UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended ~~April 30,~~July 31, 2011



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File: 001-07982

RAVEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



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

205 East 6th 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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of ~~May 27,~~August 31, 2011 there were ~~18,079,656~~18,092,240 shares of common stock, $1 par value, 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

ITEM 1. FINANCIAL STATEMENTS

RAVEN INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS
(unaudited)


(in thousands, except per-share data)	April 30, 2011			January 31, 2011			April 30, 2010			July 31, 2011			January 31, 2011			July 31, 2010
ASSETS
Current Assets
Cash and cash equivalents	$	42,125		$	37,563		$	46,972		$	46,978		$	37,563		$	51,115
Short-term investments	500			1,000			2,500			—			1,000			2,500
Accounts receivable, net of allowances of $302, $300, and $300, respectively	50,542			39,967			43,946
Accounts receivable, net of allowances of $262, $300 and $299, respectively										43,248			39,967			34,670
Inventories:
Materials	31,636			30,261			24,845			34,782			30,261			29,453
In process	5,986			5,424			6,397			7,687			5,424			8,387
Finished goods	7,916			7,994			6,304			7,780			7,994			7,352
Total inventories	45,538			43,679			37,546			50,249			43,679			45,192
Deferred income taxes	2,878			2,733			2,663			2,804			2,733			2,725
Prepaid expenses and other current assets	3,113			3,239			3,642			2,937			3,239			3,295
Total current assets	144,696			128,181			137,269			146,216			128,181			139,497

Property, plant and equipment	104,564			102,080			89,416			111,518			102,080			91,702
Accumulated depreciation	(62,155		)	(60,558		)	(56,369		)	(63,507		)	(60,558		)	(57,799		)
Property, plant and equipment, net	42,409			41,522			33,047			48,011			41,522			33,903
Goodwill	10,777			10,777			10,777			10,777			10,777			10,777
Amortizable intangible assets, net	1,700			1,585			2,039			1,816			1,585			1,887
Other assets, net	4,653			5,695			6,989			4,508			5,695			6,933

TOTAL ASSETS	$	204,235		$	187,760		$	190,121		$	211,328		$	187,760		$	192,997

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	17,447		$	16,715		$	14,450		$	16,825		$	16,715		$	14,842
Accrued liabilities	11,782			14,643			11,693			12,643			14,643			12,748
Taxes — accrued and withheld	6,713			1,453			7,940			2,244			1,453			1,449
Customer advances	1,320			1,524			1,024			2,258			1,524			3,034
Total current liabilities	37,262			34,335			35,107			33,970			34,335			32,073

Other liabilities	12,637			12,211			11,378			13,229			12,211			11,512
Total liabilities	49,899			46,546			46,485			47,199			46,546			43,585

Commitments and contingencies

Shareholders’ equity:
Common stock, $1 par value, authorized shares 100,000; issued 32,528, 32,511 and 32,478, respectively	32,528			32,511			32,478
Common stock, $1 par value, authorized shares 100,000; issued 32,539, 32,511 and 32,487, respectively										32,539			32,511			32,487
Paid in capital	7,540			7,060			5,808			8,088			7,060			6,134
Retained earnings	168,582			156,125			159,789			177,783			156,125			165,252
Accumulated other comprehensive income (loss)	(952		)	(1,120		)	(1,077		)
Accumulated other comprehensive loss										(919		)	(1,120		)	(1,099		)
Less treasury stock, at cost, 14,449 shares	(53,362		)	(53,362		)	(53,362		)	(53,362		)	(53,362		)	(53,362		)
Total shareholders’ equity	154,336			141,214			143,636			164,129			141,214			149,412

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	204,235		$	187,760		$	190,121		$	211,328		$	187,760		$	192,997

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

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RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended					Three Months Ended						Six Months Ended
(in thousands, except per-share data)	April 30, 2011			April 30, 2010		July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Net sales	$	101,541		$	85,030	$	90,344		$	73,174		$	191,885		$	158,204
Cost of sales	68,605			57,859		62,214			52,785			130,819			110,644
Gross profit	32,936			27,171		28,130			20,389			61,066			47,560

Research and development expenses	2,243			2,126		2,374			1,956			4,617			4,082
Selling, general and administrative expenses	7,160			5,540		7,082			5,810			14,242			11,350
Operating income	23,533			19,505		18,674			12,623			42,207			32,128

Other income (expense), net	(13		)	52		(76		)	(94		)	(89		)	(42		)
Income before income taxes	23,520			19,557		18,598			12,529			42,118			32,086

Income taxes	7,804			6,612		6,137			4,176			13,941			10,788

Net income	$	15,716		$	12,945	$	12,461		$	8,353		$	28,177		$	21,298

Net income per common share:
Basic	$	0.87		$	0.72	$	0.69		$	0.46		$	1.56		$	1.18
Diluted	$	0.86		$	0.72	$	0.68		$	0.46		$	1.55		$	1.18

Cash dividends paid per common share	$	0.18		$	0.16	$	0.18		$	0.16		$	0.36		$	0.32

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

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RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended						Six Months Ended
(in thousands)	April 30, 2011			April 30, 2010			July 31, 2011			July 31, 2010
OPERATING ACTIVITIES:
Net income	$	15,716		$	12,945		$	28,177		$	21,298
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,985			1,738			4,159			3,594
Change in fair value of acquisition-related contingent consideration	31			160			(93		)	352
Deferred income taxes	845			(590		)	1,352			(753		)
Share-based compensation expense	392			201			984			567
Change in operating assets and liabilities:
Accounts receivable	(10,468		)	(9,482		)	(3,192		)	(280		)
Inventories	(1,833		)	(3,058		)	(6,546		)	(10,712		)
Prepaid expenses and other assets	(1,117		)	(925		)	(932		)	(594		)
Operating liabilities	5,463			9,458			2,427			6,464
Other operating activities, net	(6		)	(111		)	(73		)	(120		)
Net cash provided by operating activities	11,008			10,336			26,263			19,816
INVESTING ACTIVITIES:
Capital expenditures	(3,585		)	(1,585		)	(11,000		)	(3,774		)
Purchase of short-term investments	—			(500		)	—			(1,700		)
Sale of short-term investments	500			1,000			1,000			2,200
Payments related to business acquisitions	(8		)	(148		)	(52		)	(383		)
Other investing activities, net	(264		)	54			(449		)	75
Net cash used in investing activities	(3,357		)	(1,179		)	(10,501		)	(3,582		)
FINANCING ACTIVITIES:
Dividends paid	(3,254		)	(2,885		)	(6,509		)	(5,771		)
Other financing activities, net	100			—			62			(36		)
Net cash used in financing activities	(3,154		)	(2,885		)	(6,447		)	(5,807		)
Effect of exchange rate changes on cash	65			16			100			4
Net increase in cash and cash equivalents	4,562			6,288			9,415			10,431
Cash and cash equivalents:
Beginning of period	37,563			40,684			37,563			40,684
End of period	$	42,125		$	46,972		$	46,978		$	51,115

