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Item 9A. Controls and Procedures

2020-08-18 compared with 2019-08-15 · 56 added, 55 removed, 92 unchanged (55% of the section changed)

CONTROLS AND PROCEDURES

E FFECTIVENESS OF D ISCLOSURE C ONTROLS AND P ROCEDURES

We conducted an evaluation as of June 30, 2019 under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), and concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”) were effective as of June 30, 2019 and designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

I NHERENT L IMITATIONS ON E FFECTIVENESS OF C ONTROLS

(a) E FFECTIVENESS OF D ISCLOSURE C ONTROLS AND P ROCEDURES

We conducted an evaluation as of July 3, 2020 under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), and concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”) were effective as of July 3, 2020 and designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

(b) I NHERENT L IMITATIONS ON E FFECTIVENESS OF C ONTROLS

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting or our internal controls will prevent or detect all errors and all fraud.

1 unchanged sentence

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

M ANAGEMENT ’ S A NNUAL R EPORT ON I NTERNAL C ONTROL O VER F INANCIAL R EPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Under the supervision of the Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2019 based on the framework in Internal Control - Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission.

As a result of this assessment, management concluded that our internal control over financial reporting was effective as of June 30, 2019.

The effectiveness of our internal control over financial reporting as of June 30, 2019 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report.

The audited consolidated financial statements of the Company include the results of the acquired Germane and GECO businesses on and after July 31, 2018 and January 29, 2019, respectively and the acquired Athena and Syntonic businesses on and after April 18, 2019, as described in Note C to the Consolidated Financial Statements.

Upon consideration of the scope of fiscal 2019, the Germane, GECO, Athena and Syntonic acquisitions, and the time constraints under which our management’s assessment would have to be made, management determined that it would not conduct an assessment of their internal controls over financial reporting environment as allowable under section 404 of the Sarbanes-Oxley Act of 2002.

Under the supervision of the Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of our internal control over financial reporting as of July 3, 2020 based on the framework in Internal Control - Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission.

As a result of this assessment, management concluded that our internal control over financial reporting was effective as of July 3, 2020.

The effectiveness of our internal control over financial reporting as of July 3, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report.

The audited consolidated financial statements of the Company include the results of the acquired APC business on and after September 23, 2019, as described in Note C to the Consolidated Financial Statements.

Upon consideration of the scope of fiscal 2020, the APC acquisition, and the time constraints under which our management’s assessment would have to be made, management determined that it would not conduct an assessment of APC's internal controls over financial reporting environment as allowable under Section 404 of the Sarbanes-Oxley Act of 2002.

Accordingly, these operations have been excluded from the management’s assessment of internal controls for fiscal year 2020.

However, management is in the process of integrating these four entities into the overall internal control over financial reporting environment for fiscal year 2020.

The Company’s consolidated financial statements reflect revenues and total assets from the acquired Germane, GECO, Athena and Syntonic business of approximately 7 percent and 11 percent (of which 8 percent represented goodwill and intangible assets included within the scope of the Company’s assessment), respectively, as of and for the year ended June 30, 2019.

C HANGES IN I NTERNAL C ONTROL O VER F INANCIAL R EPORTING

However, management is in the process of integrating this entity into the overall internal control over financial reporting environment for fiscal year 2021.

The Company’s consolidated financial statements reflect revenues and total assets from the acquired APC business of approximately 3 percent and 7 percent (of which 5 percent represented goodwill and intangible assets included within the scope of the Company’s assessment), respectively, as of and for the year ended July 3, 2020.

(d) C HANGES IN I NTERNAL C ONTROL O VER F INANCIAL R EPORTING

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal 2020 identified in connection with our Chief Executive Officer’s and Chief Financial Officer’s evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management is in the process of integrating the Germane, GECO, Athena and Syntonic businesses into our overall internal control over financial reporting environment.

Management is in the process of integrating the APC business into our overall internal control over financial reporting environment.

OTHER INFORMATION

15 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of June 30, 2019 and 2018

Consolidated Statements of Operations and Comprehensive Income for the fiscal years ended June 30, 2019 , 2018 , and 2017

Consolidated Statements of Shareholders’ Equity for the fiscal years ended June 30, 2019 , 2018 , and 2017

Consolidated Statements of Cash Flows for the years ended June 30, 2019 , 2018 , and 2017

Consolidated Balance Sheets as of July 3, 2020 and June 30, 2019

Consolidated Statements of Operations and Comprehensive Income for the fiscal years ended July 3, 2020, June 30, 2019, and June 30, 2018

Consolidated Statements of Shareholders’ Equity for the fiscal years ended July 3, 2020, June 30, 2019, and June 30, 2018

Consolidated Statements of Cash Flows for the years ended July 3, 2020, June 30, 2019, and June 30, 2018

Notes to Consolidated Financial Statements

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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

FOR FISCAL YEARS ENDED JUNE 30, 2019 , 2018 AND 2017

FOR FISCAL YEARS ENDED JULY 3, 2020, JUNE 30, 2019, and JUNE 30, 2018

(In thousands)

Allowance for Doubtful Accounts

OF PERIOD ADDITIONS REVERSALS WRITE-

2020 $ 1,228 $ 705 $ 8 $ 474 $ 1,451

2019 $ 359 $ 1,223 $ 264 $ 90 $ 1,228

2018 $ 83 $ 359 $ 31 $ 52 $ 359

Deferred Tax Asset Valuation Allowance

OF PERIOD CHARGED

EXPENSES CHARGED

ACCOUNTS DEDUCTIONS BALANCE

2020 $ 16,666 $ (842) $ — $ 4,560 $ 11,264

2019 $ 16,992 $ (326) $ — $ — $ 16,666

2018 $ 16,570 $ 422 $ — $ — $ 16,992

Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index on page 91, which is incorporated herein by reference.

1 unchanged sentence

MERCURY SYSTEMS, INC.

/s/ M ICHAEL D.

By /s/ MICHAEL D.

EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND TREASURER

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ M ARK A SLETT

President, Chief Executive Officer and Director (principal executive officer)

August 15, 2019

/ S / M ICHAEL D.

Executive Vice President, Chief Financial Officer, and Treasurer (principal financial officer)

August 15, 2019

/ S / M ICHELLE M.

Vice President, Controller, and Chief Accounting Officer (principal accounting officer)

August 15, 2019

/ S / V INCENT V ITTO

Chairman of the Board of Directors

August 15, 2019

Signature Title(s) Date

/s/ MARK ASLETT President, Chief Executive Officer and Director (principal executive officer) August 18, 2020

/S/ MICHAEL D.

RUPPERT Executive Vice President, Chief Financial Officer, and Treasurer (principal financial officer) August 18, 2020

/S/ MICHELLE M.

MCCARTHY Vice President, Chief Accounting Officer (principal accounting officer) August 18, 2020

/S/ VINCENT VITTO Chairman of the Board of Directors August 18, 2020

Vincent Vitto

/ S / J AMES K.

August 15, 2019

/ S / M ICHAEL A.

August 15, 2019

/ S / L ISA S.

August 15, 2019

/ S / M ARY L OUISE K RAKAUER

August 15, 2019

BASS Director August 18, 2020

/S/ ORLANDO P.

CARVALHO Director August 18, 2020

/S/ MICHAEL A.

DANIELS Director August 18, 2020

DISBROW Director August 18, 2020

/S/ MARY LOUISE KRAKAUER Director August 18, 2020

Mary Louise Krakauer

/ S / B ARRY R.

August 15, 2019

/ S / W ILLIAM K.

August 15, 2019

NEARHOS Director August 18, 2020

/S/ WILLIAM K.

O’BRIEN Director August 18, 2020

EXHIBIT INDEX

DESCRIPTION OF EXHIBIT

Underwriting Agreement, dated January 26, 2017, among the Company as issuer and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.

Morgan Securities LLC as representatives of the several underwriters named therein (incorporated herein by reference to Exhibit 1.1 of the Company's current report on Form 8-K filed on January 27, 2017)

Underwriting Agreement, dated May 22, 2019, among the Company as issuer and Citigroup Global Markets Inc., Goldman Sachs & Co.

Morgan Securities LLC as representatives of the several underwriters named therein (incorporated herein by reference to Exhibit 1.1 of the Company’s current report on Form 8-K filed on May 23, 2019)

Articles of Organization (incorporated herein by reference to Exhibit 3.1.1 of the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2009)

5 unchanged sentences

Form of Stock Certificate (incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1/A filed on January 7, 1998)

Description of Registrant's Securities

1997 Employee Stock Purchase Plan, as amended and restated (incorporated herein by reference to Appendix B to the Company’s definitive proxy statement filed on October 29, 2015)

19 unchanged sentences

Second Amendment to Employment Agreement, dated as of September 30, 2009, by and between the Company and Mark Aslett (incorporated herein by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009)

Third Amendment to Employment Agreement, dated as of August 13, 2019, by and between the Company and Mark Aslett

Third Amendment to Employment Agreement, dated as of August 13, 2019, by and between the Company and Mark Aslett (incorporated herein by reference to Exhibit 10.9.4 of the Company's annual report on Form 10-K for the fiscal year ended July 30, 2019)

Agreement, dated July 12, 2016, by and between the Company and Christopher C.

Cambria (incorporated herein by reference to Exhibit 10.9 of the Company's annual report on Form 10-K for the fiscal year ended June 30, 2018)

Credit Agreement, dated May 2, 2016, among the Company, the Guarantors party thereto, the Lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of the Company's current report on Form 8-K filed on May 2, 2016)

6 unchanged sentences

Ruppert and the Company (incorporated herein by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on February 6, 2018)

Form of Severance Benefits Agreement between the Company and Non-CEO Executives

Computation of Ratio of Earnings to Fixed Charges

Form of Severance Benefits Agreement between the Company and Non-CEO Executives (incorporated herein by reference to Exhibit 10.14 of the Company's annual report on Form 10-K for the fiscal year ended June 30, 2019)

Subsidiaries of the Company

7 unchanged sentences

eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

104 Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates.

3 unchanged sentences

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 9A. Controls and Procedures