10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 001-07982

RAVEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

South Dakota	46-0246171
(State of incorporation)	(IRS Employer Identification No.)

205 E. 6th Street, P.O. Box 5107
Sioux Falls, South Dakota 57117- 5107
(Address of principal executive offices)

(605) 336-2750
(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Name of Each Exchange on which Registered
Common Stock, $1 par value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past ninety days. þ Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer þ  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes þ No

The aggregate market value of the registrant’s common stock held by non-affiliates at July 31, 2007 was approximately $544,431,484. The aggregate market value was computed by reference to the closing price as reported on the NASDAQ Global Select Market, $34.02, on July 31, 2007, which was as of the last business day of the registrant’s most recently completed second fiscal quarter. The number of shares outstanding on March 24, 2008 was 18,106,134.

DOCUMENTS INCORPORATED BY REFERENCE

The 2008 Annual Report to Shareholders is incorporated by reference into Parts I, II, and III to the extent described therein. The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders, to be held May 21, 2008, is incorporated by reference into Part III to the extent described therein.

TABLE OF CONTENTS

	Page
PART I
Item 1.     Business		2
Item 1A.  Risk Factors		5
Item 1B.  Unresolved Staff Comments		7
Item 2.     Properties		7
Item 3.     Legal Proceedings		7
Item 4.     Submission of Matters to a Vote of Security Holders		7
PART II
Item 5.     Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities		7
Item 6.     Selected Financial Data		8
Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk		8
Item 8.     Financial Statements and Supplementary Data		8
Item 9.     Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		8
Item 9A.  Controls and Procedures		8
Item 9B.   Other information		9
PART III
Item 10.   Directors and Executive Officers of the Registrant		9
Item 11.   Executive Compensation		10
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		10
Item 13.   Certain Relationships and Related Transactions, and Director Independence		10
Item 14.   Principal Accounting Fees and Services		10
PART IV
Item 15.   Exhibits, Financial Statement Schedule		10
Signatures		12
2008 Annual Report to Shareholders
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

1

RAVEN INDUSTRIES, INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 31, 2008

Item 1. Business

General

Raven Industries, Inc. was incorporated in February 1956 under the laws of the State of South Dakota and began operations later that same year. Raven is an industrial manufacturer providing a variety of products to customers throughout North America. The company began operations as a manufacturer of high-altitude research balloons before diversifying into the industrial, agricultural, construction and military/aerospace markets. The company employs approximately 960 persons on active status and is headquartered at 205 E. Sixth Street, Sioux Falls, SD 57104 - telephone (605) 336-2750. The company’s Internet address is http://www.ravenind.com and its common stock trades on the NASDAQ Global Select Market under the symbol RAVN. The company has adopted a Code of Conduct applicable to all officers, directors, and employees and which is available on the website. Information on the company’s website is not part of this filing.

All reports (including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K) and proxy and information statements filed with the Securities and Exchange Commission (SEC) are available through a link from the company’s web site to the SEC web site. All such information is available as soon as reasonably practicable after it has been electronically filed. Filings can also be obtained free of charge by contacting the company, the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549, through its web site at http://www.sec.gov, or by calling the SEC at 1-800-SEC-0330.

The company has four business segments consisting of three Raven divisions and one subsidiary: Engineered Films Division, Flow Controls Division, Electronic Systems Division, and Aerostar International, Inc. (Aerostar). Many of the past and present product lines are an extension of technology and production methods developed in the original balloon business. Product lines have been grouped in these segments based on common technologies, production methods and raw materials; however, more than one business segment may serve each of the product markets identified above. Note 12 on page 42 of the company’s Annual Report to Shareholders, incorporated herein by reference, provides financial information concerning the business segments.

Following is a summary of company net sales by principal product categories (dollars in thousands):

	FY 2008		FY 2007		FY 2006
Pit lining and geomembrane films	$	32,967	$	28,715	$	20,605
Disaster film		—		9,880		11,447
Other plastic films		51,816		52,487		50,742
Agricultural flow control devices and accessories		58,335		41,855		42,895
Electronics manufacturing services		67,609		66,278		56,219
Parachute-related products		2,206		504		3,729
Uniforms and protective wear		5,842		6,396		6,117
Other		15,182		11,414		12,774
Total sales	$	233,957	$	217,529	$	204,528

Business Segments

Engineered Films

This segment produces rugged reinforced plastic sheeting for industrial, construction and agricultural applications.

The company’s sales force sells plastic sheeting to independent third-party distributors in each of the various markets it serves. The company extrudes a significant portion of the film converted for its commercial products and believes it is one of the largest sheeting converters in the United States. Engineered Films believes its ability to both extrude and convert films allows it to provide a more customized solution to customer needs. A number of suppliers of sheeting compete with Raven on both price and product availability. Engineered Films is the company’s most capital-intensive business segment, requiring regular investments in new extrusion capacity along with printers and conversion equipment. This segment’s capital expenditures were $4.0 million in fiscal 2008 and $13.3 million in fiscal 2007.

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Flow Controls

Products in this segment are electronic speed and global positioning system (GPS)-based, location compensated application control products. They are used primarily on agricultural sprayers for precision farming applications and by ship pilots for marine navigation. The company has developed products for field location control, chemical injection and automated steering. In February 2005, the company acquired the assets of Montgomery Industries, Inc., a privately-held Saskatchewan, Canada company, to expand its precision agriculture product base and its international presence.

Home office personnel sell flow control devices directly to original equipment manufacturers (OEMs) and independent third-party distributors. The segment also markets using on-site precision agriculture representatives in key geographic areas. The company’s competitive advantage in this segment is product reliability, ease of use, product availability and service after the sale.

Electronic Systems

The company has focused this segment’s capabilities in electronics manufacturing services (EMS) for commercial customers with a focus on high-mix, low-volume production. Assemblies manufactured by the Electronic Systems segment include avionics, communication, environmental controls, and other products where high quality is critical.

EMS sales are made in response to competitive bid requests by customers. The level and nature of competition varies with the type of product, but the company frequently competes with a number of EMS manufacturers on any given bid request. The markets in which the company participates are highly competitive, with customers having many suppliers to choose from.

Aerostar

Aerostar sells high altitude aerostats for public and commercial research, military parachutes, and specialty outerwear for security forces. Aerostar also manufactures other sewn and sealed products on a contract basis. It produces uniforms and protective wear for US government agencies as a subcontractor.

Sales are made in response to competitive bid requests. High-altitude research balloons are sold directly to public agencies (usually funded by the National Aeronautics and Space Administration) or commercial users. Aerostar is the only balloon supplier for high-altitude research in the United States.

Major Customer Information

Sales in fiscal 2008 and 2007 to Goodrich Corporation, a customer of the Electronic Systems segment, accounted for 11% and 10%, respectively, of consolidated sales. At January 31, 2008 Goodrich Corporation accounted for 14% of the company’s consolidated accounts receivable. The loss of this account would adversely affect profitability; however, the company believes its relationship with this customer is strong.

Seasonal Working Capital Requirements

Some seasonal demand exists in Flow Control’s agricultural market. The Flow Controls Division builds product in the fall for winter/spring delivery. Certain sales to agricultural customers offer spring dating terms for fall and early winter shipments. The resulting fluctuations in inventory and accounts receivable balances may require, and have required, seasonal short-term financing.

Financial Instruments

The principal financial instruments the company maintains are cash, cash equivalents, short-term investments and accounts receivable. The company manages the interest rate, credit and market risks associated with these accounts through periodic reviews of the carrying value of assets and liabilities and establishment of appropriate allowances in connection with the company policies. The company does not use off balance sheet financing, except to enter into operating leases as described in Note 9 to the consolidated financial statements located on page 40 of the 2008 Annual Report to Shareholders incorporated herein by reference. As discussed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, the company uses derivative financial instruments to manage foreign currency risk. The use of these financial instruments has had no material effect on consolidated results of operations, financial condition, or cash flows.

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Raw Materials

The company obtains a wide variety of materials from numerous vendors. Principal materials include numerous electronic components for the Electronic Systems and Flow Controls segments, various plastic resins for the Engineered Films segment and fabrics for the Aerostar segment. The Engineered Films segment has experienced volatile resin prices over the past three years. In fiscal 2006 and 2007, because this segment has few long-term sales contracts, price increases were passed on to customers. In fiscal 2008, price increases could not be passed on to customers due to weak demand and a more competitive pricing environment. With the exception of plastic resin price volatility, the company has not experienced any significant shortages or other problems in purchasing raw materials to date, and alternative sources of supply are generally available. However, predicting future material shortages and the related potential impact on Raven is not possible.

Patents

The company owns a number of patents. However, Raven does not believe that its business, as a whole, is materially dependent on any one patent or related group of patents. It believes the successful manufacture and sale of its products generally depend more upon its technical expertise and manufacturing skills.

Research and Development

The business segments conduct ongoing research and development efforts. Most of the company’s research and development expenditures are directed toward new products in the Flow Controls segment. Total company research and development costs are disclosed in Note 1 to the Consolidated Financial Statements located on page 37 of the 2008 Annual Report to Shareholders incorporated herein by reference.

Environmental Matters

Except as described below, the company believes that, in all material respects, it is in compliance with applicable federal, state and local environmental laws and regulations. Expenditures relating to compliance for operating facilities incurred in the past have not significantly affected the company’s capital expenditures, earnings or competitive position.

In connection with the sale of substantially all of the assets of the company’s Glasstite, Inc. subsidiary in fiscal 2000, the company has agreed to assume responsibility for the investigation and remediation of any pre-October 29, 1999 environmental contamination at the company’s Glasstite pickup-truck topper facility in Dunnell, Minnesota as required by the Minnesota Pollution Control Agency (MPCA) or the United States Environmental Protection Agency (EPA).

Also, in connection with the sale of substantially all of the assets of the company’s Plastic Tank Division in fiscal 2001, the company has agreed to assume responsibility for the investigation and remediation of any pre-August 28, 2000 environmental contamination at the property located at 1813 E Avenue, Sioux Falls, S.D. in accordance with the South Dakota Department of Environment and Natural Resources (DENR).

The company and the purchasers of the company’s Glasstite subsidiary and Plastic Tank Division have conducted environmental assessments of the properties used in these businesses. Although these assessments continue to be evaluated by the MPCA and DENR, respectively, on the basis of the data available, there is no reason to believe that any activities which might be required as a result of the findings of the assessments will have a material effect on the company’s results of operations, financial position or cash flows. The company had $94,000 accrued at January 31, 2008, its best estimate of probable costs to be incurred related to these matters.

Backlog

As of February 1, 2008, the company’s backlog of firm orders totaled $66.6 million. Backlog amounts as of February 1, 2007 and 2006 were $44.2 million and $43.6 million, respectively.

Employees

As of January 31, 2008, the company had approximately 970 employees, 960 in an active status. Following is a summary of active employees by segment: Electronic Systems — 270; Flow Controls - 265; Engineered Films – 170; Aerostar — 205; Administration — 50. Management believes its employee relations are satisfactory.

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Item 1A. Risk Factors

Forward-Looking Statements

Certain statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. Without limiting the foregoing, the words “anticipates,” “believes,” “expects,” “intends,” “may,” “plans” and similar expressions are intended to identify forward-looking statements. The company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, there is no assurance that such assumptions are correct or that these expectations will be achieved. Such assumptions involve important risks and uncertainties that could significantly affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions, which could affect certain of the company’s primary markets, such as agriculture and construction, or changes in competition, raw material availability, technology or relationships with the company’s largest customers, any of which could adversely impact any of the company’s product lines, as well as other risks described below. The foregoing list is not exhaustive and the company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.

Risks Relating to the Company

The company operates in markets that involve significant risks, many of which are beyond the company’s control. Based on current information, the company believes that the following identifies the most significant risk factors that could affect its businesses. However, the risks and uncertainties the company faces are not limited to those discussed below. There could be other unknown or unpredictable economic, business, competitive or regulatory factors, including factors that the company currently believes to be immaterial, that could have material adverse effects on the company’s financial position, liquidity, and results of operations. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Weather conditions could affect certain of the company’s markets such as agriculture and construction.
The company’s Flow Controls Division is largely dependent on the ability of farmers and growers to purchase the agricultural equipment that includes its products. If such growers and farmers experience adverse weather conditions resulting in poor growing conditions, particularly in North America, or experience unfavorable crop prices or expenses, they may be less likely to purchase agricultural equipment. Accordingly, poor weather conditions may adversely affect sales in the Flow Controls Division.

Poor weather conditions can also adversely affect sales in the company’s Engineered Films Division. To the extent weather conditions curtail construction activity, sales of the segment’s plastic sheeting will likely decrease.

Price fluctuations in and shortages of raw materials could have a significant impact on the company’s ability to sustain and grow earnings.
The company’s Engineered Films Division (EFD) consumes significant amounts of plastic resin, the costs of which primarily reflect market prices for natural gas. These prices are subject to worldwide supply and demand as well as other factors beyond the control of the company. Although EFD is sometimes able to pass such price increases to its customers, significant variations in the cost of plastic resins can affect the company’s operating results from period to period. Unusual supply disruptions, such as caused by a natural disaster, could cause suppliers to invoke “force majure” clauses in their supply agreements, causing shortages of material. Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served. If the company is not able to fully offset the effects of material availability and costs, financial results could be adversely affected.

Electronic components, used by both the Flow Controls Division and Electronic Systems Division, are sometimes in short supply, impacting their ability to meet customer demand.

Failure to develop and market new technologies and products could impact the company’s competitive position and have an adverse affect on the company’s financial results.
The company’s operating results in its Flow Controls and to a lesser extent, its Engineered Films and Aerostar segments are largely dependent on the ability to renew the pipeline of new products and to bring those products to market. This ability could be adversely affected by

5

difficulties or delays in product development such as the inability to identify viable new products, successfully complete research and development, obtain relevant regulatory approvals, obtain intellectual property protection, or gain market acceptance of new products and services. Because of the lengthy development process, technological challenges and intense competition, there can be no assurance that any of the products the company is currently developing, or could begin to develop in the future, will achieve substantial commercial success. In addition, sales of the company’s new products could replace sales of some of its current products, offsetting the benefit of even a successful product introduction.

