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, 2009
OR
   
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 Yeso 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).þ Yeso Noo
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 oAccelerated filer þ 
Non-accelerated filer o
(Do not check if a smaller reporting company)		Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o Yesþ No
As of MayAugust 31, 2009 there were 18,019,79618,020,915 shares of common stock, $1 par value, of Raven Industries, Inc. outstanding. There were no other classes of stock outstanding.
 
 

 

 

RAVEN INDUSTRIES, INC.
INDEX
       
    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)
  6-9 
Item 2.
 Management’s Discussion and Analysis of Financial Condition and Results of Operations  9-139-14 
Item 3.
 Quantitative and Qualitative Disclosures about Market Risks  1314 
Item 4.
 Internal Controls and Procedures  1315 
       
PART II — OTHER INFORMATION    
       
Item 1.
 Legal Proceedings  1516 
Item 1A.
 Risk Factors  1516 
Item 2.
 Changes in Securities  1516 
Item 3.
 Defaults upon Senior Securities  1516 
Item 4.
 Submission of Matters to a Vote of Security Holders  1516 
Item 5.
 Other Information  1516 
Item 6.
 Exhibits Filed  1516 
Signatures
  1517 
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2

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PART I — FINANCIAL INFORMATION
RAVEN INDUSTRIES, INC.
RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
                        
 April 30, January 31, April 30,  July 31, January 31, July 31, 
(in thousands except share data) 2009 2009 2008  2009 2009 2008 
ASSETS
  
Current Assets  
Cash and cash equivalents $32,269 $16,267 $18,332  $41,032 $16,267 $30,136 
Short-term investments — — 3,300  2,000 — 2,100 
Accounts receivable, net of allowances of $574, $613, and $342, respectively 36,290 40,278 50,015 
Accounts receivable, net of allowances of $350, $613, and $375, respectively 29,155 40,278 34,936 
Inventories:  
Materials 24,652 26,657 29,250  21,352 26,657 33,115 
In process 3,475 3,258 3,661  3,738 3,258 3,996 
Finished goods 4,753 6,062 4,315  4,359 6,062 5,441 
              
Total inventories 32,880 35,977 37,226  29,449 35,977 42,552 
Deferred income taxes 2,616 2,542 2,274  2,508 2,542 2,347 
Prepaid expenses and other current assets 3,377 3,009 3,616  3,123 3,009 3,323 
              
Total current assets 107,432 98,073 114,763  107,267 98,073 115,394 
              
  
Property, plant and equipment 86,966 86,324 80,807  88,370 86,324 83,194 
Accumulated depreciation  (51,579)  (50,444)  (46,194)  (53,257)  (50,444)  (47,836)
              
Property, plant and equipment, net 35,387 35,880 34,613  35,113 35,880 35,358 
Goodwill 7,612 7,450 7,057  7,716 7,450 7,202 
Amortizable intangible assets, net 1,467 1,471 1,652  1,376 1,471 1,580 
Other assets, net 1,528 1,541 2,440  1,534 1,541 1,844 
              
  
TOTAL ASSETS
 $153,426 $144,415 $160,525  $153,006 $144,415 $161,378 
              
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Current Liabilities  
Accounts payable $8,718 $9,433 $11,691  $8,485 $9,433 $12,915 
Accrued liabilities 10,999 13,281 11,047  11,270 13,281 12,919 
Income taxes payable 4,772 — 5,647  — — 411 
Customer advances 524 608 340  522 608 452 
              
Total current liabilities 25,013 23,322 28,725  20,277 23,322 26,697 
  
Other liabilities 7,735 7,537 7,734  7,898 7,537 7,916 
              
Total liabilities 32,748 30,859 36,459  28,175 30,859 34,613 
              
  
Commitments and contingencies  
  
Shareholders’ equity:  
Common stock, $1 par value, authorized shares 100,000,000; issued 32,460,934; 32,460,934; 32,413,717, respectively 32,461 32,461 32,414 
Common stock, $1 par value, authorized shares 100,000,000; issued 32,469,598; 32,460,934; 32,436,527, respectively 32,470 32,461 32,437 
Paid in capital 4,725 4,531 3,635  5,035 4,531 4,030 
Retained earnings 137,967 131,080 140,747  141,646 131,080 145,221 
Accumulated other comprehensive income (loss)  (1,113)  (1,154)  (1,581)  (958)  (1,154)  (1,561)
              
 174,040 166,918 175,215  178,193 166,918 180,127 
Less treasury stock, at cost, 14,448,683; 14,448,683; and 14,386,683 shares, respectively 53,362 53,362 51,149 
Less treasury stock, at cost, 14,448,683 shares 53,362 53,362 53,362 
              
Total shareholders’ equity 120,678 113,556 124,066  124,831 113,556 126,765 
              
  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 $153,426 $144,415 $160,525  $153,006 $144,415 $161,378 
              
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 
 April 30, April 30,  July 31, July 31, July 31, July 31, 
(in thousands except per share data) 2009 2008  2009 2008 2009 2008 
Net sales $65,222 $75,166  $56,586 $69,278 $121,808 $144,444 
Cost of goods sold 46,252 53,151  42,765 53,492 89,017 106,643 
              
  
Gross profit 18,970 22,015  13,821 15,786 32,791 37,801 
  
Selling, general and administrative expenses 4,857 5,374  4,515 5,474 9,372 10,848 
              
  
Operating income 14,113 16,641  9,306 10,312 23,419 26,953 
  
Interest income and other, net  (1)  (118)  (105)  (176)  (106)  (294)
              
Income before income taxes 14,114 16,759  9,411 10,488 23,525 27,247 
  
Income taxes 4,883 5,877  3,207 3,673 8,090 9,550 
              
  
Net income $9,231 $10,882  $6,204 $6,815 $15,435 $17,697 
              
  
Net income per common share:  
Basic $0.51 $0.60  $0.34 $0.38 $0.86 $0.98 
Diluted $0.51 $0.60  $0.34 $0.38 $0.86 $0.98 
  
