What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2020-08-18 compared with 2019-08-15 · 525 added, 433 removed, 708 unchanged (58% of the section changed)

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(In thousands, except share and per share data)

July 3, 2020 June 30, 2019

Current assets:

Cash and cash equivalents $ 226,838 $ 257,932

Accounts receivable, net of allowance for doubtful accounts of $1,228 and $359 at June 30, 2019 and 2018, respectively

Accounts receivable, net of allowance for doubtful accounts of $1,451 and $1,228 at July 3, 2020 and June 30, 2019, respectively 120,438 118,832

Unbilled receivables and costs in excess of billings 90,289 57,387

Inventory 178,093 137,112

Prepaid income taxes 2,498 90

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Property and equipment, net 87,737 60,001

Goodwill 614,076 562,146

Intangible assets, net 208,748 206,124

Operating lease right-of-use assets 60,613 —

Other non-current assets 4,777 6,534

Total assets $ 1,610,720 $ 1,416,977

Liabilities and Shareholders’ Equity

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Income taxes payable 4,117 1,273

Long-term debt

Operating lease liabilities 66,981 —

Other non-current liabilities 15,034 15,119

Total liabilities 225,936 132,238

Commitments and contingencies (Note K)

Commitments and contingencies (Note L)

Shareholders’ equity:

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85,000,000 shares authorized;

54,247,532 and 46,924,238 shares issued and outstanding at June 30, 2019 and 2018, respectively

54,702,322 and 54,247,532 shares issued and outstanding at July 3, 2020 and June 30, 2019, respectively 547 542

Additional paid-in capital 1,074,667 1,058,745

Retained earnings 312,455 226,743

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss ( 2,885 ) ( 1,291 )

Total shareholders’ equity 1,384,784 1,284,739

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(In thousands, except per share data)

For the Years Ended June 30,

For the Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Net revenues $ 796,610 $ 654,744 $ 493,184

Cost of revenues 439,766 368,588 267,326

Gross margin 356,844 286,156 225,858

Operating expenses:

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Interest expense ( 1,006 ) ( 9,109 ) ( 2,850 )

Other (expense) income, net

Other income (expense), net 1,726 ( 8,880 ) ( 1,594 )

Income before income taxes 93,933 59,527 42,573

Tax provision 8,221 12,752 1,690

Net income $ 85,712 $ 46,775 $ 40,883

Basic net earnings per share $ 1.57 $ 0.98 $ 0.88

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Weighted-average shares outstanding:

Basic 54,546 47,831 46,719

Diluted 55,115 48,500 47,471

Comprehensive income:

Net income $ 85,712 $ 46,775 $ 40,883

Foreign currency translation adjustments 174 ( 232 ) ( 137 )

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Years Ended June 30, 2019 , 2018 and 2017

For the Fiscal Years Ended July 3, 2020, June 30, 2019 and June 30, 2018

(In thousands)

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Shareholders’

Shares Amount

Balance at June 30, 2017 46,303 $ 463 $ 584,795 $ 139,085 $ 1,074 $ 725,417

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Retirement of common stock ( 329 ) ( 3 ) ( 15,505 ) — — ( 15,508 )

Follow-on public stock offering

Stock-based compensation — — 17,437 — — 17,437

Foreign currency translation adjustments

Pension benefit plan, net of tax

Net income — — — 40,883 — 40,883

Other Comprehensive Income — — — — 217 217

Balance at June 30, 2018 46,924 469 590,163 179,968 1,291 771,891

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Retirement of common stock ( 156 ) ( 2 ) ( 7,966 ) — — ( 7,968 )

Follow-on public stock offering 6,900 69 453,504 — — 453,573

Stock-based compensation — — 19,389 — — 19,389

Foreign currency translation adjustments

Pension benefit plan, net of tax

Net income — — — 46,775 — 46,775

Other Comprehensive Loss — — — — ( 2,582 ) ( 2,582 )

Balance at June 30, 2019 54,248 542 1,058,745 226,743 ( 1,291 ) 1,284,739

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Retirement of common stock ( 197 ) ( 2 ) ( 16,247 ) — — ( 16,249 )

Follow-on public stock offering

Stock-based compensation — — 26,859 — — 26,859

Foreign currency translation adjustments

Pension benefit plan, net of tax

Balance at June 30, 2019

Net income — — — 85,712 — 85,712

Other Comprehensive Loss — — — — ( 1,594 ) ( 1,594 )

Balance at July 3, 2020 54,702 $ 547 $ 1,074,667 $ 312,455 $ ( 2,885 ) $ 1,384,784

The accompanying notes are an integral part of the consolidated financial statements.

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(In thousands)

For the Years Ended June 30,

For the Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Cash flows from operating activities:

Net income $ 85,712 $ 46,775 $ 40,883

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

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Benefit for deferred income taxes ( 3,019 ) ( 1,557 ) ( 5,464 )

Non-cash interest expense

Gain on investments ( 5,817 ) — —

Termination of interest rate swap — 5,420 —

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Accounts receivable, unbilled receivables, and costs in excess of billings ( 31,079 ) ( 28,096 ) ( 22,751 )

Inventory ( 31,609 ) ( 17,101 ) ( 16,230 )

Prepaid income taxes ( 2,792 ) 3,843 ( 2,327 )

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Purchases of property and equipment ( 43,294 ) ( 26,691 ) ( 15,106 )

Proceeds from sale of investment 4,310 — —

Other investing activities — — ( 375 )

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Cash flows from financing activities:

Proceeds from equity offering, net

Proceeds from employee stock plans 5,317 3,661 3,445

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Borrowings under credit facilities 200,000 129,500 210,000

Proceeds from equity offering, net — 454,343 —

Termination of interest rate swap — ( 5,420 ) —

Payments of deferred financing and offering costs — ( 1,851 ) —

Net cash provided by financing activities

Net cash (used in) provided by financing activities ( 10,932 ) 247,765 182,937

Effect of exchange rate changes on cash and cash equivalents 140 ( 97 ) ( 497 )

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents ( 31,094 ) 191,411 24,884

Cash and cash equivalents at beginning of year 257,932 66,521 41,637

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Cash paid during the period for:

Interest $ 1,046 $ 10,368 $ 1,607

Income taxes $ 12,939 $ 7,351 $ 17,004

Supplemental disclosures—non-cash activities:

Non-cash financing activity - accrued and unpaid equity offering costs

Non-cash investing activity $ 2,623 $ — $ —

Non-cash financing activity $ — $ 770 $ —

The accompanying notes are an integral part of the consolidated financial statements.

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Mercury Systems, Inc.

(the “Company” or “Mercury”) is a leading commercial provider of secure sensor and safety-critical mission processing subsystems.

Headquartered in Andover, Massachusetts, the Company is delivering solutions that power a broad range of critical aerospace, defense and intelligence programs, configured and optimized for mission success in some of the most challenging and demanding environments.

The Company's innovative next-generation defense electronics business model is designed to meet the industry’s current and emerging technology and business needs by delivering affordable state-of-the-art solutions, rapid time-to-value, service and support to the Company's defense prime contractor customers.

The Company's products and solutions have been successfully deployed in more than 300 programs with over 25 different defense prime contractors, a testament to its deep domain expertise and culture of innovation.

(the “Company” or “Mercury”) is a leading technology company serving the aerospace and defense electronics industry, positioned at the intersection of high-tech and defense.

Headquartered in Andover, Massachusetts, the Company delivers solutions that power a broad range of aerospace and defense programs, optimized for mission success in some of the most challenging and demanding environments.

The Company envisions, creates and delivers innovative technology solutions purpose-built to meet our customers’ most-pressing high-tech needs, including those specific to the defense community.

As a leading manufacturer of essential components, modules and subsystems, the Company sells to defense prime contractors, the U.S.

government and original equipment manufacturers (“OEM”) commercial aerospace companies.

The Company has built a trusted, contemporary portfolio of proven product solutions purpose-built for aerospace and defense that it believes meets and exceeds the performance needs of its defense and commercial customers.

Customers add their own applications and algorithms to our specialized, secure and innovative pre-integrated solutions.

This allows them to complete their full system by integrating with their platform, the sensor technology and, in some cases, the processing from Mercury, with their platform.

The Company's products and solutions are deployed in more than 300 programs with over 25 different defense prime contractors and commercial aviation customers.

The Company's transformational business model accelerates the process of making new technology profoundly more accessible to its customers by bridging the gap between commercial technology and aerospace and defense applications.

The Company's long-standing deep relationships with leading high-tech companies, coupled with the Company's high level of research and development (“R&D”) investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model.

The Company's capabilities, technology and R&D investment strategy combine to differentiate Mercury in its industry.

The Company's technologies and capabilities include secure embedded processing modules and subsystems, mission computers, secure and rugged rack-mount servers, safety-critical avionics, radio frequency (“RF”) components, multi-function assemblies, subsystems and custom microelectronics.

The Company maintains our technological edge by investing in critical capabilities and intellectual property (“IP” or “building blocks”) in processing and RF, leveraging open standards and open architectures to adapt quickly those building blocks into solutions for highly data-intensive applications, including emerging needs in areas such as artificial intelligence (“AI”).

The Company's mission critical solutions are deployed by its customers for a variety of applications including command, control, communications, computers, intelligence, surveillance and reconnaissance (“C4ISR”), electronic intelligence, avionics, electro-optical/infrared (“EO/IR”), electronic warfare, weapons and missile defense, hypersonics and radar.

On September 23, 2019, the Company acquired American Panel Corporation (“APC”) on a cash-free, debt-free basis for a total purchase price of $ 100,000 , prior to net working capital and net debt adjustments.

Based in Alpharetta, Georgia, APC is a leading innovator in large area display technology for the aerospace and defense market.

APC's capabilities are deployed on a wide range of next-generation platforms.

On May 20, 2019, the Company announced the commencement of an underwritten public offering of its common stock, par value $ 0.01 per share.

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Based in Chantilly, Virginia, Germane is an industry leader in the design, development and manufacturing of rugged servers, computers and storage systems for command, control and intelligence (“C2I”) applications.

On February 1, 2018, the Company acquired Themis Computer (“Themis”) on a cash-free, debt-free basis for a total purchase price of approximately $ 180,000 , prior to net working capital and net debt adjustments.

Based in Fremont, California, Themis is a leading designer, manufacturer and integrator of commercial, SWaP-optimized rugged servers, computers and storage systems for U.S.

and international defense programs.

The acquisition of Themis is consistent with the Company's strategy and will expand its position in the Command, Control, Communications, Computers, and Intelligence (“C4I”) market.

For further details on the acquisitions, see Note C to consolidated financial statements.

For further details on the acquisitions, see Note C to the consolidated financial statements.

Summary of Significant Accounting Policies

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All intercompany transactions and balances have been eliminated.

B ASIS OF P RESENTATION

Effective July 1, 2019, the Company's fiscal year has changed to the 52-week or 53-week period ending on the Friday closest to the last day in June.

All references to fiscal 2020 are to the 53-week period from July 1, 2019 to July 3, 2020.

All references to fiscal 2019 and 2018 are to the 52-week periods from July 1, 2018 to June 30, 2019 and July 1, 2017 to June 30, 2018, respectively.

There have been no reclassifications of prior comparable periods due to this change.

U SE OF E STIMATES

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B USINESS C OMBINATIONS

The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations, (“ASC 805”), for all transactions and events which it obtains control over one or more other businesses, to recognize the fair value of all assets and liabilities acquired, even if less than one hundred percent ownership is acquired, and in establishing the acquisition date fair value as of the measurement date for all assets and liabilities assumed.

The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations, (“ASC 805”), for all transactions and events in which it obtains control over one or more other businesses, to recognize the fair value of all assets and liabilities acquired, even if less than one hundred percent ownership is acquired, and in establishing the acquisition date fair value as of the measurement date for all assets and liabilities assumed.