The company’s Electronic Systems Division is dependent on a small number of customers.
The company’s Electronic Systems Division (ESD) is dependent on a small number of customers with the top two customers together representing over 60% of ESD sales. Accordingly, the ESD segment is dependent on the continued growth, viability and financial stability of its customers, which consist of original equipment manufacturers of avionics, consumer and hospital beds, building environmental controls and secure telecommunication equipment. Future sales are dependent on the success of the company’s customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to major customers or their products, or the failure of a major customer to pay for components or services, could have an adverse effect on the performance of ESD.

Further, ESD competes against many providers of electronics manufacturing services. Certain competitors have substantially greater resources and more geographically diversified international operations than ESD. This segment may also be at a competitive disadvantage with respect to price when compared to manufacturers with lower cost structures, particularly those with more offshore facilities located where labor and other costs are lower. The company also faces competition from the manufacturing operations of current and future customers, who are continually evaluating the merits of manufacturing products internally against the advantages of outsourcing to electronics manufacturing services providers. Accordingly, to compete effectively, ESD must continue to provide technologically advanced manufacturing services, maintain strict quality standards, respond flexibly and rapidly to customers’ design and schedule changes and deliver products globally on a reliable basis at competitive prices. Customers may cancel their orders, change production quantities or delay production. Start-up costs and inefficiencies related to new or transferred programs can adversely affect operating results and such costs may not be recoverable if such new programs or transferred programs are cancelled.

Early in fiscal 2009, ESD will lose a customer that accounted for approximately $7 million in sales in fiscal 2008. It is unlikely that growth from the other customers or cost cutting will fully offset the impact on ESD’s fiscal 2009 operating income.

The company’s Aerostar segment depends on the US government for a significant portion of its sales creating uncertainty in the timing of and funding for projected contracts.
In the past three years, a significant portion of Aerostar’s sales were to the US government or US government agencies as a prime or sub-contractor. Government spending has historically been cyclical. A decrease in US government defense or near-space research spending or changes in spending allocation could result in one or more of the company’s programs being reduced, delayed or terminated. Reductions in the company’s existing programs, unless offset by other programs and opportunities, could adversely affect its ability to sustain and grow its future sales and earnings. The company’s US government sales are funded by the federal budget, which operates on an October-to-September fiscal year. Changes in congressional schedules, negotiations for program funding levels or unforeseen world events can interrupt the funding for a program or contract. Funds for multi-year contracts can be changed in subsequent years in the appropriations process.

In addition, the US government has increasingly relied on indefinite delivery, indefinite quantity (IDIQ) contracts and other procurement vehicles that are subject to a competitive bidding and funding process even after the award of the basic contract, adding an additional element of uncertainty to future funding levels. Delays in the funding process or changes in funding can impact the timing of available funds or can lead to changes in program content or termination at the government’s convenience. The loss of anticipated funding or the termination of multiple or large programs could have an adverse effect on the company’s future sales and earnings.

The company derives a portion of its revenues from foreign markets, which subjects the company to risk of changes in government policies and laws or worldwide economic conditions.
The company’s sales outside the US were $20 million in fiscal 2008. The company’s financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of US and non-US governments, agencies and similar organizations. These conditions include but are not limited to changes in a country’s or region’s economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced sales and reduced profitability associated with such sales.

6

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties

The company maintains the following properties in connection with its operations, all of which the company owns, unless indicated otherwise:

	Square			Business
Location	Feet		Function	Segments
Sioux Falls, SD		150,000	Corporate office; electronics manufacturing	All
		131,000	Plastic sheeting manufacturing	Engineered Films
		73,000	Warehouse	Engineered Films
		59,000	Plastic sheeting and hot-air balloon manufacturing	Engineered Films; Aerostar
		34,000	Warehouse and offices	Engineered Films
		27,000	Offices and material handling facility	Aerostar
		25,000	Inflatable manufacturing	Aerostar
		24,000	Electronics manufacturing	Electronic Systems
		10,000	Machine shop	Flow Controls
		10,000	Training and product development facility	Flow Controls
Sulphur Springs, TX		64,000	Research balloon manufacturing	Aerostar
Springfield, OH		30,000	Warehouse	Engineered Films
Huron, SD		24,000	Sewing plant	Aerostar
St. Louis, MO		24,000	Electronics manufacturing	Electronic Systems
Madison, SD		20,000	Sewing plant	Aerostar
Austin, TX		*7,000	Product development facility	Flow Controls
Stockholm, SK		*7,000	Warehouse	Flow Controls

* Leased

Most of the company’s manufacturing plants also serve as distribution centers and contain offices for sales, engineering and manufacturing support staff. The company believes that its properties are, in all material respects, in good condition and are adequate to meet existing production needs. The company owns 6.95 acres of undeveloped land adjacent to the other owned property in Sioux Falls, which is available for expansion.

Item 3. Legal Proceedings

The company is responsible for investigation and remediation of environmental contamination at two of its sold facilities (see “Item 1, Business — Environmental Matters”). In addition, the company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of its business. The potential costs and liability of such claims cannot be determined at this time. Management believes that any liability resulting from these claims will be substantially mitigated by insurance coverage. Accordingly, management does not believe the ultimate outcome of these matters will be significant to its results of operations, financial position or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted during the fourth quarter to a vote of security holders of the company.

Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

Incorporated by reference to pages 30 (Quarterly Information), 16-17 (Eleven-year Financial Summary), and inside back cover of the 2008 Annual Report to Shareholders.

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Repurchases of the company’s common stock during the fourth quarter of fiscal 2008 were as follows:

							Max. # (or approx $
					Total # shares		value of shares
					purchased as part		that may yet be
					of Publicly		purchased under the
Period	Total Number		Average price		Announced Plan		Plans
November 2007		—		—		—	$	2,000,000
December 2007		—		—		—	$	2,000,000
January 2008		10,000	$	31.05		10,000	$	1,689,543
Total Fourth Quarter		10,000	$	31.05		10,000

Under a resolution from the Board of Directors, dated May 22, 2007, the company had authority to repurchase up to $2.0 million of stock on the open market. On March 15, 2008, the Board of Directors increased this authorization to $10 million.

Item 6. Selected Financial Data

Incorporated by reference to pages 16-17 of the company’s 2008 Annual Report to Shareholders.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Incorporated by reference to pages 19-29 of the company’s 2008 Annual Report to Shareholders.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The exposure to market risks pertains mainly to changes in interest rates on cash and cash equivalents and short-term investments. The company has no debt. The company does not expect operating results or cash flows to be significantly affected by changes in interest rates. Additionally, the company does not enter into derivatives or other financial instruments for trading or speculative purposes. However, the company does utilize derivative financial instruments to manage the economic impact of fluctuation in foreign currency exchange rates on those transactions that are denominated in currency other than its functional currency, which is the US dollar. The use of these financial instruments had no material effect on the company’s financial condition, results of operations or cash flows.

The company’s subsidiaries that operate outside the United States use their local currency as the functional currency. The functional currency is translated into US 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 cumulative translation adjustments in accumulated other comprehensive income (loss) within shareholders’ equity. Foreign currency transaction gains or losses are recognized in the period incurred and are included in interest income and other, net in the Consolidated Statements of Income. Foreign currency fluctuations had no material effect on the company’s financial condition, results of operations or cash flows.

Item 8. Financial Statements and Supplementary Data

Incorporated by reference to pages 32-43 of the company’s 2008 Annual Report to Shareholders.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

As of January 31, 2008, the end of the period covered by this report, management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) evaluated the effectiveness of disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of such date. Based on that evaluation, the CEO and CFO have concluded that the company’s disclosure controls and procedures were effective as of January 31, 2008.

8

Management’s Report on Internal Control Over Financial Reporting

The company included a report from its management concerning its internal control over financial reporting on page 31 of its 2008 Annual Report to Shareholders, which is incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There were no changes in the company’s internal control over financial reporting that occurred during the fiscal quarter ended January 31, 2008, that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Item 9B. Other Information

Not applicable.

Item 10. Directors, Executive Officers, and Corporate Governance

Incorporated by reference to the sections entitled “Election of Directors,” “Board of Directors and Committees,” “Corporate Governance,” and “Other Matters” within the company’s Proxy Statement relating to its 2008 Annual Meeting of Shareholders.

Executive Officers

Name	Age		Position
Ronald M. Moquist		62	President and Chief Executive Officer
Thomas Iacarella		54	Vice President and Chief Financial Officer
David R. Bair		51	Division Vice President and General Manager – Electronic Systems Division
James D. Groninger		49	Division Vice President and General Manager–Engineered Films Division
Barbara K. Ohme		60	Vice President — Administration
Daniel A. Rykhus		43	Executive Vice President, General Manager–Flow Controls Division
Mark. L. West		54	President – Aerostar International, Inc.

Each of the above executive officers serves at the pleasure of the Board of Directors on a year-to-year basis.

Mr. Moquist joined Raven in 1975 as Sales and Marketing Manager, served as the company’s Executive Vice President from 1985 through 2000, and has been the company’s President and Chief Executive Officer since 2000.

Mr. Iacarella joined Raven in 1991 as Corporate Controller and has been the company’s Chief Financial Officer, Secretary and Treasurer since 1998. Prior to joining the company, he held positions with Tonka Corporation and the accounting firm now known as Ernst & Young.

Mr. Bair joined Raven in 1999 as Division Vice President and General Manager of the Electronic Systems Division.

Mr. Groninger joined Raven in 1995 as Manager of Glasstite, Inc. and has been Division Vice President and General Manager of the Engineered Films Division since 2004.

Ms. Ohme joined Raven in 1987 as Employment Manager and has been the company’s Vice President of Administration since 2004.

Mr. Rykhus joined Raven in 1990 as Director of World Class Manufacturing and has been the company’s Executive Vice President and General Manager of the Flow Controls Division since 2004.

Mr. West joined Raven in 1982 as a project engineer and has been the President of Aerostar International, Inc. since 1986.

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Item 11. Executive Compensation

Incorporated by reference to the sections entitled “Executive Compensation” and “Non-Management Director Compensation” within the company’s Proxy Statement relating to its 2008 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Incorporated by reference to the section entitled “Ownership of Common Stock” within the company’s Proxy Statement relating to its 2008 Annual Meeting of Shareholders.

The remaining information called for by this item relating to “Securities Authorized for Issuance under Equity Compensation Plans” is incorporated by reference to Note 10 on page 41 of the company’s 2008 Annual Report to Shareholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference to the sections entitled “Board of Directors and Committees” and ”Corporate Governance” contained in the company’s Proxy Statement relating to its 2008 Annual Meeting of Shareholders.

Item 14. Principal Accounting Fees and Services

Incorporate by reference to the section entitled “Independent Registered Public Accounting Firm Fees,” contained in the company’s Proxy Statement relating to its 2008 Annual Meeting of Shareholders.

Item 15. Exhibits, Financial Statement Schedule

(a) Consolidated Financial Statements and Schedule

1.	Incorporated by reference from the attached exhibit containing the 2008 Annual Report to Shareholders:
	Consolidated Balance Sheets
	Consolidated Statements of Income
	Consolidated Statements of Shareholders’ Equity and Comprehensive Income
	Consolidated Statements of Cash Flows
	Notes to Financial Statements
	Report of Independent Registered Public Accounting Firm
2.	Included in Part II:
	Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
	Schedule II — Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or not required.

10

     (b) Exhibits

Exhibit
Number			Description
	3	(a)	Articles of Incorporation of Raven Industries, Inc. and all amendments thereto.*
	3	(b)	Bylaws of Raven Industries, Inc.*
	3	(c)	Extract of Shareholders Resolution adopted on April 7, 1962 with respect to the bylaws of Raven Industries, Inc. *
	10	(a)	Employment Agreement between Raven Industries, Inc. and Daniel Rykhus dated as of April 1, 2004 (incorporated by reference to Exhibit 10(a) of the company’s Form 10-Q for the quarter ended April 30, 2004). †
	10	(b)	Employment Agreement between Raven Industries, Inc. and David R. Bair dated as of February 1, 2004. † ***
	10	(c)	Employment Agreement between Raven Industries, Inc. and James D. Groninger dated as of February 1, 2004. † ***
	10	(d)	Employment Agreement between Raven Industries, Inc. and Mark L. West dated as of February 1, 2004. † ***
	10	(e)	Employment Agreement between Raven Industries, Inc. and Ronald M. Moquist dated as of February 1, 2004.† **
	10	(f)	Employment Agreement between Raven Industries, Inc. and Thomas Iacarella dated as of February 1, 2004. † **
	10	(g)	Schedule A to Employment Agreements between Raven Industries, Inc. and Ronald M. Moquist and Thomas Iacarella dated as of February 1, 2004. †**
	10	(h)	Employment Agreement between Raven Industries, Inc. and Barbara Ohme dated as of February 1, 2004. † **
	10	(i)	Change in Control Agreement between Raven Industries, Inc. and each of the following officers and key employees:
			Ronald M. Moquist, Thomas Iacarella, Daniel A. Rykhus, David R. Bair, James D. Groninger, Barbara K. Ohme, and Mark L. West dated as of December 17, 2007 (incorporated by reference to Exhibit 10.1 of the company’s 8-K filed December 17, 2007). †
	10	(j)	Trust Agreement between Raven Industries, Inc. and Norwest Bank South Dakota, N.A. dated April 26, 1989. *
	10	(k)	Raven Industries, Inc. 2000 Stock Option and Compensation Plan adopted May 24, 2000 (incorporated by reference to Exhibit A to the company’s definitive Proxy Statement filed April 19, 2000).†
	10	(l)	Raven Industries, Inc. Deferred Compensation Plan for Directors adopted May 23, 2006 (incorporated by reference to Exhibit 10.1 to the company’s 8-K filed May 24, 2006).†
	13		2008 Annual Report to Shareholders (only those portions specifically incorporated herein by reference shall be deemed filed with the Commission).
	21		Subsidiaries of the Registrant.
	23		Consent of Independent Registered Public Accounting Firm.
	31.1		Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act.
	31.2		Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act.
	32.1		Certification pursuant to Section 906 of Sarbanes-Oxley Act.
	32.2		Certification pursuant to Section 906 of Sarbanes-Oxley Act.

