0001558370-20-001981 | 10-Q | XBRL Viewer

Warranty Reserves (Tables)

9 Months Ended

Jan. 25, 2020


	Three Months Ended				Nine Months Ended
	January 25,			January 26,	January 25,		January 26,
	2020		2019		2020		2019
Beginning balance	$	1,875	$	2,431	$	1,704	$	2,090
Warranty expense		250		53		1,469		414
Changes in estimates related to pre-existing warranties		—		—		(189)		519
Warranty costs settled		(289)		(354)		(1,148)		(893)
Ending balance	$	1,836	$	2,130	$	1,836	$	2,130

Consolidated Balance Sheets - USD ($) $ in Thousands	Jan. 25, 2020	Apr. 30, 2019
Current assets:
Cash and cash equivalents	$ 131,496	$ 172,708
Short-term investments	148,502	150,487
Accounts receivable, net of allowance for doubtful accounts of $1,039 at January 25, 2020 and $1,041 at April 30, 2019	27,936	31,051
Unbilled receivables and retentions (inclusive of related party unbilled receivables of $28,849 at January 25, 2020 and $9,028 at April 30, 2019)	77,411	53,047
Inventories	65,156	54,056
Prepaid expenses and other current assets	6,833	7,418
Income taxes receivable		821
Total current assets	457,334	469,588
Long-term investments	26,409	9,386
Property and equipment, net	19,877	16,905
Operating lease right-of-use assets	9,472
Deferred income taxes	8,296	6,685
Intangibles, net	14,357	459
Goodwill	6,340
Other assets	16,995	5,821
Total assets	559,080	508,844
Current liabilities:
Accounts payable	14,269	15,972
Wages and related accruals	17,636	18,507
Customer advances	10,633	2,962
Current operating lease liabilities	2,083
Income taxes payable	2,809
Other current liabilities	13,046	7,425
Total current liabilities	60,476	44,866
Deferred rent		1,173
Non-current operating lease liabilities	7,556
Other non-current liabilities	250	150
Deferred tax liability	29	29
Liability for uncertain tax positions	51	51
Commitments and contingencies
Stockholders' equity:
Authorized shares-10,000,000; none issued or outstanding at January 25, 2020 and April 30, 2019
Issued and outstanding shares-23,995,109 shares at January 25, 2020 and 23,946,293 shares at April 30, 2019	2	2
Additional paid-in capital	180,051	176,216
Accumulated other comprehensive loss	69	2
Retained earnings	310,619	286,351
Total AeroVironment stockholders' equity	490,741	462,571
Noncontrolling interest	(23)	4
Total equity	490,718	462,575
Total liabilities and stockholders' equity	$ 559,080	$ 508,844

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Consolidated Statements of Operations
Revenue from Related Parties	$ 11,762	$ 13,586	$ 37,491	$ 37,981
Tax expense				$ 2,463

Investments - Amortized Cost and Fair Value of the Held-to-Maturity Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jan. 25, 2020	Apr. 30, 2019
Amortized cost of held-to-maturity securities by contractual maturity
Due within one year	$ 135,302
Due after one year through five years	21,462
Total	156,764	$ 159,873
Fair value of held-to-maturity securities by contractual maturity
Due within one year	135,418
Due after one year through five years	21,478
Total	$ 156,896	$ 159,915

Share Repurchase (Details) - USD ($)	3 Months Ended		9 Months Ended
Share Repurchase (Details) - USD ($)	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019	Apr. 30, 2019	Sep. 30, 2015
Share Repurchase
Stock Repurchase Program, Authorized Amount						$ 25,000,000
Shares repurchased and retired	0	0	0	0
Share authorized for future repurchases	$ 21,200,000		$ 21,200,000		$ 21,200,000

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Parent	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Non-controlling Interest	Total
Balance at Apr. 30, 2018	$ 409,033	$ 2	$ 170,139	$ 238,913	$ (21)	$ 23
Balance (in shares) at Apr. 30, 2018		23,908,736
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Apr. 30, 2018							$ 409,056
Increase (Decrease) in Stockholders' Equity
Net income (loss)	41,756			41,756		(40)	41,716
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest							41,716
Unrealized gain on investments	57				57		57
Foreign currency translation	(32)				(32)		(32)
Stock options exercised	71		71				71
Stock options exercised (in shares)		12,725
Restricted stock awards (in shares)		39,823
Restricted stock awards forfeited (in shares)		(15,100)
Tax withholding payment related to net share settlement of equity awards	(1,033)		(1,033)				(1,033)
Tax withholding payment related to net share settlement of equity awards (in shares)		(13,724)
Stock-based compensation	5,714		5,714				5,714
Balance at Jan. 26, 2019	455,566	$ 2	174,891	280,669	4	(17)
Balance (in shares) at Jan. 26, 2019		23,932,460
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jan. 26, 2019							455,549
Balance at Oct. 27, 2018	444,174	$ 2	171,867	272,300	5	2	444,176
Balance (in shares) at Oct. 27, 2018		23,928,373
Increase (Decrease) in Stockholders' Equity
Net income (loss)	8,369			8,369		(19)	8,350
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest							8,350
Foreign currency translation	(1)				(1)		(1)
Restricted stock awards (in shares)		5,377
Restricted stock awards forfeited (in shares)		(445)
Tax withholding payment related to net share settlement of equity awards	(58)		(58)				(58)
Tax withholding payment related to net share settlement of equity awards (in shares)		(845)
Stock-based compensation	3,082		3,082				3,082
Balance at Jan. 26, 2019	455,566	$ 2	174,891	280,669	4	(17)
Balance (in shares) at Jan. 26, 2019		23,932,460
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jan. 26, 2019							455,549
Balance at Apr. 30, 2019	462,571	$ 2	176,216	286,351	2	4	462,571
Balance (in shares) at Apr. 30, 2019		23,946,293
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Apr. 30, 2019							462,575
Increase (Decrease) in Stockholders' Equity
Net income (loss)	23,603			23,603		(27)	23,576
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest							23,576
Foreign currency translation	67				67		67
Stock options exercised	93		93				93
Stock options exercised (in shares)		3,000
Restricted stock awards (in shares)		74,892
Restricted stock awards forfeited (in shares)		(11,769)
Tax withholding payment related to net share settlement of equity awards	(1,009)		(1,009)				(1,009)
Tax withholding payment related to net share settlement of equity awards (in shares)		(17,307)
Stock-based compensation	4,751		4,751				4,751
Balance at Jan. 25, 2020	490,741	$ 2	180,051	310,619	69	(23)	490,741
Balance (in shares) at Jan. 25, 2020		23,995,109
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jan. 25, 2020							490,718
Balance at Oct. 26, 2019	490,360	$ 2	178,550	311,627	181	(3)
Balance (in shares) at Oct. 26, 2019		23,990,616
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Oct. 26, 2019							490,357
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(1,008)			(1,008)		(20)	(1,028)
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest							(1,028)
Foreign currency translation	(112)				(112)		(112)
Restricted stock awards (in shares)		9,200
Restricted stock awards forfeited (in shares)		(764)
Tax withholding payment related to net share settlement of equity awards	(266)		(266)				(266)
Tax withholding payment related to net share settlement of equity awards (in shares)		(3,943)
Stock-based compensation	1,767		1,767				1,767
Balance at Jan. 25, 2020	490,741	$ 2	$ 180,051	310,619	$ 69	$ (23)	490,741
Balance (in shares) at Jan. 25, 2020		23,995,109
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jan. 25, 2020							490,718
Increase (Decrease) in Stockholders' Equity
Adoption of ASU \| ASU 2018-09	$ 665			$ 665			$ 665

Leases - Maturities - ASC 842 (Details) $ in Thousands	Jan. 25, 2020 USD ($)
Maturities of operating lease liabilities:
2020	$ (1,309)
2021	4,496
2022	3,749
2023	2,171
2024	1,055
Thereafter	62
Total lease payments	10,224
Less: imputed interest	(585)
Total present value of operating lease liabilities	$ 9,639

Discontinued Operations (Details)				3 Months Ended		9 Months Ended
Discontinued Operations (Details)	Oct. 29, 2019 USD ($)	Feb. 22, 2019 USD ($)	Jun. 29, 2018 USD ($)	Jan. 25, 2020 USD ($) contract	Jan. 26, 2019 USD ($)	Jan. 25, 2020 USD ($) contract	Jan. 26, 2019 USD ($)
Discontinued operations
Amount of alleged damages	$ 1,700,000	$ 6,500,000
Statement of operations
Net loss from discontinued operations					$ (62,000)		$ (2,511,000)
Gain on sale of business, net of tax expense of $2,463							8,452,000
Tax expense							2,463,000
Net (loss) income from discontinued operations					(62,000)		5,941,000
EES Business \| Disposed of by sale
Discontinued operations
Cash consideration received			$ 31,994,000
Gain on sale of business			11,420,000
Amount of reduction to gain resulting from a working capital adjustment							505,000
Working capital dispute			922,000
Amounts recorded in the consolidated financial statements			0
Statement of operations
Net Sales							4,256,000
Cost of sales					54,000		5,080,000
Gross margin					(54,000)		(824,000)
Selling, general and administrative					14,000		1,517,000
Research and development					34,000		1,075,000
Other income, net							1,000
Loss from discontinued operations before income taxes					(102,000)		(3,415,000)
Benefit for income taxes					(41,000)		(904,000)
Net loss from discontinued operations					(61,000)		(2,511,000)
Gain on sale of business, net of tax expense of $2,463					(1,000)		8,452,000
Tax expense							2,463,000
Net (loss) income from discontinued operations					(62,000)		5,941,000
EES Business \| Disposed of by sale \| Other income (expense)
Statement of operations
Net Sales				$ 57,000	$ 657,000	$ 545,000	$ 2,013,000
Holdback \| Disposed of by sale
Discontinued operations
Cash consideration received			$ 6,500,000
Number of remaining contracts \| contract				2		2

Inventories, net

9 Months Ended

Jan. 25, 2020

Inventories, net

Inventories, net

5. Inventories, net

Inventories consist of the following (in thousands):


	January 25,		April 30,
	2020		2019
Raw materials	$	19,119	$	16,792
Work in process		33,005		19,162
Finished goods		23,169		25,926
Inventories, gross		75,293		61,880
Reserve for inventory excess and obsolescence		(10,137)		(7,824)
Inventories, net	$	65,156	$	54,056

During the nine months ended January 25, 2020, the Company recorded inventory reserve charges of approximately $2,600,000 to impair the remaining net book value of the Company’s Quantix commercial UAS solution. For the three and nine months ended January 25, 2020, the Company recorded inventory reserve charges of $617,000 and $3,807,000, respectively. For the three and nine months end January 26, 2019 the Company recorded inventory impairment charges of $1,889,000 and $3,079,000, respectively.

Leases - Components of lease costs (Details) $ in Thousands	9 Months Ended
Leases - Components of lease costs (Details) $ in Thousands	Jan. 25, 2020 USD ($)
Components of lease costs
Operating lease cost	$ 3,453
Short term lease cost	489
Variable lease cost	609
Sublease income	(230)
Total lease costs, net	$ 4,321

Investments - Available for sale securities (Details) - Available-for-sale securities $ in Thousands	9 Months Ended
	Jan. 25, 2020 USD ($)
Investments
Sales or Purchases	$ 18,147
Carrying Value	18,147
Amortized cost of available-for-sale securities by contractual maturity
Due after 20 years	13,200
Total	13,200
Fair value of available-for-sale securities by contractual maturity
Due after 20 years	13,200
Total	$ 13,200
Minimum
Fair value of available-for-sale securities by contractual maturity
Variable rate demand notes long maturities	20 years
Maximum
Fair value of available-for-sale securities by contractual maturity
Variable rate demand notes long maturities	30 years
Investment in limited partnership fund
Investments
Sales or Purchases	$ 4,947
Carrying Value	4,947
Variable rate demand notes
Investments
Sales or Purchases	13,200
Carrying Value	$ 13,200
Put option \| Minimum
Fair value of available-for-sale securities by contractual maturity
Variable rate demand notes long maturities	1 day
Put option \| Maximum
Fair value of available-for-sale securities by contractual maturity
Variable rate demand notes long maturities	7 days

Accumulated Other Comprehensive Income and Reclassifications Adjustments (Details) - USD ($) $ in Thousands		9 Months Ended
	Apr. 30, 2019	Jan. 25, 2020
Accumulated other comprehensive loss
Balance, net of $0 deferred taxes, as of April 30, 2019		$ 2
Balance, net of $0 deferred taxes, as of January 25, 2020	$ 2	69
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss
Balance, net of $0 deferred taxes, as of April 30, 2019		2
Change in foreign currency translation adjustments, net of $0 taxes		67
Balance, net of $0 deferred taxes, as of January 25, 2020	2	69
Other comprehensive income, tax	$ 0	0
Foreign Currency Translation Adjustments
Accumulated other comprehensive loss
Other comprehensive income, tax		$ 0

- Definition

Accumulated adjustment, net of tax, that results from the process of translating subsidiary financial statements and foreign equity investments into the reporting currency from the functional currency of the reporting entity, net of reclassification of realized foreign currency translation gains or losses.

