RAVEN INDUSTRIES INC, 10-K, 1997-04-25

RAVEN INDUSTRIES INC
10-K, 1997-04-25
APPAREL & OTHER FINISHD PRODS OF FABRICS & SIMILAR MATL

Previous: QUAKER OATS CO, SC 13G, 1997-04-25

Next: SYMMETRICOM INC, 10-Q, 1997-04-25

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

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

For the Fiscal Year Ended January 31, 1997

[ ] 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 0-3136

RAVEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

South Dakota 46-0246171
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

205 E. 6th Street, Sioux Falls, South Dakota 57117
(Address of principal offices) (Zip Code)

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

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

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

Common stock, $1 par value
(Title of each class)

Indicate by checkmark 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.
Yes __X__ 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. [ ]

The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based on the closing price of $22.625 per share as reported on the
NASDAQ National Market System on April 16, 1997 was $97,636,310.

Shares of common stock outstanding at April 16, 1997: 4,837,250.

DOCUMENTS INCORPORATED BY REFERENCE

The following table shows, except as otherwise noted, the location of
information, required in this Form 10-K, in the registrant's Annual Report to
Shareholders for the year ended January 31, 1997 and Proxy Statement for
registrant's 1997 annual meeting, a definitive copy of which is to be filed on
April 18, 1997. All such information set forth under the heading "Reference"
herein below is incorporated herein by reference. A copy of the registrant's
Annual Report to Shareholders for the year ended January 31, 1997 is included in
this report.

PART I. ITEM IN FORM 10-K REFERENCE
- ------- ----------------- ---------

Item 1. Business Business, pages 4-7, this
document, Business
Segments, page 2, and
Sales by Markets, page
17, Annual Report to
Shareholders

Item 2. Properties Properties, pages 8-9, this
document

Item 3. Pending Legal Pending Legal Proceedings,
Proceedings page 9, this document

Item 4. Submission of Matters Submission of Matters to a
to a Vote of Vote of Security
Security Holders Holders, page 9, this
document

PART II.
- --------

Item 5. Market for the Regis- Quarterly Summary, page 24,
trant's Common Eleven-year Financial
Equity and Related Summary, pages 18-19,
Stockholder Matters and inside back cover,
Annual Report to
Shareholders

Item 6. Selected Financial Data Eleven-Year Financial
Summary, pages 18-19,
Annual Report to
Shareholders

Item 7. Management's Discussion Financial Review and
and Analysis of Analysis, pages 20-23,
Financial Condition Annual Report to
and Results of Shareholders
Operations

Item 8. Financial Statements and Annual Report to Share-
Supplementary Data holders, pages 25-36

Item 9. Changes in and Disagree- Changes in and Disagree-
ments with Accountants ments with Accountants
on Accounting and on Accounting and
Financial Disclosure Financial Disclosure,
page 9, this document

PART III.
- ---------

Item 10. Directors of the Regis- Election of Directors and
trant Executive Compensation,
Proxy Statement

Executive Officers of Executive Officers of
the Registrant Registrant, page 10,
this document and Other
Matters, Proxy
Statement

Item 11. Executive Compensation Executive Compensation,
Proxy Statement

Item 12. Voting Securities and Ownership of Common Stock,
Principal Holders Proxy Statement
Thereof

Item 13. Certain Relationships Election of Directors,
and Related Proxy Statement
Transactions

PART IV.
- --------

Item 14. Exhibits, Financial Exhibits, Financial
Statement Schedule Statement Schedule
and Reports on Form and Reports on Form
8-K. 8-K, pages 10-12,
this document.

RAVEN INDUSTRIES, INC.

FORM 10-K

year ended January 31, 1997

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. The
following terms - the company, Raven or the registrant - are intended to apply
to Raven Industries, Inc. and its consolidated subsidiaries listed in Exhibit 21
to this report. Raven is headquartered in Sioux Falls, South Dakota, employing
approximately 1,400 persons in eight states.

The company began operations as a manufacturer of high-altitude
research balloons. It has diversified over the years to supply specialized
products for a number of markets, including industrial, recreation, agriculture,
automotive and defense. Many of these product lines are an extension of
technology and production methods developed in the original balloon business.
The automotive product line was added via acquisition in fiscal 1987. Page 17 in
the company's Annual Report to Shareholders, incorporated herein by reference,
provides financial information regarding sales by markets.

The company has three business segments: Electronics, Plastics and Sewn
Products. 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 the product markets identified above. Page 2 in the
company's Annual Report to Shareholders, incorporated herein by reference,
provides financial information concerning the three business segments.

Business Segments

Electronics - Historically, this segment has provided a variety of
assemblies and controls to the U.S. Department of Defense and other defense
contractors. The company is expanding this segment's capabilities in contract
electronics assembly for commercial customers to offset a decline in defense
contracts. Assemblies manufactured by the Electronics segment include
communication, computer and other products where high quality is critical. Flow
control devices, used primarily for precision farming applications, are designed
and produced within this business segment. These devices are also used for
roadside and turf spraying. Management believes that acquisition of new
technologies for height and depth control will expand the company's capabilities
to support precision farming in future years. The segment also builds and
installs automated control systems for use in feedmills.

Defense and other contract electronics assembly sales are made in
response to competitive bid requests by defense agencies or other contractors.
The level and nature of competition vary with the type of product, but the
company frequently competes with a number of assembly manufacturers on any given
bid request. Home office personnel sell flow control devices directly to
original equipment manufacturers (OEMs) and distributors. Company sales
representatives sell automated systems directly to feedmills and bakeries.
Considerable competition exists for feedmill business.

Plastics - Products in this segment include heavy-duty sheeting for
industrial and agricultural applications; fiberglass, polyethylene and
dual-laminate tanks for industrial and agricultural use; high altitude balloons
for public and commercial research; and pick-up truck toppers sold in the small
truck after-market. The company's capability to produce dual-laminate tankage
resulted from the aquisition of Norcore Plastics in January 1997.

The company sells plastic sheeting to 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. A number of suppliers of sheeting
compete with Raven on both price and product availability.

Home office personnel and manufacturer's representatives sell storage
tanks to OEMs and through distributors. Competition comes not only from many
other plastic tank manufacturers, but also from manufacturers using other
materials (aluminum and steel). The company makes a number of custom fiberglass
and dual-laminate products, but polyethylene tanks tend to be commodity products
and subject to intense price competition.

The company sells research balloons directly to public agencies
(usually funded by NASA) or commercial users. Demand is small but stable. Raven
is the largest balloon supplier for high-altitude research in the United States.

Pickup-truck toppers are sold throughout the U.S., using a dealer
network. The overall market for toppers, which declined in the late 1980's and
early 1990's as alternatives to pickups with toppers, primarily minivans and
sport-utility vehicles, increased in popularity, has recovered due to strong
sales of pickup trucks. The number of topper manufacturers has fallen but is
still substantial.

Sewn Products - This segment produces and sells outerwear for a variety
of recreational activities, including skiing, hunting and fishing. The segment
also manufactures sport balloons principally for recreational use. Another major
product is large inflatable devices, which enjoy a number of uses, such as
parade floats and advertising media.

Recreational outerwear is sold both to retailers through an independent
sales representative network, and by home office personnel to catalog retailers.
There are many outerwear manufacturers in the U.S. and abroad and considerable
competition exists. The company competes successfully in the medium-to-higher
priced range of the market where specialty fabrics such as Gore-Tex(R) are
involved, emphasizing quality, service and manufacturing expertise.

The segment sells balloons through a dealer network. Raven is the
originator of modern hot-air ballooning and continues to be a leader in design
and technical expertise. The company believes it has approximately 40 percent of
the U.S. hot-air balloon market, although others are able to compete with
lower-cost products. Inflatables are sold directly to corporate customers and
are subject to varying levels of competition. Generally, the more customized the
product, the greater the company's market share.

Major Customer Information

No customer accounted for more than 10 percent of consolidated sales in
fiscal 1997. However, the company sells sewn products to several large
customers. In fiscal 1997, the top five customers in the Sewn Products segment
accounted for more than two-thirds of the sales in that segment. Although the
loss of these accounts would adversely affect profitability, the company
believes that, over the long term, addition of new customers and sales growth
from existing customers would replace any lost sales.

Seasonality/Working Capital Requirements

Some seasonality in demand exists for the company's outerwear products,
many of which are built in spring/summer for summer/fall delivery. Most of these
sales carry net thirty day terms, although some winter-dated terms are
available. Sales to the agricultural market (flow controls, plastic tanks) also
experience some seasonality, building in the fall for winter/spring delivery.

Certain sales to agricultural customers offer spring dating terms for
late fall and early winter shipments. The resulting fluctuations in inventory
and accounts receivable balances may require and have required seasonal
short-term financing.

Raw Materials

The company obtains a wide variety of materials from numerous vendors.
Principal materials include numerous electronic components for the Electronics
segment; various plastic resins for the Plastics segment; and fabric for the
Sewn Products segment. 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 their 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 industry segments noted above conduct ongoing research and
development efforts. Most of the company's research and development expenditures
are directed toward new products in the Electronics and Plastics segments. Total
company research and development costs are disclosed in Note 1 to the
consolidated financial statements located on page 29 of the Annual Report to
Shareholders, incorporated herein by reference.

Environmental Matters

Raven believes that it is in compliance in all material respects with
applicable federal, state and local environmental laws and regulations.
Expenditures relating to compliance for operating facilities incurred in the
past and anticipated in the future have not materially affected capital
expenditures, earnings or competitive position.

Backlog

As of February 1, 1997, the company's backlog of firm orders totaled
$38.1 million. Comparable backlog amounts as of February 1, 1996 and 1995 were
$32.5 million and $29.7 million, respectively.

Item 2. Properties

<TABLE>
<CAPTION>
Square Business
Location Feet Use Segments
- -------- ------ --- --------
<S> <C> <C> <C>
Sioux Falls, SD 150,000 Corporate office and Corporate and
electronics manufacturing Other
Electronics

73,300 Storage tank manufacturing Plastics

68,400 Sewn products warehouse Sewn Products

62,300 Plastic sheeting manufacturing Plastics

59,000 Plastic sheeting and hot-air balloon Plastics
manufacturing Sewn Products

31,400 Storage tank manufacturing Plastics

27,000 Offices and material handling facility Sewn Products

25,300 Inflatable manufacturing Sewn Products

10,200 Machine Shop Corporate and Other

6,200 Training/meeting center Corporate and Other

Dunnell, MN 81,500 Pickup-truck topper manufacturing Plastics

Eloy, AZ 51,600 Pickup-truck topper manufacturing Plastics

Albertville, AL 49,600 Storage tank manufacturing Plastics

Sulphur Springs, TX *45,400 Research balloon manufacturing Plastics

Springfield, OH 30,000 Plastic sheeting manufacturing Plastics

Tacoma, WA *26,500 Storage tank manufacturing Plastics

Huron, SD 24,100 Sewing plant Sewn Products

Washington Court House, OH 21,500 Storage tank manufacturing Plastics

St. Louis, MO 21,000 Electronics manufacturing Electronics

Gordo, AL *20,000 Feedmill automation equipment manufacturing Electronics

Beresford, SD 20,000 Sewing plant Sewn Products

Madison, SD 20,000 Sewing plant Sewn Products

DeSmet, SD 15,000 Sewing plant Sewn Products

Salem, SD 15,000 Sewing plant Sewn Products

Parkston, SD 14,000 Sewing plant Sewn Products

</TABLE>

* Leased short-term

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 company property in Sioux
Falls which is available for expansion.

Item 3. Pending Legal Proceedings

There are no pending legal proceedings wherein the claim for damages exceeds 10%
of the registrant's current assets.

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

There was no matter submitted during the fourth quarter to a vote of security
holders.

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

None.

