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Investments

2. Investments

Investments consist of the following:


	April 30,
	2017		2016
	(In thousands)
Short-term investments:
Held-to-maturity securities:
Municipal securities	$	47,437	$	42,179
U.S. government securities		14,515		21,184
Corporate bonds		55,519		40,041
Certificates of deposit		2,500		—
Total held-to-maturity and short-term investments	$	119,971	$	103,404
Long-term investments:
Held-to-maturity securities:
Municipal securities	$	8,942	$	—
U.S. government securities		22,540		7,518
Corporate bonds		8,117		23,561
Total held-to-maturity investments		39,599		31,079
Available-for-sale securities:
Auction rate securities		2,497		2,780
Total available-for-sale investments		2,497		2,780
Total long-term investments	$	42,096	$	33,859

Held‑To‑Maturity Securities

As of April 30, 2017 and 2016, the balance of held‑to‑maturity securities consisted of state and local government municipal securities, U.S. government securities, corporate bonds and certificates of deposit. Interest earned from these investments is recorded in interest income.

The amortized cost, gross unrealized losses, and estimated fair value of the held‑to‑maturity investments as of April 30, are as follows (in thousands):


	April 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	56,379	$	30	$	(21)	$	56,388
U.S. government securities		37,055		2		(41)		37,016
Corporate bonds		63,636		9		(85)		63,560
Certificates of deposit		2,500		1		—		2,501
Total held-to-maturity investments	$	159,570	$	42	$	(147)	$	159,465

The amortized cost and fair value of the Company’s held‑to‑maturity securities by contractual maturity at April 30, 2017, are as follows:


	Cost		Fair Value
Due within one year	$	119,971	$	119,893
Due after one year through five years		39,599		39,572
Total	$	159,570	$	159,465

Available‑For‑Sale Securities

Auction Rate Securities

As of April 30, 2017 and 2016, the entire balance of available‑for‑sale auction rate securities consisted of two investment grade auction rate municipal bonds with maturities ranging from 2 to 17 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 April 30, 2017 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 April 30, 2017 and 2016. 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 expectation of the next time 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 impairment if a further decline in fair value occurs. 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 maturity and as of April 30, 2017, 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 auction rate securities are as follows (in thousands):


	April 30,
	2017		2016
Auction rate securities
Amortized cost	$	2,700	$	3,100
Gross unrealized losses		(203)		(320)
Fair value	$	2,497	$	2,780

The amortized cost and fair value of the Company’s auction rate securities by contractual maturity at April 30, 2017 are as follows (in thousands):


	Cost		Fair Value
Due after one through five years	$	700	$	701
Due after 10 years		2,000		1,796
Total	$	2,700	$	2,497

Equity Securities

At April 30, 2015, the entire balance of available-for-sale equity securities consisted of 618,042 CybAero AB (“CybAero”) common shares. The shares were classified as available-for-sale. These shares were initially acquired on August 11, 2014, when the Company converted a convertible bond into CybAero common shares. The convertible bond was in the amount of 10 million SEK and was converted into 1,062,699 common shares of CybAero at the conversion price of 9.41 SEK per share. When the Company converted the bond on August 11, 2014, the fair value per share was 37.50 SEK which became the new cost basis going forward, with all subsequent changes in fair value being recorded to other comprehensive income.

At August 1, 2015, the Company reviewed these shares for impairment based on criteria that included the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, uncertainty as to the recovery period due to sustained losses of the investee and the Company’s intent to hold its investment until recovery. In the three months ended August 1, 2015, the Company determined it was in its best interests to liquidate the remaining shares held. As a result, during the three months ended August 1, 2015, the Company recorded an other-than-temporary-impairment loss of $2,186,000 related to the Company’s investment in the CybAero shares which was recorded to other (expense), net in the consolidated statement of operations. As a result of recording the impairment charge, the investment’s fair value became its new cost basis.

In August 2015, the Company sold its remaining shares in CybAero in a private sale at the price of 12.00 SEK per share, resulting in proceeds of approximately $777,000. During the fiscal year ended April 30, 2016, the Company realized gains on the sale of CybAero shares of $207,000, based on the difference between the original conversion price of 9.41 SEK per share and the sales price at the time of sale, inclusive of the final sale of all shares. During the fiscal year ended April 30, 2015, the Company realized gains on the sale of CybAero shares of $4,784,000.

The entire disclosure for investments in certain debt and equity securities.

Fair Value Measurements

12 Months Ended

Apr. 30, 2017

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

Fair value is 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 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 at April 30, 2017, were as follows (in thousands):


	Fair Value Measurement Using
			Significant
	Quoted prices in		other		Significant
	active markets for		observable		unobservable
	identical assets		inputs		inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Auction rate securities	$	—	$	—	$	2,497	$	2,497
Total	$	—	$	—	$	2,497	$	2,497

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
Description	(Level 3)
Balance at May 1, 2016	$	2,780
Transfers to Level 3		—
Total gains (realized or unrealized)
Included in earnings		—
Included in other comprehensive income		117
Purchases, issuances and settlements, net		(400)
Balance at April 30, 2017	$	2,497
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at April 30, 2017	$	—

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. As of April 30, 2017, the inputs used in the Company’s discounted cash flow analysis included current coupon rates of 1.6%, estimated redemption periods of 2 to 17 years and discount rates of 2.4% to 12.7%. The discount rates were based on market rates for municipal bond securities, as adjusted for a risk premium to reflect the lack of liquidity of these investments.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

Goodwill and Intangible Assets Disclosure

Inventories, net

12 Months Ended

Apr. 30, 2017

Inventories, net

Inventories, net

4. Inventories, net

Inventories consist of the following:


	April 30,
	2017		2016
	(In thousands)
Raw materials	$	18,365	$	11,609
Work in process		16,168		4,259
Finished goods		30,793		26,073
Inventories, gross		65,326		41,941
Reserve for inventory excess and obsolescence		(5,250)		(4,455)
Inventories, net	$	60,076	$	37,486

Inventory held at third parties as of April 30, 2017 and 2016 was $4,039,000 and $5,329,000, respectively.