The Company also utilizes ASC 805 for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in business combinations.

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Subsequent to the purchase price allocation period, any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determined.

The Company records the fair value of its derivative financial instruments in its condensed consolidated financial statements in other non-current assets or other non-current liabilities depending on their net position, regardless of the purpose or intent for holding the derivative contract.

Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of other comprehensive (loss) income (“OCI”).

Changes in the fair value of cash flow hedges that qualify for hedge accounting treatment are recorded in OCI and reclassified into earnings in the same line item on the Consolidated Statements of Operations and Comprehensive Income as the impact of the hedged transaction when the underlying contract matures and, for interest rate exposure derivatives, over the term of the corresponding debt instrument.

Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur.

The Company had no outstanding derivative instruments as of June 30, 2019 and 2018.

Effective July 1, 2019, the Company adopted ASC 842, Leases , (“ASC 842”), which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements.

The Company has adopted ASC 842 using the optional transition method and, as a result, there have been no reclassifications of prior comparable periods due to this adoption.

The Company has arrangements involving the lease of facilities, machinery and equipment.

Under ASC 842, at inception of the arrangement, the Company determines whether the contract is or contains a lease and whether the lease should be classified as an operating or a financing lease.

This determination, among other considerations, involves an assessment of whether the Company can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset.

The Company recognizes ROU assets and lease liabilities as of the lease commencement date based on the net present value of the future minimum lease payments over the lease term.

ASC 842 requires lessees to use the rate implicit in the lease unless it is not readily determinable and then it may use its incremental borrowing rate (“IBR”) to discount the future minimum

lease payments.

Most of the Company's lease arrangements do not provide an implicit rate;

therefore, the Company uses its IBR to discount the future minimum lease payments.

The Company determines its IBR with its credit rating and current economic information available as of the commencement date, as well as the identified lease term.

During the assessment of the lease term, the Company considers its renewal options and extensions within the arrangements and the Company includes these options when it is reasonably certain to extend the term of the lease.

The Company has lease arrangements with both lease and non-lease components.

Consideration is allocated to lease and non-lease components based on estimated standalone prices.

The Company has elected to exclude non-lease components from the calculation of its ROU assets and lease liabilities.

In the Company's adoption of ASC 842, leases with an initial term of 12 months or less will not result in recognition of a ROU asset and a lease liability and will be expensed as incurred over the lease term.

Leases of this nature were immaterial to the Company’s consolidated financial statements.

The Company has lease arrangements that contain incentives for tenant improvements as well as fixed rent escalation clauses.

For contracts with tenant improvement incentives that are determined to be a leasehold improvement that will be owned by the lessee and the Company is reasonably certain to exercise, it records a reduction to the lease liability and amortizes the incentive over the identified term of the lease as a reduction to rent expense.

The Company records rental expense on a straight-line basis over the identified lease term on contracts with rent escalation clauses.

Finance leases are not material to the Company's consolidated financial statements and the Company is not a lessor in any material lease arrangements.

There are no material restrictions, covenants, sale and leaseback transactions, variable lease payments or residual value guarantees in the Company's lease arrangements.

Operating leases are included in Operating lease right-of-use assets, Accrued expenses, and Operating lease liabilities in the Company's Consolidated Balance Sheets.

The standard had no impact on the Company's Consolidated Statements of Operations and Comprehensive Income or Consolidated Statements of Cash Flows.

See Note J to the consolidated financial statements for more information regarding the adoption of this standard.

R EVENUE R ECOGNITION

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , (“ASC 606”), which was adopted on July 1, 2018, using the retrospective method.

Revenue is recognized in accordance with the five step model set forth by ASC 606, which involves identification of the contract(s), identification of performance obligations in the contract, determination of the transaction price, allocation of the transaction price to the previously identified performance obligations, and revenue recognition as the performance obligations are satisfied.

The adoption of ASC 606 did not have a material impact to the amount or timing of revenue recognition related to the Company's legacy accounting methods for contracts including ship and bill, multiple-deliverable, and contract accounting.

Such adoption did not have a material impact, individually or in the aggregate, to any amounts in the Company's Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Shareholders’ Equity or Consolidated Statements of Cash Flows.

Refer to Note P for disaggregation of revenue for the period.

The Company recognizes revenue in accordance with the five step model set forth by ASC 606, Revenue from Contracts with Customers , (“ASC 606”), which involves identification of the contract(s), identification of performance obligations in the contract, determination of the transaction price, allocation of the transaction price to the previously identified performance obligations, and revenue recognition as the performance obligations are satisfied.

During step one of the five step model, the Company considers whether contracts should be combined or segmented, and based on this assessment, the Company combines closely related contracts when all the applicable criteria are met.

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Judgment also is involved in determining whether a single contract or group of contracts may be segmented based on how the arrangement and the related performance criteria were negotiated.

The decision to combine a group of contracts or segment a contract could change the amount of revenue and gross profit recorded in a given period.

The conclusion to combine a group of contracts or segment a contract could change the amount of revenue and gross profit recorded in a given period.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

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As a result, at the time of each product shipment, the Company believes that no further customer testing requirements exist and that there is no uncertainty of acceptance by its customer.

The Company's contracts with

customers generally do not include a right of return relative to delivered products.

The Company's contracts with customers generally do not include a right of return relative to delivered products.

In certain cases, contracts are modified to account for changes in the contract specifications or requirements.

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If the option on the customer contract was not indicative of the standalone selling price of the good or service, the material right would be accounted for as a separate performance obligation.

The Company is a leading provider of secure sensor and safety-critical mission processing subsystems.

The Company is a leader in making trusted, secure mission-critical technologies profoundly more accessible to aerospace and defense.

Revenues are derived from the sales of products that are grouped into one of the following three categories:

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and (iii) integrated subsystems.

The Company also generates revenues from the performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation.

Each promised good or service within a contract is accounted for separately under the guidance of ASC 606 if they are distinct, i.e., if a good or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

The Company also generates revenues from the

performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation.

Each promised good or service within a contract is accounted for separately under the guidance of ASC 606 if they are distinct.

Promised goods or services not meeting the criteria for being a distinct performance obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct.

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Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated subsystems and related system integration or other services.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 77 % , 79 % and 77 % of revenues in the years ended June 30, 2019, 2018, and 2017, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 73 %, 77 % and 79 % of revenues in the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively.

Revenue is recognized at a point in time for these products and services (versus over time recognition) due to the following:

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and (ii) the Company’s performance creates an asset with no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

The Company considers the nature of these contracts and the

types of products and services provided when determining the proper accounting for a particular contract.

The Company considers the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract.

These contracts include both fixed-price and cost reimbursable contracts.

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The Company bears the risk of changes in estimates to complete on a fixed-price contract which may cause profit levels to vary from period to period.

For cost reimburseable contracts, the Company is reimbursed periodically for allowable costs and is paid a portion of the fee based on contract progress.

For cost reimburseable contracts, the Company is reimbursed periodically for allowable

costs and is paid a portion of the fee based on contract progress.

In the limited instances where the Company enters into T&M contracts, revenue recognized reflects the number of direct labor hours expended in the performance of a contract multiplied by the contract billing rate, as well as reimbursement of other direct billable costs.

For T&M contracts, the Company elected to use a practical expedient permitted by ASC 606 whereby revenue is recognized in the amount for which the Company has a right to invoice the customer based on the control transferred to the customer.

For all types of contracts, the Company recognizes anticipated contract losses as soon as they become known and estimable.

For T&M contracts, the Company recognizes revenue in the amount for which the Company has a right to invoice the customer based on the control transferred to the customer.

For over time contracts, the Company recognizes anticipated contract losses as soon as they become known and estimable.

Accounting for long-term contracts requires significant judgment relative to estimating total contract revenues and costs, in particular, assumptions relative to the amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed.

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Changes in estimates are applied retrospectively and when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods.

Total revenue recognized under long-term contracts over time was 23 % , 21 % and 23 % of revenues in the years ended June 30, 2019, 2018, and 2017, respectively.

Total revenue recognized under long-term contracts over time was 27 %, 23 % and 21 % of revenues in the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively.

The Company generally does not provide its customers with rights of product return other than those related to assurance warranty provisions that permit repair or replacement of defective goods over a period of 12 to 36 months.

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C OSTS TO O BTAIN AND F ULFILL A C ONTRACT

The Company has elected to use a practical expedient available under ASC 606 whereby sales commissions are expensed as incurred for contracts where the amortization period would have been one year or less.

The Company expenses sales commissions as incurred for contracts where the amortization period would have been one year or less.

The Company has not deferred sales commissions for contracts where the amortization period is greater than one year because such amounts that would qualify for deferral are not significant.

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Contract assets are presented as unbilled receivables and costs in excess of billings on the Company’s Consolidated Balance Sheets.

Contract liabilities consist of deferred product revenue, billings in excess of

revenues, deferred service revenue, and customer advances.

Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue, and customer advances.

Deferred product revenue represents amounts that have been invoiced to customers, but are not yet recognizable as revenue because the Company has not satisfied its performance obligations under the contract.

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Contract balances are reported in a net position on a contract-by-contract basis.

The contract asset balances were $ 57,387 and $ 39,774 as of June 30, 2019 and 2018, respectively.

The contract asset balance increased due to growth in revenue recognized under long-term contracts over time during the year ended June 30, 2019.

The contract liability balances were $ 12,362 and $ 13,425 as of June 30, 2019 and 2018, respectively.

These balances remained consistent period over period.

The contract asset balances were $ 90,289 and $ 57,387 as of July 3, 2020 and June 30, 2019, respectively.

The contract asset balance increased due to growth in revenue recognized under long-term contracts over time during the fiscal year ended

July 3, 2020.

The contract liability balances were $ 19,892 and $ 12,362 as July 3, 2020 and June 30, 2019, respectively.

The contract liability increased due to a higher volume of contracts with milestone and progress payments.

Revenue recognized during fiscal 2020 that was included in the contract liability balance at June 30, 2019 was $ 10,216 .

R EMAINING P ERFORMANCE O BLIGATIONS

The Company has elected to use a practical expedient available under ASC 606 whereby contracts with original expected durations of one year or less are excluded from the remaining performance obligations, while these contracts are included within backlog.

The Company includes in its computation of remaining performance obligations customer orders for which it has accepted signed sales orders.

The definition of remaining performance obligations excludes those contracts that provide the customer with the right to cancel or terminate the order with no substantial penalty, even if the Company’s historical experience indicates the likelihood of cancellation or termination is remote.

As of June 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 186,066 .

As of July 3, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 280,346 .

The Company expects to recognize approximately 73 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.

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The Company places its cash and cash equivalents with financial institutions of high credit quality.

At June 30, 2019 and 2018 , the Company had $ 257,932 and $ 66,521 , respectively, of cash and cash equivalents on deposit or invested with its financial and lending institutions.

As of July 3, 2020 and June 30, 2019, the Company had $ 226,838 and $ 257,932 , respectively, of cash and cash equivalents on deposit or invested with its financial and lending institutions.

The Company provides credit to customers in the normal course of business.

The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary.

At June 30, 2019 , five customers accounted for 56 % of the Company's accounts receivable, unbilled receivables and costs in excess of billings.

At June 30, 2018 , five customers accounted for 54 % of the Company’s accounts receivable, unbilled receivables and costs in excess of billings.

As of July 3, 2020, five customers accounted for 52 % of the Company's accounts receivable, unbilled receivables and costs in excess of billings.

As of June 30, 2019, five customers accounted for 56 % of the Company’s accounts receivable, unbilled receivables and costs in excess of billings.

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be fully collected.

The allowance is based on the assessment of the following factors;

customer creditworthiness, historical payment experience, age of outstanding receivables and any applicable collateral.

Inventory is stated at the lower of cost (first-in, first-out) or net realizable value, and consists of materials, labor and overhead.