Cash dividends paid per common share $0.13 $0.13  $0.14 $0.13 $0.27 $0.26 
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  Three Months Ended 
 April 30, April 30,  July 31, July 31, 
(in thousands) 2009 2008  2009 2008 
OPERATING ACTIVITIES:
  
Net income $9,231 $10,882  $15,435 $17,697 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization 1,742 1,820  3,530 3,748 
Deferred income taxes  (71)  (63) 25 437 
Share-based compensation expense 192 192  544 544 
Change in operating assets and liabilities:  
Accounts receivable 4,026  (13,541) 11,407 910 
Inventories 3,526  (702) 6,571  (6,030)
Prepaid expenses and other current assets  (977)  (992)  (724)  (758)
Operating liabilities 2,021 7,492   (2,302) 6,220 
Other operating activities, net  (22) 35   (165) 123 
          
Net cash provided by operating activities 19,668 5,123  34,321 22,891 
          
  
INVESTING ACTIVITIES:
  
Capital expenditures  (1,105)  (974)  (2,304)  (3,489)
Purchase of short-term investments —  (2,100)  (2,000)  (2,100)
Sale of short-term investments — 300  — 1,500 
Other investing activities, net  (223) 45   (397)  (135)
          
Net cash used in investing activities  (1,328)  (2,729)  (4,701)  (4,224)
          
  
FINANCING ACTIVITIES:
  
Dividends paid  (2,342)  (2,353)  (4,864)  (4,692)
Purchases of treasury stock —  (2,966) —  (5,180)
Other financing activities, net —  (13)  (37) 76 
          
Net cash used in financing activities  (2,342)  (5,332)  (4,901)  (9,796)
          
  
Effect of exchange rate changes on cash 4  (2) 46  (7)
          
  
Net increase (decrease) in cash and cash equivalents
 16,002  (2,940)
Net increase in cash and cash equivalents
 24,765 8,864 
  
Cash and cash equivalents:
  
Beginning of period 16,267 21,272  16,267 21,272 
          
End of period $32,269 $18,332  $41,032 $30,136 
          
The accompanying notes are an integral part of the unaudited consolidated financial information.

5

RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(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 statement of this financial information have been included. Financial results for the interim three-month periodthree and six-month periods ended April 30,July 31, 2009 are not necessarily indicative of the results that may be expected for the year ending January 31, 2010. The January 31, 2009 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, 2009.
(2) Operating Expenses
The primary types of operating expenses are classified in the income statement as follows:
   
Cost of GoodGoods Sold Selling, General, and Administrative Expenses
Direct material costs Personnel costs
Material acquisition and handling costs Professional service fees
Direct labor Advertising
Factory overhead including depreciation Promotions
Inventory obsolescence Information technology equipment depreciation
Product warranties
Office supplies
Research and development Office supplies
The company’s gross margins may not be comparable to industry peers due to variability in the classification of these expenses across the industries in which the company operates.
The company’s research and development expense is comprised principally of labor and material costs related to product development efforts in the Applied Technology segment. During the three and six month periods ended July 31, 2009, $1.4 million and $2.9 million, respectively, were expended on research and development. During the three and six month periods ended July 31, 2008, $1.5 million and $2.8 million, respectively, were expended on research and development.
(2)(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, as their exercise prices were greater than the average market price of the company’s common stock during those periods. For the three monthsand six month periods ended April 30,July 31, 2009, 318,600 and 2008, 382,975 and 226,950 options, respectively,318,663 shares were excluded, fromrespectively. For the diluted net income per-share calculation.three and six months periods ended July 31, 2008, 74,200 and 144,883 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, April 30,  July 31, July 31, July 31, July 31, 
 2009 2008  2009 2008 2009 2008 
Numerator:  
Net income(in thousands)
 $9,231 $10,882  $6,204 $6,815 $15,435 $17,697 
              
  
Denominator:  
Weighted average common shares outstanding 18,012,251 18,093,008  18,020,535 18,018,432 18,016,393 18,055,509 
Weighted average stock units outstanding 15,140 9,893  20,954 14,306 18,047 12,100 
              
Denominator for basic calculation 18,027,391 18,102,901  18,041,489 18,032,738 18,034,440 18,067,609 
              
  
Weighted average common shares outstanding 18,012,251 18,093,008  18,020,535 18,018,432 18,016,393 18,055,509 
Weighted average stock units outstanding 15,140 9,893  20,954 14,306 18,047 12,100 
Dilutive impact of stock options — 51,002  2,215 57,927 3,305 51,629 
              
Denominator for diluted calculation 18,027,391 18,153,903  18,043,704 18,090,665 18,037,745 18,119,238 
              
  
Net income per share — basic $0.51 $0.60  $0.34 $0.38 $0.86 $0.98 
Net income per share — diluted $0.51 $0.60  $0.34 $0.38 $0.86 $0.98 

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(3)(4) 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 and reflect the organization of the company into the three Raven divisions and the Aerostar subsidiary. Raven Canada and Raven GmbH are included in the Applied Technology Division. 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. Intersegment transactions are eliminated in a separate caption entitled “intersegment eliminations” to arrive at consolidated sales and operating income. FirstSecond quarter and first half intersegment sales were primarily from Electronic Systems to Applied Technology. The results for these segments follow:
                        
