What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-05-05 · 197 added, 376 removed, 370 unchanged (61% of the section changed)

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(In thousands, except share and per share data)

March 27, 2020 June 30, 2019

October 2, 2020 July 3, 2020

Current assets:

Cash and cash equivalents $ 239,122 $ 226,838

Accounts receivable, net of allowance for doubtful accounts of $1,301 and $1,228 at March 27, 2020 and June 30, 2019, respectively 127,129 118,832

Accounts receivable, net of allowance for credit losses of $ 1,422 and $ 1,451 at October 2, 2020 and July 3, 2020, respectively

99,069 120,438

Unbilled receivables and costs in excess of billings 108,754 90,289

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Income taxes payable 4,117 4,117

Long-term debt 200,000 —

Operating lease liabilities 68,274 66,981

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85,000,000 shares authorized;

54,612,005 and 54,247,532 shares issued and outstanding at March 27, 2020 and June 30, 2019, respectively 546 542

55,044,702 and 54,702,322 shares issued and outstanding at October 2, 2020 and July 3, 2020, respectively

Additional paid-in capital 1,082,044 1,074,667

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(In thousands, except per share data)

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Net revenues $ 205,621 $ 177,304

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Interest income 72 1,187

Interest expense ( 58 ) ( 2,473 ) ( 58 ) ( 6,928 )

Other income (expense), net 2,186 ( 328 ) 401 ( 2,207 )

Other expense, net ( 846 ) ( 1,434 )

Income before income taxes 17,996 17,229

Tax provision 5,363 5,357 8,455 12,969

Tax provision (benefit) 2,198 ( 2,018 )

Net income $ 15,798 $ 19,247

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Net income $ 15,798 $ 19,247

Change in fair value of derivative instruments, net of tax — ( 2,147 ) — ( 2,147 )

Foreign currency translation adjustments ( 101 ) 75

Pension benefit plan, net of tax 31 7

Total other comprehensive income (loss), net of tax 351 ( 2,372 ) 249 ( 2,559 )

Total other comprehensive (loss) income, net of tax ( 70 ) 82

Total comprehensive income $ 15,728 $ 19,329

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(In thousands)

For the Third Quarter Ended March 27, 2020

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance at December 27, 2019 54,558 $ 545 $ 1,056,238 $ 261,666 $ ( 1,393 ) $ 1,317,056

Issuance of common stock under employee stock incentive plans 19 — — — — —

Issuance of common stock under employee stock purchase plan 41 1 2,392 — — 2,393

Purchase and retirement of common stock ( 6 ) — ( 746 ) — — ( 746 )

Stock-based compensation — — 6,814 — — 6,814

Net income — — — 23,565 — 23,565

Other comprehensive income — — — — 351 351

Balance at March 27, 2020 54,612 $ 546 $ 1,064,698 $ 285,231 $ ( 1,042 ) $ 1,349,433

For the Third Quarter Ended March 31, 2019

For the First Quarter Ended October 2, 2020

Common Stock Additional

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Comprehensive

Income (Loss) Total

Shareholders’

Shares Amount

Balance at December 31, 2018 47,249 $ 472 $ 594,670 $ 199,830 $ 1,104 $ 796,076

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

Issuance of common stock under employee stock incentive plans 344 3 ( 1 ) — — 2

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Other comprehensive loss — — — — ( 70 ) ( 70 )

Balance at March 31, 2019 47,265 $ 473 $ 599,238 $ 213,939 $ ( 1,268 ) $ 812,382

For the Nine Months Ended March 27, 2020

Balance at October 2, 2020 55,045 $ 550 $ 1,082,044 $ 328,253 $ ( 2,955 ) $ 1,407,892

For the First Quarter Ended September 27, 2019

Common Stock Additional

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Issuance of common stock under employee stock incentive plans 462 5 ( 2 ) — — 3

Issuance of common stock under employee stock purchase plan 41 1 2,392 — — 2,393

Purchase and retirement of common stock ( 176 ) ( 2 ) ( 14,560 ) — — ( 14,562 )

2 unchanged sentences

Other comprehensive income — — — — 82 82

Balance at March 27, 2020 54,612 $ 546 $ 1,064,698 $ 285,231 $ ( 1,042 ) $ 1,349,433

For the Nine Months Ended March 31, 2019

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shareholders’

Shares Amount

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

Issuance of common stock under employee stock incentive plans 439 5 ( 5 ) — — —

Issuance of common stock under employee stock purchase plan 51 1 1,676 — — 1,677

Purchase and retirement of common stock ( 149 ) ( 2 ) ( 7,432 ) — — ( 7,434 )

