,580
95,883

calculation . . . . . . . . . . . . .

18,043,436

18,080,242

18,204,063

Net income per share–basic . . . . $
Net income per share–diluted . . . $

1.58
1.58

$
$

1.71
1.70

$
$

1.54
1.53

Note 13. Business Segments and Major Customer
Information
The company’s reportable segments are defined by their common
technologies, production processes and inventories. These seg-
ments reflect Raven’s organization into three Raven divisions and
the Aerostar subsidiary. Raven Canada and Raven GmbH are
included in the Applied Technology Division. Substantially all of
the company’s long-lived assets are located in the United States.

Applied Technology products are electronic and Global Positioning
System (GPS) devices. They are used primarily on agricultural
sprayers for precision farming applications. The segment has
developed products for field location control, chemical injection
and automated steering. Engineered Films produces rugged rein-
forced plastic sheeting for industrial, construction and agriculture
applications. Electronic System’s capabilities are focused on elec-
tronics manufacturing services (EMS) for commercial customers
with a focus on high-mix, low-volume production. Assemblies
manufactured by the Electronic Systems segment include avionics,
secure communication, environmental controls and other products
where high quality is critical. Aerostar sells high-altitude and
tethered aerostats for government and commercial research, and
military parachutes. It produces uniforms and protective wear for
U.S. government agencies as a subcontractor and also manufac-
tures other sewn and sealed products on a contract basis.

The company measures the performance of its segments based on
their operating income excluding 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.

Sales to a customer of the Electronic Systems segment accounted
for 16%, 13% and 11% of consolidated sales in fiscal 2010, 2009
and 2008, respectively, and 13%, 18% and 14%, of consolidated
accounts receivable at the end of fiscal 2010, 2009 and 2008,
respectively.

Foreign sales are attributed to product delivered to non-U.S. loca-
tions. Sales to countries outside the United States, primarily to
Canada, were as follows:

Dollars in thousands

For the years ended January 31

2010

2009

2008

Applied Technology . . . . . . . . . . . . . . . . . $17,140
1,383
Engineered Films . . . . . . . . . . . . . . . . . . .
495
Electronic Systems . . . . . . . . . . . . . . . . . .
1,219
Aerostar . . . . . . . . . . . . . . . . . . . . . . . .

$18,847
2,034
568
1,004

$10,104
1,803
6,852
1,310

Total foreign sales . . . . . . . . . . . . . . . . $20,237

$22,453

$20,069

Business segment information is as follows:

Dollars in thousands

For the years ended January 31

2010

2009

2008

APPLIED TECHNOLOGY DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,217 $103,098
33,884
Operating income . . . . . . . . . . . . . . . . . .
48,881
Assets . . . . . . . . . . . . . . . . . . . . . . . . .
2,674
Capital expenditures . . . . . . . . . . . . . . . .
1,383
Depreciation and amortization . . . . . . . . . .

25,722
51,029
941
1,677

ENGINEERED FILMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,783 $ 89,858
10,919
Operating income . . . . . . . . . . . . . . . . . .
35,862
Assets. . . . . . . . . . . . . . . . . . . . . . . . .
3,120
Capital expenditures . . . . . . . . . . . . . . . .
4,303
Depreciation and amortization . . . . . . . . . .

10,232
35,999
1,460
3,707

ELECTRONIC SYSTEMS DIVISION
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,525 $ 61,983
5,926
Operating income . . . . . . . . . . . . . . . . . .
26,847
Assets. . . . . . . . . . . . . . . . . . . . . . . . .
1,399
Capital expenditures . . . . . . . . . . . . . . . .
1,159
Depreciation and amortization . . . . . . . . . .

8,979
21,216
290
939

AEROSTAR
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,244 $ 27,186
4,219
Operating income . . . . . . . . . . . . . . . . . .
8,744
Assets. . . . . . . . . . . . . . . . . . . . . . . . .
383
Capital expenditures . . . . . . . . . . . . . . . .
444
Depreciation and amortization . . . . . . . . . .

5,634
10,462
332
398

$ 64,291
19,102
36,938
1,008
1,125

$ 85,316
17,739
43,688
4,012
4,046

$ 67,987
10,365
25,865
1,077
1,237

$ 17,290
1,506
9,941
156
499

INTERSEGMENT ELIMINATIONS
Sales

Engineered Films Division . . . . . . . . . . . $
Electronic Systems Division . . . . . . . . . . .
Aerostar . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . .
Assets. . . . . . . . . . . . . . . . . . . . . . . . .