†	Management contract or compensatory plan or arrangement.
*	Incorporated by reference to corresponding Exhibit Number of the company’s Form 10-K for the year ended January 31, 1989.
**	Incorporated by reference to corresponding Exhibit Number of the company’s Form 10-K for the year ended January 31, 2004.
***	Incorporated by reference to corresponding Exhibit Number of the company’s Form 10-K for the year ended January 31, 2007.

11

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RAVEN INDUSTRIES, INC.
	(Registrant)
March 31, 2008	By:	/s/ Ronald M. Moquist
Date		Ronald M. Moquist
		President and Chief Executive Officer (Principal Executive Officer and Director)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

March 31, 2008	/s/ Ronald M. Moquist
Date	Ronald M. Moquist
	President and Chief Executive Officer (Principal Executive
	Officer and Director)
March 31, 2008	/s/ Thomas Iacarella
Date	Thomas Iacarella
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)
Directors:
March 31, 2008	/s/ Conrad J. Hoigaard
Date	Conrad J. Hoigaard
March 31, 2008	/s/ Anthony W. Bour
Date	Anthony W. Bour
March 31, 2008	/s/ David A. Christensen
Date	David A. Christensen
March 31, 2008	/s/ Thomas S. Everist
Date	Thomas S. Everist
March 31, 2008	/s/ Mark E. Griffin
Date	Mark E. Griffin
March 31, 2008	/s/ Kevin T. Kirby
Date	Kevin T. Kirby
March 31, 2008	/s/ Cynthia H. Milligan
Date	Cynthia H. Milligan

12

Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule

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

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated March 20, 2008 appearing in the 2008 Annual Report to Shareholders of Raven Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 20, 2008

13

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

for the years ended January 31, 2008, 2007 and 2006

(Dollars in thousands)

			Column C
	Column B		Additions			Column D
	Balance at		Charged to		Charged to	Deductions		Column E
Column A	Beginning		Costs and		Other	From		Balance at
Description	of Year		Expenses		Accounts	Reserves (1)		End of Year
Deducted in the balance sheet from the asset to which it applies:
Allowance for doubtful accounts:
Year ended January 31, 2008	$	258	$	91	None	$	56	$	293
Year ended January 31, 2007	$	257	$	40	None	$	39	$	258
Year ended January 31, 2006	$	265	$	78	None	$	86	$	257

Note:
(1)	Represents uncollectible accounts receivable written off during the year, net of recoveries.

14

EX-13

ELEVEN-YEAR FINANCIAL SUMMARY

	For the years ended January 31
Dollars in thousands except per-share data	2008			2007			2006
OPERATIONS FOR THE YEAR
Net sales
Ongoing operations	$	233,957		$	217,529		$	204,528
Sold businesses(a)		—			—			—
Total		233,957			217,529			204,528
Gross profit		59,148			54,882			53,231
Operating income
Ongoing operations		41,145			38,302			37,284
Sold businesses(a)		—			—			—
Total		41,145			38,302			37,284
Income before income taxes		42,224			38,835			37,494
Net income	$	27,802		$	25,441		$	24,262
Net income as % of sales		11.9	%		11.7	%		11.9	%
Net income as % of beginning equity		28.3	%		30.1	%		36.7	%
Cash dividends	$	7,966		$	6,507		$	5,056
FINANCIAL POSITION
Current assets	$	100,869		$	73,219		$	71,345
Current liabilities		22,108			16,464			20,050
Working capital	$	78,761		$	56,755		$	51,295
Current ratio		4.56			4.45			3.56
Property, plant and equipment	$	35,743		$	36,264		$	25,602
Total assets		147,861			119,764			106,157
Long-term debt, less current portion		—			—			9
Shareholders’ equity	$	118,275		$	98,268		$	84,389
Long-term debt / total capitalization		0.0	%		0.0	%		0.0	%
Inventory turnover (CGS / year-end inventory)		4.8			5.8			5.4
CASH FLOWS PROVIDED BY (USED IN)
Operating activities	$	27,151		$	26,313		$	21,189
Investing activities		(4,433	)		(18,664	)		(11,435	)
Financing activities		(8,270	)		(10,277	)		(6,946	)
Increase (decrease) in cash and cash equivalents		14,489			(2,626	)		2,790
COMMON STOCK DATA
Net income per share — basic	$	1.54		$	1.41		$	1.34
Net income per share — diluted		1.53			1.39			1.32
Cash dividends per share		0.44			0.36			0.28
Book value per share		6.52			5.45			4.67
Stock price range during year
High	$	45.85		$	42.70		$	33.15
Low		26.20			25.46			16.54
Close	$	30.02		$	28.43		$	31.60
Shares and stock units outstanding, year end (in thousands)		18,130			18,044			18,072
Number of shareholders, year end		8,700			8,992			9,263
OTHER DATA
Price / earnings ratio		19.6			20.5			23.9
Average number of employees		930			884			845
Sales per employee	$	252		$	246		$	242
Backlog	$	66,628		$	44,237		$	43,619

	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.

16      2008 ANNUAL REPORT

2005	2004			2003			2002			2001			2000			1999			1998
$168,086	$	142,727		$	119,589		$	112,018		$	113,360		$	107,862		$	108,408		$	104,489
—		—			1,314			6,497			19,498			42,523			46,798			47,679
168,086		142,727			120,903			118,515			132,858			150,385			155,206			152,168
43,200		33,759			27,515			23,851			21,123			24,217			24,441			24,929
27,862		21,981			16,861			13,788		7,417		(c)		7,971			8,220			9,555
—		(355	)		204			(613	)	3,331		(d)	2,606		(e)		1,453			1,007
27,862		21,626			17,065			13,175			10,748			10,577			9,673			10,562
27,955		21,716			17,254			13,565			10,924			10,503			9,649		12,540		(f)
$  17,891	$	13,836		$	11,185		$	8,847		$	6,411	(c)(d)	$	6,762	(e)	$	6,182		$	8,062
10.6%		9.7	%		9.3	%		7.5	%		4.8	%		4.5	%		4.0	%		5.3	%
26.9%		23.8	%		21.5	%		18.4	%		11.8	%		10.9	%		10.0	%		14.2	%
$ 15,298(b)	$	3,075		$	2,563		$	2,371		$	2,399		$	2,895		$	2,944		$	2,709
$ 61,592	$	55,710		$	49,351		$	45,308		$	51,817		$	55,371		$	60,279		$	57,285
20,950		11,895			13,167			13,810			13,935			14,702			15,128			17,816
$  40,642	$	43,815		$	36,184		$	31,498		$	37,882		$	40,669		$	45,151		$	39,469
2.94		4.68			3.75			3.28			3.72			3.77			3.98			3.22
$  19,964	$	15,950		$	16,455		$	14,059		$	11,647		$	15,068		$	19,563		$	19,817
88,509		79,508			72,816			67,836			65,656			74,047			83,657			82,066
—		57			151			280			2,013			3,024			4,572			1,128
$  66,082	$	66,471		$	58,236		$	52,032		$	47,989		$	54,519		$	62,293		$	61,563
0.0%		0.1	%		0.3	%		0.5	%		4.0	%		5.3	%		6.8	%		1.8	%
5.4		6.5			4.4			5.0			5.9			5.2			4.9			4.8
$  18,871	$	19,732		$	12,735		$	18,496		$	9,441		$	10,375		$	8,326		$	9,274
(7,631)		(4,352	)		(9,166	)		(13,152	)		9,752			6,323			(3,127	)		(4,979	)
(19,063)		(6,155	)		(5,830	)		(8,539	)		(14,227	)		(16,326	)		(2,714	)		(4,884	)
(7,823)		9,225			(2,261	)		(3,195	)		4,966			372			2,485			(589	)
$     0. 99	$	0.77		$	0.61		$	0.48		$	0.31		$	0.26		$	0.22		$	0.28
0.97		0.75			0.60			0.47			0.31			0.26			0.22			0.28
0.85(b)		0.17			0.14			0.13			0.12			0.11			0.10			0.09
3.67		3.68			3.21			2.82			2.53			2.32			2.21			2.13
$   26.94	$	15.23		$	9.20		$	5.88		$	3.48		$	3.04		$	3.79		$	4.29
13.08		7.56			4.38			3.02			1.88			2.25			2.54			3.27
$   18.38	$	14.11		$	7.91		$	5.64		$	3.04		$	2.40		$	2.67		$	3.77
17,999		18,041			18,133			18,424			18,956			23,496			28,164			28,944
6,269		3,560			2,781			2,387			2,460			2,749			3,014			3,221
18.9		18.8			13.2			12.1			9.8			9.2			12.4			13.7
835		787			784			858			1,082			1,369			1,507			1,573
$     201	$	181		$	154		$	138		$	123		$	110		$	103		$	97
$43,646	$	47,120		$	42,826		$	33,834		$	38,239		$	44,935		$	47,431		$	47,154

(b)	Includes a special dividend of $.625 per share that was paid in fiscal 2005.
(c)	Includes $2.6 million of business repositioning charges, net of gains on plant sales, primarily in Electronic Systems and Aerostar.
(d)	Includes the $3.1 million pretax gain ($1.4 million net of tax) on the sale of the company’s Plastic Tank Division.
(e)	Includes the $1.2 million pretax gain ($764,000 net of tax) on the sale of assets of the company’s Glasstite subsidiary.
(f)	Includes the $1.8 million pretax gain ($1.2 million net of tax) on the sale of an investment in an affiliate.

RAVEN INDUSTRIES      17

BUSINESS SEGMENTS

	For the years ended January 31
Dollars in thousands	2008			2007			2006			2005			2004			2003
ENGINEERED FILMS DIVISION
Sales	$	84,783		$	91,082		$	82,794		$	58,657		$	42,636		$	35,096
Operating income		17,655			23,440			19,907			15,739			10,563			10,030
Assets		43,688			41,988			33,512			25,181			15,941			17,244
Capital expenditures		4,012			13,266			7,359			3,960			712			4,080
Depreciation & amortization		4,046			2,887			2,436			1,403			1,611			1,475
FLOW CONTROLS DIVISION
Sales	$	64,291		$	45,515		$	47,506		$	40,726		$	35,059		$	28,496
Operating income		19,102			10,111			13,586			10,516	(b)		8,254			6,897
Assets		36,922			27,629			30,047			23,701			19,304			21,483
Capital expenditures		1,008			577			938			1,372			341			729
Depreciation & amortization		1,125			1,142			1,085			876			1,004			948
ELECTRONIC SYSTEMS DIVISION
Sales	$	67,609		$	66,278		$	56,219		$	47,049		$	44,307		$	38,589
Operating income		10,349			10,850			8,916			4,492			5,797			4,022
Assets		25,865			25,175			20,191			17,382			14,975			14,528
Capital expenditures		1,077			1,357			1,612			1,201			841			395
Depreciation & amortization		1,237			1,086			871			880			850			978
AEROSTAR
Sales	$	17,274		$	14,654		$	18,009		$	21,654		$	20,725		$	17,408
Operating income		1,506			707			2,133			3,609			3,092	(c)		1,012
Assets		9,857			8,161			6,837			7,492			7,756			7,032
Capital expenditures		156			812			179			542			1,130			570
Depreciation & amortization		499			375			359			389			436			374
REPORTABLE SEGMENTS TOTAL
Sales	$	233,957		$	217,529		$	204,528		$	168,086		$	142,727		$	119,589
Operating income		48,612			45,108			44,542			34,356	(b)		27,706	(c)		21,961
Assets		116,332			102,953			90,587			73,756			57,976			60,287
Capital expenditures		6,253			16,012			10,088			7,075			3,024			5,774
Depreciation & amortization		6,907			5,490			4,751			3,548			3,901			3,775
CORPORATE & OTHER(a)
Sales from sold business	$	—		$	—		$	—		$	—		$	—		$	1,314
Operating income (loss) from sold business		—			—			—			—			(355	)		204
Operating (loss) from administrative expenses		(7,467	)		(6,806	)		(7,258	)		(6,494	)		(5,725	)		(5,100	)
Assets		31,529			16,811			15,570			14,753			21,532			12,529
Capital expenditures		382			510			270			466			306			259
Depreciation & amortization		437			395			400			293			244			191
TOTAL COMPANY
Sales	$	233,957		$	217,529		$	204,528		$	168,086		$	142,727		$	120,903
Operating income		41,145			38,302			37,284			27,862	(b)		21,626	(c)		17,065
Assets		147,861			119,764			106,157			88,509			79,508			72,816
Capital expenditures		6,635			16,522			10,358			7,541			3,330			6,033
Depreciation & amortization		7,344			5,885			5,151			3,841			4,145			3,966

(a)	Operating income from sold businesses includes administrative expenses directly attributable to the sold businesses. Assets are principally cash, investments, deferred taxes and notes receivable.
(b)	Includes a $1.3 million pretax writeoff of assets related to the Fluent Systems product line.
(c)	Includes $182,000 of pretax gain on plant sale.