Stock-based compensation — — 14,836 — — 14,836

Net income — — — 33,971 — 33,971

Other comprehensive loss — — — — ( 2,559 ) ( 2,559 )

Balance at March 31, 2019 47,265 $ 473 $ 599,238 $ 213,939 $ ( 1,268 ) $ 812,382

Balance at September 27, 2019 54,534 $ 545 $ 1,049,952 $ 245,990 $ ( 1,209 ) $ 1,295,278

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

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(In thousands)

Nine Months Ended

March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Cash flows from operating activities:

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Stock-based compensation expense 7,184 5,659

Provision (benefit) for deferred income taxes 1,174 ( 1,054 )

Gain on sale of investment ( 3,810 ) —

(Benefit) provision for deferred income taxes ( 2,921 ) 238

Other non-cash items 268 548

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Cash flows from investing activities:

Acquisition of business, net of cash acquired ( 96,502 ) ( 81,529 )

Purchases of property and equipment ( 10,978 ) ( 9,595 )

Proceeds from sale of investment 4,310 —

Acquisition of business, net of cash acquired — ( 96,502 )

Net cash used in investing activities ( 10,978 ) ( 106,097 )

1 unchanged sentence

Proceeds from employee stock plans 2 3

Borrowings under credit facilities 200,000 81,500

Purchase and retirement of common stock ( 66 ) ( 14,562 )

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

Net cash provided by financing activities 186,713 73,892

Net cash used in financing activities ( 64 ) ( 14,559 )

Effect of exchange rate changes on cash and cash equivalents 397 ( 287 )

Net increase in cash and cash equivalents 149,214 45,994

Net increase (decrease) in cash and cash equivalents 12,284 ( 96,633 )

Cash and cash equivalents at beginning of period 226,838 257,932

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Income taxes $ 6,950 $ 3,647

Supplemental disclosures—non-cash activities:

Non-cash investing activity $ 1,369 $ —

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

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Mercury Systems, Inc.

(the “Company” or “Mercury”) is the leader in making trusted, secure mission-critical technologies profoundly more accessible to aerospace and defense.

Operating at the intersection of high-tech and defense, Mercury specializes in engineering, adapting and manufacturing purpose-built solutions to meet current and emerging high-tech needs.

Mercury’s innovative solutions power more than 300 mission-critical aerospace, commercial aviation, defense, security and intelligence programs, including Aegis, Patriot, LTAMDS, SEWIP, F-35, JLTV, Global Hawk and Stormbreaker, delivering Innovation That Matters ® .

Headquartered in Andover, MA, Mercury has pioneered a transformational defense electronics business model specifically designed to provide end-users with trusted and secure leading-edge technology, affordably and with significantly shorter lead times.

Mercury’s relationships with key commercial processing technology providers, such as Intel, NVIDIA and Xilinx, coupled with its commitment to open standards architecture (“OSA”), allow it to develop products that are optimized for customer success and upgradeability.

A proven portfolio of advanced capability, a demonstrated model for accelerated development and a commitment to its cultures and values, uniquely position Mercury to deliver Innovation That Matters ® from chip-scale to system-scale.

(the “Company” or “Mercury”) is a leading technology company serving the aerospace and defense 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 its 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 manufacturer (“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 the Company's 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.

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 its technological edge by investing in critical capabilities and intellectual property 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.

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, electronic intelligence, avionics, electro-optical/infrared, electronic warfare, weapons and missile defense, hypersonics and radar.

Investors and others should note that the Company announces material financial information using its website ( www.mrcy.com ), Securities and Exchange Commission (“SEC”) filings, press releases, public conference calls, webcasts, and social media, including Twitter ( twitter.com/mrcy and twitter.com/mrcy_CEO ) and LinkedIn ( www.linkedin.com/company/mercury-systems ).

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however, in the opinion of management the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature, necessary for fair presentation.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended June 30, 2019 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 15, 2019.

The results for the third quarter and nine months ended March 27, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended July 3, 2020 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 18, 2020.

The results for the first quarter are not necessarily indicative of the results to be expected for the full fiscal year.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation .

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 the third quarter of fiscal 2020 are to the quarter ending March 27, 2020.

There were approximately 13-weeks during the third quarters ended March 27, 2020 and March 31, 2019, respectively.

There were 39-weeks during the nine months ended March 27, 2020 and March 31, 2019, respectively.

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

All references to the first quarter of fiscal 2021 are to the quarter ended October 2, 2020.

There were 13-weeks during the first quarters ended October 2, 2020 and September 27, 2019, respectively.