Intangibles

12 Months Ended

Apr. 30, 2017

Intangibles

5. Intangibles

Intangibles are included in other assets on the balance sheet. The components of intangibles are as follows:


	April 30,
	2017		2016
	(In thousands)
Licenses	$	818	$	818
Customer relationships		1,600		-
Trademarks and tradenames		60		-
Other		3		-
Less accumulated amortization		(658)		(518)
Intangibles, net	$	1,823	$	300

The weighted average amortization period at April 30, 2017 and 2016 was six years and four years, respectively. Amortization expense for the years ended April 30, 2017, 2016 and 2015 was $139,000, $80,000 and $249,000, respectively.

The customer relationships, trademarks and tradenames, and other intangible assets were recognized in conjunction with the Company’s acquisition of a controlling interest in its Altoy joint venture on February 1, 2017. Refer to Note 19 - Business Combinations for further details.

During the fiscal year ended April 30, 2015, the Company recorded an impairment charge of $438,000 recorded in SG&A expenses related to an exclusive distribution agreement as the Company determined that it would not be selling any products through the exclusive distribution agreement.

Estimated amortization expense for the next five years is as follows:


	Year ending
	April 30,
	(In thousands)
2018	$	318
2019		317
2020		298
2021		237
2022		237
	$	1,407

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

Property and Equipment, net

Goodwill

12 Months Ended

Apr. 30, 2017

Goodwill Disclosure [Abstract]

Goodwill

6. Goodwill

The following table presents the changes in the Company's goodwill balance (in thousands):


Balance at April 30, 2016	$	—
Goodwill arising from acquisitions		122
Balance at April 30, 2017	$	122

The increase of goodwill is attributable to the acquisition of a controlling interest in Altoy as detailed in Note 19 - Business Acquisitions.

Property and Equipment, net

12 Months Ended

Apr. 30, 2017

Property and Equipment, net

7. Property and Equipment, net

Property and equipment consist of the following:


	April 30,
	2017		2016
	(In thousands)
Leasehold improvements	$	9,809	$	8,939
Machinery and equipment		53,077		48,034
Furniture and fixtures		1,962		1,730
Computer equipment and software		32,485		30,171
Construction in process		4,608		3,885
Property and equipment, gross		101,941		92,759
Less accumulated depreciation and amortization		(82,721)		(75,997)
Property and equipment, net	$	19,220	$	16,762

Depreciation expense for the years ended April 30, 2017, 2016 and 2015 was $6,913,000, $5,993,000 and $8,116,000, respectively. At April 30, 2017 and 2016, property and equipment includes computer equipment and software under capital leases with a cost basis of $1,836,000 and $1,836,000 and accumulated depreciation of $1,433,000 and $1,058,000, respectively. Depreciation of computer equipment and software under capital leases was $375,000 and $455,000 for the fiscal years ended April 30, 2017 and 2016 respectively.

Investments in Companies Accounted for Using the Equity Method	12 Months Ended
	Apr. 30, 2017
Investments in Companies Accounted for Using the Equity Method
Investments in Companies Accounted for Using the Equity Method	8. Investments in Companies Accounted for Using the Equity Method In March of 2014, the Company purchased 49% of the outstanding common stock of Altoy, a Turkish corporation founded in February 2014. During the years ended April 30, 2017, 2016 and 2015, the Company recorded 49% of the net loss of Altoy, or $119,000, $138,000 and $240,000, respectively, in “Other (expense) income” in the consolidated statement of income. At April 30, 2016 and 2015, the carrying value of the investment in Altoy was $386,000 and $230,000, respectively, and was recorded in “Other assets, long‑term.” On February 1, 2017, the Company acquired an additional 36% interest in Altoy, increasing the Company’s total ownership interest to 85%, for total cash consideration of $625,000. As a result of the Company obtaining a controlling interest in Altoy, Altoy has been consolidated into the consolidated financial statements of the Company as of the date of the acquisition. Refer to Note 19 - Business Acquisitions.

Warranty Reserves

12 Months Ended

Apr. 30, 2017

Warranty Reserves

Warranty Reserves

9. Warranty Reserves

Warranty reserve activity is summarized as follows:


	April 30,
	2017		2016
	(In thousands)
Beginning balance	$	4,134	$	2,653
Warranty expense		1,428		4,516
Changes in estimates related to pre-existing warranties		1,651		(424)
Warranty costs settled		(3,982)		(2,611)
Ending balance	$	3,231	$	4,134

During the fiscal year ended April 30, 2017, the Company revised its estimates based on the results of additional engineering studies and recorded incremental warranty reserve charges totaling $1,651,000, related to the estimated costs to repair a component of certain small UAS that were delivered in prior periods. At April 30, 2017, the total remaining warranty reserve related to the estimated costs to repair the impacted UAS was $441,000. As of April 30, 2017 a total of $1,762,000 of costs related to this warranty have been incurred. The impact to net income attributable to AeroVironment and diluted earnings per share of the change in estimate was approximately $(1,034,000) and $(0.04), respectively.

Employee Savings Plan	12 Months Ended
Employee Savings Plan	Apr. 30, 2017
Employee Savings Plan
Employee Savings Plan	10. Employee Savings Plan The Company has an employee 401(k) savings plan covering all eligible employees. The Company expensed approximately $3,016,000, $3,028,000 and $2,818,000 in contributions to the plan for the years ended April 30, 2017, 2016 and 2015, respectively.

Severence Charges	12 Months Ended
Severence Charges	Apr. 30, 2017
Severance Charges
Severance Charges	11. Severance Charges During the fiscal year ended April 30, 2017, the Company recorded severance costs totaling $2,190,000. Of this total, approximately $850,000 was due to two officers who left the Company during the fiscal year ended April 30, 2017. The remaining severance costs were due to certain strategic headcount reductions consisting entirely of severance payments. Of the total, approximately $900,000 was recorded to cost of sales and $1,290,000 was recorded to SG&A. Of the total recorded to cost of sales, approximately $550,000 related to UAS and approximately $350,000 to EES. The Company does not report SG&A costs by segment as the CODM only reviews the revenue and gross margin results for each of these segments when making resource allocation decisions. Of the total, approximately $295,000 was in accrued wages and related accruals at April 30, 2017. During the fiscal year ended April 30, 2016, the Company made certain strategic headcount reductions with a total cost of approximately $933,000, consisting entirely of severance payments. The Company recorded this charge during its fourth fiscal quarter ended April 30, 2016. Of the total, approximately $362,000 was recorded to cost of sales and $571,000 was recorded to SG&A. Of the total recorded to cost of sales, approximately $300,000 related to UAS and approximately $62,000 to EES. The Company does not report SG&A costs by segment as the CODM only reviews the revenue and gross margin results for each of these segments when making resource allocation decisions. Of the total, approximately $834,000 was in accrued wages and related accruals at April 30, 2016. All amounts were paid out prior to April 30, 2017.

Stock-Based Compensation

12 Months Ended

Apr. 30, 2017

Stock-Based Compensation

Stock-Based Compensation

12. Stock‑Based Compensation

For the years ended April 30, 2017, 2016 and 2015, the Company recorded stock‑based compensation expense of approximately $3,709,000, $4,562,000 and $3,768,000, respectively.

On January 14, 2007, the stockholders of the Company approved the 2006 Equity Incentive Plan, or 2006 Plan, effective January 21, 2007, for officers, directors, key employees and consultants. On September 29, 2011, the stockholders of the Company approved an amendment and restatement of the 2006 Plan, or Restated 2006 Plan. Under the Restated 2006 Plan, incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation right awards, performance share awards, performance stock unit awards, dividend equivalents awards, stock payment awards, deferred stock awards, restricted stock unit awards, other stock‑based awards, performance bonus awards or performance‑based awards may be granted at the discretion of the compensation committee, which consists of outside directors. A maximum of 4,884,157 shares of stock may be issued pursuant to awards under the Restated 2006 Plan. The maximum number of shares of common stock with respect to one or more awards that may be granted to any one participant during any twelve month period is 2,000,000. A maximum of $5,000,000 may be paid in cash to any one participant as a performance‑based award during any twelve month period. The exercise price for any incentive stock option shall not be less than 100% of the fair market value on the date of grant. Vesting of awards is established at the time of grant.

The Company had an equity incentive plan, or 2002 Plan, for officers, directors and key employees. Under the 2002 Plan, incentive stock options or nonqualified stock options were granted, as determined by the administrator at the time of grant. Stock purchase rights were also granted under the 2002 Plan. Options under the 2002 Plan were granted at their fair market value (as determined by the board of directors). The options became exercisable at various times over a five-year period from the grant date. The 2002 Plan was terminated on the effective date of the 2006 Plan. Awards outstanding under the 2002 Plan remain outstanding and exercisable; no additional awards may be made under the 2002 Plan.

The Company had a 1992 nonqualified stock option plan, or 1992 Plan, for certain officers and key employees. Options under the 1992 Plan were granted at their fair market value (as determined by the board of directors) at the date of grant and became exercisable at various times over a five-year period from the grant date. The 1992 Plan expired in August 2002.

The fair value of stock options granted was estimated at the grant date using the Black‑Scholes option pricing model with the following weighted average assumptions for the years ended April 30, 2017, 2016 and 2015:


	Year Ended April 30,
	2017			2016			2015
Expected term (in years)		—			6.00			6.00
Expected volatility		—	%		36.14	%		44.65	%
Risk-free interest rate		—	%		1.88	%		1.92	%
Expected dividend		—			—			—
Weighted average fair value at grant date	$	—		$	10.18		$	14.05

No options were granted during the fiscal year ended April 30, 2017.

The expected term of stock options represents the weighted average period the Company expects the stock options to remain outstanding, based on the Company’s historical exercise and post‑vesting cancellation experience and the remaining contractual life of its outstanding options.

The expected volatility is based on historical volatility for the Company’s stock.

The risk free interest rate is based on the implied yield on a U.S. Treasury zero‑coupon bond with a remaining term that approximates the expected term of the option.

The expected dividend yield of zero reflects that the Company has not paid any cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future.

Information related to the stock option plans at April 30, 2017, 2016 and 2015, and for the years then ended is as follows:


	Restated 2006 Plan			2002 Plan			1992 Plan
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding at April 30, 2014	713,110		23.20	48,511		7.18	105,079		0.52
Options granted	85,599		31.27	—		—	—		—
Options exercised	(30,000)		23.81	(3,518)		2.13	(1,500)		0.59
Options canceled	(111,592)		24.75	—		—	—		—
Outstanding at April 30, 2015	657,117		23.96	44,993		7.57	103,579		0.59
Options granted	128,000		26.83	—		—	—		—
Options exercised	(43,000)		21.81	(31,161)		5.70	(10,720)		0.59
Options canceled	(58,318)		25.98	(8)		2.13	—		—
Outstanding at April 30, 2016	683,799		24.46	13,824		11.79	92,859		0.59
Options granted	—		—	—		—	—		—
Options exercised	(167,310)		22.32	(9,601)		11.79	(27,219)		0.59
Options canceled	(64,865)		26.76	(4,223)		11.79	—		—
Outstanding at April 30, 2017	451,624		24.92	—		—	65,640		0.59
Options exercisable at April 30, 2017	311,506	$	24.52	—	$	—	65,640	$	0.59

The total intrinsic value of all options exercised during the years ended April 30, 2017, 2016 and 2015 was approximately $1,801,000, $1,218,000, and $455,000, respectively. The intrinsic value of all options outstanding at April 30, 2017 and 2016 was $3,656,000 and $6,060,000, respectively. The intrinsic value of all exercisable options at April 30, 2017 and 2016 was $3,208,000 and $5,047,000, respectively.

A summary of the status of the Company’s non‑vested stock options as of April 30, 2016 and the year then ended is as follows:


		Weighted
		Average
		Grant Date
Non-vested Options	Options	Fair Value
Non-vested at April 30, 2016	292,513	$	10.53
Granted	—		—
Expired	—		—
Canceled	(60,619)		10.71
Vested	(91,776)		10.07
Non-vested at April 30, 2017	140,118	$	10.76

As of April 30, 2017, there was approximately $8,248,000 of total unrecognized compensation cost related to non‑vested share‑based compensation awards granted under the equity plans. That cost is expected to be recognized over an approximately three‑year period or a weighted average period of approximately 2.4 years.

The weighted average fair value of options issued for the years ended April 30, 2016 and 2015 was $10.18 and $14.05, respectively. No options were granted during the fiscal year ended April 30, 2017. The total fair value of shares vesting during the years ended April 30, 2017, 2016 and 2015 was $3,332,000, $2,965,000 and $2,389,000, respectively.

Proceeds from all option exercises under all stock option plans for the years ended April 30, 2017, 2016 and 2015 were approximately $3,865,000, $1,122,000 and $722,000, respectively. The tax benefit realized from stock‑based compensation during the years ended April 30, 2017, 2016 and 2015 was approximately $0, $98,000, and $191,000, respectively.

The following tabulation summarizes certain information concerning outstanding and exercisable options at April 30, 2017:


				Options Outstanding
					Weighted
					Average			Options Exercisable
					Remaining	Weighted			Weighted
				As of	Contractual	Average		As of	Average
				April 30,	Life In	Exercise		April 30,	Exercise
Range of Exercise Prices				2017	Years	Price		2017	Price
$	0.59	-	18.32	115,640	4.25	$	8.15	108,040	$	7.45
	18.33	-	22.90	98,000	4.56		19.87	74,000		19.97
	22.91	-	26.99	134,600	5.66		25.77	68,600		24.91
	27.00	-	29.26	100,000	5.70		28.00	80,000		28.18
	29.27	-	32.19	69,024	5.54		30.94	46,506		30.78
$	0.59	-	32.19	517,264	5.13	$	21.83	377,146	$	20.36

The remaining weighted average contractual life of exercisable options at April 30, 2017 was 4.33 years.

Information related to the Company’s restricted stock awards at April 30, 2017 and for the year then ended is as follows:


	Restated 2006 Plan
		Weighted
		Average
		Grant Date
	Shares	Fair Value
Unvested stock at April 30, 2016	427,064	$	25.99
Stock granted	126,557		25.33
Stock vested	(134,270)		24.82
Stock canceled	(56,093)		25.29
Unvested stock at April 30, 2017	363,258	$	26.30

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

Accumulated Other Comprehensive Loss

Long-Term Incentive Awards	12 Months Ended
Long-Term Incentive Awards	Apr. 30, 2017
Long-Term Incentive Awards.
Long-Term Incentive Awards	13. Long‑Term Incentive Awards On May 30, 2017, the Company granted an award under the Restated 2006 Plan to key employees. Each award generally consists of: (i) 50% of the target in time based restricted stock awards which vest in equal tranches in July 2017, July 2018 and July 2019, and (ii) 50% of the target in performance based restricted stock units. For the performance based awards, the performance period is the three‑year period ending April 30, 2019. A target payout was established at the award date. Each recipient was issued time based restricted stock awards on the award date generally equal to 50% of the award date target. The actual payout for the performance awards at the end of the performance period will be calculated based upon the Company’s achievement of established revenue and operating income targets for the performance period. Payouts of the performance awards will be made in shares of restricted stock units. During the year ended April 30, 2016, the Company granted a three-year performance award under the Restated 2006 Plan to key employees. The performance period for each three-year award is the three‑year period ending April 30, 2018. A target payout was established at the award date. The actual payout at the end of the performance period will be calculated based upon the Company’s achievement of revenue and gross margin for the performance period. Payouts will be made in cash and restricted stock units. Upon vesting of the restricted stock units, the Company has the discretion to settle the restricted stock units in cash or stock. During the year ended April 30, 2015, the Company granted a performance award under the Restated 2006 Plan to key employees. The performance period for the award is the three-years ended April 30, 2017. A target payout was established at the award date. The actual payout at the end of the performance period will be calculated based upon the Company’s achievement of revenue and gross margin for the fiscal year ended April 30, 2017. Payouts will be made in cash and restricted stock units. Upon vesting of the restricted stock units, the Company has the discretion to settle the restricted stock units in cash or stock. The revenue and operating targets under the plan were not achieved, and therefore, no amounts will be paid out on the 2015 long-term incentive awards. The cash component of the award is accounted for as a liability. The equity component is accounted for as a stock‑based liability, as the restricted stock units may be settled in cash or stock solely at the discretion of the Company. At each reporting period, the Company reassesses the probability of achieving the performance targets. The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. During the years ended April 30, 2017, 2016 and 2015, the Company did not record any compensation expense for the long‑term incentive awards. At April 30, 2017 and 2016, the Company had an accrued liability of $0 for outstanding awards. At April 30, 2017, the maximum compensation expense that may be recorded for outstanding awards is $2,690,000.

Income Taxes

12 Months Ended

Apr. 30, 2017

Income Taxes

Income Taxes

14. Income Taxes

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


	Year Ended April 30,
	2017		2016		2015
Domestic	$	14,415	$	8,125	$	2,138
Foreign		(206)		(57)		(245)
Total	$	14,209	$	8,068	$	1,893

The Company expects any foreign earnings to be reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income taxes on undistributed earnings are recorded. The foreign subsidiaries do not have any undistributed earnings.

A reconciliation of income tax expense computed using the U.S. federal statutory rates to actual income tax (benefit) expense is as follows:


	Year Ended April 30,
	2017		2016		2015
U.S. federal statutory income tax rate	34.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	(3.0)		(15.3)		(84.4)
R&D and other tax credits	(19.5)		(49.9)		(172.3)
Valuation allowance	6.4		17.1		96.7
Foreign rate differential	0.2		—		—
Uncertain tax position adjustment	—		—		(1.9)
Return to provision adjustments	(0.4)		6.1		78.3
Permanent items	(4.0)		(2.6)		(5.2)
Other	(1.4)		(1.5)		0.9
Effective income tax rate	12.3	%	(11.1)	%	(52.9)	%

The components of the (benefit) provision for income taxes are as follows (in thousands):


	Year Ended April 30,
	2017		2016		2015
Current:
Federal	$	1,766	$	1,804	$	573
State		129		154		(1,292)
Foreign		—		—		—
		1,895		1,958		(719)
Deferred:
Federal		(451)		(2,859)		(1,972)
State		343		3		1,689
Foreign		(35)
		(143)		(2,856)		(283)
Total income tax (benefit) expense	$	1,752	$	(898)	$	(1,002)

Significant components of the Company’s deferred income tax assets and liabilities are as follows (in thousands):


	April 30,
	2017		2016
Deferred income tax assets:
Accrued expenses	$	7,074	$	8,238
Allowances, reserves, and other		1,801		1,330
Unrealized loss on securities		74		119
Net operating loss and credit carry-forwards		11,854		9,554
Intangibles basis		43		416
Total deferred income tax assets		20,846		19,657
Deferred income tax liabilities:
Other		(29)		—
Fixed asset basis		(428)		(395)
Total deferred income tax liabilities		(457)		(395)
Valuation allowance		(5,416)		(4,511)
Net deferred tax assets	$	14,973	$	14,751

At April 30, 2017 and 2016 the Company recorded a valuation allowance of $5,416,000 and $4,511,000, respectively, against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against foreign net operating losses that are not more likely than not to be utilized. The valuation allowance increased by $905,000 and $1,383,000 for April 30, 2017 and April 30, 2016, respectively.

At April 30, 2017 the Company had state credit carryforwards of $18,173,000 that do not expire and federal tax credit carryforwards of $7,003,000 that expire in 2035.

At April 30, 2017, the Company had multiple state net operating loss carryforwards and had foreign losses of approximately $57,000 and $1,144,000, respectively. The state net operating loss carryforwards begin to expire in 2023. $1,017,000 of the foreign loss carryforwards begin to expire in 2019 with the remainder having an indefinite carryforward.

At April 30, 2017 and 2016, the Company had approximately $9,856,000 and $9,905,000, respectively, of unrecognized tax benefits all of which would impact the Company’s effective tax rate if recognized. The Company estimates that none of its unrecognized tax benefits will decrease in the next twelve months due to statute of limitation expiration.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended April 30, 2017 and 2016 (in thousands):


	April 30,
	2017		2016
Balance as of May 1	$	9,905	$	8,190
Increases related to prior year tax positions		3		581
Decreases related to prior year tax positions		(26)		—
Increases related to current year tax positions		901		1,144
Decreases related to lapsing of statute of limitations		(927)		(10)
Balance as of April 30,	$	9,856	$	9,905

The Company records interest and penalties on uncertain tax positions to income tax expense. As of April 30, 2017 and 2016, the Company had accrued approximately $16,000 and $55,000, respectively, of interest and penalties related to uncertain tax positions. The Company is currently under audit by various state jurisdictions but does not anticipate any material adjustments from these examinations. The tax years 2014 to 2017 remain open to examination by the IRS for federal income taxes. The tax years 2010 to 2017 remain open for major state taxing jurisdictions.

During the fiscal year ended April 30, 2017, the Company recorded a reversal of a $968,000 reserve, including the related interest, for uncertain tax positions due to the settlement of prior fiscal year audits.

Accumulated Other Comprehensive Loss and Reclassifications Adjustments

12 Months Ended

Apr. 30, 2017

Accumulated Other Comprehensive Loss

15. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows (in thousands):


			Total Accumulated
			Other
	Available-for-Sale		Comprehensive
	Securities		Loss
Total accumulated other comprehensive loss balance as of April 30, 2016	$	(201)	$	(201)
Unrealized gains, net of $43 of taxes		74		74
Total accumulated other comprehensive loss balance as of April 30, 2017		(127)		(127)

Commitments and Contingencies

The entire disclosure for comprehensive income, which includes, but is not limited to, 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6522872

+ Details

Changes in Accounting Estimates	12 Months Ended
Changes in Accounting Estimates	Apr. 30, 2017
Changes in Accounting Estimates
Changes in Accounting Estimates	16. Changes in Accounting Estimates During the years ended April 30, 2017, 2016 and 2015, the Company revised its estimates at completion of various fixed-price contracts which resulted in cumulative catch up adjustments during the year in which the change in estimate occurred. The change in estimate was a result of the Company changing the total costs required to complete the contracts due to having more accurate cost information as work progressed in subsequent periods on the various contracts. The changes in estimates resulted in cumulative catch-up adjustments to income from continuing operations for the years ended April 30, 2017, 2016 and 2015 that were not material. Refer also to Note 9 – Warranty Reserves for further details of change in warranty estimates during the fiscal year ended April 30, 2017.

Related Party Transactions	12 Months Ended
Related Party Transactions	Apr. 30, 2017
Related Party Transactions
Related Party Transactions	17. Related Party Transactions Pursuant to a consulting agreement, the Company paid a board member approximately $80,000, $96,000 and $96,000 for fiscal years ended April 30, 2017, 2016 and 2015, respectively, for consulting services independent of his board service.

Commitments and Contingencies

12 Months Ended

Apr. 30, 2017

Commitments and Contingencies

18. Commitments and Contingencies

Commitments

The Company’s operations are conducted in leased facilities. The Company finances the purchase of certain IT equipment and perpetual software licenses under capital lease arrangements. Following is a summary of non‑cancelable operating and capital lease commitments:


	April 30, 2017
	(In thousands)

		Operating leases		Capital leases
2018	$	3,492	$	304
2019		3,046		168
2020		2,888		—
2021		2,042		—
2022		1,648		—
Thereafter		2,631		—
	$	15,747		472
Less: amounts representing interest				(23)
Present value of capital lease obligations				449
Less: Current portion				(288)
Long-term portion of capital lease obligations			$	161

Rental expense under operating leases was approximately $4,612,000, $4,820,000 and $4,350,000 for the years ended April 30, 2017, 2016 and 2015, respectively.

Not included in the table above are future rental payments associated with a lease amendment executed by the Company on June 13, 2017 to amend and extend its existing lease for one of its administrative properties. The amendment extends the term of the lease until June 30, 2022 and provides a tenant improvement allowance of up to $420,332. Beginning July 1, 2017, base monthly rent under the Second Amendment will be $65,200, which amount shall increase by 2.5%, compounded annually, commencing July 1, 2018. In addition, the Company has two 5-year options to extend the term of lease at the end of the then-current term.

Contingencies

The Company is subject to legal proceedings and claims which arise out of the ordinary course of its business. Although adverse decisions or settlements may occur, the Company, in consultation with legal counsel, believes that the final disposition of such matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

At April 30, 2017 and 2016, the Company had outstanding letters of credit totaling $2,070,000 and $1,080,000, respectively.

Contract Cost Audits

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, or 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 costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations (“FAR”), the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. Historically, the Company has not experienced material disallowed costs as a result of government audits. However, 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.

The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at actual rates unless collectability is not reasonably assured.

The Defense Contract Management Agency (“DCMA”) disallowed a portion of the Company’s executive compensation and/or other costs included in the Company’s fiscal 2006, 2007 and 2008 incurred cost claims and sought interest for all three years and penalties for fiscal 2006, based on the disallowed costs. The Company appealed these cost disallowances to the Armed Services Board of Contract Appeals. For fiscal 2006, as a result of partial settlements and a decision of the Armed Services Board of Contract Appeals in March 2016, the government’s remaining claims were dismissed with prejudice. All of the government’s claims related to the Company’s 2007 and 2008 incurred cost claims were settled as of October 2015 by payment to the government of $50,000 and the government’s claims related to the Company’s 2009 and 2010 incurred cost claims were settled as of October 2015 and April 2016, respectfully, without the payment of any consideration. During the fiscal year ended April 30, 2017, the Company settled rates for its incurred cost claims for fiscal years 2011 through 2014 without payment of any consideration.

As a result of the settlement agreements and the Armed Services Board of Contract Appeals ruling, the Company reversed reserves of $3,607,000 related to those fiscal years as a credit to cost of sales, allocated as $3,203,000 to the UAS segment and $404,000 to the EES segment during the fiscal year ended April 30, 2016. At April 30, 2017 and 2016, the Company did not have any remaining reserves for incurred cost claim audits.

Business Acquisitions

12 Months Ended

Apr. 30, 2017

Business Combinations [Abstract]

Business Acquisitions

19. Business Acquisitions

On February 1, 2017, the Company completed the acquisition of 36% of the common shares of Altoy for cash consideration of $625,000, which increased its interest from 49% to 85% and provided the Company with control over Altoy. As a result, Altoy became a consolidated subsidiary of the Company on the date of the acquisition. Altoy aims to market and distribute small UAS in Turkey. The Company previously accounted for its 49% interest in Altoy as an equity method investment. As a result of the acquisition, the Company is expected to expand the sales of its small UAS and related services in Turkey.

The following table summarizes the consideration transferred to acquire Altoy and the amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the noncontrolling interest in Altoy at the acquisition date (in thousands):



Customer relationships	$	1,600
Goodwill		122
Trademark and trade names		60
Deferred tax liability		(332)
Other assets and liabilities assumed		286
Total net identified assets acquired	$	1,736

Fair value of consideration transferred:
Cash	$	625
Fair value of the Company's investment in Altoy prior to the acquisition		851
Fair value of the noncontrolling interest in Altoy		260
Total	$	1,736

As a result of the Company obtaining control over Altoy, the Company’s previously held 49% interest was remeasured to fair value, resulting in a gain of $584,000 which has been recognized in “other income (loss), net” on the consolidated statement of income.

The fair value of the noncontrolling interest of $260,000 and the fair value of the previously held equity interest of $851,000 in Aloy, immediately prior to the acquisition, were estimated by applying an income approach. These fair value measurements of the noncontrolling interest and the previously held equity interest are based on significant inputs not observable in the market, and thus represent Level 3 measurements.

The goodwill is attributable to the workforce of Altoy and expected future customers in the Turkey market. Goodwill is not tax deductible for tax purposes. All of the goodwill was assigned to the Company’s UAS segment.

Supplemental Pro Forma Information (unaudited)

Altoy contributed revenues of $0 and a net loss of $122,000 to the Company for the period from February 1, 2017 to April 30, 2017. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on May 1, 2015 (in thousands):


	Fiscal year ended April 30,
	2017		2016
Revenue	$	265,220	$	264,301
Net income	$	11,654	$	9,168
Net income attributable to AeroVironment	$	11,734	$	9,239

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Altoy to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2015, with the consequential tax effects.

The Company incurred approximately $74,000 of acquisition-related costs. These expenses are included in selling, general and administrative expense on the Company’s consolidated income statement for the fiscal year ended April 30, 2017 and are reflected in pro forma net income for the fiscal year ended April 30, 2016, in the table above.

The unaudited pro forma supplemental information is based on estimates and assumptions which we believe are reasonable and are not necessarily indicative of the results that have been realized had the acquisitions been consolidated in the tables above as of May 1, 2015.

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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+ Details

Segment Data

12 Months Ended

Apr. 30, 2017

Segment Data

Segment Data

20. Segment Data

The Company’s product segments are as follows:

Unmanned Aircraft Systems—The UAS segment focuses primarily on the design, development, production, support and operation of innovative UAS and tactical missile systems that provide situational awareness, multi‑band communications, force protection and other mission effects to increase the security and effectiveness of the operations of the Company’s customers.

Efficient Energy Systems—The EES segment focuses primarily on the design, development, production, marketing, support and operation of innovative efficient electric energy systems that address the growing demand for electric transportation solutions.

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 only limited financial statement information by segment.

The segment results are as follows (in thousands):


	Year Ended April 30,

	2017		2016		2015
Revenue:
UAS	$	228,940	$	233,738	$	220,950
EES		35,933		30,360		38,448
Total		264,873		264,098		259,398
Cost of sales:
UAS		135,937		132,209		128,233
EES		26,826		19,786		26,897
Total		162,763		151,995		155,130
Gross margin:
UAS		93,003		101,529		92,717
EES		9,107		10,574		11,551
Total		102,110		112,103		104,268
Selling, general and administrative		56,537		60,077		55,763
Research and development		33,042		42,291		46,491
Income from operations		12,531		9,735		2,014
Other income (expense):
Interest income, net		1,618		1,032		882
Other income (expense), net		60		(2,699)		(1,003)
Income before income taxes	$	14,209	$	8,068	$	1,893

Geographic Information

Sales to non‑U.S. customers accounted for 36%, 28% and 9% of revenue for each of the fiscal years ended April 30, 2017, 2016 and 2015, respectively.

Quarterly Results of Operations (Unaudited)

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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+ Details

Quarterly Results of Operations (Unaudited)

12 Months Ended

Apr. 30, 2017

Quarterly Results of Operations (Unaudited)

21. Quarterly Results of Operations (Unaudited)

The following tables present selected unaudited consolidated financial data for each of the eight quarters in the two‑year period ended April 30, 2017. In the Company’s opinion, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial information for the period presented. The Company’s fiscal year ends on April 30. Due to the fixed year end date of April 30, the first and fourth quarters each consist of approximately 13 weeks. The second and third quarters each consist of exactly 13 weeks. The first three quarters end on a Saturday.


	Three Months Ended
	July 30, 2016			October 29, 2016		January 28, 2017		April 30, 2017
	(In thousands except per share data)
Year ended April 30, 2017
Revenue	$	36,218		$	50,116	$	53,163	$	125,376
Gross margin	$	6,683		$	17,417	$	19,351	$	58,659
Net (loss) income attributable to AeroVironment	$	(11,642)	(1)	$	(4,172)	$	(2,183)	$	30,476	(2)
Net (loss) income per share attributable to AeroVironment—basic(6)	$	(0.51)		$	(0.18)	$	(0.09)	$	1.32
Net (loss) income per share attributable to AeroVironment—diluted(6)	$	(0.51)		$	(0.18)	$	(0.09)	$	1.30


	Three Months Ended
	August 2,			November 1,			January 31,			April 30,
	2015			2015			2016			2016
	(In thousands except per share data)
Year ended April 30, 2016
Revenue	$	47,050		$	64,731		$	67,560		$	84,757
Gross margin	$	16,023		$	31,533	(4)	$	26,625		$	37,922
Net (loss) income	$	(6,981)	(3)	$	4,419		$	6,164	(5)	$	5,364
Net (loss) income per share—basic(6)	$	(0.30)		$	0.19		$	0.27		$	0.23
Net (loss) income per share—diluted(6)	$	(0.30)		$	0.19		$	0.27		$	0.23

(1)

Includes the reversal of a $968,000 reserve, including the related interest, for uncertain tax positions due to the settlement of prior fiscal year tax audits.

(2)

Includes a gain of $0.6 million related to the acquisition of a controlling interest in our Turkish Joint Venture, Altoy, which was recorded to other income (expense), net in the consolidated statement of operations.

(3)

Includes an other-than-temporary-impairment loss of $2.2 million related to the Company’s investment in the CybAero shares which was recorded to other expense, net in the consolidated statement of operations.

(4)

Includes reversal of $3.5 million remaining reserve as a result of the settlement by the parties or the dismissal by the Armed Services Board of Contract Appeals of the government’s claims related to the Company’s incurred cost submittals for fiscal years 2006 through 2009 which was recorded as a credit to cost of sales.

(5)

Includes the impact of $0.9 million of out-of-period expenses related to sales and use tax and capital leases.

(6)

Earnings per share is computed independently for each of the quarters presented. The sum of the quarterly earnings per share may not equal the total earnings per share computed for the year due to rounding.

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Apr. 30, 2017

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS


			Additions
	Balance at		Charged to		Charged to				Balance at
	Beginning		Costs and		Other				End of
Description	of Period		Expenses		Accounts		Deductions		Period
	(In thousands)
Allowance for doubtful accounts for the year ended April 30:
2015	$	791	$	106	$	—	$	(291)	$	606
2016	$	606	$	178	$	—	$	(522)	$	262
2017	$	262	$	56	$	—	$	(27)	$	291
Warranty reserve for the year ended April 30:
2015	$	1,280	$	2,919	$	—	$	(1,546)	$	2,653
2016	$	2,653	$	4,516	$	(424)	$	(2,611)	$	4,134
2017	$	4,134	$	3,079	$	—	$	(3,982)	$	3,231
Reserve for inventory excess and obsolescence for the year ended April 30:
2015	$	3,234	$	2,035	$	—	$	(681)	$	4,588
2016	$	4,588	$	2,767	$	—	$	(2,900)	$	4,455
2017	$	4,455	$	2,040	$	—	$	(1,245)	$	5,250
Reserve for self-insured medical claims for the year ended April 30:
2015	$	1,281	$	8,953	$	—	$	(8,941)	$	1,293
2016	$	1,293	$	9,213	$	—	$	(9,330)	$	1,176
2017	$	1,176	$	8,251	$	—	$	(8,098)	$	1,329

Organization and Significant Accounting Policies (Policies)

12 Months Ended

Apr. 30, 2017

Organization and Significant Accounting Policies

Principles of Consolidation

Investments in Companies Accounted for Using the Equity or Cost Method

Segments

Use of Estimates

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation due to the adoption of ASU 2016-09 and ASU 2015-17.

Cash Equivalents

Investments

The Company’s investments are accounted for as held‑to‑maturity and available‑for‑sale and reported at amortized cost and fair value, respectively.

Management determines the appropriate classification of securities at the time of purchase and re‑evaluates such designation as of each balance sheet date.

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.

Concentration of Credit Risk

Accounts Receivable, Unbilled Receivables and Retentions

Inventories

Long-Lived Assets

Long‑Lived Assets


Machinery and equipment	2 - 7	years
Computer equipment and software	2 - 5	years
Furniture and fixtures	3 - 7	years
Leasehold improvements	Lesser of useful life or term of lease

Intangible Assets-Acquired in Business Combinations

Intangibles Assets — Acquired in Business Combinations

Goodwill

Product Warranty

Accrued Sales Commissions

As of April 30, 2017 and 2016, the Company accrued sales commissions in other current liabilities of $4,874,000 and $3,287,000, respectively.

Self-Insurance Liability

Self‑Insurance Liability

Income Taxes

Customer Advances and Amounts in Excess of Cost Incurred

Revenue Recognition

Stock-Based Compensation

Stock‑Based Compensation

Long-Term Incentive Awards

Long‑Term Incentive Awards

Research and Development

Lease Accounting

Advertising Costs

Foreign Currency Transactions

Earnings Per Share

The reconciliation of diluted to basic shares is as follows:


	Year Ended April 30,
	2017		2016		2015
Numerator for basic earnings per share:
Net income attributable to AeroVironment	$	12,479,000	$	8,966,000	$	2,895,000
Denominator for basic earnings per share:
Weighted average common shares		23,059,045		22,936,413		22,868,733
Dilutive effect of employee stock options, restricted stock and restricted stock units		248,693		217,080		277,264
Denominator for diluted earnings per share		23,307,738		23,153,493		23,145,997

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

Recently Issued Accounting Standards

Organization and Significant Accounting Policies (Tables)

12 Months Ended

Apr. 30, 2017

Organization and Significant Accounting Policies

Schedule of estimated useful lives of property and equipment


Machinery and equipment	2 - 7	years
Computer equipment and software	2 - 5	years
Furniture and fixtures	3 - 7	years
Leasehold improvements	Lesser of useful life or term of lease

Schedule of reconciliation of basic to diluted shares


	Year Ended April 30,
	2017		2016		2015
Numerator for basic earnings per share:
Net income attributable to AeroVironment	$	12,479,000	$	8,966,000	$	2,895,000
Denominator for basic earnings per share:
Weighted average common shares		23,059,045		22,936,413		22,868,733
Dilutive effect of employee stock options, restricted stock and restricted stock units		248,693		217,080		277,264
Denominator for diluted earnings per share		23,307,738		23,153,493		23,145,997

Investments (Tables)

12 Months Ended

Apr. 30, 2017

Held-to-maturity securities

Schedule of investments


	April 30,
	2017		2016
	(In thousands)
Short-term investments:
Held-to-maturity securities:
Municipal securities	$	47,437	$	42,179
U.S. government securities		14,515		21,184
Corporate bonds		55,519		40,041
Certificates of deposit		2,500		—
Total held-to-maturity and short-term investments	$	119,971	$	103,404
Long-term investments:
Held-to-maturity securities:
Municipal securities	$	8,942	$	—
U.S. government securities		22,540		7,518
Corporate bonds		8,117		23,561
Total held-to-maturity investments		39,599		31,079
Available-for-sale securities:
Auction rate securities		2,497		2,780
Total available-for-sale investments		2,497		2,780
Total long-term investments	$	42,096	$	33,859

Schedule of amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of held-to-maturity investments

The amortized cost, gross unrealized losses, and estimated fair value of the held‑to‑maturity investments as of April 30, are as follows (in thousands):


	April 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	56,379	$	30	$	(21)	$	56,388
U.S. government securities		37,055		2		(41)		37,016
Corporate bonds		63,636		9		(85)		63,560
Certificates of deposit		2,500		1		—		2,501
Total held-to-maturity investments	$	159,570	$	42	$	(147)	$	159,465

Schedule of amortized cost and fair value by contractual maturity

The amortized cost and fair value of the Company’s held‑to‑maturity securities by contractual maturity at April 30, 2017, are as follows:


	Cost		Fair Value
Due within one year	$	119,971	$	119,893
Due after one year through five years		39,599		39,572
Total	$	159,570	$	159,465

Available-for-sale securities | Auction rate securities

Schedule of amortized cost and fair value by contractual maturity


	April 30,
	2017		2016
Auction rate securities
Amortized cost	$	2,700	$	3,100
Gross unrealized losses		(203)		(320)
Fair value	$	2,497	$	2,780

The amortized cost and fair value of the Company’s auction rate securities by contractual maturity at April 30, 2017 are as follows (in thousands):


	Cost		Fair Value
Due after one through five years	$	700	$	701
Due after 10 years		2,000		1,796
Total	$	2,700	$	2,497

Schedule of amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of available-for-sale investments

The amortized cost, gross unrealized losses, and estimated fair value of the available‑for‑sale auction rate securities are as follows (in thousands):


	April 30,
	2017		2016
Auction rate securities
Amortized cost	$	2,700	$	3,100
Gross unrealized losses		(203)		(320)
Fair value	$	2,497	$	2,780

Tabular disclosure of all investments in certain debt and equity securities for which the entity has the positive intent and ability to hold until maturity.