18      2008 ANNUAL REPORT

FINANCIAL REVIEW AND ANALYSIS

Comparative Results of Operations

	For the years ended January 31
	2008							2007							2006
				%		%					%		%					%		%
Dollars in thousands, except per-share data				sales		change					sales		change					sales		change
Net sales	$	233,957					+ 7.6	$	217,529					+6.4	$	204,528					+21.7
Gross profit		59,148			25.3		+ 7.8		54,882			25.2		+3.1		53,231			26.0		+23.2
Operating expenses		18,003			7.7		+ 8.6		16,580			7.6		+4.5		15,947			7.8		+12.9
Operating income		41,145			17.6		+ 7.4		38,302			17.6		+2.7		37,284			18.2		+33.8
Income before income taxes		42,224			18.0		+ 8.7		38,835			17.9		+3.6		37,494			18.3		+34.1
Income taxes		14,422			6.2		+ 7.7		13,394			6.2		+1.2		13,232			6.5		+31.5
Net income	$	27,802			11.9		+ 9.3	$	25,441			11.7		+4.9	$	24,262			11.9		+35.6
Net income per share — diluted	$	1.53					+10.1	$	1.39					+5.3	$	1.32					+36.1
Effective income tax rate		34.2	%				–0.9		34.5	%				–2.3		35.3	%				–1.9

Executive Summary

Raven Industries, Inc. is an industrial manufacturer providing a variety of products to customers in the industrial, agricultural, construction and military/aerospace markets, primarily in North America. It operates four business segments: Engineered Films, Flow Controls, Electronic Systems and Aerostar.

Fiscal 2008 was another record-breaking year for the company, which reported $27.8 million in net income and $1.53 of earnings per diluted share. Net income increased $2.4 million, or 9.3%, over last year’s $25.4 million, while earnings per diluted share rose 14 cents from one year ago. Fiscal year net sales climbed to $234.0 million, exceeding fiscal 2007 by $16.4 million, or 7.6%. Sales and profit increases were driven by a strong performance from the company’s Flow Controls segment.

In fiscal 2008, Raven raised its quarterly dividend from 9 cents per share to 11 cents per share, representing the 21st-consecutive annual increase. Fiscal 2008 capital spending was $6.6 million, down significantly from the $16.5 million spent one year earlier. In fiscal 2007 and 2006, the company made significant capital investments in its Engineered Films segment, adding extrusion capacity and manufacturing capabilities. Management expects that fiscal 2009 capital spending will be in the $8 million range.

The following discussion highlights the consolidated operating results. Operating results are more fully explained in the segment discussions that appear after this.

Fiscal 2008 versus Fiscal 2007

Consolidated net sales for fiscal 2008 of $234.0 million were $16.4 million, or 7.6%, higher than last year. Flow Controls was the main driver of the annual revenue growth and, combined with revenue increases for Electronic Systems and Aerostar, offset lower Engineered Films sales. An improved agricultural economy which increased product demand and the introduction of new products grew Flow Controls sales by $18.8 million, to $64.3 million. Electronic Systems net sales of $67.6 million were $1.3 million higher than fiscal 2007, with deliveries of aviation and secure communication electronics increasing over last year. Aerostar fiscal 2008 net sales of $17.3 million improved $2.6 million over one year earlier, due mainly to higher research balloon and parachute sales activity. Engineered Films net sales of $84.8 million were $6.3 million lower than fiscal 2007, which included $9.9 million in disaster film shipments that did not recur in fiscal 2008.

Fiscal 2008 operating income of $41.1 million increased $2.8 million, or 7.4%, as compared with $38.3 million for fiscal 2007. A strong profit performance in Flow Controls, together with increased Aerostar operating income, offset lower Engineered Films and Electronic Systems results. Flow Controls improved profits by $9.0 million from fiscal 2007, leveraging higher sales volume on the existing manufacturing cost base to reach $19.1 million in operating income. Aerostar reported operating income of $1.5 million for fiscal 2008, more than double the $707,000 posted one year earlier. This was due mainly to higher research balloon profits and improved results on the MC-6 Army parachute contract. Engineered Films operating income of $17.7 million was down $5.8 million from one year ago, reflecting a lower sales level, increased raw material costs, and higher depreciation expense. Electronic Systems operating income of $10.3 million fell short of last fiscal year due primarily to a less favorable product mix, decreasing $501,000 on slightly higher sales volume.

RAVEN INDUSTRIES      19

FINANCIAL REVIEW AND ANALYSIS (continued)

Fiscal 2007 versus Fiscal 2006

Fiscal 2007 net sales of $217.5 million exceeded the prior year by $13.0 million, or 6.4%. Engineered Films and Electronic Systems posted record net sales for the fiscal year ended January 31, 2007, while Flow Controls and Aerostar fell short of fiscal 2006 revenue levels. Engineered Films net sales reached $91.1 million, an $8.3 million improvement over fiscal 2006, with increased demand for pit liners used in oil and gas fields, along with higher construction film sales, resulting in 10.0% revenue growth. Electronic Systems net sales climbed to $66.3 million, a $10.1 million increase over fiscal 2006. Higher product demand from the segment’s largest customer accounted for most of fiscal 2007’s revenue increase. Flow Controls net sales of $45.5 million for the fiscal year ended January 31, 2007, were behind the prior year by $2.0 million. There was a fair amount of uncertainty in the agricultural economy during that year and customer buying decisions were delayed. Lower parachute product deliveries accounted for the fiscal 2007 revenue decrease for Aerostar, as net sales of $14.7 million represented a $3.4 million decline from fiscal 2006.

For the year ended January 31, 2007, operating income rose 2.7% to $38.3 million, an increase of $1.0 million compared with $37.3 million reported for fiscal 2006. Strong performances from Engineered Films and Electronic Systems were partially offset by lower operating income for Flow Controls and Aerostar. Higher sales and favorable raw material pricing contributed to Engineered Films’ improved operating income, which increased $3.5 million to reach $23.4 million. Fiscal 2007 Electronic Systems operating income of $10.9 million grew $1.9 million, due mainly to higher sales and better operational execution on existing customer contracts. Flow Controls fiscal 2007 operating income of $10.1 million represented a decrease of $3.5 million in contrast to one year earlier. Lower sales volume on relatively fixed costs negatively affected this segment’s profit for the year ended January 31, 2007. With the lack of parachute product shipments during fiscal 2007, Aerostar reported a decrease in operating income of $1.4 million, falling to $707,000.

Prospects

Management expects another year of record sales and profits in fiscal 2009, with continuing demand for Flow Controls precision agriculture products leading revenue and income growth. Aerostar is anticipating its turnaround to continue in fiscal 2009, as full-year deliveries under the government protective wear and MC-6 parachute contracts are expected to increase revenue and operating income for the segment. With the additional capabilities and capacity of the new extrusion equipment placed into service during fiscal 2008, Engineered Films continues to position itself for future revenue and profit growth and is expected to post higher sales and operating income in fiscal 2009. The company anticipates lower Electronic Systems sales and profits in fiscal 2009, due to the loss of an important customer and weak demand for consumer bed controls.

Performance Measures

Raven seeks to enhance shareholder value by delivering high returns on sales and invested capital. Fiscal 2008 net income was 11.9% of net sales, matching the company’s fiscal 2006 record. Net income as a percent of average assets was 20.8% as compared to 22.5% in fiscal 2007. As a percent of beginning equity, fiscal 2008 net income was 28.3%, down from fiscal 2007’s 30.1%.

	2008			2007			2006			2005			2004			2003
Net income as % of
Net sales		11.9	%		11.7	%		11.9	%		10.6	%		9.7	%		9.3	%
Average assets		20.8	%		22.5	%		24.9	%		21.3	%		18.2	%		15.9	%
Beginning equity		28.3	%		30.1	%		36.7	%		26.9	%		23.8	%		21.5	%

20     2008 ANNUAL REPORT

Segment Analysis

Net Sales and Operating Income by Segment

	2008				2007				2006
			%				%				%
Dollars in thousands	amount		change		amount		change		amount		change
Net Sales
Engineered Films	$	84,783		–6.9	$	91,082		+10.0	$	82,794		+41.1
Flow Controls		64,291		+41.3		45,515		–4.2		47,506		+16.6
Electronic Systems		67,609		+  2.0		66,278		+17.9		56,219		+19.5
Aerostar		17,274		+17.9		14,654		–18.6		18,009		–16.8
Total	$	233,957		+ 7.6	$	217,529		+ 6.4	$	204,528		+21.7

	2008					2007					2006
				%					%					%
	amount			sales		amount			sales		amount			sales
Operating Income
Engineered Films	$	17,655			20.8	$	23,440			25.7	$	19,907			24.0
Flow Controls		19,102			29.7		10,111			22.2		13,586			28.6
Electronic Systems		10,349			15.3		10,850			16.4		8,916			15.9
Aerostar		1,506			8.7		707			4.8		2,133			11.8
Corporate expenses		(7,467	)				(6,806	)				(7,258	)
Total	$	41,145			17.6	$	38,302			17.6	$	37,284			18.2

Engineered Films

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

Engineered Films — Comparative Results of Operations

	2008						2007						2006
			%		%				%		%				%		%
Dollars in thousands			sales		change				sales		change				sales		change
Net sales	$	84,783				–6.9	$	91,082				+10.0	$	82,794				+41.1
Gross profit		21,040		24.8		–21.5		26,803		29.4		+17.5		22,818		27.6		+24.1
Selling expenses		3,385		4.0		+ 0.7		3,363		3.7		+15.5		2,911		3.5		+  9.7
Operating income		17,655		20.8		–24.7		23,440		25.7		+17.7		19,907		24.0		+26.5

Fiscal 2008 versus Fiscal 2007

Net sales of $84.8 million for the year ended January 31, 2008, were $6.3 million, or 6.9%, behind the $91.1 million mark posted one year ago. Lower disaster film shipments of $9.9 million and a decrease in industrial market revenue were partially offset by higher sales of pit liners used in the energy sector and an increase in underslab vapor barrier deliveries. Increased drilling activity due to high oil and gas prices throughout the year accounted for the sales improvement in the energy market, while higher market share and industry growth boosted vapor barrier revenue. In the past, the segment has been able to pass through raw material cost increases in the form of higher selling prices. However, competitive pricing pressures in the construction market did not allow for this type of adjustment in fiscal 2008. Despite higher raw material costs in fiscal 2008, selling prices were down approximately 3% from fiscal 2007 because of lower product pricing.

Fiscal 2008 operating income of $17.7 million fell behind the prior year by $5.8 million, or 24.7%. In addition, gross profit as a percent of sales dropped from 29.4% to 24.8%. For the quarter ended January 31, 2008, operating income of $3.4 million was down $914,000, or 21.2%, compared with one year earlier. Profits and margins have been negatively affected by a more competitive pricing environment, as higher input costs have not equated to increased selling prices due to excess film capacity in the marketplace. Besides higher raw material costs, the segment also experienced increased depreciation expense and start-up costs associated with the new extruders placed into service during the first and second quarters of fiscal 2008. Fiscal 2008 selling expenses of $3.4 million were even with last year, reflecting lower personnel costs offset by increased product development expense.

RAVEN INDUSTRIES     21

FINANCIAL REVIEW AND ANALYSIS (continued)

Fiscal 2007 versus Fiscal 2006

Fiscal 2007 net sales of $91.1 million grew 10.0%, or $8.3 million, from $82.8 million reported for fiscal 2006. Sales of pit lining and construction films posted significant revenue growth for fiscal 2007, but were partially offset with decreased sales activity in the manufactured housing and disaster film markets. Fiscal 2007 disaster film sales totaled $9.9 million versus $11.4 million one year earlier. Selling price adjustments positively affected the fiscal 2007 sales level. The amount of sales attributable to higher product pricing (and not due to an increase in volume) was estimated to be about 8% of total fiscal 2007 reported sales.

Operating income in fiscal 2007 climbed to $23.4 million, up $3.5 million, or 17.7%. Gross profit as a percentage of net sales increased from 27.6% in fiscal 2006 to 29.4%. Higher sales and favorable resin costs contributed to the profit growth and higher margin percentage. A rise in fiscal 2007 selling expenses partially offset the positive impact of the segment’s higher sales level and favorable material costs. Fiscal 2007 selling expenses exceeded the prior year because of higher personnel costs and an increased trade show presence to support the segment’s expanded product offerings and manufacturing capabilities.

Prospects

Engineered Films is expected to generate double-digit sales growth in the upcoming year. However, operating income is not anticipated to grow at the same pace, as the current pricing environment is expected to continue into fiscal 2009. Management believes that the recent investments in extrusion capacity will allow this segment to expand its product offerings and open new markets, but notes that it generally takes two-to-three years to fully utilize new extrusion capacity. The degree of the continuing downturn in construction activity and the opportunity to sell disaster film in fiscal 2009 represent significant risk and upside, respectively, to the current outlook.

Flow Controls

Flow Controls, including Raven Canada and Raven GmbH (Europe), provides electronic and Global Positioning System (GPS) products for precision agriculture, marine navigation and other niche markets.

Flow Controls — Comparative Results of Operations

	2008						2007						2006
			%		%				%		%				%		%
Dollars in thousands			sales		change				sales		change				sales		change
Net sales	$	64,291				+41.3	$	45,515				– 4.2	$	47,506				+16.6
Gross profit		24,397		37.9		+67.1		14,599		32.1		– 16.9		17,571		37.0		+17.7
Selling expenses		5,295		8.2		+18.0		4,488		9.9		+12.6		3,985		8.4		+27.3
Operating income		19,102		29.7		+88.9		10,111		22.2		– 25.6		13,586		28.6		+15.2

Fiscal 2008 versus Fiscal 2007

Flow Controls fiscal 2008 net sales climbed to a record $64.3 million, an increase of $18.8 million, or 41.3%, over fiscal 2007. The strong farm economy pushed sales higher in all of the segment’s product groups (standard, precision, steering, and autoboom), with standard sprayer control systems making a significant contribution. Anhydrous ammonia control systems used in corn production accounted for the majority of sales growth within the standard product group. Increased deliveries of marine navigation systems and international agricultural sales also contributed to revenue expansion. Fiscal 2008 fourth-quarter sales of $16.6 million topped last year’s final quarter by $6.2 million, or 59.3%. Standard sprayer control system deliveries continued strong during the fourth quarter, while the segment also benefitted from sales of the recently introduced Envizio PRO™ and Cruizer™ products.