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 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 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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The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at average exchange rates during the period for results of operations.

The related translation adjustments are reported in accumulated other comprehensive (loss) income (“AOCI”) in shareholders’ equity.

The related translation adjustments are reported in Accumulated other comprehensive loss (“AOCL”) in shareholders’ equity.

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

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.

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 N to the consolidated financial statements for more information regarding the adoption of this standard.

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

R EVENUE R ECOGNITION

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , (“ASC 606”).

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

Mercury is a leading technology company serving the aerospace and defense industry, positioned at the intersection of high-tech and defense.

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

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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.

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.

The appropriate allocation of the transaction price and recognition of revenue is then determined for the bundled performance obligation.

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 70 % and 74 % of revenues for the third quarter and nine months ended March 27, 2020, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 74 % and 76 % of revenues for the third quarter and nine months ended March 31, 2019, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 64 % and 73 % of revenues for the first quarters ended October 2, 2020 and September 27, 2019, respectively.

The Company also engages in long-term contracts for development, production and service activities and recognizes revenue for performance obligations over time.

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The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material contracts.

Total revenue recognized under long-term contracts over time was 30 % and 26 % of total revenues for the third quarter and nine months ended March 27, 2020, respectively.

Total revenue recognized under long-term contracts over time was 26 % and 24 % of total revenues for the third quarter and nine months ended March 31, 2019, respectively.

Total revenue recognized under long-term contracts over time was 36 % and 27 % of total revenues for the first quarters ended October 2, 2020 and September 27, 2019, 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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Accounts receivable, net, represents amounts that have been billed and are currently due from customers.

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

The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected.

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 as necessary.

The allowance is based upon an assessment of the customers’ credit worthiness, history with the customer, and the age of the receivable balance.

The allowance is based upon an assessment of the customers’ credit worthiness, reasonable forecasts about the future, history with the customer, and the age of the receivable balance.

The Company typically invoices a customer upon shipment of the product (or completion of a service) for contracts where revenue is recognized at a point in time.

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

The contract asset balances were $ 86,860 and $ 57,387 as of March 27, 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 nine months ended March 27, 2020.

The contract liability balances were $ 14,858 and $ 12,362 as of March 27, 2020 and June 30, 2019, respectively.

The increase was due to advanced billings across multiple programs.

Revenue recognized for the third quarter and nine months ended March 27, 2020 that was previously included in the contract liability balance at June 30, 2019 was $ 1,564 and $ 9,838 , respectively.

Revenue recognized for the third quarter and nine months ended March 31, 2019 that was included in the contract liability balance at June 30, 2018 was $ 1,173 and $ 10,156 , respectively.

The contract asset balances were $ 108,754 and $ 90,289 as of October 2, 2020 and July 3, 2020, respectively.

The contract asset balance increased due to growth in revenue recognized and timing of billable events under long-term contracts over time during the first quarter ended October 2, 2020.

The contract liability balances were $ 27,655 and $ 19,892 as of October 2, 2020 and July 3, 2020, respectively.

The increase was due to a greater number of long-term contracts with advanced billings across multiple programs.

Revenue recognized for the first quarter ended October 2, 2020 that was included in the contract liability balance at July 3, 2020 was $ 9,030 .

Revenue recognized for the first quarter ended September 27, 2019 that was included in the contract liability balance at June 30, 2019 was $ 5,376 .

R EMAINING P ERFORMANCE O BLIGATIONS

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The definition of remaining performance obligations excludes contracts with original expected durations of less than one year, as well as 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 March 27, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 262,425 .

As of October 2, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 287,526 .

The Company expects to recognize approximately 72 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.

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Weighted-average shares were calculated as follows:

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Basic weighted-average shares outstanding 54,883 54,388

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Diluted weighted-average shares outstanding 55,339 55,078

Equity instruments to purchase 3 and 136 shares of common stock were not included in the calculation of diluted net earnings per share for the third quarter and nine months ended March 27, 2020, because the equity instruments were anti-dilutive.

Equity instruments to purchase 11 and 244 shares of common stock were not included in the calculation of diluted net earnings per share for the third quarter and nine months ended March 31, 2019, because the equity instruments were anti-dilutive.

Equity instruments to purchase 203 and 154 shares of common stock were not included in the calculation of diluted net earnings per share for the first quarters ended October 2, 2020 and September 27, 2019, respectively, because the equity instruments were anti-dilutive.

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

In August 2018, the FASB issued ASU No.

2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715) Changes to the Disclosure Requirements for Defined Benefit Plans , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant.