On a quarterly basis, the Company evaluates inventory for net realizable value.

Once an item is written down, the value becomes

the new inventory cost basis.

Once an item is written down, the value becomes the new inventory cost basis.

The Company reduces the value of inventory for excess and obsolete inventory, consisting of on-hand and non-cancelable on-order inventory in excess of estimated usage.

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The Company uses the management approach for segment disclosure, which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of its reportable segments.

The Company manages its business on the basis of one reportable segment, as a leading commercial provider of secure sensor and safety critical mission processing subsystems for a broad range of critical aerospace, defense and intelligence programs.

Company manages its business on the basis of one reportable segment, as a leader in making trusted, secure mission-critical technologies profoundly more accessible to aerospace and defense.

G OODWILL AND I NTANGIBLE A SSETS

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L ONG - LIVED A SSETS

Long-lived assets primarily include property and equipment and acquired intangible assets.

Long-lived assets primarily include property and equipment, intangible assets and ROU assets.

The Company regularly evaluates its long-lived assets for events and circumstances that indicate a potential impairment in accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”).

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For software developed for internal use, all external direct costs for material and services and certain payroll and related fringe benefit costs are capitalized in accordance with ASC 350.

During fiscal 2019 , 2018 and 2017 , the Company capitalized $ 749 , $ 733 and $ 508 of software development costs.

During fiscal 2020, 2019 and 2018, the Company capitalized $ 905 , $ 749 and $ 733 of software development costs, respectively.

I NCOME T AXES

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If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements.

The amount of the benefit that may be recognized is the largest amount that has a greater than 50 % likelihood of being realized

upon ultimate settlement.

The amount of the benefit that may be recognized is the largest amount that has a greater than 50 % likelihood of being realized upon ultimate settlement.

The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

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At time of product shipment, the Company accrues for the estimated cost to repair or replace potentially defective products.

Estimated warranty costs are based upon prior actual warranty costs for substantially similar transactions and any specifically identified warranty requirements.

Estimated warranty

costs are based upon prior actual warranty costs for substantially similar transactions and any specifically identified warranty requirements.

Product warranty accrual is included as part of accrued expenses in the accompanying Consolidated Balance Sheets.

The following table presents the changes in the Company's product warranty accrual.

Beginning balance at July 1,

Fiscal 2020 Fiscal 2019 Fiscal 2018

Beginning balance $ 1,870 $ 1,336 $ 1,691

Warranty assumed from APC 739 — —

Warranty assumed from Germane — 169 —

Warranty assumed from Themis — — 117

Warranty assumed from CES

Warranty assumed from Delta

Accruals for warranties issued during the period 2,839 2,274 1,318

Settlements made during the period ( 1,613 ) ( 1,909 ) ( 1,790 )

Ending balance at June 30,

Ending balance $ 3,835 $ 1,870 $ 1,336

R ESEARCH AND D EVELOPMENT C OSTS

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Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of the awards that will be forfeited.

Stock-based compensation expense for the Company’s performance-based restricted stock awards are amortized over the requisite service period using graded vesting.

Stock-based compensation expense for the Company’s performance-based restricted stock awards is amortized over the requisite service period using graded vesting.

The Company’s other restricted stock awards recognize expense over the requisite service period on a straight-line basis.

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Basic and diluted weighted average shares outstanding were as follows:

Years Ended June 30,

2020 2019 2018

Basic weighted-average shares outstanding 54,546 47,831 46,719

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Diluted weighted-average shares outstanding 55,115 48,500 47,471

Equity instruments to purchase 32 , 329 and 16 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended June 30, 2019 , 2018 and 2017 , respectively, because the equity instruments were anti-dilutive.

Equity instruments to purchase 8 , 32 and 329 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively, because the equity instruments were anti-dilutive.

A CCUMULATED O THER C OMPREHENSIVE I NCOME ( L OSS)

Accumulated other comprehensive income (loss) (“AOCI”) includes foreign currency translation adjustments and pension benefit plan adjustments.

The components of accumulated other comprehensive (loss) income included $( 232 ) , $( 137 ) and $( 93 ) of foreign currency translation adjustments for the years ended June 30, 2019 , 2018 and 2017, respectively.

In addition, pension benefit plan adjustments totaled $( 2,350 ) , $ 354 and $ 220 for the years ended June 30, 2019, 2018 and 2017 respectively.

There were no material net unrealized gains on investments for the years ended June 30, 2019 , 2018 and 2017.

The components of AOCI included $ 174 , $( 232 ) and $( 137 ) of foreign currency translation adjustments for the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively.

In addition, pension benefit plan adjustments totaled $( 1,768 ), $( 2,350 ) and $ 354 for the fiscal years ended July 3, 2020, June 30, 2019 and 2018 respectively.

F OREIGN C URRENCY

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Gains (losses) resulting from non-U.S.

currency transactions are included in other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Income and were immaterial for all periods presented.

currency transactions are included in Other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income and were immaterial for all periods presented.

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , an amendment of the FASB Accounting Standards Codification.

This ASU requires lessees to recognize a right-of-use asset and lease liability for most lease arrangements.

The new standard is effective for the Company on July 1, 2019.

The standard mandates a modified retrospective transition method for all entities and early adoption is permitted.

This ASU, among other things, allows companies to elect an optional transition method to apply the new lease standard through a cumulative-effect adjustment in the period of adoption.

The Company plans to adopt the new standard using the optional transition method.

As of June 30, 2019 , the Company had $ 69,630 of future minimum lease payments under non-cancelable operating leases, primarily for facilities.

The future minimum lease payments have not yet been adjusted to the present value, as the Company is still assessing the impact of each applicable discount rate.

The Company will leverage the rate implicit in the lease unless that rate cannot be readily determined, in which case the Company's incremental borrowing rate will be used to determine the discount rate applicable for the calculation of our lease liabilities.

See Note K to consolidated financial statements for more information about the timing and amount of future operating lease payments, which the Company believes is indicative of the materiality of adoption of the ASU to the Company's consolidated financial statements.

The Company intends to elect the package of practical expedients which allows the Company to not reassess 1) whether any expired or existing contracts are or contain leases;

2) the lease classification for any expired or existing leases;

and 3) initial direct costs for any existing leases.

The Company has completed the identification of the population of leases subject to the ASU and is in the process of calculating the financial impact that the adoption will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326) , an amendment of the FASB Accounting Standards Codification.

Subsequent to the issuance of ASU 2016-13, there were various updates that amended and clarified the impact of ASU 2016-13.

This ASU broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually.

The amendments in this ASU will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

The use of forecasted information incorporates more timely information in the estimate of expected credit losses.

For public business entities, the standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.

In January 2017, the FASB issued ASU No.

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Federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included.

For all entities, the new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that annual period, and early adoption is permitted.

The Company is evaluating the effect that ASU 2018-02 will have on its consolidated financial statements and related disclosures.

The Company has determined that there is no activity that falls within the scope of this ASU.

In August 2018, the FASB issued ASU No.

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For public business entities, the standard is effective for fiscal years ending after December 15, 2020.

The ASU requires retrospective adoption and permits early adoption

for all entities.

The ASU requires retrospective adoption and permits early adoption for all entities.

The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.

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2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) , an amendment of the FASB Accounting Standards Codification.

The ASU provides guidance to determine whether to capitalize implementation costs of cloud computing arrangement that is a service contract or expense as incurred.

The ASU provides guidance to determine whether to capitalize implementation costs of a cloud computing arrangement that is a service contract or expense as incurred.

Costs of arrangements that do not include a software license should be accounted for as a service contract and expensed as incurred.

3 unchanged sentences

The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity

method investments and adds guidance whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction.

This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements and related disclosures.

R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS

Effective July 1, 2018, the Company adopted ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

The ASU replaces most existing revenue recognition guidance in GAAP.

The new standard permits adoption by using either (i) a retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

In accordance with this standard, the Company has adopted the new standard using the retrospective method.

The Company has completed the assessment phase and implemented the new standard accordingly.

Further, it has evaluated the Company's policies in relation to its internal controls framework.

This assessment included identification, consideration, and quantification of the impact of the new standard on our financial statements, accounting policies, processes, control environment and systems.

The outcome of this assessment included implementation of supporting processes and systems that enable timely and accurate reporting under the new standard.

Adoption of the new standard did not result in a significant change in the Company's control environment.

Such adoption has resulted in additional disclosures around the nature and timing of our performance obligations, contract liabilities, deferred contract cost assets, as well as significant judgments and practical expedients used by us.

The Company has applied the standard’s practical expedient that permits the omission of prior-period information about our remaining performance obligations.

The Company has also elected to use a practical expedient available under the new standard whereby contracts with original expected durations of one year or less are excluded from the Company's remaining performance obligations.

Adoption of the new standard did not have a material impact to the amount or timing of revenue recognition related to the Company's legacy accounting methods for contracts including ship and bill, multiple-deliverable, and contract accounting, which encompassed the legacy percentage-of-completion, completed contract and time and materials methods.

For T&M contracts, the Company has elected to use a practical expedient permitted by the new standard whereby revenue is recognized in the amount for which the Company has a right to invoice the customer based on the control transferred to the customer.

Such adoption did not have a material impact to its consolidated financial statements.

In connection with the adoption of the new standard, there is a requirement to capitalize certain incremental costs of obtaining a contract, which for the Company, primarily comprises commission expenses for internal and external sales representatives.

Any such costs required to be capitalized would be amortized over the period of performance for the underlying contracts.

The Company has elected the practical expedient under the new standard whereby costs associated with contracts that have a duration less than one year are expensed as incurred.

The Company has completed the evaluation of capitalizing costs to obtain a contract, noting that the impact related to these costs would be limited to commissions on contracts with a duration exceeding one year.

The impact was not material to its consolidated financial statements.

Effective July 1, 2018, the Company adopted ASU No.

2016-15, Classification of Certain Cash Receipts and Cash Payments , an amendment of the FASB Accounting Standards Codification.

This ASU will reduce diversity in practice for classifying cash payments and receipts in the statement of cash flows for a number of common transactions.

It will also clarify when identifiable cash flows should be separated versus classified based on their predominant source or use.

Such adoption has not and will not have any impact to its consolidated financial statements.

Effective July 1, 2018, we adopted ASU No.

2016-16, Intra-Entity Transfers of Assets Other Than Inventory, an amendment of the FASB Accounting Standards Codification.

This ASU requires the seller and buyer to recognize at the transaction date the current and deferred income tax consequences of intercompany asset transfers (except transfers of inventory).

Under current U.S.

GAAP, the seller and buyer defer the consolidated tax consequences of an intercompany asset transfer from the period of the transfer to a future period when the asset is transferred out of the consolidated group, or otherwise affects consolidated earnings.

This standard will cause volatility in companies’ effective tax rates, particularly for those that transfer intangible assets to foreign subsidiaries.

Such adoption has not and will not have any impact to the Company's consolidated financial statements.

Effective July 1, 2018, we adopted ASU No.

2017-07, Compensation Retirement Benefits (Topic 715):

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , an amendment of the FASB Accounting Standards Codification.

This ASU requires employers that sponsor defined benefit pension and/or other post-retirement benefit plans to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.

Employers are required to present the other components of net benefit costs in the income statement separately from the service cost component and outside a subtotal of income from operations.

Additionally, only the service cost component of net periodic pension cost will be eligible for asset capitalization.

The ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.

Such adoption has not and will not have a material impact to the Company's consolidated financial statements.

Effective January 1, 2019, the Company adopted ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , an amendment of the FASB Accounting Standards Codification.

This ASU provides improved financial reporting of hedging relationships to better portray the economic result of an entity's risk management activities in its financial statements.

In addition, the amendments in this update make certain targeted improvements to simplify the application of hedge accounting guidance.