Fiscal 2008 operating income of $19.1 million grew 88.9% or $9.0 million, from one year earlier. Gross profit as a percentage of sales was 37.9% and compared favorably to 32.1% in fiscal 2007. Fiscal 2008 fourth quarter operating income of $4.5 million was more than double the $2.1 million for the quarter ended January 31, 2007. Gross margins increased from 29.9% one year ago to 35.8% for the just-ended quarter. The fiscal 2008 profit growth and favorable margin comparisons for both the full year and the fourth quarter were due to the higher sales volume and the effect of leveraging the increased revenue across a relatively fixed manufacturing cost base. Higher personnel costs for the segment’s domestic selling efforts and increased advertising expense related to new product introductions accounted for fiscal 2008 selling expenses rising 18.0% to $5.3 million. Fiscal 2008 selling expense as a percent of sales fell to 8.2% versus 9.9% one year ago.

22     2008 ANNUAL REPORT

Fiscal 2007 versus Fiscal 2006

Fiscal 2007 net sales were $45.5 million, a decrease of $2.0 million, or 4.2%, from the prior year. Revenue growth was hampered by three factors: softness in the U.S. agricultural economy; weakness in global markets, especially South America and Australia; and reliability issues with the segment’s GPS-based agriculture products.

Flow Controls fiscal 2007 operating income of $10.1 million was down $3.5 million, or 25.6%, from fiscal 2006 results due to lower sales volume on fixed costs, increased product warranty expense, and higher selling expenses. As a percentage of sales, gross profit declined to 32.1% versus 37.0% for fiscal 2006. Fiscal 2007 selling expenses were $4.5 million, up from the prior year’s $4.0 million by $503,000, or 12.6%. During fiscal 2007, Flow Controls concentrated its sales and marketing efforts on international markets. The benefits of cost controls put into place in the segment’s domestic selling group were offset by increased selling efforts in Canada and Europe.

Prospects

Management expects strong sales growth in the coming year, given the current strength of the agricultural market and Flow Controls sales order backlog heading into fiscal 2009. Management also expects international sales to increase, as past investments in reaching the Canadian, European, and South American markets continue to pay off. New product sales, specifically the Envizio PRO™ and Cruizer™, should contribute to the fiscal 2009 revenue growth. These products were introduced late in fiscal 2008 and fourth-quarter sales indicated strong customer acceptance. Fiscal 2009 sales growth for Flow Controls is targeted to exceed 20%. Operating income growth is expected to be tempered by reinvestment in product development, marketing, and manufacturing capacity.

Electronic Systems

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

Electronic Systems — Comparative Results of Operations

	2008						2007						2006
			%		%				%		%				%		%
Dollars in thousands			sales		change				sales		change				sales		change
Net sales	$	67,609				+ 2.0	$	66,278				+17.9	$	56,219				+19.5
Gross profit		11,502		17.0		–3.8		11,951		18.0		+21.9		9,801		17.4		+84.4
Selling expenses		1,153		1.7		+ 4.7		1,101		1.7		+24.4		885		1.6		+  7.5
Operating income		10,349		15.3		–4.6		10,850		16.4		+21.7		8,916		15.9		+98.5

Fiscal 2008 versus Fiscal 2007

In fiscal 2008, Electronic Systems surpassed the prior year’s record $66.3 million in net sales, reaching $67.6 million. This represented a $1.3 million, or 2.0%, sales improvement. Increased deliveries of secure communication and aviation electronics accounted for the sales growth, but were partially offset by a 19.7% decrease in hand-held bed control shipments.

Despite higher sales volume in fiscal 2008, Electronic Systems operating income of $10.3 million fell short of fiscal 2007, dropping $501,000, or 4.6%. As a percentage of sales, fiscal 2008 gross profit decreased from 18.0% a year ago to 17.0%. Unusually high profit margins realized on closeout orders placed by a former customer were not enough to offset the impact of lower sales of hand-held bed controls in fiscal 2008. Fourth quarter operating income declined 34.2% to $1.9 million from $2.9 million reported for the quarter ended January 31, 2007, reflecting lower-margin product sales on decreased sales volume.

Fiscal 2007 versus Fiscal 2006

Electronic Systems increased net sales 17.9%, or $10.1 million, over fiscal 2006 to reach $66.3 million. Most of the fiscal 2007 sales growth came from a high level of aviation electronics deliveries made to the segment’s largest customer.

Fiscal 2007 operating income reached $10.9 million, improving $1.9 million, or 21.7%, over fiscal 2006. Higher sales volume and better execution on existing contracts accounted for this improvement. As a percentage of net sales, gross profit in fiscal 2007 increased to 18.0% versus 17.4% for fiscal 2006, reflecting the operational gains made during the year. Higher personnel costs in fiscal 2007 contributed to selling expenses rising 24.4% to $1.1 million.

RAVEN INDUSTRIES      23

FINANCIAL REVIEW AND ANALYSIS (continued)

Prospects

Management anticipates fiscal 2009 net sales to be down less than 10% when compared with fiscal 2008. The loss of approximately $7 million of business, resulting from a customer being acquired and moving its manufacturing to another supplier, will be difficult to replace. The slowdown in demand for hand-held bed controls is also expected to continue into fiscal 2009. These revenue downturns are expected to be partially offset by additional sales of secure communication and aviation electronics. Margins are expected to decrease due to unfavorable product mix and the impact of fixed costs on a lower revenue base. Electronic Systems operating income is expected to decline significantly in the first quarter of fiscal 2009, leading to lower full-year operating income.

Aerostar

The Aerostar segment manufactures military parachutes, protective wear, custom-shaped inflatable products, and high-altitude balloons for public and commercial research.

Aerostar — Comparative Results of Operations

	2008						2007						2006
			%		%				%		%				%		%
Dollars in thousands			sales		change				sales		change				sales		change
Net sales	$	17,274				+ 17.9	$	14,654				-18.6	$	18,009				-16.8
Gross profit		2,209		12.8		+ 44.5		1,529		10.4		-49.7		3,041		16.9		-33.4
Selling expenses		703		4.1		- 14.5		822		5.6		- 9.5		908		5.0		- 4.9
Operating income		1,506		8.7		+113.0		707		4.8		-66.9		2,133		11.8		-40.9

Fiscal 2008 versus Fiscal 2007

Fiscal 2008 net sales of $17.3 million increased $2.6 million, or 17.9%, from fiscal 2007. Higher research balloon and parachute sales accounted for the growth. Fiscal 2008 research balloon sales activity included more international deliveries. In addition, shipments began under the segment’s $14 million MC-6 parachute contract in the fourth quarter of fiscal 2008, with $2.1 million of parachute revenue recorded in that quarter.

Operating income more than doubled in fiscal 2008, hitting $1.5 million versus $707,000 one year earlier, with gross profit margins improving from last year’s 10.4% to 12.8%. Higher research balloon profits due to increased volume and improved results on the parachute contract contributed to operating income growth in fiscal 2008. Fiscal 2008 selling expenses of $703,000 declined $119,000, or 14.5%, compared with one year earlier. There were no expenses incurred during the current year for hot-air balloon selling efforts, reflecting the decision to exit this business in fiscal 2007.

Fiscal 2007 versus Fiscal 2006

Aerostar’s fiscal 2007 net sales of $14.7 million were $3.4 million, or 18.6%, lower than in fiscal 2006. Higher sales of commercial inflatable products during fiscal 2007 were offset by lower parachute product deliveries and a decline in research balloon revenue.

Fiscal 2007 operating income of $707,000 decreased $1.4 million from fiscal 2006. The lack of parachute business and a decrease in research balloon profits were the main factors in the operating income decline. Under-utilized plant capacity caused the fiscal 2007 gross margin to drop 6.5 percentage points, decreasing to 10.4%. Selling expenses of $822,000 were down 9.5%, as cost controls were put into place at the beginning of fiscal 2007.

Prospects

Management expected fiscal 2008 to be a stronger turnaround year for Aerostar, but as government-related design issues delayed deliveries on the MC-6 parachute contract until the fourth quarter, fiscal 2008 operating results did not fulfill expectations. During fiscal 2008, Aerostar received an add-on to the MC-6 Army parachute contract for another $7.3 million, bringing the total parachute contract order to more than $14 million. Start-up costs under the contract were incurred during fiscal 2008, and as a result, Aerostar should be well-positioned to take advantage of full production during fiscal 2009. Shipments are expected to accelerate rapidly, with Aerostar in a position to more than redouble its operating income in the coming year. Fiscal 2009 sales are targeted to increase approximately 45%, due mainly to higher parachute revenues.

24      2008 ANNUAL REPORT

Expenses, Income Taxes and Other

Corporate expenses of $7.5 million increased $661,000, or 9.7%, from fiscal 2007 due primarily to higher personnel compensation expense. Fiscal 2008 corporate expense as a percentage of net sales was 3.2% versus 3.1% in the preceding year. Fiscal 2007 corporate expenses of $6.8 million declined 5.2% from fiscal 2006 as a result of lower corporate giving and management incentive costs. Fiscal 2009 corporate expenses are expected to increase approximately 8-10% due primarily to higher personnel compensation and professional service expense.

Raven had no outstanding debt at January 31, 2008, and no short-term borrowings were made during the fiscal year. Other income of $1.1 million in fiscal 2008 grew from $533,000 in fiscal 2007. The main component of other income is interest income, which rose in fiscal 2008 due to higher cash and short-term investment balances. Fiscal 2008’s effective income tax rate of 34.2% was lower than last year’s rate of 34.5% and fiscal 2006’s rate of 35.3%. An increase in the U.S. federal tax deduction for income attributable to manufacturing activities accounted for most of the decrease in the fiscal 2008 effective tax rate. The effective tax rate in fiscal 2009 is expected to remain consistent with fiscal 2008, assuming that the U.S. research and development tax credit is renewed. Absent the renewal, the rate is expected to rise to the 35% range.

Liquidity and Capital Resources

The following table summarizes cash provided by (used in) the company’s business activities for the past three fiscal years:

Dollars in thousands	2008			2007			2006
Operating activities	$	27,151		$	26,313		$	21,189
Investing activities		(4,433	)		(18,664	)		(11,435	)
Financing activities		(8,270	)		(10,277	)		(6,946	)

Operating Activities and Cash Position

Cash flow from operations over the past three years of $74.7 million compared with net income of $77.5 million over the same period. Net cash provided by operating activities in fiscal 2008 totaled $27.2 million, an $838,000 increase compared with operating cash inflows in fiscal 2007. The improvement in fiscal 2008 operating cash flows versus one year ago was due primarily to company earnings and increases in the accounts payable and accrued liabilities balances at year-end, partially offset by higher inventory and accounts receivable levels. Cash consumed to finance accounts receivable and inventory balances for the year ended January 31, 2008, was $13.6 million versus cash used of $2.4 million during fiscal 2007. Flow Controls growth accounted for most of the increase. Net cash provided by operating activities in fiscal 2007 totaled $26.3 million, a $5.1 million increase from operating cash inflows of $21.2 million in fiscal 2006. Growth slowed during fiscal 2007 and the amount of incremental cash required for working capital requirements decreased. Cash used to finance inventory and accounts receivable balances in fiscal 2007 decreased $5.8 million as compared with fiscal 2006.

Cash, cash equivalents and short-term investments totaled $22.8 million at January 31, 2008, up $12.0 million from one year earlier. Higher cash balances reflect strong operating cash flows, lower capital spending, and a decrease in treasury stock purchases. During fiscal 2007, operating cash inflows were consumed by a high level of capital investment in Engineered Films for additional manufacturing equipment and facilities, and an increase in equity returned to the shareholders in the form of cash dividends and stock repurchases. Management expects that cash and short-term investments, combined with continued positive operating cash flows, will continue to be sufficient to fund day-to-day operations.

RAVEN INDUSTRIES     25

FINANCIAL REVIEW AND ANALYSIS (continued)

Investing Activities

Net cash used in investing activities in fiscal 2008 totaled $4.4 million versus $18.7 million in fiscal 2007. Fiscal 2008 capital expenditures of $6.6 million decreased $9.9 million from the prior year’s $16.5 million, when $13.3 million was invested in Engineered Films for additional manufacturing capacity and facilities. At the end of fiscal 2008, $2.5 million of short-term investments matured, were converted to cash, and are being reinvested in the first quarter of fiscal 2009. Net cash used in investing activities in fiscal 2007 totaled $18.7 million, up from $11.4 million in fiscal 2006. Besides the significant amount of capital expenditures made, fiscal 2007 investing activities also included placing an additional $2.0 million of cash into short-term investments.

Financing Activities

Net cash used in financing activities in fiscal 2008 of $8.3 million decreased $2.0 million from the $10.3 million consumed in fiscal 2007. No short-term borrowings were required during fiscal 2008. The company’s main financing activities continue to be the payment of dividends and the repurchase of company stock. In fiscal 2008, Raven increased its quarterly dividend on a per-share basis for the 21st-consecutive year, with quarterly dividend payments of 11 cents per share increasing 22.2% from the prior year. Treasury share purchases totaled $592,000 during fiscal 2008 and were $3.6 million lower than the prior year. In fiscal 2008, 20,150 shares were purchased at an average share price of $29.42. Net cash used in financing activities in fiscal 2007 of $10.3 million grew $3.3 million from the $6.9 million used in fiscal 2006. The increase in cash used in financing activities during fiscal 2007 was due mainly to a 28.7% rise in dividend payments and $2.5 million more of treasury stock purchases.

Off-balance Sheet Arrangements and Contractual Obligations

As of January 31, 2008, 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 $1.2 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, 2008, and for the next five years is shown below.

									More
			Less than		1-3		3-5		than
Dollars in thousands	Total		1 year		years		years		5 years
Contractual Obligations:
Line of credit(a)	$	—	$	—	$	—	$	—	$	—
Operating leases		427		173		254		—		—
Postretirement benefit obligation		5,447		201		464		548		4,234
Unconditional purchase obligations		38,318		38,318		—		—		—
Uncertain tax positions(b)		—		—		—		—		—
	$	44,192	$	38,692	$	718	$	548	$	4,234

(a)	$8.0 million line bears interest at 5.00% as of January 31, 2008, and expires July 2008. The line of credit is reduced by outstanding letters of credit totaling $1.2 million.
(b)	The total liability for uncertain tax positions under FIN 48 at January 31, 2008, was $2.2 million. The company is not able to reasonably estimate the timing of future payments relating to non-current tax benefits.