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

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RAVEN INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except per-share amounts)

(1) Basis of Presentation

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 statement of this financial information have been included. Financial results for the interim ~~three-month period~~three and six-month periods ended ~~April 30,~~July 31, 2011 isare not necessarily indicative of the results that may be expected for the year ending January 31, 2012. The January 31, 2011 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, 2011.

(2) Summary of Significant Accounting Policies

There have been no material changes to the company's significant accounting policies as compared to the significant accounting policies described in the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2011. Additionally, there were no new accounting standards issued or effective during the three months ended April 30, 2011 that had or are expected to have a material impact on the company's consolidated results of operations, financial condition, or cash flows.

(3) Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average common shares and stock units outstanding. Diluted net income per share is computed by dividing net income by the weighted-average common and common equivalent shares outstanding (which includes the shares issuable upon exercise of employee stock options net of shares assumed purchased with the option proceeds) and stock units outstanding. Certain outstanding options were excluded from the diluted net income per-share calculations because their effect would have been anti-dilutive. For the ~~three-month~~three and six-month periods ended ~~April 30,~~July 31, 2011 and ~~April 30,~~July 31, 2010, 136 and ~~224~~155 shares were excluded, respectively. Details of the earnings per share computation are presented below:


	Three Months Ended				Three Months Ended				Six Months Ended
	April 30, 2011		April 30, 2010		July 31, 2011		July 31, 2010		July 31, 2011		July 31, 2010
Numerator:
Net income	$	15,716	$	12,945	$	12,461	$	8,353	$	28,177	$	21,298

Denominator:
Weighted average common shares outstanding	18,075		18,030		18,083		18,037		18,079		18,033
Weighted average stock units outstanding	27		21		29		26		28		24
Denominator for basic calculation	18,102		18,051		18,112		18,063		18,107		18,057

Weighted average common shares outstanding	18,075		18,030		18,083		18,037		18,079		18,033
Weighted average stock units outstanding	27		21		29		26		28		24
Dilutive impact of stock options	110		7		103		33		107		22
Denominator for diluted calculation	18,212		18,058		18,215		18,096		18,214		18,079

Net income per share — basic	$	0.87	$	0.72	$	0.69	$	0.46	$	1.56	$	1.18
Net income per share — diluted	$	0.86	$	0.72	$	0.68	$	0.46	$	1.55	$	1.18

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(4) Segment Reporting

The company has four business segments: Applied Technology Division, Engineered Films Division, Aerostar Division and

~~Table of Contents~~

Electronic Systems Division which are defined by their common technologies, production processes and inventories. Applied Technology has precision agriculture representatives on location in key geographic areas, including Canada, Europe, Ukraine and Australia. The company measures the performance of its segments based on their operating income exclusive of administrative and general expenses. Other income, interest expense and income taxes are not allocated to individual operating segments. Segment information is reported consistent with the company’s management reporting structure.

Intersegment sales were primarily from Electronic Systems to Applied Technology. Business segment results are as follows:


	Three Months Ended						Three Months Ended						Six Months Ended
	April 30, 2011			April 30, 2010			July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Net sales
Applied Technology	$	39,125		$	32,925		$	32,269		$	20,966		$	71,394		$	53,891
Engineered Films	30,091			25,633			32,459			26,120			62,550			51,753
Aerostar	15,139			11,693			10,861			9,195			26,000			20,888
Electronic Systems	19,477			16,288			16,530			18,067			36,007			34,355
Intersegment eliminations	(2,291		)	(1,509		)	(1,775		)	(1,174		)	(4,066		)	(2,683		)
Consolidated net sales	$	101,541		$	85,030		$	90,344		$	73,174		$	191,885		$	158,204

Operating income (loss)
Applied Technology	$	15,074		$	12,403		$	12,118		$	5,518		$	27,192		$	17,921
Engineered Films	4,129			4,127			5,284			5,543			9,413			9,670
Aerostar	4,062			2,164			2,184			1,345			6,246			3,509
Electronic Systems	3,412			3,124			2,307			2,813			5,719			5,937
Intersegment eliminations	12			(49		)	8			2			20			(47		)
Total reportable segment income	26,689			21,769			21,901			15,221			48,590			36,990
Administrative and general expenses	(3,156		)	(2,264		)	(3,227		)	(2,598		)	(6,383		)	(4,862		)
Consolidated operating income	$	23,533		$	19,505		$	18,674		$	12,623		$	42,207		$	32,128

(5) Financing Arrangements

Raven has an uncollateralized credit agreement providing a line of credit of $8,000 with a maturity date of ~~July 1,~~September 29, 2011, bearing interest at the prime rate with a minimum rate of 4.00%. Letters of credit totaling $1,342 have been issued under the line, primarily to support self-insured workers compensation bonding requirements. No borrowings were outstanding as of ~~April 30,~~July 31, 2011, January 31, 2011 or ~~April 30,~~July 31, 2010, and $6,658 was available at ~~April 30,~~July 31, 2011.

(6) Dividends

The company announced on ~~May 24,~~August 31, 2011, that its board of directors approved a quarterly cash dividend of 18 cents per share, payable ~~July 15,~~October 14, 2011, to shareholders of record on ~~June~~September 30, 2011.

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(7) Comprehensive Income

Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenue, expenses, gains, and losses that under U.S. generally accepted accounting principles are recorded as an element of shareholders’ equity but are excluded from net income.

