AeroVironment, Inc. AVAV
Q2 2012 Earnings Call Transcript

Operator: Brian Gesuale, Raymond James.

Brian Gesuale - Raymond James: Just a couple of quick questions here for you. Tim, you mentioned manage some of the government risks in the short-term in your prepared remarks with the pull out in Afghanistan – or in Iraq rather and what's going on in Afghanistan. Can you maybe talk about the trajectory of the logistic services and then if you are seeing any product inventory move from one area of operations to another.

Tim Conver - Chairman and CEO: I'd be glad to, Brian. I think we have long thought that the primary effect of the pull off in Iraq would be less the matter of reduced procurement relative to the original requirements and more a matter of reduced spare parts and repairs if users were training with these systems rather than fighting with them. We saw a number of things happen when the draw down in Iraq was affected. In one scenario is – one effect was that many of the larger footprint UAS and ISR assets were removed from the theater with the large scale deployment. That left people that were there with more vulnerability and they've moved to Small UAS to cover that gap and it was – there were multiple documented scenarios where about the significant effectiveness of increased use of Ravens for example. We also saw that people -- that there was -- that the trap and the risk to people in the theater didn't abate and in fact, could arguably have been more greater with the reduction in troops and that has led to a growing demand for our UAS services. Now, of course at the same time, we were building up troops in Afghanistan and for whatever -- whether it was experience from Iraq or experience from Afghanistan, the Army decided to significantly increase the number of Small UAS allocated to combat brigades in Afghanistan, and I think that went from the original 15 to 35 systems per brigade. So, overall, an significant increase really in demand. We still maintain support in Iraq and we have stood up an increasing amount of support in Afghanistan to support our customers in those theaters.

Operator: Michael Lewis, Lazard Capital.

Michael Lewis - Lazard Capital: Tim just a quick question on the most recent markup that hit the other day. As I went through the various line items and in it all the different supports, I did notice that there were a number of Raven procurements in there. But I wonder whether this was in line with what you have been planning, but whether this was higher or lower? Could you give us some take on that?

Tim Conver - Chairman and CEO: Let me just make sure, I understood what documents you are referring to Mike?

Michael Lewis - Lazard Capital: It's the most recent Senate markup that just passed during the Senate for $600 billion -- the base was 526, one-half of these supplemental?

Tim Conver - Chairman and CEO: Well, let me tell you what at least what I am aware of. I believe that the House, both Authorization and Appropriation has put forward the same number. In terms of Raven I think it's around $70 million for GFY12. In the Senate, I think Appropriations or Authorization previously plussed up the -- that number by about $50 million and then mostly recently, Appropriations took down that number by almost $12 million. So, I think that there is some ongoing dialog that in around that between the Army and the Senate, and obviously, that ultimately goes to conference and gets sorted out. So, I don't know if that's consistent with what you've been looking at, but that's my take at this point.