+ References + Details

Income Taxes

9 Months Ended

Jan. 25, 2020

Income Taxes

Income Taxes

14. Income Taxes

For the three and nine months ended January 25, 2020, the Company recorded a (benefit from) provision for income taxes of $(38,000) and $3,203,000, respectively, yielding an effective tax rate of (28.4)% and 10.6%, respectively. For the three and nine months ended January 26, 2019, the Company recorded a provision for income taxes of $946,000 and $4,724,000, respectively, yielding effective tax rates of 9.4% and 11.1%, respectively. The variance from statutory rates for the three and nine months ended January 25, 2020 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options. The variance from statutory rates for the three and nine months ended January 26, 2019 was primarily due to federal R&D credits and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

Organization and Significant Accounting Policies - Performance Obligations (Details)	Jan. 25, 2020 USD ($)
Organization and Significant Accounting Policies
Remaining performance obligations	$ 125,958,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-30
Organization and Significant Accounting Policies
Remaining performance obligations (as a percentage)	75.00%
Performance Obligations
Year of performance obligations	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-30
Organization and Significant Accounting Policies
Remaining performance obligations (as a percentage)	24.00%
Performance Obligations
Year of performance obligations	2 years

Leases - Supplemental lease information (Details) $ in Thousands	9 Months Ended
	Jan. 25, 2020 USD ($)
Leases
Cash paid for amounts included in the measurement of operating lease liabilities	$ 4,029
Right-of-use assets obtained in exchange for new lease liabilities	$ 12,634
Weighted average remaining lease term	35 months
Weighted average discount rate	3.60%

Long-Term Incentive Awards

9 Months Ended

Jan. 25, 2020

Long-Term Incentive Awards.

Long-Term Incentive Awards

13. Long-Term Incentive Awards

During the three months ended July 27, 2019, the Company granted awards under its amended and restated 2006 Equity Incentive Plan (the “Restated 2006 Plan”) to key employees (“Fiscal 2020 LTIP”). Awards under the Fiscal 2020 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2020, July 2021 and July 2022, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2022. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 200% for each such metric

were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. For the three and nine months ended January 25, 2020, the Company recorded $215,000 and $512,000 of compensation expense related to the Fiscal 2020 LTIP. At January 25, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $4,263,000.

During the three months ended July 28, 2018, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2019 LTIP”). Awards under the Fiscal 2019 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2019, July 2020 and July 2021, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2021. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 200% for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. For the three and nine months ended January 25, 2020, the Company recorded $246,000 and $294,000 of compensation expense related to the Fiscal 2019 LTIP, respectively. For the three and nine months ended January 26, 2019, the Company recorded $226,000 and $482,000 of compensation expense related to the Fiscal 2019 LTIP, respectively. At January 25, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2019 LTIP is $2,478,000.

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2018 LTIP”). Awards under the Fiscal 2018 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2018, July 2019 and July 2020, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2020. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 200% for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. For the three and nine months ended January 25, 2020, the Company recorded $201,000 and $162,000 of compensation expense related to the Fiscal 2018 LTIP, respectively. For the three and nine months ended January 26, 2019, the Company recorded $317,000 and $653,000 of compensation expense related to the Fiscal 2018 LTIP, respectively. At January 25, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2018 LTIP is $1,850,000.

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2017 LTIP”). Awards under the Fiscal 2017 LTIP consist of: (i) time-based restricted stock awards, which vested in equal tranches in July 2017, July 2018 and July 2019, and (ii) PRSUs, which vested based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2019. During the three months ended July 27, 2019, the Company issued a total of 14,814 fully-vested shares of common stock to settle the PRSUs in the Fiscal 2017 LTIP. No compensation expense was recorded during the three and nine months ended January 25, 2020 for the Fiscal 2017 LTIP.

At January 25, 2020 and April 30, 2019, the Company recorded cumulative stock-based compensation expense from the Fiscal 2020 LTIP, Fiscal 2019 LTIP and Fiscal 2018 LTIP of $2,397,000 and $1,429,000, respectively. At each reporting period, the Company reassesses the probability of achieving the performance targets for the PRSUs. 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. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

Investments (Details) - USD ($) $ in Thousands	Jan. 25, 2020	Apr. 30, 2019
Short-term investments:
Total held-to-maturity and short-term investments	$ 148,502	$ 150,487
Long-term investments:
Total long-term investments	26,409	9,386
Held to maturity securities
Short-term investments:
Total held-to-maturity and short-term investments	135,302	150,487
Long-term investments:
Total long-term investments	21,462	9,386
Held to maturity securities \| Municipal securities
Short-term investments:
Total held-to-maturity and short-term investments	7,565	5,332
Long-term investments:
Total long-term investments	15,887
Held to maturity securities \| U.S. government securities
Short-term investments:
Total held-to-maturity and short-term investments	45,439	63,205
Long-term investments:
Total long-term investments		7,404
Held to maturity securities \| Corporate bonds
Short-term investments:
Total held-to-maturity and short-term investments	82,298	81,950
Long-term investments:
Total long-term investments	4,558	$ 1,982
Held to maturity securities \| Certificates of deposit
Long-term investments:
Total long-term investments	1,017
Available-for-sale securities
Short-term investments:
Total held-to-maturity and short-term investments	13,200
Long-term investments:
Total long-term investments	4,947
Available-for-sale securities \| Investment in limited partnership fund
Long-term investments:
Total long-term investments	4,947
Available-for-sale securities \| Variable rate demand notes
Short-term investments:
Total held-to-maturity and short-term investments	$ 13,200

Fair Value Measurements - (Details) $ in Thousands	Jan. 25, 2020 USD ($)
Fair Value Measurement
Financial liabilities	$ 15,700
Variable rate demand notes
Fair Value Measurement
Financial liabilities	13,200
Contingent consideration
Fair Value Measurement
Financial liabilities	2,500
Recurring basis \| Significant other observable inputs (Level 2)
Fair Value Measurement
Financial liabilities	13,200
Recurring basis \| Significant other observable inputs (Level 2) \| Variable rate demand notes
Fair Value Measurement
Financial liabilities	13,200
Recurring basis \| Significant unobservable inputs (Level 3)
Fair Value Measurement
Financial liabilities	2,500
Recurring basis \| Significant unobservable inputs (Level 3) \| Contingent consideration
Fair Value Measurement
Financial liabilities	$ 2,500

Fair Value Measurements - Reconciliation (Details) - Significant unobservable inputs (Level 3) $ in Thousands	9 Months Ended
	Jan. 25, 2020 USD ($)
Reconciliation between beginning and ending balances of items measured at fair value on recurring basis
Business acquisition	$ 1,703
Included in inventories	380
Balance at the end of the period	2,500
Cost of sales
Reconciliation between beginning and ending balances of items measured at fair value on recurring basis
Included in earnings	767
SG&A
Reconciliation between beginning and ending balances of items measured at fair value on recurring basis
Included in earnings	(703)
Reseach and development
Reconciliation between beginning and ending balances of items measured at fair value on recurring basis
Included in earnings	$ 353

Organization and Significant Accounting Policies - Revenue by Category (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Disaggregation of revenue
Revenue	$ 61,891,000	$ 75,322,000	$ 232,073,000	$ 226,344,000
Contract Liability
Disaggregation of revenue
Revenue	12,000	10,000	1,670,000	1,587,000
Domestic
Disaggregation of revenue
Revenue	27,626,000	34,436,000	116,399,000	116,514,000
International
Disaggregation of revenue
Revenue	34,265,000	40,886,000	115,674,000	109,830,000
U.S. government
Disaggregation of revenue
Revenue	25,535,000	52,383,000	124,971,000	135,232,000
Non-U.S. government
Disaggregation of revenue
Revenue	36,356,000	22,939,000	107,102,000	91,112,000
FFP
Disaggregation of revenue
Revenue	40,145,000	52,833,000	168,607,000	160,890,000
CPFF
Disaggregation of revenue
Revenue	20,863,000	22,370,000	60,384,000	65,223,000
T&M
Disaggregation of revenue
Revenue	883,000	119,000	3,082,000	231,000
Small UAS
Disaggregation of revenue
Revenue	36,965,000	47,704,000	162,868,000	131,119,000
TMS
Disaggregation of revenue
Revenue	7,908,000	11,270,000	21,419,000	49,055,000
HAPS
Disaggregation of revenue
Revenue	11,762,000	13,586,000	37,490,000	37,981,000
Other
Disaggregation of revenue
Revenue	$ 5,256,000	$ 2,762,000	$ 10,296,000	$ 8,189,000

Intangibles - Estimated amortization expense (Details) $ in Thousands	Apr. 30, 2019 USD ($)
Estimated amortization expense for the next five years
2020	$ 720
2021	2,792
2022	2,829
2023	2,688
2024	2,629
Total	$ 11,658

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Income taxes
(Benefit from) provision for income taxes	$ (38)	$ 946	$ 3,203	$ 4,724
Effective tax benefit rate (as a percent)	(28.40%)	9.40%	10.60%	11.10%

Intangibles

9 Months Ended

Jan. 25, 2020

Intangibles

Intangibles

8. Intangibles

The components of intangibles are as follows (in thousands):


	January 25,		April 30,
	2020		2019
Technology	$	14,950	$	-
Licenses		1,006		1,006
Customer relationships		873		733
In-process research and development		550		-
Non-compete agreements		320		-
Trademarks and tradenames		68		28
Other		3		3
Intangibles, gross		17,770		1,770
Less accumulated amortization		(3,413)		(1,311)
Intangibles, net	$	14,357	$	459

The weighted average amortization period at January 25, 2020 and April 30, 2019 was five years and one year, respectively. Amortization expense for the three and nine months ended January 25, 2020 was $775,000 and $2,102,000, respectively. Amortization expense for the three and nine months ended January 26, 2019 was $104,000 and $253,000, respectively.

Technology, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements were recognized in conjunction with the Company’s acquisition of Pulse on June 10, 2019. Refer to Note 18—Business Acquisitions for further details.

Estimated amortization expense for the next five years is as follows (in thousands):


	Year ending
	April 30,
2020	$	720
2021		2,792
2022		2,829
2023		2,688
2024		2,629
	$	11,658

Organization and Significant Accounting Policies - Government Contracts (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019	Apr. 30, 2019
Government Contracts
Reserves for incurred cost claim audits	$ 275,000		$ 275,000		$ 93,000
Numerator for basic earnings per share:
Continuing operations attributable to AeroVironment	(1,008,000)	$ 8,431,000	23,603,000	$ 35,815,000
Discontinued operations, net of tax		(62,000)		5,941,000
Net (loss) income attributable to AeroVironment	$ (1,008,000)	$ 8,369,000	$ 23,603,000	$ 41,756,000
Denominator for basic (loss) earnings per share:
Weighted average common shares	23,821,145	23,687,672	23,790,788	23,643,866
Dilutive effect of employee stock options, restricted stock and restricted stock units		394,147	285,407	420,142
Denominator for diluted (loss) earnings per share	23,821,145	24,081,819	24,076,195	24,064,008
Number of shares reserved for issuance	0		0
Number of anti-dilutive shares	287,408	1,705	3,076	5,519

Investments

9 Months Ended

Jan. 25, 2020

Investments

Investments

3. Investments

Investments consist of the following (in thousands):


	January 25,		April 30,
	2020		2019

Short-term investments:
Held-to-maturity securities:
Municipal securities	$	7,565	$	5,332
U.S. government securities		45,439		63,205
Corporate bonds		82,298		81,950
Total held-to-maturity investments		135,302		150,487
Available-for-sale securities:
Variable rate demand notes		13,200		—
Total available-for-sale investments		13,200		—
Total short-term investments	$	148,502	$	150,487
Long-term investments:
Held-to-maturity securities:
Municipal securities		15,887		—
U.S. government securities		—		7,404
Corporate bonds		4,558		1,982
Certificates of deposit		1,017		—
Total held-to-maturity investments		21,462		9,386
Available-for-sale securities:
Investment in limited partnership fund		4,947		—
Total available-for-sale investments		4,947		—
Total long-term investments	$	26,409	$	9,386

Held-To-Maturity Securities

As of January 25, 2020 and April 30, 2019, the balance of held-to-maturity securities consisted of state and local government municipal securities, U.S. government securities, U.S. government agency securities, highly rated corporate bonds, and certificates of deposit. 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 January 25, 2020 were as follows (in thousands):


	January 25, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	23,452	$	12	$	(4)	$	23,460
U.S. government securities		45,439		63		—		45,502
Corporate bonds		86,856		57		—		86,913
Certificates of deposit		1,017		4		—		1,021
Total held-to-maturity investments	$	156,764	$	136	$	(4)	$	156,896

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of April 30, 2019 were as follows (in thousands):


	April 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	5,332	$	2	$	(1)	$	5,333
U.S. government securities		70,609		78		(52)		70,635
Corporate bonds		83,932		20		(5)		83,947
Total held-to-maturity investments	$	159,873	$	100	$	(58)	$	159,915

The amortized cost and fair value of the held-to-maturity securities by contractual maturity at January 25, 2020 were as follows (in thousands):


	Cost		Fair Value
Due within one year	$	135,302	$	135,418
Due after one year through five years		21,462		21,478
Total	$	156,764	$	156,896

Available-For-Sale Securities

Variable Rate Demand Notes

Variable rate demand notes (“VRDNs”) are floating rate municipal instruments usually with long maturities (commonly 20 or 30 years), and carry a coupon that resets periodically. VRDNs are classified as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations. Despite the long-term nature of their stated contractual maturities, VRDNs typically have either a one- or seven-day put option which allows investors to put the security back to the remarketing agent at par value plus accrued interest in the event the Company decides to liquidate its investment in a particular VRDN.

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at January 25, 2020 were as follows (in thousands):


	Cost		Fair Value
Due after 20 years	$	13,200	$	13,200
Total	$	13,200	$	13,200

Investment in Limited Partnership Fund

During the three months ended July 27, 2019, the Company made its initial capital contribution to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets. This investment does not have readily determinable fair values. The Company has elected to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments (in thousands):


	April 30, 2019		Changes in				January 25, 2020
	Carrying		Fair Value		Sales or		Carrying
	Value		Reflected in Net Income		Purchases		Value
Variable rate demand notes	$	—	$	—	$	13,200	$	13,200
Investment in limited partnership		—		—		4,947		4,947
Total available-for-sale investments	$	—	$	—	$	18,147	$	18,147

Auction Rate Securities

As of April 30, 2018, the balance of available-for-sale auction rate securities consisted of two investment grade auction rate municipal bonds with maturities ranging from 1 to 16 years. These investments have characteristics similar to short term investments. During the three months ended July 28, 2018, the remaining investment grade auction rate municipal bonds were redeemed at par value.

Accumulated Other Comprehensive Income and Reclassifications Adjustments

9 Months Ended

Jan. 25, 2020

Accumulated Other Comprehensive Income and Reclassifications Adjustments

Accumulated Other Comprehensive Income and Reclassifications Adjustments

11. Accumulated Other Comprehensive Income and Reclassifications Adjustments

The components of accumulated other comprehensive income and adjustments are as follows (in thousands):


	Accumulated Other
	Income
Balance, net of $0 deferred taxes, as of April 30, 2019	$	2
Reclassifications out of accumulated other comprehensive income, net of taxes		—
Change in foreign currency translation adjustments, net of $0 taxes		67
Balance, net of $0 deferred taxes, as of January 25, 2020	$	69

Fair Value Measurements

9 Months Ended

Jan. 25, 2020

Fair Value Measurements

Fair Value Measurements

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 liabilities measured at fair value on a recurring basis at January 25, 2020, 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
Variable rate demand notes	$	—	$	13,200	$	—	$	13,200
Contingent consideration		—		—		2,500		2,500
Total	$	—	$	13,200	$	2,500	$	15,700

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):


	Fair Value
	Measurements Using
	Significant
	Unobservable Inputs
Description	(Level 3)
Balance at May 1, 2019	$	—
Business acquisition		1,703
Transfers to Level 3		—
Total (gains) losses (realized or unrealized)
Included in inventories		380
Included in product cost of sales		767
Included in selling, general and administrative		(703)
Included in research and development		353
Included in other comprehensive income		—
Settlements		—
Balance at January 25, 2020	$	2,500
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 or liabilities still held at January 25, 2020	$	—

Pursuant to the Pulse Purchase Agreement, the sellers may receive up to a maximum of $5,000,000 in additional cash consideration (“contingent consideration”), if specific research and development milestones are achieved by December 10, 2021 and the continued employment of specific key employees. The contingent consideration was valued using a probability weighted discounted cash flow model. The analysis considered, among other items, contractual terms of the Pulse Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the milestones required for payment of the contingent consideration will be achieved. See Note 18—Business Acquisitions. During the three months ended January 25, 2020, one of the research and development milestones was achieved, and the requirements for the payout of remaining contingent consideration were concluded to not have been met. As a result, the Company recorded a gain of $832,000, which was recorded in selling, general, and administrative expense in the consolidated statements of operations. On February 26, 2020, $2,500,000 of contingent consideration was paid to the sellers for the achieved milestone, and the remaining $2,500,000 is no longer restricted.

- Definition

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.

+ References + Details

Investments - Auction rate securities (Details) - Auction rate securities	Apr. 30, 2018 item
Investments
Number of available-for-sale securities	2
Minimum
Available For Sale Securities
Maturity period of available-for-sale securities	1 year
Maximum
Available For Sale Securities
Maturity period of available-for-sale securities	16 years

Accumulated Other Comprehensive Income and Reclassifications Adjustments (Tables)

9 Months Ended

Jan. 25, 2020

Accumulated Other Comprehensive Income and Reclassifications Adjustments

Schedule of components of accumulated other comprehensive loss

The components of accumulated other comprehensive income and adjustments are as follows (in thousands):


	Accumulated Other
	Income
Balance, net of $0 deferred taxes, as of April 30, 2019	$	2
Reclassifications out of accumulated other comprehensive income, net of taxes		—
Change in foreign currency translation adjustments, net of $0 taxes		67
Balance, net of $0 deferred taxes, as of January 25, 2020	$	69

Inventories, net (Tables)

9 Months Ended

Jan. 25, 2020

Inventories, net

Schedule of inventories

Inventories consist of the following (in thousands):


	January 25,		April 30,
	2020		2019
Raw materials	$	19,119	$	16,792
Work in process		33,005		19,162
Finished goods		23,169		25,926
Inventories, gross		75,293		61,880
Reserve for inventory excess and obsolescence		(10,137)		(7,824)
Inventories, net	$	65,156	$	54,056

Organization and Significant Accounting Policies - Pulse Aerospace, LLC (Details)	Jun. 10, 2019
Organization and Significant Accounting Policies
Ownership interest acquired	100.00%

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Jan. 25, 2020	Feb. 25, 2020
Document and Entity Information
Entity Registrant Name	AEROVIRONMENT, INC.
Entity File Number	001-33261
Entity Central Index Key	0001368622
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jan. 25, 2020
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-2705790
Amendment Flag	false
Trading Symbol	AVAV
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--04-30
Entity Address, Address Line One	900 Innovators Way
Entity Address, City or Town	Simi Valley
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	93065
City Area Code	805
Local Phone Number	520-8350
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		23,995,109
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Small Business	false

Discontinued Operations (Tables)

9 Months Ended

Jan. 25, 2020

Discontinued Operations.

Schedule of statements of operations data for the EES Business


	Three Months Ended		Nine Months Ended
	January 26,		January 26,
	2019		2019
Net sales	$	—	$	4,256
Cost of sales		54		5,080
Gross margin		(54)		(824)
Selling, general and administrative		14		1,517
Research and development		34		1,075
Other income, net		—		1
Loss from discontinued operations before income taxes		(102)		(3,415)
Benefit for income taxes		(41)		(904)
Net loss from discontinued operations	$	(61)	$	(2,511)
Gain on sale of business, net of tax expense of $2,463		(1)		8,452
Net (loss) income from discontinued operations	$	(62)	$	5,941

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 50
-Paragraph 3A
-URI http://asc.fasb.org/extlink&oid=109226691&loc=SL51724579-110230

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109222650&loc=d3e1474-107760

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5D
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721677-107760

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=109222160&loc=SL51721533-107759

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 3A
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721659-107760

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 4B
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721665-107760

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109226691&loc=d3e2941-110230

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5C
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721675-107760

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721683-107760

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=109222650&loc=d3e1361-107760

Reference 11: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5A
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721671-107760

Reference 12: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5B
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721673-107760

Reference 13: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 4A
-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721663-107760

+ Details

Leases

9 Months Ended

Jan. 25, 2020

Leases

Leases

10. Leases

The Company leases certain buildings, land and equipment. Under the New Lease Standard, at contract inception the Company determines whether the contract is, or contains, a lease and whether the lease should be classified as an

operating or a financing lease. Operating leases are recorded in operating lease right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

The Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification. The Company defines the initial lease term to include renewal options determined to be reasonably certain. The Company’s leases have remaining lease terms of less than one year to six years, some of which may include options to extend the lease for up to 10 years, and some of which may include options to terminate the lease after two years. None of the Company’s options to extend or terminate are reasonably certain of being exercised, and are therefore not included in the Company’s determination of lease assets and liabilities. For operating leases, the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Many of the Company’s real estate lease agreements contain incentives for tenant improvements, rent holidays, or rent escalation clauses. For tenant improvement incentives, if the incentive is determined to be a leasehold improvement owned by the lessee, the Company generally records incentive as a reduction to fixed lease payments thereby reducing rent expense. For rent holidays and rent escalation clauses during the lease term, the Company records rental expense on a straight-line basis over the term of the lease. For these lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use.

The Company does not have any finance leases. The Company does not have any material restrictions or covenants in its lease agreements, sale-leaseback transactions, land easements or residual value guarantees.

In determining the inputs to the incremental borrowing rate calculation, the Company makes judgments about the value of the leased asset, its credit rating and the lease term including the probability of its exercising options to extend or terminate the underlying lease. Additionally, the Company makes judgments around contractual asset substitution rights in determining whether a contract contains a lease.

The components of lease costs recorded in cost of sales for product sales and contract services and selling, general and administrative (“SG&A”) expense were as follows (in thousands):


	Nine Months Ended
	January 25,
	2020
Operating lease cost	$	3,453
Short term lease cost		489
Variable lease cost		609
Sublease income		(230)
Total lease costs, net	$	4,321

Supplemental lease information were as follows:


	Nine Months Ended
	January 25,
	2020
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,029
Right-of-use assets obtained in exchange for new lease liabilities	$	12,634

Weighted average remaining lease term		35 months
Weighted average discount rate		3.6%

Maturities of operating lease liabilities as of January 25, 2020 were as follows (in thousands):


2020	$	(1,309)
2021		4,496
2022		3,749
2023		2,171
2024		1,055
Thereafter		62
Total lease payments		10,224
Less: imputed interest		(585)
Total present value of operating lease liabilities	$	9,639

Maturities of operating lease liabilities as of April 30, 2019 were as follows:


2020	$	5,298
2021		3,527
2022		2,723
2023		1,554
2024		953
Thereafter		—
Total lease payments	$	14,055

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jan. 25, 2020	Apr. 30, 2019
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1,039	$ 1,041
Due from Related Parties	$ 28,849	$ 9,028
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, Authorized shares	10,000,000	10,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, Authorized shares	100,000,000	100,000,000
Common stock, Issued shares	23,995,109	23,946,293
Common stock, outstanding shares	23,995,109	23,946,293

Consolidated Statements of Comprehensive (Loss) Income (Parenthetical) $ in Thousands	9 Months Ended
	Jan. 26, 2019 USD ($)
Consolidated Statements of Comprehensive (Loss) Income
Unrealized gain on investments, net of deferred tax expense	$ 51

Leases (Tables)

9 Months Ended

Jan. 25, 2020

Leases

Schedule of components of lease costs

The components of lease costs recorded in cost of sales for product sales and contract services and selling, general and administrative (“SG&A”) expense were as follows (in thousands):


	Nine Months Ended
	January 25,
	2020
Operating lease cost	$	3,453
Short term lease cost		489
Variable lease cost		609
Sublease income		(230)
Total lease costs, net	$	4,321

Schedule of supplemental lease information


	Nine Months Ended
	January 25,
	2020
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,029
Right-of-use assets obtained in exchange for new lease liabilities	$	12,634

Weighted average remaining lease term		35 months
Weighted average discount rate		3.6%

Schedule of maturities of operating lease liabilities - ASC 842

Maturities of operating lease liabilities as of January 25, 2020 were as follows (in thousands):


2020	$	(1,309)
2021		4,496
2022		3,749
2023		2,171
2024		1,055
Thereafter		62
Total lease payments		10,224
Less: imputed interest		(585)
Total present value of operating lease liabilities	$	9,639

Schedule of maturities of operating lease liabilities - ASC 840


2020	$	5,298
2021		3,527
2022		2,723
2023		1,554
2024		953
Thereafter		—
Total lease payments	$	14,055

Share Repurchase

9 Months Ended

Jan. 25, 2020

Share Repurchase

Share Repurchase

15. Share Repurchase

In September 2015, the Company’s Board of Directors authorized a program to repurchase up to $25,000,000 of the Company’s common stock with no specified termination date for the program. No shares were repurchased under the program during the three and nine months ended January 25, 2020 or January 26, 2019. As of January 25, 2020 and April 30, 2019, approximately $21,200,000 remained authorized for future repurchases under this program.

Fair Value Measurements (Tables)

9 Months Ended

Jan. 25, 2020

Fair Value Measurements

Schedule of financial liabilities measured at fair value on recurring basis

The Company’s financial liabilities measured at fair value on a recurring basis at January 25, 2020, 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
Variable rate demand notes	$	—	$	13,200	$	—	$	13,200
Contingent consideration		—		—		2,500		2,500
Total	$	—	$	13,200	$	2,500	$	15,700

Schedule of financial assets measured at fair value on a recurring basis


	Fair Value
	Measurements Using
	Significant
	Unobservable Inputs
Description	(Level 3)
Balance at May 1, 2019	$	—
Business acquisition		1,703
Transfers to Level 3		—
Total (gains) losses (realized or unrealized)
Included in inventories		380
Included in product cost of sales		767
Included in selling, general and administrative		(703)
Included in research and development		353
Included in other comprehensive income		—
Settlements		—
Balance at January 25, 2020	$	2,500
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 or liabilities still held at January 25, 2020	$	—

Warranty Reserves

9 Months Ended

Jan. 25, 2020

Warranty Reserves

Warranty Reserves

7. 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 nine months ended January 25, 2020 and January 26, 2019, respectively (in thousands):


	Three Months Ended				Nine Months Ended
	January 25,			January 26,	January 25,		January 26,
	2020		2019		2020		2019
Beginning balance	$	1,875	$	2,431	$	1,704	$	2,090
Warranty expense		250		53		1,469		414
Changes in estimates related to pre-existing warranties		—		—		(189)		519
Warranty costs settled		(289)		(354)		(1,148)		(893)
Ending balance	$	1,836	$	2,130	$	1,836	$	2,130

Related Party Transactions

9 Months Ended

Jan. 25, 2020

Related Party Transactions

Related Party Transactions

16. Related Party Transactions

Related party transactions are defined as transactions between the Company and entities either controlled by the Company or that the Company can significantly influence. Although SoftBank has a controlling interest in HAPSMobile, the Company determined that it has the ability to exercise significant influence over HAPSMobile. As such, HAPSMobile and SoftBank are considered related parties of the Company. Concurrent with the formation of HAPSMobile, the Company executed a Design and Development Agreement (the “DDA”) with HAPSMobile. Under the DDA and related efforts, the Company will use its best efforts, up to a maximum net value of $148,576,000, to design and build prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conduct low altitude and high altitude flight tests of the prototype aircraft.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $11,762,000 and $37,491,000 for the three and nine months ended January 25, 2020, respectively. The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $13,586,000 and $37,981,000 for the three and nine months ended January 26, 2019, respectively. At January 25, 2020 and April 30, 2019, the Company had unbilled related party receivables from HAPSMobile of $28,849,000 and $9,028,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively. During the year ended April 30, 2019, the Company owned a 10% stake in accordance with the Joint Venture Agreement which was diluted to approximately 5% during the first three months ended July 27, 2019. On December 4, 2019, the Company purchased 540,050,000 yen ($4,982,000) of additional shares of HAPSMobile to increase its ownership stake to approximately 7%. Refer to Note 6—Equity Method Investments for further details.

Equity Method Investments

9 Months Ended

Jan. 25, 2020

Equity Method Investments

Equity Method Investments

6. Equity Method Investments

In December of 2017, the Company and SoftBank formed a joint venture, HAPSMobile, which is a Japanese corporation. As of January 25, 2020, the Company’s ownership stake in HAPSMobile was approximately 7%, with the remaining 93% held by SoftBank. In connection with the formation of the joint venture on December 27, 2017, the Company initially purchased shares of HAPSMobile representing a 5% ownership interest in exchange for an investment of 210,000,000 yen ($1,860,000). The Company subsequently purchased additional shares of HAPSMobile in order to maintain a 5% ownership stake in the joint venture. The first such purchase occurred on April 17, 2018, at which time the Company invested 150,000,000 yen ($1,407,000) for the purchase of additional shares of HAPSMobile. On January 29, 2019, the Company invested an additional 209,500,000 yen ($1,926,000) to maintain its 5% ownership stake. On February 9, 2019, the Company elected to purchase 632,800,000 yen ($5,671,000) of additional shares of HAPSMobile to increase the Company’s ownership in the joint venture from 5% to 10%, and on May 10, 2019, the Company purchased 500,000,000 yen ($4,569,000) of additional shares of HAPSMobile to maintain its 10% ownership stake. The Company’s ownership percentage was subsequently diluted from 10% to approximately 5%. On December 4, 2019, the Company purchased 540,050,000 yen ($4,982,000) of additional shares of HAPSMobile to increase its ownership stake to approximately 7%.

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile pursuant to the applicable Joint Venture Agreement and related organizational documents, the Company’s investment is accounted for as an equity method investment. For the three and nine months ended January 25, 2020, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $1,200,000 and $3,410,000, respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations. For the three and nine months ended January 26, 2019, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $717,000 and $2,071,000, respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations. At January 25, 2020 and April 30, 2019, the carrying value of the investment in HAPSMobile of $11,819,000 and $5,612,000, respectively, was recorded in other assets.

Customer-Funded Research & Development

9 Months Ended

Jan. 25, 2020

Customer-Funded Research & Development

Customer-Funded Research & Development

12. 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 as costs are incurred. Revenue from customer-funded R&D contracts are recognized in accordance with Topic 606 over time as costs are incurred. Revenue from customer-funded R&D was approximately $17,939,000 and $50,565,000 for the three and nine months ended January 25, 2020, respectively. Revenue from customer-funded R&D was approximately $19,437,000 and $55,344,000 for the three and nine months ended January 26, 2019, respectively.

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Revenue:
Total revenue	$ 61,891	$ 75,322	$ 232,073	$ 226,344
Cost of sales:
Cost of sales	38,395	44,930	132,139	134,964
Gross margin:
Total gross margin	23,496	30,392	99,934	91,380
Selling, general and administrative	13,223	14,464	43,146	40,066
Research and development	11,381	8,087	30,948	22,631
(Loss) income from continuing operations	(1,108)	7,841	25,840	28,683
Other income:
Interest income, net	1,122	1,272	3,717	3,246
Other income, net	120	962	632	10,641
Income from continuing operations before income taxes	134	10,075	30,189	42,570
(Benefit from) provision for income taxes	(38)	946	3,203	4,724
Equity method investment loss, net of tax	(1,200)	(717)	(3,410)	(2,071)
Net income from continuing operations	(1,028)	8,412	23,576	35,775
Discontinued operations:
Gain on sale of business, net of tax expense of $2,463				8,452
Loss from discontinued operations, net of tax		(62)		(2,511)
Net (loss) income from discontinued operations		(62)		5,941
Net (loss) income	(1,028)	8,350	23,576	41,716
Net loss attributable to noncontrolling interest	20	19	27	40
Net (loss) income attributable to AeroVironment	$ (1,008)	$ 8,369	$ 23,603	$ 41,756
Net (loss) income per share attributable to AeroVironment-Basic
Basic, continuing (in dollars per share)	$ (0.04)	$ 0.35	$ 0.99	$ 1.52
Basic, discontinuing (in dollars per share)				0.25
Net (loss) income per share attributable to AeroVironment-Basic (in dollars per share)	(0.04)	0.35	0.99	1.77
Net (loss) income per share attributable to AeroVironment-Diluted
Diluted, continuing (in dollars per share)	(0.04)	0.35	0.98	1.49
Diluted, discontinued (in dollars per share)				0.25
Net (loss) income per share attributable to AeroVironment-Diluted	$ (0.04)	$ 0.35	$ 0.98	$ 1.74
Weighted-average shares outstanding:
Basic (in shares)	23,821,145	23,687,672	23,790,788	23,643,866
Diluted (in shares)	23,821,145	24,081,819	24,076,195	24,064,008
Product sales
Revenue:
Revenue	$ 36,432	$ 50,024	$ 159,657	$ 152,393
Cost of sales:
Cost of sales	21,034	26,780	82,244	83,158
Gross margin:
Total gross margin	15,398	23,244	77,413	69,235
Contract services
Revenue:
Revenue	25,459	25,298	72,416	73,951
Cost of sales:
Cost of sales	17,361	18,150	49,895	51,806
Gross margin:
Total gross margin	$ 8,098	$ 7,148	$ 22,521	$ 22,145

Inventories, net (Details) - USD ($)	3 Months Ended		9 Months Ended
Inventories, net (Details) - USD ($)	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019	Apr. 30, 2019
Inventories, net
Raw materials	$ 19,119,000		$ 19,119,000		$ 16,792,000
Work in process	33,005,000		33,005,000		19,162,000
Finished goods	23,169,000		23,169,000		25,926,000
Inventories, gross	75,293,000		75,293,000		61,880,000
Reserve for inventory excess and obsolescence	(10,137,000)		(10,137,000)		(7,824,000)
Inventories, net	65,156,000		65,156,000		$ 54,056,000
Inventory reserve charge	$ 617,000		3,807,000
Impairment of long-lived assets		$ 1,889,000		$ 3,079,000
UAS Quantix Solution
Inventories, net
Inventory reserve charge			$ 2,600,000

Business Acquisitions (Details)				3 Months Ended		9 Months Ended
Business Acquisitions (Details)	Feb. 26, 2020 USD ($)	Feb. 20, 2020 USD ($)	Jun. 10, 2019 USD ($) item	Jan. 25, 2020 USD ($) item	Jan. 26, 2019 USD ($)	Jan. 25, 2020 USD ($)	Jan. 26, 2019 USD ($)
Business Acquisitions
Ownership interest acquired			100.00%
Business Combinations, Assets Acquired and Liabilities Assumed at Acquisition Date
Goodwill				$ 6,340,000		$ 6,340,000
Fair value of consideration transferred:
Period of goodwill deduction						15 years
Supplemental Pro forma Information
Revenue				2,229,000		$ 2,901,000
Amortization of Intangible Assets				775,000	$ 104,000	2,102,000	$ 253,000
SG&A
Supplemental Pro forma Information
Acquisition-related costs				$ 344,000		1,036,000
Pulse Aerospace, LLC
Business Acquisitions
Ownership interest acquired			100.00%
Amount of cash less closing indebtedness and transaction costs			$ 20,650,000
Amount of retention to cover post closing indemnification claims			250,000
Amount of holdback			$ 1,250,000
Number of months after closing holdback will be paid			18 months
Number of research and development milestones \| item			2	1
Each milestone achievement	$ 2,500,000	$ 2,500,000
Total milestone achievement			$ 5,000,000
Business acquisitions gain						832,000
Fair value of contingent consideration				$ 2,500,000		2,500,000
Business Combinations, Assets Acquired and Liabilities Assumed at Acquisition Date
Inventory			334,000
Goodwill			6,340,000
Other assets and liabilities assumed			(614,000)
Total net identified assets acquired			21,880,000
Fair value of consideration transferred:
Cash	$ 2,500,000	$ 2,500,000	18,677,000
Holdback			1,250,000
Retention			250,000
Contingent consideration			$ 1,703,000
Supplemental Pro forma Information
Revenue				61,891,000	75,922,000	232,300,000	228,533,000
Net income attributable to AeroVironment				(726,000)	$ 7,244,000	24,227,000	$ 38,471,000
Amortization of Intangible Assets				$ (671,000)		(1,790,000)
Pulse Aerospace, LLC \| Discount rate
Business Acquisitions
Measurement input			4.5
Pulse Aerospace, LLC \| Minimum
Business Acquisitions
Each milestone achievement			$ 0
Pulse Aerospace, LLC \| Maximum
Business Acquisitions
Each milestone achievement			2,500,000
Fair value of consideration transferred:
Cash						$ 5,000,000
Pulse Aerospace, LLC \| Technology
Business Combinations, Assets Acquired and Liabilities Assumed at Acquisition Date
Intangible assets			14,950,000
Pulse Aerospace, LLC \| In process research and development
Business Combinations, Assets Acquired and Liabilities Assumed at Acquisition Date
Intangible assets			550,000
Pulse Aerospace, LLC \| Non-compete agreements
Business Combinations, Assets Acquired and Liabilities Assumed at Acquisition Date
Intangible assets			$ 320,000

Customer-Funded Research & Development (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Customer-Funded Research & Development
Revenue from customer funded research and development	$ 17,939,000	$ 19,437,000	$ 50,565,000	$ 55,344,000

Goodwill

9 Months Ended

Jan. 25, 2020

Goodwill.

Goodwill

9. Goodwill

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


Balance at April 30, 2019	$	-
Additions to goodwill		6,340
Impairment of goodwill		-
Balance at January 25, 2020	$	6,340

The increase of goodwill is attributable to the acquisition of Pulse. Refer to Note 18—Business Acquisitions for further details.

Warranty Reserves (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Warranty Reserves (Details) - USD ($) $ in Thousands	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Warranty Reserves
Beginning balance	$ 1,875	$ 2,431	$ 1,704	$ 2,090
Warranty expense	250	53	1,469	414
Changes in estimates related to pre-existing warranties			(189)	519
Warranty costs settled	(289)	(354)	(1,148)	(893)
Ending balance	$ 1,836	$ 2,130	$ 1,836	$ 2,130

Business Acquisitions

9 Months Ended

Jan. 25, 2020

Business Acquisitions

Business Acquisitions

18. Business Acquisitions

On June 10, 2019, the Company purchased 100% of the issued and outstanding member units of Pulse pursuant to the terms of the Pulse Purchase Agreement. The Company’s acquisition of Pulse’s helicopter UAS product family strengthens AeroVironment’s leading family of fixed-wing small unmanned aircraft systems and increases the mission capabilities of AeroVironment’s family of systems.

Pursuant to the Pulse Purchase Agreement, at closing, the Company paid $20,650,000 in cash, less closing indebtedness and transaction costs as defined in the Pulse Purchase Agreement, less a $250,000 retention to cover any post-closing indemnification claims, and less a $1,250,000 holdback amount, with the retention and holdback to be released to the member unit holders of Pulse, less any amounts paid or reserved, 18 months after the closing of the transactions in accordance with the terms of the Pulse Purchase Agreement. The closing cash consideration included the payoff of the outstanding indebtedness of Pulse as of the closing date. The Company financed the acquisition entirely from available cash on hand.

In addition to the consideration paid at closing, the acquisition of Pulse includes contingent consideration arrangements that require additional consideration to be paid by the Company to the sellers of Pulse if two specified research and development milestones are achieved by December 10, 2021 and the continued employment of specified employees. Amounts are payable upon the achievement of the milestones. The range of the undiscounted amounts the Company could pay under each of the contingent consideration agreements is zero or $2,500,000 ($5,000,000 in total if both milestones are achieved and specific key employees continued employment). The fair value of the contingent consideration recognized on the acquisition date of $1,703,000 was estimated by applying the income approach. That measure is based on significant Level 3 inputs not observable in the market. Key assumptions include (1) a discount rate of 4.5% and (2) the probability that each of the milestones will be achieved.

As of January 25, 2020, the fair value of the contingent consideration was $2,500,000 recorded in other current liabilities on the consolidated balance sheet. During the three months ended January 25, 2020, one of the research and development milestones was achieved, and the requirements for the payout of remaining contingent consideration were concluded to not have been met. As a result, the Company recorded a gain of $832,000 which was recorded in selling, general, and administrative expense in the consolidated statements of operations. On February 26, 2020, $2,500,000 of contingent consideration was paid to the sellers for the achieved milestone, and the remaining $2,500,000 is no longer restricted.

The following table summarizes the provisional allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the acquisition of Pulse (in thousands):


	June 10,
	2019
Technology	$	14,950
Goodwill		6,340
In-process R&D		550
Inventory		334
Non-compete agreements		320
Other assets, net of liabilities assumed		(614)
Total net identified assets acquired	$	21,880

Fair value of consideration:
Cash	$	18,677
Holdback		1,250
Retention		250
Contingent consideration		1,703
Total	$	21,880

Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s best estimate of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield materially different results.

The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing customers, the workforce of Pulse and expected future customers in the helicopter UAS market. For tax purposes the acquisition was treated as an asset purchase and the goodwill is deductible ratably over a period of fifteen years.

Supplemental Pro Forma Information (unaudited)

Pulse revenue for the three and nine months ended January 25, 2020 since acquisition on June 10, 2019 were $2,229,000 and $2,901,000, respectively. Other than the aforementioned revenue and intangible asset amortization expense of $671,000 and $1,790,000 for the three and nine months ended January 25, 2020 since acquisition on June 10, 2019, the Pulse financial results were not significant. The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2018 (in thousands):


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
	2020		2019		2020		2019
Revenue	$	61,891	$	75,922	$	232,300	$	228,533
Net (loss) income attributable to AeroVironment	$	(726)	$	7,244	$	24,227	$	38,471

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

These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 28, 2018, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2018 with the consequential tax effects, and including the results of Pulse prior to acquisition.

The Company incurred approximately $344,000 and $1,036,000 of acquisition-related expenses for the three and nine months ended January 25, 2020. These expenses are included in selling, general and administrative, research and development, and product cost of sales on the Company’s consolidated income statement.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes 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, 2018, nor are they indicative of results of operations that may occur in the future.

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019
Operating activities
Net income	$ 23,576	$ 41,716
Gain on sale of business, net of tax		(8,452)
Loss from discontinued operations, net of tax		2,511
Net income from continuing operations	23,576	35,775
Adjustments to reconcile net income from continuing operations to cash provided by operating activities from continuing operations:
Depreciation and amortization	7,107	5,530
Loss from equity method investment	3,410	2,071
Provision for doubtful accounts	(2)	(33)
Other non-cash gain, net	(719)
Non-cash lease expense	3,453
Gains on foreign currency transactions		(10)
Deferred income taxes	(946)	(1,214)
Stock-based compensation	4,751	5,599
(Gain) loss on sale of property and equipment	(71)	51
Amortization of debt securities	(1,291)	(941)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	3,245	22,817
Unbilled receivables and retentions	(24,364)	(34,760)
Inventories	(10,766)	(12,954)
Income tax receivable	821
Prepaid expenses and other assets	216	(1,791)
Accounts payable	(1,301)	(10,645)
Other liabilities	7,947	(2,598)
Net cash provided by operating activities of continuing operations	15,066	6,897
Investing activities
Acquisition of property and equipment	(8,504)	(6,806)
Equity method investments	(9,551)
Business acquisition, net of cash acquired	(18,641)
Proceeds from sale of business		31,994
Proceeds from sale of property and equipment	81
Redemptions of held-to-maturity investments	166,917	191,455
Purchases of held-to-maturity investments	(162,517)	(211,120)
Redemptions of available-for-sale investments	41,150	2,250
Purchases of available-for-sale investments	(59,297)
Net cash (used in) provided by investing activities from continuing operations	(50,362)	7,773
Financing activities
Principal payments of capital lease obligations		(154)
Tax withholding payment related to net settlement of equity awards	(1,009)	(1,033)
Exercise of stock options	93	71
Net cash used in financing activities from continuing operations	(916)	(1,116)
Discontinued operations
Operating activities of discontinued operations	0	(7,250)
Investing activities of discontinued operations	0	(452)
Net cash used in discontinued operations		(7,702)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(36,212)	5,852
Cash, cash equivalents, and restricted cash at beginning of period	172,708	143,517
Cash, cash equivalents, and restricted cash at end of period	136,496	149,369
Cash paid, net during the period for:
Income taxes	518	6,777
Non-cash activities
Unrealized gain on investments, net of deferred tax expense of $51		57
Change in foreign currency translation adjustments	67	(32)
Acquisitions of property and equipment included in accounts payable	$ 263	$ 58

Organization and Significant Accounting Policies

9 Months Ended

Jan. 25, 2020

Organization and Significant Accounting Policies

Organization and Significant Accounting Policies

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 (“UAS”) 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 (“U.S. GAAP”) 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 U.S. GAAP 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 nine months ended January 25, 2020 are not necessarily indicative of the results for the full year ending April 30, 2020. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2019, included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP 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 intercompany accounts and transactions have been eliminated.

In December 2017, the Company and SoftBank Corp. (“SoftBank”) formed a joint venture, HAPSMobile, Inc. (“HAPSMobile”). As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment has been accounted for as an equity method investment. The Company has presented its proportion of HAPSMobile’s net loss in equity method investment activity, net of tax in the consolidated statements of operations. The carrying value of the investment in HAPSMobile was recorded in other assets. Refer to Note 6—Equity Method Investments for further details.

On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its Efficient Energy Systems business segment (the “EES Business”) to Webasto Charging Systems, Inc. (“Webasto”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) between Webasto and the Company. The Company determined that the EES Business met the criteria for classification as an asset held for sale at April 30, 2018 and represents a strategic shift in the Company’s operations. Therefore, the assets and liabilities and the results of operations of the EES Business are reported as discontinued operations for all periods presented. Refer to Note 2—Discontinued Operations for further details.

On June 10, 2019, the Company purchased 100% of the issued and outstanding member units of Pulse Aerospace, LLC (“Pulse”) pursuant to the terms of a Unit Purchase Agreement (the “Pulse Purchase Agreement”). The assets, liabilities and operating results of Pulse have been included in the Company’s consolidated financial statements. Refer to Note 18—Business Acquisitions for further details.

During the three months ended October 27, 2019, the Company dissolved its wholly-owned subsidiary, Skytower, Inc., the results of which were not material to the consolidated financial statements.

Recently Adopted Accounting Standards

Effective May 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), along with several additional clarification ASU’s issued during 2018, collectively the “New Lease Standard”. This New Lease Standard requires the lessee to recognize the assets and liabilities for the rights and obligations created by leases. The Company elected to adopt the New Lease Standard using the modified retrospective transition approach through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As such the Company did not recast comparative consolidated financial statements. The Company also elected the package of practical expedients which allows the Company to not reassess existing or expired contracts for existence of a lease, lease classification, or amortization of previously capitalized initial direct leasing cost. Additionally, the Company elected the short-term lease exception to not record right-of-use assets and lease liabilities for leases with a term less than 12 months and the practical expedient to not separate lease and non-lease components. Adoption of the New Lease Standard resulted in the recording of lease assets and lease liabilities on the consolidated balance sheet with no cumulative impact to retained earnings and did not have a material impact on the consolidated statement of cash flows. Refer to Note 10—Leases for additional information required as part of the adoption of the New Lease Standard.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 provides technical corrections, clarifications and other improvements across a variety of accounting topics. Among the clarifications, ASU 2018-09 clarifies that an entity should recognize excess tax benefits in the period in which the amount of the deduction is determined. This includes deductions that are taken on the entity’s return in a different period from when the event that gives rise to the tax deduction occurs and the uncertainty about whether the entity will receive a tax deduction and the amount of the tax deduction is resolved. Certain amendments were applicable immediately while others provide transition guidance and are effective in the Company’s first quarter of fiscal year 2020. The Company adopted ASU 2018-09 on May 1, 2019 using the modified retrospective method. The adoption of ASU 2018-09 resulted in a cumulative adjustment to increase retained earnings by $665,000 at May 1, 2019.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, the Company’s existing intangible assets have been reclassified from other assets to intangibles, net on the consolidated balance sheet for all periods presented.

Restricted Cash

The Company classifies cash accounts which are not available for general use as restricted cash. Pursuant to the terms of the Pulse Purchase Agreement, the Company maintains an escrow account to satisfy the payment of contingent consideration due to the sellers if certain objectives are met. The restricted funds in the escrow account are recorded in other assets on the consolidated balance sheet. As of January 25, 2020 restricted cash was $5,000,000. During the three months ended January 25, 2020, one of the research and development milestones was achieved, and the requirements for the remaining contingent consideration were concluded to not have been met. On February 26, 2020, $2,500,000 of contingent consideration was paid to the sellers for the achieved milestone, and the remaining $2,500,000 is no longer restricted. The Company had no restricted cash as of April 30, 2019.

Revenue Recognition

The Company’s revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products and to provide related engineering, technical and other services according to the specifications of the customers. These contracts may be firm fixed price (“FFP”), cost plus fixed fee (“CPFF”), or time and materials (“T&M”). The Company considers all such contracts to be within the scope of ASC Topic 606.

Performance Obligations

A performance obligation is a promise in a contract to transfer distinct goods or services to a customer, and it is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and

revenue is recognized when each performance obligation under the terms of a contract is satisfied. Revenue is measured at the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its observable standalone selling price for products and services. When the standalone selling price is not directly observable, the Company uses its best estimate of the standalone selling price of each distinct good or service in the contract using the cost plus margin approach. This approach estimates the Company’s expected costs of satisfying the performance obligation and then adds an appropriate margin for that distinct good or service.

Contract modifications are routine in the performance of the Company’s contracts. In most instances, contract modifications are for additional goods and/or services that are distinct and, therefore, accounted for as new contracts.

The Company’s performance obligations are satisfied over time or at a point in time. Performance obligations are satisfied over time if the customer receives the benefits as the Company performs, if the customer controls the asset as it is being developed or produced, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for the Company’s costs incurred to date plus a reasonable margin. The contractual right to payment is generally supported by termination for convenience clauses that allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit, and take control of any work in process. Revenue for tactical missile systems (“TMS”) product deliveries and Customer-Funded Research and Development contracts is recognized over time as costs are incurred. Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services. Contract services revenue is recognized over time as services are rendered. Typically, revenue is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Training services are recognized over time using an output method based on days of training completed.

For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer. Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied. The Company’s small UAS product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS systems and spare parts. Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.

On January 25, 2020, the Company had approximately $125,958,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog. The Company currently expects to recognize approximately 75% of the remaining performance obligations as revenue in fiscal 2020, an additional 24% in fiscal 2021, and the balance thereafter.

The Company collects sales, value added, and other taxes concurrent with revenue producing activities, which are excluded from revenue when they are both imposed on a specific transaction and collected from a customer.

Contract Estimates

Accounting for contracts and programs primarily with a duration of less than six months involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the total expected costs to complete the contract and recognizes revenue based on the percentage of costs incurred at period end. Typically, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

The nature of the Company’s contracts gives rise to several types of variable consideration, including penalty fees and incentive awards generally for late delivery and early delivery, respectively. The Company generally estimates such variable consideration as the most likely amount. In addition, the Company includes the estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the related uncertainty is resolved. These estimates are based on historical award experience, anticipated performance and the Company’s best judgment at the time. Because of the certainty in estimating these amounts, they are included in the transaction price of the Company’s contracts and the associated remaining performance obligations.

As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, the Company regularly reviews and updates its contract-related estimates. Changes in cumulative revenue estimates, due to changes in the estimated transaction price or cost estimates, are recorded using a cumulative catch-up adjustment in the period identified for contracts with performance obligations recognized over time. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the quarter it is identified, and it is recorded in other current liabilities.

The impact of adjustments in contract estimates on the Company’s operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate net favorable impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was approximately $1,152,000 and $1,169,000 for the three and nine month periods ended January 25, 2020, respectively. No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three month period ended January 25, 2020. During the nine month period ended January 25, 2020, the Company revised its estimates of the total expected costs to complete a contract associated with a design and development agreement. The impact of the revised estimate on this contract on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase of approximately $1,036,000. The aggregate net unfavorable impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was approximately $1,705,000 for the three months ended January 26, 2019. For the three months ended January 26, 2019, the Company revised its estimates of the total expected costs to complete a TMS contract due to ongoing test and evaluation resulting from some systems not passing the customer’s final lot acceptance tests which the Company anticipates to be resolved in a future period. The impact of the revised estimate on this contract on revenue related to performance obligations satisfied or partially satisfied in previous periods was a reduction of approximately $1,519,000. The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the nine month period ended January 26, 2019. No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the nine month period ended January 26, 2019.

Revenue by Category

The following tables present the Company’s revenue disaggregated by major product line, contract type, customer category and geographic location (in thousands):


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by major product line/program	2020		2019		2020		2019
Small UAS	$	36,965	$	47,704	$	162,868	$	131,119
TMS		7,908		11,270		21,419		49,055
HAPS		11,762		13,586		37,490		37,981
Other		5,256		2,762		10,296		8,189
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by contract type	2020		2019		2020		2019
FFP	$	40,145	$	52,833	$	168,607	$	160,890
CPFF		20,863		22,370		60,384		65,223
T&M		883		119		3,082		231
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344

Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with FFP contracts. However, these types of contracts generally offer additional profits when the Company completes the work for less than originally estimated. CPFF contracts generally subject the Company to lower risk. Accordingly, the associated base fees are usually lower than fees on FFP contracts. Under T&M contracts, the Company’s profit may vary if actual labor hour rates vary significantly from the negotiated rates.


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by customer category	2020		2019		2020		2019
U.S. government:	$	25,535	$	52,383	$	124,971	$	135,232
Non-U.S. government		36,356		22,939		107,102		91,112
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by geographic location	2020		2019		2020		2019
Domestic	$	27,626	$	34,436	$	116,399	$	116,514
International		34,265		40,886		115,674		109,830
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344

Contract Balances

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits on the consolidated balance sheet. In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities recorded in customer advances on the consolidated balance sheet. Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. For the Company’s product revenue, the Company generally receives cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable. Changes in the contract asset and liability balances during the nine month period ended January 25, 2020 were not materially impacted by any other factors. For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.

Revenue recognized for the three and nine month periods ended January 25, 2020 that was included in contract liability balances at April 30, 2019 were $12,000 and $1,670,000, respectively; and revenue recognized for the three and nine month periods ended January 26, 2019 that was included in contract liability balances at April 30, 2018 were $10,000 and $1,587,000, respectively.

Segments

Operating segments are defined as components of an enterprise about 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, who is the Chief Executive Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the focus of research and development (“R&D”), on a consolidated basis for the Company’s continuing operations. Accordingly, the Company operates its business as a single reportable segment.

Investments

The Company’s investments are accounted for as held-to-maturity reported at amortized cost, available-for-sale reported at cost less impairment, and available-for-sale reported at fair value, which approximates book value. The Company has elected to measure available-for-sale investments that do not have readily determinable fair values at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Fair Values of Financial Instruments

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

Government Contracts

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

For example, during the course of its audits, the DCAA may question the Company’s incurred 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. 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 CPFF or T&M government contracts to be recorded at actual rates to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. During the fiscal year ended April 30, 2019, the Company settled rates for its incurred cost claims with the DCAA for fiscal years 2016 and 2017 without payment of any consideration. At January 25, 2020 and April 30, 2019, the Company had $275,000 and $93,000 reserved for incurred cost claim audits, respectively.

Intangibles Assets — Acquired in Business Combinations

The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of the acquired business to the respective net tangible and intangible assets. Acquired intangible assets include technology, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses and the Company’s comparable businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits are consumed.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is

tested for impairment annually during the fourth quarter of the Company’s fiscal year or when events or circumstances change in a manner that indicates goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business or political climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends or significant underperformance relative to projected future results of operations.

(Loss) Earnings Per Share

Basic (loss) earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

The reconciliation of basic to diluted shares is as follows (in thousands except share data):


		Three Months Ended				Nine Months Ended
(Loss) income from	January 25, 2020		January 26, 2019		January 25, 2020		January 26, 2019
Continuing operations attributable to AeroVironment	$	(1,008)	$	8,431	$	23,603	$	35,815
Discontinued operations, net of tax		—		(62)		—		5,941
Net (loss) income attributable to AeroVironment	$	(1,008)	$	8,369	$	23,603	$	41,756
Denominator for basic (loss) earnings per share:
Weighted average common shares		23,821,145		23,687,672		23,790,788		23,643,866
Dilutive effect of employee stock options, restricted stock and restricted stock units		—		394,147		285,407		420,142
Denominator for diluted (loss) earnings per share		23,821,145		24,081,819		24,076,195		24,064,008

Due to the net loss for the three months ended January 25, 2020, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive. Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 287,408 and 3,076 for the three and nine months ended January 25, 2020, respectively. Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 1,705 and 5,519 for the three and nine months ended January 26, 2019, respectively.

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This ASU, and several related amendments the FASB has issued to provide additional supplemental guidance on certain aspects of the original pronouncement, is intended to replace the incurred loss impairment methodology under GAAP with a methodology that reflects using a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments, and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The guidance is effective for fiscal years beginning after December 15, 2019 and the interim periods therein, with early adoption permitted. The Company plans to adopt the guidance May 1, 2020 using the modified retrospective approach. The Company does not believe the guidance will have a material impact the Company’s allowance for doubtful accounts for accounts receivable. The Company is still evaluating the potential impact on its consolidated financial statements for remaining financial instruments within the scope of this guidance, primarily the debt securities in the Company’s investment portfolio.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). This ASU removes or modifies current disclosures while adding certain new disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods therein, with early adoption permitted for the removed or modified disclosures. The removed and modified disclosures can be adopted retrospectively, and the added disclosures should be adopted prospectively. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350-40). This ASU allows for capitalization of implementation costs associated with certain cloud computing arrangements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods therein, with early adoption permitted. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted. The adoption method is dependent on the specific amendment included in this update as certain amendments require retrospective adoption, modified retrospective adoption, an option of retrospective or modified retrospective, and prospective adoption. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (Topic 321, Topic 323, and Topic 815). This ASU clarifies accounting certain topics impacted by Topic 321 Investments—Equity Securities. These topics include measuring equity securities using the measurement alternative, how the measurement alternative should be applied to equity method accounting, and certain forward contracts and purchased options which would be accounted for under the equity method of accounting upon settlement or exercise. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted. The amendments should be adopted prospectively. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

Equity Method Investments (Details) ¥ in Thousands	3 Months Ended		9 Months Ended
Equity Method Investments (Details) ¥ in Thousands	Jan. 25, 2020 USD ($)	Jan. 26, 2019 USD ($)	Jan. 25, 2020 USD ($)	Jan. 26, 2019 USD ($)	Dec. 04, 2019 USD ($)	Dec. 04, 2019 JPY (¥)	Jul. 27, 2019	May 10, 2019 USD ($)	May 10, 2019 JPY (¥)	Apr. 30, 2019 USD ($)	Feb. 09, 2019 USD ($)	Feb. 09, 2019 JPY (¥)	Feb. 08, 2019	Jan. 29, 2019 USD ($)	Jan. 29, 2019 JPY (¥)	Apr. 17, 2018 USD ($)	Apr. 17, 2018 JPY (¥)	Dec. 27, 2017 USD ($)	Dec. 27, 2017 JPY (¥)
Equity Method Investments
Equity method investment loss, net of tax	$ (1,200,000)	$ (717,000)	$ (3,410,000)	$ (2,071,000)
HAPSMobile
Equity Method Investments
Ownership percentage					7.00%	7.00%	5.00%	10.00%	10.00%	10.00%	10.00%	10.00%	5.00%	5.00%	5.00%			5.00%	5.00%
Payments for purchase of interest					$ 4,982,000	¥ 540,050		$ 4,569,000	¥ 500,000		$ 5,671,000	¥ 632,800		$ 1,926,000	¥ 209,500	$ 1,407,000	¥ 150,000	$ 1,860,000	¥ 210,000
HAPSMobile \| Equity method investment loss, net of tax
Equity Method Investments
Equity method investment loss, net of tax		$ 717,000		$ 2,071,000
HAPSMobile \| Equity method investment activity, net of tax
Equity Method Investments
Equity method investment loss, net of tax	(1,200,000)		(3,410,000)
HAPSMobile \| Other assets, long term
Equity Method Investments
Carrying value of investment	$ 11,819,000		$ 11,819,000							$ 5,612,000
HAPSMobile \| SoftBank
Equity Method Investments
Ownership percentage	93.00%		93.00%
AeroVironment \| HAPSMobile
Equity Method Investments
Ownership percentage	7.00%		7.00%

Organization and Significant Accounting Policies - Contract Estimates (Details)	3 Months Ended		9 Months Ended
	Jan. 25, 2020 USD ($) contract	Jan. 26, 2019 USD ($) contract	Jan. 25, 2020 USD ($) contract	Jan. 26, 2019 USD ($) contract
Material adjustment to any one contract	$ 0			$ 0
Number of active contracts \| contract	1	1	1	1
Design and development agreement
Amount of aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods	$ 1,152,000		$ 1,169,000
TMS contract
Amount of aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods		$ 1,705,000
Revision of estimate of total costs required to complete the contracts \| Cumulative catch-up adjustment \| Design and development agreement
Amount of revised aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods	1,036,000		1,036,000
Revision of estimate of total costs required to complete the contracts \| Cumulative catch-up adjustment \| TMS contract
Amount of revised aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods	$ 1,519,000		$ 1,519,000

Organization and Significant Accounting Policies (Policies)

9 Months Ended

Jan. 25, 2020

Organization and Significant Accounting Policies

Basis of Presentation

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

During the three months ended October 27, 2019, the Company dissolved its wholly-owned subsidiary, Skytower, Inc., the results of which were not material to the consolidated financial statements.

Recently Adopted Accounting Standards

Reclassifications

Restricted Cash

Revenue Recognition

Performance Obligations

Contract Estimates

Revenue by Category

The following tables present the Company’s revenue disaggregated by major product line, contract type, customer category and geographic location (in thousands):


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by major product line/program	2020		2019		2020		2019
Small UAS	$	36,965	$	47,704	$	162,868	$	131,119
TMS		7,908		11,270		21,419		49,055
HAPS		11,762		13,586		37,490		37,981
Other		5,256		2,762		10,296		8,189
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by contract type	2020		2019		2020		2019
FFP	$	40,145	$	52,833	$	168,607	$	160,890
CPFF		20,863		22,370		60,384		65,223
T&M		883		119		3,082		231
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by customer category	2020		2019		2020		2019
U.S. government:	$	25,535	$	52,383	$	124,971	$	135,232
Non-U.S. government		36,356		22,939		107,102		91,112
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by geographic location	2020		2019		2020		2019
Domestic	$	27,626	$	34,436	$	116,399	$	116,514
International		34,265		40,886		115,674		109,830
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344

Contract Balances

Segments

Investments

Fair Values of Financial Instruments

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

Government Contracts

Intangible Assets-Acquired in Business Combinations

Intangibles Assets — Acquired in Business Combinations

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is

(Loss) Earnings Per Share

(Loss) Earnings Per Share

Basic (loss) earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

The reconciliation of basic to diluted shares is as follows (in thousands except share data):


		Three Months Ended				Nine Months Ended
(Loss) income from	January 25, 2020		January 26, 2019		January 25, 2020		January 26, 2019
Continuing operations attributable to AeroVironment	$	(1,008)	$	8,431	$	23,603	$	35,815
Discontinued operations, net of tax		—		(62)		—		5,941
Net (loss) income attributable to AeroVironment	$	(1,008)	$	8,369	$	23,603	$	41,756
Denominator for basic (loss) earnings per share:
Weighted average common shares		23,821,145		23,687,672		23,790,788		23,643,866
Dilutive effect of employee stock options, restricted stock and restricted stock units		—		394,147		285,407		420,142
Denominator for diluted (loss) earnings per share		23,821,145		24,081,819		24,076,195		24,064,008

Recently Issued Accounting Standards

Fair Value Measurements - Pulse purchase agreement (Details) - Pulse Aerospace, LLC				3 Months Ended	9 Months Ended
	Feb. 26, 2020 USD ($)	Feb. 20, 2020 USD ($)	Jun. 10, 2019 USD ($) item	Jan. 25, 2020 item	Jan. 25, 2020 USD ($)
Fair Value Measurement
Total cash consideration	$ 2,500,000	$ 2,500,000	$ 18,677,000
Each milestone achievement	$ 2,500,000	$ 2,500,000
Number of research and development milestones \| item			2	1
Business acquisitions gain					$ 832,000
Maximum
Fair Value Measurement
Total cash consideration					$ 5,000,000
Each milestone achievement			$ 2,500,000

Legal Settlements

9 Months Ended

Jan. 25, 2020

Legal Settlements

Legal Settlements

17. Legal Settlements

In May 2018, the Company entered into a settlement agreement to dismiss its claims against MicaSense Inc. and former AeroVironment employees, Gabriel Torres, Justin McAllister, and Jeff McBride. The terms and amount of the settlement agreement are confidential. The proceeds of the settlement were received during the three months ended July 28, 2018 and have been recorded in other income, net on the consolidated statements of operations.

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019
Consolidated Statements of Comprehensive (Loss) Income
Net income	$ (1,028)	$ 8,350	$ 23,576	$ 41,716
Other comprehensive (loss) income:
Change in foreign currency translation adjustments	(112)	(1)	67	(32)
Unrealized gain on investments, net of deferred tax expense of $51				57
Total comprehensive (loss) income	(1,140)	8,349	23,643	41,741
Net loss attributable to noncontrolling interest	20	19	27	40
Comprehensive (loss) income attributable to AeroVironment	$ (1,120)	$ 8,368	$ 23,670	$ 41,781

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1B
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669625-108580

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (c)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8736-108599

Reference 6: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591551-111686

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=118932676&loc=d3e3000-108585

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=108774443&loc=SL4569616-111683

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591552-111686

+ Details

Business Acquisitions (Tables)

9 Months Ended

Jan. 25, 2020

Business Acquisitions

Schedule of the fair value of the assets acquired and liabilities assumed at the acquisition date

The following table summarizes the provisional allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the acquisition of Pulse (in thousands):


	June 10,
	2019
Technology	$	14,950
Goodwill		6,340
In-process R&D		550
Inventory		334
Non-compete agreements		320
Other assets, net of liabilities assumed		(614)
Total net identified assets acquired	$	21,880

Fair value of consideration:
Cash	$	18,677
Holdback		1,250
Retention		250
Contingent consideration		1,703
Total	$	21,880

Schedule of unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
	2020		2019		2020		2019
Revenue	$	61,891	$	75,922	$	232,300	$	228,533
Net (loss) income attributable to AeroVironment	$	(726)	$	7,244	$	24,227	$	38,471

Investments (Tables)

9 Months Ended

Jan. 25, 2020

Investments

Schedule of investments

Investments consist of the following (in thousands):


	January 25,		April 30,
	2020		2019

Short-term investments:
Held-to-maturity securities:
Municipal securities	$	7,565	$	5,332
U.S. government securities		45,439		63,205
Corporate bonds		82,298		81,950
Total held-to-maturity investments		135,302		150,487
Available-for-sale securities:
Variable rate demand notes		13,200		—
Total available-for-sale investments		13,200		—
Total short-term investments	$	148,502	$	150,487
Long-term investments:
Held-to-maturity securities:
Municipal securities		15,887		—
U.S. government securities		—		7,404
Corporate bonds		4,558		1,982
Certificates of deposit		1,017		—
Total held-to-maturity investments		21,462		9,386
Available-for-sale securities:
Investment in limited partnership fund		4,947		—
Total available-for-sale investments		4,947		—
Total long-term investments	$	26,409	$	9,386

schedule of amortized cost and fair value of the available-for-sale debt securities by contractual maturity

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at January 25, 2020 were as follows (in thousands):


	Cost		Fair Value
Due after 20 years	$	13,200	$	13,200
Total	$	13,200	$	13,200

Schedule of activity related to available-for-sale investments recorded in short-term and long-term investments

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments (in thousands):


	April 30, 2019		Changes in				January 25, 2020
	Carrying		Fair Value		Sales or		Carrying
	Value		Reflected in Net Income		Purchases		Value
Variable rate demand notes	$	—	$	—	$	13,200	$	13,200
Investment in limited partnership		—		—		4,947		4,947
Total available-for-sale investments	$	—	$	—	$	18,147	$	18,147

Held to maturity securities

Investments

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

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of January 25, 2020 were as follows (in thousands):


	January 25, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	23,452	$	12	$	(4)	$	23,460
U.S. government securities		45,439		63		—		45,502
Corporate bonds		86,856		57		—		86,913
Certificates of deposit		1,017		4		—		1,021
Total held-to-maturity investments	$	156,764	$	136	$	(4)	$	156,896

The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the held-to-maturity investments as of April 30, 2019 were as follows (in thousands):


	April 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Municipal securities	$	5,332	$	2	$	(1)	$	5,333
U.S. government securities		70,609		78		(52)		70,635
Corporate bonds		83,932		20		(5)		83,947
Total held-to-maturity investments	$	159,873	$	100	$	(58)	$	159,915

Schedule of amortized cost and fair value by contractual maturity

The amortized cost and fair value of the held-to-maturity securities by contractual maturity at January 25, 2020 were as follows (in thousands):


	Cost		Fair Value
Due within one year	$	135,302	$	135,418
Due after one year through five years		21,462		21,478
Total	$	156,764	$	156,896

Organization and Significant Accounting Policies - Recently Adopted Accounting Standards (Details)	May 01, 2019 USD ($)
ASU 2018-09 \| Effect of the Adoption of ASC Topic 606
Revenue recognition
Retained earnings, continuing operations	$ 665,000

Leases (Details)	9 Months Ended
Leases (Details)	Jan. 25, 2020
Leases
Option to extend	true
Option to terminate	true
Option to terminate period (in years)	2 years
Minimum
Leases
Remaining lease terms (in years)	1 year
Maximum
Leases
Remaining lease terms (in years)	6 years
Option to extend period (in years)	10 years

Intangibles (Tables)

9 Months Ended

Jan. 25, 2020

Intangibles

Schedule of components of intangibles

The components of intangibles are as follows (in thousands):


	January 25,		April 30,
	2020		2019
Technology	$	14,950	$	-
Licenses		1,006		1,006
Customer relationships		873		733
In-process research and development		550		-
Non-compete agreements		320		-
Trademarks and tradenames		68		28
Other		3		3
Intangibles, gross		17,770		1,770
Less accumulated amortization		(3,413)		(1,311)
Intangibles, net	$	14,357	$	459

Schedule of estimated amortization expense for the next five years

Estimated amortization expense for the next five years is as follows (in thousands):


	Year ending
	April 30,
2020	$	720
2021		2,792
2022		2,829
2023		2,688
2024		2,629
	$	11,658

Investments - Held-To-Maturity Securities (Details) - USD ($) $ in Thousands	Jan. 25, 2020	Apr. 30, 2019
Held To Maturity Securities
Amortized Cost	$ 156,764	$ 159,873
Gross Unrealized Gains	136	100
Gross Unrealized Losses	(4)	(58)
Total	156,896	159,915
Municipal securities
Held To Maturity Securities
Amortized Cost	23,452	5,332
Gross Unrealized Gains	12	2
Gross Unrealized Losses	(4)	(1)
Total	23,460	5,333
U.S. government securities
Held To Maturity Securities
Amortized Cost	45,439	70,609
Gross Unrealized Gains	63	78
Gross Unrealized Losses		(52)
Total	45,502	70,635
Corporate bonds
Held To Maturity Securities
Amortized Cost	86,856	83,932
Gross Unrealized Gains	57	20
Gross Unrealized Losses		(5)
Total	86,913	$ 83,947
Certificates of deposit
Held To Maturity Securities
Amortized Cost	1,017
Gross Unrealized Gains	4
Total	$ 1,021

Intangibles (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
Intangibles (Details) - USD ($)	Jan. 25, 2020	Jan. 26, 2019	Jan. 25, 2020	Jan. 26, 2019	Apr. 30, 2019
Intangibles
Intangibles, gross	$ 17,770,000		$ 17,770,000		$ 1,770,000
Less accumulated amortization	(3,413,000)		(3,413,000)		(1,311,000)
Intangibles, net	14,357,000		$ 14,357,000		$ 459,000
Weighted average amortization period			5 years		1 year
Amortization expense	775,000	$ 104,000	$ 2,102,000	$ 253,000
Technology
Intangibles
Intangibles, gross	14,950,000		14,950,000
Licenses
Intangibles
Intangibles, gross	1,006,000		1,006,000		$ 1,006,000
Customer relationships
Intangibles
Intangibles, gross	873,000		873,000		733,000
In process research and development
Intangibles
Intangibles, gross	550,000		550,000
Non-compete agreements
Intangibles
Intangibles, gross	320,000		320,000
Trademarks and tradenames
Intangibles
Intangibles, gross	68,000		68,000		28,000
Other
Intangibles
Intangibles, gross	$ 3,000		$ 3,000		$ 3,000

Consolidated Statements of Cash Flows (Parenthetical) $ in Thousands	9 Months Ended
	Jan. 26, 2019 USD ($)
Consolidated Statements of Cash Flows
Unrealized change in fair value of investments recorded in other comprehensive income (loss), net of deferred taxes	$ 51

Goodwill (Tables)

9 Months Ended

Jan. 25, 2020

Goodwill.

Schedule of the changes in goodwill balances

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


Balance at April 30, 2019	$	-
Additions to goodwill		6,340
Impairment of goodwill		-
Balance at January 25, 2020	$	6,340

Leases - Maturities - ASC 840 (Details) $ in Thousands	Apr. 30, 2019 USD ($)
Maturities of operating lease liabilities:
2020	$ 5,298
2021	3,527
2022	2,723
2023	1,554
2024	953
Total lease payments	$ 14,055

Goodwill (Details) $ in Thousands	9 Months Ended
Goodwill (Details) $ in Thousands	Jan. 25, 2020 USD ($)
Goodwill.
Additions to goodwill	$ 6,340
Goodwill, Ending Balance	$ 6,340

Organization and Significant Accounting Policies (Tables)

9 Months Ended

Jan. 25, 2020

Organization and Significant Accounting Policies

Schedule of revenue by category

The following tables present the Company’s revenue disaggregated by major product line, contract type, customer category and geographic location (in thousands):


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by major product line/program	2020		2019		2020		2019
Small UAS	$	36,965	$	47,704	$	162,868	$	131,119
TMS		7,908		11,270		21,419		49,055
HAPS		11,762		13,586		37,490		37,981
Other		5,256		2,762		10,296		8,189
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by contract type	2020		2019		2020		2019
FFP	$	40,145	$	52,833	$	168,607	$	160,890
CPFF		20,863		22,370		60,384		65,223
T&M		883		119		3,082		231
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by customer category	2020		2019		2020		2019
U.S. government:	$	25,535	$	52,383	$	124,971	$	135,232
Non-U.S. government		36,356		22,939		107,102		91,112
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
Revenue by geographic location	2020		2019		2020		2019
Domestic	$	27,626	$	34,436	$	116,399	$	116,514
International		34,265		40,886		115,674		109,830
Total revenue	$	61,891	$	75,322	$	232,073	$	226,344

Schedule of reconciliation of basic to diluted shares

The reconciliation of basic to diluted shares is as follows (in thousands except share data):


		Three Months Ended				Nine Months Ended
(Loss) income from	January 25, 2020		January 26, 2019		January 25, 2020		January 26, 2019
Continuing operations attributable to AeroVironment	$	(1,008)	$	8,431	$	23,603	$	35,815
Discontinued operations, net of tax		—		(62)		—		5,941
Net (loss) income attributable to AeroVironment	$	(1,008)	$	8,369	$	23,603	$	41,756
Denominator for basic (loss) earnings per share:
Weighted average common shares		23,821,145		23,687,672		23,790,788		23,643,866
Dilutive effect of employee stock options, restricted stock and restricted stock units		—		394,147		285,407		420,142
Denominator for diluted (loss) earnings per share		23,821,145		24,081,819		24,076,195		24,064,008

Discontinued Operations

9 Months Ended

Jan. 25, 2020

Discontinued Operations.

Discontinued Operations

2. Discontinued Operations

On June 29, 2018, the Company completed the sale of the EES Business to Webasto. In accordance with the terms of the Purchase Agreement, as amended by a side letter agreement executed at the closing, the Company received cash consideration of $31,994,000 upon closing, which resulted in a gain of $11,420,000 and has been recorded in gain on sale of business, net of tax in the consolidated statements of operations. During the nine months ended January 26, 2019, the Company recorded a reduction to the gain resulting from a working capital adjustment of $505,000. In addition, the Company and Webasto have engaged an independent accounting firm to resolve a working capital dispute in the amount of $922,000 pursuant to the terms of the Purchase Agreement. No amounts have been recorded in the consolidated financial statements related to the additional working capital dispute as the Company has assessed the likelihood of a loss to be less than probable.

The Company is entitled to receive additional cash consideration of $6,500,000 (the “Holdback”) upon tendering consents to assignment of two remaining customer contracts to Webasto. The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of January 25, 2020. The Company’s satisfaction of the requirements for the payment of the Holdback is currently in dispute.

On February 22, 2019, Webasto filed a lawsuit alleging several claims against the Company for breach of contract, indemnity, and bad faith, including allegations regarding inaccuracy of certain diligence disclosures, failure to provide certain consents to contract assignments and related to a previously announced product recall. Webasto seeks to recover the costs of the recall and other damages totaling a minimum of $6,500,000 in addition to attorneys’ fees, costs, and punitive damages. On August 16, 2019, the Company filed a counterclaim against Webasto seeking payment of the Holdback and declaratory relief regarding Webasto’s cancellation of an assigned contract. The Company believes that the allegations are generally meritless and is mounting a vigorous defense.

On October 29, 2019, P.B.M S.r.l. (“PBM”), filed a Notice of Arbitration naming Webasto and the Company as defendants, alleging over $1,700,000, plus attorneys’ fees, for unpaid invoices and reliance damages stemming from a 2017 agreement that the Company assigned to Webasto in the sale of the EES Business. In December 2019, the Company reached a settlement with PBM, and PBM settled its claims against Webasto, concurrently. PBM has

withdrawn its Notice of Arbitration, and the Company considers this matter closed. Parties to the Webasto lawsuit will amend their pleadings to reflect that any claims associated with PBM are no longer in dispute.

During the three months ended October 27, 2018, Webasto filed a recall report with the National Highway Traffic Safety Administration that named certain of the Company’s EES products as subject to the recall. The Company is continuing to assess the facts giving rise to the recall. Under the terms of the Purchase Agreement, the Company may be responsible for certain costs of such recall of named products the Company manufactured, sold or serviced prior to the closing of the sale of the EES Business. On August 14, 2019, Benchmark Electronics, Inc. (“Benchmark”), the company that assembled the products subject to the recall, served a demand for arbitration to the Company and Webasto, and a third-party part supplier pursuant to its contracts with the Company and Webasto, respectively. The Company filed a responsive pleading in the Benchmark arbitration on October 29, 2019, consisting of a general denial, affirmative defenses, and a reservation of the right to file counter-claims at a later date. Webasto challenged the validity of the Benchmark arbitration by filing an action in New York Superior Court. In December 2019, Webasto and Benchmark reached a settlement of their disputed claims. Benchmark withdrew its Notice of Arbitration against Webasto and the Company, but reserved its right to pursue indemnity claims against suppliers. The recall remains a significant part of the Webasto lawsuit.

Concurrent with the execution of the Purchase Agreement, the Company entered into a transition services agreement (the “TSA”) to provide certain general and administrative services to Webasto for a defined period. Income from performing services under the TSA was $57,000 and $545,000 has been recorded in other income, net in the consolidated statements of operations for three and nine months ended January 25, 2020, respectively, and $657,000 and $2,013,000 for three and nine months ended January 26, 2019, respectively.

The Company determined that the EES Business met the criteria for classification as an asset held for sale as of April 30, 2018 and represents a strategic shift in the Company’s operations. Therefore, the assets and liabilities and the results of operations of the EES Business are reported as discontinued operations for all periods presented. The table below presents the statements of operations data for the EES Business (in thousands).


	Three Months Ended		Nine Months Ended
	January 26,		January 26,
	2019		2019
Net sales	$	—	$	4,256
Cost of sales		54		5,080
Gross margin		(54)		(824)
Selling, general and administrative		14		1,517
Research and development		34		1,075
Other income, net		—		1
Loss from discontinued operations before income taxes		(102)		(3,415)
Benefit for income taxes		(41)		(904)
Net loss from discontinued operations	$	(61)	$	(2,511)
Gain on sale of business, net of tax expense of $2,463		(1)		8,452
Net (loss) income from discontinued operations	$	(62)	$	5,941

Organization and Significant Accounting Policies - Restricted Cash (Details) - USD ($)	Feb. 26, 2020	Feb. 20, 2020	Jun. 10, 2019	Jan. 25, 2020	Apr. 30, 2019
Restricted Cash [Abstract]
Restricted Cash				$ 5,000,000	$ 0
Pulse Aerospace, LLC
Restricted Cash [Abstract]
Each milestone achievement	$ 2,500,000	$ 2,500,000
Cash	$ 2,500,000	$ 2,500,000	$ 18,677,000

Related Party Transactions (Details) ¥ in Thousands	3 Months Ended		9 Months Ended
Related Party Transactions (Details) ¥ in Thousands	Jan. 25, 2020 USD ($)	Jan. 26, 2019 USD ($)	Jan. 25, 2020 USD ($)	Jan. 26, 2019 USD ($)	Dec. 04, 2019 USD ($)	Dec. 04, 2019 JPY (¥)	Jul. 27, 2019	May 10, 2019 USD ($)	May 10, 2019 JPY (¥)	Apr. 30, 2019 USD ($)	Feb. 09, 2019 USD ($)	Feb. 09, 2019 JPY (¥)	Feb. 08, 2019	Jan. 29, 2019 USD ($)	Jan. 29, 2019 JPY (¥)	Apr. 17, 2018 USD ($)	Apr. 17, 2018 JPY (¥)	Dec. 27, 2017 USD ($)	Dec. 27, 2017 JPY (¥)
Long-Term Incentive Awards
Revenue	$ 11,762,000	$ 13,586,000	$ 37,491,000	$ 37,981,000
Unbilled related party receivables	28,849,000		28,849,000							$ 9,028,000
Design and Development Agreement
Long-Term Incentive Awards
Maximum net value	148,576,000		148,576,000
HAPSMobile \| Design and Development Agreement
Long-Term Incentive Awards
Revenue	11,762,000	$ 13,586,000	37,491,000	$ 37,981,000
Unbilled related party receivables	$ 28,849,000		$ 28,849,000							$ 9,028,000
HAPSMobile
Long-Term Incentive Awards
Payments for purchase of interest					$ 4,982,000	¥ 540,050		$ 4,569,000	¥ 500,000		$ 5,671,000	¥ 632,800		$ 1,926,000	¥ 209,500	$ 1,407,000	¥ 150,000	$ 1,860,000	¥ 210,000
Ownership percentage					7.00%	7.00%	5.00%	10.00%	10.00%	10.00%	10.00%	10.00%	5.00%	5.00%	5.00%			5.00%	5.00%

Long-Term Incentive Awards (Details) - USD ($)	3 Months Ended					9 Months Ended		12 Months Ended
Long-Term Incentive Awards (Details) - USD ($)	Jan. 25, 2020	Jul. 27, 2019	Jan. 26, 2019	Jul. 28, 2018	Jul. 29, 2017	Jan. 25, 2020	Jan. 26, 2019	Apr. 30, 2019
Stock Based Compensation
Stock based compensation expense						$ 0		$ 0
Fiscal 2020 LTIP \| Performance based restricted stock units
Stock Based Compensation
Stock based compensation expense	$ 215,000					512,000
Exercisable period from grant date		3 years
Fiscal 2020 LTIP \| Performance based restricted stock units \| 100% Vested
Stock Based Compensation
Vesting (as a percentage)		100.00%
Fiscal 2020 LTIP \| Performance based restricted stock units \| 50% Vested
Stock Based Compensation
Vesting (as a percentage)		50.00%
Fiscal 2020 LTIP \| Performance based restricted stock units \| 200% Vested
Stock Based Compensation
Vesting (as a percentage)		200.00%
Fiscal 2020 LTIP \| Performance based restricted stock units \| Maximum
Stock Based Compensation
Stock based compensation expense						4,263,000
Fiscal 2019 LTIP \| Performance based restricted stock units
Stock Based Compensation
Stock based compensation expense	246,000		$ 226,000			294,000	$ 482,000
Exercisable period from grant date				3 years
Fiscal 2019 LTIP \| Performance based restricted stock units \| 100% Vested
Stock Based Compensation
Vesting (as a percentage)				100.00%
Fiscal 2019 LTIP \| Performance based restricted stock units \| 50% Vested
Stock Based Compensation
Vesting (as a percentage)				50.00%
Fiscal 2019 LTIP \| Performance based restricted stock units \| 200% Vested
Stock Based Compensation
Vesting (as a percentage)				200.00%
Fiscal 2019 LTIP \| Performance based restricted stock units \| Maximum
Stock Based Compensation
Stock based compensation expense						2,478,000
Fiscal 2018 LTIP \| Performance based restricted stock units
Stock Based Compensation
Stock based compensation expense	201,000		$ 317,000			162,000	$ 653,000
Exercisable period from grant date					3 years
Fiscal 2018 LTIP \| Performance based restricted stock units \| 100% Vested
Stock Based Compensation
Vesting (as a percentage)					100.00%
Fiscal 2018 LTIP \| Performance based restricted stock units \| 50% Vested
Stock Based Compensation
Vesting (as a percentage)					50.00%
Fiscal 2018 LTIP \| Performance based restricted stock units \| 200% Vested
Stock Based Compensation
Vesting (as a percentage)					200.00%
Fiscal 2018 LTIP \| Performance based restricted stock units \| Maximum
Stock Based Compensation
Stock based compensation expense						1,850,000
Fiscal 2017 LTIP \| Performance based restricted stock units
Stock Based Compensation
Stock based compensation expense	$ 0					0
Exercisable period from grant date					3 years
Issue of fully-vested shares of common stock to settle		14,814
Fiscal 2020 LTIP, Fiscal 2019 LTIP and Fiscal 2018 LTIP
Stock Based Compensation
Stock based compensation expense						$ 2,397,000		$ 1,429,000