26      2008 ANNUAL REPORT

Capital Requirements

Raven maintains an excellent financial condition and capacity for growth. Management continues to look for opportunities to expand its core businesses through acquisitions or internal growth. The company has the capacity to secure additional financing and will do so if the appropriate strategic opportunity presents itself. Capital expenditures for fiscal 2009 are expected to be in the $8 million range. The company intends to return approximately 30% of its earnings to shareholders in the form of quarterly dividends. Stock repurchases are anticipated to continue as a way to return additional cash to shareholders and increase balance sheet leverage. Cash generated from operations and the availability of cash under existing credit facilities should be sufficient to fund these initiatives. If stock repurchase or investment opportunities do not materialize and cash balances continue to build, management intends to pay a special dividend by the end of fiscal 2009.

Critical Accounting Policies and New Accounting Standards

Critical Accounting Policies

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 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 lifecycle, inventory value declines slowly or the product has alternative uses. Management uses its manufacturing resources planning data to help determine if inventory is slow-moving or has become obsolete due to an engineering change. The company closely reviews items that have balances in excess of the prior year’s requirements or that have been dropped from production requirements. Despite these reviews, technological or strategic decisions made by management or the company’s customers may result in unexpected excess material. In Electronic Systems, the company 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 operating unit of the company, management must manage obsolete inventory risk. The accounting judgment ultimately made is an evaluation of the success that management will have in controlling inventory risk and mitigating the impact of obsolescence when it does occur.

RAVEN INDUSTRIES     27

FINANCIAL REVIEW AND ANALYSIS (continued)

Warranty

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.

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.

Self-insurance Reserves

Raven purchases insurance with deductibles for product liability; general insurance, including aviation product liability; and workers’ compensation. Third-party insurance is carried for what is believed to be the major portion of potential exposure. The company has established accruals for potential uninsured claims, including estimated costs and legal fees. Management considers these accruals adequate, although a substantial change in the number and/or severity of claims would result in materially different amounts.

Goodwill and Long-lived Assets

Management periodically assesses goodwill and other long-lived assets for impairment, or more frequently if events or changes in circumstances indicate that an asset might be impaired, using fair value measurement techniques. For goodwill, Raven performs impairment reviews annually by reporting units, which are the company’s reportable segments. The one exception is Aerostar’s high-altitude research balloon operation, which is evaluated independently from Aerostar’s other operations. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These valuation methodologies use significant estimates and assumptions, which include projected future cash flows, including timing and the risks inherent in future cash flows, perpetual growth rates, and determination of appropriate market comparables.

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.

28      2008 ANNUAL REPORT

New Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement. The standard provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The statement is effective as of the beginning of the company’s 2009 fiscal year. The company does not expect the implementation of SFAS No. 157 to have a material impact on its consolidated results of operations, financial condition or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for the beginning of the company’s 2009 fiscal year. The company does not expect the provisions of SFAS No. 159 to have a material impact on its consolidated results of operations, financial condition, or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) requires an entity to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It also requires acquisition-related costs to be expensed as incurred, restructuring costs to generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. The adoption of SFAS No. 141(R) will change the company’s accounting treatment for business combinations on a prospective basis beginning February 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 changes the accounting and reporting for minority interests, which will be characterized as non-controlling interests and classified as a component of equity. The adoption of SFAS No. 160 is effective on a prospective basis beginning February 1, 2009. The company does not expect the provisions of SFAS No. 160 to have a material impact on its consolidated results of operations, financial condition, or cash flows.

RAVEN INDUSTRIES     29

MONTHLY CLOSING STOCK PRICE AND VOLUME

QUARTERLY INFORMATION (Unaudited)

											Net Income				Common Stock				Cash
Dollars in thousands	Net		Gross		Operating		Pretax		Net		Per Share(a)				Market Price				Dividends
except per-share data	Sales		Profit		Income		Income		Income		Basic		Diluted		High		Low		Per Share
FISCAL 2008
First Quarter	$	58,103	$	17,374	$	12,838	$	13,025	$	8,540	$	0.47	$	0.47	$	30.84	$	26.20	$	0.11
Second Quarter		55,653		13,407		8,543		8,857		5,843		0.32		0.32		39.36		28.39		0.11
Third Quarter		61,842		15,299		10,940		11,254		7,398		0.41		0.41		45.85		33.42		0.11
Fourth Quarter		58,359		13,068		8,824		9,088		6,021		0.33		0.33		42.75		27.57		0.11
Total Year	$	233,957	$	59,148	$	41,145	$	42,224	$	27,802	$	1.54	$	1.53	$	45.85	$	26.20	$	0.44
FISCAL 2007
First Quarter	$	58,465	$	15,891	$	11,477	$	11,615	$	7,502	$	0.41	$	0.41	$	42.16	$	31.22	$	0.09
Second Quarter		50,381		12,183		7,872		7,937		5,127		0.28		0.28		42.70		25.89		0.09
Third Quarter		57,435		14,480		10,540		10,713		6,968		0.39		0.38		32.64		25.89		0.09
Fourth Quarter		51,248		12,328		8,413		8,570		5,844		0.32		0.32		35.35		25.46		0.09
Total Year	$	217,529	$	54,882	$	38,302	$	38,835	$	25,441	$	1.41	$	1.39	$	42.70	$	25.46	$	0.36
FISCAL 2006
First Quarter	$	50,704	$	15,161	$	11,136	$	11,098	$	7,157	$	0.40	$	0.39	$	22.28	$	16.54	$	0.07
Second Quarter		45,304		10,882		7,299		7,391		4,774		0.26		0.26		27.78		18.68		0.07
Third Quarter		54,135		14,213		10,568		10,635		6,869		0.38		0.37		31.99		21.75		0.07
Fourth Quarter		54,385		12,975		8,281		8,370		5,462		0.30		0.30		33.15		26.75		0.07
Total Year	$	204,528	$	53,231	$	37,284	$	37,494	$	24,262	$	1.34	$	1.32	$	33.15	$	16.54	$	0.28

(a) Net income per share is computed discretely by quarter and may not add to the full year.

30      2008 ANNUAL REPORT

MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed our internal control over financial reporting in relation to criteria described in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment using those criteria, we concluded that, as of January 31, 2008, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of January 31, 2008, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page 43 of this Annual Report.

Ronald M. Moquist	Thomas Iacarella
President & Chief Executive Officer	Vice President & Chief Financial Officer

March 20, 2008

RAVEN INDUSTRIES     31

CONSOLIDATED BALANCE SHEETS

	As of January 31
Dollars in thousands, except share data	2008		2007		2006
ASSETS
Current assets
Cash and cash equivalents	$	21,272	$	6,783	$	9,409
Short-term investments		1,500		4,000		2,000
Accounts receivable, net		36,538		31,336		29,290
Inventories, net		36,529		28,071		27,819
Deferred income taxes		2,075		1,761		1,746
Other current assets		2,955		1,268		1,081
Total current assets		100,869		73,219		71,345
Property, plant and equipment, net		35,743		36,264		25,602
Goodwill		6,902		6,604		6,401
Other assets, net		4,347		3,677		2,809
Total assets	$	147,861	$	119,764	$	106,157
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,374	$	6,093	$	8,179
Accrued liabilities		12,804		9,579		11,154
Customer advances		930		792		717
Total current liabilities		22,108		16,464		20,050
Other liabilities		7,478		5,032		1,718
Commitments and contingencies
Shareholders’ equity		118,275		98,268		84,389
Common shares, par value $1.00 per share
Authorized — 100,000,000
Outstanding — 2008: 18,120,513; 2007: 18,039,223; 2006: 18,072,369
Total liabilities and shareholders’ equity	$	147,861	$	119,764	$	106,157

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

32      2008 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF INCOME

	For the years ended January 31
Dollars in thousands, except per-share data	2008			2007			2006
Net sales	$	233,957		$	217,529		$	204,528
Cost of goods sold		174,809			162,647			151,297
Gross profit		59,148			54,882			53,231
Selling, general and administrative expenses		18,003			16,580			15,947
Operating income		41,145			38,302			37,284
Interest income and other, net		(1,079	)		(533	)		(210	)
Income before income taxes		42,224			38,835			37,494
Income taxes		14,422			13,394			13,232
Net income	$	27,802		$	25,441		$	24,262
Net income per common share:
— Basic	$	1.54		$	1.41		$	1.34
— Diluted	$	1.53		$	1.39		$	1.32

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

RAVEN INDUSTRIES     33

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

																Accumulated
																other
	$1 Par															comprehensive
	common			Paid-in			Treasury stock						Retained			income
Dollars in thousands, except per-share data	stock			capital			Shares			Cost			earnings			(loss)			Total
Balance January 31, 2005	$	32,053		$	765			(14,053,386	)	$	(41,700	)	$	74,964		$	—		$	66,082
Net income		—			—			—			—			24,262			—			24,262
Foreign currency translation		—			—			—			—			—			13			13
Total comprehensive income																				24,275
Cash dividends ($.28 per share)		—			—			—			—			(5,056	)		—			(5,056	)
Purchase of stock		—			—			(67,800	)		(1,689	)		—			—			(1,689	)
Stock surrendered upon exercise of stock options		(27	)		(689	)		—			—			—			—			(716	)
Employees’ stock options exercised		168			410			—			—			—			—			578
Share-based compensation		—			485			—			—			—			—			485
Tax benefit from exercise of stock options		—			430			—			—			—			—			430
Balance January 31, 2006		32,194			1,401			(14,121,186	)		(43,389	)		94,170			13			84,389
Net income		—			—			—			—			25,441			—			25,441
Foreign currency translation		—			—			—			—			—			(21	)		(21	)
Total comprehensive income																				25,420
Adoption of SFAS No. 158, net of tax		—			—			—			—			—			(1,885	)		(1,885	)
Dividends ($.36 per share)		—			1			—			—			(6,508	)		—			(6,507	)
Purchase of stock		—			—			(146,247	)		(4,201	)					—			(4,201	)
Stock surrendered upon exercise of stock options		(28	)		(854	)		—			—			—			—			(882	)
Employees’ stock options exercised		141			718			—			—			—			—			859
Share-based compensation		—			605			—			—			—			—			605
Tax benefit from exercise of stock options		—			470			—			—			—			—			470
Balance January 31, 2007		32,307			2,341			(14,267,433	)		(47,590	)		113,103			(1,893	)		98,268
Net income		—			—			—			—			27,802			—			27,802
Postretirement benefits, net of $84 income tax		—			—			—			—			—			156			156
Foreign currency translation		—			—			—			—			—			131			131
Total comprehensive income																				28,089
Adoption of FIN 48		—			—			—			—			(716	)		—			(716	)
Dividends ($.44 per share)		—			4			—			—			(7,970	)		—			(7,966	)
Purchase of stock		—			—			(20,150	)		(592	)		—			—			(592	)
Stock surrendered upon exercise of stock options		(47	)		(1,462	)		—			—			—			—			(1,509	)
Employees’ stock options exercised		148			1,170			—			—			—			—			1,318
Share-based compensation		—			904			—			—			—			—			904
Tax benefit from exercise of stock options		—			479			—			—			—			—			479
Balance January 31, 2008	$	32,408		$	3,436			(14,287,583	)	$	(48,182	)	$	132,219		$	(1,606	)	$	118,275

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

34      2008 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended January 31
Dollars in thousands	2008			2007			2006
Cash flows from operating activities:
Net income	$	27,802		$	25,441		$	24,262
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,944			5,445			4,684
Amortization of intangible assets		400			440			467
Provision for losses on accounts receivable, net of recoveries.		91			40			78
Deferred income taxes		(779	)		(293	)		(809	)
Share-based compensation expense		904			605			485
Change in operating assets and liabilities, net of effects from acquisition and disposition of businesses and assets		(8,187	)		(5,380	)		(8,086	)
Other operating activities, net		(24	)		15			108
Net cash provided by operating activities		27,151			26,313			21,189
Cash flows from investing activities:
Capital expenditures		(6,635	)		(16,522	)		(10,358	)
Purchase of short-term investments		(3,100	)		(6,000	)		(4,500	)
Sale of short-term investments		5,600			4,000			5,500
Acquisition of business		(269	)		(203	)		(2,828	)
Sale of unconsolidated affiliate		—			—			650
Other investing activities, net		(29	)		61			101
Net cash used in investing activities		(4,433	)		(18,664	)		(11,435	)
Cash flows from financing activities:
Proceeds from borrowing under line of credit		—			—			4,500
Repayment of borrowing under line of credit		—			—			(4,500	)
Dividends paid		(7,966	)		(6,507	)		(5,056	)
Purchases of treasury stock		(592	)		(4,201	)		(1,689	)
Excess tax benefit on stock option exercises		479			470			—
Other financing activities, net		(191	)		(39	)		(201	)
Net cash used in financing activities		(8,270	)		(10,277	)		(6,946	)
Effect of exchange rate changes on cash		41			2			(18	)
Net increase (decrease) in cash and cash equivalents		14,489			(2,626	)		2,790
Cash and cash equivalents at beginning of year		6,783			9,409			6,619
Cash and cash equivalents at end of year	$	21,272		$	6,783		$	9,409

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

RAVEN INDUSTRIES       35

NOTES TO FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Raven Industries, Inc. and its wholly owned subsidiaries (the company). The company is an industrial manufacturer providing a variety of products to customers within the industrial, agricultural, construction and military/aerospace markets primarily in North America. The company operates three divisions (Flow Controls, Engineered Films and Electronic Systems) in addition to 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.

USE OF ESTIMATES

The preparation of the company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

FOREIGN CURRENCY

The company’s subsidiaries that operate outside the United States use their local currency as the 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 cumulative translation adjustments in accumulated other comprehensive income (loss) within shareholders’ equity. Foreign currency transaction gains or losses are recognized in the period incurred and are included in 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 months or less to be cash equivalents. Cash and cash equivalent balances are principally concentrated in checking, money market and sweep accounts with Wells Fargo Bank, N.A. and Wells Fargo Brokerage Services, LLC.