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 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 add guidance as to 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 4, 2020, the Company adopted ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually.

This ASU requires 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 Company will rely on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount and will exercise judgment in determining the relevant information and estimation methods that are appropriate in measurement of the credit losses.

This adoption did not have a material impact to the Company's consolidated financial statements or related disclosures.

Effective July 4, 2020 the Company adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

This ASU eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit, the Step 2 test, from the goodwill impairment test.

Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit.

This adoption did not have an impact on the Company's consolidated financial statements or related disclosures.

Effective July 4, 2020 the Company adopted ASU No.

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 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.

This adoption did not have an impact to the Company's consolidated financial statements or related disclosures.

A MERICAN P ANEL C ORPORATION A CQUISITION

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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:

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

Consideration transferred

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Net purchase price $ 96,502

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable 3,726

Inventory 11,271

Fixed assets 690

Other current and non-current assets 3,494

Accounts payable ( 1,554 )

Accrued expenses ( 1,013 )

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

Estimated fair value of net tangible assets acquired 11,691

Estimated fair value of identifiable intangible assets 33,200

Estimated goodwill 52,437

Estimated fair value of net assets acquired 97,328

Less cash acquired ( 826 )

Net purchase price $ 96,502

The amounts above represent the preliminary fair value estimates as of March 27, 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 $ 20,400 with a useful life of 11 years, completed technology of $ 10,400 with a useful life of 11 years and backlog of $ 2,400 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 $ 52,437 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 March 27, 2020, the Company had $ 51,686 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 the third quarter ended March 27, 2020 were $ 7,600 and $ 103 , respectively.

The revenues and income before income taxes from APC included in the Company's consolidated results for the nine months ended March 27, 2020 were $ 18,196 and $ 1,905 , 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.

(“Athena”), 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:

Consideration transferred

Cash paid at closing $ 34,049

Working capital and net debt adjustment ( 446 )

Less cash acquired ( 49 )

Net purchase price $ 33,554

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable 726

Fixed assets 74

Other current and non-current assets 260

Accounts payable ( 48 )

Accrued expenses ( 143 )

Other current and non-current liabilities ( 600 )

Deferred tax liability ( 6,414 )

Estimated fair value of net tangible liabilities acquired ( 6,096 )

Estimated fair value of identifiable intangible assets 23,700

Estimated goodwill 15,999

Estimated fair value of net assets acquired 33,603

Less cash acquired ( 49 )

Net purchase price $ 33,554

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

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

The goodwill of $ 15,999 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 and is not tax deductible.

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.

S YNTONIC M ICROWAVE L LC A CQUISITION

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

Consideration transferred

Cash paid at closing $ 13,118

Less cash acquired ( 1,118 )

Net purchase price $ 12,000

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable 281

Inventory 482

Fixed assets 31

Other current and non-current assets 6

Accounts payable ( 71 )

Accrued expenses ( 61 )

Estimated fair value of net tangible assets acquired 1,786

Estimated fair value of identifiable intangible assets 7,100

Estimated goodwill 4,232

Estimated 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 nine 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.

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.

The goodwill from this acquisition is reported under the Advanced Microelectronic Solutions (“AMS”) reporting unit.

Since Syntonic 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 March 27, 2020, the Company had $ 2,936 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.

G ECO A VIONICS A QUISITION

On January 29, 2019, the Company announced that it had acquired GECO Avionics, LLC (“GECO”), 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

Cash paid at closing $ 36,500

Net purchase price $ 36,500

Fair value of tangible assets acquired and liabilities assumed

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Fixed assets 690

Accounts payable ( 217 )

Accrued expenses ( 239 )

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 36,500

Net purchase price $ 36,500

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 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 March 27, 2020, the Company had $ 19,939 of goodwill deductible for tax purposes.

G ERMANE S YSTEMS A QUISITION

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 (“Germane”) 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 command, control and intelligence (“C2I”) applications.

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

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

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:

Consideration transferred

Cash paid at closing $ 47,166

Working capital and net debt adjustment ( 1,244 )

Less cash acquired ( 193 )

Net purchase price $ 45,729

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 3,494

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Net purchase price $ 96,502

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 .

On September 23, 2020, the measurement period for APC expired.

The identifiable intangible assets include 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 .

The goodwill of $ 53,022 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 MDS reporting unit.

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

The goodwill from this acquisition is reported under the Mission 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 March 27, 2020, the Company had $ 21,363 of goodwill deductible for tax purposes.

As of October 2, 2020, the Company had $ 50,649 of goodwill deductible for tax purposes.

