What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-08-25 compared with 2020-08-27 · 263 added, 413 removed, 945 unchanged (42% of the section changed)

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Commitments and Contingencies

Note 13 Subsequent Event

Quarterly Financial Data (Unaudited)

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We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc.

(the “Company”) as of July 3, 2020 and June 28, 2019, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three fiscal years in the period ended July 3, 2020, the related notes and the financial statement schedule - Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 3, 2020 and June 28, 2019, and the results of its operations and its cash flows for each of the three fiscal years in the period ended July 3, 2020, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 and Note 4 to the consolidated financial statements, the Company has changed its accounting method for accounting for leases in fiscal year 2020 due to the adoption of Topic 842:

Leases, using a modified retrospective approach, and as discussed in Note 1 to the consolidated financial statements, the Company changed its method for recognizing revenue in fiscal year 2019 due to the adoption of Topic 606:

Revenue from Contracts with Customers.

(the “Company”) as of July 2, 2021 and July 3, 2020, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three fiscal years in the period ended July 2, 2021, the related notes and the financial statement schedule - Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 2, 2021 and July 3, 2020, and the results of its operations and its cash flows for each of the three fiscal years in the period ended July 2, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of July 2, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated August 25, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Estimated Costs to Complete

As described in Note 3 to the consolidated financial statements, revenues from network planning and design, engineering and installation-related services are recognized based on an overtime recognition model using the cost-input method.

The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals.

Changes in job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue recognition.

We identified estimated costs to complete for open and ongoing over-time revenue contracts at year end as a critical audit matter.

The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions.

Changes in these estimates or timing of when the costs occur can have a significant impact on the revenue recognized each period.

Auditing these elements involved especially challenging and subjective auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of certain controls related to estimated costs to complete, including controls over management’s review of cost estimates.

Evaluating the reasonableness of a sample of project budgets for projects completed during the year through a retrospective review against actual performance at project completion.

Assessing the reasonableness of the estimated costs to complete for a sample of open projects through:

(i) evaluating the reasonableness of project budgets and the nature of costs required to complete open projects, (ii) assessing the status of completion of respective projects through testing of a sample of project costs incurred to date, (iii) evaluating the reasonableness of project status by performing inquiries of project managers and assessing the nature of activities required to complete open projects, and (iv) performing retrospective review on closed projects and investigating budget to actual variances (if any).

Assessing the reasonableness of changes in estimated costs to complete and investigating reasons for changes in expected costs and project margins.

/s/ BDO USA, LLP

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August 25, 2021

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Aviat Networks, Inc.

Austin, Texas

Opinion on Internal Control over Financial Reporting

We have audited Aviat Networks, Inc.’s (the “Company’s”) internal control over financial reporting as of July 2, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 25, 2021, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of July 2, 2021 and July 3, 2020, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three fiscal years in the period ended July 2, 2021, the related notes and the financial statement schedule - Valuation and Qualifying Accounts and our report dated August 25, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

San Jose, California

August 25, 2021

AVIAT NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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2020 June 28,

2019 June 29,

Revenue from product sales $ 185,787 $ 153,793 $ 156,724

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Income before income taxes 22,440 3,709 1,550

Provision for (benefit from) income taxes 3,452 ( 8,188 ) ( 1,036 )

(Benefit from) provision for income taxes ( 87,699 ) 3,452 ( 8,188 )

Net income $ 110,139 $ 257 $ 9,738

Net income attributable to noncontrolling interest, net of tax — — 457

Net income attributable to Aviat Networks $ 257 $ 9,738 $ 1,845

Net income per share:

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AVIAT NETWORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Year Ended

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2020 June 28,

2019 June 29,

Net income $ 110,139 $ 257 $ 9,738

Other comprehensive loss:

Net change in cumulative translation adjustments ( 2,233 ) ( 131 ) ( 820 )

Other comprehensive loss ( 2,233 ) ( 131 ) ( 820 )

Comprehensive (loss) income ( 1,976 ) 9,607 1,482

Comprehensive income attributable to noncontrolling interests, net of tax — — 457

Comprehensive (loss) income attributable to Aviat Networks $ ( 1,976 ) $ 9,607 $ 1,025

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax 642 ( 2,233 ) ( 131 )

Other comprehensive income (loss) 642 ( 2,233 ) ( 131 )

Comprehensive income (loss) $ 110,781 $ ( 1,976 ) $ 9,607

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) July 3, 2020 June 28, 2019

(In thousands, except share and par value amounts) July 2, 2021 July 3, 2020

Current Assets:

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Customer service inventories 1,431 1,234

Asset held for sale 2,218 —

Other current assets 9,556 10,355

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300,000,000 shares authorized;

5,400,487 and 5,359,695 shares issued and outstanding as of July 3, 2020 and June 28, 2019, respectively

11,153,445 and 10,800,974 shares issued and outstanding as of July 2, 2021 and July 3, 2020, respectively

Treasury stock 19,587 and 0 shares as of July 2, 2021 and July 3, 2020, respectively

Additional paid-in-capital 818,939 814,283

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2020 June 28,

2019 June 29,

Operating Activities

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Payments for acquisition of property, plant and equipment ( 2,847 ) ( 4,608 ) ( 5,246 )

Maturities of short-term investments — — 264

Net cash used in investing activities ( 2,847 ) ( 4,608 ) ( 5,246 )

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Payments for repurchase of common stock — ( 1,772 ) ( 2,316 )

Payments for repurchase of common stock - treasury shares ( 787 ) — —

Payments for taxes related to net settlement of equity awards ( 167 ) ( 802 ) ( 671 )

Proceeds from issuance of common stock under employee stock plans and exercises of stock options 1,906 29 35

Net cash (used in) provided by financing activities ( 2,545 ) ( 2,952 ) 12

Net cash used in financing activities ( 8,048 ) ( 2,545 ) ( 2,952 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 77 ) ( 669 ) ( 309 )

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2020 June 28,

2019 June 29,

Non-cash investing activities:

Unpaid property, plant and equipment $ 228 $ 277 $ 578

Noncontrolling interests buyout $ — $ — $ 603

Supplemental disclosures of cash flow information:

Cash paid for interest $ 4 $ 60 $ 70

Cash paid for income taxes, net $ 1,057 $ 687 $ 1,282

Cash (received) paid for income taxes, net $ ( 2,119 ) $ 1,057 $ 687

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF EQUITY

Common Stock Additional

Common Stock Treasury Stock Additional

Capital Accumulated

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Comprehensive

Loss Total Aviat

Stockholders’

Equity Noncontrolling

Interests Total Equity

(In thousands, except share amounts) Shares $

(In thousands, except share amounts) Shares $ Amount Shares $ Amount

Balance as of June 29, 2018 10,702,310 $ 108 — $ — $ 816,372 $ ( 746,359 ) $ ( 12,605 ) $ 57,516

Cumulative-effect adjustment for ASC Topic 606 — — — — — 5,623 — 5,623

Net income — — — — — 9,738 — 9,738

Other comprehensive loss, net of tax — — — — ( 820 ) ( 820 ) — ( 820 )

Other comprehensive (loss) income, net of tax — — — — — — ( 131 ) ( 131 )

Issuance of common stock under employee stock plans 345,406 4 — — 31 — — 35

Shares withheld for taxes related to vesting of equity awards ( 15,788 ) ( 2 ) — — ( 670 ) — — ( 672 )

Stock repurchase ( 312,538 ) ( 2 ) — — ( 2,314 ) — — ( 2,316 )

Share-based compensation — — — — 1,723 — — 1,723

Noncontrolling interests buyout — — 325 — — 325 ( 1,000 ) ( 675 )

Balance as of June 28, 2019 10,719,390 108 — — 815,142 ( 730,998 ) ( 12,736 ) 71,516

Cumulative-effect adjustment for ASC Topic 606 — — — 5,623 — 5,623 — 5,623

Net income — — — — — 257 — 257

Other comprehensive loss, net of tax — — — — ( 131 ) ( 131 ) — ( 131 )

Other comprehensive (loss) income, net of tax — — — — — — ( 2,233 ) ( 2,233 )

Issuance of common stock under employee stock plans 450,112 4 — — 25 — — 29

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Share-based compensation — — — — 1,686 — — 1,686

Balance as of June 28, 2019 5,359,695 54 815,196 ( 730,998 ) ( 12,736 ) 71,516 — 71,516

Balance as of July 3, 2020 10,800,974 108 — — 814,283 ( 730,741 ) ( 14,969 ) 68,681

Net income — — — — — 110,139 — 110,139

Other comprehensive loss, net of tax — — — — ( 2,233 ) ( 2,233 ) — ( 2,233 )

Other comprehensive income (loss), net of tax — — — — — — 642 642

Issuance of common stock under employee stock plans 393,724 4 — — 1,902 — — 1,906

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Share-based compensation — — — — 2,921 — — 2,921

Exercise of options 832 — 12 — — 12 — 12

Balance as of July 2, 2021 11,153,445 $ 112 19,587 $ ( 787 ) $ 818,939 $ ( 620,602 ) $ ( 14,327 ) $ 183,335

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Our fiscal year ends on the Friday nearest June 30.