SHORT-TERM INVESTMENTS

The company has invested in certificates of deposit with rates ranging from 3.50% to 5.00%. The investments have varying maturity dates, all of which are less than 12 months from the balance sheet date.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the company’s best estimate of the amount of probable credit losses based on historical 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 encompasses consideration of all business factors including price, contract terms and usefulness.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost and are depreciated over the estimated useful lives of the assets using accelerated methods. The estimated useful lives used for computing depreciation are as follows:

Building and improvements	15 - 39 years
Manufacturing equipment by segment
Flow Controls	3 - 5 years
Engineered Films	5-12 years
Electronic Systems	3 - 5 years
Aerostar	3 - 5 years
Furniture, fixtures, office equipment and other	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.

INTANGIBLE ASSETS

Intangible assets, primarily comprised of technologies acquired through acquisition, are recorded at cost and are presented net of accumulated amortization. Amortization is computed on a straight-line basis over estimated useful lives ranging from 3 to 20 years. The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in each reporting period.

GOODWILL

The company recognizes the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis during the fourth quarter, and between annual tests whenever there is an impairment indicated. 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 using fair value measurement techniques. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted

36       2008 ANNUAL REPORT

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. Fair value is generally determined using a discounted cash flow analysis.

INSURANCE OBLIGATIONS

The company employs insurance policies covering workers’ compensation and general liability costs. Liabilities are accrued related to claims filed and estimates for claims incurred but not reported. To the extent these obligations will be reimbursed by insurance, the expected 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 probable that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated. The settlement of such claims cannot be determined at this time; however, management believes that any liability resulting from these claims will be substantially mitigated by insurance coverage. Accordingly, management does not believe that the ultimate outcome of these matters will be significant to its results of operations, financial position or cash flows.

REVENUE RECOGNITION

The company recognizes revenue upon shipment of products because there is persuasive evidence of an arrangement, the sales price is determinable, collectibility 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 obligations 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 component of cost of goods sold.

WARRANTIES

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

RESEARCH AND DEVELOPMENT

Research and development expenditures of $4.4 million in fiscal 2008, $2.6 million in fiscal 2007, and $2.5 million in fiscal 2006 were charged to cost of goods sold in the year incurred. Expenditures are principally composed of labor and material costs.

SHARE-BASED COMPENSATION

In fiscal 2003, the company began recording compensation expense related to its share-based compensation plans using the fair value method permitted by SFAS No. 123, Accounting for Stock-Based Compensation. On February 1, 2006, the company adopted SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) requires that the cash retained as a result of the tax deductibility of employee share-based awards be presented as a component of cash flows from financing activities in the consolidated statement of cash flows. In prior periods, the company reported these amounts as a component of cash flows from operating activities. The adoption of SFAS No. 123(R) has had no other effect on consolidated results of operations, financial condition, or cash flows.

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. Judgmental reserves are maintained for uncertain tax positions.

NEW ACCOUNTING STANDARDS

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement. The standard provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The statement is effective as of the beginning of the company’s 2009 fiscal year. The company does not expect the implementation of SFAS No. 157 to have a material impact on its consolidated results of operations, financial condition or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for the beginning of the company’s 2009 fiscal year. The company does not expect the provisions of SFAS No. 159 to have a material impact on its consolidated results of operations, financial condition, or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141 (R) requires an entity to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It also requires acquisition-related costs to be expensed as incurred, restructuring costs to generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. The adoption of SFAS No. 141(R) will change the company’s accounting treatment for business combinations on a prospective basis beginning February 1, 2009.

RAVEN INDUSTRIES       37

NOTES TO FINANCIAL STATEMENTS (continued)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 changes the accounting and reporting for minority interests, which will be characterized as non-controlling interests and classified as a component of equity. The adoption of SFAS No. 160 is effective on a prospective basis beginning February 1, 2009. The company does not expect the provisions of SFAS No. 160 to have a material impact on its consolidated results of operations, financial condition, or cash flows.

Note 2. Selected Balance Sheet Information

Following are the components of selected balance sheet items:

	As of January 31
Dollars in thousands	2008			2007			2006
Accounts receivable, net:
Trade accounts	$	36,831		$	31,594		$	29,547
Allowance for doubtful accounts		(293	)		(258	)		(257	)
	$	36,538		$	31,336		$	29,290
Inventories, net:
Finished goods	$	4,975		$	3,750		$	3,504
In process		3,631			2,612			3,652
Materials		27,923			21,709			20,663
	$	36,529		$	28,071		$	27,819
Other current assets:
Insurance policy benefit	$	2,549		$	651		$	747
Prepaid expenses and other		406			617			334
	$	2,955		$	1,268		$	1,081
Property, plant and equipment, net:
Land	$	1,227		$	1,227		$	1,084
Buildings and improvements		21,523			21,494			16,662
Machinery and equipment		57,563			52,552			43,256
Accumulated depreciation		(44,570	)		(39,009	)		(35,400	)
	$	35,743		$	36,264		$	25,602
Other assets, net:
Amortizable assets:
Purchased technology	$	2,300		$	3,380		$	3,380
Other intangibles		1,172			1,305			1,265
Accumulated amortization		(1,740	)		(2,729	)		(2,300	)
		1,732			1,956			2,345
Deferred income taxes		2,540			1,607			318
Other, net		75			114			146
	$	4,347		$	3,677		$	2,809
Accrued liabilities:
Salaries and benefits	$	2,109		$	1,722		$	2,167
Vacation		2,415			2,212			2,119
401(k) contributions		1,184			1,109			1,049
Insurance obligations		4,010			1,743			1,632
Income taxes		—			265			808
Profit sharing		490			553			1,168
Warranty		684			397			569
Other		1,912			1,578			1,642
	$	12,804		$	9,579		$	11,154
Other liabilities:
Long-term debt	$	—		$	—		$	9
Postretirement benefits		5,246			5,032			1,709
Uncertain tax positions		2,232			—			—
	$	7,478		$	5,032		$	1,718

Note 3. Supplemental Cash Flow Information

	For the years ended January 31
Dollars in thousands	2008			2007			2006
Changes in operating assets and liabilities, net of effects from acquisition and disposition of businesses and assets:
Accounts receivable	$	(5,216	)	$	(2,097	)	$	(3,821	)
Inventories		(8,403	)		(262	)		(4,356	)
Prepaid expenses and other assets		218			(284	)		(103	)
Accounts payable		2,437			(1,770	)		(2,688	)
Accrued and other liabilities		2,648			(1,045	)		3,021
Customer advances		129			78			(139	)
	$	(8,187	)	$	(5,380	)	$	(8,086	)
Cash paid during the year for:
Income taxes	$	14,068		$	13,759		$	12,806

Note 4. Montgomery Industries Acquisition

On February 17, 2005, the company acquired substantially all of the assets of Montgomery Industries, Inc., a privately held Canadian corporation, for $2.7 million in cash plus the assumption of certain liabilities and a quarterly payment of 6 percent on future sales of Montgomery products up to a maximum payment of $1.825 million. Montgomery developed and sold an automatic boom height control system under the name “Autoboom™” for agricultural sprayers designed to successfully maintain optimum boom height in uneven terrain without compromising the speed with which the sprayer can be operated. Of the purchase price, $289,000 was allocated to current assets; $82,000 was allocated to property, plant and equipment; $2.560 million was allocated to amortizable intangible assets (amortized over approximately seven years); $539,000 to current liabilities assumed; and $285,000 to goodwill, which is deductible for tax purposes.

For the years ended January 31, 2008, 2007, and 2006, the earn-out on the sales of Montgomery products was $298,000, $203,000, and $183,000, respectively, which was recorded as an increase in goodwill.

The operation is a component of the Flow Controls segment. The results of operations for the acquired business have been included in the consolidated financial statements since the date of acquisition. Pro forma earnings are not presented due to the immateriality of the effect of the acquisition to the company’s consolidated operations.

38       2008 ANNUAL REPORT

Note 5. Goodwill and Other Intangibles

Goodwill

The changes in the carrying amount of goodwill by reporting segment are shown below:

	Flow		Engineered		Electronic
Dollars in thousands	Controls		Films		Systems		Aerostar		Total
Balance at January 31, 2005	$	4,940	$	96	$	433	$	464	$	5,933
Goodwill acquired during the year		285		—		—		—		285
Acquisition earn-outs		183		—		—		—		183
Balance at January 31, 2006		5,408		96		433		464		6,401
Acquisition earn-outs		203		—		—		—		203
Balance at January 31, 2007		5,611		96		433		464		6,604
Acquisition earn-outs		298		—		—		—		298
Balance at January 31, 2008	$	5,909	$	96	$	433	$	464	$	6,902

Intangible Assets

Estimated future amortization expense based on the current carrying value of amortizable intangible assets for fiscal periods 2009 through 2013 is $398,000, $389,000, $357,000, $351,000, and $22,000, respectively. The company wrote-off $1.1 million of fully amortized intangible assets in fiscal 2008.

Note 6. Employee Retirement Benefits

The company has a 401(k) plan covering substantially all employees and contributed 3% of qualified payroll. The company’s contribution expense was $1,020,000, $935,000, and $892,000 for fiscal 2008, 2007 and 2006, 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 the company’s operating cash and investments. The company accounts for these benefits in accordance with SFAS No. 106, Accounting for Postretirement Benefits Other Than Pensions. At January 31, 2007, the company adopted SFAS No. 158, Employers’ Accounting for Defined Pension and Other Postretirement Plans. This statement requires the company to fully recognize the liability for its postretirement benefits through changes in accumulated other comprehensive income.

The incremental effect of applying SFAS No. 158 on the following balance sheet items as of January 31, 2007, was as follows:

	Impact of SFAS No. 158
Dollars in thousands	Before			Adjustment			After
Non-current deferred tax assets	$	592		$	1,015		$	1,607
Total assets		118,749			1,015			119,764
Other liabilities		2,132			2,900			5,032
Accumulated other comprehensive income (loss)		(8	)		(1,885	)		(1,893	)
Total shareholders’ equity		100,153			(1,885	)		98,268

The accumulated benefit obligation for these benefits is shown below:

	For the years ended January 31
Dollars in thousands	2008			2007			2006
Benefit obligation at beginning of year	$	5,213		$	4,928		$	2,722
Service cost		90			84			80
Interest cost		307			278			259
Actuarial (gain) loss		(2	)		89			2,014
Total recognized in net and other comprehensive income		395
Retiree benefits paid		(161	)		(166	)		(147	)
Benefit obligation at end of year		5,447			5,213			4,928
Less: unrecognized actuarial losses		—			—			(3,045	)
Ending liability balance	$	5,447		$	5,213		$	1,883

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

	For the years ended January 31
Dollars in thousands	2008			2007			2006
Beginning liability balance	$	5,213		$	1,883		$	1,447
Employer expense		635			596			583
Other comprehensive income		(240	)		—			—
Total recognized in net and other comprehensive income		395
Initial effect of adopting SFAS No. 158		—			2,900			—
Retiree benefits paid		(161	)		(166	)		(147	)
Ending liability balance		5,447			5,213			1,883
Current portion		(201	)		(181	)		(174	)
Long-term portion	$	5,246		$	5,032		$	1,709
Assumptions used:
Discount rate		6.75	%		6.00	%		5.75	%
Wage inflation rate		4.00	%		4.00	%		4.00	%

The discount rate is based on matching rates of return on high-quality fixed-income investments with the timing and amount of expected benefit payments. No material fluctuations in retiree benefit payments are expected in future years.

The assumed health care cost trend rate for fiscal 2008 was 10.38% as compared to 9.64% and 9.39% assumed for fiscal 2007 and 2006. 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 approximately $900,000. The rate to which the fiscal 2008 health care cost trend rate is assumed to decline is 5.25%, which is the ultimate trend rate. The fiscal year that the rate reaches the ultimate trend rate is expected to be fiscal 2028.

Note 7. Warranties

Changes in the warranty accrual were as follows:

	As of January 31
Dollars in thousands	2008			2007			2006
Beginning balance	$	397		$	569		$	452
Accrual for warranties		1,390			1,317			958
Settlements made (in cash or in kind)		(1,103	)		(1,489	)		(841	)
Ending balance	$	684		$	397		$	569

RAVEN INDUSTRIES       39

NOTES TO FINANCIAL STATEMENTS (continued)

Note 8. Income Taxes

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

	For the years ended
	January 31
Dollars in thousands	2008			2007			2006
Tax at U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of U.S. federal benefit		1.5			1.1			1.1
Tax benefit on qualified production activities		(2.1	)		(1.0	)		(1.0	)
Tax credit for research activities		(0.7	)		(0.5	)		(0.1	)
Other, net		0.5			(0.1	)		0.3
		34.2	%		34.5	%		35.3	%

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

	For the years ended January 31
Dollars in thousands	2008			2007			2006
Income taxes:
Currently payable	$	15,201		$	13,687		$	14,041
Deferred		(779	)		(293	)		(809	)
	$	14,422		$	13,394		$	13,232

Deferred Tax Assets

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the company’s deferred tax assets and liabilities were as follows:

	As of January 31
Dollars in thousands	2008			2007			2006
Current deferred tax assets:
Accounts receivable	$	105		$	91		$	88
Inventories		215			212			220
Accrued vacation		781			711			680
Insurance obligations		456			357			282
Other accrued liabilities		518			390			476
		2,075			1,761			1,746
Non-current deferred tax assets (liabilities):
Postretirement and other employee benefits		1,836			1,758			598
Depreciation and amortization		(478	)		(405	)		(439	)
Net operating loss carryforward(a)		123			82			—
Uncertain tax positions		741			—			—
Other		318			172			159
		2,540			1,607			318
Net deferred tax asset	$	4,615		$	3,368		$	2,064

(a) The company’s Canadian operation incurred a $317,000 net operating loss that if unused will begin to expire in 2017.

Uncertain Tax Positions

Effective February 1, 2007, the company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Upon adoption of FIN 48 the company recorded 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. As of the adoption date, the company had gross unrecognized tax benefits of $1.3 million ($1.6 million including interest and penalties). The following table summarizes the activity related to the gross unrecognized tax benefits (excluding interest and penalties) for the year ended January 31, 2008:

Dollars in thousands
Balance as of February 1, 2007	$	1,328
Increases related to current year tax positions		465
Balance as of January 31, 2008	$	1,793

During the fiscal year ended January 31, 2008, there were no increases, decreases or settlements of uncertain tax positions related to prior years. 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 $1.2 million and $0.9 million as of January 31, 2008 and February 1, 2007, respectively.

The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At January 31, 2008 and February 1, 2007, accrued interest and penalties were $439,000 and $264,000, 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. The company’s fiscal 2004 through 2007 U.S. tax returns remain subject to examination by federal tax authorities, and the company’s fiscal 2003 through 2007 state and local tax returns remain subject to examination by state and local authorities.

Note 9. Financing Arrangements

The company has an uncollateralized credit agreement providing a line of credit of $8.0 million with a maturity date of July 1, 2008, bearing interest at 1.00% under the prime rate. Letters of credit totaling $1.2 million have been issued under the line, primarily to support self-insured workers’ compensation bonding requirements. No borrowings were outstanding as of January 31, 2008, 2007 or 2006, and $6.8 million was available at January 31, 2008. The weighted-average interest rate for borrowing under the short-term credit line in fiscal 2006 was 5.63%. There were no borrowings under the credit line in fiscal years 2008 or 2007.

Wells Fargo Bank, N.A. provides the company’s line of credit and holds the company’s cash and cash equivalents. One member of the company’s board of directors is also on the board of directors of Wells Fargo & Co., the parent company of Wells Fargo Bank, N.A.

The company leases certain vehicles, equipment and facilities under operating leases. Total rent and lease expense was $268,000, $351,000, and $381,000 in fiscal 2008, 2007 and 2006, respectively. Future minimum lease payments under non-cancelable operating leases for fiscal periods 2009 to 2011 are $173,000, $139,000, and $115,000, respectively, with all leases scheduled to expire by fiscal 2011.

40       2008 ANNUAL REPORT

Note 10. Share-based Compensation

At January 31, 2008, the company had two share-based compensation plans, which are described below. The compensation cost for these plans was $904,000, $605,000, and $485,000 in fiscal 2008, 2007, and 2006, respectively. The related income tax benefit recorded in the income statement was $154,000, $110,000, and $58,000 for fiscal 2008, 2007, and 2006, respectively. Compensation cost capitalized as part of inventory at January 31, 2008, 2007, and 2006, was $54,000, $40,000 and $63,000, respectively.

2000 Stock Option and Compensation Plan

The company’s 2000 Stock Option and Compensation Plan, approved by the shareholders, is administered by the Personnel and Compensation Committee of the Board of Directors and allows for either incentive or non-qualified options with terms not to exceed 10 years. There are 438,125 shares of the company’s common stock reserved for future option grants under the plan at January 31, 2008. 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
	2008			2007			2006
Risk-free interest rate		3.07	%		4.45	%		4.36	%
Expected dividend yield		1.28	%		1.29	%		0.90	%
Expected volatility factor		40.62	%		38.97	%		39.25	%
Expected option term (in years)		4.25			4.25			4.25
Weighted average grant date fair value	$	11.45		$	9.51		$	10.90

Information regarding option activity for the year ended January 31, 2008 is as follows:

								Weighted
								average
				Weighted		Aggregate		remaining
				average		intrinsic		contractual
	Number			exercise		value		term
	of options			price		(in 000s)		(years)
Outstanding at beginning of year		447,050		$	18.89
Granted		75,400			34.50
Exercised		(147,769	)		8.91
Forfeited		(1,650	)		26.94
Outstanding at end of year		373,031		$	25.96	$	1,926		2.80
Options exercisable at end of year		182,250		$	21.16	$	1,652		1.78

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 $3.5 million, $3.7 million and $3.6 million during the years ended January 31, 2008, 2007 and 2006, respectively. As of January 31, 2008, the total compensation cost for non-vested awards not yet recognized in the company’s statements of income was $ 1.4 million, net of the effect of estimated forfeitures. This amount is expected to be recognized over a weighted average period of 2.56 years.

Deferred Stock Compensation Plan for Directors

On May 23, 2006, the company’s stockholders approved the Deferred Stock Compensation Plan for Directors of Raven Industries, Inc. 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 in the name of the non-employee director by the company. 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. The plan is administered by the Governance Committee of the Board of Directors.

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.

Information regarding outstanding stock units for the year ended January 31, 2008, is as follows:

			Weighted
	Number		average
	of units		price
Outstanding at beginning of year		4,828	$	28.43
Granted		3,846		36.40
Deferred retainers		1,099		36.40
Dividends		105		35.79
Converted into common shares		—		—
Outstanding at end of year		9,878	$	30.02

Note 11. 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 outstanding options were excluded from the diluted net income per-share calculations because their effect would have been anti-dilutive, as their

RAVEN INDUSTRIES       41

NOTES TO FINANCIAL STATEMENTS (continued)

exercise prices were greater than the average market price of the company’s common stock during those periods. For fiscal 2008, 2007, and 2006, 90,338, 96,075, and 19,125 options, respectively, were excluded from the diluted net income per-share calculation. Details of the computation are presented below.

	For the years ended January 31
	2008		2007		2006
Numerator:
Net income (in thousands)	$	27,802	$	25,441	$	24,262
Denominator:
Weighted average common shares outstanding		18,099,600		18,082,606		18,055,439
Weighted average stock units outstanding		8,580		3,602		—
Denominator for basic calculation		18,108,180		18,086,208		18,055,439
Weighted average common shares outstanding		18,099,600		18,082,606		18,055,439
Weighted average stock units outstanding		8,580		3,602
Dilutive impact of stock options		95,883		186,705		259,104
Denominator for diluted calculation		18,204,063		18,272,913		18,314,543
Net income per share — basic	$	1.54	$	1.41	$	1.34
Net income per share — diluted	$	1.53	$	1.39	$	1.32

Note 12. Business Segments and Major Customer Information

The company’s reportable segments are defined by their common technologies, production processes and inventories. These segments reflect the organization of the company into the three Raven divisions, each with a Divisional Vice President, and its Aerostar subsidiary.

Engineered Films produces rugged reinforced plastic sheeting for industrial, construction, manufactured housing and agriculture applications. Flow Controls, including Raven Canada and Raven GmbH, provides electronic and Global Positioning System (GPS) products for the precision agriculture, marine navigation and other niche markets. Electronic Systems is a total-solutions provider of electronics manufacturing services. Aerostar manufactures military parachutes, protective wear, custom-shaped inflatable products and high-altitude balloons for government and commercial research.

The company measures the performance of its segments based on their operating income exclusive of administrative and general expenses. The accounting policies of the operating segments are the same as those described in Note 1, Summary of Significant Accounting Policies. Other income, interest expense and income taxes are not allocated to individual operating segments, and assets not identifiable to an individual segment are included as corporate assets. Segment information is reported consistent with the company’s management reporting structure as required by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.

Business segment information is as follows:

	For the years ended January 31
Dollars in thousands	2008			2007			2006
ENGINEERED FILMS DIVISION
Sales	$	84,783		$	91,082		$	82,794
Operating income		17,655			23,440			19,907
Assets		43,688			41,988			33,512
Capital expenditures		4,012			13,266			7,359
Depreciation & amortization		4,046			2,887			2,436
FLOW CONTROLS DIVISION
Sales	$	64,291		$	45,515		$	47,506
Operating income		19,102			10,111			13,586
Assets		36,922			27,629			30,047
Capital expenditures		1,008			577			938
Depreciation & amortization		1,125			1,142			1,085
ELECTRONIC SYSTEMS DIVISION
Sales	$	67,609		$	66,278		$	56,219
Operating income		10,349			10,850			8,916
Assets		25,865			25,175			20,191
Capital expenditures		1,077			1,357			1,612
Depreciation & amortization		1,237			1,086			871
AEROSTAR
Sales	$	17,274		$	14,654		$	18,009
Operating income		1,506			707			2,133
Assets		9,857			8,161			6,837
Capital expenditures		156			812			179
Depreciation & amortization		499			375			359
REPORTABLE SEGMENTS TOTAL
Sales	$	233,957		$	217,529		$	204,528
Operating income		48,612			45,108			44,542
Assets		116,332			102,953			90,587
Capital expenditures		6,253			16,012			10,088
Depreciation & amortization		6,907			5,490			4,751
CORPORATE & OTHER(a)
Operating (loss) from administrative expenses	$	(7,467	)	$	(6,806	)	$	(7,258	)
Assets		31,529			16,811			15,570
Capital expenditures		382			510			270
Depreciation & amortization		437			395			400
TOTAL COMPANY
Sales	$	233,957		$	217,529		$	204,528
Operating income		41,145			38,302			37,284
Assets		147,861			119,764			106,157
Capital expenditures		6,635			16,522			10,358
Depreciation & amortization		7,344			5,885			5,151

(a) Assets are principally cash, investments, deferred taxes and notes receivable.

Sales to a customer of the Electronic Systems segment accounted for 11% and 10% of consolidated sales in fiscal 2008 and 2007, respectively, and 14% of the company’s consolidated accounts receivable at January 31, 2008 and January 31, 2007. No customer accounted for more than 10% of the company’s consolidated sales or accounts receivable in fiscal 2006.

Sales to countries outside the United States, primarily to Canada, were as follows:

	For the years ended January 31
Dollars in thousands	2008		2007		2006
Flow Controls	$	10,100	$	7,100	$	6,700
Engineered Films		1,800		2,000		1,300
Electronic Systems		6,900		8,700		8,000
Aerostar		1,300		900		800
Total foreign sales	$	20,100	$	18,700	$	16,800

Note 13. Quarterly Information (Unaudited)

The company’s quarterly information is presented on page 30.

42       2008 ANNUAL REPORT

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 at January 31, 2008, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2008 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, 2008 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 31 of the 2008 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.

As described in Note 6 to the consolidated financial statements, effective January 31, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. As described in Note 8 to the consolidated financial statements, effective February 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Minneapolis, Minnesota

March 20, 2008

RAVEN INDUSTRIES       43

INVESTOR INFORMATION

Annual Meeting

May 21, 2008, 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 about 30% of the company’s earnings to shareholders as a dividend. Each year our board of directors reviews Raven’s dividend. Fiscal 2008 represented the 21st-consecutive year we raised our annual dividend: a 22% increase to 44 cents per share.

Raven Web Site

www.ravenind.com

Stock Quotations

Listed on the Nasdaq NGS Stock Market—RAVN

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP
Minneapolis, MN

Stock Transfer Agent & Registrar

Wells Fargo Bank, N.A.
161 N. Concord Exchange
P.O. Box 64854
South St. Paul, MN 55164-0854
Phone: 1-800-468-9716

Form 10-K

Upon written request, Raven Industries, Inc.’s Form 10-K for the fiscal year ended January 31, 2008, which has been filed with the Securities and Exchange Commission, is available free of charge.

Affirmative Action Plan

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

Direct inquires to:

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

Delivering Long-term Shareholder Value

If an investor purchased $100 of Raven stock on January 31, 2003, held it for the next five years and reinvested the dividends, its value would have increased to $419.77. This was a significant premium over the same investment in the S&P 1500 Industrial Index, which would have been worth $227.10, or in the Russell 2000 Index, which would have grown to $203.82.

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, which could affect some of the company’s primary markets, such as agriculture and construction; or changes in competition, raw material availability, technology or relationships with the company’s largest customers — any of which could adversely affect any of the company’s product lines, as well as other risks described in Raven’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.

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

NAME OF SUBSIDIARY	JURISDICTION
Aerostar International, Inc.	South Dakota, USA
GTH, Inc. (formerly known as Glasstite, Inc.)	Minnesota, USA
Raven Industries Canada, Inc.	Nova Scotia, CANADA
Raven Industries GmbH	Solothurn, SWITZERLAND

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 33-38614 and 333-41352) of Raven Industries, Inc. of our report dated March 20, 2008 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated March 20, 2008 relating to the financial statement schedule, which appears in this Form 10-K.

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 31, 2008

EX-31.1

Exhibit 31.1

CERTIFICATION OF CEO PURSUANT TO
SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Ronald M. Moquist, certify that:

1.	I have reviewed this annual report on Form 10-K of Raven Industries, Inc. (the “Registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or others performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: March 31, 2008	/s/ Ronald M. Moquist
	Ronald M. Moquist
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CFO PURSUANT TO
SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Thomas Iacarella, certify that:

1.	I have reviewed this annual report on Form 10-K of Raven Industries, Inc. (the “Registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or others performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: March 31, 2008	/s/ Thomas Iacarella
	Thomas Iacarella
	Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

RAVEN INDUSTRIES, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

The undersigned, Ronald M. Moquist, the President and Chief Executive Officer of Raven Industries, Inc., has executed this Certification in connection with the filing with the Securities and Exchange Commission of Raven Industries, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 31, 2008 (the “Report”).

The undersigned hereby certifies, to his knowledge, that:

• the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Raven Industries, Inc.

IN WITNESS WHEREOF, the undersigned has executed this Certification as of the 31^st day of March 2008.

/s/ Ronald M. Moquist  

Ronald M. Moquist 

President and Chief Executive Officer 

EX-32.2

Exhibit 32.2

RAVEN INDUSTRIES, INC.

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

The undersigned, Thomas Iacarella, the Vice President and Chief Financial Officer of Raven Industries, Inc., has executed this Certification in connection with the filing with the Securities and Exchange Commission of Raven Industries, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 31, 2008 (the “Report”).

The undersigned hereby certifies, to his knowledge, that:

• the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Raven Industries, Inc.

IN WITNESS WHEREOF, the undersigned has executed this Certification as of the 31^st day of March 2008.

/s/ Thomas Iacarella  

Thomas Iacarella 

Vice President and Chief Financial Officer