Fair Value of Financial Instruments

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 27, 2020:

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at October 2, 2020:

Fair Value Measurements

March 27, 2020 Level 1 Level 2 Level 3

Certificates of deposit $ 99,905 $ — $ 99,905 $ —

October 2, 2020 Level 1 Level 2 Level 3

equity securities $ 1,964 $ 1,964 $ — $ —

Total $ 1,964 $ 1,964 $ — $ —

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.

During the third quarter ended March 27, 2020 the Company received gross proceeds and recorded a gain on sale of a cost-method investment of $ 4,310 and $ 3,810 , respectively.

The gain on sale of investment is included within Other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income for the third quarter and nine months ended March 27, 2020.

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 recorded a loss on the change in fair value of a cost-method investment of $ 43 .

The change in fair value of these U.S.

equity securities was the result of an observable price change during the first quarter ended October 2, 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 October 2, 2020.

The loss on investments were included within Other expense, net in the Consolidated Statements of Operations and Comprehensive Income for the first quarter ended October 2, 2020.

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

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Inventory was comprised of the following:

March 27, 2020 June 30, 2019

October 2, 2020 July 3, 2020

Raw materials $ 124,628 $ 111,225

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Total $ 206,044 $ 178,093

The following table sets forth the changes in the carrying amount of goodwill by reporting unit for the nine months ended March 27, 2020:

SMP AMS MDS Total

Balance at June 30, 2019 $ 140,783 $ 222,379 $ 198,984 $ 562,146

Goodwill adjustment for the Germane acquisition — — 447 447

Goodwill adjustment for the GECO acquisition ( 200 ) — — ( 200 )

Goodwill arising from the APC acquisition 52,437 — — 52,437

Balance at March 27, 2020 $ 193,020 $ 222,379 $ 199,431 $ 614,830

In the nine months ended March 27, 2020, there were no triggering events, as defined by ASC 350, Intangibles - Goodwill and Other , which required an interim goodwill impairment test.

The $ 27,951 increase in inventory was due to an increase in overall demand, especially for larger, more complex integrated subsystems, and advanced purchases intended to mitigate potential disruptions to the supply chain or unforeseen changes in customer behavior resulting from the COVID pandemic.

During the first quarter of fiscal 2021, the Company reorganized its internal reporting unit structure to align with the Company's market and brand strategy as well as promote scale as the organization continues to grow.

In accordance with FASB ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company determines its reporting units based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit.

A reporting unit is considered to be an operating segment or one level below an operating segment also known as a component.

Component level financial information is reviewed by management across three divisions:

Processing, Microelectronics and Mission.

Accordingly, these were determined to be the Company's new reporting units.

The internal reorganization and change in reporting units qualified as a triggering event and required goodwill to be tested for impairment.

As required by ASC 350, the Company tested goodwill for impairment immediately before and after the reorganization.

As a result of these analyses, it was determined that goodwill was not impaired before or after the reorganization.

In the first quarter ended October 2, 2020, the Company assigned goodwill to the new reporting units based on the relative fair value of transferred operations.

The following table sets forth the changes in the carrying amount of goodwill for the first quarter ended October 2, 2020:

Balance at July 3, 2020 $ 614,076

Goodwill adjustment for the APC acquisition 346

Balance at October 2, 2020 $ 614,422

The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year.

Restructuring

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

Related Facilities

& Other Total

Restructuring liability at June 30, 2019 $ 4 $ — $ 4

Restructuring and other charges 1,740 75 1,815

Cash paid ( 892 ) ( 75 ) ( 967 )

Restructuring liability at March 27, 2020 $ 852 $ — $ 852

During the nine months ended March 27, 2020, the Company incurred net restructuring and other charges of $ 1,815 .

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

During the first quarter ended October 2, 2020, the Company incurred net restructuring and other charges of $ 1,297 primarily related to severance costs associated with the elimination of 19 positions, predominantly in the manufacturing, sales and R&D functions.

These charges related to talent shifts and resource redundancy resulting from the internal reorganization the Company completed in August which created better alignment with its market and brand strategy as well as promote scale as the Company continues to grow.

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 restructuring liability is classified as Accrued expenses in the Consolidated Balance Sheets.

The Company recorded an income tax provision of $ 5,363 and $ 5,357 on income before income taxes of $ 28,928 and $ 19,466 for the third quarters ended March 27, 2020 and March 31, 2019, respectively.

The Company recorded an income tax provision of $ 8,455 and $ 12,969 on income before income taxes of $ 66,943 and $ 46,940 for the nine months ended March 27, 2020 and March 31, 2019, respectively.