 Three Months Ended Three Months Ended Six Months Ended 
 April 30, April 30,  July 31, July 31, July 31, July 31, 
(in thousands) 2009 2008  2009 2008 2009 2008 
Net sales  
Applied Technology $29,434 $34,846  $18,572 $22,716 $48,006 $57,562 
Engineered Films 13,358 22,005  15,017 26,504 28,375 48,509 
Electronic Systems 16,153 13,279  17,913 14,739 34,066 28,018 
Aerostar 6,565 6,019  5,838 5,547 12,403 11,566 
Intersegment eliminations  (288)  (983)  (754)  (228)  (1,042)  (1,211)
              
Consolidated net sales $65,222 $75,166  $56,586 $69,278 $121,808 $144,444 
              
  
Operating income 
Operating income (loss) 
Applied Technology $9,610 $13,546  $5,117 $7,060 $14,727 $20,606 
Engineered Films 2,715 3,864  2,081 3,515 4,796 7,379 
Electronic Systems 2,495 640  2,962 1,239 5,457 1,879 
Aerostar 1,158 806  1,136 718 2,294 1,524 
Intersegment eliminations 28  (29)  (26) 26 2  (3)
              
Total reportable segment income 16,006 18,827  11,270 12,558 27,276 31,385 
Administrative and general expenses  (1,893)  (2,186)  (1,964)  (2,246)  (3,857)  (4,432)
              
Consolidated operating income $14,113 $16,641  $9,306 $10,312 $23,419 $26,953 
              
(4)(5) Financing Arrangements
Raven has an uncollateralized credit agreement providing a line of credit of $8.0 million with a maturity date of July 1,September 29, 2009, bearing interest at 1.00% under the prime rate. Letters of credit totaling $1.3 million have been issued under the line, primarily to support self-insured workers compensation bonding requirements. No borrowings were outstanding as of April 30,July 31, 2009, January 31, 2009 or April 30,July 31, 2008, and $6.7 million was available at April 30,July 31, 2009.
(5)(6) Dividends
The company announced on May 21,August 25, 2009, that its board of directors approved a quarterly cash dividend of 14 cents per share, payable JulyOctober 15, 2009 to shareholders of record on JuneSeptember 25, 2009.
(6)(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. The components of total comprehensive income and accumulated other comprehensive income (loss) follow:

7

Comprehensive income
                        
 Three Months Ended Three Months Ended Six Months Ended 
 April 30, April 30,  July 31, July 31, July 31, July 31, 
(in thousands) 2009 2008  2009 2008 2009 2008 
Net income $9,231 $10,882  $6,204 $6,815 $15,435 $17,697 
Other comprehensive income (loss): 
Other comprehensive income: 
Foreign currency translation 20  (12) 134  (17) 154  (29)
Amortization of postretirement benefit plan actuarial losses, net of income tax of $11 and $20, respectively 21 37 
Amortization of postretirement benefit plan actuarial losses, net of income tax of $11, $20, $22 and $39, respectively 21 36 42 74 
              
Total other comprehensive income 41 25  155 19 196 45 
              
Total comprehensive income $9,272 $10,907  $6,359 $6,834 $15,631 $17,742 
              
Accumulated other comprehensive income (loss)
                        
 April 30, January 31, April 30,  July 31, January 31, July 31, 
(in thousands) 2009 2009 2008  2009 2009 2008 
Foreign currency translation $(104) $(124) $111  $31 $(124) $94 
Post-retirement benefits  (1,009)  (1,030)  (1,692)  (989)  (1,030)  (1,655)
              
Total accumulated other comprehensive income (loss) $(1,113) $(1,154) $(1,581)
Total accumulated other comprehensive loss $(958) $(1,154) $(1,561)
              
(7)(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, April 30,  July 31, July 31, July 31, July 31, 
(in thousands) 2009 2008  2009 2008 2009 2008 
Service cost $14 $17  $13 $17 $27 $34 
Interest cost 83 90  83 90 166 180 
Amortization of actuarial losses 32 57  32 56 64 113 
              
Net periodic benefit cost $129 $164  $128 $163 $257 $327 
              
(8)(9) Product Warranty Costs
Accruals necessary for product warranties are estimated based upon historical warranty costs and average time elapsed between purchases and returns for each division. Any warranty issues that are unusual in nature are accrued individually. Changes in the carrying amount of accrued product warranty costs follow:
                        
 Three Months Ended Three Months Ended Six Months Ended 
 April 30, April 30,  July 31, July 31, July 31, July 31, 
(in thousands) 2009 2008  2009 2008 2009 2008 
Balance, beginning of period $1,004 $684  $1,099 $793 $1,004 $684 
Accrual for warranties 485 459  755 852 1,240 1,311 
Settlements made (in cash or in kind)  (390)  (350)  (748) ��(627)  (1,138)  (977)
              
Balance, end of period $1,099 $793  $1,106 $1,018 $1,106 $1,018 
              
(9)(10) Recent Accounting Pronouncements
At the beginning of fiscal 2010 the company adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about (a) how and why derivative instruments are used, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The adoption of SFAS No. 161 did not have a materialhad no impact on the company’s consolidated results of operations, financial condition or cash flows.
At the beginning of fiscal 2010 the company adopted FSP No. FAS 142-3,Determination of the Useful Life of Intangible Assets, which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142,Goodwill and Other Intangible Assets. The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets, and (2) intangible assets acquired in both business combinations and asset acquisitions. Under FSP No. FAS 142-3, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience,

8

must consider assumptions that market participants would use about renewal or extension. As this guidance applies only to assets acquired in the future, the company is not able to predict the impact, if any, on the company’s consolidated results of operations, financial condition or cash flows.

8

As of July 31, 2009 the company adopted SFAS No. 165,Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of FSPSFAS No. FAS 142-3165 did not have a material impact on the company’s consolidated results of operations, financial condition or cash flows. In accordance with SFAS No. 165, the company has evaluated subsequent events through the date and time the financial statements were issued on September 2, 2009.
New pronouncementsIn June 2009, the FASB issued butSFAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS No. 168 establishes a two-level GAAP hierarchy for nongovernmental entities: authoritative guidance and non-authoritative guidance. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, and EITF Abstracts; instead, the Board will issue new guidance as Accounting Standards Updates, which will include revisions to the codification, as well as background information and the Board’s basis for conclusions for new guidance. SFAS No. 168 is effective for interim and annual reporting periods ending after September 15, 2009. The adoption of SFAS No. 168 will not effective until after April 30, 2009, are not expected to have a materialan impact on the company’s consolidated results of operations, financial condition or cash flows.
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, 2009 and April 30,July 31, 2008, 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, 2009.
EXECUTIVE SUMMARY
Raven Industries, Inc. is an industrial manufacturer providing a variety of products to customers within the industrial, agricultural, construction and military/aerospace markets, primarily in North America. The company operates in four business segments: Applied Technology (formerly Flow Controls), Engineered Films, Electronic Systems and Aerostar.
Significant financial items related to the first quarter of fiscal 2010 include:
•Diluted earnings per share of $0.51 decreased $0.09 (15%) from $0.60 per share in the first quarter of fiscal 2009.
•Net sales of $65.2 million decreased $9.9 million (13%) compared to $75.2 million in the first quarter of fiscal 2009. The recession and related economic uncertainty lowered Engineered Films and Applied Technology sales volumes. Electronic Systems and Aerostar sales were not directly impacted.
•Gross margins of 29.1% decreased slightly from 29.3% in the first quarter of fiscal 2009 stemming from a five point contraction in Applied Technology gross margins partially offset by increased Engineered Films and Electronic Systems margins.
•Net income decreased 15% to $9.2 million versus $10.9 million in the first quarter of fiscal 2009.
•The company generated first quarter operating cash flow of $19.7 million versus $5.1 million in the year ago quarter. The increase was driven by improved inventory management and accelerated collections of accounts receivable.
•The company paid dividends of $2.3 million during the first quarter of fiscal 2010.
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.
ResultsSnapshot
Consolidated financial highlights for the second quarter and first six months of Operations (Q1 fiscal 2010 versus Q1include the following:
                         
  Three Months Ended Six Months Ended
  July 31, July 31, % July 31, July 31, %
(dollars in thousands except per share data) 2009 2008 Change 2009 2008 Change
   
                         
Net sales $56,586  $69,278   (18)% $121,808  $144,444   (16)%
Gross profit  13,821   15,786   (12)%  32,791   37,801   (13)%
Gross margins  24.4%  22.8%      26.9%  26.2%    
Operating income  9,306   10,312   (10)%  23,419   26,953   (13)%
Net income  6,204   6,815   (9)%  15,435   17,697   (13)%
Diluted earnings per share  0.34   0.38   (11)%  0.86   0.98   (12)%
                         
Operating cash flow              34,321   22,891   50%
Cash dividends              4,864   4,692   4%
Common stock repurchases              —   5,180     

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The quarter-over-quarter and year-over-year declines in financial results were driven by softening global agricultural fundamentals and recessionary global economic conditions. The drop in net sales for the second quarter and first half of fiscal 2009)
Net2010 is the result of year-over-year sales decreased $9.9 million (13%) to $65.2 million from $75.2 million. The decrease was driven primarily by lowerdeclines in Applied Technology and Engineered Films sales partially offset by strongersales growth in Electronic Systems and Aerostar sales.Aerostar. In addition, the company reported lower quarter-over-quarter and year-over-year operating income, net income, and diluted earnings per share. The drop in second quarter and first half operating income is attributable to falling profits in Applied Technology and Engineered Films, partially offset by profit growth in Electronic Systems and Aerostar.
Applied Technology net sales of $18.6 million in the second quarter of fiscal 2010 were down $4.1 million (18%) and operating income of $5.1 million fell $1.9 million (28%) compared to the second quarter of fiscal 2009. For the first half ended July 31, 2009, Applied Technology net sales of $48.0 million dropped $9.6 million (17%) and operating income of $14.7 million decreased $5.4$5.9 million (16%(29%) as compared to $29.4 million as a result ofthe first half ended July 31, 2008. Applied Technology’s results were negatively impacted by a less robust agricultural market. market as farm incomes have declined from prior year record levels due to falling commodity prices and uncertainty stemming from turbulent financial markets. Furthermore, quarter-over-quarter comparisons were unfavorable as the prior year’s second quarter included carryover demand as orders in the first quarter of fiscal 2009 exceeded production capacity.
Engineered Films net sales of $15.0 million in the second quarter of fiscal 2010 fell $11.5 million (43%) and operating income of $2.1 million declined $1.4 million (41%) as compared to the second quarter of fiscal 2009. In the first half of fiscal 2010, Engineered Films net sales of $28.4 million dropped $20.1 million (42%) and operating income of $4.8 million decreased $8.6$2.6 million (39%(35%) as compared to $13.4 million versus $22.0 million due to decreasedthe first half of fiscal 2009. Engineered Films second quarter and first half results were negatively impacted by the continuation of a weak construction market, resulting in reduced demand for construction films and depressed selling prices. Additionally, demand for pit liners and construction filmdeclined, reflecting depressedless oil and gas drilling activity caused by falling oil prices. Sequentially, gross margins fell from 25.8% in the first quarter of fiscal 2010 to 18.2% in the current quarter, reflecting approximately $1.3 million of first quarter profit from one-time opportune purchases of prime grade plastic resin.
Electronic Systems net sales of $17.9 million in the second quarter of fiscal 2010 grew $3.2 million (22%) and construction activity. Additionally, downward pressure on Engineered Films selling prices contributedoperating income of $3.0 million rose $1.7 million (139%) as compared to the year-over-year revenue decline.second quarter of fiscal 2009. Electronic Systems net sales increased $2.9of $34.1 million in the first half of fiscal 2010 improved $6.0 million (22%) and operating income of $5.5 million in the first half of fiscal 2010 increased $3.6 million (190%) as compared to $16.2 million from $13.3 million reflectingthe first half of fiscal 2009. Electronic Systems second quarter and first half results were positively impacted by stronger salesshipments of printed circuit board assembliesboards for the aviation industry and secure communication devices. Aerostar
Aerostar’s fiscal 2010 second quarter sales increased $546,000 (9%of $5.8 million grew $291,000 (5%) to $6.6 million versus $6.0 million due to increased shipments of tethered aerostats and inflatable decoys.
Operating income decreased $2.5 million (15%) to $14.1 million from $16.6 million. Higher profits at Electronic Systems were offset by lower Applied Technology and Engineered Films results. Applied Technology operating income decreased $3.9of $1.1 million (29%expanded $418,000 (58%) as compared to $9.6the second quarter of fiscal 2009. Aerostar’s fiscal 2010 first half sales of $12.4 million from $13.5 million due to lower sales volumerose $837,000 (7%) and negative operating leverage stemming from the drop in revenue on a higher cost base versus a year ago. Engineered Films operating income decreased 30%of $2.3 million improved $770,000 (51%) as compared to $2.7 million from $3.9 million reflecting the 39% drop in sales (roughly 27% volumefirst half of fiscal 2009. Aerostar’s second quarter and 12% price)first half results were positively impacted by shipments under the MC-6 Army parachute contract which was partially offset by more favorable plastic resin costs, the primary component of plastic films. Electronic Systems operating income increased $1.9 million to $2.5 million from $640,000a decline in fiscal 2009 as a result of increased sales, positive operating leverage, and efficiency gains. Aerostar’s operating income increased to $1.2 million from $806,000 reflecting increased efficiencies and positive operating leverage gained though higher sales volume.protective wear shipments.

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RESULTS OF OPERATIONS — SEGMENT ANALYSIS(Q1 fiscal 2010 versus Q1 fiscal 2009)
Applied Technology
Applied Technology provides electronic and Global Positioning System (GPS) products designed to reduce operating costs and improve yields for the agriculture market.
Net sales of $29.4 million decreased $5.4 million (16%) and operating income of $9.6 million decreased $3.9 million (29%).
                                 
  Three Months Ended Six Months Ended
  July 31, July 31, $ % July 31, July 31, $ %
(dollars in thousands) 2009 2008 Change Change 2009 2008 Change Change
   
Net sales $18,572  $22,716  $(4,144)  (18)% $48,006  $57,562  $(9,556)  (17)%
Gross profit  6,544   8,884   (2,340)  (26)%  17,888   24,063   (6,175)  (26)%
Gross margins  35.2%  39.1%          37.3%  41.8%        
Operating income  5,117   7,060   (1,943)  (28)%  14,727   20,606   (5,879)  (29)%
Several factors contributed to the relative change:quarter-over-quarter and year-over-year declines in net sales and operating income:
 • Worldwide agricultural conditions remained fairly strong asNet farm income has declined from 2008 levels due to a result of gooddecline in crop prices for corn, soybeans and other feed grains. However,partially offset by a reduction in farm production costs. Farm income remains high by historical standards; however, grower and custom spray applicator purchasing decisions were deferred as a result of uncertainty regarding global economic conditions causing a decline in sales across substantially all of the segment’s product categories. The volume decrease was partially offset by a modest selling price increase.
 
 • The decline in sales for the three and six month periods was comprised of a drop in volume offset by a modest increase in selling prices.

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•First quarterhalf international sales of $5.8$9.9 million fell $900,000 (13%$1.7 million (15%) year-over-year. Although foreign revenue decreased from last year it accounted for a larger share of Applied TechnologyNet sales increasing from 19%outside the U.S. comprised approximately 21% of segment sales one year ago toin fiscal 2010 up slightly from 20%. While in fiscal 2009. Sharp declines experienced in some geographic markets experienced volatile conditions, revenues were enhancedpartially offset by expanding sales efforts inexpansion into regions not previously served. This caused the relative decline in international sales to be less than the drop in U.S. sales.
 
 • New product sales declined. In thedeclined year-over-year because last year’s first threesix months included a high level of last year, the division’s Cruizer™ product was introduced.shipments. This simple and affordable guidance system, which was introduced at the beginning of last year, targeted new entrants to the precision agricultural market and was well received in the marketplace.
 
 • GrossFirst half fiscal 2010 gross margins of 38.5%37.3% contracted from 43.6%41.8% for the first half of fiscal 2009 as result of negative operating leverage stemming from decreased sales volume.volume that was partially offset by spending cuts and modest selling price increases.
 
 • First quarter selling expense of $1.8 million was up from the prior year’s first quarter, increasing $121,000 (7%) due mainly to higher personnel cost. As a percentage of sales, first half selling expense increased to 6.0%6.9% versus 4.7%5.9% in the prior six-month period due to higher expense on lower sales volume. Selling expense of $3.3 million decreased 3% year-over-year, however, lagged the 17% drop in sales.
Engineered Films
Engineered Films produces rugged reinforced plastic sheeting for industrial, construction, geomembrane and agricultural applications.
Net sales of $13.4 million decreased $8.6 million (39%) and operating income of $2.7 million decreased $1.2 million (30%).
                                 
  Three Months Ended Six Months Ended
  July 31, July 31, $ % July 31, July 31, $ %
(dollars in thousands) 2009 2008 Change Change 2009 2008 Change Change
   
Net sales $15,017  $26,504  $(11,487)  (43)% $28,375  $48,509  $(20,134)  (42)%
Gross profit  2,738   4,458   (1,720)  (39)%  6,186   9,356   (3,170)  (34)%
Gross margins  18.2%  16.8%          21.8%  19.3%        
Operating income  2,081   3,515   (1,434)  (41)%  4,796   7,379   (2,583)  (35)%
The following factors contributed to the comparativequarter-over-quarter and year-over-year change:
 • Sales volume declined approximately 27% due to the freefall of businessThis segment has been negatively impacted by weak global economic activity that began in the fourth quartersecond half of fiscal 2009 and has continued through the first half of fiscal 2010.
•Approximately 25% of the year-over-year decline in sales is attributable to a reduction in selling prices. Selling prices have been driven downward by the market in response to lower resin costs and competitors slashing prices in order to reduce inventories and fill excess capacity.
•Roughly 75% of the year-over-year decline in sales is due to a decline in sales volume which was down approximately 32%. Construction orders fell as customers in the construction market participants adapted to a weakening economic outlook and the scarcity of credit. In addition,Also, deliveries of pit liners to the energy exploration market declined from prior year levels. Drilling activity slowed due to lower oil prices and reductions in forecasted demand.
 
 • Selling prices declined by roughly 12% year-over-year driven by competitive pricing pressure.
��GrossThe expansion of gross margins increased from 22.3% to 25.8% in the current quarter due to lowerand year-over-year reflect reduced spending levels and a reduction in plastic resin costs. Opportune purchases of prime-grade plastic resins resultedcosts that outpaced the decline in approximately $1.3 million of one-time material savings.selling prices.
 
 • First quarter selling expense of $725,000 decreased $260,000 from one year earlier reflecting a reduction in sales personnel and constrained discretionary spending due to the lower sales volume. As a result of the decrease in sales activity,half selling expense as a percentage of sales increased to 5.4%4.9% versus 4.5%3.9% in the prior year. Selling expense of $1.4 million decreased 26% year-over-year through reductions in personnel and promotional expenses, however, sales dropped 42%.
Electronic Systems
Electronic Systems is a total-solutions provider of electronics manufacturing services, primarily to North American original equipment manufacturers.
Net sales of $16.2 million increased $2.9 million (22%) and operating income of $2.5 million rose $1.9 million (290%).
                                 
  Three Months Ended Six Months Ended
  July 31, July 31, $ % July 31, July 31, $ %
(dollars in thousands) 2009 2008 Change Change 2009 2008 Change Change
   
Net sales $17,913  $14,739  $3,174   22% $34,066  $28,018  $6,048   22%
Gross profit  3,239   1,475   1,764   120%  6,037   2,425   3,612   149%
Gross margins  18.1%  10.0%          17.7%  8.7%        
Operating income  2,962   1,239   1,723   139%  5,457   1,879   3,578   190%
The relative quarter-over-quarter and year-over-year change is primarily the result of the following:
 • The increase in net sales improvement was substantially dueis attributable to higherincreased shipment volume of aviation electronics shipments resulting fromand secure communication equipment in response to increased customer demand.
 
 • First quarterShipments of hand-held bed control shipments were flat compared withcontrols have begun to stabilize from the depressed levels of one year ago due to steadying of consumer spending on non-essential home-related products.ago.

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 • Gross margins expanded from 7.2%8.7% in the first half of fiscal 2009 to 17.3%17.7% for the current quarter.first half of fiscal 2010. The improvement was attributable to more favorable product mix, cost controls such as staff reduction and facility consolidation, and positive operating leverage generated through increased sales. Staff reductions, and facility consolidations helped reduce costs and improve efficiencies.
 
 • SellingFirst half selling expense was flat year-over-year and as a percentage of sales felldecreased to 1.7% versus 1.9% in the prior year. Selling expense of $580,000 increased slightly from 2.3%one year ago due mainly to 1.9%.higher personnel costs, however, lagged the 22% growth in net sales.
Aerostar
Aerostar manufactures military parachutes, protective wear, custom shaped inflatable products, and high-altitude aerostats for government and commercial research.
Net sales of $6.6 million increased $546,000 (9%) and operating income of $1.2 million increased $352,000 (44%).
                                 
  Three Months Ended Six Months Ended
  July 31, July 31, $ % July 31, July 31, $ %
(dollars in thousands) 2009 2008 Change Change 2009 2008 Change Change
   
Net sales $5,838  $5,547  $291   5% $12,403  $11,566  $837   7%
Gross profit  1,326   943   383   41%  2,678   1,960   718   37%
Gross margins  22.7%  17.0%          21.6%  16.9%        
Operating income  1,136   718   418   58%  2,294   1,524   770   51%
The comparativequarter-over-quarter and year-over-year change is primarily due to the following:
 • SalesIncreased sales volume of tethered aerostats and inflatable decoys were upMC-6 Army parachutes was partially offset by reduced protective wear shipments. Protective wear sales have declined from onelast year earlier.at this time due to the completion of a relatively large contract in January 2009.
 
 • Improved efficiencies onGross margins improved in the second quarter and first half of fiscal 2010 reflecting parachute and protective wear product lines resulted in expanded gross margins to 20.6% from 16.9%.manufacturing efficiencies.
 
 • SellingFor the first six months, selling expense as a percentage of sales decreased to 3.0%3.1% from 3.5%3.8% due to relatively flat selling expense and increased sales.
Corporate Expenses (administrative expenses, interest income and other, net and income taxes)
                        
 Three Months Ended Three Months EndedSix Months Ended
 April 30, April 30, July 31, July 31, July 31, July 31,
Dollars in thousands 2009 2008
(dollars in thousands) 2009 2008 2009 2008
Administrative expenses $1,893 $2,186  $1,964 $2,246 $3,857 $4,432 
Administrative expenses as a % of sales  2.9%  2.9%  3.5%  3.2%  3.2%  3.1%
Interest income and other, net $1 $118  $105 $176 $106 $294 
Effective tax rate  34.6%  35.1%  34.1%  35.0%  34.4%  35.0%
First quarter administrativeAdministrative expenses of $1.9 million decreased 13% from $2.2 million reported a year ago. The decrease wasfor the three and six month periods ended July 31, 2009 due primarily to lower compensation expense.
“Interest income and other, net” consists mainly of interest income, bank fees and foreign currency transaction gain or loss. Interest income declined year-over-year due to lower interest rates.
The decrease in the effective tax rate is attributable to reinstatement of the U.S. research and development tax credit in October 2008.
OUTLOOK
FiscalFinancial results for the first half of fiscal 2010 first quarter results were notably affectedhave been impacted by the recessionary global economic recession and its impact onenvironment. The weak business activity experienced in the company’s markets. Thisfourth quarter of fiscal 2009 has continued throughout the first half of fiscal 2010. It is expected to continue throughoutlikely that current economic conditions will persist for the remainder of fiscal 2010. As with the current fiscalfirst half of the year, making comparisons to last year’s record results challenging. Management does not expect to beat last year’s record sales and earnings levels and anticipates secondthird quarter results are expected to be down from one year earlier.ago and on a sequential quarter basis, be similar or slightly lower when comparing year-over-year on a percentage basis. Management expects full-year sales and earnings to fall short of last year’s record levels.
Management reacted promptly and decisively in the fourth quarter of fiscal 2009 to control costs in response to deteriorating economic conditions. In addition, the company’s strong product offerings and commitment to quality and service have resulted in preservation of market share and mitigated the impact of the harsh economic conditions.
Applied Technology
SecondThird quarter sales are expected to continue to fall significantly short ofmiss last year’s levels. Current year revenuerecord results. Management continues to see increased acceptance of precision agricultural equipment as an essential tool for maximizing yields in an environment of volatile input costs. However, the short-term

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outlook is forecast to be affectedless clear. Grower and custom spray applicator purchasing decisions are impacted by theuncertainty regarding global economic slowdown, in contrast to the strong market environment one year ago. Sequentially, second quarter revenueconditions. This is expected to decrease duecontinue to seasonality.negatively impact sales through the third quarter. Fourth quarter revenues could be greater than the previous year because last year’s fourth quarter was impacted by the recession. This segment entered into an agreement to distribute select products through John Deere dealers starting in August 2009.the third quarter. The benefit from this agreement is expected to be material to fiscal 2011 results but its impact on the current year cannot be determined. Staff cuts and spending constraints implemented late in the first quarter will decrease the cost base going forward but are not expected to offset the effect of the lower sales volume on profits for the full year.
Engineered Films
Management expects second quarter revenues to remain depressed and gross margins to decline. Included in the first quarter results were approximately $1.3 million of material savings due to opportune purchases of resin. This is notThe growth prospects for Engineered Films are expected to be repeateddriven by increased penetration of existing markets and the introduction of innovative products. Ultimately, Engineered Films is dependent on the reversal of the severe economic contraction, particularly in subsequent quarters. Year-over-year revenue comparisonsthe oil and gas drilling and construction markets, to achieve growth.
In the near-term, management expects a difficult third quarter as current economic conditions create unfavorable year-over-year comparisons. Sequentially, gross margins are expected to remain significantly unfavorable overdecline in the coursethird quarter due to higher resin costs. The construction market continues to be hampered by bleak industry conditions and the scarcity of credit. In addition, deliveries of pit liners to the fiscalenergy exploration market are expected to decline from prior year aslevels. Drilling activity has slowed due to lower oil prices and reductions in forecasted demand. Recent increases in oil prices are encouraging but it is unlikely that drilling activity will return to prior year levels. Because gross profit rates have improved, management does not anticipate a recovery from current economic conditionsexpect the previous year’s fourth quarter loss to occur until next fiscal year. The two

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largest Engineered Films markets are energy (oil and gas drilling) and construction, both of which are dependent on a reversal of the current economic situation in order for sales to recover to prior year levels.be repeated.
Electronic Systems
Electronic Systems secondthird quarter revenue is targeted to increase sequentially and year-over-year due to increased demand for secure communication and aviation electronics. Gross margins in the first quarter benefited from a favorable product mix andsales are expected to decline duringfrom last year’s third quarter, however, profits are forecasted to increase year-over-year as cost cutting and plant consolidation measures are expected to continue to result in efficiency gains and improved margins. Sequentially, margins are expected to be lower due to product mix, although will remain strong as compared year-over-year. With avionics sales accounting for more than 50 percent of this segment’s sales, an anticipated inventory reduction by the year.segment’s largest customer could further reduce sales in the fourth quarter.
Aerostar
Management expects secondAlthough Aerostar’s long-term potential will be driven by success in the high-altitude research balloon and tethered aerostats markets, third quarter sales and profits are expected to be up slightly as compared with one year earlier as lower protective weardue to higher MC-6 Army parachute deliveries. Sales in the previous year’s fourth quarter included $3 million of parachute sales that were delayed from the third quarter. As a result, fourth quarter year-over-year comparisons are expected to be offset by higher MC-6 parachute deliveries. Gross profit rates are expected to be lower than in the first quarter due to a less favorable product mix.unfavorable.
LIQUIDITY AND CAPITAL RESOURCES
The company’s liquidity and capital resources are strong despite the global economic recession. Management focuses on the current cash balance and operating cash flows in considering liquidity as operating cash flows have historically been 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 $32.3$43.0 million at April 30,July 31, 2009, a $16.0$26.8 million increase compared to cash, cash equivalents, and short-term investments at January 31, 2009 of $16.3 million. The comparable balances one year earlier totaled $21.6$32.2 million. In November 2008, the company paid a special cash dividend of $22.5 million.
Operating Activities
Cash provided by operating activities was $19.7$34.3 million in the first quarterhalf of fiscal 2010 compared to $5.1$22.9 million in the first quarterhalf of fiscal 2009. The company’s operating cash flows result primarily from cash received from customers offset by cash payments for inventories, services, and employee compensation. The increase in quarterlyfirst half operating cash flows reflects improved working capital management. Specifically, receivables from agricultural customers were lower as ais the result of accelerated payment termsvariability in working capital. For the six-month period, inventory and accounts receivable have combined to generate $18.0 million in cash as compared with cash consumed of $5.1 million during thelast year’s first quarter of fiscal 2010 and inventorysix months. Inventory balances have declined significantly due to improved management, lower sales and a drop in plastic resin costs and lower expected demand for Applied Technology and Engineered Films products.costs. Additionally, accounts receivable have declined which reflects the decrease in business activity. This was partially offset by year-over-year reductions in accounts payable.

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Investing Activities
Cash used in investing activities totaled $1.3$4.7 million in the first quarterhalf of fiscal 2010, a $1.4 million decrease compared to $4.2 million in the first quarterhalf of fiscal 2009. The variance was caused primarily by decreasedreflects a $1.4 million increase in net purchases of short-term investments. Net short-term investment purchases totaled $1.8investments which was partially offset by a $1.2 million one year ago versus nonereduction in the current quarter. Capital expenditures totaled $1.1 million during the current quarter compared to $1.0 million in the year ago quarter.capital expenditures. Capital expenditures are expected to be in the $3 million range for the current fiscal year.
Financing Activities
Financing activities consumed cash of $2.3$4.9 million for the threesix months ended April 30,July 31, 2009 compared to $5.3with $9.8 million used in last year’s comparable period. Cash used in financing activities is primarily for dividend payments and repurchases of common stock. The reduced spendingquarterly per-share cash dividend was causedincreased by 8 percent, to 14 cents per share in the second quarter. Dividends of $4.9 million or 27 cents per share were paid in the current year compared to $4.7 million in the first half of fiscal 2009. Treasury stock purchases totaled $5.2 million for the first six months of last year, just prior to the suspension of the share repurchase program in July 2008. Dividends of $2.3 million or 13 cents per share were paid during the current quarter compared to $2.4 million in the year ago quarter.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
There have been no material changes since the fiscal year ended January 31, 2009.
NEW ACCOUNTING STANDARDS
At the beginning of fiscal 2010 the company adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about (a) how and why derivative

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instruments are used, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The adoption of SFAS No. 161 did not have a materialhad no impact on the company’s consolidated results of operations, financial condition or cash flows.
At the beginning of fiscal 2010 the company adopted FSP No. FAS 142-3,Determination of the Useful Life of Intangible Assets, which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142,Goodwill and Other Intangible Assets. The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets, and (2) intangible assets acquired in both business combinations and asset acquisitions. Under FSP No. FAS 142-3, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. As this guidance applies only to assets acquired in the future, the company is not able to predict the impact, if any, on the company’s consolidated results of operations, financial condition or cash flows.
As of July 31, 2009 the company adopted SFAS No. 165,Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of FSPSFAS No. FAS 142-3165 did not have a material impact on the company’s consolidated results of operations, financial condition or cash flows. In accordance with SFAS No. 165, the company has evaluated subsequent events through the date and time the financial statements were issued on September 2, 2009.
New pronouncementsIn June 2009, the FASB issued butSFAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 establishes a two-level GAAP hierarchy for nongovernmental entities: authoritative guidance and non-authoritative guidance. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, and EITF Abstracts; instead, the Board will issue new guidance as Accounting Standards Updates, which will include revisions to the codification, as well as background information and the Board’s basis for conclusions for new guidance. SFAS No. 168 is effective for interim and annual reporting periods ending after September 15, 2009. The adoption of SFAS No. 168 will not effective until after April 30, 2009, are not expected to have a materialan impact on the company’s consolidated results of operations, financial condition or cash flows.
ITEM 3.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.

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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 interest“interest income and other, netnet” 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.ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of April 30,July 31, 2009, 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, 2009.
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, 2009 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 onForm 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.
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.
Item 1A.Risk Factors: No material change.
Item 2.
Item 2.Changes in Securities:
Under a resolution from the Board of Directors dated March 15, 2008, the company was authorized to repurchase up to $10 million of stock on the open market. No shares were repurchased during the first quarterhalf of fiscal 2010. Approximately $5.1 million of the repurchase authorization remains open; however, the company temporarily suspended the share repurchase program in July 2008.
Item 3.
Item 3.Defaults upon Senior Securities: None
Item 4.
Item 4.Submission of Matters to a Vote of Security Holders:
The company’s annual meeting of Mattersstockholders was held May 21, 2009.
Election of Directors
The following members were elected to a Votethe company’s Board of Security Holders: NoneDirectors to hold office for the ensuing year.
         
Nominee In Favor  Withheld 
Anthony W. Bour  16,541,384   105,249 
David A. Christensen  11,174,734   5,471,899 
Thomas S. Everist  16,549,507   97,126 
Mark E. Griffin  16,545,536   101,097 
Conrad J. Hoigaard  16,503,121   143,512 
Kevin T. Kirby  16,573,542   73,091 
Cynthia H. Milligan  16,568,168   78,465 
Ronald M. Moquist  16,559,602   87,031 
Daniel A. Rykhus  16,548,424   98,209 
Ratification of the Appointment of the Independent Registered Public Accounting Firm
The appointment of PricewaterhouseCoopers LLP as our independent auditors was ratified by the stockholders with 16,564,307 votes cast in favor of the proposal, 55,183 votes cast against the proposal, and 27,188 votes abstained.
Item 5.
Item 5.Other Information: None
Item 6.
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

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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
(Principal Financial and Accounting Officer) 		 
Date: June 5,September 2, 2009

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