Item 10. Executive Officers of the Registrant

Name Age Position Period Served
---- --- -------- -------------

David A. Christensen 62 President and Chief April 1971 to present
Executive Officer

Gary L. Conradi 57 Vice President, January 1980 to present
Corporate Services

Ronald M. Moquist 51 Executive Vice January 1979 to present
President

Arnold J. Thue 58 Vice President, January 1980 to present
Finance,Secretary
and Treasurer

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

Item 14. Exhibits, Financial Statement Schedule and Reports on

Form 8-K

(a) Consolidated Financial Statements and Schedule

1. Incorporated by reference from the attached 1997
Annual Report to Shareholders:

Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants

2. Included in Part II:
Report of Independent Accountants on Financial
Statement Schedule
Schedule II - Valuation and Qualifying Accounts

The following schedules are omitted for the reason that they are not
applicable or are not required: I, III and IV.

(b) Reports on Form 8-K

There were no reports filed on Form 8-K during the fourth quarter ended
January 31, 1997.

Exhibit
Number Description
------ -----------

3(a) Articles of Incorporation of Raven Industries, Inc. and all
amendments thereto.*

3(b) By-Laws of Raven Industries, Inc.*

3(c) Extract of Shareholders Resolution adopted on April 7, 1962
with respect to the by-laws of Raven Industries, Inc.*

4(a) Rights Agreement dated as of March 16, 1989 between Raven
Industries, Inc. and Norwest Bank Minnesota, National
Association (incorporated by reference to Exhibit 1 to the
Company's Report on Form 8-K dated March 16, 1989).

10(a) Change in Control Agreement between Raven Industries, Inc. and
David A. Christensen dated as of March 17, 1989.*

10(b) Change in Control Agreement between Raven Industries, Inc. and
Gary L. Conradi dated as of March 17, 1989.*

10(c) Change in Control Agreement between Raven Industries, Inc. and
Ronald M. Moquist dated as of March 17, 1989.*

10(d) Change in Control Agreement between Raven Industries, Inc. and
Arnold J. Thue dated as of March 17, 1989.*

10(f) The Raven Industries, Inc. Health and Survivor Benefit Plan.*

10(g) The Raven Industries, Inc. Post-Retirement Health and Survivor
Benefit Plan.*

10(h) Deferred Compensation Plan between Raven Industries, Inc. and
David A. Christensen dated as of June 1, 1986.*

10(i) Trust Agreement between Raven Industries, Inc. and Norwest
Bank South Dakota, N.A. dated April 26, 1989.*

10(n) Form of Incentive Stock Option Agreements.*

10(o) Form of Nonqualified Stock Option Agreements.*

10(p) Form of Amendment Agreement relating to outstanding Incentive
Stock Options.*

10(q) Raven Industries, Inc. 1990 Stock Option Plan adopted January
30, 1990 (incorporated by reference to Exhibit A to the
Company's definitive Proxy Statement filed April 25, 1990).

11 Detailed Computation of Earnings per Share.

13 1997 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 Accountants.

27 Financial Data Schedule (for S.E.C. only).

* Incorporated by reference to corresponding Exhibit
Number of the Company's Form 10-K for the year ended
January 31, 1989.

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)

April 25, 1997 By: /S/ David A. Christensen
- ------------------------------ -------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)

April 25, 1997 /S/ Arnold J. Thue
- ------------------------------ -------------------------------------
Date Arnold J. Thue
Vice President, Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)

Directors:

April 25, 1997 /S/ Conrad J. Hoigaard
- ------------------------------ -------------------------------------
Date Conrad J. Hoigaard

April 25, 1997 /S/ John C. Skoglund
- ------------------------------ -------------------------------------
Date John C. Skoglund

April 25, 1997 /S/ Mark E. Griffin
- ------------------------------ -------------------------------------
Date Mark E. Griffin

April 25, 1997 /S/ Kevin T. Kirby
- ------------------------------ -------------------------------------
Date Kevin T. Kirby

April 25, 1997 /S/ Anthony W. Bour
- ------------------------------ -------------------------------------
Date Anthony W. Bour

April 25, 1997 /S/ Thomas S. Everist
- ------------------------------ -------------------------------------
Date Thomas S. Everist

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

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

Our report on the consolidated financial statements of Raven
Industries, Inc. and Subsidiaries has been incorporated by reference in this
Form 10-K from page 36 of the 1997 Annual Report to Shareholders of Raven
Industries, Inc. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in Item
14.(a)2. on page 10 of this Form 10-K.

In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
March 12, 1997

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

for the years ended January 31, 1997, 1996 and 1995

(Dollars in thousands)

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ------------------------------- ----------- --------

Additions
-------------------------------
Balance at Charged to Charged to Deductions
Beginning Costs and Other From Balance at
Description of Year Expenses Accounts Reserves(1) End of Year
----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deducted in the balance sheet
from the asset to which it
applies:
Allowance for doubtful
accounts:
Year ended January 31, 1997 $340 $ 88 None $ 88 $340
==== ==== ==== ====

Year ended January 31, 1996 $350 $ 68 None $ 78 $340
==== ==== ==== ====

Year ended January 31, 1995 $350 $135 None $135 $350
==== ==== ==== ====

Note:

(1) Represents uncollectible accounts receivable written off during the year, net of recoveries.
</TABLE>

EXHIBIT 11

DETAILED COMPUTATION OF EARNINGS PER SHARE

(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
For the year ended January 31
-------------------------------------------

PER SHARE DATA 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income $7,688 $6,197 $6,088
====== ====== ======

Net income per common and common
equivalent shares:
Primary $1.61 $1.30 $1.27
====== ====== ======

Fully diluted (1) $1.61 $1.29 $1.27
====== ====== ======

AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES

Primary:
Weighted average number of common
shares outstanding 4,738,511 4,735,223 4,726,026
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 36,649 46,962 65,057
--------- --------- ---------

4,775,160 4,782,185 4,791,083
========= ========= =========

Fully diluted (1):
Weighted average number of common
shares outstanding 4,738,511 4,735,223 4,726,026
Common equivalent shares:
Dilutive stock options, using
Treasury Stock Method 38,217 51,227 65,057
--------- --------- ---------

4,776,728 4,786,450 4,791,083
========= ========= =========

(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.

</TABLE>

1997 ANNUAL REPORT

FOR THE FISCAL YEAR ENDED JANUARY 31

RAVEN
INDUSTRIES

OPERATING INCOME CLIMBS 25% * RECORD SALES UP 16%

RECORD NET INCOME CLIMBS 24% * STEADILY IMPROVING NET MARGINS

CONTENTS

Financial Highlights
........................1

Business Segments
........................2

Segment Performance
........................3

Letter to Shareholders
.......................14

Mission Statement
.......................16

Sales by Markets
.......................17

Eleven-Year
Financial Summary
.......................18

Financial
Review & Analysis
.......................20

Stock Price, Volume,
P/E Performance &
Quarterly Summary
.......................24

Financial Statements
.......................25

Notes to
Financial Statements
.......................29

Report of
Independent
Accountants
.......................36
Investor Information
........Inside back cover

CORPORATE PROFILE

Founded in 1956, Raven Industries is a diversified manufacturer based in
Sioux Falls, SD. It supplies plastic, electronic and special apparel products to
well-defined niche markets where it maintains a dominant position. In the past
three years, the company has moved away from defense products, including
special-weather and chemical-suit apparel for the U.S. Army.

Today Raven operates three reportable business segments: Plastics,
Electronics and Sewn Products. It manufactures products such as ultrathin and
rugged reinforced plastic films, large-volume plastic and fiberglass tanks,
superior-performance outerwear and pickup-truck toppers. The company also makes
industrial controls, computerized flow control hardware and software--including
sprayer control and chemical injection systems, and ultrasonic soil-depth
control devices--as well as high-altitude research balloons for NASA, the
historic core product of the company which has led to a variety of other
products based on this foundation technology.

Raven's cash dividend has risen every year since 1986 and currently
management targets 15-20% average annual EPS growth and annual sales growth of
15%.

SAFE HARBOR STATEMENT

Certain sections of this report contain discussions of items which may
constitute forward-looking statements within the meaning of federal securities
laws. Although Raven Industries believes that expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurances that its expectations will be achieved. Factors that could cause
actual results to differ from expectations include general economic conditions,
weather conditions which could affect certain of the company's primary markets
such as the agricultural market or its market for outerwear, or changes in
competition which could impact any of the company's product lines.

FINANCIAL HIGHLIGHTS

(Dollars in thousands, except per-share data)
For the years ended January 31 1997 1996 Change
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS

Sales.......................................................... $ 139,441 $ 120,444 15.8%
Operating income............................................... 11,971 9,561 25.2%
Pretax income.................................................. 11,915 9,566 24.6%
Net income..................................................... 7,688 6,197 24.1%

PER SHARE

Net income..................................................... $ 1.61 $ 1.30 23.8%
Cash dividends................................................. 0.50 0.45 11.1%
Book value..................................................... 11.73 10.42 12.6%

PERFORMANCE

Percentage pretax profit on sales.............................. 8.5% 7.9% 7.6%
Return on sales................................................ 5.5% 5.1% 7.8%
Return on average assets....................................... 10.4% 9.3% 11.8%
Return on beginning shareholders' equity....................... 15.6% 13.6% 14.7%
Long-term debt to total capitalization......................... 5.3% 5.4% - 1.9%
Weighted average shares outstanding (in thousands)............. 4,775 4,782 - 0.1%
Number of employees............................................ 1,387 1,368 1.4%
Number of shareholders, year-end............................... 3,011 3,190 - 5.6%

</TABLE>

NET PROFIT MARGIN
(Percent)

[PLOT POINTS CHART]

YEAR %

'92 5.3%
'93 5.4%
'94 5.7%
'95 5.0%
'96 5.1%
'97 5.5%

TOTAL ASSETS
(Dollars in millions)

[PLOT POINTS CHART]

YEAR ASSETS

'92 46,528
'93 54,813
'94 60,597
'95 65,636
'96 67,553
'97 80,662

EARNINGS PER SHARE
(Dollars)

[PLOT POINTS CHART]

YEAR EPS

'92 1.13
'93 1.27
'94 1.45
'95 1.27
'96 1.30
'97 1.61

DIVIDENDS
PAID PER SHARE
(Dollars)

[PLOT POINTS CHART]

YEAR DIVIDEND PER SHARE

'92 0.25
'93 0.28
'94 0.33
'95 0.39
'96 0.45
'97 0.50

BUSINESS SEGMENTS

<TABLE>
<CAPTION>
For the years ended January 31
(Dollars in thousands) 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ELECTRONICS

Sales.......................... $ 43,861 $ 32,962 $ 31,959 $ 35,771 $ 34,538 $ 35,243
Operating income............... 4,913 4,600 2,753(a) 4,529 5,146 5,963
Identifiable assets............ 23,251 19,204 16,912 18,838 19,082 15,622
Capital expenditures........... 1,071 807 552 985 953 823
Depreciation & amortization.... 1,273 1,077 872 804 712 639

PLASTICS

Sales.......................... $ 59,158 $ 55,281 $ 48,971 $ 40,386 $ 36,070 $ 31,568
Operating income............... 4,187 3,267 3,470 2,815 2,625 2,406
Identifiable assets............ 33,879 26,092 25,817 16,796 13,769 12,874
Capital expenditures........... 2,539 2,973 6,387 3,587 1,305 1,194
Depreciation & amortization.... 2,678 2,414 1,845 1,263 1,245 1,302

SEWN PRODUCTS

Sales.......................... $ 36,422 $ 32,201 $ 40,790 $ 45,311 $ 40,606 $ 33,798
Operating income (loss)........ 2,871 1,694 2,913 3,096 1,375 (231)
Identifiable assets............ 14,990 13,934 16,384 16,510 17,760 12,879
Capital expenditures........... 379 396 765 1,141 888 1,620
Depreciation & amortization.... 583 719 832 803 683 570

CORPORATE & OTHER

Identifiable assets............ $ 8,542 $ 8,323 $ 6,523 $ 8,453 $ 4,202 $ 5,153
Capital expenditures........... 20 10 49 71 13 235
Depreciation & amortization.... 32 32 33 27 23 26

TOTAL COMPANY

Sales.......................... $ 139,441 $ 120,444 $ 121,720 $ 121,468 $ 111,214 $ 100,609
Operating income............... 11,971 9,561 9,136(a) 10,440 9,146 8,138
Identifiable assets............ 80,662 67,553 65,636 60,597 54,813 46,528
Capital expenditures........... 4,009 4,186 7,753 5,784 3,159 3,872
Depreciation & amortization.... 4,566 4,242 3,582 2,897 2,663 2,537

(a)INCLUDES THE $1.8 MILLION BETA RAVEN CHARGE (SEE NOTE 5).