During the third quarters ended March 27, 2020 and March 31, 2019, the Company recognized a discrete tax benefit of $ 159 and $ 143 , respectively, related to excess tax benefits on stock-based compensation.

During the nine months ended March 27, 2020 and March 31, 2019, the Company recognized a discrete tax benefit of $ 6,639 and $ 1,858 , respectively, related to excess tax benefits on stock-based compensation.

The Company recognized a discrete tax benefit of $ 1,005 , net of a $ 251 tax reserve, related to research and development credits and an $ 813 discrete tax benefit from a release of a valuation allowance on a capital loss carryforward, during the third quarter and nine months ended March 27, 2020.

The effective tax rate for the third quarters ended March 27, 2020 and March 31, 2019 differed from the Federal statutory rate primarily due to Federal research and development credits, excess tax benefits related to stock-based compensation, a release of a valuation allowance on a capital loss carryforward, a modified territorial tax system and a minimum tax on certain foreign earnings, and state taxes.

The effective tax rate for the nine months ended March 27, 2020 and March 31, 2019 differed from the Federal statutory rate primarily due to Federal research and development credits, excess tax benefits related to stock-based compensation, a release of a valuation allowance on a capital loss carryforward, a modified territorial tax system and a minimum tax on certain foreign earnings, and state taxes.

The Company recorded an increase to its unrecognized tax positions of $ 251 related to research and development credits claimed on an amended Federal tax return during the third quarter ended March 27, 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the coronavirus disease 2019 (“COVID”) pandemic.

The CARES Act, among other things, permits immediate expensing of Qualified Improvement Property for tax purposes.

The Company is currently evaluating the impact of the CARES Act on its consolidated financial statements and related disclosures, and the Company expects that it will result in a cash benefit.

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

Restructuring liability at July 3, 2020 $ 597

Restructuring and other charges 1,297

Cash paid ( 898 )

Restructuring liability at October 2, 2020 $ 996

The Company recorded an income tax provision of $ 2,198 and an income tax benefit of $ 2,018 on income before income taxes of $ 17,996 and $ 17,229 for the first quarters ended October 2, 2020 and September 27, 2019, respectively.

During the first quarters ended October 2, 2020 and September 27, 2019, the Company recognized a discrete tax benefit of $ 2,480 and $ 6,127 , respectively, related to excess tax benefits on stock-based compensation.

The Company also recognized a discrete tax benefit of $ 443 related to foreign tax rate changes during the first quarter ended September 27, 2019.

The effective tax rate for the first quarters ended October 2, 2020 and September 27, 2019 differed from the Federal statutory rate primarily due to Federal and State research and development credits, excess tax benefits related to stock-based compensation, non-deductible compensation and state taxes.

During the first quarter ended October 2, 2020, there were no material changes to the Company's unrecognized tax positions.

R EVOLVING C REDIT F ACILITY

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.

As of March 27, 2020, the Company's outstanding balance of unamortized deferred financing costs was $ 4,705 , which is being amortized to Other income (expense), net on a straight line basis over the term of the Revolver.

During the third quarter ended March 27, 2020, the Company drew $ 200,000 to provide access to capital and flexibility in managing its operations during this time of uncertainty due to COVID.

As of March 27, 2020, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 200,000 against the Revolver, resulting in interest expense of $ 58 for both the third quarter and nine months ended March 27, 2020.

There were outstanding letters of credit of $ 904 as of March 27, 2020.

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

As of October 2, 2020, the Company's outstanding balance of unamortized deferred financing costs was $ 4,033 , which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive Income on a straight line basis over the term of the Revolver.

As of October 2, 2020, the Company was in compliance with all covenants and conditions under the Revolver and there were no outstanding borrowings against the Revolver.

There were outstanding letters of credit of $ 904 as of October 2, 2020.

Employee Benefit Plan

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The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan.

The Plan's funded status at March 27, 2020 was a net liability of $ 9,583 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net gain of $ 7 and $ 22 in AOCI during the third quarter and nine months ended March 27, 2020, respectively.

The Company recorded a net loss of $ 15 and $ 45 in AOCI during the third quarter and nine months ended March 31, 2019, respectively.

The Company recognized net periodic benefit costs of $ 304 and $ 896 associated with the Plan for the third quarter and nine months ended March 27, 2020, respectively.

The Company recognized net periodic benefit costs of $ 197 and $ 599 associated with the Plan for the third quarter and nine months ended March 31, 2019, respectively.

The Plan's funded status at October 2, 2020 was a net liability of $ 12,337 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net gain of $ 31 and $ 7 in AOCL during the first quarters ended October 2, 2020 and September 27, 2019, respectively.