(210) $

(210) $

(2,776)
(1)
60
(92)

(1,977)
(25)
(52)
(152)

(533)
(378)
(16)
(100)
(100)

REPORTABLE SEGMENTS TOTAL
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $237,782 $279,913
54,896
Operating income . . . . . . . . . . . . . . . . . .
120,182
Assets . . . . . . . . . . . . . . . . . . . . . . . . .
7,576
Capital expenditures . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
7,289
CORPORATE & OTHER(a)
Operating (loss) from administrative

50,627
118,614
3,023
6,721

$233,957
48,612
116,332
6,253
6,907

expenses . . . . . . . . . . . . . . . . . . . . . $ (7,407) $ (8,502) $ (7,467)
31,529
382
437

Assets . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .

51,695
279
387

24,233
425
469

TOTAL COMPANY
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $237,782 $279,913
46,394
Operating income . . . . . . . . . . . . . . . . . .
144,415
Assets . . . . . . . . . . . . . . . . . . . . . . . . .
8,001
Capital expenditures . . . . . . . . . . . . . . . .
7,758
Depreciation and amortization . . . . . . . . . .

43,220
170,309
3,302
7,108

$233,957
41,145
147,861
6,635
7,344

(a) Assets are principally cash, investments, deferred taxes and other receivables.

2 0 1 0 A N N U A L R E P O R T RAVEN

45

Report of Independent Registered
Public Accounting Firm

To the Board of Directors and Shareholders of Raven Industries, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and
comprehensive income and cash flows present fairly, in all material respects, the financial position of Raven Industries, Inc. and its
subsidiaries (the “Company”) at January 31, 2010, 2009 and 2008 and the results of their operations and their cash flows for each of the
three years in the period ended January 31, 2010 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
January 31, 2010 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, appearing on page 32 of the 2010 Annual Report to Shareholders in Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial
reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Effective February 1, 2007, as described in Note 9 to the consolidated financial statements, the Company changed the manner in which it
accounts for unrecognized tax benefits. As described in Note 1 to the consolidated financial statements, the Company changed the manner
in which it accounts for business combinations affecting business combinations closing after February 1, 2009.

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.

Minneapolis, Minnesota
March 31, 2010

46

2 0 1 0 A N N U A L R E P O R T RAVEN

Board of Directors

From left to right:
Anthony W. Bour
President & Chief Executive Ofﬁcer
Showplace Wood Products, Inc. 
Sioux Falls, SD 
Director since 1995

David A. Christensen                    
Former President &  
Chief Executive Ofﬁcer
Raven Industries, Inc. 
Sioux Falls, SD  
Director since 1971

 Kevin T. Kirby
President
Kirby Investment Corporation 
Sioux Falls, SD 
Director since 2007

Ronald M. Moquist
President & Chief Executive Ofﬁcer
Raven Industries, Inc. 
Sioux Falls, SD 
Director since 1999

Conrad J. Hoigaard
Former Chairman of the Board
Raven Industries, Inc. 
Chairman of the Board  
Hoigaard’s Inc. 
Minneapolis, MN 
Director since 1976 

Cynthia H. Milligan
Dean Emeritus
College of Business Administration  
University of Nebraska, Lincoln 
Lincoln, NE 
Director since 2001

Mark E. Grifﬁn
President & Chief Executive Ofﬁcer
Lewis Drugs, Inc. 
Sioux Falls, SD 
Director since 1987

Daniel A. Rykhus
Executive Vice President
Raven Industries, Inc. 
Sioux Falls, SD 
Director since 2008

Thomas S. Everist
Chairman of the Board
Raven Industries, Inc. 
President
The Everist Company  
Sioux Falls, SD 
Director since 1996

The Raven Board held four regular and two special meetings in ﬁscal year 2010. 
In May 2009, it increased the quarterly dividend for the 23rd-consecutive year.

Audit Committee

Anthony W. Bour, Chair 
Kevin T. Kirby 
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 ﬁndings regarding Raven’s 
ﬁnancial reporting process, related internal and disclosure  
controls and compliance with applicable standards.

Personnel and  
Compensation Committee

David A. Christensen, Chair 
Thomas S. Everist  
Mark E. Grifﬁn 
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. Grifﬁn 
Conrad J. Hoigaard 
Kevin T. Kirby

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. 