~~Table of Contents~~

The components of total comprehensive income follow:


	Three Months Ended				Three Months Ended					Six Months Ended
	April 30, 2011		April 30, 2010		July 31, 2011		July 31, 2010			July 31, 2011		July 31, 2010

Net income	$	15,716	$	12,945	$	12,461	$	8,353		$	28,177	$	21,298
Other comprehensive income:
Foreign currency translation	139		97		21		(49		)	160		48
Amortization of postretirement benefit plan actuarial losses, net of income tax of $15	29		27
Amortization of postretirement benefit plan actuarial losses, net of income tax of $7, $15, $22, and $29					12		27			41		54
Total other comprehensive income	168		124		33		(22		)	201		102
Total comprehensive income	$	15,884	$	13,069	$	12,494	$	8,331		$	28,378	$	21,400

(8) Employee Retirement Benefits

The components of net periodic benefit cost for postretirement benefits are as follows:


	Three Months Ended				Three Months Ended				Six Months Ended
	April 30, 2011		April 30, 2010		July 31, 2011		July 31, 2010		July 31, 2011		July 31, 2010
Service cost	$	30	$	15	$	30	$	15	$	60	$	31
Interest cost	84		81		84		81		168		162
Amortization of actuarial losses	32		42		31		42		63		83
Net periodic benefit cost	$	146	$	138	$	145	$	138	$	291	$	276

(9) Product Warranty Costs

Accruals necessary for product warranties are estimated based on historical warranty costs and average time elapsed between purchases and returns for each division. Additional accruals are made for any significant, discrete warranty issues. Changes in the warranty accrual were as follows:


	Three Months Ended						Three Months Ended						Six Months Ended
	April 30, 2011			April 30, 2010			July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Balance, beginning of period	$	1,437		$	1,259		$	1,631		$	1,613		$	1,437		$	1,259
Accrual for warranties	807			734			781			711			1,588			1,445
Settlements made (in cash or in kind)	(613		)	(380		)	(770		)	(512		)	(1,383		)	(892		)
Balance, end of period	$	1,631		$	1,613		$	1,642		$	1,812		$	1,642		$	1,812

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(10) New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued guidance on the presentation of comprehensive income. This guidance gives an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In either option, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The guidance eliminates the option to present the components of other comprehensive income as a part of the statement of changes in shareholders' equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance should be applied retrospectively, and for public companies is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The company is evaluating the presentation options.

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

This commentary should be read in conjunction with the company's consolidated financial statements for the three and six months ended ~~April 30,~~July 31, 2011 and ~~April 30,~~July 31, 2010, as well as the company's consolidated financial statements and related notes thereto and management's discussion and analysis of financial condition and results of operations in the company's Form 10-K for the year ended January 31, 2011.

EXECUTIVE OVERVIEW

Raven, which began operations in 1956 as a manufacturer of high-altitude balloons, is a diversified provider of specialized products ~~and services~~ for the industrial, agricultural, energy, construction and military/aerospace markets.

The company is comprised of unique operating units, classified into four reportable segments: Applied Technology, Engineered Films, Aerostar and Electronic Systems. While each segment has distinct characteristics, the products ~~services~~ and technologies are largely extensions of durable competitive advantages rooted in the original research balloon business.

Applied Technology produces precision agriculture products and information management tools to reduce costs and improve farm yields. Products include field computers, application controls, GPS-guidance and assisted-steering systems, automatic boom controls, yield monitoring and planter controls and an integrated information platform.

Engineered Films is a leading manufacturer and supplier of high-quality flexible films and sheeting for custom applications in energy, industrial, environmental, construction and agricultural markets throughout the United States and abroad. Products include pit liners used in the oil and gas drilling process, high performance in-wall and under concrete slab moisture and vapor retarders, weather resistive barriers used for construction, silage covers that reduce the amount of spoilage in cattle feed and textured reinforced geomembranes.

Aerostar designs and fabricates lighter-than-air solutions (i.e. aerostats, airships, and high-altitude research balloons) for customers such as NASA and the Department of Defense and manufactures parachutes and protective wear for the U.S. military.

Electronic Systems is a total solution provider of contract electronic manufacturing services to a select base of customers in the industrial controls and instrumentation, aerospace/aviation and communication industries.

Seasonality

The Applied Technology segment is predominately focused on the agricultural market and quarterly financial results have typically been impacted by the inherent seasonality of this market. Historically, Applied Technology's first quarter results are the strongest and the second quarter the weakest.

Vision and Strategy

The company's vision is to advance its leadership positions in niche markets through the development of innovative solutions to address the needs of customers and help solve global challenges in the areas of hunger, safety, peace and stability.

The company's primary strategy to achieve this vision is the maintenance of a diversified, but integrated portfolio of industrial manufacturing businesses. Diversification has enabled the company to consistently generate cash, achieve profitability and

maintain financial strength by limiting the impact of market disruptions and facilitating growth in both strong and weak economic cycles. Additionally, the company continues to achieve increased geographic, product and market diversification.

The company's overall approach to creating value, which is employed consistently across the four unique operating units, is summarized as follows -

Seek to expand in niche markets that have strong prospects for growth and above-average profit margins.

Elevate customer service by leveraging innovation, speed and dedicated engineering support to solve the customer's problem.

Reinvest cash generated from operations to fuel growth. Capital is allocated aggressively when the prospects are high for above-average, risk-adjusted returns on capital. When the company accumulates cash in excess of investment opportunities for above-average, risk-adjusted returns, it will be returned to shareholders in the form of special dividends or stock buy backs.

Continue to increase the quarterly dividend annually.

Results of Operations ~~(Q1 fiscal 2012 versus Q1 fiscal 2011)~~

Consolidated financial highlights for the second quarter and first ~~quarter~~six months of fiscal 2012 and fiscal 2011 include the following:


	Three Months Ended								Three Months Ended								Six Months Ended
(dollars in thousands, except per-share data)	April 30, 2011			April 30, 2010			% Change		July 31, 2011			July 31, 2010			% Change		July 31, 2011			July 31, 2010			% Change
Net sales	$	101,541		$	85,030		19	%	$	90,344		$	73,174		23	%	$	191,885		$	158,204		21	%
Gross profit	32,936			27,171			21	%	28,130			20,389			38	%	61,066			47,560			28	%
Gross margins^(a)	32.4		%	32.0		%			31.1		%	27.9		%			31.8		%	30.1		%
Operating income	$	23,533		$	19,505		21	%	$	18,674		$	12,623		48	%	$	42,207		$	32,128		31	%
Operating margins	23.2		%	22.9		%			20.7		%	17.3		%			22.0		%	20.3		%
Net income	$	15,716		$	12,945		21	%	$	12,461		$	8,353		49	%	$	28,177		$	21,298		32	%
Diluted earnings per share	$	0.86		$	0.72				$	0.68		$	0.46				$	1.55		$	1.18

Operating cash flow	11,008			10,336			7	%									26,263			19,816			33	%
Cash dividends	3,254			2,885			13	%									6,509			5,771			13	%



^(a)	The company's gross and operating margins may not be comparable to industry peers due to the diversity of its operations and variability in the classification of expenses across industries in which the company operates.

