SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

(X)

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

  For the quarterly period ended October 31, 2004

OR

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

For the transition period from          to           .

Commission File: 0-3136

RAVEN INDUSTRIES, INC.

205 East 6^th Street
P.O. Box 5107
Sioux Falls, SD 57117-5107
(Address of principal executive offices)

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

Indicate by check mark (“x”) 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 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. (X) Yes (  ) No

Indicate by check mark (‘x”) whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). (X) Yes (  ) No

As of December 1, 2004 there were 18,033,980 shares of common stock of Raven Industries, Inc. outstanding. There were no other classes of stock outstanding.

RAVEN INDUSTRIES, INC.

INDEX

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PART I – FINANCIAL INFORMATION

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

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RAVEN INDUSTRIES, INC.

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

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RAVEN INDUSTRIES, INC.

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

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RAVEN INDUSTRIES, INC.

(1) Basis of Presentation and Description of Business

The accompanying unaudited consolidated financial information has been prepared by Raven Industries, Inc. (the “company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair representation have been included. Financial results for the interim three and nine-month periods ended October 31, 2004 are not necessarily indicative of the results that may be expected for the year ending January 31, 2005. The January 31, 2004 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. This financial information should be read in conjunction with the consolidated financial statements and notes included in the company’s Annual Report on Form 10-K for the year ended January 31, 2004.

(2) Earnings Per Share

Basic net income per share is computed by dividing net income by the weighted-average common shares outstanding. Share and per-share data have been restated to reflect the October 15, 2004, two-for-one stock split. Diluted net income per share is computed by dividing net income by the weighted-average common and common equivalent shares outstanding, which includes the shares issuable upon exercise of employee stock options, net of shares assumed purchased with the option proceeds. Details of the earnings per share computation are presented on the following table:

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(3) Segment Reporting

The company’s reportable segments are defined by their common technologies, production processes and inventories. These segments are consistent with the company’s management reporting structure. The company measures the performance of its segments based on their operating income exclusive of administrative and general expenses. The results of these segments are shown on the following table:

During the quarter ended April 30, 2004, the company’s high-altitude research balloon operation, formerly in the Engineered Films segment, moved under the management of Aerostar. As a result of this change in the company’s organizational structure, the financial results of those operations have been included in

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Aerostar’s segment disclosures. The following table shows revised segment sales, operating income, assets, capital expenditures, and depreciation and amortization for Engineered Films and Aerostar segments for the prior six fiscal years.

(4) Financing Transactions

The company has an uncollateralized credit agreement providing a line of credit of $7.0 million which was renewed in May 2004 and expires in May 2005. Letters of credit totaling $1.7 million have been issued under the line, primarily to support self-insured workers compensation bonding requirements. The credit agreement contains certain restrictive covenants that, among other things, require maintenance of certain levels of net worth and working capital. No borrowings were outstanding on the line at October 31, 2004.

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(5) Short-term Investments

At October 31, 2004, the company has invested $4.0 million of excess cash into federally insured certificates of deposit with rates ranging from 1.55% to 2.4%. The investments have varying maturity dates which extend over the next 12 months.

(6) Dividends

The company paid a special one-time dividend of $0.625 per post-split share or $11.3 million on May 20, 2004 to shareholders of record at May 3, 2004.

The company announced on November 19, 2004, that its board of directors approved a quarterly cash dividend of 5 1/2 cents per share, payable January 14, 2005 to shareholders of record on December 23, 2004.

(7) Commitments

In May 2004, the company entered into an agreement to purchase a building owned by Design Tanks, Inc. to be used for the Engineered Films division. The $1.8 million purchase price was less than the independently appraised value. Design Tanks’ owner was hired as the Engineered Films Division Vice-President subsequent to the building purchase. The agreement required an earnest payment of $25,000 at signing with the remainder due upon closing, on or before May 1, 2006.

On November 8, 2004, the company issued a purchase order totaling $2.4 million for additional extrusion capacity in the Engineered Films segment. The new extrusion line is expected to be operational during the fourth quarter of fiscal 2005.

(8) Stock Split

On August 20, 2004, the Board of Directors declared a two-for-one stock split of the company’s common stock to be effected in the form of a stock dividend. The record date for the stock dividend was September 24, 2004, with the shares distributed on October 15, 2004. Per share calculations and average shares outstanding for all reported periods reflect the stock split.

(9) Loss on Disposition of Assets

The company incurred approximately $1.3 million of inventory, fixed assets, and intangible write-downs in the three and nine months ended October 31, 2004 that related to the company’s December 2003 acquisition of Fluent Systems, LLC. The write-downs, which were recorded in the Flow Controls segment, were a result of that division’s decision to abandon the Fluent monitoring system product.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Raven Industries, Inc. is an industrial manufacturer providing a variety of products to customers within the industrial, agricultural, construction and military/aerospace markets throughout North America. The company operates three divisions (Flow Controls, Engineered Films and Electronic Systems) in addition to a wholly owned subsidiary, Aerostar International, Inc. (Aerostar). Flow Controls provides electronic speed and Global Positioning System (GPS)-based, location-compensated application-control products for the agriculture, marine navigation and other niche markets. Engineered Films produces rugged

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reinforced plastic sheeting for industrial, construction, manufactured housing and agriculture applications. Electronic Systems is a total-solutions provider of electronics manufacturing services. Aerostar manufactures military cargo parachutes, government service uniforms, high-altitude research balloons and other large-scale inflatable products. Management of the high altitude balloon operations was moved to Aerostar in April 2004. Segment results have been revised to reflect this organizational change.

EXECUTIVE SUMMARY

Record earnings for the three months ended October 31, 2004 of $5.2 million topped the fiscal 2004 third quarter earnings by $1.3 million, or 33.1%. Third quarter diluted earnings per share increased 7 cents per share from 21 cents to 28 cents. Increased sales in the company’s Engineered Films division resulted in gross profit gains, driving the earnings growth. The profit gain from Engineered Films’ higher sales level was partially offset by write-downs of $1.3 million against inventory, fixed assets, and intangibles related to the company’s December 2003 acquisition of Fluent Systems, LLC. The write-downs, which were recorded in the Flow Controls segment, were a result of that division’s decision to abandon the Fluent monitoring system product. For the first nine months, net income rose to $14.3 million, a $3.0 million increase over the prior year. Earnings per diluted share reached 77 cents; a 26.2% increase over the nine-month period reported one year earlier. Higher earnings for the nine months were attributed to gross profit rate growth in the company’s Aerostar and Flow Controls segments, despite the write-downs taken in the current year’s third quarter, and higher sales levels in Engineered Films.

Record consolidated sales for the current quarter reached $48.6 million, a $12.5 million increase over sales for the quarter ended October 31, 2003. Third quarter sales were positively impacted by $4.1 million of reinforced plastic sheeting deliveries by the Engineered Films division for hurricane relief. For the nine months ended October 31, 2004, consolidated sales reached $124.1 million, an increase of $14.9 million over sales reported for the same period in 2003. For the quarter and nine-months ended October 31, 2004, all of the company’s reporting segments posted revenue gains over last year’s comparable periods. Engineered Films led the sales increase in both periods, increasing sales 54.3% for the third quarter and 27.5% for the first nine months.

Consolidated operating income of $8.1 million for the current quarter topped fiscal 2004’s third quarter by 32.3% or $2.0 million. Engineered Films, Electronic Systems, and Aerostar all posted gains in operating income for the quarter, with Engineered Films posting a particularly strong quarter performance. Flow Controls’ operating income fell 29.9% due to the asset write-downs. Administrative expenses increased $197,000, or 14.1% from the quarter ended October 31, 2003 due primarily to spending for professional services and increased contributions. Consolidated gross profit as a percentage of sales increased from 25.6% for the quarter ended October 2003 to 26.7% for the current quarter. Operating income for the first nine months reached $22.2 million, an increase of 26.1% over the first nine months of last year. Flow Controls, Engineered Films, and Aerostar all achieved substantial gains in operating income, while Electronic Systems reported a decline in operating income for the nine-month period of $1.2 million, or 28.2%. For the nine months ended October 31, 2004, administrative expenses reached $4.6 million, an increase of 9.6% over last year’s comparable period. Prior year results included a gain of $181,000 from the sale of a sewing plant closed during fiscal year 2003 and additional provisions of $355,000 for open issues at previously sold businesses. Gross profit as a percentage of sales of 26.9% for the current nine months was 2.6 percentage points ahead of the 24.3% reported for the nine months ended October 31, 2003 due to strong performances in the company’s Engineered Films, Flow Controls, and Aerostar segments.

Consolidated interest expense and other income, mainly interest income from excess cash investments, remained steady between the quarter and nine months ended October 31, 2004 as compared to October 31, 2003. Income tax expense increased from $2.2 million for the quarter ended October 31, 2003 to $2.9 million for the current quarter, while year-to-date income tax expense reached $8.0 million, a $1.6 million increase over the prior year’s comparable period. The increases reported for the quarter and nine-month period reflect higher taxable income as earnings have risen.

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The company anticipates fourth quarter results to exceed fiscal 2004 fourth quarter levels, adding on to a strong performance reported so far in the first nine months. Flow Controls is expected to continue to post positive operating variances over last year, while Electronic Systems is expected to continue making gains in improving their profitability. Engineered Films’ sales growth will likely continue as market demand and hurricane film orders are fulfilled, though material supply and capacity constraints may reduce fourth-quarter gains. Aerostar sales and profits are expected to decrease in the upcoming quarter as a result of scaled-back shipments on the segment’s parachute contract. The delivery schedule on the subsidiary’s parachute contract has been renegotiated, extending $2.5 million of shipments, which were scheduled to be delivered by February 2005, out through October 2005.

RESULTS OF OPERATIONS

FLOW CONTROLS

Sales of $10.4 million for the current quarter were 27.2% higher than sales for the quarter ended October 31, 2003. For the nine months ended October 31, 2004, sales were $30.8 million, a $1.8 million increase from the same period of 2003. Included in the prior year’s nine-month period was $6.0 million in final shipments under a special-order for chemical injection systems. Current year revenue growth was due to the improving ag economy, new product sales, and market share gains resulting from the successful implementation of the division’s new distribution strategy. These factors have offset the revenue loss from last year’s chemical injection system order.

Operating income of $1.7 million for the current quarter declined $712,000, or 29.9%, as compared to the quarter ended October 31, 2003. Asset write-downs totaling $1.3 million were included in the current quarter’s operating income figure. Third quarter gross profits of $3.8 million increased by $783,000 over last year’s comparable period. Higher margin product mix, an increase in sales level, and the division’s value-engineering activities have had a favorable impact on profits. As a percentage of sales, gross profit margins decreased slightly to 36.6% from the 36.9% reported for the prior year’s comparable quarter. For the current quarter, selling expenses increased $217,000, or 34.2%, reflecting higher personnel costs, advertising, and show expenses associated with the precision agriculture distribution plan. Operating income of $8.6 million for the first nine months increased $1.3 million, or 17.5%, over income of $7.3 million for the nine months ended October 31, 2003. Gross profits grew as a result of favorable product mix and operating efficiencies. These profit gains were tempered by the $1.3 million asset write-downs and higher selling expenses, which were $542,000, or 31.7%, more than the nine-month period ended October 31, 2003. As with the quarter, higher expenses associated with the division’s new distribution strategy increased selling expenses over last year.

ENGINEERED FILMS

For the three months ended October 31, 2004, sales increased substantially, reaching $18.3 million, or $6.5 million more than the third quarter ended one year earlier. The current quarter’s sales level benefited from $4.1 million of hurricane film revenue. Sales of pit liners for the oil-drilling industry and revenue growth experienced in the agricultural, industrial, and construction markets also contributed to the sales increase for the quarter. Sales of $40.7 million for the current nine months ended were $8.8 million higher than sales for the same period in 2003. In addition to the hurricane film sales, the division posted significant revenue gains in the pit lining, manufactured housing, agricultural, and vapor barrier markets on a year-to-date basis.

For the quarter, operating income of $5.2 million almost doubled that of last year’s third quarter, increasing by 91.7%. Operating income was positively impacted by the division’s higher sales level achieved in the quarter, which helped offset the negative impact of higher resin costs. Gross profit as a percentage of sales was 32.4% for the current quarter as compared to 27.6% recorded for the three months ended October 31, 2003. Increased selling expenses countered some of the gross profit gain for the quarter, increasing to $696,000, a $157,000, or 29.1%, increase over last year’s third quarter. As for

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the nine months ended October 31, 2004, operating income of $11.4 million exceeded the prior year’s comparable period by 42.3%, or $3.4 million. Gross profits grew as a result of the increased sales level. The gross profit percentage of 32.4% for the nine months ended was ahead of the 30.3% achieved for the nine months ended October 31, 2003.

ELECTRONIC SYSTEMS

Segment sales of $14.0 million for the current quarter ended were $3.5 million higher than the $10.5 million sales level reported for the third quarter of fiscal 2004, reflecting increased shipments to one of the division’s newer customers. For the nine months ended October 31, 2004, sales were $34.8 million, 8.1% higher than the revenue posted for the same period last year. The third quarter sales increase pushed the division’s year-to-date sales level over the comparable period of one year earlier, as revenue growth for the first half of the year was negatively impacted by operating inefficiencies.

For the quarter ended October 31, 2004, operating income of $1.6 million was even with results posted for last year’s third quarter, despite the higher sales level experienced by the division. Start-up inefficiencies had a negative impact on gross profits, as reflected in the gross profit rate decline from 17.5% for the three months ended October 31, 2003 to 13.0% for the current year’s third quarter. Operating income was $3.1 million for the first nine months; a $1.2 million decrease over operating income of $4.3 million for the prior year’s comparable period. As a percentage of sales, gross profit declined from 15.2% for the nine months ended October 31, 2003 to 10.8% for the current nine months ended. Operating income results for the nine-month period were negatively impacted by the lack of sales growth, manufacturing inefficiencies, and higher selling expenses experienced in the first half of the current fiscal year.

AEROSTAR

Sales of $5.8 million for the current quarter were 5.7%, or $315,000, higher than sales for the quarter ended October 31, 2003. The third quarter revenue growth was attributed to increased sales in the subsidiary’s scientific research balloon product line. For the nine months ended October 31, 2004, net sales were $17.7 million, a $1.7 million improvement over the prior year’s comparable period. Sales gains in parachute products, military decoys, and service uniforms accounted for the positive sales variance recorded in the first nine months. This revenue growth has more than offset year-to-date sales decreases in hot-air balloons and commercial inflatable products.

Segment operating income for the current quarter increased $281,000 to $1.2 million when compared to operating income for the quarter ended October 31, 2003. As a percentage of sales, gross profits increased from 19.6% for the quarter ended October 31, 2003 to 23.9% for the current quarter. Higher profits on the subsidiary’s parachute products and scientific research balloons drove the income improvement over last year’s comparable period. Operating income for the first nine months of the current year was $3.7 million, an increase of $1.2 million over the first nine months of last year. Included in last year’s nine-month operating income results was a $181,000 gain from sales of a sewing plant and equipment. Gross profit as a percent of sales increased from last year’s 18.1% to the current year-to-date percentage of 24.7%, reflecting strong profitability on sales of parachute products and military decoys. Partially offsetting this operating income growth was a decline in gross profit from the subsidiary’s commercial inflatable product line.

SOLD BUSINESSES

This segment consists of the operations of businesses sold and the company’s ongoing liability for environmental or legal issues of these businesses. Included in the results for last year’s third quarter was an additional $75,000 provision for changes in estimated closing costs, which resulted from information received by the company from its advisors. The results for the nine months ended October 31, 2003 include $355,000 of additional provisions for changes in estimated closing costs.

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LIQUIDITY AND CAPITAL RESOURCES

Operating Activities and Cash Position

Operations generated $10.8 million of positive cash flows in the nine months ended October 31, 2004, a decrease of $6.2 million from the same period of fiscal 2004. Higher working capital requirements, particularly higher inventory and accounts receivable levels, accounted for the decrease in net cash provided by operating activities between the two periods. Engineered Films and Electronic Systems’ inventory levels have increased during the current fiscal year to support higher sales levels. Accounts receivable levels have increased as compared to October 31, 2003 mainly due to the substantial sales growth attained in the Engineered Films segment. The company’s continued strong earnings performance in the first nine months of the year and higher accrued liability balances partially countered the impact of the higher inventory and accounts receivable levels.

Total cash, cash equivalents, and short-term investments were $8.9 million as of October 31, 2004, reflecting a $9.5 million decrease over the January 31, 2004 cash position. Higher inventory and accounts receivable levels and the payment of a special one-time dividend of $0.625 per post-split share, or $11.3 million, on May 20, 2004 were significant cash outflows made during the current year. As compared to the October 31, 2003 balance of $19.3 million, cash and short-term investment levels have decreased $10.4 million.

The company expects that current cash and short-term investments, combined with continued positive operating cash flows, will be sufficient to fund day-to-day operations.

Investing and Financing Activities

Cash used in investing activities totaled $4.0 million, increasing $1.5 million for the nine months ended October 31, 2004 as compared to cash used of $2.5 million for the nine months ended October 31, 2003. The increase was a result of higher capital expenditures, particularly in the company’s Engineered Films and Flow Controls segments.

Financing activities used $16.3 million in cash for the nine months ended October 31, 2004. The payment of dividends and repurchases of stock continue to be the principal financing activities of the company. Dividend payments totaled $14.3 million for the first nine months of the current year, $11.3 million of which was the special one-time dividend payment made in May 2004. For the nine months ended October 31, 2004, treasury stock purchases totaled $2.0 million as compared to $2.2 million of purchases made for the nine months ended one year earlier.

Stock Repurchases

Repurchases of the company’s common stock (on a post-split basis) during the third quarter of fiscal 2005 were as follows:

The company repurchases stock under an authorization from its Board of Directors. It has not publicly announced its repurchase plans, other than to indicate a willingness to buy less than 2% of shares outstanding on an annual basis. Under a resolution from the Board of Directors, dated November 19,

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2004, the company has authority to repurchase up to $1.5 million of stock on the open market. The Board of Directors has renewed these authorizations quarterly; there is no assurance the Board will continue this practice.

Commitments and Contingencies

In May 2004, the company entered into an agreement to purchase a building to be used for the Engineered Films division. The agreement required an earnest payment of $25,000 at signing, with the remaining $1,775,000 due on or before May 1, 2006.

On November 8, 2004, the company issued a purchase order totaling $2.4 million for additional extrusion capacity in the Engineered Films segment. The new extrusion line is expected to be operational during the fourth quarter of fiscal 2005.

There have been no other material changes to the company’s commitments and contingencies since the obligations disclosed in its Form 10-K for the fiscal year ended January 31, 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The exposure to market risks pertains mainly to changes in interest rates on cash and cash equivalents and short-term investments. The company’s debt consists of capital leases, all of which have fixed interest rates. The company does not expect operating results or cash flows to be significantly affected by changes in interest rates. Additionally, the company has no derivative contracts and typically buys materials and sells products in US dollars.

ITEM 4. INTERNAL CONTROLS AND PROCEDURES

Under the supervision and with the participation of the company’s management, including the Chief Executive Officer and Chief Financial Officer, the company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e) and 15(d)-15(e) as of October 31, 2004. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no significant changes in the company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced above, including any corrective actions with regard to significant deficiencies and material weaknesses.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the company with the Securities and Exchange Commission (as well as information included in statements made or to be made by the company) contains statements that are forward-looking. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, there is no assurance that such expectations will be achieved. Such assumptions involve important risks and uncertainties that could significantly affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions, which could affect certain of the company’s primary markets, such as agriculture and construction, or changes in competition, material availability, technology or relationships with the company’s largest customers, any of which could adversely impact any of the company’s product lines. The foregoing list is not exhaustive and the company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.

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RAVEN INDUSTRIES, INC.

Item 1. Legal Proceedings:

The company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of business. The settlement of such claims cannot be determined at this time. Management believes that any liability resulting from these claims will be substantially mitigated by insurance coverage. Accordingly, management does not believe the ultimate outcome of these matters will be significant to its results of operations, financial position or cash flows.

Item 2. Changes in Securities: None

Item 3. Defaults upon Senior Securities: None

Item 4. Submission of Matters to a Vote of Security Holders: None

Item 5. Other Information: None

Item 6. (a) Exhibits Filed:

31.1		Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act
31.2		Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act
32		Certification Pursuant to Section 906 of Sarbanes-Oxley Act

(b)		Reports on Form 8-K:
		We furnished a Form 8-K dated August 19, 2004 under Item 12 to disclose our second quarter earnings.

SIGNATURES

Pursuant to the requirements 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.
	/s/ Thomas Iacarella
	Thomas Iacarella
	Vice President and CFO, Secretary and Treasurer (Principal Financial and Accounting Officer)

Date: December 6, 2004

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