This was July 3 for fiscal 2020, June 28 for fiscal 2019 and June 29 for fiscal 2018.

Fiscal 2020 presented included 53 weeks while fiscal 2019 and fiscal 2018 presented each included 52 weeks.

This was July 2, for fiscal 2021, July 3, for fiscal 2020 and June 28, for fiscal 2019.

Fiscal 2021 presented 52 weeks while fiscal 2020 included 53 weeks and fiscal 2019 included 52 weeks.

In these notes to consolidated financial statements, we refer to our fiscal years as “fiscal 2021”, “fiscal 2020” and “fiscal 2019.”

On April 7, 2021 we effected a two -for-one stock split in the form of a stock dividend to shareholders of record as of April 1, 2021.

Common stock, Additional paid-in-capital, per share and equity award amounts for all periods presented have been retrospectively reclassified to reflect the two -for-one stock split in the form of a stock dividend.

Use of Estimates

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Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods.

Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, restructuring obligations, product warranty obligations, share-based awards, contingencies, recoverability of long-lived assets and useful lives of property, plant and equipment.

Cash, Cash Equivalents and Restricted Cash

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However, a substantial portion of the cash equivalents is invested in prime money market funds which are backed by the securities in the fund.

As of July 3, 2020 and June 28, 2019, all of our high-quality marketable debt securities were invested in prime money market funds.

As of July 2, 2021 and July 3, 2020, all of our high-quality marketable debt securities were invested in prime money market funds.

Cash and cash equivalents that are restricted as to withdrawal or usage under the terms of contractual agreements are recorded as restricted cash.

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We record the financing charges on discounting these letters of credit as interest expense.

During fiscal 2020, there were no customers that accounted for more than 10% of our total revenue.

During fiscal 2019 and 2018, Mobile Telephone Networks Group (“MTN Group”) in Africa accounted for 11 % and 13 %, respectively, of our total revenue.

As of July 3, 2020 and June 28, 2019, MTN Group accounted for approximately 21 % and 13 %, respectively, of our accounts receivable.

During fiscal 2021 and 2020 there were no customers that accounted for more than 10% of our total revenue.

During fiscal 2019, Mobile Telephone Networks Group (“MTN Group”) in Africa accounted for 11 % of our total revenue.

As of July 2, 2021 and July 3, 2020, MTN Group accounted for approximately 14 % and 21 %, respectively, of our accounts receivable.

Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash equivalents, marketable debt securities, trade accounts receivable and financial instruments used in foreign currency hedging activities.

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We are exposed to credit risks related to such instruments in the event of default or decrease in credit-worthiness of the issuers of the investments.

Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and investing in, creditworthy institutions.

We perform ongoing credit evaluations of our customers and generally do not require collateral on accounts receivable, as the majority of our customers are large, well-established companies.

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Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-

first-out basis.

Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-first-out basis.

We regularly review inventory quantities on hand and record adjustments to reduce the cost of inventory for excess and obsolete inventory based primarily on our estimated forecast of product demand and production requirements.

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We assess the adequacy of our recorded warranty liabilities every quarter and make adjustments to the liabilities as necessary.

Noncontrolling Interests

A noncontrolling interest represents the equity interest in a subsidiary that is not attributable, either directly or indirectly, to Aviat Networks and is reported as our equity, separately from our controlling interests.

The noncontrolling interests related to our ownership interest in a subsidiary company in South Africa with a local partner, where we were the majority owner at 51 % prior to our acquisition of the remaining interest of this subsidiary in the fourth quarter of 2018.

Revenues, expenses, gains, losses, net loss and other comprehensive income (loss) are reported in the consolidated financial statements at the consolidated amounts, which include the amounts attributable to both the controlling and noncontrolling interests.

During the fourth quarter of fiscal year 2018, we acquired the remaining interest of this subsidiary for $ 0.6 million which was recorded as “Accrued expenses” on our consolidated balance sheets as of June 29, 2018.

This amount was fully paid during fiscal 2019.

On June 29, 2019, the first day of our fiscal 2020, we adopted ASC 842 using the modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of accumulated deficit to be recognized on the date of adoption with prior periods not restated.

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Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our July 2, 2021 consolidated balance sheets.

We did not enter into any finance leases during fiscal 2020.

We have not entered into any financing leases during fiscal 2021.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

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Certain of our lease arrangements include non-lease components and we account for non-lease components together with lease components for all such lease arrangements.

Leases with an initial term of 12 months or less are not recorded on our balance sheet.

Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

We recognize lease expense for these leases on a straight-line basis over the lease term.

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Income and expenses are re-measured at the average exchange rate prevailing during the period.

and losses resulting from the re-measurement of these subsidiaries’ financial statements are included in the consolidated statements of operations.

Gains and losses resulting from the re-measurement of these subsidiaries’ financial statements are included in the consolidated statements of operations.

Our other international subsidiaries use their respective local currency as their functional currency.

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The resulting translation adjustments are included in accumulated other comprehensive loss.

Gains and losses resulting from foreign exchange transactions and revaluation of monetary assets and liabilities in non-functional currencies are included in either cost of product sales and services or other (expense) income, net in the accompanying consolidated statements of operations, based on the nature of the transactions.

Gains and losses resulting from foreign exchange transactions and revaluation of monetary assets and liabilities in non-functional currencies are included in cost of product sales and services in the accompanying consolidated statements

of operations, based on the nature of the transactions.

Net foreign exchange gain (loss) recorded in our consolidated statements of operations during fiscal 2021, 2020 and 2019 was as follows:

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Amount included in costs of revenues $ 1,015 $ 419 $ ( 664 )

Amount included in other (expense) income, net — — ( 188 )

Total foreign exchange gain (loss), net $ 1,015 $ 419 $ ( 664 )

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Revenue Recognition

Effective June 30, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, using the modified retrospective method applied to those contracts that were not completed as of June 29, 2018.

Results for the reporting periods after June 29, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605.

We recognize revenue by applying the following five-step approach:

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, we recognize revenue by applying the following five-step approach:

(1) identification of the contract with a customer;

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and (5) recognition of revenue when, or as, we satisfy a performance obligation.

Revenue from product sales, recognized at a point-in-time, is generated predominately from the sales of products manufactured by third-party manufacturers to whom we have outsourced our manufacturing processes.

Printed circuit assemblies, mechanical housings, and packaged modules are manufactured by contract manufacturing partners, with periodic business reviews of material levels and obsolescence.

Product assembly, product testing, complete system integration, and system testing may either be performed within our own facilities or at the locations of our third-party manufacturers.

Revenue from services includes certain network planning and design, engineering, installation and commissioning, extended warranty, customer support, consulting, training, and education.

Maintenance and support services are generally offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of maintenance and support contracts.

The network planning and design, engineering and installation related services noted are recognized based on an over-time recognition model using the cost-input method.

Revenues related to certain contracts for customized network solutions are recognized over time using the cost input method.

In using the cost input method, we generally apply the cost-to-cost method of accounting where sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion.

Recognition of profit on these contracts requires estimates of the total contract value, the total cost at completion, and the measurement of progress towards completion.

Significant judgment is required when estimating total contract costs and progress to completion on the arrangements, as well as whether a loss is expected to be incurred on the contract.

If circumstances

arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made.

These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known to us.

We perform ongoing profitability analysis of our service contracts accounted for under this method in order to determine whether the latest estimates of revenues, costs, and profits require updating.

If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately.

We establish billing terms at the time project deliverables and milestones are agreed.

Revenues recognized in excess of the amounts invoiced to clients are classified as unbilled receivables on our consolidated balance sheet.

Contracts and customer purchase orders are used to determine the existence of an arrangement.

In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer of control.

We typically satisfy our performance obligations upon shipment or delivery of product depending on the contractual terms.

Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered to be standard payment terms.

We assess our ability to collect from our customers based primarily on the creditworthiness and past payment history of the customer.

While our customers generally do not have the right of return, we reserve for estimated product returns as an offset to revenue based primarily on historical trends.

Actual product returns may be different than what was estimated.

These factors and unanticipated changes in economic and industry condition could make actual results differ from our return estimates.

See Note 3 for additional discussion on revenue recognition.

Cost of Product Sales and Services

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Our research and development costs, which include costs in connection with new product development, improvement of existing products, process improvement, and product use technologies, are generally charged to operations in the period in which they are incurred.

For certain of our software projects under development, we capitalize the development costs during the period between determining technological feasibility of the product and commercial release.