The company achieved record ~~quarterly~~second quarter sales and net income, improving 23% and 49%, respectively, from last year's second quarter records. Growth in sales and profitability ~~in the first quarter of fiscal 2012. The solid financial results were~~was driven primarily by the Applied Technology Division, as favorable market conditions, international market expansion and improved operating leverage pushed sales and earnings to higher levels.

For the six-month period, sales increased 21% to $191.9 million, from $158.2 million one year earlier. First half net income of $28.2 million, or $1.55 per diluted share, ~~gains, operating efficiencies~~was up 32% year-over-year. As with the quarter, Applied Technology led the sales and ~~solid returns on capital investments.~~profit increases for the first half of the year.

~~Double digit year-over-year sales growth in all four segments resulted in a 19% increase in consolidated net sales.~~ The ~~21% rise in~~company reports its segment operating income ~~was driven by Applied Technology~~exclusive of administrative and ~~Aerostar as higher sales~~general expenses. Other income, interest expense and ~~strong~~income taxes are not allocated to individual operating leverage drove profitability. Engineered Films operating margins were negatively impacted by volatile material costs and competitive pricing pressures. Electronic Systems product mix had an unfavorable impact on first quarter operating margins.segments.

Applied Technology

~~Fiscal~~Net sales of ~~2012~~$32.3 million ~~first~~in the second quarter of fiscal 2012 were up $11.3 million (54%) year-over-year and operating income of $12.1 million increased $6.6 million, or 120%. For the six-month period, net sales of $~~39.1~~71.4 million grew $~~6.2~~17.5 million (~~19%~~32%) and operating income of $~~15.1~~27.2 million increased $~~2.7~~9.3 million (, or ~~22%~~52%~~) reflecting~~. The favorable year-over-year comparisons reflect strong sales growth across the majority of the division's product offerings, including application controls (i.e. control systems, flow meters, valves), field computers, guidance and steering products and boom controls. Applied Technology benefited from healthy agricultural fundamentals, capitalizing on strong brand recognition, industry leading service and greater acceptance of precision agriculture as a means of controlling input costs. International sales growth outpaced domestic growth for the first ~~three~~six months of fiscal 2012 as compared with one year ~~ago.~~ago, increasing 61%. Profits improved for the three and six-month periods due to higher sales volume and positive operating leverage, although the growth was tempered by continued investments in R&D and business development.

Engineered Films

~~Fiscal~~ ~~2012~~ ~~first~~For the second quarter, net sales of $~~30.1~~32.5 million grew $6.3 million (24%) as compared with the second quarter of last year and established an all-time quarterly sales record for the division. Second quarter operating income of $5.3 million declined 5% year-over-year despite higher sales. Fiscal 2012 first half net sales of $62.6 million increased $~~4.5~~10.8 million (~~17%~~21%) and operating income of $~~4.1~~9.4 million was ~~flat. Increased~~down slightly, decreasing 3%. For both periods, increased demand for pit liners was driven by intensified drilling for oil and natural gas. ~~Strong~~In addition to the higher energy market sales, deliveries of ~~agriculture films such as FeedFresh™ silage covers reflect broader appreciation of~~film to the ~~value-added benefits of this highly engineered film.~~geomembrane market, which are used primarily for environmental and water conservation containment liners, contributed to the sales growth for the quarter and first half. Lower year-over-year profitability for both the quarter and six-month periods related to margin contraction due to higher material and overhead costs relative to sales.

Aerostar

Fiscal 2012 ~~first~~ second quarter net sales of $~~15.1~~10.9 million grew $1.7 million (18%), while operating income of $2.2 million improved $0.8 million, or 62%. Fiscal 2012 year-to-date net sales of $26.0 million increased $~~3.4~~5.1 million (~~29%~~24%) and operating income of $~~4.1~~6.2 million increased $~~1.9~~2.7 million (, or ~~88%~~78%). ~~Increased~~Sales and profit results benefited from increased sales volume of T-11 Army parachutes, ~~was partially offset by a decrease in tethered aerostat deliveries due to government funding delays. Parachute~~as contract shipments were not at full delivery levels until the third quarter of last year. Higher parachute sales and the resulting profit, along with increased manufacturing efficiencies, ~~led~~drove gross margins up to ~~profit margin expansion.~~32% for the first half as compared to 23% one year earlier, but were tempered by higher investment spending levels.

Electronic Systems

~~Fiscal~~ ~~2012~~ ~~first~~Second quarter net sales of $~~19.5~~16.5 million as compared with $18.1 million one year earlier decreased 9%. Operating income of $2.3 million was down $0.5 million (18%) year-over-year. For the quarter, lower aviation electronics deliveries and unfavorable product mix negatively impacted results. Fiscal 2012 six-month net sales of $36.0 million increased ~~$3.2~~by $1.7 million ~~(20%~~ (5%) ~~and~~, however, operating income of $~~3.4~~5.7 million ~~increased~~fell $~~0.3~~0.2 million (, or 9%4%). ~~Higher sales of printed circuit board assemblies for~~For the ~~aviation industry and~~first half, increased intercompany ~~shipments~~sourcing to the Applied Technology ~~were~~Division was partially offset by weaker sales of ~~secure communication devices. Profit~~avionics. Higher sales did not result in profit growth, as profit margins fell ~~as a result of~~in response to a less favorable product mix.

RESULTS OF OPERATIONS - SEGMENT ANALYSIS ~~(Q1 fiscal 2012 versus Q1 fiscal 2011)~~

Applied Technology

Applied Technology provides precision agriculture products and information management tools to reduce costs and improve farm yields.


