16. Impact of Adoption of New Accounting Standards

During the three months ended July 28, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The impact to the Company’s unaudited balance sheet as a result of adopting the standard was as follows (in thousands):


			Effect of the
	April 30, 2018		Adoption of		April 30, 2018
	As Reported		ASC Topic 606		As Adjusted
Assets
Current assets:
Cash and cash equivalents	$	143,517	$	—	$	143,517
Short-term investments		113,649		—		113,649
Accounts receivable, net of allowance for doubtful accounts of $1,080 at April 30, 2018		56,813		—		56,813
Unbilled receivables and retentions (inclusive of related party unbilled receivables of $3,145 at April 30, 2018)		13,076		3,796		16,872
Inventories, net		38,640		(1,215)		37,425
Prepaid expenses and other current assets		5,103		—		5,103
Current assets of discontinued operations		28,349		(2,681)		25,668
Total current assets		399,147		(100)		399,047
Long-term investments		40,656		—		40,656
Property and equipment, net		19,219		—		19,219
Deferred income taxes		11,168		326		11,494
Other assets		2,721		281		3,002
Total assets	$	472,911	$	507	$	473,418
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	21,340	$	—	$	21,340
Wages and related accruals		16,851		—		16,851
Income taxes payable		4,085		—		4,085
Customer advances		2,145		1,419		3,564
Other current liabilities		6,892		62		6,954
Current liabilities of discontinued operations		9,184		110		9,294
Total current liabilities		60,497		1,591		62,088
Deferred rent		1,536		—		1,536
Other non-current liabilities		622		—		622
Deferred tax liability		67		—		67
Liability for uncertain tax positions		49		—		49
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding at April 30, 2018		—		—		—
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—23,908,736 at April 30, 2018		2		—		2
Additional paid-in capital		170,139		—		170,139
Accumulated other comprehensive loss		(21)		—		(21)
Retained earnings		239,997		(1,084)		238,913
Total AeroVironment stockholders’ equity		410,117		(1,084)		409,033
Noncontrolling interest		23		—		23
Total equity		410,140		(1,084)		409,056
Total liabilities and stockholders’ equity	$	472,911	$	507	$	473,418

The tables below presents the impact of adoption on the Company’s unaudited statement of operations for the three and six months ended October 27, 2018 (in thousands except share and per share data).


	Three Months Ended		Effect of the		Three Months Ended
	October 28, 2017		Adoption of		October 28, 2017
	As Reported		ASC Topic 606		As Adjusted
Revenue:
Product sales	$	43,675	$	4,745	$	48,420
Contract services (inclusive of related party revenue of $7,071 for the three months ended October 28, 2017, respectively)		20,313		(2,932)		17,381
		63,988		1,813		65,801
Cost of sales:
Product sales		23,194		2,002		25,196
Contract services		12,101		(1,639)		10,462
		35,295		363		35,658
Gross margin:
Product sales		20,481		2,743		23,224
Contract services		8,212		(1,293)		6,919
		28,693		1,450		30,143
Selling, general and administrative		12,768		—		12,768
Research and development		6,844		—		6,844
Income from continuing operations		9,081		1,450		10,531
Other income (expense):
Interest income, net		432		—		432
Other (expense), net		(55)		—		(55)
Income from continuing operations before income taxes		9,458		1,450		10,908
Provision for income taxes		2,975		383		3,358
Equity method investment activity, net of tax		—		—		—
Net income from continuing operations		6,483		1,067	$	7,550
Discontinued operations:
Gain on sale of business, net of tax expense of $0 for the three months ended October 28, 2017		—		—		—
Income (Loss) from discontinued operations, net of tax		329		(362)		(33)
Net income (loss) from discontinued operations		329		(362)		(33)
Net income		6,812		705		7,517
Net loss attributable to noncontrolling interest		206		—		206
Net income attributable to AeroVironment	$	7,018	$	705	$	7,723
Net income (loss) per share attributable to AeroVironment—Basic
Continuing operations	$	0.29	$	0.05	$	0.33
Discontinued operations		0.01		(0.02)		—
Net income per share attributable to AeroVironment—Basic	$	0.30	$	0.03	$	0.33
Net income (loss) per share attributable to AeroVironment—Diluted
Continuing operations	$	0.28	$	0.05	$	0.32
Discontinued operations		0.01		(0.02)		—
Net income per share attributable to AeroVironment—Diluted	$	0.29	$	0.03	$	0.32
Weighted-average shares outstanding:
Basic		23,477,914		23,477,914		23,477,914
Diluted		23,832,959		23,832,959		23,832,959


	Six Months Ended		Effect of the		Six Months Ended
	October 28, 2017		Adoption of		October 28, 2017
	As Reported		ASC Topic 606		As Adjusted
Revenue:
Product sales	$	67,773	$	(573)	$	67,200
Contract services (inclusive of related party revenue of $9,622 for the six months ended October 28, 2017, respectively)		32,465		497		32,962
		100,238		(76)		100,162
Cost of sales:
Product sales		41,978		(810)		41,168
Contract services		19,472		681		20,153
		61,450		(129)		61,321
Gross margin:
Product sales		25,795		237		26,032
Contract services		12,993		(184)		12,809
		38,788		53		38,841
Selling, general and administrative		24,055		—		24,055
Research and development		12,386		—		12,386
Income from continuing operations		2,347		53		2,400
Other income (expense):
Interest income, net		944		—		944
Other expense, net		(51)		—		(51)
Income from continuing operations before income taxes		3,240		53		3,293
Provision (benefit) for income taxes		144		(7)		137
Equity method investment activity, net of tax		—		—		—
Net income from continuing operations		3,096		60	$	3,156
Discontinued operations:
Gain on sale of business, net of tax expense of $0 for the six months ended October 28, 2017		—		—		—
Loss from discontinued operations, net of tax		(750)		(771)		(1,521)
Net loss from discontinued operations		(750)		(771)		(1,521)
Net income (loss)		2,346		(711)		1,635
Net loss attributable to noncontrolling interest		229		—		229
Net income (loss) attributable to AeroVironment	$	2,575	$	(711)	$	1,864
Net income (loss) per share attributable to AeroVironment—Basic
Continuing operations	$	0.14	$	0.00	$	0.14
Discontinued operations		(0.03)		(0.03)		(0.06)
Net income (loss) per share attributable to AeroVironment—Basic	$	0.11	$	(0.03)	$	0.08
Net income (loss) per share attributable to AeroVironment—Diluted
Continuing operations	$	0.14	$	0.00	$	0.14
Discontinued operations		(0.03)		(0.03)		(0.06)
Net income (loss) per share attributable to AeroVironment—Diluted	$	0.11	$	(0.03)	$	0.08
Weighted-average shares outstanding:
Basic		23,407,500		23,407,500		23,407,500
Diluted		23,715,997		23,715,997		23,715,997

The tables below presents the impact of adoption on the Company’s unaudited statement of comprehensive loss for the three and six months October 28, 2017 (in thousands).


	Three Months Ended		Effect of the		Three Months Ended
	October 28, 2017		Adoption of		October 28, 2017
	As Reported		ASC Topic 606		As Adjusted
Net income	$	6,812	$	705	$	7,517
Other comprehensive income:
Change in foreign currency translation adjustments		—		—		—
Unrealized gain on investments, net of deferred tax expense of $17 for the three months ended October 28, 2017, respectively		26		—		26
Total comprehensive income		6,838		705	$	7,543
Net loss attributable to noncontrolling interest		206		—		206
Comprehensive income attributable to AeroVironment	$	7,044	$	705	$	7,749


	Six Months Ended		Effect of the		Six Months Ended
	October 28, 2017		Adoption of		October 28, 2017
	As Reported		ASC Topic 606		As Adjusted
Net income	$	2,346	$	(711)	$	1,635
Other comprehensive income:
Change in foreign currency translation adjustments		—		—		—
Unrealized gain on investments, net of deferred tax expense of $19 for the six months ended October 28, 2017, respectively		29		—		29
Total comprehensive income		2,375		(711)	$	1,664
Net loss attributable to noncontrolling interest		229		—		229
Comprehensive income attributable to AeroVironment	$	2,604	$	(711)	$	1,893

The table below presents the impact of adoption on the Company’s unaudited statement of cash flows (in thousands).


	Six Months Ended		Effect of the		Six Months Ended
	October 28, 2017		Adoption of		October 28, 2017
	As Reported		ASC Topic 606		As Adjusted
Operating activities
Net income	$	2,346	$	(711)	$	1,635
Gain on sale of business, net of tax		—		—		—
Loss from discontinued operations, net of tax		750		771		1,521
Net income from continuing operations		3,096		60		3,156
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		2,784		—		2,784
Loss from equity method investments		—		—		—
Impairment of long-lived assets		255		—		255
Provision for doubtful accounts		935		—		935
Impairment of intangible assets and goodwill		1,021		—		1,021
Gains on foreign currency transactions		(108)		—		(108)
Deferred income taxes		(1,094)		—		(1,094)
Stock-based compensation		2,535		—		2,535
Loss on disposition of property and equipment		15		—		15
Amortization of held-to-maturity investments		897		—		897
Changes in operating assets and liabilities:
Accounts receivable		39,861		—		39,861
Unbilled receivables and retentions		625		(25)		600
Inventories		(13,621)		(151)		(13,772)
Income tax receivable		—		(307)		(307)
Prepaid expenses and other assets		413		—		413
Accounts payable		(2,972)		—		(2,972)
Other liabilities		(4,348)		123		(4,225)
Net cash provided by (used in) operating activities of continuing operations		30,294		(300)		29,994
Investing activities
Acquisition of property and equipment		(5,455)		—		(5,455)
Proceeds from sale of business		—		—		—
Redemptions of held-to-maturity investments		105,758		—		105,758
Purchases of held-to-maturity investments		(88,763)		—		(88,763)
Redemptions of available-for-sale investments		450		—		450
Net cash provided by investing activities from continuing operations		11,990		—		11,990
Financing activities
Principal payments of capital lease obligations		(173)		—		(173)
Tax withholding payment related to net settlement of equity awards		(313)		—		(313)
Exercise of stock options		2,164		—		2,164
Net cash provided by financing activities from continuing operations		1,678		—		1,678
Discontinued operations
Operating activities of discontinued operations		(6,175)		300		(5,875)
Investing activities of discontinued operations		(582)		—		(582)
Financing activities of discontinued operations		—		—		—
Net cash used in discontinued operations		(6,757)		300		(6,457)
Net increase in cash and cash equivalents		37,205		—		37,205
Cash and cash equivalents at beginning of period		79,904		—		79,904
Cash and cash equivalents at end of period	$	117,109	$	—	$	117,109
Supplemental disclosures of cash flow information
Cash paid, net during the period for:
Income taxes	$	1,803		—	$	1,803
Non-cash activities
Unrealized gain on investments, net of deferred tax expense of $19	$	29		—	$	29
Reclassification from share-based liability compensation to equity	$	384		—	$	384
Change in foreign currency translation adjustments	$	—		—	$	—
Acquisitions of property and equipment included in accounts payable	$	888		—	$	888