The ASU requires modified retrospective adoption and permits early adoption in any interim period after issuance of the ASU.

Disclosures reflect the adoption of ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , in the third quarter of fiscal 2019.

Prior period amounts have not been restated.

See Note Q for additional disclosures.

Effective January 1, 2019, the Company adopted SEC Final Rule 33-10532, Disclosure Update and Simplification , which requires disclosure of the changes in each caption of shareholders’ equity for the current and comparative year-to-date periods, with subtotals for each interim period and the amount of dividends per share for each class of shares.

Such adoption has not and will not have a material impact to the Company's consolidated financial statements.

T HE A THENA G ROUP A CQUISITION

On April 18, 2019, the Company acquired The Athena Group, Inc.

Athena was a privately-held company based in Gainesville, Florida and a leading provider of cryptographic and countermeasure IP vital to securing defense computing systems.

The Company acquired Athena for an all cash purchase price of $ 34,000 , prior to net working capital and net debt adjustments, which was funded through the revolving credit facility (“the Revolver”).

The following table presents the net purchase price and the fair values of the assets and liabilities of Athena on a preliminary basis:

Effective July 1, 2019, the Company adopted ASC 842, Leases , which requires lessees to recognize a ROU asset and lease liability for most lease arrangements.

This ASU supersedes existing lease guidance, including ASC 840, Leases (Topic 840) .

The standard mandates a modified retrospective transition method for all entities and early adoption is permitted.

This ASU, among other things, allows companies to elect an optional transition method to apply the new lease standard through a cumulative-effect adjustment in the period of adoption.

The Company adopted ASC 842 using the optional transition method and, as a result, did not recast prior period consolidated financial statements.

All prior period amounts and disclosures remain presented under ASC 840.

The Company elected the package of practical expedients which allows the Company to not reassess:

1) whether any expired or existing contracts are or contain leases;

2) the lease classification for any expired or existing leases;

and 3) initial direct costs for any existing leases.

The Company also elected the hindsight practical expedient, permitting the use of hindsight when determining the lease term and assessing impairment of ROU assets.

Adoption of the new standard resulted in additional lease assets and lease liabilities on the Consolidated Balance Sheets with no cumulative impact to retained earnings and did not have a material impact on our Consolidated Statements of Operations and Comprehensive Income or Consolidated Statements of Cash Flows.

A MERICAN P ANEL C ORPORATION A CQUISITION

On September 23, 2019, the Company acquired American Panel Corporation.

Based in Alpharetta, Georgia, APC is a leading innovator in large area display technology for the aerospace and defense market.

APC's capabilities are deployed on a wide range of next-generation platforms.

The Company acquired APC for an all cash purchase price of $ 100,000 , prior to net working capital and net debt adjustments.

The Company funded the acquisition with cash on hand.

The following table presents the net purchase price and the fair values of the assets and liabilities of APC on a preliminary basis:

Consideration transferred

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Working capital and net debt adjustment ( 5,952 )

Liabilities assumed 2,454

Less cash acquired ( 826 )

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Accounts receivable 3,726

Inventory 11,271

Fixed assets 690

Other current and non-current assets 3,494

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Other current and non-current liabilities ( 5,749 )

Deferred tax liability

Estimated fair value of net tangible liabilities acquired

Estimated fair value of net tangible assets acquired 11,452

Estimated fair value of identifiable intangible assets 33,200

3 unchanged sentences

Net purchase price $ 96,502

The amounts above represent the preliminary fair value estimates as of June 30, 2019 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates.

The preliminary identifiable intangible asset estimate includes completed technology of $ 23,700 with a useful life of 11 years.

The amounts above represent the preliminary fair value estimates as of July 3, 2020 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates.

The preliminary identifiable intangible asset estimate includes customer relationships of $ 20,600 with a useful life of 11 years, completed technology of $ 10,400 with a useful life of 11 years and backlog of $ 2,200 with a useful life of two years .

Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

The goodwill of $ 52,676 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets.

The goodwill from this acquisition is reported under the Sensor and Mission Processing (“SMP”) reporting unit.

Since APC was a qualified subchapter S subsidiary, the acquisition is treated as an asset purchase for tax purposes.

The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes.

As of July 3, 2020, the Company had $ 51,553 of goodwill deductible for tax purposes.

The Company has not furnished pro forma information relating to APC because such information is not material to the Company's financial results.

The revenues and income before income taxes from APC included in the Company's consolidated results for fiscal year ended July 3, 2020 were $ 27,383 and $ 3,309 , respectively.

The APC results include expenses resulting from purchase accounting, which include amortization of intangible assets and inventory step-up.

T HE A THENA G ROUP A CQUISITION

On April 18, 2019, the Company acquired The Athena Group, Inc., a privately-held company based in Gainesville, Florida and a leading provider of cryptographic and countermeasure IP vital to securing defense computing systems.

The following table presents the net purchase price and the fair values of the assets and liabilities of Athena:

Consideration transferred

Cash paid at closing $ 34,049

Working capital and net debt adjustment ( 446 )

Less cash acquired ( 49 )

Net purchase price $ 33,554

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 726

Fixed assets 74

Other current and non-current assets 398

Accounts payable ( 48 )

Accrued expenses ( 520 )

Other current and non-current liabilities ( 600 )

Deferred tax liability ( 5,183 )

Fair value of net tangible liabilities acquired ( 5,104 )

Fair value of identifiable intangible assets 23,700

Goodwill 15,007

Fair value of net assets acquired 33,603

Less cash acquired ( 49 )

Net purchase price $ 33,554

On April 18, 2020, the measurement period for Athena expired.

The identifiable intangible assets include completed technology of $ 23,700 with a useful life of 11 years.

The goodwill of $ 15,007 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets.

The goodwill from this acquisition is reported under the Mercury Defense Systems (“MDS”) reporting unit.

The Company has not furnished pro forma information relating to Athena because such information is not material to the Company's financial results.

The revenues and loss before income taxes from Athena included in the Company's consolidated results for the fiscal year ended June 30, 2019 were $ 1,071 and $ 93 , respectively.

The Athena results include expenses resulting from purchase accounting which include amortization of intangible assets.

S YNTONIC M ICROWAVE LLC A CQUISITION

On April 18, 2019, the Company acquired Syntonic Microwave LLC (“Syntonic”).

Syntonic was a privately held company based in Campbell, California and a leading provider of advanced synthesizers, wideband phase coherent tuners and microwave converters optimized for signals intelligence and electronic intelligence applications demanding frequency coverage up to 40 GHz with 2 GHz instantaneous bandwidth.

On April 18, 2019, the Company acquired Syntonic Microwave LLC, a privately held company based in Campbell, California and a leading provider of advanced synthesizers, wideband phase coherent tuners and microwave converters optimized for signals intelligence and electronic intelligence applications demanding frequency coverage up to 40 GHz with 2 GHz instantaneous bandwidth.

The Company acquired Syntonic for an all cash purchase price of $ 12,000 , prior to net working capital and net debt adjustments, which was funded through the Revolver.

The following table presents the net purchase price and the fair values of the assets and liabilities of Syntonic on a preliminary basis:

The following table presents the net purchase price and the fair values of the assets and liabilities of Syntonic:

Consideration transferred

2 unchanged sentences

Net purchase price $ 12,000

Estimated fair value of tangible assets acquired and liabilities assumed

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 281

Inventory 482

Fixed assets 31

Other current and non-current assets 6

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Accrued expenses ( 61 )

Estimated fair value of net tangible assets acquired

Estimated fair value of identifiable intangible assets

Estimated goodwill

Estimated fair value of net assets acquired

Fair value of net tangible assets acquired 1,786

Fair value of identifiable intangible assets 7,100

Goodwill 4,232

Fair value of net assets acquired 13,118

Less cash acquired ( 1,118 )

Net purchase price $ 12,000

The preliminary identifiable intangible asset estimates include customer relationships of $ 4,200 with a useful life of 10 years, completed technology of $ 2,500 with a useful life of 9 years and backlog of $ 400 with a useful life of one year .

Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

On April 18, 2020, the measurement period for Syntonic expired.

The identifiable intangible assets include customer relationships of $ 4,200 with a useful life of 10 years, completed technology of $ 2,500 with a useful life of nine years and backlog of $ 400 with a useful life of one year .

The goodwill of $ 4,232 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets.

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The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes.

As of June 30, 2019, the Company had $ 3,092 of goodwill deductible for tax purposes.

The Company has not furnished pro forma information relating to Syntonic because such information is not material to the Company's financial results.

The revenues and income before income taxes from Syntonic included in the Company's consolidated results for the fiscal year ended June 30, 2019 were $ 993 and $ 133 , respectively.

The Syntonic results include expenses resulting from purchase accounting which include amortization of intangible assets.

As of July 3, 2020, the Company had $ 2,986 of goodwill deductible for tax purposes.

G ECO A VIONICS A QUISITION

On January 29, 2019, the Company acquired GECO Avionics, LLC (“GECO”).

Based in Mesa, Arizona, GECO has over twenty years of experience designing and manufacturing affordable safety-critical avionics and mission computing solutions.

The Company acquired GECO for an all cash purchase price of $ 36,500 , prior to net working capital and net debt adjustments, which was funded through the Revolver.

The following table presents the net purchase price and the fair values of the assets and liabilities of GECO on a preliminary basis:

On January 29, 2019, the Company announced that it had acquired GECO Avionics, LLC, a privately held company in Mesa, Arizona, with over twenty years of experience designing and manufacturing affordable safety-critical avionics and mission computing solutions.

The Company acquired GECO for an all cash purchase price of $ 36,500 , which was funded through the Revolver.

The following table presents the net purchase price and the fair values of the assets and liabilities of GECO:

Consideration transferred

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Accounts receivable $ 1,320

Inventory 1,454

Fixed assets 459

Accounts payable ( 217 )

Accrued expenses ( 239 )

Estimated fair value of net tangible assets acquired

Estimated fair value of identifiable intangible assets

Estimated goodwill

Estimated fair value of net assets acquired

Fair value of net tangible assets acquired 2,777

Fair value of identifiable intangible assets 12,700

Goodwill 21,023

Fair value of net assets acquired

Net purchase price $ 36,500

The preliminary identifiable intangible asset estimates include customer relationships of $ 6,700 with a useful life of 11 years, completed technology of $ 4,800 with a useful life of 10 years and backlog of $ 1,000 with a useful life of two years .

Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

On January 29, 2020, the measurement period for GECO expired.

The identifiable intangible assets include customer relationships of $ 6,900 with a useful life of 11 years, completed technology of $ 4,800 with a useful life of 10 years and backlog of $ 1,000 with a useful life of two years .

The goodwill of $ 21,023 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets.

The goodwill from this acquisition is reported under the Sensor and Mission Processing (“SMP”) reporting unit.

The goodwill from this acquisition is reported under the SMP reporting unit.

Since GECO was a limited liability company, the acquisition is treated as an asset purchase for tax purposes.

The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes.

As of June 30, 2019, the Company had $ 20,984 of goodwill deductible for tax purposes.

The Company has not furnished pro forma information relating to GECO because such information is not material to the Company's financial results.

The revenues and loss before income taxes from GECO included in the Company's consolidated results for the fiscal year ended June 30, 2019 were $ 6,834 and $ 112 , respectively.

The GECO results include expenses resulting from purchase accounting which include amortization of intangible assets and inventory step-up.

As of July 3, 2020, the Company had $ 19,766 of goodwill deductible for tax purposes.

G ERMANE S YSTEMS A CQUISITION

On July 31, 2018, the Company acquired Germane Systems, LC (“Germane”).

On July 31, 2018, the Company announced that it had entered into a membership interest purchase agreement (the "Purchase Agreement") and acquired Germane Systems, LC pursuant to the terms of the Purchase Agreement.

Based in Chantilly, Virginia, Germane is an industry leader in the design, development and manufacturing of rugged servers, computers and storage systems for C2I applications.

The Company acquired Germane for an all cash purchase price of $ 45,000 , prior to net working capital and net debt adjustments.

1 unchanged sentence

On December 12, 2018 the Company and former owners of Germane agreed to post-closing adjustments totaling $ 1,244 , which decreased the Company's net purchase price.

The following table presents the net purchase price and the fair values of the assets and liabilities of Germane on a preliminary basis:

The following table presents the net purchase price and the fair values of the assets and liabilities of Germane:

Consideration transferred

3 unchanged sentences

Net purchase price $ 45,729

Estimated fair value of tangible assets acquired and liabilities assumed

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 4,277

Inventory 8,575

Fixed assets 867

Other current and non-current assets 596

2 unchanged sentences

Other current and non-current liabilities ( 514 )

Estimated fair value of net tangible assets acquired

Estimated fair value of identifiable intangible assets

Estimated goodwill

Estimated fair value of net assets acquired

Fair value of net tangible assets acquired 9,454

Fair value of identifiable intangible assets 12,910

Goodwill 23,558

Fair value of net assets acquired

Less cash acquired

Net purchase price $ 45,729

The preliminary identifiable intangible asset estimates include customer relationships of $ 8,500 with a useful life of 11 years, completed technology of $ 4,200 with a useful life of eight years and backlog of $ 210 with a useful life of one year .

Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

On July 31, 2019, the measurement period for Germane expired.

The identifiable intangible assets include customer relationships of $ 8,500 with a useful life of 11 years, completed technology of $ 4,200 with a useful life of eight years and backlog of $ 210 with a useful life of one year .

The goodwill of $ 23,558 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets.

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The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes.

As of June 30, 2019, the Company had $ 22,102 of goodwill deductible for tax purposes.

The Company has not furnished pro forma information relating to Germane because such information is not material to the Company's financial results.

The revenues and income before income taxes from Germane included in the Company's consolidated results for the fiscal year ended June 30, 2019 were $ 46,767 and $ 3,132 , respectively.

The Germane results include expenses resulting from purchase accounting which include amortization of intangible assets and inventory step-up.

T HEMIS C OMPUTER A CQUISITION

On December 21, 2017, the Company and Thunderbird Merger Sub, Inc., a newly formed, wholly-owned subsidiary of the Company (the “Merger Sub”), entered into a Merger Agreement (the “Merger Agreement”) with Ceres Systems (“Ceres”), the holding company that owned Themis Computer (“Themis”, and together with Ceres, collectively the “Acquired Company”).

On February 1, 2018, the Company closed the transaction and the Merger Sub merged with and into Ceres with Ceres continuing as the surviving company and a wholly-owned subsidiary of Mercury (the “Merger”).

By operation of the Merger, the Company acquired both Ceres and its wholly-owned subsidiary, Themis.

Based in Fremont, California, Themis is a leading designer, manufacturer and integrator of commercial, SWaP-optimized rugged servers, computers and storage systems for U.S.

and international markets.

Under the terms of the Merger Agreement, the

merger consideration (including payments with respect to outstanding stock options) consisted of an all cash purchase price of approximately $ 180,000 , prior to net working capital and net debt adjustments.

The merger consideration is subject to post-closing adjustments based on a determination of closing net working capital, transaction expenses and net debt (all as defined in the Merger Agreement).

The Company funded the acquisition with borrowings obtained under the Revolver.

On July 13, 2018, the Company and former owners of Ceres agreed to post-closing adjustments totaling $ 700 , which decreased the Company's net purchase price.

The following table presents the net purchase price and the fair values of the assets and liabilities of Themis:

Consideration transferred

Cash paid at closing

Working capital and net debt adjustment

Less cash acquired

Net purchase price

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable

Other current and non-current assets

Accounts payable

Accrued expenses

Other current and non-current liabilities

Deferred tax liability

Fair value of net tangible assets acquired

Fair value of identifiable intangible assets

Fair value of net assets acquired

Less cash acquired

Net purchase price

On February 1, 2019, the measurement period for Themis expired.

The identifiable intangible asset estimates include customer relationships of $ 52,600 with a useful life of 12.5 years , completed technology of $ 17,150 with a useful life of 9.5 years and backlog of $ 1,970 with a useful life of one year .

The goodwill of $ 112,987 largely reflects the potential synergies and expansion of the Company's offerings across product lines and MDS reporting unit and is not tax deductible.

As of July 3, 2020, the Company had $ 20,555 of goodwill deductible for tax purposes.

Fair Value of Financial Instruments

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at June 30, 2019 :

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at July 3, 2020:

Fair Value Measurements

June 30, 2019

July 3, 2020 Level 1 Level 2 Level 3

Certificates of deposit $ 10,006 $ — $ 10,006 $ —

equity securities 2,007 2,007 — —

Total $ 12,013 $ 2,007 $ 10,006 $ —

During the fiscal year ended July 3, 2020, the Company received gross proceeds and recorded a gain on a cost-method investment of $ 4,310 and $ 3,810 , respectively.

The Company's cost-method investment did not have a readily determinable fair value and was recorded at cost within Other non-current assets in the Consolidated Balance Sheet prior to its sale.

The Company also recorded a gain on the change in fair value of a cost-method investment of $ 2,007 .

The change in fair value of these U.S equity securities was the result of an observable price change during the fourth quarter of fiscal 2020.

Its fair value is based on a quoted price of identical instruments in an active market and is included within Prepaid expenses and other current assets on the Consolidated Balance Sheet as of July 3, 2020.

The gain on investments were included within Other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income for the fiscal year ended July 3, 2020.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at June 30, 2019:

Fair Value Measurements

June 30, 2018

June 30, 2019 Level 1 Level 2 Level 3

Certificates of deposit $ 31,522 $ — $ 31,522 $ —

Total $ 31,522 $ — $ 31,522 $ —

The carrying values of cash and cash equivalents, including money market funds, restricted cash, accounts receivable and payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities.

The fair value of the Company’s certificates of deposit are determined through quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable.

The Company terminated its interest rate swap during the fourth quarter of fiscal 2019 in conjunction with the net proceeds generated by the follow-on equity offering.

As such, the Company had no interest rate swaps as of June 30, 2019.

As such, the Company had no interest rate swaps as of July 3, 2020 and June 30, 2019.

Inventory was comprised of the following:

July 3, 2020 June 30, 2019

Raw materials $ 111,225 $ 84,561

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Finished goods 17,221 14,026

The $ 28,527 increase in inventory was primarily due to an increase in overall demand, especially for larger, more complex sub-assemblies and integrated sub-systems and the acquisitions of Germane and GECO.

Total $ 178,093 $ 137,112

The $ 40,981 increase in inventory was due to an increase in overall demand, especially for larger, more complex sub-assemblies and integrated sub-systems, a dvanced purchases intended to mitigate potential disruptions to the supply chain resulting from the COVID pandemic and the acquisition of APC.

Property and Equipment

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Estimated Useful Lives

(Years) As of

July 3, 2020 June 30, 2019

Computer equipment and software 3-4 $ 85,705 $ 78,195

Furniture and fixtures 5 5,993 5,330

Leasehold improvements

lesser of estimated useful life or lease term

Leasehold improvements lesser of estimated useful life or lease term 36,874 25,646

Machinery and equipment 5-10 90,970 63,792

219,542 172,963

accumulated depreciation ( 131,805 ) ( 112,962 )

The $ 9,021 increase in property and equipment was primarily due to current year additions and property and equipment associated with the acquisitions of Germane, GECO, Athena and Syntonic.

These increases were partially offset by ongoing depreciation expense.

$ 87,737 $ 60,001

The $ 27,736 increase in property and equipment was primarily due to current year additions and property and equipment associated with improvements to the Company's facilities, including the expansion of its trusted custom microelectronics business and the acquisition of APC.

These increases were partially offset by depreciation expense.

During fiscal 2020 and 2019, the Company retired $ 64 and $ 3,980 , respectively, of computer equipment and software, furniture, and fixtures, leasehold improvements, and machinery and equipment that were no longer in use by the Company.

Depreciation expense related to property and equipment for the fiscal years ended June 30, 2019 , 2018 and 2017 was $ 18,478 , $ 16,273 and $ 12,589 , respectively.

The following table sets forth the changes in the carrying amount of goodwill by reporting unit for the year ended June 30, 2019:

Balance at June 30, 2018

Goodwill adjustment for the Themis acquisition

Goodwill arising from the Germane acquisition

Goodwill arising from the GECO acquisition

Goodwill arising from the Syntonic acquisition

Goodwill arising from the Athena acquisition

Depreciation expense related to property and equipment for the fiscal years ended July 3, 2020, June 30, 2019 and 2018 was $ 18,770 , $ 18,478 and $ 16,273 , respectively.

The following table sets forth the changes in the carrying amount of goodwill by reporting unit for the year ended July 3, 2020:

Balance at June 30, 2019 $ 562,146

Goodwill adjustment for the Germane acquisition 447

Goodwill adjustment for the GECO acquisition ( 200 )

Goodwill adjustment for the Athena acquisition ( 993 )

Goodwill arising from the APC acquisition 52,676

Balance at July 3, 2020 $ 614,076

As defined by ASC 350, goodwill is tested for impairment on an interim basis at the occurrence of certain triggering events or at a minimum on an annual basis.

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Intangible assets consisted of the following:

June 30, 2019

Customer relationships

Licensing agreements and patents

Completed technologies

Amount Accumulated

Amortization Net

Amount Weighted

Customer relationships $ 181,960 $ ( 48,450 ) $ 133,510 11.4 years

Licensing agreements and patents 1,505 ( 1,404 ) 101 3.5 years

Completed technologies 107,992 ( 34,522 ) 73,470 9.2 years

Backlog 3,200 ( 1,533 ) 1,667 2.0 years

$ 294,657 $ ( 85,909 ) $ 208,748

June 30, 2019

Customer relationships

Licensing agreements and patents

Completed technologies

Estimated future amortization expense for intangible assets remaining at June 30, 2019 is as follows:

Customer relationships $ 167,460 $ ( 38,308 ) $ 129,152 11.4 years

Licensing agreements and patents 1,505 ( 1,022 ) 483 3.5 years

Completed technologies 97,592 ( 22,246 ) 75,346 9.0 years

Backlog 1,610 ( 467 ) 1,143 1.6 years

$ 268,167 $ ( 62,043 ) $ 206,124

Estimated future amortization expense for intangible assets remaining at July 3, 2020 is as follows:

Fiscal Year Totals

2021 $ 30,326

Thereafter 76,803

Total future amortization expense $ 208,748

The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the Athena acquisition.

These assets are included in the Company's gross and net carrying amounts as of June 30, 2019.

Completed technologies

The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the Syntonic acquisition.

These assets are included in the Company's gross and net carrying amounts as of June 30, 2019.

Customer relationships

Completed technologies

The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the GECO acquisition.

These assets are included in the Company's gross and net carrying amounts as of June 30, 2019.

Customer relationships

Completed technologies

The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the Germane acquisition.

These assets are included in the Company's gross and net carrying amounts as of June 30, 2019.

Customer relationships

Completed technologies

The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the APC acquisition.

These assets are included in the Company's gross and net carrying amounts as of July 3, 2020.

Amount Accumulated

Amortization Net

Amount Weighted

Customer relationships $ 20,600 $ ( 1,405 ) $ 19,195 11.0 years

Completed technologies 10,400 ( 709 ) 9,691 11.0 years

Backlog 2,200 ( 825 ) 1,375 2.0 years

$ 33,200 $ ( 2,939 ) $ 30,261

Restructuring

During fiscal 2019 , the Company incurred $ 560 of net restructuring and other charges primarily related to severance costs associated with the recently acquired Germane business.

Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities.

During fiscal 2018 , the Company incurred $ 3,159 of restructuring and other charges primarily related to the elimination of 38 positions predominantly in R&D and operations functions as well as executive severance.

During the fourth quarter of fiscal 2017 , the Company initiated a plan to close its Manteca, California facility as a result of the acquisition of Delta.

The Company incurred $ 910 of severance and related expenses in conjunction with the elimination of 33 positions primarily in operations functions related to the planned closure of the facility.

Additionally, the Company incurred $ 1,042 in restructuring expenses related to other various restructuring events during fiscal 2017 .

All of the restructuring and other charges are classified as operating expenses in the consolidated statements of operations and any remaining severance obligations are expected to be paid within the next twelve months.

During fiscal 2020, the Company incurred $ 1,805 of net restructuring and other charges primarily related to severance costs associated with the elimination of 20 positions, predominantly in SG&A and R&D functions.

During fiscal 2019, the Company incurred $ 560 of net restructuring and other charges primarily related to severance costs associated with the acquired Germane business.

During fiscal 2018, the Company incurred $ 3,159 related to the elimination of 38 positions predominantly in R&D and operations functions as well as executive severance.

All of the restructuring and other charges are classified as operating expenses in the Consolidated Statements of Operations and Comprehensive Income and any remaining severance obligations are expected to be paid within the next twelve months.

The remaining restructuring liability is classified as accrued expenses in the Consolidated Balance Sheets.

The following table presents the detail of expenses for the Company’s restructuring plans:

Severance & Related

Facilities & Other

Severance & Related Facilities & Other Total

Restructuring liability at June 30, 2018 $ 1,801 $ — $ 1,801

Restructuring charges 549 80 629

Cash paid ( 2,333 ) ( 24 ) ( 2,357 )

Reversals (*) ( 13 ) ( 56 ) ( 69 )

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Restructuring charges 1,730 75 1,805

Reversals (*)

Restructuring liability at June 30, 2019

Cash paid ( 1,137 ) ( 75 ) ( 1,212 )

Restructuring liability at July 3, 2020 $ 597 $ — $ 597

(*) Reversals result from the unused outplacement services and operating costs.

The Company enters into lease arrangements to facilitate its operations, including manufacturing, storage, as well as engineering, sales, marketing, and administration resources.

As described in Note B to the consolidated financial statements, effective July 1, 2019, the Company adopted ASC 842 using the optional transition method and, as a result, did not recast prior period unaudited consolidated comparative financial statements.

As such, all prior period amounts and disclosures are presented under ASC 840, Leases (Topic 840) .

Finance leases are not material to the Company's consolidated financial statements and therefore are excluded from the following disclosures.

S UPPLEMENTAL B ALANCE S HEET I NFORMATION

Supplemental operating lease balance sheet information is summarized as follows:

Operating lease right-of-use assets $ 60,613

Accrued expenses (1)

Operating lease liabilities 66,981

Total operating lease liabilities $ 73,931

(1) The short term portion of the Operating lease liabilities is included within Accrued expenses on the Consolidated Balance Sheet.

O THER S UPPLEMENTAL I NFORMATION

Other supplemental operating lease information is summarized as follows:

For the Fiscal Year Ended

Cash paid for amounts included in the measurement of operating lease liabilities

Right-of-use assets obtained in exchange for new lease liabilities

Weighted average remaining lease term 9.3 years

Weighted average discount rate 4.91 %

M ATURITIES OF L EASE C OMMITMENTS

Maturities of operating lease commitments as of July 3, 2020 were as follows:

Fiscal Year Totals

Thereafter 44,763

Total lease payments 94,037

imputed interest ( 20,106 )

Present value of operating lease liabilities $ 73,931

As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2019, future minimum lease payments for non-cancelable operating leases were as follows:

Fiscal Year Totals

2020 $ 10,205

Thereafter 28,286

Total minimum lease payments $ 69,630

During fiscal 2020 and 2019, the Company recognized operating lease expense of $ 10,029 and $ 8,710 , respectively.

There were no material restrictions, covenants, sale and leaseback transactions, variable lease payments or residual value guarantees imposed by the Company's leases at July 3, 2020.

The components of income before income taxes and income tax expense were as follows:

Year Ended June 30,

2020 2019 2018

Income before income taxes:

United States $ 93,388 $ 57,281 $ 43,368

Foreign 545 2,246 ( 795 )

$ 93,933 $ 59,527 $ 42,573

Tax provision (benefit):

Current $ 8,442 $ 11,454 $ 4,470

Deferred ( 1,077 ) ( 3,008 ) ( 4,527 )

7,365 8,446 ( 57 )

Current 3,407 5,194 2,370

Deferred ( 2,327 ) ( 1,421 ) ( 537 )

1,080 3,773 1,833

Current 475 546 186

Deferred ( 699 ) ( 13 ) ( 272 )

( 224 ) 533 ( 86 )

$ 8,221 $ 12,752 $ 1,690

The following is the reconciliation between the statutory Federal income tax rate and the Company’s effective income tax rate:

Year Ended June 30,

2020 2019 2018

Tax provision at federal statutory rates 21.0 % 21.0 % 28.0 %

State income tax, net of federal tax benefit 6.1 5.9 5.6

Research and development credits

Excess tax benefits on stock compensation

Research and development tax credits ( 11.9 ) ( 4.5 ) ( 5.1 )

Provision to return ( 3.1 ) — —

Excess tax benefits related to stock compensation ( 7.7 ) ( 4.5 ) ( 18.5 )

Domestic manufacturing deduction — — ( 2.0 )

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Foreign income tax rate differential 0.1 0.1 0.3

Officer and equity compensation

Non-deductible compensation 2.6 2.0 1.7

Acquisition costs — 0.1 1.4

Reserves for tax contingencies

Benefit from tax rate changes

Reserves for unrecognized income tax benefits 3.0 0.3 0.3

Tax rate changes ( 0.5 ) — ( 2.3 )

Impacts related to acquired tax attributes

Other ( 0.8 ) 1.0 1.4

8.8 % 21.4 % 4.0 %

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted by the U.S.

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corporate tax rate of approximately 28% for the Company's fiscal year ended June 30, 2018, and 21% for fiscal year ended June 30, 2019 and subsequent fiscal years.

The Tax Act also includes items that increase the Company’s tax expense including, but not limited to, the elimination of the domestic manufacturing deduction and increased limitations on deductions for executive compensation.

In addition, the actual effective tax rate may be materially different than the statutory Federal tax rate (including being higher) based on the availability and impact of various other adjustments including, but not limited to, state taxes, Federal research and development credits, discrete tax benefits related to stock compensation, and the inclusion or exclusion of various items in taxable income which may differ from GAAP income.

The effective tax rate for fiscal 2019 differed from the federal statutory rate primarily due to benefits related to research and development tax credits and excess tax benefits for equity compensation.

These benefits are offset by additional tax expense for state and local income taxes, non-deductible officer compensation and non-deductible equity compensation.

During fiscal 2019 and 2018, the Company recognized a discrete tax benefit of $ 2,672 and $ 7,897 , respectively, related to excess tax benefits on stock-based compensation.

The Tax Act also includes provisions that increase the Company’s tax expense including, but not limited to, the elimination of the domestic manufacturing deduction and increased limitations on deductions for executive compensation.

addition, the effective tax rate may be materially different than the statutory Federal tax rate due to state taxes, Federal research and development tax credits, excess tax benefits related to stock compensation, reserves for unrecognized income tax benefits, and other book to tax permanent differences.

The effective tax rate for fiscal 2020 and 2019 differed from the Federal statutory rate primarily due to benefits related to research and development tax credits and excess tax benefits related to stock compensation, partially offset by additional tax expense related to state taxes and non-deductible compensation.

During fiscal 2020 and 2019, the Company recognized a tax benefit of $ 7,259 and $ 2,672 related to excess tax benefits on stock compensation, respectively.

The Company also recognized a tax benefit of $ 6,325 and a tax reserve of $ 2,240 , related to research and development tax credits claimed on prior year federal and state tax returns and other favorable provision to return adjustments of $ 2,917 .

The components of the Company’s net deferred tax liabilities were as follows:

July 3, 2020 June 30, 2019

Deferred tax assets:

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Accrued compensation 5,941 4,644

Equity compensation

Federal and state research and development tax credit carryforwards

Stock compensation 5,062 4,595

Federal and state tax credit carryforwards 11,782 15,510

Other accruals 1,086 1,128

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Acquired net operating loss carryforward

Operating lease liabilities 20,035 —

Capital loss carryforwards — 2,354

Other temporary differences

Other 1,876 2,258

59,203 43,084

Valuation allowance ( 11,264 ) ( 16,666 )

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Intangible assets ( 33,007 ) ( 38,399 )

Other temporary differences

Operating lease right-of-use assets ( 16,426 ) —

Other ( 616 ) ( 58 )

Total deferred tax liabilities ( 61,828 ) ( 44,232 )

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Deferred tax liabilities $ ( 13,889 ) $ ( 17,814 )

At June 30, 2019, the Company evaluated the need for a valuation allowance on deferred tax assets.

$ ( 13,889 ) $ ( 17,814 )

At July 3, 2020, the Company evaluated the need for a valuation allowance on deferred tax assets.

In assessing whether the deferred tax assets are realizable, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the Company's past operating results, its forecast of future earnings, future taxable income, and tax planning strategies.

The Company continues to conclude that it is more likely than not that most domestic deferred tax assets would be realizable based on recent financial performance, projected future taxable income and the reversal of existing deferred tax liabilities.

The Company continues to record a full valuation allowance on capital loss carryforwards and certain state research and development credits as of June 30, 2019 as management continues to believe that it is not more likely than not that these deferred tax assets would be realized.

Any future reversals of the valuation allowance will impact income tax expense.

The Company had federal research and development credit carryforwards of $ 345 , which will begin to expire in 2029 .

The Company had state research and development credit carryforwards of $ 15,165 , which will expire from 2019 through 2033.

The Company files income tax returns in all jurisdictions in which it operates.

The ultimate realization of deferred tax assets is dependent upon the Company's past and recent operating performance and results, future taxable income including the reversal of existing deferred tax liabilities, and tax planning strategies.

The Company continues to conclude that its deferred tax assets are more likely than not to be realized with the exception of certain state research and development tax credits, which management continues to believe that it is not more likely than not to be realized.

The change in valuation allowance is primarily related to the expiration of capital loss carryforwards that had a full valuation allowance.

Any future changes in the valuation allowance will impact income tax expense.

The Company has state research and development tax credit carryforwards of $ 14,884 , which will expire starting in fiscal year 2021 through fiscal year 2034 .

The Company is subject to taxation in the U.S.

(Federal and state) and various foreign jurisdictions that it operates in.

The Company has established reserves to provide for additional income taxes that management believes will more likely than not be due in future years as these previously filed tax returns are audited.

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All tax reserves are analyzed quarterly and adjustments are made as events occur and warrant modification.

On August 21, 2018, the Internal Revenue Service (“IRS”) provided initial guidance on amendments made to the limitation on executive compensation by the Tax Act.

During the three months ended September 30, 2018, the Company recorded an unrecognized tax position as a result of this guidance.

Upon further technical and legal analysis, the Company determined that it’s position no longer required a reserve.

No other material changes to the Company’s unrecognized tax positions occurred during fiscal 2019.

During the period ended July 3, 2020, the Company filed amended Federal and state tax returns primarily relating to the research and development tax credits.

As part of the study, the Company adjusted the reserve previously recorded on the research and development tax credits claimed.

The changes in the Company’s reserves for unrecognized income tax benefits are summarized as follows:

Year Ended June 30,

Unrecognized tax benefits, beginning of period $ 1,273 $ 998

Increases for previously recognized positions

Settlements of previously recognized positions

Reductions as a result of a lapse of the applicable statute of limitations

Increases for currently recognized positions

Reductions for previously recognized positions

Increases for tax positions taken related to a prior period 2,146 —

Increases for tax positions taken during the current period 854 275

Decreases for tax positions taken related to a prior period — —

Decreases for tax positions taken during current period — —

Decreases for settlements of previously recognized positions — —

Decreases as a result of a lapse of the applicable statute of limitations ( 156 ) —

Unrecognized tax benefits, end of period $ 4,117 $ 1,273

The $ 1,273 of unrecognized tax benefits as of June 30, 2019 , if released, would reduce income tax expense.

The $ 4,117 of unrecognized tax benefits as of July 3, 2020, if released, would reduce income tax expense.

The Company increased its unrecognized income tax benefits primarily due to additional research and development tax credits claimed on prior year Federal and state returns.

The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.

The total amount of gross interest and penalties accrued was $ 84 as of June 30, 2019 and 2018.

In connection with tax matters, the Company recognized interest and penalty expense in fiscal 2019, 2018 and 2017 of $ 101 , $ 42 and $ 30 , respectively.

The total amount of gross interest and penalties accrued was $ 175 and $ 84 as of July 3, 2020 and June 30, 2019, respectively, and the amount of interest and penalties recognized in fiscal 2020, 2019 and 2018 was $ 91 , $ 101 and $ 42 , respectively.

The Company’s major tax jurisdiction is the U.S.

and the open tax years are fiscal 2016 through 2019.

(Federal and state) and the open tax years are fiscal 2016 through 2020.

Commitments and Contingencies

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P URCHASE C OMMITMENTS

As of June 30, 2019 , the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

As of July 3, 2020, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

The purchase commitments covered by these agreements are for less than one year and aggregate to $ 103,548 .

L EASE C OMMITMENTS

The Company leases certain facilities, machinery and equipment under various cancelable and non-cancelable operating leases that expire at various dates through fiscal 2032.

The leases contain various renewal options.

Rental charges are subject to escalation for increases in certain operating costs of the lessor.

For tenant improvement allowances and rent holidays, the Company records a deferred rent liability on the consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the consolidated statements of operations.

Rental expense during the fiscal years ended June 30, 2019 , 2018 and 2017 was $ 8,710 , $ 6,534 and $ 7,774 , respectively.

Minimum lease payments under the Company’s non-cancelable operating leases are as follows:

Total minimum lease payments

As part of the Company's strategy for growth, the Company continues to explore acquisitions or strategic alliances.

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The Company may elect from time to time to purchase and subsequently retire shares of common stock in order to settle an individual employees’ tax liability associated with vesting of a restricted stock award or exercise of stock options.

These transactions would be treated as a use of cash in financing activities in the Company's statement of cash flows.

These transactions would be treated as a use of cash in financing activities in the Company's Statements of Cash Flows.

Revolving Credit Facilities

On May 2, 2016, the Company and certain of its subsidiaries, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent.

The Credit Agreement provided for a $ 200,000 term loan facility (“the Term Loan”) and a $ 100,000 revolving credit facility.

On June 27, 2017, the Company amended the Credit Agreement to increase and extend the borrowing capacity of the Revolver to $ 400,000 expiring in June 2022 (“the Amended Credit Agreement”).

In connection with the amendment, the Company also repaid the remaining principal and accrued and unpaid interest outstanding on the Term Loan using cash on hand at which point the Term Loan portion of the Credit Agreement was cancelled.

On September 28, 2018, the Company amended the Revolver to increase and extend the borrowing capacity to a $750,000 , 5 -year revolving credit line, with the maturity extended to September 28, 2023.

On September 28, 2018, the Company amended its Credit Agreement (the “Credit Agreement”) with a syndicate of commercial banks to increase and extend the borrowing capacity of the Revolver to a $750,000, 5-year revolving credit line, with the maturity extended to September 28, 2023 (the “Amended Credit Agreement”).

The Company evaluated the Amended Credit Agreement under ASC 470, Debt , and determined that the amendment represented a modification of the Credit Agreement.

Due to the increase in the borrowing capacity of the Revolver, new costs associated with the amendment and the previous balance of unamortized deferred financing costs totaling $ 4,369 , are being amortized to Other income (expense), net on a straight line basis over the new term of the Revolver.

As of June 30, 2019 , there were no outstanding borrowings against the Revolver.

The Company incurred interest expense from the Revolver of $ 9,109 and $ 2,850 for the years ended June 30, 2019 and 2018, respectively.

There were also outstanding letters of credit of $ 1,737 as of June 30, 2019 .

The Revolver has a five years maturity, which was extended to September 28, 2023.

As of July 3, 2020, there were no outstanding borrowings against the Revolver.

The Company incurred interest expense from the Revolver of $ 1,006 and $ 9,109 for the fiscal years ended July 3, 2020 and June 30, 2019, respectively.

There were also outstanding letters of credit of $ 904 as of July 3, 2020.

The Revolver has a five year maturity, which was extended to September 28, 2023.

Interest Rates and Fees

Borrowings under the Revolver bear interest, at the Company’s option, at floating rates tied to LIBOR or the prime rate plus an applicable percentage.

The applicable percentage is set at LIBOR plus 1.5 % and is established pursuant to a pricing grid based on the Company's total net leverage ratio.

The applicable percentage is set at LIBOR plus a markup pursuant to a pricing grid based on the Company's total net leverage ratio.

As of July 3, 2020, the applicable percentage was set at LIBOR plus 1.125 % based on the Company's total net leverage ratio.

In addition to interest on the aggregate outstanding principal amounts of any borrowings, the Company will also pay a quarterly commitment fee on the unutilized commitments under the Revolver.

The applicable percentage is pursuant to a pricing

grid based on the Company's total net leverage ratio.

As of June 30, 2019, the stated interest rate for unutilized commitments was 0.25 % per annum.

The applicable percentage is pursuant to a pricing grid based on the Company's total net leverage ratio.

As of July 3, 2020, the stated interest rate for unutilized commitments was 0.20 % per annum.

The Company will also pay customary letter of credit and agency fees.

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If an event of default occurs, the lenders under the Revolver will be entitled to take various actions, including the termination of unutilized commitments, the acceleration of amounts outstanding under the Revolver and all actions permitted to be taken by a secured creditor.

As of June 30, 2019 , the Company was in compliance with all covenants and conditions under the Revolver.

As of July 3, 2020, the Company was in compliance with all covenants and conditions under the Revolver.

Guarantees and Security

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These prior service costs are amortized from AOCI to net periodic benefit costs over approximately 10 years.

At June 30, 2019 , the accumulated benefit obligation of the Plan equals the fair value of the Plan's assets.

The Plan's funded status at June 30, 2019 and 2018 was a net liability of $ 9,186 and $ 6,098 , respectively, which is recorded in other non-current liabilities on the consolidated balance sheets.

The Company recorded a net loss of $ 2,350 and a net gain of $ 354 in AOCI during the year ended June 30, 2019 and 2018 , respectively.

Total employer contributions to the Plan were $ 741 during the year ended June 30, 2019 , and the Company's total expected employer contributions to the Plan during fiscal 2020 are $822 .

At July 3, 2020, the accumulated benefit obligation of the Plan equals the fair value of the Plan's assets.

The Plan's funded status at July 3, 2020 and 2019 was a net liability of $ 11,877 and $ 9,186 , respectively, which is recorded in other non-current liabilities on the Consolidated Balance Sheets.

The Company recorded a net loss of $ 1,768 and $ 2,350 in AOCI during the fiscal years ended July 3, 2020 and June 30, 2019, respectively.

Total employer contributions to the Plan were $ 911 during the year ended July 3, 2020, and the Company's total expected employer contributions to the Plan during fiscal 2021 are $957.

The following table reflects the total pension benefits expected to be paid from the Plan, which is funded from contributions by participants and the Company.

Fiscal Year Total

Thereafter (next 5 years) 6,423

The following table outlines the components of net periodic benefit cost of the Plan for the year ended June 30, 2019 and 2018 :

Year Ended June 30,

Total $ 12,076

The following table outlines the components of net periodic benefit cost of the Plan for the fiscal years ended July 3, 2020 and June 30, 2019:

Fiscal Years Ended

July 3, 2020 June 30, 2019

Service cost $ 1,375 $ 903

Interest cost 125 156

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Amortization of prior service cost ( 63 ) ( 61 )

Amortization net of loss 33 —

Net periodic benefit cost $ 1,237 $ 815

The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the year ended June 30, 2019 and 2018 :

Year Ended June 30,

The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the fiscal years ended July 3, 2020 and June 30, 2019:

Fiscal Years Ended

July 3, 2020 June 30, 2019

Discount rate 0.30 % 0.50 %

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The following table presents the change in projected benefit obligation for the periods presented:

Year Ended June 30,

Fiscal Years Ended

July 3, 2020 June 30, 2019

Projected benefit obligation, beginning $ 24,274 $ 18,127

Service cost 1,375 903

Interest cost 125 156

Employee contributions 1,916 3,577

Actuarial gain

Actuarial loss 2,387 2,859

Benefits paid ( 906 ) ( 1,607 )

Plan amendment

Foreign exchange loss (gain)

Foreign exchange loss 784 259

Projected benefit obligation at end of year $ 29,955 $ 24,274

The following table presents the change in Plan assets for the periods presented:

Year Ended June 30,

Fiscal Years Ended

July 3, 2020 June 30, 2019

Fair value of Plan assets, beginning $ 15,088 $ 12,029

3 unchanged sentences

Benefits paid ( 906 ) ( 1,607 )

Foreign exchange gain (loss)

Foreign exchange gain 487 181

Fair value of Plan assets at end of year $ 18,078 $ 15,088

The following table presents the Company's reconciliation of funded status for the period presented:

June 30, 2019

June 30, 2018

July 3, 2020 June 30, 2019

Projected benefit obligation at end of year $ 29,955 $ 24,274

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Funded status $ ( 11,877 ) $ ( 9,186 )

The fair value of Plan assets were $ 15,088 at June 30, 2019 .

The fair value of Plan assets were $ 18,078 at July 3, 2020.

The Plan is denominated in a foreign currency, the Swiss Franc, which can have an impact on the fair value of Plan assets.

The Plan was not subject to material fluctuations during years ended June 30, 2019 or 2018 .

The Plan was not subject to material fluctuations during the years ended July 3, 2020 or June 30, 2019.

The Plan’s assets are administered by an independent pension fund foundation (the “foundation”).

As of June 30, 2019, the foundation has invested the assets of the Plan in various investments vehicles, including cash, real estate, equity securities, and bonds.

As of July 3, 2020, the foundation has invested the assets of the Plan in various investments vehicles, including cash, real estate, equity securities, and bonds.

The investments are measured at fair value using a mix of Level 1, Level 2 and Level 3 inputs.

The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S.

During fiscal 2019 , 2018 and 2017 , the Company matched employee contributions up to 3 % of eligible compensation.

During fiscal years 2020, 2019 and 2018, the Company matched employee contributions up to 3 % of eligible compensation.

The Company may also make optional contributions to the plan for any plan year at its discretion.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 4,525 , $ 3,684 and $ 3,206 during the fiscal years ended June 30, 2019 , 2018 , and 2017 , respectively.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 5,954 , $ 4,525 and $ 3,684 during the fiscal years ended July 3, 2020, June 30, 2019, and 2018, respectively.

Shareholders’ Equity

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The 2018 Plan became effective upon the approval of shareholders at the Company’s annual meeting held on October 24, 2018.

The aggregate

number of shares authorized for issuance under the 2018 Plan is 2,862 shares, with an additional 710 shares rolled into the 2018 Plan that were available for future grant under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”) at the time of shareholder approval of the 2018 Plan.

The aggregate number of shares authorized for issuance under the 2018 Plan is 2,862 shares, with an additional 710 shares rolled into the 2018 Plan that were available for future grant under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”) at the time of shareholder approval of the 2018 Plan.

The 2018 Plan replaced the 2005 Plan.

The shares authorized for issuance under the 2018 Plan will be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan.

On November 6, 2019, an additional 184 shares from the 2005 Plan were rolled into the 2018 Plan as a result of forfeiture, cancellation, or termination (other than by exercise) of previously-made grants under the 2005 Plan.

The shares authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan.

The foregoing does not affect any outstanding awards under the 2005 Plan, which remain in full force and effect in accordance with their terms.

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All stock options are granted with an exercise price of not less than 100% of the fair value of the Company’s common stock at the date of grant and the options generally have a term of seven years.

There were 3,512 shares available for future grant under the 2018 Plan at June 30, 2019.

There were 2,632 shares available for future grant under the 2018 Plan at July 3, 2020.

As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives and employees pursuant to the 2018 Plan.

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The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets.

The performance targets include:

(i) the achievement of internal performance targets only, and (ii) the achievement of internal performance targets in relation to a peer group of companies.

The performance targets generally include the achievement of internal performance targets in relation to a peer group of companies.

E MPLOYEE S TOCK P URCHASE P LAN

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The number of shares issued under the ESPP during fiscal years 2020, 2019, and 2018 was 89 , 102 and 82 , respectively.

Shares available for future purchase under the ESPP totaled 118 at June 30, 2019 .

Shares available for future purchase under the ESPP totaled 29 at July 3, 2020.

S TOCK O PTION AND A WARD A CTIVITY

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Options Outstanding

Weighted Average

Exercise Price

Weighted Average

Shares Weighted Average

Exercise Price Weighted Average

Contractual Term

(Years) Aggregate

Intrinsic Value as

Outstanding at June 30, 2018 4 $ 5.52 3.13

Outstanding at June 30, 2018

Exercised — —

Cancelled — —

Outstanding at June 30, 2019 4 $ 5.52 2.13

Vested and expected to vest at June 30, 2019

Exercisable at June 30, 2019

There were no options exercised during fiscal 2019 .

Granted — $ —

Exercised ( 1 ) $ 5.52

Cancelled — $ —

Outstanding at July 3, 2020 3 $ 5.52 1.12 $ 208

Vested and expected to vest at July 3, 2020 3 $ 5.52 1.12 $ 208

Exercisable at July 3, 2020 3 $ 5.52 1.12 $ 208

The intrinsic value of the options exercised during fiscal years 2020, and 2018 was $ 67 and $ 1,780 , respectively.

There were no options exercised during fiscal 2019.

Non-vested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions.

As of June 30, 2019 , 2018 and 2017 , there was no unrecognized compensation cost related to non-vested options granted under the Company’s stock plans.

As of July 3, 2020, June 30, 2019 and 2018, there was no unrecognized compensation cost related to non-vested options granted under the Company’s stock plans.

There were no stock options granted during fiscal years 2020, 2019 or 2018.

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Non-Vested Restricted Stock Awards

Weighted Average

Outstanding at June 30, 2017

Shares Weighted Average

Outstanding at June 30, 2018 1,135 $ 27.26

Granted 468 52.50

Vested ( 478 ) 51.50

Forfeited ( 79 ) 36.97

Outstanding at June 30, 2019 1,046 $ 39.62

Granted 522 80.87

Vested ( 562 ) 31.40

Forfeited ( 49 ) 54.96

Outstanding at July 3, 2020 957 $ 61.59

The total fair value of restricted stock awards vested during fiscal years 2020, 2019, and 2018 was $ 46,089 , $ 24,596 and $ 38,344 , respectively.

Non-vested restricted stock awards are subject to the risk of forfeiture until the fulfillment of specified conditions.

As of June 30, 2019 , there was $ 32,886 of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of 2.5 years from June 30, 2019 .

As of July 3, 2020, there was $ 44,690 of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of 2.4 years from July 3, 2020.

As of June 30, 2019, there was $ 32,886 of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of 2.5 years from June 30, 2019.

S TOCK - BASED C OMPENSATION E XPENSE

The Company recognizes expense for its share-based payment plans in the consolidated statements of operations for the fiscal years 2019 and 2018 in accordance with ASC 718.

The Company had $ 241 and $ 317 of capitalized stock-based compensation expense on the consolidated balance sheet as of June 30, 2019 and 2018 , respectively.

The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive Income in accordance with ASC 718.

The Company had $ 562 and $ 241 of capitalized stock-based compensation expense on the Consolidated Balance Sheets as of July 3, 2020 and June 30, 2019, respectively.

Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period.

The following table presents share-based compensation expenses from continuing operations included in the Company’s consolidated statement of operations:

Year Ended June 30,

The following table presents share-based compensation expenses from continuing operations included in the Company’s Consolidated Statements of Operations and Comprehensive Income:

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Cost of revenues $ 989 $ 820 $ 502

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Stock-based compensation expense before tax 26,538 19,422 17,314

Income taxes ( 6,900 ) ( 5,263 ) ( 5,713 )

Stock-based compensation expense, net of income taxes $ 19,638 $ 14,159 $ 11,601

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The geographic distribution of the Company’s revenues as determined by order origination based on the country in which the Company's legal subsidiary is domiciled is summarized as follows:

YEAR ENDED JUNE 30, 2019

Europe Asia Pacific Eliminations Total

YEAR ENDED JULY 3, 2020

Net revenues to unaffiliated customers $ 744,270 $ 50,092 $ 2,248 $ — $ 796,610

Inter-geographic revenues 4,938 3,067 — ( 8,005 ) —

Net revenues $ 749,208 $ 53,159 $ 2,248 $ ( 8,005 ) $ 796,610

Identifiable long-lived assets (1) $ 82,588 $ 5,144 $ 5 $ — $ 87,737

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Inter-geographic revenues 10,570 1,343 — ( 11,913 ) —

Net revenues $ 609,992 $ 50,675 $ 5,990 $ ( 11,913 ) $ 654,744

Identifiable long-lived assets (1) $ 54,952 $ 5,037 $ 12 $ — $ 60,001

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Inter-geographic revenues 10,650 925 — ( 11,575 ) —

Net revenues $ 460,868 $ 35,925 $ 7,966 $ ( 11,575 ) $ 493,184

Identifiable long-lived assets (1) $ 47,997 $ 2,974 $ 9 $ — $ 50,980

(1) Identifiable long-lived assets exclude goodwill and intangible assets.

(1) Identifiable long-lived assets exclude ROU assets, goodwill, and intangible assets.

In recent years, the Company completed a series of acquisitions that changed its technological capabilities, applications and end markets.

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The following table presents the Company's net revenue by end market for the periods presented:

Year Ended June 30,

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Domestic (1) $ 704,722 $ 580,935 $ 410,050

International/Foreign Military Sales (2) 91,888 73,809 83,134

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The following table presents the Company's net revenue by end application for the periods presented:

Year Ended June 30,

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Radar (1) $ 233,967 $ 164,046 $ 159,737

Electronic Warfare (2) 161,782 128,841 114,801

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Total Sensor and Effector 500,924 383,132 322,626

C4I (4) 207,000 183,172 87,414

Other (5) 88,686 88,440 83,144

Total Net Revenues $ 796,610 $ 654,744 $ 493,184

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The following table presents the Company's net revenue by product grouping for the periods presented:

Year Ended June 30,

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Components (1) $ 225,292 $ 184,870 $ 142,982

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Integrated subsystems also include spare and replacement modules and sub-assemblies sold as part of the same program for use in or with integrated subsystems sold by the Company.

The following table presents the Company's net revenue by platform for the periods presented:

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Airborne (1) $ 402,670 $ 306,412 $ 242,611

Land (2) 102,956 83,034 41,841

Naval (3) 157,225 136,966 110,620

Other (4) 133,759 128,332 98,112

Total Net Revenues $ 796,610 $ 654,744 $ 493,184

(1) Airborne platform includes products that relate to personnel, equipment, or pieces of equipment designed for airborne applications

(2) Land platform includes products that relate to fixed or mobile equipment, or pieces of equipment for personnel, weapon systems, vehicles and support elements operating on land

(3) Naval platform includes products that relate to personnel, equipment, or pieces of equipment designed for naval operations

(4) All platforms other than Airborne, Land or Naval.

Customers comprising 10% or more of the Company’s revenues for the periods shown below are as follows:

Year Ended June 30,

Raytheon Company

Fiscal Years Ended

July 3, 2020 June 30, 2019 June 30, 2018

Raytheon Technologies 16 % 20 % 19 %

Lockheed Martin Corporation 16 % 17 % 19 %

32 % 37 % 38 %

While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms.

There were no programs comprising 10% or more of the Company's revenues for the year ended June 30, 2019 , 2018 and 2017 .

The Company utilizes interest rate derivatives to mitigate interest rate exposure with respect to its financing arrangements.

On January 11, 2019, the Company entered into an interest rate swap (the “Swap”) with Bank of America, N.A.

for a notional amount of $ 175,000 in order to fix the interest rate associated with a portion of the Revolver.

The Swap agreement was designated and qualified for hedge accounting treatment as a cash flow hedge.

The Swap would have matured on September 28, 2023, coterminous with the maturity of the Revolver.

The Swap established a fixed interest rate on the first $ 175,000 of the Company's

outstanding borrowings against the Revolver obligation at 2.54 % .

The Company incurred $ 5,400 in expense associated with the termination of the interest rate swap in conjunction with leveraging the net proceeds generated by our follow-on equity offering to pay down the balance on the Revolver during the fourth quarter of fiscal 2019.

There were no outstanding interest rate derivatives at June 30, 2019.

There were no programs comprising 10% or more of the Company's revenues for the years ended July 3, 2020, June 30, 2019 and 2018.

Subsequent Events

On July 30, 2019, the Company announced the pending purchase agreement to acquire American Panel Corporation (“APC”).

Based in Alpharetta, Georgia, APC is a leading innovator in large area display technology.

Their capabilities are deployed on a wide range of Defense and Commercial aviation platforms.

The Company's agreement to acquire APC is for an all cash purchase price of $ 100,000 , subject to net working capital and net debt adjustments.

The acquisition and associated transaction expenses will be funded with cash on hand.

Effective as of July 1, 2019, the Company's fiscal year has changed to the 52-week or 53-week period ending on the Friday closest to the last day in June.

The Company has evaluated subsequent events from the date of the Consolidated Balance Sheet through the date the consolidated financial statements were issued.

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Such quarterly results are not necessarily indicative of future results of operations and should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto.

2019 (In thousands, except per share data)

2020 (In thousands, except per share data) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER

Net revenues $ 177,304 $ 193,913 $ 208,016 $ 217,377

Gross margin $ 78,400 $ 88,506 $ 93,325 $ 96,613

Income from operations $ 17,476 $ 20,825 $ 26,342 $ 26,419

Income before income taxes $ 17,229 $ 20,786 $ 28,928 $ 26,990

Income tax provision (benefit)

Income tax (benefit) provision $ ( 2,018 ) $ 5,110 $ 5,363 $ ( 234 )

Net income $ 19,247 $ 15,676 $ 23,565 $ 27,224

Net income per share:

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Diluted net income per share $ 0.35 $ 0.29 $ 0.43 $ 0.49

2018 (In thousands, except per share data)

2019 (In thousands, except per share data) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER

Net revenues $ 144,056 $ 159,089 $ 174,636 $ 176,963

Gross margin $ 61,583 $ 70,887 $ 73,847 $ 79,839

Income from operations $ 13,810 $ 19,861 $ 22,062 $ 20,851

Income before income taxes $ 10,608 $ 16,866 $ 19,466 $ 12,587

Income tax (benefit) provision

Income tax provision (benefit) $ 3,129 $ 4,483 $ 5,357 $ ( 217 )

Net income $ 7,479 $ 12,383 $ 14,109 $ 12,804

Net income per share:

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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