47

Executive Team

David R. Bair  

Division Vice President & General Manager–Electronic Systems Division, Age: 53, Service 11 years  

Matthew T. Burkhart 

Division Vice President & General Manager–Applied Technology Division, Age: 34, Service 2 years  

James D. Groninger 

Division Vice President & General Manager–Engineered Films Division, Age: 51, Service 23 years  

Thomas Iacarella 

Vice President & Chief Financial Ofﬁcer, Age: 56, Service 18 years 

Ronald M. Moquist  

President & Chief Executive Ofﬁcer, Age: 64, Service 34 years  

Barbara K. Ohme 

Vice President–Administration, Age: 62, Service 22 years 

Daniel A. Rykhus 

Executive Vice President, Age: 45, Service 20 years 

Mark L. West 

President–Aerostar International, Inc., Age: 56, Service 28 years

Raven Corporate Ofﬁcers

From left to right: Daniel Rykhus, Executive Vice President; Ronald Moquist, President & Chief Executive Ofﬁcer;  
Barbara Ohme, Vice President–Administration; Thomas Iacarella, Vice President & Chief Financial Ofﬁcer

48

Investor Information

Annual Meeting 
May 25, 2010, 9:00 a.m. 
Ramkota Hotel and Conference Center 
3200 W. Maple Avenue 
Sioux Falls, SD

Dividend Reinvestment Plan 
Raven Industries, Inc. sponsors a Dividend Reinvestment Plan 
so shareholders can purchase additional Raven common stock 
without paying 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 to our Investor 
Relations Department.

Dividend Policy 
Our policy is to return a substantial portion of earnings to 
shareholders through regular dividends. Each year our board of 
directors reviews Raven’s dividend and will increase it when  
the new level is sustainable. Fiscal 2010 was the 23nd-
consecutive year we raised our annual dividend.

Raven Website 
www.ravenind.com

Independent Registered Public 
Accounting Firm 
PricewaterhouseCoopers LLP 
Minneapolis, MN

Total Return Index
Base Year = 100

Stock Quotations 
Listed on the Nasdaq NGS Stock Market—RAVN

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 
Raven Industries, Inc.’s Form 10-K for the ﬁscal year ended 
January 31, 2010, which has been ﬁled with the Securities 
and Exchange Commission, is available free of charge on the 
company’s website, or upon written request to the Investor 
Relations Department.

Afﬁrmative Action Plan 
Raven Industries, Inc. and Aerostar International, Inc. are Equal 
Employment Opportunity Employers with approved afﬁrmative 
action plans.

Inquiries 
Raven Industries, Inc. 
Attention: Investor Relations 
P.O. Box 5107 
Sioux Falls, SD 57117-5107 
Phone: 605-336-2750

200

150

100

50

0
Jan 2005 

Jan 2006 

Jan 2007 

Jan 2008 

Jan 2009 

Jan 2010

Raven Industries Inc

SP1500 Industrial Machinery

Russell 2000 Index

Adding Value for Shareholders

Raven stock continues to outperform 
its industrial peers and the overall 
market in shareholder return. 
Investors who bought $100 of the 
company’s stock on January 31, 2005, 
held this for ﬁve years and reinvested 
the dividends, have seen its value 
increase to $174.24. This 12% 
cumulative growth rate outpaced the 
S&P 1500 Industrial Index’s minor 
loss (at $99.59) and the Russell 
2000’s slight gain (to $103.25). 

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FORWARD-LOOKING STATEMENTS
This annual report contains “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 management believes that the expectations reﬂected in forward-looking statements are based on reasonable 
assumptions, there is no assurance these assumptions are correct or that these expectations will be achieved. Assumptions involve important risks and uncertainties that could signiﬁcantly 
affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions and commodity prices, which could affect sales and proﬁtability in 
some of the company’s primary markets, such as agriculture, construction and oil and gas drilling; or changes in competition, raw material availability, technology or relationships with the 
company’s largest customers—any of which could adversely affect any of the company’s product lines—as well as other risks described in the company’s 10-K under Item 1A. This list is not 
exhaustive, and the company does not have an obligation to revise any forward-looking statements to reﬂect events or circumstances after the date these statements are made.

 
 
 
 
 
 
 
 
RAVEN

Raven Industries, Inc. 
P.O. Box 5107 
Sioux Falls, SD 57117-5107

www.ravenind.com

00070122