	Three Months Ended										Three Months Ended										Six Months Ended
(dollars in thousands)	April 30, 2011			April 30, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change		% Change
Net sales	$	39,125		$	32,925		$	6,200	19	%	$	32,269		$	20,966		$	11,303	54	%	$	71,394		$	53,891		$	17,503	32	%
Gross profit	18,931			15,956			2,975		19	%	16,011			8,932			7,079		79	%	34,942			24,888			10,054		40	%
Gross margins	48.4		%	48.5		%					49.6		%	42.6		%					48.9		%	46.2		%
Operating income	15,074			12,403			2,671		22	%	12,118			5,518			6,600		120	%	27,192			17,921			9,271		52	%
Operating margins	38.5		%	37.7		%					37.6		%	26.3		%					38.1		%	33.3		%

The following factors were the primary drivers of the three and six-month year-over-year growth in net sales and operating income:

Market conditions. Global market fundamentals ~~are~~were healthy as population and income growth in emerging economies have increased demand for food, ~~and~~while natural disasters and adverse weather conditions have restricted ~~supplies, resulting~~supplies. These factors have resulted in higher crop prices and wider acceptance of precision agriculture as a sound investment for maximizing yields and controlling input ~~costs~~costs.

Sales volume and selling prices. The increase in net sales was driven by higher sales volume, as selling prices reflected only a modest increase year-over-year.

International sales. ~~Net~~For the three-month period, international sales more than doubled from one year ago and represented 30% of total segment revenue. For the first six months, sales outside the U.S. accounted for ~~28%~~29% of ~~segment sales in~~revenue versus 24% for the first ~~quarter of fiscal 2012 versus 24% in the first quarter~~six months of fiscal 2011. International sales of ~~$11.0~~$20.5 million in the first six months of fiscal 2012 rose ~~$2.9~~$7.7 million ~~(36%~~(61%) year-over-year as ~~economic growth and strong~~improved farm fundamentals drove strong overall demand in ~~South America~~Brazil, Australia and Eastern Europe.

Gross margins. ~~Sequentially, gross~~Gross margins improved from ~~43.4%~~42.6% for the ~~three-months~~three months ended ~~January~~July 31, 2010 to 49.6% for three months ended July 31, 2011 due to ~~48.4%~~favorable product mix and higher sales volume. Year-over-year comparative gross margins for the ~~three-months ended April 30, 2011, reflecting~~six-month periods also improved, further highlighting the ~~seasonal impact~~effect of higher sales and operating leverage on profitability. ~~Year-over-year comparative gross margins were flat.~~

Operating expenses. ~~First~~Second quarter operating expenses decreased to ~~9.9%~~12.1% of net sales from ~~10.8%~~16.3% in the prior ~~year first~~year's second quarter primarily as ~~research and development~~a result of a decrease in R&D expense to 5.4% of net sales compared to 7.5%. Six-month operating expenses ~~decreased~~were down from ~~3.8%~~12.9% of net sales in fiscal 2011 to 10.9% for the first ~~quarter~~half of fiscal ~~2012 compared to 4.8%~~2012. Higher spending for R&D and business development were outpaced by the growth in ~~the first quarter of fiscal 2011.~~net sales.

Engineered Films

Engineered Films produces high-quality flexible film for applications in energy, construction, agriculture, water and environmental safety.


	Three Months Ended										Three Months Ended											Six Months Ended
(dollars in thousands)	April 30, 2011			April 30, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change			% Change		July 31, 2011			July 31, 2010			$ Change			% Change
Net sales	$	30,091		$	25,633		$	4,458	17	%	$	32,459		$	26,120		$	6,339		24	%	$	62,550		$	51,753		$	10,797		21	%
Gross profit	5,239			5,000			239		5	%	6,212			6,331			(119		)	(2	)%	11,451			11,331			120			1	%
Gross margins	17.4		%	19.5		%					19.1		%	24.2		%						18.3		%	21.9		%
Operating income	4,129			4,127			2		—	%	5,284			5,543			(259		)	(5	)%	9,413			9,670			(257		)	(3	)%
Operating margins	13.7		%	16.1		%					16.3		%	21.2		%						15.0		%	18.7		%

The following factors were the primary drivers of the quarter and first half year-over-year ~~changes in net sales and operating income:~~changes:

Market conditions. ~~Engineered Films’ primary end markets—energy, geomembrane, industrial, agriculture and construction—~~Economic growth in emerging markets continued to ~~rebounded from recessionary levels. Worldwide economic growth continues to~~ support higher oil and natural gas prices, and in turn, increased related drilling activity and demand for pit ~~liners.~~liners in the energy market. The ~~construction~~geomembrane market ~~excluding disaster films, continued to rebound from recessionary levels~~reported higher sales for the quarter and six-month periods, as environmental and water conservation projects have increased demand for the ~~agriculture market was supported by strong fundamentals.~~division's containment liners.

Sales volume and selling prices. Selling prices ~~were up roughly 12%~~increased approximately 10% for the three and six-month periods, reflecting higher ~~input costs.~~material costs as compared with one year ago. Sales of new products also tended to increase revenues per pound shipped. Sales volume, as measured by pounds shipped, increased ~~5%. The increase in sales volume~~roughly 7% for the six-month period. Revenue growth for the second quarter and year-to-date was ~~fueled~~predominately driven by pit liners sold into the energy market ~~demand for pit liners~~ and to a lesser extent, increased demand for ~~agriculture~~geomembrane liners and ~~construction films. The year ago quarter included $1.5 million of disaster film shipments to Haiti to support earthquake relief efforts.~~covers.

~~Margin~~Gross margin decline. ~~Operating margins were unfavorably impacted by increased overhead spending,~~Despite an increase in sales, higher material and overhead costs ~~and competitive pricing pressure. Consequently, increases in production costs outpaced increases in selling prices.~~relative to sales caused gross margins to contract year-over-year. For the three-month period, margins declined approximately five percentage points, while year-to-date margins fell roughly four points.

Operating expenses. ~~First~~Second quarter operating expenses of $0.9 million increased 18% versus one year earlier; however, were ~~3.7%~~relatively flat at 2.9% of net sales ~~in fiscal 2012 versus 3.4% in fiscal 2011~~when compared to one year ago. Year-to-date operating expenses of $2.0 million were up 22.7% year-over-year due to higher ~~research~~R&D spending and increased marketing and business development costs. As with the quarter, operating expenses ~~to support expansion efforts in engineering and new product development.~~kept pace with the sales increase. As a percentage of net sales, operating expenses were relatively flat versus last year at 3.3%.