For certain software projects under development, we capitalize the development costs during the period between determining technological feasibility of the product and commercial release and are included in Other assets on the consolidated balance sheet.

We amortize the capitalized development cost upon commercial release, generally over three years .

To date, the amount of development costs capitalized have not been material.

To date, the amount of development costs capitalized and amount amortized have not been material.

Share-Based Compensation

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Accounting Standards Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842, which amends the existing accounting standards for leases.

The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases).

For lessees, leases will continue to be classified as either operating or financing in the income statement.

We adopted ASC 842, effective June 29, 2019, using the modified retrospective transition method with the cumulative effect recognized as an adjustment to the opening balance of our accumulated deficit.

Prior-period financial statements were not retrospectively restated.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, assessment of whether a contract was or contains a lease, and initial direct costs for leases that existed prior to June 28, 2019.

We also elected not to recognize right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of 12 months or less.

We elected not to apply the hindsight practical expedient when determining lease term and assessing impairment of ROU assets.

See Note 4, “Leases” to the Notes to our consolidated financial statements for more information.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation:

Improvement to Nonemployees Share-Based Payment Accounting (ASU 2018-07), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees.

ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards.

ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606.

This ASU is effective for fiscal years beginning after December 15, 2018.

We adopted this update during the first quarter of fiscal 2020.

The adoption had no material impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and was effective March 12, 2020 through December 31, 2022.

We are currently evaluating the potential impact of ASU 2020-04 will have on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740).

This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes.

ASU 2019-12 will be effective for us in our first quarter of fiscal 2022.

We are currently evaluating the potential impact that adopting ASU 2019-12 will have on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

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The standard can be adopted either using the prospective or retrospective transition approach.

We are evaluating the potential impact adopting ASU 2018-15 will have on our consolidated financial statements.

We adopted this amendment on July 4, 2020.

We have assessed the amendments of ASU 2018-15 and determined the amendments to have an immaterial impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

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ASU 2018-13 will be effective for us in our first quarter of fiscal 2021 and early adoption is permitted of the entire standard or only the provisions that eliminate or modify disclosure requirements.

We are evaluating the impact the adoption of ASU 2018-13 will have on our consolidated financial statements.

We adopted this amendment on July 4, 2020.

We have assessed the amendments of ASU 2018-13 and determined the amendments to have an immaterial impact on our consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740).

ASU 2019-12 will be effective for us in our first quarter of fiscal 2022.

We are currently evaluating the potential impact of ASU 2019-12 will have on our consolidated financial statements..

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and will be effective through December 31, 2022.

We are currently evaluating the potential impact of ASU 2020-04 will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

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Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

Topic 326 will be effective for us in our first quarter of fiscal 2024, and earlier adoption is permitted.

Topic 326 will be effective for us in our first quarter of

fiscal 2024, and earlier adoption is permitted.

We are evaluating the impact adopting Topic 326 will have on our consolidated financial statements.

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(In thousands, except per share amounts) 2021 2020 2019

Net income attributable to Aviat Networks

$ 257 $ 9,738 $ 1,845

Net income $ 110,139 $ 257 $ 9,738

Weighted average shares outstanding, basic 11,036 10,782 10,754

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Weighted average shares outstanding, diluted 11,688 10,936 11,236

Net income per share attributable to Aviat Networks:

Net income per share:

Basic $ 9.98 $ 0.02 $ 0.91

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Contracts and customer purchase orders are used to determine the existence of an arrangement.

Many of the Company’s arrangements with customers contain multiple performance obligations and therefore promises to provide multiple goods and services.

The Company evaluates each promised good and service in a contract to determine whether it represents a distinct performance obligation or should be accounted for as a combined performance obligation.

For goods and services determined to be distinct we have concluded that they provide a benefit

to the customer either on their own or together with other resources that are readily available to the customer, without having the need for significant integration or customization.

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Product assembly, product testing, complete system integration, and system testing may either be performed within our own facilities or at the locations of our third-party manufacturers.

Revenue from services includes certain network planning and design, engineering, installation and commissioning, extended warranty, customer support, consulting, training, and education.

Revenue from services includes certain network planning and design, engineering, installation and commissioning (“field services”), extended warranty, customer support, consulting, training, and education.

Maintenance and support services are generally offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of maintenance and support contracts.

The network planning and design, engineering and installation related services noted are recognized based on an over-time recognition model using the cost-input method.

Revenues related to certain contracts for customized network solutions are recognized over time using the cost input method.

In using this input method, we generally apply the cost-to-cost method of accounting where sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion.

Recognition of profit on these contracts requires estimates of the total contract value, the total cost at completion, and the measurement of

progress towards completion.

Significant judgment is required when estimating total contract costs and progress to completion on the arrangements, as well as whether a loss is expected to be incurred on the contract.

If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made.

Certain judgment is required when estimating total contract costs and progress to completion on the over-time arrangements, as well as whether a loss is expected to be incurred on the contract.

The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals.

Changes in job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue recognition.

If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made in a timely manner.

We perform ongoing profitability analysis of our service contracts accounted for under this method in order to determine whether the latest estimates of revenues, costs, and profits require updating.

If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately.

In rare circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately.

We establish billing terms at the time project deliverables and milestones are agreed.

Revenues recognized in excess of the amounts invoiced to clients are classified as unbilled receivables on the unaudited condensed consolidated balance sheet.

Revenues recognized in excess of the amounts invoiced to clients are classified as unbilled receivables and if invoicing is ahead of revenue recognized it is classified as an unearned liability on the consolidated balance sheets.

In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer of control.

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Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered to be standard payment terms.

Revenue recognition does not necessarily follow payment terms as there are a number of scenarios where they would be different.

Recognition follows contractual terms and those vary depending on the nature of the performance obligation being satisfied.

These timing differences result in contract assets and liabilities as discussed below.

We assess our ability to collect from our customers based primarily on the creditworthiness and past payment history of the customer.

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The capitalized sales commissions are included in Other Current Assets and Other Assets on the consolidated balance sheets.

We have not identified any impairments during the periods presented.

We elected the practical expedient to expense sales commissions as incurred when the amortization period of the related asset is one year or less.

These costs are recorded as sales and marketing expense and included in our consolidated balance sheet as accrued expenses until paid.

Our amortization expense was not material for the fiscal years ended July 3, 2020 and June 28, 2019.

Our amortization expense was not material for the fiscal years ended July 2, 2021, July 3, 2020 and June 28, 2019.

Contract Balances, Performance Obligations, and Backlog

The following table provides information about receivables and liabilities from contracts with customers (in thousands):

July 3, 2020 June 28, 2019

July 2, 2021 July 3, 2020

Contract Assets

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As of July 2, 2021, we had $ 40.9 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 80 % is expected to be recognized as revenue in fiscal 2022 and the remainder thereafter.

During fiscal 2020, we recognized approximately $ 14.0 million which was included in advance payments and unearned revenue at June 28, 2019.

During fiscal years 2021 and 2020, we recognized approximately $ 21.9 million and $ 14.0 million respectively, that was included in advance payments and unearned revenue at the beginning of each reporting period.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to the unsatisfied performance obligations (or partially unsatisfied) was approximately $ 83.4 million at July 3, 2020.

Of this amount, we expect to recognize approximately 60 % as revenue during fiscal 2021, with the remaining amount to be recognized as revenue within two to five years.

ASC 606 Adoption

We recorded a net reduction to the opening balance of our accumulated deficit of $ 5.6 million as of June 30, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to our bill-and-hold and services revenue.

Our revenue was $ 243.9 million for fiscal 2019 under ASC 606, compared to $ 231.4 million under ASC 605.

The details of the significant changes and quantitative impact of our adoption of ASC 606 are set out below:

• Bill-and-Hold Sales:

ASC 606 requires consideration of the indicators of when control has been transferred and sets forth additional criteria to be met in a bill-and-hold arrangement potentially resulting in revenue being recognized earlier than under ASC 605.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to June 30, 2018 opening accumulated deficit consisting of bill-and-hold backlog of $ 10.5 million that will not be recognized as revenue under ASC 606, less related cost of product sales and income taxes, resulting in a net decrease to accumulated deficit of $ 1.7 million.

• Professional Services Revenue:

We historically recognized certain professional services revenue upon completion under ASC 605 which changed to over time revenue recognition under ASC 606.

We use the input method based on costs incurred, where revenue is calculated based on the percentage of total costs incurred in relation to total estimated costs at completion of the contract.

The input method is reasonable because the costs incurred best reflect our efforts toward satisfying the performance obligation over time.

The use of the input method requires us to make reasonably dependable estimates.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to June 30, 2018 opening accumulated deficit of $ 4.7 million that will not be recognized as revenue under ASC 606, less related cost of services and income taxes, resulting in a net decrease to accumulated deficit of $ 1.6 million.

• Transfer of Control:

Certain of our contracts include penalties, acceptance provisions, or other price variability that precluded revenue recognition under ASC 605 because of the requirement for amounts to be fixed or determinable.

ASC 606 requires us to estimate and account for variable consideration as a reduction of the transaction price.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to June 30, 2018 opening accumulated deficit of $ 0.6 million that will not be recognized as revenue under ASC 606, less related cost of revenues and income taxes, resulting in a net decrease to accumulated deficit of $ 0.4 million.

In addition, revenue allocation under ASC 606 requires an allocation of revenue between deliverables, or performance obligations, within an arrangement.

Under ASC 605, the allocation of revenue was restricted to the amount which was not contingent on future deliverables;

however, ASC 606 removes this restriction.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to decrease June 30, 2018 opening accumulated deficit by $ 0.5 million.

Under ASC 605, we deferred revenue for stand-alone software licenses where vendor-specific objective evidence (VSOE) of fair value had not been established for undelivered items, and revenue was recognized straight line over the term of the maintenance agreement.

Under ASC 606, software revenue is allocated to delivered and undelivered elements based on relative fair value resulting in more software arrangement revenue being recognized earlier.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to decrease June 30, 2018 opening accumulated deficit by $ 0.7 million.

Previously, we expensed the majority of our commission expense as incurred.

Under ASC 606, we capitalize and amortize incremental commission costs to obtain the contract over a benefit period.

We elected a practical expedient to exclude contracts with a benefit period of a year or less from this deferral requirement.

Upon adoption of ASC 606, we recorded a cumulative effect adjustment to decrease June 30, 2018 opening accumulated deficit by $ 0.7 million.

Impacts on Financial Statements

The following tables summarize the impacts of adopting ASC 606 on our consolidated statements of operations for fiscal 2019 and our consolidated balance sheet as of June 28, 2019 (in thousands):

(In thousands)

Balances without adoption of ASC 606

Income Statement

Revenue from product sales

$ 156,724 $ ( 7,387 ) $ 149,337

Revenue from services

87,134 ( 5,098 ) 82,036

Total revenues

$ 243,858 $ ( 12,485 ) $ 231,373

Cost of revenues:

Cost of product sales

$ 103,517 $ ( 4,967 ) $ 98,550

Cost of services

61,071 ( 3,355 ) 57,716

Total cost of revenues

$ 164,588 $ ( 8,322 ) $ 156,266

Selling and administrative expenses

$ 56,055 $ 295 $ 56,350

$ 9,738 $ ( 7,253 ) $ 2,485

See Note 10, “Segment and Geographic Information” to the Notes to Consolidated Financial Statements for discussion on the impact of additional information, including disaggregated revenue disclosures.

(In thousands)

Balances as of June 29, 2018

Adjustments due to ASC 606

As Adjusted as of June 30, 2018

Balance Sheet

Accounts receivable, net

$ 43,068 $ 2,503 $ 45,571

Unbilled receivables

$ 14,167 $ 8,627 $ 22,794

$ 21,290 $ ( 11,516 ) $ 9,774

Other current assets

$ 6,006 $ 476 $ 6,482

Deferred income taxes

$ 5,600 $ ( 545 ) $ 5,055

$ 9,816 $ 180 $ 9,996

Advance payments and unearned revenue

$ 19,300 $ ( 6,600 ) $ 12,700

Unearned revenue - long term

$ 6,593 $ 702 $ 7,295

Accumulated deficit

$ ( 746,359 ) $ 5,623 $ ( 740,736 )

The effects of the adoption of the new revenue recognition guidance on our June 28, 2019 consolidated balance sheet were as follows:

Adoption of ASC 606

(In thousands)

Adjustments due to ASC 606 Balances without Adoption of ASC 606

Balance Sheet

Accounts receivable, net

$ 51,937 $ ( 6,079 ) $ 45,858

Unbilled receivables

$ 27,780 $ ( 16,567 ) $ 11,213

$ 8,573 $ 19,289 $ 27,862

Other current assets

$ 4,825 $ ( 587 ) $ 4,238

Deferred income taxes

$ 13,864 $ ( 2,274 ) $ 11,590

$ 12,077 $ ( 368 ) $ 11,709

Accrued expenses

$ 22,555 $ ( 45 ) $ 22,510

Advance payments and unearned revenue

$ 13,962 $ 8,414 $ 22,376

Unearned revenue - long term

$ 9,662 $ ( 2,022 ) $ 7,640

Reserve for uncertain tax positions

$ 3,606 $ ( 55 ) $ 3,551

Accumulated deficit

$ ( 730,998 ) $ ( 12,877 ) $ ( 743,875 )

On June 29, 2019, the first day of our fiscal 2020, we adopted ASC 842 using the modified retrospective transition method as of the effective date, which requires a cumulative-effect adjustment, if any, to the opening balance of accumulated deficit to be recognized on the date of adoption with prior periods not restated.

We elect the practical consideration to exclude performance obligations that relate to contracts with original expected durations of one year or less.

As our product purchase orders are generally delivered within one year or less and our maintenance and support service contracts can be terminated without substantive termination penalties resulting in contracts with less than one year of duration, these performance obligations have been excluded from the remaining performance obligation amounts.

The aggregate amount of transaction price allocated to the remaining unsatisfied performance obligations (or partially unsatisfied) was approximately $ 70.4 million at July 2, 2021 relating to our long-term field service projects.

Of this amount, we expect to recognize approximately 60 % as revenue during fiscal 2022, with the remaining amount to be recognized as revenue beyond 12 months.

We lease facilities under non-cancelable operating lease agreements.

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Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our July 2, 2021 consolidated balance sheet.

We did not enter into any finance leases during fiscal 2020.

We have not entered into any financing leases during fiscal 2021.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

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The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred.

Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation.

Variable lease payments are expensed as incurred and are not included within

the ROU asset and lease liability calculation.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Certain of our lease arrangements include non-lease components and we account for non-lease components together with lease components for all such lease arrangements.

Leases with an initial term of 12 months or less are not recorded on our balance sheet.

Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

We recognize lease expense for these leases on a straight-line basis over the lease term.

Adoption of ASC 842

Upon our adoption of ASC 842 , we recorded total ROU assets of $ 7.9 million, with corresponding liabilities of $ 8.3 million, on our consolidated balance sheet.

The ROU assets include adjustments for prepayments and accrued lease payments.

The adoption did not impact our prior year consolidated statements of operations and statements of cash flows.

As of July 2, 2021, total ROU assets were approximately $ 3.8 million, and short-term lease liabilities and long-term lease liabilities were approximately $ 0.8 million and $ 3.2 million, respectively.

Cash paid for lease liabilities was $ 1.3 million for fiscal 2021.

During fiscal 2020, we obtained $ 0.3 million, of right-of-use assets in exchange for new operating lease obligations.

The following summarizes our lease costs, lease term and discount rate for fiscal 2020 (in thousands, except for weighted average):

The following summarizes our lease costs, lease term and discount rate for fiscal 2021 and 2020 (in thousands):

Operating lease costs $ 1,213 $ 5,241

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Total lease costs $ 3,176 $ 7,133

Weighted average remaining lease term 6.8

Other information related to our operating leases for fiscal 2021 and 2020 (in thousands, except for weighted average):

Weighted average remaining lease term 7.8 years 6.8 years

Weighted average discount rate 5.7 % 6.8 %

Rental expense for operating leases, including rentals on a month-to-month basis was $ 3.7 million for each of fiscal 2020, 2019 and 2018.

Operating lease assets obtained in exchange for operating lease liabilities $ 1,772 $ —

Rental expense for operating leases, including rentals on a month-to-month basis was $ 3.3 million for fiscal 2021 and $ 3.7 million for each of fiscal 2020 and 2019.

As of July 2, 2021, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

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Present value of lease liabilities $ 3,991

Prior to our adoption of the new lease accounting standard, as of June 28, 2019, our future minimum lease payments under all non-cancelable operating leases were as follows (in thousands):

Fiscal years Amount

Thereafter 2,090

Total $ 6,358

Balance Sheet Components

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(In thousands) July 2,

2020 June 28,

Cash and cash equivalents $ 47,942 $ 41,618

Restricted cash included in Other assets 256 254

Total cash, cash equivalents, and restricted cash in the Statements of Cash Flows $ 41,872 $ 32,201

Total cash, cash equivalents, and restricted cash $ 48,198 $ 41,872

Accounts Receivable, net

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(In thousands) July 2,

2020 June 28,

Accounts receivable $ 50,276 $ 46,502

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(In thousands) July 2,

2020 June 28,

Finished products $ 15,409 $ 9,055

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Total charges $ 1,452 $ 945 $ 553

Assets Held for Sale

We consider properties to be Assets held for sale when management approves and commits to a plan to dispose of a property or group of properties.

The property held for sale prior to the sale date is separately presented on the consolidated balance sheets as Assets held for sale.

During the second quarter of fiscal 2021 management initiated the sale of our facility located in Lanarkshire, Scotland.

We expect to complete the sale within twelve months .

The carrying value of this asset held for sale as of April 2, 2021 of $ 2.2 million which represents the lower of 1) the carrying value or 2) fair value of the assets, less estimated

costs to sell the assets.

We performed an analysis and determined the estimated fair value of the assets, less estimated selling costs, is higher than the carrying value of the assets.

As a result, no impairment charge was recorded in our consolidated statements of operations.

Property, Plant and Equipment, net

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(In thousands) July 2,

2020 June 28,

Land $ 210 $ 710

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Total Property, Plant and Equipment, net $ 11,701 $ 16,911

Included in the total plant, property and equipment above were $ 3.5 million and $ 2.8 million of assets in progress which have not been placed in service as of July 3, 2020 and June 28, 2019, respectively.

Depreciation and amortization expense related to property, plant and equipment, including amortization of internal use software and capital lease equipment, was $ 4.4 million, $ 4.5 million and $ 5.2 million in fiscal 2020, 2019 and 2018, respectively.

Included in the total plant, property and equipment above were $ 0.3 million and $ 3.5 million of assets in progress which have not been placed in service as of July 2, 2021 and July 3, 2020, respectively.

Depreciation and amortization expense related to property, plant and equipment, including amortization of internal use software was $ 5.4 million, $ 4.4 million and $ 4.5 million in fiscal 2021, 2020 and 2019, respectively.

Accrued Expenses

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(In thousands) July 2,

2020 June 28,

Accrued compensation and benefits $ 13,455 $ 11,814

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(In thousands) July 2,

2020 June 28,

Advance payments $ 2,445 $ 2,529

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts, estimated fair values and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of July 3, 2020 and June 28, 2019 were as follows:

July 3, 2020 June 28, 2019

The carrying amounts, estimated fair values and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of July 2, 2021 and July 3, 2020 were as follows:

July 2, 2021 July 3, 2020

(In thousands) Carrying

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We classify items within Level 1 if quoted prices are available in active markets.

Our Level 1 items mainly are money market funds purchased from two major financial institutions.

Our Level 1 items mainly are money market funds purchased from major financial institutions.

As of July 2, 2021, these money market funds were valued at $ 1.00 net asset value per share by these financial institutions.

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Foreign currency forward contracts are measured at fair value using observable foreign currency exchange rates.

The assets and liabilities related to our foreign currency forward contracts were not material as of July 3, 2020 and June 28, 2019.

The assets and liabilities related to our foreign currency forward contracts were not material as of July 2, 2021 and July 3, 2020.

We did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

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We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of July 3, 2020, available credit under the SVB Credit Facility was $ 13.3 million reflecting the calculated borrowing base of $ 23.8 million less existing borrowings of $ 9.0 million and outstanding letters of credit of $ 1.5 million.

As of July 2, 2021, available credit under the SVB Credit Facility was $ 22.7 million reflecting the calculated borrowing base of $ 25.0 million less outstanding letters of credit of $ 2.3 million.

We did not borrow against the SVB Credit Facility during fiscal 2021 and there was no borrowing outstanding as of July 2, 2021.

The SVB Credit Facility carries an interest rate, at our option, computed (i) at the prime rate reported in the Wall Street Journal plus a spread of 0.50 % to 1.50 %, with such spread determined based on our adjusted quick ratio;

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Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00 % above the applicable prime or LIBOR rate.

During fiscal 2020, the weighted average interest rate on our outstanding loan was 3.97 %.

As of July 3, 2020 and June 28, 2019, our outstanding debt balance under the SVB Credit Facility was $ 9.0 million, and the interest rate was 3.75 % and 6.00 %, respectively.

The SVB Credit Facility contains monthly and quarterly financial covenants including minimum adjusted quick ratio and minimum profitability (EBITDA) requirements.

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As of July 2, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility.

The $ 9.0 million borrowing was classified as a current liability as of July 3, 2020 and June 28, 2019.

We repaid the $ 9.0 million outstanding as of July 3, 2020 in July 2020.

Due to the current economic uncertainty stemming from the impact of the COVID-19 pandemic, on April 21, 2020, we entered into a Paycheck Protection Program Note (the “Note”) with Silicon Valley Bank as the lender (“Lender”) in an aggregate principal amount of $ 5.9 million pursuant to the Paycheck Protection Program under the CARES Act (the “PPP Loan”).

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(In thousands) Severance and Benefits Facilities and Other

Q4 2020 Plan Q3 2020 Plan Fiscal 2020 Plan Fiscal

Plan Prior Years' Plans Fiscal

Plan Prior Years' Plans Total

Balance as of June 30, 2017 $ — $ — $ — $ — $ 478 $ 563 $ 673 $ 1,714

Fiscal 2021 Plan Q4 2020 Plan Prior Years' Plan Prior Years' Plans Total

Restructuring liability June 29, 2018 $ — $ — $ 1,646 $ 266 $ 1,912

Charges, net — — 736 — 736

Cash payments — — ( 1,293 ) ( 23 ) ( 1,316 )

Foreign currency translation loss — — — — 2 19 — 21

Foreign currency translation (gain) loss — — — ( 5 ) ( 5 )

Balance as of June 28, 2019 — — 1,089 238 1,327

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Cash payments — ( 322 ) ( 2,314 ) — ( 2,636 )

Foreign currency translation gain — — — — — ( 5 ) — ( 5 )

Balance as of June 28, 2019 — — — 1,023 66 238 — 1,327

Foreign currency translation (gain) loss — — — ( 2 ) ( 2 )

Balance as of July 3, 2020 — 1,557 945 236 2,738

Charges, net 2,414 92 ( 235 ) — 2,271

Cash payments ( 205 ) ( 1,440 ) ( 646 ) — ( 2,291 )

Foreign current translation gain — — — — — ( 2 ) — ( 2 )

Foreign currency translation (gain) loss — 7 — 12 19

Balance as of July 2, 2021 $ 2,209 $ 216 $ 64 $ 248 $ 2,737

As of July 2, 2021, the sum of the accrual balance of $ 2.7 million was in short-term restructuring liabilities on the consolidated balance sheets.

Fiscal 2021 Plan

During the third and fourth quarters of fiscal 2021, our Board of Directors approved restructuring plans (the “Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability.

We recorded restructuring charges of $ 2.4 million related to the Fiscal 2021 Plan in fiscal 2021.

Payments related to the accrued restructuring balances for this plan are expected to be fully paid in fiscal 2022.

During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”) in order to continue to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.

The Q4 2020 Plan is being implemented starting with our fourth fiscal quarter of 2020 through the second fiscal quarter of 2021.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2022.

During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”) in order to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Payments related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.

Fiscal 2020 Plan

During the fourth quarter of fiscal 2019, our Board of Directors approved a restructuring plan (the “Fiscal 2020 Plan”) to primarily consolidate product development, right size our resources to support our international business and other support functions.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Payments related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.

Fiscal 2018-2019 Plan

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We completed the restructuring activities under the Fiscal 2018-2019 Plan at the end of fiscal 2019.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Fiscal 2015-2016 Plan

In January 2018, we reached a settlement with certain foreign government for grant liabilities which allowed us to reduce our estimated payments relating to prior years’ restructuring plan by $ 0.3 million.

During the third quarter of fiscal 2015, with the intent to bring our operational cost structure in line with the changing dynamics of the microwave radio and telecommunications markets, we initiated a restructuring plan (the “Fiscal 2015-2016 Plan”) to lower fixed overhead costs and operating expenses and to preserve cash flow.

Activities under the Fiscal 2015-2016 Plan primarily included reductions in workforce across the Company, but primarily in operations outside the United States.

We completed the restructuring activities under the Fiscal 2015-2016 Plan as of July 1, 2016.

Payments related to the accrued restructuring liability balance for this plan are expected to be paid in fiscal 2021.

Payments related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.

Stockholders’ Equity

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(In thousands, except share and per-share amounts) Shares Weighted-Average Price Paid per Share Aggregate purchase price

Fiscal 2021 Treasury Shares 19,587 $ 40.16 $ 787

Fiscal 2020 256,046 $ 6.91 $ 1,769

Fiscal 2019 312,538 $ 7.39 $ 2,309

All repurchased shares were retired.

Starting in February 2021 repurchased shares were recorded as treasury stock and we do not anticipate retiring them.

Treasury stock did not participate in the two -for-one stock split in the form of a stock dividend paid on April 7, 2021.

All repurchased shares prior to February 2021 were retired and reflected the two -for-one stock split.

As of July 2, 2021, $ 2.6 million remained available for repurchase under our stock repurchase program.

The repurchase program has been suspended temporarily since February 2020.

Stock Incentive Programs

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Shares of our common stock remaining available for future issuance under the 2018 Plan totaled 784,793 as of July 2, 2021.

On September 6, 2016, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share (the “Common Shares”), to our stockholders of record as of the close of business on September 16, 2016 (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $ 35.00 (the “Exercise Price”) per one one-thousandth of a Preferred Share, subject to adjustment.

On March 3, 2020, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share, to our stockholders of record as of the close of business on March 3, 2020, (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $ 35.00 per one one-thousandth of a Preferred Share, subject to adjustment.

Until the rights become exercisable, they will not be evidenced by separate certificates and will trade automatically with shares of the Company’s common stock.

The Rights have a de minimis fair value.

The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), dated as of September 6, 2016, between the Company and Computershare Inc., as rights agent.

By adopting the Plan, we are helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended.

The Plan reduces the likelihood that changes in our investor base have the unintended effect of limiting our use of the Tax Benefits.

The Plan expired on September 6, 2019.

On March 3, 2020, our Board of Directors reauthorized the Plan at the same term with a Record Date of March 13, 2020.

Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”).

The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of our common stock.

The Plan, reauthorized by our Board of Directors on March 3, 2020, will be subject to our shareholders approval at our upcoming Annual Shareholders’ Meeting to be held in November 2020.

The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), dated as of March 3, 2020, and amended as of August 27, 2020, between the Company and Computershare Inc., as rights agent.

We submitted the Plan to a stockholder vote and our stockholders voted to approve the Plan at the 2020 Annual Meeting of Stockholders.

Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of our common stock.

Employee Stock Purchase Plan

27 unchanged sentences

(Years) (In thousands)

Options outstanding as of June 28, 2019 369,004 $ 21.85 3.37 $ —

Options outstanding as of July 3, 2020 643,436 $ 8.65 4.20

Granted 243,810 $ 12.02

5 unchanged sentences

Options exercisable as of July 2, 2021 66,592 $ 8.40 3.86 $ 1,564

The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing price of our common stock on July 2, 2020 of $ 18.59 , in place of July 3, 2020 as the stock market was closed in observance of Independence Day, and the exercise price for in-the-money options that would have been received by the optionees if all options had been exercised on July 3, 2020.

The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing price of our common stock on July 2, 2021 of $ 31.88 , and the exercise price for in-the-money options that would have been received by the optionees if all options had been exercised on July 2, 2021.

The fair value of each option grant under our 2018 Stock Plan was estimated using the Black-Scholes option pricing model on the date of grant.

1 unchanged sentence

2021 2020 2019

Expected dividends — — N/A

Expected volatility 51.7 % 59.0 % N/A

Risk-free interest rate 1.7 % 2.8 % N/A

Weighted-average grant date fair value per share granted $ 14.45 $ 8.93 N/A

Expected dividends — % — % — %

Expected volatility 48.5 % 51.7 % 59.0 %

Risk-free interest rate 0.2 % 1.7 % 2.80 %

Expected term (in years) 3.0 4.6 4.5

The following summarizes all of our stock options outstanding and exercisable as of July 2, 2021:

10 unchanged sentences

540,790 5.38 $ 9.55 66,592 $ 8.40

$ 23.52 — $ 26.28 29,695 0.32 $ 25.85 29,695 $ 25.85

$ 27.72 — $ 27.72 291 0.50 $ 27.72 291 $ 27.72

$ 31.20 — $ 31.20 13,131 0.19 $ 31.20 13,131 $ 31.20

$ 12.48 — $ 31.20 321,718 4.20 $ 17.30 134,955 $ 19.81

Additional information related to our stock options is summarized below:

5 unchanged sentences

Shares Weighted-Average

Restricted stock outstanding as of June 28, 2019 171,567 $ 9.90

Restricted stock outstanding as of July 3, 2020 161,658 $ 7.14

Granted 120,122 $ 12.51

7 unchanged sentences

Shares Weighted-Average

Restricted stock outstanding as of June 28, 2019 — $ —

Restricted stock outstanding as of July 3, 2020 93,000 $ 9.53

Granted 72,000 14.07

4 unchanged sentences

Expected volatility 53.2 % - 48.9 %

36.4 % - 47.3 %

Risk-free interest rate .13 % - .19 %

1.57 % - 1.58 %

Weighted-average grant date fair value per share granted $ 14.07 $ 9.53

2 unchanged sentences

Shares Weighted-Average

Performance share awards and units outstanding as of June 28, 2019 124,597 $ 14.59

Performance share awards and units outstanding as of July 3, 2020 151,536 $ 7.95

Granted 76,706 $ 11.84

24 unchanged sentences

United States $ 181,842 66.1 %

Philippines $ 12,550 5.3 %

United States $ 147,795 61.9 %

1 unchanged sentence

United States $ 129,929 53.3 %

South Africa $ 13,929 5.7 %

Philippines $ 24,368 10.0 %

Our long-lived assets, consisting primarily of net property, plant and equipment, by geographic areas based on the physical location of the assets as of July 3, 2020 and June 28, 2019 were as follows:

Our long-lived assets, consisting primarily of net property, plant and equipment, by geographic areas based on the physical location of the assets as of July 2, 2021 and July 3, 2020 were as follows:

(In thousands) July 2,

2020 June 28,

New Zealand $ 6,840 $ 8,342

3 unchanged sentences

Total $ 11,701 $ 16,911

During fiscal 2021 management initiated the sale of our facility located in Lanarkshire, Scotland.

Therefore, the carrying value of $ 2.2 million relating to the real property was reclassified to assets held for sale in the consolidated balance sheet.

Income before provision for income taxes during fiscal year 2021, 2020 and 2019 consisted of the following:

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Total income before income taxes $ 22,440 $ 3,709 $ 1,550

Provision for (benefit from) income taxes from continuing operations for fiscal year 2020, 2019 and 2018 were summarized as follows:

(Benefit from) provision for income taxes for fiscal year 2021, 2020 and 2019 were summarized as follows:

(In thousands) 2021 2020 2019

7 unchanged sentences

Foreign 983 572 ( 1,278 )

( 172 ) ( 8,760 ) ( 3,155 )

Total provision for (benefit from) income taxes

State and local ( 15,384 ) — —

( 89,988 ) ( 172 ) ( 8,760 )

The provision for (benefit from) income taxes differed from the amount computed by applying the federal statutory rate of 21.0%, 21.0% and 28.1% for fiscal 2020, 2019 and 2018, respectively, to our income before provision for (benefit from) income taxes as follows:

Total (benefit from) provision for income taxes $ ( 87,699 ) $ 3,452 $ ( 8,188 )

The (benefit from) provision for income taxes differed from the amount computed by applying the federal statutory rate of 21.0%, to our income before (benefit from) provision for income taxes as follows:

(In thousands) 2021 2020 2019

6 unchanged sentences

statutory rate 209 764 1,488

Stock-based compensation excess tax benefits

Tax credit/deductions - generated and expired 108 99 2,167

1 unchanged sentence

Brazil withholding tax receivable 72 — ( 1,877 )

Singapore refund — — ( 1,325 )

Change in uncertain tax positions 102 2,674 859

Impact from tax reform — — 50,115

Deferred true-up adjustments 5,634 ( 1,371 ) —

Return-to-provision/Deferred true-up adjustments — 5,634 ( 1,371 )

Other 1,101 ( 419 ) 116

1 unchanged sentence

$ ( 87,699 ) $ 3,452 $ ( 8,188 )

Our provision for (benefit from) income taxes was $ 3.5 million of expense for fiscal 2020, $ 8.2 million of benefit for fiscal 2019 and $ 1.0 million of benefit for fiscal 2018.

The tax expense for fiscal 2020 was primarily due to tax expense related to profitable foreign subsidiaries and increase in our reserve for uncertain tax positions.

During fiscal year 2020, we corrected the prior year balance of deferred tax assets and liabilities relating to property and equipment, accruals and reserves, stock compensation, unrealized exchange loss and tax loss and credit carryforwards, as well as the valuation allowance related to these assets by an equal and offsetting amount.

As a result, certain items that comprised our prior year tax benefit reconciliation have been revised as of June 28, 2019, with no change to the tax benefit amount of $ 8.2 million.

As a result, the previously reported amounts were revised as follows:

valuation allowance decreased by $ 0.7 million, tax credit/deductions - generated and expired increased by $ 0.2 million and deferred true-up adjustments increased by $ 0.5 million as of June 28, 2019 in the table above.

There was also a reclassification of $ 1.9 million between deferred true-up adjustments and other.

These immaterial adjustments to the disclosures had no effect on the consolidated balance sheets, statements of operations and cash flows for any periods presented.

Our tax benefit for fiscal 2019 was primarily due to the release of certain U.S.

federal and state valuation allowances of $ 7.5 million and refundable foreign withholding tax credit, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits.

During the first quarter of fiscal 2019, we received notification from the Department of Federal Revenue of Brazil that our withholding tax refund request had been approved.

We recorded a net discrete income tax benefit of $ 1.6 million for the release of valuation allowance previously recorded as a deferred tax asset for the withholding tax credits.

This consisted of an income tax benefit of $ 1.9 million for the refundable withholding tax credit, less tax expense of $ 0.3 million from recognizing an ASC 740-10 reserve previously recorded as a reduction to the withholding tax credits.

We expect to receive the refundable withholding tax credit during our fiscal year 2021.

Our (benefit from) provision for income taxes was $ 87.7 million of benefit for fiscal 2021, $ 3.5 million of expense for fiscal 2020 and $ 8.2 million of benefit for fiscal 2019.

Our tax benefit for fiscal 2021 was primarily due to the release of valuation allowance on our U.S.

federal and state deferred tax assets.

Our tax expense for fiscal 2020 was primarily due to tax expense related to profitable foreign subsidiaries and increase in our reserve for uncertain tax positions.

The components of deferred tax assets and liabilities were as follows:

(In thousands) July 3, 2020 June 28, 2019

(In thousands) July 2, 2021 July 3, 2020

Deferred tax assets:

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Depreciation 450 142

Inventory — 1,810

Right of Use Asset 556 —

Right of use assets 634 556

Total deferred tax liabilities 1,214 818

5 unchanged sentences

$ 102,853 $ 12,254

As a result, the previously reported amounts were revised as follows:

deferred tax assets decreased by $ 0.2 million, valuation allowance decreased by $ 0.7 million and deferred tax liabilities increased by $ 0.5 million as of June 28, 2019 in the table above.

These immaterial adjustments to the disclosures had no effect on the consolidated balance sheets, statements of operations and cash flows for any periods presented.

Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was $ 136.1 million as of July 3, 2020 and $ 142.9 million as of June 28, 2019.

The change in valuation allowance for the fiscal years ended July 3, 2020 and June 28, 2019 was a decrease of $ 6.8 million and $ 14.4 million, as revised for the correction to the deferred tax assets in table above, respectively.

Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was $ 37.4 million as of July 2, 2021 and $ 136.1 million as of July 3, 2020.

The change in valuation allowance for the fiscal years ended July 2, 2021 and July 3, 2020 was a decrease of $ 98.7 million and $ 6.8 million.

The decrease in the valuation allowance in fiscal 2021 was primarily due to the release of certain U.S.

federal, state, and foreign valuation allowances, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits.

During the third quarter of fiscal 2021, we recorded a valuation allowance release of $ 92.2 million as a discrete item based on management’s reassessment of the amount of its U.S.

federal and state deferred tax assets that are more likely than not to be realized, primarily as a result of increases in U.S.

profitability in the current period and expectations of continued profitability in future periods.

In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets.

We continue to maintain a valuation allowance of $ 1.4 million on certain U.S.

federal and state deferred tax assets that we believe is not more likely than not to be realized in future periods.

We entered into a tax sharing agreement with Harris effective on January 26, 2007, the date of the acquisition of Stratex.

The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and tax attributes, including tax loss carryforwards that are attributable to the Microwave Communication Division when it was a division of Harris.

There were no settlement payments recorded since the acquisition date.

Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.

Prior to fiscal 2019, due to our U.S.

operating losses in previous years and continuing U.S.

earnings volatility which did not allow sustainable profitability, we had established and maintained a full valuation allowance for our U.S.

deferred tax assets.

While there had been a trend of positive evidence that had been strengthening prior to fiscal 2019, it was not sufficiently persuasive to outweigh the negative evidence in future periods.

During the third quarter of fiscal 2019, we generated our third consecutive profitable year from a U.S.

pre-tax book income perspective.

Accordingly, we determined that it was more likely than not that we would realize a portion of our U.S.

deferred tax assets, primarily relating to certain net operating loss carryforwards and current temporary differences.

The positive evidence as of March 29, 2019, which outweighed the negative evidence to release a portion of the valuation allowance, included our fiscal 2019 and three-year cumulative U.S.

profitability driven by continued demand for our products in North America that have historically resulted in higher margins than international sales, reductions in operating expenses resulting from our previous restructurings, and our forecasted U.S.

operating profits in future periods.

The negative evidence primarily relates to certain net operating loss carryforwards and credits that are expected to expire prior to utilization.

We believed that our positive evidence was strong and continues to be strong in fiscal 2020.

The improved financial performance as it relates to U.S.

profitability in recent years is an objectively verifiable piece of positive evidence and is the result of a number of factors which have been present to a greater or lesser extent in prior years but had only gathered sufficient weight to deliver objectively verifiable, consistent U.S.

pre-tax book profits in fiscal 2019.

In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets.

Accordingly, during fiscal 2019, we released $ 7.5 million of U.S.

valuation allowance as a discrete item on certain deferred tax assets.

The remaining valuation allowance relates to deferred tax assets, for which we believe it is not more likely than not to be realized in future periods.

We also performed this analysis in fiscal 2020, which resulted in no additional U.S.

valuation allowance release.

There have been no settlement payments recorded since the acquisition date.

Tax loss and credit carryforwards as of July 2, 2021 have expiration dates ranging between one year and no expiration in certain instances.

The amounts of U.S.

federal tax loss carryforwards as of July 3, 2020 and June 28, 2019 were $ 404.1 million ($ 325.6 million and $ 78.5 million related to Harris tax attributes) and $ 408.5 million ($ 330.0 million and $ 78.5 million to Harris tax attributes), respectively, and begin to expire in fiscal 2023.

federal tax loss carryforwards as of July 2, 2021 and July 3, 2020 were $ 382.3 million ($ 303.8 million and $ 78.5 million to Harris tax attributes) and $ 404.1 million ($ 325.6 million and $ 78.5 million related to Harris tax attributes), respectively, and begin to expire in fiscal 2023.

The amount of U.S.

2 unchanged sentences

The amount of foreign tax credit carryforwards as of July 2, 2021 was $ 2.9 million, and certain credits will begin to expire in fiscal 2026.

United States income taxes have not been provided on basis differences in foreign subsidiaries of $ 1.6 million and $ 0.8 million as of July 3, 2020 and June 28, 2019, respectively, because of our intention to reinvest these earnings indefinitely.

The residual U.S.

tax liability, if such amounts were remitted, would be nominal.

As of July 3, 2020 and June 28, 2019, we had unrecognized tax benefits of $ 18.0 million and $ 13.0 million, respectively, as revised for correction to unrecognized tax benefits in the table below, for various federal, foreign, and state income tax matters.

Unrecognized tax benefits increased by $ 5.0 million.

Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $ 5.8 million and $ 3.6 million, respectively, as of July 3, 2020 and June 28, 2019.

United States income taxes have not been provided on basis differences in foreign subsidiaries of $ 2.8 million and $ 1.6 million as of July 2, 2021 and July 3, 2020, respectively, because of our intention to reinvest these earnings indefinitely.

Additionally, no foreign withholding taxes, federal or state taxes have been provided if these unremitted earnings of the Company’s foreign subsidiaries were distributed, as such amounts are considered permanently reinvested.

It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes, that would be due upon the repatriation of these earnings.

As of July 2, 2021 and July 3, 2020, we had unrecognized tax benefits of $ 17.3 million and $ 18.0 million, respectively, as revised for correction to unrecognized tax benefits in the table below, for various federal, foreign, and state income tax matters.

Unrecognized tax benefits decreased by $ 0.8 million.

Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $ 5.2 million and $ 5.8 million, respectively, as of July 2, 2021 and July 3, 2020.

These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for income taxes.

The interest accrued was $ 0.7 million as of July 3, 2020 and $ 0.6 million as of June 28, 2019.

The interest accrued was $ 0.6 million as of July 2, 2021 and $ 0.7 million as of July 3, 2020.

An immaterial amount of penalties have been accrued.

11 unchanged sentences

Decreases related to change of foreign exchange rate ( 365 )

Unrecognized tax benefit as of June 28, 2019 12,987

Unrecognized tax benefit as of July 3, 2020 18,047

Additions for tax positions in prior periods 184

3 unchanged sentences

Unrecognized tax benefit as of July 2, 2021 $ 17,255

During fiscal year 2020, we corrected the prior year balance of unrecognized tax benefits relating to certain reserves, as well as the deferred tax asset and valuation allowance related to these reserves by an equal and offsetting amount.

As a result, the net unrecognized tax benefit as of June 30, 2017 and June 28, 2019 have both been adjusted in the table above and decreased by $ 3.3 million and $ 0.2 million, respectively.

Our unrecognized tax benefit decreased for tax positions in prior periods by $ 0.9 million, $ 3.8 million and $ 0.0 million for fiscal year 2021, 2020 and 2019, respectively, related to settlements with tax authorities in the table above.

Our unrecognized tax benefit decreased for tax positions in prior periods by $ 0.6 million, $ 0.9 million and $ 0.2 million for fiscal year 2021, 2020 and 2019, respectively, related to lapses of the applicable statute of limitations in the table above.

We have a number of years with open tax audits which vary from jurisdiction to jurisdiction.

4 unchanged sentences

Saudi Arabia - 2019, and Ivory Coast - 2017.

During the fourth quarter of fiscal 2020, we completed our audit with the Inland Revenue of Singapore (IRAS) for fiscal years 2011 to 2014, which resulted in a reduction to net operating loss carryforward of $ 9.7 million and recorded no tax expense due to a full valuation allowance against Singapore’s deferred tax assets.

During the first quarter of 2021, we received a tax refund of $ 1.2 million from the Federal Revenue of Brazil related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the Financial Administration of the Republic of Slovenia for fiscal years 2016 to 2018 and recorded $ 0.4 million of tax expense related to the denial of research and development tax relief as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the General Authority of Zakat and Tax in Saudi Arabia for fiscal years 2016 to 2018 and recorded minimal tax benefit related to the release of previously recorded ASC 740-10 reserve as a discrete item.

During the first and third quarter of 2021, we settled tax litigation cases with the Income Tax Department of Ministry of Finance for fiscal years 2005 to 2011 and recorded minimal tax benefit related to the release of previously recorded ASC740-10 reserve as a discrete item.

On March 27, 2020, the US enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act which provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes in the deduction of interest, (3) acceleration of alternative minimum tax credit (AMT) refunds, and (4) a technical correction to allow accelerated deductions for qualified improvement property.

1 unchanged sentence

The CARES Act allows for acceleration of the refundable AMT credit up to 100% of the AMT credit to be refunded in tax year 2018.

During the third quarter of fiscal 2020, in connection with our analysis of the impact of the CARES Act, we reclassified the refundable AMT credit of $ 3.4 million from long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of the CARES Act.

During the third quarter of 2021, we received a tax refund of $ 3.5 million from the U.S.

Internal Revenue Service primarily related to our refundable AMT credit claim under the CARES Act and recorded minimal tax benefit related to interest as a discrete item.

On December 27, 2020, the US enacted the Consolidated Appropriations Act of 2021 (CAA) which extended and expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of Payroll Protection Program loans, and (2) the Employer Retention Credit for 2021.

On March 11, 2021, the US enacted the American Rescue Plan Act of 2021 (ARPA) which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, 2026.

We continue to examine the elements of CARES Act, CAA, and ARPA and the impact they may have on our future business.

Commitments and Contingencies

1 unchanged sentence

From time to time in the normal course of business, we may enter into purchasing agreements with our suppliers that require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products that we requested be held as safety stock, and work in process started on our behalf in the event we cancel or terminate the purchasing agreement.

Because these agreements do not specify fixed or minimum quantities, do not

specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements.

Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements.

As of July 2, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 31.4 million.

7 unchanged sentences

During the second quarter of fiscal 2017, we recorded a payout in cost of revenues of $ 0.4 million on the performance guarantees to a contractor in the Middle East region.

We believe the customer improperly drew down on the performance bond and intend to pursue all remedies available to recover the payment.

We believe the customer improperly drew down on the performance bond and

intend to pursue all remedies available to recover the payment.

We do not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on the performance guarantees in the future.

8 unchanged sentences

We are subject from time to time to disputes with customers concerning our products and services.

In May 2016, we received notification of a claim for damages from a customer alleging that certain of our products were defective.

Although we believe that we have numerous contractual and legal defenses to these disputes but at this time we have accrued an immaterial amount representing the estimated probable loss for which we would settle the matter.

We currently cannot form an estimate of the range of loss in excess of our amounts already accrued.

If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.

In May 2016, we received notification of a claim for damages from a customer alleging that certain of our products were defective which we settled for an immaterial amount during the third quarter of 2021.

From time to time, we may be involved in various other legal claims and litigation that arise in the normal course of our operations.

7 unchanged sentences

We evaluate, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable.

We have not recorded any accrual for loss contingencies associated with such legal claims or litigation discussed above.

We have not recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.

Contingent Liabilities

4 unchanged sentences

We expense all legal costs incurred to resolve regulatory, legal and tax matters as incurred.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against our subsidiary Aviat India relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under FEMA.

In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima India, a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act.

In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009.

In September 2019, our directors of Aviat India appeared before the Ministry of Finance Enforcement Directorate.

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The COVID-19 virus may have an impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including ongoing vaccination efforts, any new variant strains of the underlying virus and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of COVID-19 on our financial condition, liquidity, operations, suppliers, industry, and workforce.

3 unchanged sentences

We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the second half of fiscal 2020.

The impact to our supply chain lead times and ability to fulfill orders was minimal for fiscal 2021.

However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods.

We are monitoring, assessing and adapting to the situation and preparing for implications to our business, supply chain and customer demand.

We continue to monitor, assess and adapt to the situation and prepare for implications to our business, supply chain and customer demand.

We expect these challenges to continue until business and economic activities return to more normal levels.

The financial results for the second half of fiscal 2020 reflect some of the reduced activity experienced during the period in various locations around the world.

The financial results for fiscal 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessary indicative of the results for the next fiscal period or fiscal year.

Subsequent Event

On August 25, 2021, our Board of Directors approved a restructuring plan to further reduce operating costs and improve profitability.

We estimate the restructuring charges, consist of one-time severance charges, will be approximately $ 0.8 million to be recorded in the first quarter of fiscal 2022.

We anticipate it will generate approximately $ 0.6 million in annual net savings, the majority of which will be allocated to support growth-related initiatives to be in a stronger position to drive both top- and bottom- line performance.

Quarterly Financial Data (Unaudited)

3 unchanged sentences

(In thousands, except per share amounts) Q1

12/27/2019 Q3

Revenue $ 66,290 $ 70,531 $ 66,404 $ 71,686

Gross margin 24,249 26,909 25,578 25,879

Operating income (loss) 1,519 ( 1,497 ) 1,236 2,120

Net income (loss) 54 ( 1,671 ) 731 1,143

Operating income 6,565 7,878 4,035 3,732

Net income 5,936 6,641 94,731 2,831

Per share data:

Basic net income (loss) per common share $ 0.01 $ ( 0.31 ) $ 0.14 $ 0.21

Diluted net income (loss) per common share $ 0.01 $ ( 0.31 ) $ 0.13 $ 0.21

Basic net income per common share $ 0.55 $ 0.60 $ 8.49 $ 0.25

Diluted net income per common share $ 0.54 $ 0.58 $ 8.00 $ 0.24

(In thousands, except per share amounts) Q1

2 unchanged sentences

Gross margin 22,556 18,319 21,961 21,860

Operating (loss) income ( 1,514 ) 2,883 ( 2,503 ) 2,502

Net (loss) income ( 750 ) 2,310 4,339 3,839

Operating income (loss) 1,519 ( 1,497 ) 1,236 2,120

Net income (loss) 54 ( 1,671 ) 731 1,143

Per share data:

Basic net (loss) income per common share $ ( 0.14 ) $ 0.43 $ 0.81 $ 0.71

Diluted net (loss) income per common share $ ( 0.14 ) $ 0.41 $ 0.78 $ 0.69

The following tables summarize charges (recoveries) included in our results of operations for each of the fiscal quarters presented:

Basic net income (loss) per common share $ 0.01 $ ( 0.15 ) $ 0.07 $ 0.11

Diluted net income (loss) per common share $ — $ ( 0.15 ) $ 0.07 $ 0.10

The following tables summarize charges included in our results of operations for each of the fiscal quarters presented:

(In thousands) Q1

12/27/2019 Q3

Restructuring charges $ — $ — $ 1,162 $ 1,109

Release of valuation allowance $ — $ — $ ( 92,200 ) $ —

(In thousands) Q1

12/27/2019 Q3

Restructuring charges (recovery) $ 796 $ — $ — $ ( 60 )

WTM inventory recovery $ ( 88 ) $ ( 2 ) $ — $ ( 65 )

Strategic alternative costs $ — $ — $ 491 $ 102

Tax receivable from Department of Federal Revenue of Brazil $ ( 1,646 ) $ — $ — $ —

Release of valuation allowance $ — $ — $ ( 7,054 ) $ ( 432 )

Restructuring charges $ 1,177 $ 381 $ 617 $ 1,874

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data