The Company recognized net periodic benefit costs of $ 413 and $ 296 associated with the Plan for the first quarters ended October 2, 2020 and September 27, 2019, respectively.

The Company's total expected employer contributions to the Plan during fiscal 2021 are $ 957 .

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The 2018 Plan replaced 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.

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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 on the date of grant and the options generally have a term of seven years .

There were 2,656 shares available for future grant under the 2018 Plan at March 27, 2020.

There were 1,698 shares available for future grant under the 2018 Plan at October 2, 2020.

On October 28, 2020, the Shareholders of the Company approved 3,000 shares to be added to the 2018 Plan.

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 ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10 % of an employee’s compensation as defined in the ESPP.

There were 41 and 51 shares issued under the ESPP during the nine months ended March 27, 2020 and March 31, 2019, respectively.

Shares available for future purchase under the ESPP totaled 77 at March 27, 2020.

There were no shares issued under the ESPP during the first quarters ended October 2, 2020 and September 27, 2019, respectively.

Shares available for future purchase under the ESPP totaled 29 at October 2, 2020.

On October 28, 2020, the Shareholders of the Company approved 500 shares to be added to the ESPP.

S TOCK O PTION AND A WARD A CTIVITY

The following table summarizes activity of the Company’s stock option plans since June 30, 2019:

The following table summarizes activity of the Company’s stock option plans since July 3, 2020:

Options Outstanding

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Contractual Term

Outstanding at June 30, 2019 4 $ 5.52 2.13

Outstanding at July 3, 2020 3 $ 5.52 1.12

Exercised ( 1 ) 5.52

Outstanding at March 27, 2020 3 $ 5.52 1.38

The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since June 30, 2019:

Outstanding at October 2, 2020 2 $ 5.52 0.87

The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since July 3, 2020:

Non-vested Restricted Stock Awards

Shares Weighted Average

Outstanding at June 30, 2019 1,046 $ 39.62

Outstanding at July 3, 2020 957 $ 61.59

Granted 454 77.26

1 unchanged sentence

Forfeited ( 9 ) 61.95

Outstanding at March 27, 2020 996 $ 60.00

Outstanding at October 2, 2020 1,059 $ 69.80

S TOCK - BASED C OMPENSATION E XPENSE

The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive Income in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).

The Company had $ 481 and $ 241 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended March 27, 2020 and June 30, 2019, respectively.

The Company had $ 802 and $ 542 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended October 2, 2020 and July 3, 2020, 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, net of estimated forfeitures.

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

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Cost of revenues $ 295 $ 141

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Operating Segment, Geographic Information and Significant Customers

Operating segments are defined as components of an enterprise evaluated regularly by the Company's chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

The Company is comprised of one operating and reportable segment.

The Company utilized the management approach for determining its operating segment in accordance with ASC 280, Segment Reporting .

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:

Operating segments are defined as components of an enterprise evaluated regularly by the Company's CODM in deciding how to allocate resources and assess performance.

The Company evaluated this reorganization under ASC 280 to determine whether this change has impacted the Company's single operating and reportable segment.

The Company concluded this change had no effect given the CODM continues to evaluate and manage the Company on the basis of one operating and reportable segment.

The Company utilized the management approach for determining its operating segment in accordance with ASC 280.

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

Europe Asia Pacific Eliminations Total

THIRD QUARTER ENDED MARCH 27, 2020

Net revenues to unaffiliated customers $ 196,158 $ 11,408 $ 450 $ — $ 208,016

Inter-geographic revenues 389 754 — ( 1,143 ) —

Net revenues $ 196,547 $ 12,162 $ 450 $ ( 1,143 ) $ 208,016

THIRD QUARTER ENDED MARCH 31, 2019

Net revenues to unaffiliated customers $ 158,715 $ 15,280 $ 641 $ — $ 174,636

Inter-geographic revenues 2,984 314 — ( 3,298 ) —

Net revenues $ 161,699 $ 15,594 $ 641 $ ( 3,298 ) $ 174,636

NINE MONTHS ENDED MARCH 27, 2020

FIRST QUARTER ENDED OCTOBER 2, 2020

Net revenues to unaffiliated customers $ 195,847 $ 9,663 $ 111 $ — $ 205,621

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Net revenues $ 196,087 $ 10,007 $ 111 $ ( 584 ) $ 205,621

NINE MONTHS ENDED MARCH 31, 2019

FIRST QUARTER ENDED SEPTEMBER 27, 2019

Net revenues to unaffiliated customers $ 161,996 $ 14,440 $ 868 $ — $ 177,304

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Net revenues $ 162,968 $ 15,091 $ 868 $ ( 1,623 ) $ 177,304

The Company offers a broad family of products designed to meet the full range of requirements in compute-intensive, signal processing, image processing and command and control applications.

