AeroVironment, Inc. Announces Fiscal 2013 Third Quarter Results

AeroVironment, Inc. Announces Fiscal 2013 Third Quarter Results

MONROVIA, Calif.--(BUSINESS WIRE)-- AeroVironment, Inc. (NAS: AVAV) today reported financial results for its third quarter ending January 26, 2013.

"Third quarter revenue of $47.1 million and earnings per share of $0.17 fell well short of our plans primarily due to delays in government procurements expected during the quarter," said Tim Conver, AeroVironment chairman and chief executive officer. "We believe these are delays in order timing, and not lost orders. We have recalibrated our expectations for order and shipment timing in our UAS business based on the procurement timelines we are currently experiencing, resulting in a significant reduction in expected revenue and earnings per share for fiscal 2013."


"We continue to see multiple opportunities for growth in fiscal 2014 and beyond based on leading market positions and significant new development activities for both defense and non-defense solutions," Conver added.

FISCAL 2013 THIRD QUARTER RESULTS

Revenue for the third quarter of fiscal 2013 was $47.1 million, down $24.9 million from third quarter fiscal 2012 revenue of $72.0 million. The decrease in revenue resulted from decreased sales in our Unmanned Aircraft Systems (UAS) segment of $19.6 million and in our Efficient Energy Systems (EES) segment of $5.3 million.

Loss from operations for the third quarter of fiscal 2013 was $1.1 million, a decrease of 115% from income from operations for the third quarter of fiscal 2012 of $7.3 million. The decrease in income from operations resulted from lower gross margin of $7.8 million and higher research and development (R&D) expense of $3.1 million, offset by lower selling, general and administrative (SG&A) expense of $2.4 million.

Net income for the third quarter of fiscal 2013 was $3.9 million, a decrease of $1.8 million from net income for the third quarter of fiscal 2012 of $5.7 million.

Earnings per diluted share for the third quarter of fiscal 2013 were $0.17, a decrease of $0.09 from third quarter fiscal 2012 earnings per diluted share of $0.26.

FISCAL 2013 YEAR-TO-DATE RESULTS

Revenue for the first nine months of fiscal 2013 was $186.0 million, down 13% from the first nine months of fiscal 2012 revenue of $214.3 million. The decrease in revenue resulted from lower sales in our UAS segment of $24.5 million and EES segment of $3.8 million.

Income from operations for the first nine months of fiscal 2013 was $9.8 million, a decrease of 44% from the first nine months of fiscal 2012 income from operations of $17.3 million. The decrease in income from operations resulted from lower gross margin of $5.0 million and higher R&D expense of $4.2 million, offset by lower SG&A expense of $1.6 million.

Net income for the first nine months of fiscal 2013 was $11.2 million, a decrease of $1.4 million from net income for the first nine months of fiscal 2012 of $12.7 million.

Earnings per diluted share for the first nine months of fiscal 2013 were $0.50, a decrease of $0.07 from the first nine months of fiscal 2012 income per diluted share of $0.57.

BACKLOG

As of January 26, 2013, funded backlog (unfilled firm orders for which funding is currently appropriated to us under a customer contract) was $70.5 million compared to $93.2 million as of April 30, 2012.

FISCAL 2013 — OUTLOOK FOR THE FULL YEAR

For fiscal year 2013, the Company is reducing its guidance to reflect anticipated full year revenue of $230 million to $250 million, and earnings per share of $0.30 to $0.50 on a fully diluted basis.

"Significant delays in government procurement activities have reduced our expected revenue sharply from our original guidance of $348 million to $370 million. Multiple orders for our unmanned aircraft systems solutions have been delayed, including a funded requirement of the U.S. government awaiting final contract actions, and the time it takes to complete them has increased considerably, pushing them into fiscal 2014," said Tim Conver. "Looking forward, we see significant opportunities to achieve long-term compound growth with Switchblade Loitering Munitions systems, mission services and international small UAS sales."

The foregoing estimates are forward looking and reflect management's view of current and future market conditions, including certain assumptions with respect to our ability to obtain and retain government contracts, delays or changes in government funding, changes in the demand for our products and services, activities of competitors and changes in the regulatory environment, and general economic and business conditions in the United States and elsewhere in the world. Investors are reminded that actual results may differ materially from these estimates.

CONFERENCE CALL

In conjunction with this release, AeroVironment, Inc. will host a conference call today, Tuesday, March 5, 2013, at 1:30 pm Pacific Time that will be broadcast live over the Internet. Timothy E. Conver, chairman and chief executive officer, Jikun Kim, chief financial officer, Tom Herring, chief operating officer and Steven A. Gitlin, vice president of investor relations, will host the call.

4:30 PM ET
3:30 PM CT
2:30 PM MT
1:30 PM PT

Investors may dial into the call at (877) 561-2749 (U.S.) or (678) 809-1029 (international) five to ten minutes prior to the start time to allow for registration.

Investors with Internet access may listen to the live audio webcast via the Investor Relations section of the AeroVironment, Inc. website, http://investor.avinc.com. Please allow 15 minutes prior to the call to download and install any necessary audio software.

Audio Replay Options

An audio replay of the event will be archived on the Investor Relations section of the Company's website, at http://investor.avinc.com. The audio replay will also be available via telephone from Tuesday, March 5, 2013, at approximately 4:30 p.m. Pacific Time through Tuesday, March 12, 2013 at 9:00 p.m. Pacific Time. Dial (855) 859-2056 and enter the passcode 99341363. International callers should dial (404) 537-3406 and enter the same passcode number to access the audio replay.

ABOUT AEROVIRONMENT, INC.

AeroVironment is a technology solutions provider that designs, develops, produces, supports and operates an advanced portfolio of Unmanned Aircraft Systems (UAS) and electric transportation solutions. Agencies of the U.S. Department of Defense and allied military services use AeroVironment's electric-powered, hand-launched unmanned aircraft systems extensively to provide situational awareness to tactical operating units through real-time, airborne reconnaissance, surveillance and communication. AeroVironment's electric transportation solutions include a comprehensive suite of electric vehicle (EV) charging systems, installation and network services for consumers, automakers, utilities and government agencies, power cycling and test systems for EV developers and industrial electric vehicle charging systems for commercial fleets. More information about AeroVironment is available at www.avinc.com.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as "believe," "anticipate," "expect," "estimate," "intend," "project," "plan," or words or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, reliance on sales to the U.S. government; delays or changes in government funding; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors; failure of the markets in which we operate to grow; failure to expand into new markets; changes in significant operating expenses, including components and raw materials; failure to develop new products; changes in the regulatory environment; and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

AeroVironment, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands except share and per share data)

Three Months Ended

Nine Months Ended

January 26,

January 28,

January 26,

January 28,

2013

2012

2013

2012

Revenue:

Product sales

$

23,496

$

36,645

$

104,601

$

113,802

Contract services

23,591

35,319

81,441

100,531

47,087

71,964

186,042

214,333

Cost of sales:

Product sales

14,281

23,587

63,055

69,958

Contract services

13,133

20,944

48,173

64,597

27,414

44,531

111,228

134,555

Gross margin

19,673

27,433

74,814

79,778

Selling, general and administrative

10,433

12,866

37,230

38,806

Research and development

10,306

7,238

27,828

23,640

(Loss) income from operations

(1,066

)

7,329

9,756

17,332

Other income:

Interest income

164

129

498

313

Other income

49

49

(Loss) income before income taxes

(853

)

7,458

10,303

17,645

(Benefit) provision for income taxes

(4,722

)

1,714

(918

)

4,988

Net income

$

3,869

$

5,744

$

11,221

$

12,657

Earnings per share data:

Basic

$

0.17

$

0.26

$

0.51

$

0.58

Diluted

$

0.17

$

0.26

$

0.50

$

0.57

Weighted average shares outstanding:

Basic

22,142,917

21,797,802

22,035,007

21,761,927

Diluted

22,408,377

22,317,015

22,375,126

22,269,675

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share and per share data)

January 26,
2013

April 30,
2012

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

63,975

$

64,220

Short-term investments

69,811

77,152

Accounts receivable, net of allowance for doubtful accounts of $815 at January 26, 2013 and $921 at April 30, 2012

31,600

56,417

Unbilled receivables and retentions

15,409

27,034

Inventories, net

63,597

43,539

Income tax receivable

8,349

Deferred income taxes

9,785

9,377

Prepaid expenses and other current assets

4,283

4,030

Total current assets

266,809

281,769

Long-term investments

60,928

58,457

Property and equipment, net

21,714

23,515

Deferred income taxes

5,180

5,209

Other assets

4,159

201

Total assets

$

358,790

$

369,151

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

15,777

$

20,213

Wages and related accruals

9,652

19,076

Income taxes payable

8,788

Customer advances

5,915

5,124

Other current liabilities

6,877

9,898

Liability for uncertain tax positions

606

606

Total current liabilities

38,827

63,705

Wages and other accruals

1,203

Deferred rent

842

1,019

Liability for uncertain tax positions

4,026

4,026

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.0001 par value:

Authorized shares — 10,000,000; none issued or outstanding

Common stock, $0.0001 par value:

Authorized shares — 100,000,000

Issued and outstanding shares — 22,417,427 at January 26, 2013 and 22,243,903 at April 30, 2012

2

2

Additional paid-in capital

129,588

124,954

Accumulated other comprehensive loss

(652

)

(694

)

Retained earnings

186,157

174,936

Total stockholders' equity

315,095

299,198

Total liabilities and stockholders' equity

$

358,790

$

369,151

AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Nine Months Ended

January 26,
2013

January 28,
2012

Operating activities

Net income

$

11,221

$

12,657

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

8,340

6,418

Provision for doubtful accounts

338

354

Deferred income taxes

(407

)

(510

)

Unrealized foreign currency gain

(53

)

Stock-based compensation

2,629

2,319

Tax benefit from exercise of stock options

1,536

664

Excess tax benefit from stock-based compensation

(115

)

Gain on sale of property and equipment

(13

)

Changes in operating assets and liabilities:

Accounts receivable

24,479

19,809

Unbilled receivables and retentions

11,625

(2,541

)

Inventories

(20,058

)

(10,310

)

Income tax receivable

(8,349

)

Other assets

(282

)

(441

)

Accounts payable

(4,436

)

(17,759

)

Other liabilities

(21,518

)

(5,678

)

Net cash provided by operating activities

5,065

4,854

Investing activities

Acquisitions of property and equipment

(6,528

)

(9,856

)

Proceeds from the sale of property and equipment

13

Acquisition of intangible assets

(850

)

Investment in CybAero AB convertible notes

(3,037

)

Net redemptions of held-to-maturity investments

4,690

7,965

Net sales of available-for-sale investments

250

225

Net cash used in investing activities

(5,475

)