</TABLE>

PRODUCT LINES BY BUSINESS SEGMENT

[PHOTO]
ELECTRONICS

* Contract electronics
manufacturing
* Flow controls-
precision farming
* Feedmill and bakery
automation
* Military radio assemblies

[PHOTO]
PLASTICS

* Sheeting
* Storage/sprayer tanks
* Research balloons
* Pickup-truck toppers

[PHOTO]
SEWN PRODUCTS

* Performance
outerwear
* Sport balloons
* Inflatables

SEGMENT PERFORMANCE

ALL THREE OF RAVEN'S OPERATING SEGMENTS SHOWED SALES GAINS BOTH FOR THE FINAL
QUARTER AND FULL YEAR OF FISCAL 1997. LOOKING FORWARD THROUGH THE END OF THE
DECADE, RAVEN WILL CONTINUE TO ENHANCE AND EXPAND ITS CORE TECHNOLOGIES. THE
COMPANY'S GOAL IS AN AVERAGE ANNUAL GAIN OF 15% IN REVENUES AND 15-20% GROWTH IN
NET EARNINGS.

ELECTRONICS

FLOW CONTROLS--SALES UP 24%

Raven engineers continue to develop, refine and update flow-control products
for today's increasingly sophisticated farmers, helping them maximize yield
while containing costs.

Escalating demand for such "precision farming" hardware and software pushed
Raven's fiscal 1997 sales to $16.69 million, up 24% from fiscal 1996's $13.47
million.

NEW GLOBAL-POSITIONING SATELLITE TECHNOLOGY

During the year, the company introduced a new variable-rate controller that
utilizes global-positioning satellite (GPS) technology to enable farmers to
apply chemicals with far more precision and control. The technology operates on
a grid system. The operator divides his farmland into a series of zones or
segments and then pre-programs the controller to apply chemicals based on the
desired mixture or strength prescribed by him for each area plotted. The system
can control the application of various chemicals--liquid, granular, or nitrate
fertilizer (NH3).

Raven also introduced a new line of control systems for both planting and
harvesting. The precision depth control system for seed-planting allows the
farmer to seek optimum soil depth based on moisture retention, drainage and
emergence. The height control system for combines senses changes immediately in
front of the cutter and allows height position with one-half inch accuracy. This
feature allows the combine operator the capability of

FLOW
CONTROLS SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 4.622
'93 6.542
'94 8.229
'95 10.223
'96 13.467
'97 16.689

ELECTRONICS
SEGMENT SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 35.243
'93 34.538
'94 35.771
'95 31.959
'96 32.962
'97 43.861

operating very close to the ground, maximizing the intake of low-canopy crops
such as beans, with reduced risk of equipment damage.

CLIMB IN EXPORT SALES

Export sales are becoming increasingly important in electronic controls for
agriculture. As the U.S. market matures, greater penetration of foreign markets
is needed to maintain the 29% compound annual growth rate Raven has enjoyed over
the past five years--one of the company's most consistent growth areas.

CONTRACT MANUFACTURING--SALES DOUBLE

Contract manufacturing sales doubled in fiscal 1997 from $9 million the year
previous to $18 million. In just over a year, Raven revamped its Electronic
Systems Division, moving from military electronics contracting to virtually all
commercial work.

In this short time frame, the company has developed approximately 20
significant new customers. Products now being produced at Raven include
specialty computer boards, heating and air conditioning control systems and
sophisticated global positioning equipment.

SUPERIOR ENGINEERING STAFF

Raven has progressed rapidly thanks to a superior engineering staff that
specializes in electronic and mechanical design as well as value-engineering in
an environment where Total Quality Manufacturing (TQM) has been emphasized for
years and the company holds ISO 9002 certification.

Raven is now firmly established as a superior-quality contract manufacturer
and its management expects to maintain a 20% or better annual growth rate in
this area for the foreseeable future.

PROCESS CONTROLS--REFOCUSING EFFORTS

Beta Raven sales of $9.2 million in fiscal 1997 dropped 12% from the $10.5
million level of fiscal 1996. Sales declined in the contract manufacturing area
and remained flat in the process controls business as Beta Raven continued to
refocus its efforts on what once was its core business--primarily feed mills and
chemical and industrial plants.

During the past year the automation of a large chemical plant for an
international company was successfully completed. This $1 million-plus
installation is expected to be the first of several projects for controlling the
flow of materials in chemical plant operations for this company alone.

[PHOTO]

Raven engineers continue to develop, refine
and update flow-control products for today's
increasingly sophisticated farmers, helping
them maximize yield while containing costs.

PLASTICS
SEGMENT SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 31.568
'93 36.070
'94 40.386
'95 48.971
'96 55.281
'97 59.158

ENGINEERED
FILM SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 14.390
'93 15.129
'94 15.272
'95 19.815
'96 23.653
'97 25.799

We believe there will continue to be opportunities to apply our technology
to a variety of process industries, and with operations now on a firm and
profitable foundation we can successfully pursue them.

Contract manufacturing at Beta Raven has also been refocused, working now
with a relatively small group of accounts with reasonable growth prospects and
secure financing. During this process, some sales were sacrificed but long-term
prospects are much improved.

PLASTICS

ENGINEERED FILMS--A BANNER YEAR

Raven's engineered films range from ultra-thin 0.25 millimeter plastic
sheeting--used in its manufacture of high-altitude research balloons--to
heavy-duty 40 millimeter films utilized for pit lining and in capping landfills.
The markets for these films range from manufactured housing, now the company's
largest market, to pit liners, landfill covers, construction enclosures,
house-wrap, vapor barriers for residential construction, general industrial use,
agriculture, and NASA-employed space-research balloons.

Total sales of engineered films for the year ended January 31, 1997, totaled
$25.8 million, up 9% from last year's $23.7 million.

SIGNIFICANT CAPACITY EXPANSION

The past year was marked by significant capacity expansion. In Springfield,
Ohio, Raven completed a new 30,000-square-foot plant to improve service to
customers and reduce shipping costs. In Sioux Falls, the extrusion facility was
not only expanded but now operates 24 hours per day, 7 days a week, and a
further expansion is being planned for fiscal 1998.

HIGH-ALTITUDE RESEARCH BALLOON BUSINESS UP 18%

The company's high-altitude research balloon business--the core business on
which Raven was founded 41 years ago--remains a viable and consistently
profitable if small product line. Raven produces its high-altitude balloons in a
plant dedicated solely for this purpose in Sulfur Springs, Texas. Sales
increased 18% in fiscal 1997.

[PHOTO]

Raven has progressed rapidly thanks to a superior
engineering staff that specializes in electronic and
mechanical design as well as value-engineering in an
environment where Total Quality Manufacturing
(TQM) has been emphasized for years and the
company holds ISO 9002 certification.

PLASTIC
TANK SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 9.682
'93 11.341
'94 12.397
'95 13.238
'96 15.838
'97 15.702

PICKUP-TRUCK
TOPPER SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 5.183
'93 7.672
'94 10.931
'95 13.512
'96 15.402
'97 17.657

PLASTIC TANKS

Plastic tank sales of $15.2 million in fiscal 1997 declined 4% from the
previous year's $15.8 million due to lower agricultural sales. Following a 20%
increase in fiscal 1996, the falloff was not expected at the beginning of the
year. The agricultural market, however, is typically a cyclical business and
Raven's sales reflected a downturn of the overall market.

This new year, however, is off to a good start. Orders placed in early
fiscal 1998 are substantially ahead of the pace of fiscal 1997 and orders for
large poly-storage tanks are particularly strong. Improving sales in this area
is especially important as the company has made substantial investments in plant
and equipment.

ACQUISITION

In January 1997, Raven acquired Tacoma, Washington-based Norcore Plastics,
Inc. Norcore's business is primarily in the fabricating of fiberglass tanks for
industrial use, utilizing `dual laminate' technology, which consists of
combining specialty plastic films with the tank-manufacturing process to produce
tanks capable of handling high-purity liquids and chemicals. One of the most
important markets for dual-laminate containers is the semiconductor industry.
Other markets include mining, paper and pulp and the chemical-process industry.

The acquisition of Norcore, when coupled with Raven's existing fiberglass
tank business and its poly tank operations, give the company the most complete
product offering in the plastic tank business. Norcore's annual sales level of
approximately $9 million, combined with the anticipated increase in Raven's
existing poly and fiberglass tank business this coming year, should have a
positive impact on overall company performance in fiscal 1998.

PICKUP-TRUCK TOPPERS--SALES AND PROFIT UP

Sales of $17.7 million for the Glasstite truck topper line in fiscal 1997
rose 15% over the $15.4 million in the previous year. While overall sales in the
topper market remain weak, Raven management believes that the products the
company offers will continue to gain wider acceptance and sales strength.
Profitability, while well below the company average, did improve in fiscal 1997,
and further gains are expected in this new year. The Arizona plant, which opened
in fiscal 1996, is now operating at a reasonable level of

[PHOTO]

Raven's plastic extrusion facility in Sioux Falls, SD
manufactures plastic sheeting ranging from as thin as
0.25 millimeters to a heavy-duty 40 millimeters. The films
are used for pit lining and capping landfills as well as
construction enclosures, house-wrap and NASA space-research
balloons. Engineered film sales rose 9% in FY 1997 to $25.8 million.

efficiency and producing quality products. Additional sales volume is still
needed to produce a better bottom line.

As new truck models continue to proliferate, requiring continual style
changes, varying sizes and a multitude of colors with a quality automotive
finish, the Raven product line continues to gain momentum. The company has made
the investment in styling, design and the facilities to manufacture a product
that matches the appearance of new truck models.

THE NEW GLASSTITE TARGA AND GLASSTITE VISION II

During the past year, Raven introduced a new cab-high topper called the
Glasstite Targa. Targa's stylish design has been gaining in popularity and
management anticipates a substantial jump in sales now that all of the designs
for the various pickup-truck models are complete.

A second new product, the Glasstite Vision II, was introduced at the
industry's national trade show in February 1997 and created a great deal of
excitement with Raven dealers. The Vision II is a premium-priced product with a
high-rise profile, giving it considerably more internal height for storage than
traditional cab-high models. Sales of the Vision II will commence in April 1997.

These new models, coupled with continued penetration of the West Coast
market, should provide strong impetus to substantial pickup-truck topper revenue
and profit growth this year.

SEWN PRODUCTS

A REMARKABLE RECOVERY

Favorable weather conditions helped stimulate consumer demand for rugged
outerwear this past year. This--combined with the continuing growth of our
primary market, large catalog retailers--pushed total segment sales up 13% to
$36.4 million from the previous year's $32.2 million.

Higher volumes and steady demand during fiscal 1997 kept Raven's
manufacturing plants running at a favorable capacity level, improving
efficiencies and boosting profit margins. One of management's major goals for
fiscal 1998 is to attain an even higher level of flexibility in manufacturing
operations in order to be more responsive in servicing customer demand. The
first full year of operations under an in-house-developed Manufacturing

SEWN PRODUCTS
SEGMENT SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 33.798
'93 40.606
'94 45.311
'95 40.790
'96 32.201
'97 36.422

[PHOTO]

Tank orders placed in early fiscal 1998 are
substantially ahead of the pace of fiscal 1997 and
orders for large poly-storage tanks are particularly strong.
Improving sales in this area is especially important as
this is where the company's investments in plant and
equipment have been made.

SEVERE-WEATHER
UNIFORM SALES
(Dollars in millions)

[BAR CHART]

YEAR SALES

'95 1.068
'96 2.403
'97 4.298

SPORTSWEAR SALES
(Dollars in millions)

[BAR CHART]

YEAR NET SALES

'92 17.946
'93 20.582
'94 28.143
'95 32.116
'96 26.426
'97 29.901

Resource Planning (MRP II) system also proved highly successful. Very high
levels of inventory accuracy have been achieved with significantly improved
turnover rates and customer satisfaction--virtually eliminating shipment errors,
shortages and related problems.

A STRONG YEAR FOR OUTERWEAR

Apparel sales rose 13% to $29.9 million from the previous year's $26.4
million, and superior-quality "performance outerwear" continues to be the focus
of the Sewn Products segment. Despite the general decline of the U.S. apparel
industry as manufacturers move overseas, we see a continuing demand for our
products.

Severe-weather uniforms, an important product area in this past year's
growth, was a market Raven first entered in fiscal 1995. Sales of high-quality
cold- and severe-weather uniforms for police departments and government agency
personnel climbed from $2.4 million in fiscal 1996 to $4.3 million in fiscal
1997. The companies Raven sells to are financially strong entities and offer
excellent potential for continued growth. Customer demand for special hunting
outerwear also was strong this past year--and orders for fiscal 1998 are coming
in at a record pace.

CLEAN-ROOM SUITS SALES UP 58%

While a small part of segment sales, Raven's top-quality clean-room suits
accounted for a 58% rise in sales in fiscal 1997 to $1.9 million from fiscal
1996's $1.2 million.

AEROSTAR SALES CLIMB 12%

Aerostar completed its most successful year with sales increases in both
hot-air balloons and inflatable shapes produced for amusement parks, parades and
advertising. Total sales for fiscal 1997 rose 12% to $6.5 million from $5.8
million the previous year. Sales of inflatables climbed 11% for the year while
hot-air balloon sales increased 14%.

As with other Raven product lines, the use of computerized design and
cutting equipment gives Aerostar the ability to design and manufacture complex
shapes with precision accuracy. This is paramount in satisfying the needs of
Aerostar customers, which include some of the most well-known companies in
America.

[PHOTO]

The use of computerized design and cutting
equipment gives Raven the ability to design and
manufacture complex shapes with precision accuracy.
This is paramount in satisfying the needs of our
customers, which include some of the most
well-known companies in America.

TO OUR SHAREHOLDERS

LAST YEAR'S ANNUAL REPORT COVER HIGHLIGHTED AN AGGRESSIVE AGENDA FOR FISCAL
1997. WE WENT ON RECORD THAT WE PLANNED TO MAXIMIZE REVENUE GROWTH, DOING THIS
PRIMARILY THROUGH NEW PRODUCT INTRODUCTIONS. WE TOLD YOU WE ALSO PLANNED TO
IMPROVE PRODUCT QUALITY, DOUBLE ELECTRONICS CONTRACT BUSINESS, CONTINUE 30%
GROWTH IN "PRECISION FARMING" ELECTRONICS SYSTEMS, BOOST OPERATING MARGINS IN
OUR PLASTICS SEGMENT, AND ACHIEVE RECORD EARNINGS.

FOR THE MOST PART, WE REACHED WHAT WE STRIVED FOR--BOTH RAVEN'S SALES AND
EARNINGS CLIMBED TO RECORD LEVELS IN FISCAL 1997. SALES ROSE 16% TO $139.4
MILLION OVER FISCAL 1996'S $120.4 MILLION. NET INCOME OF $7.7 MILLION IMPROVED
24% OVER THE PREVIOUS YEAR'S $6.2 MILLION AND EARNINGS PER SHARE OF $1.61 ALSO
INCREASED 24% OVER THE $1.30 EARNED THE PREVIOUS YEAR.

Excerpt from last year's annual report cover

Raven Industries

AGENDA
for year ending 1/31/97

Maximize revenue growth thru product intros, productivity gains

Watchdog waste while improving quality

Double electronics contract business, adding $10 million to topline

Continue 30% growth in electronics for precision farming

In plastics, boost operating margins

Earn significantly more than previous best year

NEW PRODUCT INTRODUCTIONS

We introduced several new products in the agricultural electronics field
this past year, including precision depth controls for planting, tillage, and
harvesting operations. Market testing was generally very positive and where fine
tuning was indicated, we did it. A new variable rate controller was introduced
using global-positioning satellite (GPS) technology for applying chemicals and
fertilizer. Our height- and depth-control devices are relatively new to the
North American market, but we feel demand for this type of highly sophisticated
product will grow rapidly when its benefits become more widely known.

SHAREHOLDERS'
EQUITY
(Dollars in millions)

[PLOT POINTS CHART]

'92 30.601
'93 35.530
'94 41.100
'95 45.526
'96 49.151
'97 56.729

DEBT TO TOTAL
CAPITAL
(Percent)

[BAR CHART]

YEAR %

'92 10.7%
'93 8.3%
'94 5.8%
'95 8.4%
'96 5.4%
'97 5.3%

SALES PER EMPLOYEE
(Dollars in thousands)

[BAR CHART]

'92 80
'93 85
'94 85
'95 86
'96 88
'97 101

As spelled out in our agenda, a major priority was increasing our contract
electronics business. As the year closed on January 31, 1997, we grew from $9
million in fiscal 1996 to $18 million for fiscal 1997--and we expect continuing
future growth in this area. We have become recognized as an efficient and
high-quality producer in a relatively short time with a number of substantial
customers.

INCREASED PROFITABILITY IN PLASTICS

In Plastics, our primary goal was to increase profitability. We achieved
this with operating income up 28% on a 7% sales increase. Sales of our
engineered films product line rose 9% and improved an already good level of
profitability. We also introduced new woven film products and test-marketed new
industrial packaging materials.

We worked hard on new truck topper models, enhancing superior-quality
finishes and attractive designs and features to keep this product line moving
forward. We improved profitability for the truck topper line as sales grew 15%,
but frankly we need a great deal of further improvement to get this operation to
an acceptable profit level. Our plastic tank business saw a downturn in its
agricultural business in the first-half of the year, but had a good second-half
recovery. Profits and sales for the full year, however, ended slightly below
last year.

In January 1997, we acquired Norcore Plastics, Inc. of Tacoma, Washington.
The acquisition will add approximately $9 million in sales for fiscal 1998 and
give Raven a much stronger presence in the industrial tank market.

A REMARKABLE RECOVERY

Raven's Sewn Products, or Special Apparel segment, made a remarkable
recovery in fiscal 1997 with sales up 13% for the year and profits making a
substantial gain. While most of our growth strategy revolves around the Plastics
and Electronics business, the Sewn Products segment continues to be a
significant part of making Raven a successful company.

Our balance sheet remains strong with long-term debt only 5% of total
capitalization. No short-term borrowings were utilized during the year and we
were again able to raise our quarterly cash dividend 8% from 12 cents to 13
cents per share. We have the resources to grow both internally and by making
strategic acquisitions, ones that complement our present businesses and are
accretive to earnings.

[PHOTO] Davis A. Christensen

In conclusion, I want to give credit and sincere thanks to our employees for
making this past year a highly successful one. The dedication, loyalty, and
commitment of our employees to producing quality products and serving our
customers is an absolute must for our continuing success.

/s/ David A. Christensen
David A. Christensen
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 24, 1997

MISSION STATEMENT

Raven Industries is a specialty manufacturer of plastic, electronic and sewn
products. Our mission is to become a dominant factor in the niche markets we
serve by meeting World Class Standards of quality, cost and service. In doing
so, we increase shareholder value--a prime goal of the company--and benefit
employees as well. We also will attract and retain quality employees and give
them the motivation and support to succeed and grow with the company.

VISION

* To be recognized by employees, customers, suppliers and the communities in
which we are located as a leader in product quality, customer satisfaction,
employee relations and financial management.

* To be a leader in key financial ratios compared to similar companies.

* To have a well-trained and motivated work force at all levels of the
organization.

GUIDING PRINCIPLES

* To strive for continuous improvement in everything we do and to focus on the
quality of our products and services.

* To conduct our business with integrity.

* To treat our dealers and suppliers as business partners.

* To treat our employees with dignity and respect and to provide a safe
workplace for them.

* To share our financial success with all those who contributed to it.

* To have a positive social and economic impact on the communities in which we
work.

SALES BY MARKETS

(Dollars in thousands)
For the years ended January 31 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL

Plastic sheeting.......................................... $ 21,276 $ 19,225 $ 16,295
Industrial tanks.......................................... 7,070 6,566 5,842
Electronics............................................... 17,754 11,391 7,488
Research balloons......................................... 3,268 2,776 2,205
Inflatables............................................... 3,515 3,169 2,414
-----------------------------------------
$ 52,883 $ 43,127 $ 34,244

RECREATION

Performance outerwear..................................... $ 29,901 $ 26,426 $ 32,116
Sport balloons............................................ 2,790 2,454 2,589
-----------------------------------------
$ 32,691 $ 28,880 $ 34,705

AGRICULTURE

Flow controls-precision farming........................... $ 16,689 $ 13,467 $ 10,223
Feedmill automation....................................... 3,859 4,181 3,643
Storage/sprayer tanks..................................... 8,632 9,271 7,396
Plastic sheeting.......................................... 1,255 1,653 1,315
-----------------------------------------
$ 30,435 $ 28,572 $ 22,577

AUTOMOTIVE

Pickup-truck toppers...................................... $ 17,657 $ 15,402 $ 13,512
Other..................................................... 388 2,406
-----------------------------------------
$ 17,657 $ 15,790 $ 15,918

DEFENSE

Electronics............................................... $ 5,559 $ 3,922 $ 10,605
Other..................................................... 216 153 3,671
-----------------------------------------
$ 5,775 $ 4,075 $ 14,276

TOTAL COMPANY SALES

Industrial................................................ $ 52,883 $ 43,127 $ 34,244
Recreation................................................ 32,691 28,880 34,705
Agriculture............................................... 30,435 28,572 22,577
Automotive................................................ 17,657 15,790 15,918
-----------------------------------------

Total Commercial Sales.................................... $ 133,666 $ 116,369 $ 107,444

Defense................................................... 5,775 4,075 14,276
-----------------------------------------

Total Company Sales....................................... $ 139,441 $ 120,444 $ 121,720
=========================================
</TABLE>

ELEVEN-YEAR FINANCIAL SUMMARY

(Dollars in thousands, except per-share data)
For the years ended January 31 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS FOR YEAR:

Net sales ................................. $ 139,441 $ 120,444 $ 121,720 $ 121,468 $ 111,214 $ 100,609
Gross profit .............................. 25,287 22,660 23,968 23,574 21,048 19,109
Operating income .......................... 11,971 9,561 9,136(a) 10,440 9,146 8,138
Income before income taxes ................ 11,915 9,566 9,372 10,638 9,182 8,067
Net income ................................ 7,688 6,197 6,088 6,954 6,030 5,306
Net income % of sales ..................... 5.5% 5.1% 5.0% 5.7% 5.4% 5.3%
Net income % of beginning equity .......... 15.6% 13.6% 14.8% 19.6% 19.7% 20.2%
Cash dividends ............................ $ 2,367 $ 2,130 $ 1,843 $ 1,545 $ 1,316 $ 1,165

FINANCIAL POSITION:

Current assets ............................ $ 56,696 $ 45,695 $ 43,795 $ 45,037 $ 42,476 $ 34,798
Current liabilities ....................... 20,016 14,771 15,078 16,088 15,253 11,284
Working capital ........................... 36,680 30,924 28,717 28,949 27,223 23,514
Current ratio ............................. 2.83 3.09 2.90 2.80 2.78 3.08
Property, plant and equipment ............. 18,142 18,069 18,570 13,371 10,457 9,947
Total assets .............................. 80,662 67,553 65,636 60,597 54,813 46,528
Long-term debt ............................ 3,181 2,816 4,179 2,539 3,224 3,676
Shareholders' equity ...................... 56,729 49,151 45,526 41,100 35,530 30,601
Long-term debt/total capitalization ....... 5.3% 5.4% 8.4% 5.8% 8.3% 10.7%
Inventory turnover (CGS/year-end inventory) 4.5 4.1 4.4 4.4 3.8 4.2

CASH FLOWS PROVIDED BY (USED IN):

Operating activities ...................... $ 7,088 $ 9,687 $ 7,452 $ 11,257 $ 3,475 $ 7,489
Investing activities ...................... (5,090) (4,158) (10,000) (5,908) (3,107) (3,886)
Financing activities ...................... (2,363) (4,029) 406 (2,042) (1,659) (2,518)
Increase (decrease) in cash ............... (365) 1,500 (2,142) 3,307 (1,291) 1,085

COMMON STOCK DATA:

Net income per share ...................... $ 1.61 $ 1.30 $ 1.27 $ 1.45 $ 1.27 $ 1.13
Cash dividends per share .................. 0.50 0.45 0.39 0.33 0.28 0.25
Book value per share ...................... 11.73 10.42 9.62 8.76 7.60 6.63
Stock price range during year
High ................................... $ 23.50 $ 20.75 $ 24.50 $ 23.50 $ 21.50 $ 15.83
Low .................................... $ 16.00 $ 15.50 $ 18.00 $ 18.00 $ 13.83 $ 8.00
Shares outstanding, average (in thousands) 4,775 4,782 4,791 4,796 4,763 4,713
Shares outstanding, year-end (in thousands) 4,836 4,716 4,735 4,694 4,676 4,629
Number of shareholders, year-end .......... 3,011 3,190 3,031 3,173 3,147 2,775

OTHER DATA:

Average number of employees ............... 1,387 1,368 1,414 1,435 1,316 1,252
Sales per employee ........................ $ 101 $ 88 $ 86 $ 85 $ 85 $ 80
Backlog ................................... $ 38,102 $ 32,539 $ 29,661 $ 36,403 $ 49,033 $ 48,200

</TABLE>

(WIDE TABLE CONTINUED FROM ABOVE)

1991 1990 1989 1988 1987
- ------------------------------------------------------------------

$ 85,502 $ 90,973 $ 77,563 64,305 $ 52,303
17,685 18,177 14,857 14,292 12,303
7,311 7,461 5,127 4,983 4,250
7,071 6,831 4,578 4,390 3,919
4,605 4,235 2,930 2,656 2,122
5.4% 4.7% 3.8% 4.1% 4.1%
20.2% 19.7% 15.3% 15.5% 13.5%
$ 1,014 $ 849 $ 732 $ 680 $ 659

$ 33,900 $ 30,570 $ 24,976 $ 21,795 $ 18,416
12,147 11,247 9,633 8,799 6,621
21,753 19,323 15,342 12,997 11,795
2.79 2.72 2.59 2.48 2.78
8,368 7,163 8,702 9,672 7,855
44,103 39,547 35,892 33,920 28,847
4,679 4,966 4,115 5,254 4,485
26,236 22,802 21,448 19,170 17,155
15.1% 17.5% 15.7% 20.9% 20.2%
3.4 4.1 4.6 4.1 3.5

$ 5,583 $ 2,404 $ 3,908 $ 4,108 $ 2,046
(3,113) (1,308) (1,331) (3,598) (4,545)
(2,071) (1,875) (1,869) 274 (1,084)
399 (779) 708 784 (3,583)

$ 0.98 $ 0.87 $ 0.61 $ 0.55 $ 0.45
0.22 0.18 0.15 0.14 0.14
5.77 5.01 4.48 4.03 3.63

$ 9.75 $ 10.00 $ 5.75 $ 7.09 $ 5.59
$ 6.42 $ 5.33 $ 4.37 $ 4.21 $ 3.59
4,704 4,839 4,826 4,811 4,754
4,559 4,554 4,785 4,758 4,734
2,526 1,898 1,925 2,000 1,869

1,141 1,234 1,138 1,019 864
$ 75 $ 74 $ 68 $ 63 $ 61
$ 53,587 $ 42,078 $ 33,436 $ 21,424 $ 19,808

All per share, shares outstanding and market price data reflect the October 1992
three-for-two and the July 1989 two-for-one stock splits. All other figures
are as reported.
(a) Includes the $1.8 million Beta Raven charge (See Note 5).

18 & 19

FINANCIAL REVIEW AND ANALYSIS

RESULTS OF OPERATIONS: MARGIN ANALYSIS

(In thousands, except per-share data)
For the years ended January 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------

% % % % % %
AMOUNT SALES CHANGE Amount Sales Change Amount Sales Change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ....... $139,441 100.0 + 15.8 $120,444 100.0 - 1.0 $121,720 100.0 + 0.2
Gross profit .... 25,287 18.1 + 11.6 22,660 18.8 - 5.5 23,968 19.7 + 1.7
Beta Raven charge 1,800 1.5
Other operating
expenses ..... 13,316 9.5 + 1.7 13,099 10.9 + 0.5 13,032 10.7 - 0.8
Operating income 11,971 8.6 + 25.2 9,561 7.9 + 4.7 9,136 7.5 -12.5
Income before
income taxes . 11,915 8.5 + 24.6 9,566 7.9 + 2.1 9,372 7.7 -11.9
Income taxes .... 4,227 3.0 + 25.5 3,369 2.8 + 2.6 3,284 2.7 -10.9
Net income ...... 7,688 5.5 + 24.1 6,197 5.1 + 1.8 6,088 5.0 -12.5
Net income
per share .... 1.61 + 23.8 1.30 + 2.4 1.27 -12.4
Average shares
outstanding .. 4,775 - 0.1 4,782 - 0.2 4,791 - 0.1
Effective income
tax rate ..... 35.5% + 0.9 35.2% + 0.6 35.0% + 1.2

</TABLE>

LONG-TERM PERFORMANCE

Stronger product offerings in the Electronics segment combined with improved
profitability in the Plastics and Sewn Products segments to create a record year
for sales and earnings. Fiscal 1997 sales of $139.4 million were 16% higher than
the previous year and 15% higher than the previous record. Net income of $7.7
million, or $1.61 per share, was up 24% compared with fiscal 1996 and 11% higher
than the previous record.

The company returned to its longer term growth pattern in fiscal 1997. The
loss of more than $20 million of annual defense revenues between fiscal 1994 and
fiscal 1996 negatively affected the company's performance during the two
previous fiscal years. In fiscal 1997, the company returned 15.6% on
shareholders' equity, and 5.5% on sales; increased the book value of the company
by 12.6%; paid a record per share dividend; invested for future growth and made
a strategic acquisition in its Plastics business segment.

<TABLE>
<CAPTION>
For the years ended January 31 1997 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income as % of
Sales......................................................... 5.5% 5.1% 5.0% 5.7% 5.4% 5.3%
Average assets................................................ 10.4% 9.3% 9.6% 12.1% 11.9% 11.7%
Beginning equity.............................................. 15.6% 13.6% 14.8% 19.6% 19.7% 20.2%

</TABLE>

SEGMENT ANALYSIS

The following table summarizes sales and gross profits in the company's three
business segments for each of the past three fiscal years:

(Dollars in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------

AMOUNT % CHANGE Amount % Change Amount % Change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES

Electronics .... $ 43,861 + 33.1 $ 32,962 + 3.1 $ 31,959 - 10.7
Plastics ....... 59,158 + 7.0 55,281 + 12.9 48,971 + 21.3
Sewn Products .. 36,422 + 13.1 32,201 - 21.1 40,790 - 10.0
-------- -------- --------
Total .......... $139,441 + 15.8 $120,444 - 1.0 $121,720 + 0.2
======== ======== ========

AMOUNT % SALES Amount % Sales Amount % Sales
- ------------------------------------------------------------------------------------------------

GROSS PROFITS

Electronics...... $ 8,617 19.6 $ 7,841 23.8 $ 7,581 23.7
Plastics......... 10,154 17.2 9,450 17.1 9,227 18.8
Sewn Products.... 6,516 17.9 5,369 16.7 7,160 17.6
-------- -------- --------
Total............ $ 25,287 18.1 $ 22,660 18.8 $ 23,968 19.7
======== ======== ========
</TABLE>

ELECTRONICS SEGMENT

FISCAL 1997 VERSUS FISCAL 1996

The company successfully broadened its commercial contract electronics
offerings in fiscal 1997. Revenues from contract electronics manufacturing in
the Raven Electronic Systems division doubled over fiscal 1996 levels and
reached $18.0 million. Sales of flow and position control devices for precision
farming applications increased from $13.5 to $16.7 million. Lower contract
manufacturing revenues from the company's Beta Raven subsidiary partially offset
these increases. The lower gross profit rate in fiscal 1997 was a result of the
high rate of technological and customer start-up costs incurred with the
introduction of new products and transformation from defense orientation to a
commercial customer base.

ELECTRONICS SEGMENT
(Dollars in millions)

[BAR CHART]

GROSS
YEAR SALES PROFITS
'95 31.959 7.581
'96 32.962 7.841
'97 43.861 8.617

FISCAL 1996 VERSUS FISCAL 1995

Sales of flow control devices for precision farming increased by more than
30% in fiscal 1996 and totaled nearly $13.5 million. Defense electronics sales
dropped from $10.6 million in fiscal 1995 to $3.9 million in fiscal 1996 because
of lower levels of procurement by the U.S. government. Higher deliveries under
commercial contracts partially offset the reduction of defense contract
activity. Beta Raven sales of process control systems were at approximately the
same level as in fiscal 1995. The gross profit increase reflected relatively
higher sales of agricultural electronics. Additionally, improved efficiencies at
Beta Raven raised their gross profit rate. These improvements were partially
offset by the impact of idle capacity that resulted from the drop in defense
business.

During fiscal 1995, it became apparent that the approach taken by the
company's Beta Raven subsidiary to automate bakeries was more technologically
complex than originally estimated. Raven management assumed more direct control
of this subsidiary, replacing top management. The number of Beta Raven employees
was reduced by 65. Products with high technological risk were de-emphasized or
abandoned. The company incurred a $1.2 million write-down of development costs
and inventories and accrued $.6 million related to cost overruns on bakery
installations and employee severance costs.

PROSPECTS

Sales are expected to continue to grow between 15-20% in this segment in the
coming fiscal year. Gross profit rates are expected to improve slightly as the
impact of start-up costs are lessened by a higher percentage of repeat business.
Timely delivery of quality products under commercial contracts during the first
half of the year is crucial to obtaining additional orders and meeting the
established goals for this segment.

PLASTICS SEGMENT

FISCAL 1997 VERSUS FISCAL 1996

Continued growth in sales of engineered films in fiscal 1997 was central to
the company's success in this business segment. Engineered film sales were $25.8
million, up 9% over fiscal 1996. Fiscal 1996 sales included emergency demand for
hurricane film. Sales of high-altitude research balloons and pickup-truck
toppers increased by 18% and 15%, respectively. Weakness in agricultural markets
reduced sales of plastic tanks by 4%. Higher sales combined with improved
operations in the second year of production at the company's pickup-truck topper
plant increased gross profits in fiscal 1997, compared with fiscal 1996.

PLASTICS SEGMENT
(Dollars in millions)

[BAR CHART]

GROSS
YEAR SALES PROFITS
'95 48.971 9.227
'96 55.281 9.450
'97 59.158 10.154

FISCAL 1996 VERSUS FISCAL 1995

Sales of engineered films increased 20% in fiscal 1996 and totaled $23.6
million. Process improvements and expansion of production capacity allowed the
company to meet demand for new products and to supply films needed in response
to hurricane damage in the United States. Sales of plastic tanks increased 20%
as demand for agricultural tanks was strong. Pickup-truck topper sales also
increased, but by less than management expectations. The gross profit impact of
these higher sales was substantially offset by losses incurred during the start
up of a new pickup-truck topper plant. During fiscal 1996, the company sold its
utility-truck body business and related assets. This sale had no material impact
on the financial statements.

PROSPECTS

The addition of Norcore Plastics products to this segment is expected to
increase sales by nearly $9 million in fiscal 1998. Total sales in the Plastics
segment are expected to grow by more than 25% over fiscal 1997 levels. Success
will depend on successful integration of Norcore Plastics into the company's
marketing and manufacturing strategies. Gross profit rates are expected to
decline somewhat as the costs of integration are incurred.

SEWN PRODUCTS SEGMENT

FISCAL 1997 VERSUS FISCAL 1996

Sales of $36.4 million in fiscal 1997 were 13% higher than in fiscal 1996 as
a result of improved market conditions for outerwear sales to catalog
merchandisers and increased sales of severe weather uniforms. Sales of
inflatable display products and hot-air balloons also increased. Raven branded
skiwear and western wear sales continued to decline. Higher sales and production
levels improved plant efficiencies and aided the recovery of the gross profit
rate.

FISCAL 1996 VERSUS FISCAL 1995

The impact of the unusually warm winter of 1994-1995 was to create lower
demand for outerwear and higher than normal retail inventory levels. As a
result, fiscal 1996 sales in the sewn products segment were much lower than the
prior year. Sales to catalog merchandisers were down almost $5 million in fiscal
1996 compared with fiscal 1995. Skiwear sales were also lower than the prior
year. Chemical warfare protection suit production ended in fiscal 1995, but did
contribute $3.3 million to fiscal 1995 sales. Sales of nonmilitary cold weather
uniforms increased over last year. The lower sales negatively impacted the level
of gross profits, and higher levels of low margin and close out sales reduced
the gross profit rate.

SEWN PRODUCTS SEGMENT
(Dollars in millions)

[BAR CHART]

GROSS
YEAR SALES PROFITS
'95 40.790 7.160
'96 32.201 5.369
'97 36.422 6.516

PROSPECTS

Sales are expected to stay relatively flat in this segment. Management
believes that a less aggressive strategy in its Sewn Products businesses will
improve consistency and predictability of profits. As a result, gross profits
are also expected to stay relatively stable. Management believes these
businesses do have sufficient resources to respond to opportunities as they
arise.

EXPENSES, INCOME TAXES AND OTHER

FISCAL 1997 VERSUS FISCAL 1996

Selling and administrative costs increased by 1.7% over fiscal 1996 levels.
As a percent of sales they were reduced to 9.5% from 10.9% one year earlier.
Selling expenses did not increase over the prior year as a result of declines in
commissionable sales and lower promotional expenses.

Administrative expenses did increase by 3.9% as a result of higher
compensation expenses. Interest expense declined due to lower borrowing levels.
The company's effective income tax rate increased from 35.2% in fiscal 1996 to
35.5% in fiscal 1997 due primarily to the taxation of income over $10 million at
a higher federal rate.

FISCAL 1996 VERSUS FISCAL 1995

Selling and administrative costs were essentially unchanged, both as a
percent of sales and in spending levels. Higher selling costs in support of
precision farming and due to higher commissionable sales were offset by
administrative cost reductions. Interest expense increased as a result of
financing capital expenditures made in late fiscal 1995. The effective income
tax rate was 35.2% in fiscal 1996 and 35.0% in fiscal 1995.

PROSPECTS

Operating expenses are expected to remain relatively constant as a
percentage of sales in fiscal 1998. Interest costs are projected to remain level
as positive cash flow from operations is expected to offset increased capital
expenditures and working capital requirements in the coming year. The company's
effective income tax rate is expected to rise to the 36% range as the goodwill
amortization associated with the Norcore acquisition will not be deductible for
federal income tax purposes.

ANALYSIS OF FINANCIAL POSITION, 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) 1997 1996 1995
- ------------------------------------------------------------------

Operating activities....... $ 7,088 $ 9,687 $ 7,452
Investing activities....... (5,090) (4,158) (10,000)
Financing activities....... (2,363) (4,029) 406

Increase (decrease)
in cash................. $ (365) $ 1,500 $ (2,142)

OPERATING ACTIVITIES

The company's cash flow from operations totaled $24.2 million over the past
three years, compared with net income of $20.0 million over the same period.
Accounts receivable, net of the impact of the Norcore acquisition, increased by
$8.1 million in fiscal 1997, due primarily to a 29% increase in fourth quarter
shipments over the prior year. Inventory levels were flat and higher accounts
payable and accrued expenses offset some of the impact of higher accounts
receivable levels. Working capital requirements are projected to grow along with
revenues in fiscal 1998.

INVESTING ACTIVITIES

The company acquired Norcore Plastics, Inc. in January 1997, acquiring all
of its capital stock for $1.1 million in cash and 93,701 shares of Raven common
stock. Capital expenditures totaled $4.0 million in fiscal 1997, approximately
the same level as the prior year and slightly less than depreciation and
amortization. Capital expenditures are expected to exceed depreciation and
amortization by approximately $2 million in fiscal 1998. Over one-half the
expenditures in fiscal 1997 and projected for fiscal 1998 are in support of
continued growth in the Plastics segment.

FINANCING ACTIVITIES AND CREDIT LINES

The company increased its dividend, on a per share basis, for the tenth
consecutive year. Cash required for the Norcore acquisition and to refinance
debt assumed in the merger was obtained, in part, by borrowing $1.5 million
under a long-term note.

The company's cash position was strong throughout the year and use of the
short-term credit facility was not required. Maximum borrowings under the
company's line of credit were $1.5 million during fiscal 1996. Management
believes the company's $5.0 million line of credit will only be required for
seasonal short-term financing during fiscal 1998.

CAPITAL STRUCTURE AND LONG-TERM FINANCING

The company's long-term debt to total capitalization ratio was 5.3% at
January 31, 1997 compared with 5.4% one year earlier. Refer to Note 8 to the
consolidated financial statements for types and sources of long-term debt. Using
a prime rate of 8.25%, the weighted average interest rate of the company's debt
was 7.8% at January 31, 1997. No new long-term borrowing is planned for fiscal
1998.

The company's solid financial condition and capacity to assume additional
financing, if needed, provide the company a strategic advantage over many of its
competitors. In the opinion of management, the company is well-positioned to
take on new opportunities in its core businesses with emphasis on those that
build on the company's strengths of customer service and quality manufacturing.

WEEKLY STOCK PRICE, VOLUME AND P/E--FISCAL 1997

[BAR AND LINE CHART]

DATE STOCK PRICE VOLUME P/E

FEB 2/02 18 14500.0 13.846
2/09 17 3/4 7400.00 13.654
2/16 17 3/4 21600.0 13.654
2/23 17 64700.0 13.077

MAR 3/01 16 1/2 109300 12.692
3/08 16 1/4 22300.0 12.500
3/15 16 7/8 33000.0 12.981
3/22 16 1/4 17900.0 12.500
3/29 17 1/2 8600.00 13.462

APR 4/05 16 17300.0 12.308
4/12 17 40900.0 13.077
4/19 L 16 49400.0 L 12.308
4/26 16 3/4 41400.0 12.885

MAY 5/03 17 5/8 21700.0 12.960
5/10 17 1/2 16900.0 12.868
5/17 17 3/4 21300.0 13.051
5/24 18 5/8 13400.0 13.695
5/31 19 3/4 17800.0 14.522

JUN 6/07 20 1/2 56700.0 15.074
6/14 20 1/2 2500.00 15.074
6/21 20 1/2 19900.0 15.074
6/28 20 1/4 6100.00 14.890

JUL 7/05 20 1/4 2200.00 14.890
7/12 20 6900.00 14.706
7/19 19 1/4 13900.0 14.154
7/26 18 5/8 28400.0 13.695

AUG 8/02 18 1/2 42200.0 12.937
8/09 19 5400.00 13.287
8/16 21 3/4 103700 15.210
8/23 22 72900.0 15.385
8/30 22 3/4 47200.0 H 15.909

SEP 9/06 21 7/8 3400.00 15.297
9/13 22 1/8 18100.0 15.472
9/20 21 5/8 40600.0 15.122
9/27 20 3/4 76200.0 14.510

OCT 10/04 21 1/4 51600.0 14.860
10/11 22 1/2 63000.0 15.734
10/18 21 3/4 17500.0 15.210
10/25 21 3/4 63400.0 15.210

NOV 11/01 22 1/4 27700.0 14.833
11/08 21 5/8 40700.0 14.417
11/15 20 7/8 15900.0 13.917
11/22 21 1/2 66000.0 14.333
11/29 21 6000.00 14.000

DEC 12/06 21 3/8 30000.0 14.250
12/13 22 7000.00 14.667
12/20 22 19100.0 14.667
12/27 21 3/4 3700.00 14.500

JAN 1/03 21 3/4 23600.0 14.500
1/10 22 3/8 16400.0 15.167
1/17 22 1/2 14300.0 15.000
1/24 H 23 1/2 13700.0 15.667
1/31 22 1/2 900.00 15.000

QUARTERLY SUMMARY (UNAUDITED)

<TABLE>
<CAPTION>
Common stock
market price
(Dollars in thousands, Net Gross Operating Pretax Net Net income ------------------- Dividends
except per share data) sales profit income income income per share High Low per share
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL 1997
First Quarter............ $ 30,875 $ 6,086 $ 2,826 $ 2,797 $ 1,808 $ 0.38 $ 18.75 $ 16.00 $ 0.120
Second Quarter........... 31,270 5,398 2,215 2,191 1,409 0.30 22.00 16.00 0.120
Third Quarter............ 38,943 7,055 3,598 3,571 2,303 0.48 22.75 18.25 0.130
Fourth Quarter........... 38,353 6,748 3,332 3,356 2,168 0.45 23.50 20.88 0.130
--------- --------- -------- -------- -------- --------- -------
Total Year............... $ 139,441 $ 25,287 $ 11,971 $ 11,915 $ 7,688 $ 1.61 $ 23.50 $ 16.00 $ 0.500
========= ========= ======== ======== ======== ========= =======

FISCAL 1996
First Quarter............ $ 27,787 $ 5,776 $ 2,404 $ 2,380 $ 1,535 $ 0.32 $ 20.50 $ 17.25 $ 0.105
Second Quarter........... 27,253 4,795 1,675 1,732 1,117 0.23 20.75 19.50 0.105
Third Quarter............ 35,560 6,400 3,115 3,057 1,972 0.41 20.50 17.50 0.120
Fourth Quarter........... 29,844 5,689 2,367 2,397 1,573 0.34 19.25 15.50 0.120
--------- --------- -------- -------- -------- --------- -------
Total Year............... $ 120,444 $ 22,660 $ 9,561 $ 9,566 $ 6,197 $ 1.30 $ 20.75 $ 15.50 $ 0.450
========= ========= ======== ======== ======== ========= =======

FISCAL 1995
First Quarter............ $ 27,816 $ 5,360 $ 2,046 $ 2,134 $ 1,376 $ 0.29 $ 24.50 $ 19.75 $ 0.090
Second Quarter........... 26,919 5,044 137(a) 182 130 0.03 22.50 18.50 0.090
Third Quarter............ 35,890 7,200 3,880 3,877 2,519 0.53 20.00 18.00 0.105
Fourth Quarter........... 31,095 6,364 3,073 3,179 2,063 0.42 20.00 18.25 0.105
--------- --------- -------- -------- -------- --------- -------
Total Year............... $ 121,720 $ 23,968 $ 9,136 $ 9,372 $ 6,088 $ 1.27 $ 24.50 $ 18.00 $ 0.390
========= ========= ======== ======== ======== ========= =======

</TABLE>

(a) Includes the $1.8 million Beta Raven charge (See Note 5).

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)
As of January 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS

Current assets
Cash and cash equivalents ....................................... $ 3,439 $ 3,804 $ 2,304
Accounts receivable ............................................. 25,637 16,002 17,592
Inventories ..................................................... 25,125 23,897 22,103
Prepaid expenses and other current assets ....................... 431 413 382
Deferred income taxes ........................................... 2,064 1,579 1,414
------- ------- -------
Total current assets ......................................... 56,696 45,695 43,795

Property, plant and equipment, net ................................. 18,142 18,069 18,570
Other assets, net .................................................. 5,824 3,789 3,271
------- ------- -------
Total assets ................................................. $80,662 $67,553 $65,636
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Current portion of long-term debt ............................... $ 1,366 $ 813 $ 907
Accounts payable ................................................ 7,849 4,651 5,435
Accrued liabilities ............................................. 10,197 8,309 8,191
Customer advances ............................................... 604 998 545
------- ------- -------
Total current liabilities .................................... 20,016 14,771 15,078

Long-term debt, less current portion ............................... 3,181 2,816 4,179
Deferred income taxes .............................................. 736 815 853

Stockholders' equity ............................................... 56,729 49,151 45,526
------- ------- -------
Common shares
Authorized--100,000,000
Outstanding--1997: 4,835,558; 1996: 4,715,976; 1995: 4,734,530
Total liabilities and stockholders' equity ...................... $80,662 $67,553 $65,636
======= ======= =======

</TABLE>

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

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)
For the years ended January 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ............................................. $ 139,441 $ 120,444 $ 121,720

Cost of goods sold .................................... 114,154 97,784 97,752
----------- ----------- -----------
Gross profit ....................................... 25,287 22,660 23,968

Operating expenses
Selling ............................................ 7,211 7,223 7,075
Administrative ..................................... 6,105 5,876 5,957
Beta Raven charge .................................. 1,800
----------- ----------- -----------
Operating income ................................ 11,971 9,561 9,136
----------- ----------- -----------

Interest expense ...................................... (310) (375) (323)
Other income, net ..................................... 254 380 559
----------- ----------- -----------
Income before income taxes ......................... 11,915 9,566 9,372
----------- ----------- -----------
Income taxes .......................................... 4,227 3,369 3,284
----------- ----------- -----------
Net income ......................................... $ 7,688 $ 6,197 $ 6,088
=========== =========== ===========

Net income per common and common-equivalent share ..... $ 1.61 $ 1.30 $ 1.27
=========== =========== ===========

Average common and common-equivalent shares outstanding 4,775,160 4,782,185 4,791,083
=========== =========== ===========

</TABLE>

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

$1 Par Treasury stock
common Paid-in ----------------------- Retained
(Dollars in thousands, except per-share data) stock capital Shares At cost earnings Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1994..................... $ 5,010 $ 279 (315,903) $ (2,334) $ 38,145 $ 41,100
Net income.................................... 6,088 6,088
Cash dividends ($.39 per share)............... (1,843) (1,843)
Purchase and retirement of stock.............. (35) (730) (765)
Employees' stock options exercised............ 75 494 569
Tax benefit from exercise
of stock options........................... 377 377
------- ------- -------- -------- -------- --------

Balance January 31, 1995...................... 5,050 420 (315,903) (2,334) 42,390 45,526
Net income.................................... 6,197 6,197
Cash dividends ($.45 per share)............... (2,130) (2,130)
Purchase of treasury stock.................... (36,500) (576) (576)
Purchase and retirement of stock.............. (9) (172) (181)
Employees' stock options exercised............ 27 180 207
Tax benefit from exercise
of stock options........................... 108 108
------- ------- -------- -------- -------- --------

Balance January 31, 1996...................... 5,068 536 (352,403) (2,910) 46,457 49,151
Net income.................................... 7,688 7,688
Cash dividends ($.50 per share)............... (2,367) (2,367)
Shares issued for acquisition................. 94 1,956 2,050
Purchase and retirement of stock.............. (30) (624) (654)
Employees' stock options exercised............ 56 618 674
Tax benefit from exercise
of stock options........................... 187 187
------- ------- -------- -------- -------- --------
Balance January 31, 1997...................... $ 5,188 $ 2,673 (352,403) $ (2,910) $ 51,778 $ 56,729
======= ======= ======== ======== ======== ========

</TABLE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
For the years ended January 31 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income .......................................................... $ 7,688 $ 6,197 $ 6,088
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................. 4,566 4,242 3,582
Provision for losses on accounts receivable ................... 88 86 135
Deferred income taxes ......................................... (514) (203) (29)
Equity in earnings of affiliate, net of dividends ............. (6) (105) (180)
Change in operating assets and liabilities, net of
effects from acquisition of businesses ..................... (4,808) (525) (2,110)
Other operating activities, net ............................... 74 (5) (34)
------- ------- --------
Net cash provided by operating activities ........................... 7,088 9,687 7,452

Cash flows from investing activities
Capital expenditures ................................................ (4,009) (4,186) (7,753)
Acquisition of businesses ........................................... (1,105) (510) (2,372)
Other investing activities, net ..................................... 24 538 125
------- ------- --------
Net cash used in investing activities ............................... (5,090) (4,158) (10,000)

Cash flows from financing activities
Issuance of short-term debt ......................................... 4,500 7,500
Payment of short-term debt .......................................... (4,500) (7,500)
Retire debt of acquired business .................................... (890)
Long-term debt principal payments ................................... (813) (1,457) (804)
Proceeds from issuance of long-term debt ............................ 1,500 2,872
Net proceeds from exercise of stock options ......................... 207 134 181
Dividends paid ...................................................... (2,367) (2,130) (1,843)
Purchase of treasury stock .......................................... (576)
------- ------- --------
Net cash provided by (used in) financing activities ................. (2,363) (4,029) 406
------- ------- --------

Net increase (decrease) in cash and cash equivalents ................... (365) 1,500 (2,142)

Cash and cash equivalents at beginning of year ......................... 3,804 2,304 4,446
------- ------- --------

Cash and cash equivalents at end of year ............................... $ 3,439 $ 3,804 $ 2,304
======= ======= ========

</TABLE>

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

NOTES TO FINANCIAL STATEMENTS

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of Raven
Industries, Inc. ("Raven") and its wholly-owned subsidiaries (the "company"),
Aerostar International, Inc. ("Aerostar"); Beta Raven Inc. ("Beta"); and
Glasstite, Inc. ("Glasstite"). All material intercompany balances and
transactions have been eliminated in consolidation.

USE OF ESTIMATES:

The preparation of the company's financial statements requires management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from these estimates.

CASH AND CASH EQUIVALENTS:

The company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Cash and cash
equivalent balances are principally concentrated in a money market mutual fund
with Norwest Advantage Funds, an affiliate of Norwest Bank Minnesota, N.A.

INVENTORY VALUATION:

Inventories are stated at the lower of cost or market with cost determined
on the first-in, first-out basis.

PROPERTY, PLANT AND EQUIPMENT:

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

Buildings and improvements.................. 7 to 39 years
Machinery and equipment..................... 3 to 7 years

Maintenance and repairs are charged to expense in the year incurred and
renewals and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or disposed of are removed from the accounts and the
resulting gain or loss is reflected in income.

INTANGIBLE ASSETS:

Intangible assets are primarily comprised of goodwill and patents which are
recorded at cost net of accumulated amortization. Amortization is computed on a
straight-line basis over estimated useful lives ranging from 5 to 20 years.

INVESTMENT IN AFFILIATE:

Raven has a 50 percent equity interest in a corporation engaged in the
manufacture of injection-molded plastic products. Raven accounts for the
investment using the equity method.

INSURANCE OBLIGATIONS:

The company employs large deductible insurance policies covering workers
compensation, employee health care and general liability costs. Costs are
accrued up to the limits of these policies based on claims filed and estimates
for claims incurred but not reported.

CONTINGENCIES:

The company may from time to time be involved as a defendant in lawsuits,
claims or disputes in the normal course of business. An estimated loss is
charged to operations when it is probable that an asset has been impaired or a
liability incurred and the amount of the loss can be reasonably estimated.

RESEARCH AND DEVELOPMENT:

Research and development expenditures of $678,000 in fiscal 1997, $619,000
in fiscal 1996, and $955,000 in fiscal 1995 were charged to cost of goods sold
in the year incurred.

STOCK OPTIONS:

The company records compensation expense related to its stock option plan
using the intrinsic value method.

INCOME TAXES:

Deferred income taxes reflect temporary differences between assets and
liabilities reported on the company's balance sheet and their tax basis. These
differences are measured using enacted tax laws and statutory tax rates
applicable to the periods when the temporary differences will impact taxable
income. Deferred tax assets are reduced by a valuation allowance to reflect
realizable value, when necessary. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and liabilities.

NET INCOME PER SHARE:

Earnings per share are computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding. Common shares
outstanding represent common shares issued less shares purchased and held in
treasury. Common equivalent shares represent shares issuable upon the assumed
exercise of dilutive employee stock options less treasury shares assumed
purchased with the option proceeds.

NOTE 2

SELECTED BALANCE SHEET INFORMATION

Following are the components of selected balance sheet items:

(Dollars in thousands)
As of January 31 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable:
Trade accounts ....................... $ 25,977 $ 16,342 $ 17,942
Allowance for doubtful accounts ...... (340) (340) (350)
-------- -------- --------
Total ............................. $ 25,637 $ 16,002 $ 17,592
======== ======== ========

Inventories:
Finished goods ....................... $ 4,275 $ 5,236 $ 4,247
In process ........................... 4,574 5,344 4,709
Materials ............................ 16,276 13,317 13,147
-------- -------- --------
Total ............................. $ 25,125 $ 23,897 $ 22,103
======== ======== ========

Property, plant, and equipment:
Land ................................. $ 1,185 $ 1,185 $ 1,129
Building and improvements ............ 13,988 13,285 13,253
Machinery and equipment .............. 33,142 30,550 28,726
-------- -------- --------
48,315 45,020 43,108
Accumulated depreciation ............. (30,173) (26,951) (24,538)
-------- -------- --------
Total ............................. $ 18,142 $ 18,069 $ 18,570
======== ======== ========

Other assets:
Intangible assets, net of amortization $ 3,732 $ 1,746 $ 1,474
Investment in affiliate .............. 1,802 1,796 1,691
Other non-current assets ............. 290 247 106
-------- -------- --------
Total ............................. $ 5,824 $ 3,789 $ 3,271
======== ======== ========

Accrued liabilities:
Profit sharing ....................... $ 1,654 $ 1,324 $ 1,557
Vacations ............................ 1,786 1,622 1,573
Salaries and wages ................... 2,514 2,427 2,121
Insurance obligations ................ 2,070 1,502 1,405
Other ................................ 2,173 1,434 1,535
-------- -------- --------
Total ............................. $ 10,197 $ 8,309 $ 8,191
======== ======== ========

</TABLE>

NOTE 3

SUPPLEMENTAL CASH FLOW INFORMATION

(Dollars in thousands)
For the years ended January 31 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Changes in operating assets and liabilities:
Accounts receivable ........................ $(8,112) $ 1,504 $(1,187)
Inventories ................................ (393) (1,785) 497
Prepaid expenses and other current assets .. 53 (31) 42
Accounts payable ........................... 2,450 (784) (467)
Accrued liabilities ........................ 1,588 118 (397)
Customer advances .......................... (394) 453 (598)
------- ------- -------
$(4,808) $ (525) $(2,110)
======= ======= =======

Cash paid during the year for:
Interest ................................... $ 309 $ 395 $ 318
Income taxes ............................... 4,201 3,761 2,733

</TABLE>

NOTE 4

ACQUISITIONS

In January 1997, the company acquired all the outstanding shares of Norcore
Plastics, Inc., a manufacturer of large industrial storage tanks utilizing "dual
laminate" technology. Consideration paid included $1.1 million of cash and the
issuance of 93,701 shares of unregistered common stock. Raven acquired assets of
$3.0 million and assumed liabilities of $2.1 million in connection with the
merger. A five-year real property lease commitment with the former owners for
approximately $120,000 annually was also assumed by the company. In fiscal 1996
and fiscal 1995, the company acquired certain assets of several different
companies for $510,000 and $2.4 million, respectively.

All of the acquisitions were accounted for as purchases. The cost in excess
of net tangible assets acquired resulted in goodwill of $3.6 million. The
consolidated financial statements include the results of operations of these
businesses subsequent to the acquisition dates.

NOTE 5

BETA RAVEN CHARGE

During the quarter ended July 31, 1994, the Company recorded a charge of
$1.8 million related to its Beta Raven Inc. subsidiary. The charge related
principally to a reorganization of the subsidiary's bakery equipment
installation business and to provide for direct management of the subsidiary's
operations by Raven's corporate officers and management. Products with high
technological risk were de-emphasized or abandoned. The charge consisted
primarily of a $1.2 million write-down of development costs and inventories and
the accrual of $.6 million related to cost overruns on bakery installations and
employee severance costs.

NOTE 6

BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION

The company operates in three reportable business segments consisting of
Electronics, Plastics and Sewn Products. Segment information can be found on
page 2, along with a description of product lines included in each segment.

Sewn Products segment sales to a catalog merchandiser were $14.5 million in
fiscal 1995. No other customer accounted for more than 10% of consolidated sales
in any fiscal year presented.

NOTE 7

QUARTERLY DATA (UNAUDITED)

Quarterly net sales, gross profit, net income and net income per share data
are presented on page 24.

NOTE 8

FINANCING ARRANGEMENTS

Long-term debt consisted of the following:

(Dollars in thousands)
As of January 31 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Norwest bank notes payable in installments
through 2001 with interest at the prime rate ...... $ 3,620 $ 2,680 $ 3,540
Contracts, notes and mortgages payable in installments
through 2003 with interest from 3.0% to 14.0% ..... 762 740 1,293
Industrial revenue bonds payable in installments
through 2001 with interest at 83% of the prime rate 165 209 253
------- ------- -------
Total long-term debt ........................... 4,547 3,629 5,086
Current portion ................................ (1,366) (813) (907)
------- ------- -------
$ 3,181 $ 2,816 $ 4,179
======= ======= =======

</TABLE>

Certain long-term debt is collateralized by land, buildings and equipment
having an aggregate depreciated cost at January 31, 1997 of $2.0 million.
Norwest Bank South Dakota, N.A. (Norwest) provides the company's unsecured notes
payable and unsecured line of credit. Two members of the company's board of
directors are also on the board of directors of Norwest.

The aggregate amounts of long-term debt maturing during the years subsequent to
January 31, 1997 are as follows:

(Dollars in thousands) year ending January 31
- ----------------------------------------------------------------

1998...................................... $ 1,366
1999...................................... 2,054
2000...................................... 559
2001...................................... 544
2002...................................... 12
Thereafter................................ 12
-------
Total.................................. $ 4,547
=======

The company had a $5.0 million unsecured line of credit available as of
January 31, 1997; no borrowings were outstanding as of that date. Borrowings on
the line bear interest at rates approximating the prime rate. The prime rates at
January 31, 1997, 1996, and 1995 were 8.25%, 8.5%, and 8.5%, respectively. In
fiscal 1997, there were no borrowings under the credit line. The weighted
average interest rates under short-term credit lines in fiscal 1996 and 1995
were 8.9% and 7.6%, respectively.

NOTE 9

SHARE PURCHASE RIGHTS PLAN

The company has a Share Purchase Rights Plan designed to protect the
interests of its stockholders by preventing a potential acquiror from gaining
control of the company without offering a fair price to all stockholders. Under
the Plan, each stockholder has one Right for each share of the company's common
stock owned. Each Right entitles the stockholder to purchase from the company
one share of the company's common stock for a specified price. The Rights are
not exercisable or transferable apart from the common stock until ten days after
a person or group has acquired 20 percent or more, or makes a tender offer for
30 percent or more, of the company's outstanding common stock. The Rights expire
in March 1999 and are redeemable by the company at $.01 per Right prior to the
date upon which they become exercisable, and in certain limited circumstances
following such date.

NOTE 10

STOCK OPTIONS

Officers and key employees of the company have been granted options to
purchase stock under the 1990 Stock Option Plan. The plan, administered by the
Board of Directors, allows for a cash bonus when options are exercised and may
grant either incentive stock options or non-qualified options with terms not to
exceed ten years. The plan reserves 177,200 shares of the company's common stock
at January 31, 1997. Options have been granted at prices not less than market
value at the date of grant, vest over a four-year period and expire after five
years. Compensation expense related to the cash bonus was $343,000 in fiscal
1997 and $298,000 in fiscal 1996.

In accordance with Statement of Financial Standards No. 123 the company has
elected to continue to use the intrinsic value method to recognize compensation
expense for stock options. If compensation expense had been recognized in fiscal
1996 and 1997 in accordance with the fair value method, the company's net income
and net income per share would have been:

For the years ended January 31 1997 1996
- --------------------------------------------------------------------------------
AS REPORTED PRO FORMA As reported Pro forma
- --------------------------------------------------------------------------------
Net income (in thousands)....... $ 7,688 $ 7,573 $ 6,197 $ 6,172
Net income per share............ $ 1.61 $ 1.59 $ 1.30 $ 1.29

The pro forma information above only includes stock options granted in
fiscal 1996 and 1997. Pro forma compensation expense under the fair value method
will increase over the next few years as additional option grants are
considered. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: Dividend yield of 2.5-2.7%; expected volatility of 25%; risk-free
interest rate of 5.8%; and expected lives of 4.5 years. The fair value of each
option granted, including the cash bonus, was $7.30 in fiscal 1996 and $8.75 in
fiscal 1997.

Information regarding option activity follows:

For the years ended January 31 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............... 280,292 $ 16.50 247,581 $ 15.17 270,080 $ 12.40
Granted ...................................... 65,100 21.00 60,000 17.87 59,400 18.25
Exercised...................................... (55,642) 12.11 (27,289) 7.57 (74,812) 7.60
Forfeited...................................... (2,000) 18.51 (7,087) 15.60
------- ------- -------
Outstanding at end of year..................... 287,750 $ 18.35 280,292 $ 16.50 247,581 $ 15.17
======= ======= =======
Options exercisable at year-end................ 135,400 $ 17.05 134,329 $ 14.65 105,411 $ 12.32

</TABLE>

The following table contains information about stock options outstanding at
January 31, 1997:

Remaining
Exercise Contractual Number Number
Price Life (Years) Outstanding Exercisable
- ------------------------------------------------------------------

$13.87 0.75 50,850 50,850
20.00 1.75 53,900 40,425
18.25 2.75 58,600 29,300
17.87 3.75 59,300 14,825
21.00 4.75 65,100 --
------- -------
287,750 135,400
======= =======

NOTE 11

EMPLOYEE RETIREMENT PLAN

The company has a profit sharing plan covering substantially all employees.
Contributions to the profit sharing plan, not to exceed 15% of total eligible
compensation, are made by Raven and each subsidiary, at the discretion of each
entity's Board of Directors. The company's contribution to the plan was
$1,654,000, $1,324,000, and $1,557,000 for fiscal 1997, 1996 and 1995,
respectively.

NOTE 12

INCOME TAXES

Significant components of the company's income tax provision are as follows:

(Dollars in thousands)
For the years ended January 31 1997 1996 1995
- ------------------------------------------------------------------------------

Income taxes
Currently payable......................... $ 4,741 $ 3,572 $ 3,313
Deferred benefit.......................... (514) (203) (29)
------- ------- -------
$ 4,227 $ 3,369 $ 3,284
======= ======= =======

Significant components of the company's deferred tax assets and liabilities are
as follows:

(Dollars in thousands)
As of January 31 1997 1996 1995
- -----------------------------------------------------------------------------

Deferred tax assets:
Allowance for doubtful accounts ......... $ 119 $ 119 $ 122
Inventory valuation methods ............. 256 107 99
Accrued vacations ....................... 478 429 416
Insurance obligations ................... 718 491 441
Other accrued liabilities ............... 493 433 336
------ ------ ------
Total ................................ 2,064 1,579 1,414
------ ------ ------

Deferred tax liabilities:
Carrying value of investment in affiliate 626 622 588
Depreciation methods .................... 76 83 90
Safe-harbor leases ...................... 34 110 175
------ ------ ------
Total ................................ 736 815 853
------ ------ ------
Net deferred tax asset ..................... $1,328 $ 764 $ 561
====== ====== ======

The company's effective tax rate was 35.5%, 35.2%, and 35.0%, in fiscal
1997, 1996, and 1995, respectively. The tax rate varies from the statutory rate
of 35% due primarily to the effect of state income taxes and non-deductible
expenses offset by the impact of graduated income tax rates.

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Raven
Industries, Inc. and subsidiaries as of January 31, 1997, 1996, and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended January 31,1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Raven
Industries, Inc. and subsidiaries as of January 31, 1997, 1996, and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1997, in conformity with generally
accepted accounting principles.

/s/ COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
March 12, 1997

INVESTOR INFORMATION

DIRECTORS

CONRAD J. HOIGAARD(2,3)
Chairman of the Board
Raven Industries, Inc.
Chairman of the Board
Hoigaard's Inc.
Minneapolis, MN
Age: 60

DAVID A. CHRISTENSEN(3)
President & Chief Executive Officer
Raven Industries, Inc.
Sioux Falls, SD
Age: 62

ANTHONY W. BOUR(1)
Former President
Starmark, Inc.
Sioux Falls, SD
Age: 59

MARK E. GRIFFIN(2)
President & Chief Executive Officer
Lewis Drugs, Inc.
Sioux Falls, SD
Age:46

KEVIN T. KIRBY(1)
President
Kirby Investment Corp.
Sioux Falls, SD
Age: 42

JOHN C. SKOGLUND(2,3)
Chairman
Skoglund Communications
Duluth, MN
Chairman
Minnesota Vikings
Minneapolis, MN
Age: 64

THOMAS S. EVERIST(1)
President
L.G. Everist
Sioux Falls, SD
Age: 47

(1) Audit Committee
(2) Compensation Committee
(3) Executive Committee

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
Minneapolis, MN

OFFICERS

DAVID A. CHRISTENSEN
President & Chief Executive Officer
Age: 62 * Service: 34 years

GARY L. CONRADI
Vice President
Corporate Services
Age: 57 * Service:30 years

RONALD M. MOQUIST
Executive Vice President
Age: 51 * Service: 21 years

ARNOLD J. THUE
Vice President, Finance
Secretary & Treasurer
Age: 58 * Service: 29 years

STOCK TRANSFER AGENT
AND REGISTRAR

Norwest Bank
Minnesota, N.A.
161 N. Concord Exchange
P. O. Box 738
S. St. Paul, MN 55075-0738

Norwest Trust Company
New York, NY

FORM 10-K

Upon written request, Raven Industries, Inc.'s Form 10-K for the fiscal year
ended January 31, 1997, which has been filed with the Securities and Exchange
Commission, is available free of charge.

DIRECT INQUIRIES TO:
Raven Industries, Inc.
Attention: Vice President, Finance
Box 5107
Sioux Falls, SD 57117-5107

STOCK QUOTATIONS

Nasdaq Ticker Symbol--RAVN

ANNUAL MEETING

May 22, 1997
9:00 a.m.
Ramkota Inn
Hwy. 38 & I-29
Sioux Falls, SD

Raven Industries, Inc. is an Equal Employment Opportunity Employer with an
approved affirmative action plan.

RAVEN INDUSTRIES
PO Box 5107 * Sioux Falls, SD 57117-9878

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Name of Subsidiary State of Incorporation
------------------ ----------------------

Aerostar International, Inc. South Dakota

Beta Raven Inc. Missouri

Glasstite, Inc. Minnesota

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration
Statement of Raven Industries, Inc. on Form S-8 (Registration No. 33-38614) of
our reports dated March 12, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Raven Industries, Inc. as of
January 31, 1997, 1996 and 1995, and for the years ended January 31, 1997, 1996
and 1995, which reports are included or incorporated by reference in this Annual
Report on Form 10-K.

COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
April 25, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 3,439
<SECURITIES> 0
<RECEIVABLES> 25,977
<ALLOWANCES> 340
<INVENTORY> 25,125
<CURRENT-ASSETS> 56,696
<PP&E> 48,315
<DEPRECIATION> 30,173
<TOTAL-ASSETS> 80,662
<CURRENT-LIABILITIES> 20,016
<BONDS> 3,181
0
0
<COMMON> 5,188
<OTHER-SE> 51,541
<TOTAL-LIABILITY-AND-EQUITY> 80,662
<SALES> 139,441
<TOTAL-REVENUES> 139,441
<CGS> 114,154
<TOTAL-COSTS> 114,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310
<INCOME-PRETAX> 11,915
<INCOME-TAX> 4,227
<INCOME-CONTINUING> 7,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,688
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61

</TABLE>