To maintain a competitive advantage, the Company seeks to leverage technology investments across multiple product lines and product solutions.

The Company’s products are typically compute-intensive and require extremely high bandwidth and high throughput.

These systems often must also meet significant SWaP constraints for use in aircraft, unmanned aerial vehicles, ships and other platforms and be ruggedized for use in harsh environments.

The Company's products transform the massive streams of digital data created in these applications into usable information in real time.

The systems can scale from a few processors to thousands of processors.

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

As these acquisitions and changes occurred, the Company increased the proportion of its revenue derived from the sale of components in different technological areas, and also increased the amount of revenue associated with combining technologies into more complex and diverse products including modules, sub-assemblies and integrated subsystems.

As these acquisitions and changes occurred, the Company's proportion of revenue derived from the sale of components in different technological areas, and modules, sub-assemblies and integrated subsystems which combine technologies into more complex diverse products has shifted.

The following tables present revenue consistent with the Company's strategy of expanding its technological capabilities and program content.

As additional information related to the Company’s products by end user, application and/or product grouping is attained, the categorization of these products can vary over time.

When this occurs, the Company reclassifies revenue by end user, application and/or product grouping for prior periods.

Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each revenue category.

As additional information related to the Company’s products by end user, application, product grouping and/or platform is attained, the categorization of these products can vary over time.

When this occurs, the Company reclassifies revenue by end user, application, product grouping and/or platform for prior periods.

Such reclassifications typically do not materially change the underlying trends of results within each revenue category.

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

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

$ 178,743 $ 157,475

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

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

$ 72,409 $ 37,919

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

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Components (1)

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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:

First Quarters Ended

October 2, 2020 September 27, 2019

$ 89,436 $ 86,157

37,551 16,310

46,282 39,710

32,352 35,127

Total Net Revenues $ 205,621 $ 177,304

(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.

The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows:

Europe Asia Pacific Eliminations Total

March 27, 2020 $ 73,549 $ 5,108 $ 7 $ — $ 78,664

June 30, 2019 $ 54,952 $ 5,037 $ 12 $ — $ 60,001

October 2, 2020 $ 89,261 $ 5,479 $ 4 $ — $ 94,744

July 3, 2020 $ 82,588 $ 5,144 $ 5 $ — $ 87,737

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

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

Third Quarters Ended Nine Months Ended

March 27, 2020 March 31, 2019 March 27, 2020 March 31, 2019

First Quarters Ended

October 2, 2020 September 27, 2019

Raytheon Technologies 23 % 13 %

Lockheed Martin Corporation

17 % 24 % 17 % 16 %

Raytheon Company 17 % 19 % 15 % 21 %

Northrop Grumman Corporation * 11 %

L3Harris Technologies * 13 %

34 % 43 % 42 % 37 %

* Indicates that the amount is less than 10% of the Company's revenue for the respective period.

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 revenue for the third quarters and nine months ended March 27, 2020 and March 31, 2019.

There were no programs comprising 10% or more of the Company's revenues for the first quarters ended October 2, 2020 and September 27, 2019.

Commitments and Contingencies

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P URCHASE C OMMITMENTS

As of March 27, 2020, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

As of October 2, 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 $ 113,227 .

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

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:

March 27, 2020

Operating lease right-of-use assets $ 61,112

Accrued expenses (1)

Operating lease liabilities 67,028

Total operating lease liabilities $ 73,833

(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:

Nine Months Ended

March 27, 2020

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

Right-of-use assets obtained in exchange for new lease liabilities (1)

Weighted average remaining lease term 9.4 years

Weighted average discount rate 4.89 %

(1) This balance includes $ 2,485 of Right-of-use assets associated with the acquisition of APC on September 23, 2019.

M ATURITIES OF L EASE C OMMITMENTS

Maturities of operating lease commitments as of March 27, 2020 were as follows:

Fiscal Year Totals

Thereafter 53,580

Total lease payments 94,555

imputed interest ( 20,722 )

Present value of operating lease liabilities $ 73,833

(1) Excludes the nine months ended March 27, 2020.

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 the third quarter and nine months ended March 27, 2020, the Company recognized operating lease expense of $ 2,550 and $ 7,541 , 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 March 27, 2020.

Subsequent Events

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements