AeroVironment, Inc.
AeroVironment Inc (Form: 10-Q, Received: 09/09/2009 06:02:15)

Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 


 

þ

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

 

 

 

For the quarterly period ended August 1, 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 Number: 001-33261

 


 

AEROVIRONMENT, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-2705790

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

181 W. Huntington Drive, Suite 202

 

 

Monrovia, California

 

91016

(Address of principal executive offices)

 

(Zip Code)

 

(626) 357-9983

(Registrant’s telephone number, including area code)

 

N/A

(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. Yes   þ       No o

 

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). Yes o No o

 

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.

 

o    Large accelerated filer

þ    Accelerated filer

o   Non-accelerated filer

o    Smaller reporting company

 

 

(Do not check if smaller
reporting company)

 

 

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

 

As of August 25, 2009, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 21,509,200.

 



Table of Contents

 

AeroVironment, Inc.

 

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements:

 

 

Consolidated Balance Sheets as of August 1, 2009 (Unaudited) and April 30, 2009

3

 

Consolidated Statements of Operations for the three months ended August 1, 2009 (Unaudited) and August 2, 2008 (Unaudited)

4

 

Consolidated Statements of Cash Flows for the three months ended August 1, 2009 (Unaudited) and August 2, 2008 (Unaudited)

5

 

Notes to Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

17

Item 4.

Controls and Procedures

18

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

19

Item 1A.

Risk Factors

19

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 3.

Defaults Upon Senior Securities

19

Item 4.

Submission of Matters to a Vote of Security Holders

19

Item 5.

Other Information

19

Item 6.

Exhibits

20

Signatures

 

21

Exhibit Index

 

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share and per share data)

 

 

 

August 1,
2009

 

April 30,
2009

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

113,284

 

$

116,501

 

Short-term investments

 

27,513

 

21,523

 

Accounts receivable, net of allowance for doubtful accounts of $351 at August 1, 2009 and $291 at April 30, 2009

 

17,485

 

42,551

 

Unbilled receivables and retentions

 

14,458

 

20,070

 

Inventories, net

 

19,212

 

11,602

 

Income tax receivable

 

5,536

 

3,415

 

Deferred income taxes

 

4,119

 

3,994

 

Prepaid expenses and other current assets

 

2,066

 

1,718

 

Total current assets

 

203,673

 

221,374

 

Long-term investments

 

6,952

 

7,156

 

Property and equipment, net

 

18,529

 

18,218

 

Deferred income taxes

 

6,263

 

6,313

 

Other assets

 

112

 

120

 

Total assets

 

$

235,529

 

$

253,181

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

12,091

 

$

23,990

 

Wages and related accruals

 

6,740

 

10,231

 

Other current liabilities

 

4,018

 

3,686

 

Liability for uncertain tax positions

 

730

 

730

 

Total current liabilities

 

23,579

 

38,637

 

Deferred rent

 

1,465

 

1,463

 

Liability for uncertain tax positions

 

5,686

 

5,654

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.0001 par value:

 

 

 

 

 

Authorized shares — 10,000,000

 

 

 

 

 

None issued or outstanding

 

 

 

Common stock, $0.0001 par value:

 

 

 

 

 

Authorized shares — 100,000,000

 

 

 

 

 

Issued and outstanding shares — 21,508,700 at August 1, 2009 and 21,470,481 at April 30, 2009

 

2

 

2

 

Additional paid-in capital

 

111,093

 

110,102

 

Accumulated other comprehensive loss

 

(569

)

(537

)

Retained earnings

 

94,273

 

97,860

 

Total stockholders’ equity

 

204,799

 

207,427

 

Total liabilities and stockholders’ equity

 

$

235,529

 

$

253,181

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

3



Table of Contents

 

AeroVironment, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

 

 

 

Three Months Ended

 

 

 

August 1,

 

August 2,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

Product sales

 

$

8,229

 

$

25,327

 

Contract services

 

29,711

 

28,286

 

 

 

37,940

 

53,613

 

Cost of sales:

 

 

 

 

 

Product sales

 

5,557

 

14,358

 

Contract services

 

21,668

 

18,672

 

 

 

27,225

 

33,030

 

Gross margin

 

10,715

 

20,583

 

Selling, general and administrative

 

10,495

 

8,095

 

Research and development

 

5,673

 

5,260

 

(Loss) income from operations

 

(5,453

)

7,228

 

Other income:

 

 

 

 

 

Interest income

 

59

 

541

 

(Loss) income before income taxes

 

(5,394

)

7,769

 

(Benefit) provision for income taxes

 

(1,807

)

2,960

 

Net (loss) income

 

$

(3,587

)

$

4,809

 

(Loss) earnings per share data:

 

 

 

 

 

Basic

 

$

(0.17

)

$

0.23

 

Diluted

 

$

(0.17

)

$

0.22

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

21,316,776

 

20,711,656

 

Diluted

 

21,316,776

 

21,651,032

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

4



Table of Contents

 

AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

August 1,
2009

 

August 2,
2008

 

Operating activities

 

 

 

 

 

Net (loss) income

 

$

(3,587

)

$

4,809

 

Adjustments to reconcile net (loss) income to net cash and cash equivalents provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

1,950

 

1,070

 

Provision for doubtful accounts

 

60

 

(24

)

Deferred income taxes

 

(53

)

(65

)

Stock-based compensation

 

422

 

161

 

Tax benefit from exercise of stock options

 

176

 

6,555

 

Excess tax benefit from exercise of stock options

 

(82

)

(3

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

25,006

 

457

 

Unbilled receivables and retentions

 

5,612

 

(940

)

Inventories

 

(7,610

)

(4,764

)

Income tax receivable

 

(2,039

)

(3,530

)

Other assets

 

(340

)

73

 

Accounts payable

 

(11,899

)

(2,429

)

Other liabilities

 

(3,125

)

(4,372

)

Net cash and cash equivalents provided by (used in) operating activities

 

4,491

 

(3,002

)

Investing activities

 

 

 

 

 

Acquisitions of property and equipment

 

(2,261

)

(2,341

)

Net purchases of held-to-maturity investments

 

(5,990

)

 

Net sales of available-for-sale investments

 

150

 

4,850

 

Net cash and cash equivalents (used in) provided by investing activities

 

(8,101

)

2,509

 

Financing activities

 

 

 

 

 

Excess tax benefit from exercise of stock options

 

82

 

3

 

Exercise of stock options

 

311

 

257

 

Net cash and cash equivalents provided by financing activities

 

393

 

260

 

Net decrease in cash and cash equivalents

 

(3,217

)

(233

)

Cash and cash equivalents at beginning of period

 

116,501

 

105,064

 

Cash and cash equivalents at end of period

 

$

113,284

 

$

104,831

 

 

 

 

 

 

 

Supplemental disclosure:

 

 

 

 

 

Unrealized losses on long-term investments recorded in other comprehensive income, net of deferred tax benefit of $22

 

$

(32

)

$

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

5



Table of Contents

 

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

1. Organization and Significant Accounting Policies

 

Organization

 

AeroVironment, Inc., a Delaware corporation (the “Company”), is engaged in the design, development, production and support of unmanned aircraft systems and efficient energy systems for various industries and governmental agencies.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included. The results of operations for the three months ended August 1, 2009 are not necessarily indicative of the results for the full year ending April 30, 2010. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2009, included in AeroVironment, Inc.’s Annual Report on Form 10-K.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, including estimates of anticipated contract costs and revenue utilized in the revenue recognition process, that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.

 

The Company’s consolidated financial statements include the assets, liabilities and operating results of wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

 

Segments

 

The Company’s products are sold and divided among two reportable segments, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosures about Segments of an Enterprise and Related Information  (“SFAS No. 131”) , to reflect the Company’s strategic goals. Operating segments are defined as components of an enterprise from which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Chief Executive Officer, who reviews the revenue and gross margin results for each of these segments in order to make resource allocation decisions, including the focus of research and development, or R&D, activities and assessing performance. The Company’s reportable segments are business units that offer different products and services and are managed separately.

 

Investments

 

The Company’s investments are accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities , as held-to-maturity and available-for-sale and reported at amortized cost and fair value, respectively.

 

Fair Values of Financial Instruments

 

Fair values of cash and cash equivalents, accounts receivable, unbilled receivables, retentions and accounts payable approximate cost due to the short period of time to maturity.

 

Government Contracts

 

Payments to the Company on government cost reimbursable contracts are based on provisional, or estimated indirect rates, which are subject to an annual audit by the Defense Contract Audit Agency (“DCAA”). The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited. The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company.

 

For example, during the course of its audits, the DCAA may question the Company’s incurred project costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. The Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future.

 

6



Table of Contents

 

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

(Loss) Earnings Per Share

 

Basic (loss) earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock. The dilutive effect of potential common shares outstanding is included in diluted earnings per share and excludes any anti-dilutive effects of options and shares of unvested restricted stock.

 

The reconciliation of diluted to basic shares is as follows:

 

 

 

Three Months Ended

 

 

 

August 1,
2009

 

August 2,
2008

 

Denominator for basic (loss) earnings per share:

 

 

 

 

 

Weighted average common shares outstanding, excluding shares of unvested restricted stock

 

21,316,776

 

20,711,656

 

Dilutive effect of employee stock options and shares of unvested restricted stock

 

 

939,376

 

Denominator for diluted (loss) earnings per share

 

21,316,776

 

21,651,032

 

 

Due to the net loss for the three months ended August 1, 2009, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive. During the three months ended August 2, 2008 certain options and shares of unvested restricted stock were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive. The number of options and shares of unvested restricted stock which met this anti-dilutive criterion was approximately 31,000 for the three months ended August 2, 2008.

 

Recently Issued Accounting Standards

 

In April 2009, the Financial Accounting Standards Board (“FASB”) issued Staff Position (“FSP”) FAS 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “ Interim Disclosures about Fair Value of Financial Instruments ” (“FSP 107-1 and APB 28-1”). FSP 107-1 and APB 28-1 amend SFAS No. 107, “ Disclosures About Fair Value of Financial Instruments ,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP 107-1 and APB 28-1 also amend APB Opinion No. 28, “ Interim Financial Reporting ,” to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 and APB 28-1 are effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP 107-1 and APB 28-1 do not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FSP 107-1 and APB 28-1 require comparative disclosures only for periods ending after initial adoption. The adoption of FSP 107-1 and APB 28-1 did not have a material impact on the Company’s consolidated financial statements.

 

In April 2009, the FASB issued FSP FAS 157-4, “ Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “ Fair Value Measurements ,” (“SFAS No. 157”) when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP 157-4 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FSP 157-4 requires comparative disclosures only for periods ending after initial adoption. The adoption of FSP 157-4 did not have a material impact on the Company’s consolidated financial statements.

 

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “ Recognition and Presentation of Other-Than-Temporary Impairments ” (“FSP 115-2 and 124-2”). FSP 115-2 and 124-2 amend the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP 115-2 and 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP 115-2 and 124-2 are effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP 115-2 and 124-2 do not require disclosures for earlier periods presented for comparative purposes at initial adoption. The adoption of FSP 115-2 and 124-2 did not have a material impact on the Company’s consolidated financial statements.

 

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Table of Contents

 

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

In April 2009, the FASB issued FSP FAS 141(R)-1, “ Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies ” (“FSP 141(R)-1”). FSP 141R-1 amends the provisions in SFAS No. 141(R), “ Business Combinations ,” for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP 141(R)-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in SFAS No. 141(R) and carries forward most of the provisions in SFAS No. 141 for acquired contingencies. FSP 141(R)-1 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of FSP 141(R)-1 did not have a material impact on the Company’s consolidated financial statements.

 

In May 2009, the FASB issued SFAS No. 165, “ Subsequent Events ” (“SFAS No. 165”).  SFAS No. 165 establishes standards for reporting events that occur after the balance sheet date, but before financial statements are issued or are available to be issued and is effective for the Company as of August 1, 2009. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through September 8, 2009, the date the financial statements were issued.

 

In June 2009, the FASB issued SFAS No. 168, “ The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ” (the “Codification”). This standard replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and non-authoritative. The Codification will become the source of authoritative, non-governmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (“SEC”), which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company will begin to use the new guidelines and numbering system prescribed by the Codification when referring to GAAP in the quarter ending October 31, 2009. As the Codification was not intended to change or alter existing GAAP, it will not have a material impact on the Company’s consolidated financial statements.

 

2. Investments

 

Investments consist of the following:

 

 

 

August 1,
2009

 

April 30,
2009

 

 

 

(In thousands)

 

Short-term investments:

 

 

 

 

 

Held-to-maturity securities:

 

 

 

 

 

Pre-refunded municipal bond

 

$

2,016

 

$

2,029

 

U.S. Treasury bills

 

25,497

 

19,494

 

Total short-term investments

 

$

27,513

 

$

21,523

 

Long-term investments:

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

Auction rate securities

 

$

6,952

 

$

7,156

 

Total long-term investments

 

$

6,952

 

$

7,156

 

 

Held-To-Maturity Securities

 

At August 1, 2009, the balance of held-to-maturity securities consisted of one pre-refunded municipal bond and U.S. Treasury bills. Pre-refunded municipal bonds are created when municipalities issue new debt to refinance debt issued when interest rates were higher. Once the refinancing is completed, the issuer uses the proceeds to purchase U.S. Treasury securities or state and local government securities and places these securities in an escrow account. These proceeds are then used to pay interest and principal on the original debt until the bond is called. Interest earned from these investments is recorded in interest income.

 

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Table of Contents

 

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

The amortized cost, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of August 1, 2009, is as follows (in thousands):

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

Pre-refunded municipal bond

 

$

2,016

 

$

2

 

$

 

$

2,018

 

U.S. Treasury bills

 

25,497

 

 

 

25,497

 

Total held-to-maturity investments

 

$

27,513

 

$

2

 

$

 

$

27,515

 

 

The amortized cost and fair value of the Company’s held-to-maturity securities by contractual maturity at August 1, 2009, are as follows:

 

 

 

Cost

 

Fair Value

 

 

 

(In thousands)

 

Due within one year

 

$

27,513

 

$

27,515

 

Total

 

$

27,513

 

$

27,515

 

 

Available-For-Sale Securities

 

As of August 1, 2009, the entire balance of available-for-sale securities consisted of four investment grade auction rate municipal bonds with maturities ranging from 10 to 25 years. These investments have characteristics similar to short-term investments, because at pre-determined intervals, generally ranging from 30 to 35 days, there is a new auction process at which the interest rates for these securities are reset to current interest rates. At the end of such period, the Company chooses to roll-over its holdings or redeem the investments for cash. A market maker facilitates the redemption of the securities and the underlying issuers are not required to redeem the investment within 365 days. Interest earned from these investments is recorded in interest income.

 

During the fourth quarter of the fiscal year ended April 30, 2008, the Company began experiencing failed auctions on some of its auction rate securities. A failed auction occurs when a buyer for the securities cannot be obtained and the market maker does not buy the security for its own account. The Company continues to earn interest on the investments that failed to settle at auction at the maximum contractual rate until the next auction occurs. In the event the Company needs to access funds invested in these auction rate securities, the Company may not be able to liquidate these securities at the fair value recorded on August 1, 2009, until a future auction of these securities is successful or a buyer is found outside of the auction process.

 

As a result of the failed auctions, the fair values of these securities are estimated utilizing a discounted cash flow analysis as of August 1, 2009. The analysis considers, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the estimated date upon which the security is expected to have a successful auction.

 

Based on the Company’s ability to access its cash and cash equivalents, expected operating cash flows, and other sources of cash, the Company does not anticipate the current lack of liquidity on these investments will affect its ability to operate the business in the ordinary course. The Company believes the current lack of liquidity of these investments is temporary and expects that the securities will be redeemed or refinanced at some point in the future.  The Company will continue to monitor the value of its auction rate securities at each reporting period for a possible other-than-temporary impairment. The auction rate securities have been in an unrealized loss position for more than 12 months. The Company has the ability and the intent to hold these investments until a recovery of fair value, which may be at maturity, and as of August 1, 2009, it did not consider these investments to be other-than-temporarily impaired.

 

The amortized cost, gross unrealized losses, and estimated fair value of the available-for-sale investments as of August 1, 2009, is as follows (in thousands):

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

Auction rate securities

 

$

7,900

 

$

 

$

(948

)

$

6,952

 

Total available-for-sale investments

 

$

7,900

 

$

 

$

(948

)

$

6,952

 

 

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AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

The amortized cost and fair value of the Company’s auction rate securities by contractual maturity at August 1, 2009, are as follows:

 

 

 

Cost

 

Fair Value

 

 

 

(In thousands)

 

Due after ten years

 

$

7,900

 

$

6,952

 

Total

 

$

7,900

 

$

6,952

 

 

3. Inventories, net

 

Inventories consist of the following (in thousands):

 

 

 

August 1,
2009

 

April 30,
2009

 

Raw materials

 

$

7,399

 

$

6,055

 

Work in process

 

4,913

 

2,351

 

Finished goods

 

8,249

 

4,585

 

Inventories, gross

 

20,561

 

12,991

 

Reserve for inventory obsolescence

 

(1,349

)

(1,389

)

Inventories, net

 

$

19,212

 

$

11,602

 

 

4. Fair Value Measurements

 

SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by SFAS No. 157 contains three levels as follows:

 

·

 

Level 1 — Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

·

 

Level 2 — Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

·

 

Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability.

 

The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS No. 157 at August 1, 2009, were as follows (in thousands):

 

 

 

Fair Value Measurement Using

 

Description

 

Quoted prices in
active markets
for identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Total

 

Cash and cash equivalents

 

$

113,284

 

$

 

$

 

$

113,284

 

Auction rate securities

 

 

 

6,952

 

6,952

 

Total

 

$

113,284

 

$

 

$

6,952

 

$

120,236

 

 

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AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

Due to the auction failures of the Company’s auction rate securities that began in the fourth quarter of fiscal 2008, there are still no quoted prices in active markets for identical assets as of August 1, 2009.  Therefore, the Company has classified its auction rate securities as level 3 financial assets.  The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3) (in thousands):

 

 

 

Fair Value
Measurements Using
Significant
Unobservable Inputs
(Level 3)

 

Description

 

Auction Rate Securities

 

Balance at April 30, 2009

 

$

7,156

 

Transfers to Level 3

 

 

Total losses (realized or unrealized)

 

 

 

Included in earnings

 

 

Included in other comprehensive income

 

(54

)

Purchases, issuances and settlements, net

 

(150

)

Balance at August 1, 2009

 

$

6,952

 

The amount of total gains or (losses) for the period included in earnings (or change in net assets) attributable to the change in unrealized gains or losses relating to assets still held at August 1, 2009

 

$

 

 

The auction rate securities are valued using a discounted cash flow model.  The analysis considers, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the estimated date upon which the security is expected to have a successful auction.

 

Based on the Company’s ability to access its cash and cash equivalents, expected operating cash flows, and other sources of cash, the Company does not anticipate the current lack of liquidity on these investments will affect its ability to operate the business in the ordinary course. The Company believes the current lack of liquidity of these investments is temporary and expects that the securities will be redeemed or refinanced at some point in the future, allowing the Company to recover the original cost of $7.9 million.  The Company will continue to monitor the value of its auction rate securities at each reporting period for a possible other- than-temporary impairment.

 

5. Other Comprehensive (Loss) Income

 

The components of comprehensive income are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

August 1,
2009

 

August 2,
2008

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,587

)

$

4,809

 

Other comprehensive loss, net of tax:

 

 

 

 

 

Unrealized losses on long-term investments

 

(32

)

 

Comprehensive (loss) income

 

$

(3,619

)

$

4,809

 

 

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AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

6. Warranty Reserves

 

The Company accrues an estimate of its exposure to warranty claims based upon both current and historical product sales data and warranty costs incurred.  The warranty reserve is included in other current liabilities. The related expense is included in cost of sales.  Warranty reserve activity is summarized as follows for the three months ended August 1, 2009 and August 2, 2008 (in thousands):

 

 

 

Three Months Ended

 

 

 

August 1,
2009

 

August 2,
2008

 

Beginning balance

 

$

523

 

$

344

 

Warranty expense

 

292

 

186

 

Warranty costs incurred

 

(236

)

(247

)

Ending balance

 

$

579

 

$

283

 

 

7. Customer-Funded Research & Development

 

Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform R&D activities according to customer specifications. These costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the R&D services are performed. Revenue from customer-funded R&D was approximately $24,011,000 and $13,023,000 for the three months ended August 1, 2009 and August 2, 2008, respectively.

 

8. Income Taxes

 

For the three months ended August 1, 2009 and August 2, 2008, the Company recorded a (benefit) provision for income taxes of ($1,807,000) and $2,960,000, respectively, yielding an effective tax rate of 33.5% and 38.1%, respectively. The variance from statutory rates is primarily due to R&D tax credits.

 

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AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

9. Segment Data

 

The Company’s product segments are as follows:

 

·

 

Unmanned Aircraft Systems (“UAS”) — The UAS segment consists primarily of the design, development, production and support of unmanned aircraft systems solutions.

 

 

 

·

 

Efficient Energy Systems (“EES”) — The EES segment consists primarily of the design, development, production and support of system solutions for the clean transportation and clean energy markets.

 

The accounting policies of the segments are the same as those described in Note 1, “Organization and Significant Accounting Policies.” The operating segments do not make sales to each other. Depreciation and amortization related to the manufacturing of goods is included in gross margin for the segments. The Company does not discretely allocate assets to its operating segments, nor does the CODM evaluate operating segments using discrete asset information. Consequently, the Company operates its financial systems as a single segment for accounting and control purposes, maintains a single indirect rate structure across all segments, has no inter-segment sales or corporate elimination transactions, and maintains limited financial statement information by segment.

 

The segment results are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

August 1,

 

August 2,

 

 

 

2009

 

2008

 

Revenue:

 

 

 

 

 

UAS

 

$

33,310

 

$

46,076

 

EES

 

4,630

 

7,537

 

Total

 

37,940

 

53,613

 

Gross margin:

 

 

 

 

 

UAS

 

8,979

 

16,643

 

EES

 

1,736

 

3,940

 

Total

 

10,715

 

20,583

 

Selling, general and administrative

 

10,495

 

8,095

 

Research and development

 

5,673

 

5,260

 

(Loss) income from operations

 

(5,453

)

7,228

 

Interest income

 

59

 

541

 

(Loss) income before income taxes

 

$

(5,394

)

$

7,769

 

 

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. In some cases, forward-looking statements can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions. Such forward-looking statements are based on current expectations, estimates and projections about our industry, our management’s beliefs and assumptions made by our management. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A, “Risk Factors.”

 

Unless required by law, we expressly disclaim any obligation to update publicly any forward-looking statements, whether as result of new information, future events or otherwise.

 

Critical Accounting Policies and Estimates

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical estimates include those related to revenue recognition, inventories and reserves for excess and obsolescence, long-term investments, self-insured liabilities, accounting for stock-based awards, and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

 

There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements from those disclosed in the Form 10-K for the fiscal year ended April 30, 2009.

 

Fiscal Periods

 

Due to our fixed year end date of April 30, our first and fourth quarters each consist of approximately 13 weeks. The second and third quarters each consist of exactly 13 weeks. Our first three quarters end on a Saturday.  Our 2010 fiscal year ends on April 30, 2010 and our fiscal quarters end on August 1, 2009, October 31, 2009 and January 30, 2010.

 

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Results of Operations

 

Our operating segments are Unmanned Aircraft Systems, or UAS, and Efficient Energy Systems, or EES. The accounting policies for each of these segments are the same. In addition, a significant portion of our research and development, or R&D, selling, general and administrative, or SG&A, and general overhead resources are shared across our segments.

 

The following table sets forth our revenue and gross margin generated by each operating segment for the periods indicated (in thousands):

 

Three Months Ended August 1, 2009 Compared to Three Months Ended August 2, 2008

 

 

 

Three Months Ended

 

 

 

August 1,

 

August 2,

 

 

 

2009

 

2008

 

Revenue:

 

 

 

 

 

UAS

 

$

 33,310

 

$

 46,076

 

EES

 

4,630

 

7,537

 

Total

 

37,940

 

53,613

 

Gross margin:

 

 

 

 

 

UAS

 

8,979

 

16,643

 

EES

 

1,736

 

3,940

 

Total

 

10,715

 

20,583

 

Selling, general and administrative

 

10,495

 

8,095

 

Research and development

 

5,673

 

5,260

 

(Loss) income from operations

 

(5,453

)

7,228

 

Interest income

 

59

 

541

 

(Loss) income before income taxes

 

$

 (5,394

)

$

 7,769

 

 

Revenue. Revenue for the three months ended August 1, 2009 was $37.9 million, as compared to $53.6 million for the three months ended August 2, 2008, representing a decrease of $15.7 million, or 29%.  UAS revenue decreased $12.8 million, or 28%, to $33.3 million for the three months ended August 1, 2009, primarily due to decreased UAS product deliveries of $14.2 million and lower service revenue of $9.8 million, partially offset by an increase in customer-funded R&D work of $11.2 million. The decrease in UAS product deliveries and service revenue was primarily due to a reduction in our analog Raven B production and services as we prepare for the production and retrofit of Raven B systems integrating our Digital Data Link technology.  The increase in customer-funded R&D work was primarily due to increased activity on the Global Observer contract.  EES revenue decreased by $2.9 million, or 39%, to $4.6 million for the three months ended August 1, 2009.  The decrease in EES revenue was primarily due to decreased product deliveries of Electric Vehicle test systems and fast charge systems.

 

Cost of Sales. Cost of sales for the three months ended August 1, 2009 was $27.2 million, as compared to $33.0 million for the three months ended August 2, 2008, representing a decrease of $5.8 million, or 18%. The decrease in cost of sales was caused primarily by lower UAS cost of sales of $5.1 million and lower EES cost of sales of $0.7 million.

 

Gross Margin. Gross margin for the three months ended August 1, 2009 was $10.7 million, as compared to $20.6 million for the three months ended August 2, 2008, representing a decrease of $9.9 million, or 48%. UAS gross margin decreased $7.7 million, or 46%, to $9.0 million for the three months ended August 1, 2009. As a percentage of revenue, gross margin for UAS decreased from 36% to 27% primarily due to lower production and service volume resulting in higher unabsorbed manufacturing and engineering overhead support costs.  EES gross margin decreased $2.2 million, or 56%, to $1.7 million for the three months ended August 1, 2009.  As a percentage of revenue, EES gross margin decreased from 52% to 37% primarily due to overall lower product deliveries resulting in higher unabsorbed manufacturing and engineering overhead support costs.

 

Selling, General and Administrative .   SG&A expense for the three months ended August 1, 2009 was $10.5 million, or 28% of revenue, compared to SG&A expense of $8.1 million, or 15% of revenue, for the three months ended August 2, 2008.  SG&A expense increased $2.4 million primarily due to higher selling and business development costs, increased bid and proposal activity and higher administrative infrastructure costs.

 

Research and Development. R&D expense for the three months ended August 1, 2009 was $5.7 million, or 15% of revenue, which was higher than R&D expense of $5.3 million, or 10% of revenue, for the three months ended August 2, 2008.  R&D expense increased $0.4 million largely due to increased investment in various development initiatives.

 

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Interest Income. Interest income for the three months ended August 1, 2009 was $0.1 million, as compared to interest income of $0.5 million for the three months ended August 2, 2008, representing a decrease of $0.4 million, or 89%. Interest income decreased primarily due to lower yields on investment grade securities.

 

Income Tax Expense.  Our effective income tax rate was 33.5% for the three months ended August 1, 2009, as compared to 38.1% for the three months ended August 2, 2008.  The decrease in the effective tax rate is due to higher R&D tax credits in the current period.

 

Backlog .   We define funded backlog as unfilled firm orders for products and services for which funding currently is appropriated to us under the contract by the customer. As of August 1, 2009 and April 30, 2009, our funded backlog was approximately $108.7 million and $114.8 million, respectively.

 

In addition to our funded backlog, we also had unfunded backlog of $512.9 million and $510.6 million as of August 1, 2009 and April 30, 2009, respectively. We define unfunded backlog as the total remaining potential order amounts under cost reimbursable and fixed price contracts with multiple one-year options, and indefinite delivery indefinite quantity, or IDIQ, contracts. Unfunded backlog does not obligate the U.S. government to purchase goods or services. There can be no assurance that unfunded backlog will result in any orders in any particular period, if at all. Management believes that unfunded backlog does not provide a reliable measure of future estimated revenue under our contracts.

 

Because of possible future changes in delivery schedules and/or cancellations of orders, backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period, and actual sales for the year may not meet or exceed the backlog represented. Our backlog is typically subject to large variations from quarter to quarter as existing contracts expire or are renewed, or new contracts are awarded. A majority of our contracts, specifically our IDIQ contracts, do not currently obligate the U.S. government to purchase any goods or services. Additionally, all U.S. government contracts included in backlog, whether or not funded, may be terminated at the convenience of the U.S. government.

 

Liquidity and Capital Resources

 

We currently have no material cash commitments, except for normal recurring trade payables, accrued expenses and ongoing research and development costs, all of which we anticipate funding through our existing working capital and funds provided by operating activities. The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers. In addition, we do not currently anticipate significant investment in property, plant and equipment, and we believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure and debt service requirements, if any, during the next twelve months. There can be no assurance, however, that our business will continue to generate cash flow at current levels. If we are unable to generate sufficient cash flow from operations, then we may be required to sell assets, reduce capital expenditures or obtain additional financing.  The global credit crisis has imposed exceptional levels of volatility and disruption in the capital markets, severely diminished liquidity and credit availability, and increased counterparty risk. Nevertheless, we anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.

 

Our primary liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, and marketing acceptance and adoption of our products and services. Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control. Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from short-term borrowing are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. To the extent we require additional funding, we cannot be certain that such funding will be available to us on acceptable terms, or at all.  Although we are currently not a party to any agreement or letter of intent with respect to potential investment in, or acquisitions of, businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing.

 

Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies.  As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads.  Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers.  These factors have led to a decrease in spending by businesses and consumers alike, and a corresponding decrease in global infrastructure spending.  Continued turbulence in the U.S. and international markets and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers, including our ability to access the capital markets to meet liquidity needs. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. Given the current instability of financial institutions, we cannot be assured that we will not experience losses on these deposits.

 

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Our working capital requirements vary by contract type. On cost-plus-fee programs, we typically bill our incurred costs and fees monthly as work progresses, and therefore working capital investment is minimal. On fixed-price contracts, we typically are paid as we deliver products, and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin.

 

Cash Flows

 

The following table provides our cash flow data for the three months ended August 1, 2009 and August 2, 2008 (in thousands):

 

 

 

Three Months Ended

 

 

 

August 1,
 2009

 

August 2,
 2008

 

 

 

(Unaudited)

 

Net cash provided by (used in) operating activities

 

$

4,491

 

$

(3,002

)

Net cash (used in) provided by investing activities

 

$

(8,101

)

$

2,509

 

Net cash provided by financing activities

 

$

393

 

$

260

 

 

Cash Provided by Operating Activities. Net cash provided by operating activities for the three months ended August 1, 2009 increased by $7.5 million to $4.5 million, compared to net cash used by operating activities of $3.0 million for the three months ended August 2, 2008. This increase in net cash provided by operating activities was primarily due to lower working capital needs of $21.1 million partially offset by lower income of $8.4 million and lower tax benefits from stock option exercises of $6.4 million.

 

Cash Used in Investing Activities. Net cash used in investing activities increased by $10.6 million to $8.1 million for the three months ended August 1, 2009, compared to net cash provided by investing activities of $2.5 million for the three months ended August 2, 2008. The increase in net cash used in investing activities was primarily due to an increase in net purchases of investments of $10.7 million offset by lower capital expenditures of $0.1 million.

 

Cash Provided by Financing Activities. Net cash provided by financing activities increased by $0.1 million to $0.4 million for the three months ended August 1, 2009, compared to $0.3 million for the three months ended August 2, 2008.  During the three months ended August 1, 2009, we received proceeds from stock option exercises of $0.4 million.

 

Off-Balance Sheet Arrangements

 

During the first quarter, there were no material changes in our off balance sheet arrangements or contractual obligations and commercial commitments from those disclosed in the Form 10-K for the fiscal year ended April 30, 2009.

 

Inflation

 

Our operations have not been, and we do not expect them to be, materially affected by inflation. Historically, we have been successful in adjusting prices to our customers to reflect changes in our material and labor costs.

 

New Accounting Standards

 

Please refer to Note 1 “Organization and Significant Accounting Policies” to our unaudited consolidated financial statements in Part I, Item 1 of this quarterly report for a discussion of new accounting pronouncements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates, changes in general economic conditions, domestic and foreign competition, and foreign currency exchange rates. Please refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2009, for further discussion on quantitative and qualitative disclosures about market risk.

 

Interest Rate Risk

 

It is our policy not to enter into interest rate derivative financial instruments. We do not currently have any significant interest rate exposure.

 

Foreign Currency Exchange Rate Risk

 

Since a significant part of our sales and expenses are denominated in U.S. dollars, we have not experienced significant foreign exchange gains or losses to date, and do not expect to incur significant foreign exchange gains or losses in the future. We occasionally engage in forward contracts in foreign currencies to limit our exposure on non-U.S. dollar transactions.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

 

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended August 1, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently a party to any material legal proceedings. We are, however, subject to lawsuits from time to time in the ordinary course of business.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2009.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

Exhibit

Number

 

Description

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32

 

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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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.

 

Date: September 9, 2009

 

AEROVIRONMENT, INC.

 

 

 

 

By:

/s/ Timothy E. Conver

 

 

Timothy E. Conver

 

 

Chairman, Chief Executive Officer and President

 

 

(Principal Executive Officer)

 

 

 

 

 

/s/ Stephen C. Wright

 

 

Stephen C. Wright

 

 

Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

21


Exhibit 31.1

 

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

 

I, Timothy E. Conver, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of AeroVironment, Inc.;

 

2.               Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)               Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)              Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

a)               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 9, 2009

 

 

/s/ Timothy E. Conver

 

 

Timothy E. Conver

 

Chairman, Chief Executive Officer and Director

 


Exhibit 31.2

 

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

 

I, Stephen C. Wright, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of AeroVironment, Inc.;

 

2.               Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.               The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)               Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)              Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

a)               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 9, 2009

 

 

/s/ Stephen C. Wright

 

 

Stephen C. Wright

 

Chief Financial Officer

 


Exhibit 32

 

Certification

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) (the “Act”), each of the undersigned officers of AeroVironment, Inc., a Delaware corporation (the “Company”), does hereby certify, to each such officer’s knowledge , that:

 

The Quarterly Report on Form 10-Q for the quarter ended August 1, 2009 (the “Periodic Report”) of the Company fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ Timothy E. Conver

 

 

Timothy E. Conver

 

Chairman, Chief Executive Officer and President

 

 

 

 

 

/s/ Stephen C. Wright

 

 

Stephen C. Wright

 

Chief Financial Officer

 

Dated: September 9, 2009

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.