Aerostar

Aerostar provides solutions for scientific and military operations, research, surveillance and communications using specialized fabrics and films.


	Three Months Ended										Three Months Ended										Six Months Ended
(dollars in thousands)	April 30, 2011			April 30, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change		% Change
Net sales	$	15,139		$	11,693		$	3,446	29	%	$	10,861		$	9,195		$	1,666	18	%	$	26,000		$	20,888		$	5,112	24	%
Gross profit	5,000			2,820			2,180		77	%	3,220			1,998			1,222		61	%	8,220			4,818			3,402		71	%
Gross margins	33.0		%	24.1		%					29.6		%	21.7		%					31.6		%	23.1		%
Operating income	4,062			2,164			1,898		88	%	2,184			1,345			839		62	%	6,246			3,509			2,737		78	%
Operating margins	26.8		%	18.5		%					20.1		%	14.6		%					24.0		%	16.8		%

The following factors were the primary drivers of the year-over-year growth in net sales and operating ~~income:~~income for the three and six-month periods:

Sales volumes. ~~Increased~~ T-11 parachute deliveries drove the increase in ~~sales.~~net sales for the quarter and six-month periods. The first ~~quarter~~half of fiscal ~~2011 included~~2011included the initial T-11 ~~shipments which ramped~~shipments. Deliveries did not ramp up to full production levels inuntil the second half of ~~fiscal 2011~~last year and have continued through the first ~~quarter~~half of fiscal 2012. ~~Tethered aerostat sales declined from $8.2 million to $7.3 million.~~

Gross margin improvement. Manufacturing efficiencies in T-11 parachute production drove the year-over-year improvement in ~~fiscal 2012 first~~second quarter ~~gross~~and year-to-date margins, as ~~fiscal 2011 first quarter~~last year's margins were unfavorably impacted by T-11 parachute start-up costs.

Operating expenses. ~~Operating~~Second quarter operating expenses of $1.0 million increased to ~~6.2%~~9.5% of net sales from ~~5.6%~~7.1% in the ~~first~~second quarter of fiscal ~~2011,~~2011. First half operating expenses of $2.0 million were 7.6% of net sales versus 6.3% one year earlier. Current year operating expenses primarily ~~reflecting~~reflect increased investment in research and development to support next generation aerostat technology and the development of lighter but stronger materials, along with higher selling and business development expense to ~~support~~expand the tethered aerostat business.

Electronic Systems

Electronic Systems provides contract electronic manufacturing services, primarily for low volume/high mix industrial products.


	Three Months Ended										Three Months Ended											Six Months Ended
(dollars in thousands)	April 30, 2011			April 30, 2010			$ Change		% Change		July 31, 2011			July 31, 2010			$ Change			% Change		July 31, 2011			July 31, 2010			$ Change			% Change
Net sales	$	19,477		$	16,288		$	3,189	20	%	$	16,530		$	18,067		$	(1,537	)	(9	)%	$	36,007		$	34,355		$	1,652		5	%
Gross profit	3,754			3,444			310		9	%	2,679			3,126			(447		)	(14	)%	6,433			6,570			(137		)	(2	)%
Gross margins	19.3		%	21.1		%					16.2		%	17.3		%						17.9		%	19.1		%
Operating income	3,412			3,124			288		9	%	2,307			2,813			(506		)	(18	)%	5,719			5,937			(218		)	(4	)%
Operating margins	17.5		%	19.2		%					14.0		%	15.6		%						15.9		%	17.3		%

The following factors were the primary drivers of the year-over-year ~~growth~~changes in net sales and operating ~~income:~~income for the second quarter and first half of fiscal 2012 :

Sales volume. ~~First~~Second quarter net sales ~~growth reflects increased deliveries of~~decreased 9% year-over-year, reflecting lower avionics ~~bed controls and~~volume. This was partially offset by additional sourcing of assemblies to the Applied Technology ~~Division partially offset by weaker deliveries~~Division. For the six months, net sales were up slightly, increasing 5% from one year earlier. For the first half, increased intercompany sourcing of electronic circuit boards ~~for secure communication devices.~~to Applied Technology and higher sales of hand-held bed controls more than offset the decline in avionics shipments.

Gross margins. ~~Higher~~Lower sales volume, ~~resulted in increased profits; however, gross margins fell as a result of~~accompanied by a less favorable product ~~mix.~~mix, resulted in decreased gross margins for the quarter as compared with last year's second quarter. For the six months, higher sales volume did not result in profit growth due to the negative impact of unfavorable product mix, as a result, gross margins fell from 19.1% to 17.9%.

Operating expenses. ~~Operating~~Second quarter and year-to-date operating expenses were relatively ~~unchanged.~~unchanged year-over-year.

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


	Three Months Ended						Three Months Ended						Six Months Ended
(dollars in thousands)	April 30, 2011			April 30, 2010			July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Administrative expenses	$	3,156		$	2,264		$	3,227		$	2,598		$	6,383		$	4,862
Administrative expenses as a % of sales	3.1		%	2.7		%	3.6		%	3.6		%	3.3		%	3.1		%
Other income (expense), net	$	(13	)	$	52		$	(76	)	$	(94	)	$	(89	)	$	(42	)
Effective tax rate	33.2		%	33.8		%	33.0		%	33.3		%	33.1		%	33.6		%

~~First quarter~~Although quarterly and year-do-date administrative expenses increased ~~39% from the prior year~~year-over-year (24% and 31%, respectively), they were relatively flat as a ~~result~~percentage of ~~investments~~sales. Investments in additional finance, human

resources and information technology personnel to support current and future growth strategies through a strengthened corporate ~~infrastructure.~~infrastructure accounted for the increased spending.

“Other income (expense), net” consists mainly of interest income, foreign currency transaction gain and activity related to the company's equity investment in SST. The ~~decrease from~~year-over-year variability for the ~~prior year~~year-to-date expense is primarily attributable to ~~year-over-year variability in~~ SST ~~results-to-date.~~results.

