Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 27, 2012

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)

(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 x  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 x  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.

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

As of November 23, 2012, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 22,416,677.

Table of Contents

AeroVironment, Inc.

Table of Contents

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)

See accompanying notes to consolidated financial statements (unaudited).

3

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands except share and per share data)

See accompanying notes to consolidated financial statements (unaudited).

4

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

See accompanying notes to consolidated financial statements (unaudited).

5

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

See accompanying notes to consolidated financial statements (unaudited).

6

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, support and operation 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 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 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 and six months ended October 27, 2012 are not necessarily indicative of the results for the full year ending April 30, 2013. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2012, included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

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 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 (“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 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 billing rates, may create an additional receivable or liability for the Company.

7

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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.

Earnings Per Share

Basic 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, shares of unvested restricted stock and restricted stock units.

The reconciliation of basic to diluted shares is as follows:

During the three and six months ended October 27, 2012 and October 29, 2011, certain shares reserved for issuance upon exercise of stock options, shares of unvested restricted stock and restricted stock units were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive. The number of shares reserved for issuance upon exercise of stock options, shares of unvested restricted stock and restricted stock units that met this anti-dilutive criterion for the three months ended October 27, 2012 and October 29, 2011 was approximately 10,000 and 1,000, respectively. The number of shares reserved for issuance upon exercise of stock options, shares of unvested restricted stock and restricted stock units that met this anti-dilutive criterion for the six months ended October 27, 2012 and October 29, 2011 was approximately 5,000 and 2,000, respectively.

Recently Issued Accounting Standards

On May 1, 2012, the Company adopted changes in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), which requires companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. The Company elected to adopt the two-statement option. The new guidance eliminated the option to present the components of other comprehensive income as part of the statement of equity. Other than the change in presentation, the adoption of these changes had no material impact on the Company’s consolidated financial statements. The new guidance also required entities to present reclassification adjustments from accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. However, in December 2011, the FASB issued guidance that indefinitely defers the guidance related to the presentation of reclassification adjustments.

On May 1, 2012, the Company adopted changes in accordance with guidance issued by the FASB to provide a consistent definition of fair value and to ensure that the fair value measurement and disclosure requirements are similar between U.S. generally accepted accounting principles and International Financial Reporting Standards. The new guidance changed certain fair value measurement principles and enhanced the disclosure requirements, particularly for Level 3 fair value measurements. The adoption of these changes did not have a material impact on the Company’s consolidated financial statements.

8

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

2. Investments

Investments consist of the following (in thousands):

Held-To-Maturity Securities

At October 27, 2012 and April 30, 2012, the balance of held-to-maturity securities consisted of state and local government municipal securities and U.S. Treasury bills and notes. Interest earned from these investments is recorded in interest income.

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of October 27, 2012, were as follows (in thousands):

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of April 30, 2012, were as follows (in thousands):

The amortized cost and fair value of the Company’s held-to-maturity securities by contractual maturity at October 27, 2012, were as follows (in thousands):

Available-For-Sale Securities

As of October 27, 2012, the entire balance of available-for-sale securities consisted of four investment grade auction rate municipal bonds with maturities ranging from 7 to 22 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.

9

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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 October 27, 2012 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 October 27, 2012. 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 of 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 at maturity and as of October 27, 2012, the Company did not consider these investments to be other-than-temporarily impaired.

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the available-for-sale investments as of October 27, 2012, were as follows (in thousands):

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the available-for-sale investments as of April 30, 2012, were as follows (in thousands):

The amortized cost and fair value of the Company’s auction rate securities by contractual maturity at October 27, 2012, were as follows (in thousands):

3. Inventories, net

Inventories consist of the following (in thousands):

10

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

4. 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 October 27, 2012, were as follows (in thousands):

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 October 27, 2012.  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):

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 October 27, 2012, the inputs used in the Company’s discounted cash flow analysis included current coupon rates ranging from 0.3% to 0.6%, estimated redemption periods of 7 to 22 years and discount rates of 7.7% to 18.9%. 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. Assuming a higher discount rate, a longer estimated redemption period and lower coupon rates would result in a lower fair market value. Conversely, assuming a lower discount rate, a shorter estimated redemption period and higher coupon rates would result in a higher fair market value.

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 cost of $7.1 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.

11

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

5. 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 and six months ended October 27, 2012 and October 29, 2011 (in thousands):

6. 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 $10.4 million and $17.0 million for the three and six months ended October 27, 2012, respectively. Revenue from customer-funded R&D was approximately $4.0 million and $9.2 million for the three and six months ended October 29, 2011, respectively.

7. Income Taxes

For the three and six months ended October 27, 2012, the Company recorded a provision for income taxes of $4.5 million and $3.8 million, respectively, yielding an effective tax rate of 34.0% and 34.1%, respectively.  For the three and six months ended October 29, 2011, the Company recorded a provision for income taxes of $3.1 million and $3.3 million, respectively, yielding an effective tax rate of 32.0% and 32.1%, respectively. The variance from statutory rates for the three and six months ended October 29, 2011 was primarily due to research and development tax credits.

8. Segment Data

The Company’s product segments are as follows:

·                                          Unmanned Aircraft Systems (“UAS”) — The UAS segment focuses primarily on the design, development, production, support and operation of innovative UAS that provide situational awareness and other mission effects to increase the security and operational effectiveness of the Company’s customers.

·                                          Efficient Energy Systems (“EES”) — The EES segment focuses primarily on the design, development, production, 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 limited financial statement information by segment.

12

Table of Contents

AeroVironment, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The segment results are as follows (in thousands):

13

Table of Contents

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, 2012.

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 2013 fiscal year ends on April 30, 2013 and our fiscal quarters end on July 28, 2012, October 27, 2012 and January 26, 2013.

14

Table of Contents

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 October 27, 2012 Compared to Three Months Ended October 29, 2011

Revenue. Revenue for the three months ended October 27, 2012 was $80.3 million, as compared to $80.4 million for the three months ended October 29, 2011, representing a decrease of $0.1 million.  UAS revenue decreased by $1.5 million, or 2%, to $65.4 million for the three months ended October 27, 2012, primarily due to a decrease in UAS service revenue of $11.1 million, partially offset by an increase in customer-funded R&D work of $7.7 million and product deliveries of $1.9 million. The decrease in UAS service revenue was primarily due to fewer retrofits of Raven B systems with our Digital Data Link, or DDL, technology.  The increase in customer-funded R&D work was primarily due to additional activity related to the Switchblade program.  EES revenue increased by $1.4 million, or 10%, to $14.8 million for the three months ended October 27, 2012.  The increase in EES revenue was primarily due to increased deliveries of industrial electric vehicle charging systems, offset by fewer deliveries of electric vehicle test equipment.

Cost of Sales. Cost of sales for the three months ended October 27, 2012 was $44.6 million, as compared to $49.7 million for the three months ended October 29, 2011, representing a decrease of $5.1 million, or 10%. As a percentage of revenue, cost of sales decreased from 62% for the three months ended October 29, 2011 to 56% for the three months ended October 27, 2012.  UAS cost of sales decreased $4.4 million, or 11%, to $35.3 million for the three months ended October 27, 2012.  As a percentage of revenue, cost of sales for UAS decreased from 59% to 54%, primarily due to higher absorption of manufacturing and engineering overhead support costs.  EES cost of sales decreased $0.7 million, or 7%, to $9.4 million for the three months ended October 27, 2012. As a percentage of revenue, cost of sales for EES decreased from 75% to 63%, primarily due to lower manufacturing and engineering overhead support costs.

Gross Margin. Gross margin for the three months ended October 27, 2012 was $35.6 million, as compared to $30.6 million for the three months ended October 29, 2011, representing an increase of $5.0 million, or 16%. UAS gross margin increased $2.9 million, or 11%, to $30.2 million for the three months ended October 27, 2012. As a percentage of revenue, gross margin for UAS increased from 41% to 46%, primarily due to a higher mix of product deliveries compared to service-related contracts and higher absorption of manufacturing and engineering overhead support costs.  EES gross margin increased $2.1 million, or 61%, to $5.5 million for the three months ended October 27, 2012.  As a percentage of revenue, EES gross margin increased from 25% to 37%, primarily due to a decrease in the sales mix of lower margin products and higher absorption of manufacturing and engineering support overhead costs.

15

Table of Contents

Selling, General and Administrative.  SG&A expense for the three months ended October 27, 2012 was $13.2 million, or 16% of revenue, compared to SG&A expense of $12.2 million, or 15% of revenue, for the three months ended October 29, 2011.

Research and Development. R&D expense for the three months ended October 27, 2012 was $9.4 million, or 12% of revenue, compared to R&D expense of $8.8 million, or 11% of revenue, for the three months ended October 29, 2011.

Interest Income. Interest income for the three months ended October 27, 2012 was $0.2 million compared to interest income of $0.1 million for the three months ended October 29, 2011.

Income Tax Expense. Our effective income tax rate was 34.0% for the three months ended October 27, 2012, as compared to 32.0% for the three months ended October 29, 2011. The increase was primarily due to lower R&D tax credits for the three months ended October 27, 2012.

Six Months Ended October 27, 2012 Compared to Six Months Ended October 29, 2011

Revenue. Revenue for the six months ended October 27, 2012 was $139.0 million, as compared to $142.4 million for the six months ended October 29, 2011, representing a decrease of $3.4 million, or 2%.  UAS revenue decreased $4.9 million, or 4%, to $114.2 million for the six months ended October 27, 2012, primarily due to decreased UAS service revenue of $16.0 million, offset by higher customer-funded R&D work of $9.2 million and product deliveries of $2.0 million.  The decrease in UAS service revenue was primarily due to fewer retrofits of Raven B systems with our DDL technology.  The increase in UAS customer-funded R&D revenue was primarily due to increased activity related to the Switchblade program.  EES revenue increased by $1.5 million, or 6%, to $24.7 million for the six months ended October 27, 2012.  The increase in EES revenue was primarily due to increased deliveries of industrial electric vehicle charging systems and passenger electric vehicle charging systems, offset by fewer deliveries of electric vehicle test equipment.

Cost of Sales. Cost of sales for the six months ended October 27, 2012 was $83.8 million, as compared to $90.0 million for the six months ended October 29, 2011, representing a decrease of $6.2 million, or 7%. As a percentage of revenue, cost of sales decreased from 63% for the six months ended October 29, 2011 to 60% for the six months ended October 27, 2012.  UAS cost of sales decreased $3.7 million, or 5%, to $68.0 million for the six months ended October 27, 2012.  As a percentage of revenue, cost of sales for UAS remained at 60%.  EES cost of sales decreased $2.5 million, or 14%, to $15.8 million for the six months ended October 27, 2012. As a percentage of revenue, cost of sales for EES decreased from 79% to 64%, primarily due to a decrease in the sales mix of lower margin products and higher absorption of manufacturing and engineering support overhead costs.

16

Table of Contents

Gross Margin. Gross margin for the six months ended October 27, 2012 was $55.1 million, as compared to $52.3 million for the six months ended October 29, 2011, representing an increase of $2.8 million, or 5%. UAS gross margin decreased $1.2 million, or 3%, to $46.2 million for the six months ended October 27, 2012 primarily due to lower sales volume.  As a percentage of revenue, gross margin for UAS remained at 40%.  EES gross margin increased $4.0 million, or 82%, to $8.9 million for the six months ended October 27, 2012.  As a percentage of revenue, EES gross margin increased from 21% to 36%, primarily due to an increase in the sales mix of industrial electric vehicle charging systems and higher absorption of manufacturing and engineering support overhead costs.