~~The~~As compared with one year ago, the effective tax ~~rate~~rates for the second quarter and first ~~quarter~~half of fiscal 2012 ~~was~~were favorably affected by tax benefits associated with the U.S. research and development tax credit. The credit was not available ~~in the first quarter of fiscal 2011,~~at this time last year, but was renewed in December 2010.

OUTLOOK

Management anticipates a record year of sales and earnings. Net income growth ~~in line with~~exceeding the company's long-term objectives of 12 - 15% is expected. ~~Sales are~~Profit is forecasted to grow at a higher rate relative to ~~income~~sales as a result of positive operating leverage; however, investment spending for research and development, capacity, capabilities and human capital will temper ~~profitability~~the overall growth rate in the near-term. The upcoming third quarter is expected to show relatively flat earnings compared to one year earlier. The third quarter last year included over $7 million of tethered aerostat deliveries and a $415,000 pretax gain on the sale of an Engineered Films warehouse. Order levels do not currently support that level of aerostat sales and no gains on asset sales are anticipated. In addition, weakness in the economy could negatively impact demand in Engineered Films or Applied Technology.

Applied Technology

Management expects ~~strong~~year-over-year third quarter sales growth, although the pace of growth is expected to ~~continue amid strong demand for farm equipment.~~slow from first-half levels. Strong global demand for agriculture commodities is expected to support higher crop prices and boost farm receipts and investment in farm equipment.

Management will continue to make significant investments in product development and global expansion and is committed to building on prior year investments in SST and Ranchview. The development of an industry-leading decision-support system helps position Applied Technology as a premier total precision solutions provider (GPS steering devices, planting and spraying controls, data collection, transmission, storage and analysis). Applied Technology's strategy of integrate, inform and innovate along with strong brand recognition, ease of use, product localization and industry leading service creates strong growth opportunities. Worldwide agriculture conditions are expected to remain healthy for this segment, with rising global demand for food, heightened environmental concerns and broadening recognition of Raven's suite of productivity tools as a cost-effective investment supporting management's outlook for annual profit growth into out pace top line ~~with increased sales.~~growth.

Engineered Films

Management anticipates ~~double-digit annual~~ sales growth to be driven by increased capacity and capabilities and ~~favorable~~ market ~~conditions. Rising crude~~conditions, including energy and geomembrane. Crude oil prices continue to drive oil and gas drilling activities and ~~increased~~ demand for pit liners. The impact of transient ~~factors—~~factors, such as civil unrest in oil-producing countries and ~~speculation—~~speculation, on the price of crude oil is uncertain. ~~The construction industry continues to show gradual improvement, reflecting improved credit flow and less economic uncertainty.~~

The addition of new extrusion equipment in the second half of fiscal 2012 is expected to increase annual capacity by 25-30%. This equipment will improve sales opportunities by adding both new capacity and capabilities to this ~~segment.~~division. However, the impact on the third quarter is not expected to be significant. Additional depreciation and new product introduction costs will partially offset the positive impact of the higher pounds produced until new extrusion capacity is fully utilized. This ramp-up period has typically taken 2-3 years, depending on market conditions.

In addition, profit margins are highly dependent on the ratio of selling prices to input costs. The selling price of blown films is largely driven by competitive pricing pressure, capacity utilization and market ~~dynamics—~~dynamics, including supply and demand. Plastic ~~resin—~~resin, a derivative of natural gas and ~~oil—~~oil, is the primary component of extruded films. Management expects ~~annual~~ operating income growth ~~but at a lower rate than the~~to trail anticipated sales growth due to competitive pricing pressure and increased investment spending for research, capacity and capabilities.

Aerostar

Management ~~projects strong~~expects third quarter sales ~~growth for~~to decline by at least 10% compared to the ~~first half of fiscal 2012.~~prior year due to lower tethered aerostat shipments. Tethered aerostat systems deployed in Afghanistan have promoted the safety of U.S. troops by successfully providing continuous wide-area surveillance of insurgents. Management ~~is optimistic about new opportunities in tethered aerostats and anticipates follow-on~~expects future opportunities to provide cost-effective persistent surveillance for the ~~military. As in this past year, deliveries could vary~~military, although orders have varied significantly by quarter asand follow-on orders are dependent on the government funding process. Management also sees opportunities for growth under existing government contracts for military parachutes and new contracts for protective wear. The engineering knowledge and manufacturing technology gained from these relationships along with expertise in sewing and sealing specialty fabrics will help solidify Aerostar's competitive advantage. ~~Increased investment spending is expected to temper operating income growth relative to top-line growth.~~

Electronic Systems

Management looks at Electronic Systems as a complementary business to its growth divisions: Engineered Films, Aerostar and especially Applied Technology. This business carries technical expertise that ~~support~~supports the efforts of its sister divisions and provides electronic manufacturing services to low-volume, high-mix customers that require high levels of service and engineering support.

Management anticipates an additional customer in fiscal 2012, but believes this growth will be offset by lower avionics sales. The mid- to long-term growth strategy is predicated on the development of proprietary products, expansion of the customer base and continued in-sourcing of assemblies for Raven's other divisions. Electronic Systems Division results for the ~~remainder~~third quarter of fiscal 2012 are expected to be ~~roughly flat as compared with~~slightly lower than in fiscal 2011.

LIQUIDITY AND CAPITAL RESOURCES

The company's liquidity and capital resources are strong. Management focuses on the current cash balance and operating cash flows in considering liquidity as operating cash flows have historically been the company's primary source of liquidity. Management expects that current cash combined with the generation of positive operating cash flows will be sufficient to fund the company's operating, investing and financing activities.

The company's cash needs are seasonal, with working capital demands strongest in the first quarter. Consequently, the discussion of trends in operating cash flows focuses on the primary drivers of year-over-year variability in working capital.

Cash, cash equivalents, and short-term investments totaled $~~42.6~~47.0 million at ~~April 30,~~July 31, 2011, aan $~~4.1~~8.4 million increase compared to cash, cash equivalents, and short-term investments at January 31, 2011 of $38.6 million. The comparable balances one year earlier totaled $~~49.5~~53.6 million. Raven paid a $22.5 million special dividend in September 2010.

Operating Activities

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

Cash provided by operating activities was $~~11.0~~26.3 million in the first ~~quarter~~half of fiscal 2012 versus $~~10.3~~19.8 million in the first ~~quarter~~six months of fiscal 2011. The increase in ~~quarterly~~ operating cash flows primarily reflects higher company earnings.

Inventory and accounts receivable consumed ~~$12.3~~$9.7 million of cash in the first ~~quarter~~six months of fiscal 2012 versus ~~$12.5~~$11.0 million ~~in the first quarter of fiscal 2011.~~one year ago. The company continues to focus on disciplined inventory management (trailing 12-month inventory turnover of 5.7X at ~~April 30,~~July 31, 2011 versus ~~5.6X~~5.5X at ~~April 30,~~July 31, 2010) and efficient cash collections (trailing 12-month DSO of 4948 days at ~~April 30,~~July 31, 2011 and ~~April 30,~~ 2010). Year-over-year variability in accrued liabilities consumed ~~$2.9~~an additional $3.6 million of cash in the first ~~quarter~~half of fiscal 2012 versus ~~cash generated of $582,000 in the first quarter of fiscal 2011 as a result of~~last year's comparable period. This resulted from the payout of fiscal 2011 profit sharing and incentive compensation accruals in the first quarter of fiscal 2012.

Investing Activities

Cash used in investing activities totaled $~~3.4~~10.5 million in the first ~~quarter~~half of fiscal 2012 versus $~~1.2~~3.6 million in the first ~~quarter~~half of fiscal 2011, reflecting a ~~$2.0~~$7.2 million increase in capital expenditures. Year-to-date capital spending consisted primarily of expenditures related to increased manufacturing capacity in Engineered Films and Aerostar's commitment to a higher level of product development investments for future growth, including facilities and equipment.

Management anticipates record capital spending in fiscal ~~2012—~~2012, in the $30 million ~~range—~~range, as management sees opportunities to earn attractive returns on invested capital through organic investments. In addition, management will evaluate strategic acquisitions

that result in expanded capabilities and solidify competitive advantages.

Financing Activities

Dividends of $~~3.3~~6.5 million or ~~18 cents~~$0.36 per share were paid during the ~~current quarter~~first six months of fiscal 2012 compared to $~~2.9~~5.8 million or ~~16 cents~~$0.32 per share inone year ago. In the ~~year ago quarter. The 18 cents per share~~first quarter of fiscal 2012, the company increased the annual dividend ~~represents~~(excluding special dividends) for the ~~company's~~ 25^th consecutive ~~increase in the annual~~year. Raven has now paid a dividend ~~(excluding special dividends).~~for 39 consecutive years.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

There have been no material changes since the fiscal year ended January 31, 2011.

NEW ACCOUNTING ~~STANDARDS~~PRONOUNCEMENTS

~~There were no new accounting standards~~In June 2011, the Financial Accounting Standards Board (FASB) issued ~~or effective during the three months ended~~ ~~April 30, 2011~~ ~~that had or are expected to have a material impact~~guidance on the ~~company's consolidated results~~presentation of ~~operations, financial condition,~~comprehensive income. This guidance gives an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or ~~cash flows.~~in two separate but consecutive statements. In either option, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The guidance eliminates the option to present the components of other comprehensive income as a part of the statement of changes in shareholders' equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance should be applied retrospectively, and for public companies is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The company is evaluating the presentation options.

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

The company’s subsidiaries that operate outside the United States use their local currency as the functional currency. The functional currency is translated into U.S. dollars for balance sheet accounts using the period-end exchange rates, and average exchange rates for the statement of income. Adjustments resulting from financial statement translations are included as cumulative translation adjustments in accumulated other comprehensive income (loss) within shareholders’ equity. Foreign currency transaction gains or losses are recognized in the period incurred and are included in “other income (expense), net” in the Consolidated Statements of Income. Foreign currency fluctuations had no material effect on the company’s financial condition, results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of ~~April 30,~~July 31, 2011, the end of the period covered by this report, management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) evaluated the effectiveness of disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of such date. Based on that evaluation, the CEO and CFO have concluded that the company’s disclosure controls and procedures were effective as of ~~April 30,~~July 31, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in the company’s internal control over financial reporting that occurred during the quarter ended ~~April 30,~~July 31, 2011 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report on Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. Without limiting the foregoing, the words “anticipates,” “believes,” “expects,” “intends,” “may,” “plans” and similar expressions are intended to identify forward-looking statements. The company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act. Although management believes that the expectations reflected in forward-looking statements are based on reasonable assumptions, there is no assurance that these assumptions are correct or that these expectations will be achieved. Assumptions involve important risks and uncertainties that could significantly affect results in the future. These risks and uncertainties include, but are not limited to, those relating to weather conditions and commodity prices, which could affect sales and profitability in some of the company’s primary markets, such as agriculture, construction, and oil and gas well drilling; or changes in competition, raw material availability, technology or relationships with the company’s largest customers—any of which could adversely affect any of the company’s product lines—as well as other risks described in the company’s 10-K under Item 1A. This list is not exhaustive, and the company does not have an obligation to revise any forward-looking statements to reflect events or circumstances after the date these statements are made.

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RAVEN INDUSTRIES, INC.

PART II — OTHER INFORMATION

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 1A. Risk Factors: No material change.

Item 2. Changes in Securities: None

Item 3. Defaults upon Senior Securities: None

Item 4. Reserved

Item 5. Other Information: ~~None~~

At the company's annual meeting of shareholders on May 24, 2011, holders of a majority of the company's shares voted at the meeting expressed a preference to hold the advisory vote on executive compensation on an annual basis. Based on these results, the company's Board of Directors has determined to include a non-binding advisory vote on executive compensation at each Annual Meeting of Shareholders until the next required vote on the frequency of shareholder votes on executive compensation.

Item 6. 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.
32.1		Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act.
32.2		Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extenstion Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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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: ~~June 3,~~September 2, 2011

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	PAGE

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited)	3
Consolidated Statements of Income (unaudited)	4
Consolidated Statements of Cash Flows (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Quantitative and Qualitative Disclosures about Market Risks	1517
Item 4. Internal Controls and Procedures	1517

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	1618
Item 1A. Risk Factors	1618
Item 2. Changes in Securities	1618
Item 3. Defaults upon Senior Securities	1618
Item 4. Reserved	1618
Item 5. Other Information	1618
Item 6. Exhibits Filed	1618
Signatures	1719
EX-31.1
EX-31.2
EX-32.1
EX-32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE