What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-08-17 compared with 2020-08-18 · 273 added, 336 removed, 897 unchanged (40% of the section changed)

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(In thousands, except share and per share data)

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Current assets:

Cash and cash equivalents $ 113,839 $ 226,838

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

Accounts receivable, net of allowance for credit losses of $1,720 and $1,451 at July 2, 2021 and July 3, 2020, respectively 128,807 120,438

Unbilled receivables and costs in excess of billings 162,921 90,289

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Income taxes payable 7,467 4,117

Long-term debt 200,000 —

Operating lease liabilities 71,508 66,981

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85,000,000 shares authorized;

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

55,241,120 and 54,702,322 shares issued and outstanding at July 2, 2021 and July 3, 2020, respectively 552 547

Additional paid-in capital 1,109,434 1,074,667

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For the Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Net revenues $ 923,996 $ 796,610 $ 654,744

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Interest expense ( 1,222 ) ( 1,006 ) ( 9,109 )

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

Other (expense) income, net ( 2,785 ) 1,726 ( 8,880 )

Income before income taxes 77,173 93,933 59,527

Tax provision 8,221 12,752 1,690

Income tax provision 15,129 8,221 12,752

Net income $ 62,044 $ 85,712 $ 46,775

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Pension benefit plan, net of tax 3,285 ( 1,768 ) ( 2,350 )

Total other comprehensive (loss) income, net of tax ( 1,594 ) ( 2,582 ) 217

Total other comprehensive income (loss), net of tax 2,546 ( 1,594 ) ( 2,582 )

Total comprehensive income $ 64,590 $ 84,118 $ 44,193

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

For the Fiscal Years Ended July 2, 2021, July 3, 2020 and June 30, 2019

(In thousands)

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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

Net income — — — 46,775 — 46,775

Other Comprehensive Income — — — — 217 217

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 6,900 69 453,504 — — 453,573

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

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Other comprehensive loss — — — — ( 1,594 ) ( 1,594 )

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

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 439 4 10 — — 14

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Net income — — — 62,044 — 62,044

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

Other comprehensive income — — — — 2,546 2,546

Balance at July 2, 2021 55,241 $ 552 $ 1,109,434 $ 374,499 $ ( 339 ) $ 1,484,146

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For the Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Cash flows from operating activities:

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Proceeds from sale of investment 1,538 4,310 —

Other investing activities — — ( 375 )

Net cash used in investing activities ( 416,887 ) ( 135,486 ) ( 153,774 )

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

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

Net cash provided by (used in) financing activities 206,229 ( 10,932 ) 247,765

Effect of exchange rate changes on cash and cash equivalents 412 140 ( 97 )

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Mercury Systems, Inc.

(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.

(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 products and 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 that are open, purpose-built and uncompromised to meet our customers’ most-pressing high-tech needs, including those specific to the defense community.

On May 27, 2021, we acquired Pentek for a purchase price of $ 65.0 million , subject to net working capital and net debt adjustments.

Based in Upper Saddle River, New Jersey, Pentek is a leading designer and manufacturer of ruggedized, high-performance, commercial off-the-shelf ("COTS") software-defined radio and data acquisition boards, recording systems and subsystems for high-end commercial and defense applications.

The acquisition and associated transaction expenses were funded through a combination of cash on hand and Mercury's existing revolving credit facility (the "Revolver").

On December 30, 2020, we acquired Physical Optics Corporation ("POC") for a purchase price of $ 310.0 million , subject to net working capital and net debt adjustments.

Based in Torrance, California, POC more than doubles our global avionics business and expands its collective footprint in the platform and mission management market.

We funded the acquisition through a combination of cash on hand and our existing Revolver.

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.

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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.

On May 31, 2019 the Company closed the offering, including the full over-allotment allocation, selling an aggregate of 6,900 shares of common stock at a price to the public of $ 69.00 for total net proceeds of $ 454,343 .

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

(“Athena”) and Syntonic Microwave LLC (“Syntonic”) on a cash-free, debt-free basis for a combined total purchase price of $ 46,000 , prior to net working capital and net debt adjustments.

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.

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 January 29, 2019, the Company acquired GECO Avionics, LLC (“GECO”) on a cash-free, debt-free basis for a total purchase price of $ 36,500 .

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

On July 31, 2018, the Company acquired Germane Systems, LC (“Germane”) on a cash-free, debt-free basis for a total purchase price of $ 45,000 , prior to net working capital and net debt adjustments.

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.

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

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All references to fiscal 2021 are to the 52-week period from July 4, 2020 to July 2, 2021.

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.

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

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

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

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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.

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 measures its lease obligations in accordance with ASC 842, Leases , (“ASC 842”), which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements.

Effective July 1, 2019, the Company 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.

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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.

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;

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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.

See Note J to the consolidated financial statements for more information regarding our obligations under leases.

R EVENUE R ECOGNITION

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The combination of two or more contracts requires judgment in determining whether the intent of entering into the contracts was effectively to enter into a single contract, which should be combined to reflect an overall profit rate.

Similarly, the Company may separate an arrangement, which may consist of a single contract or group of contracts, with varying rates of profitability, only if the applicable criteria are met.

Similarly, the Company may separate an arrangement, which may consist of a single contract or group of contracts, with varying rates of profitability,

only if the applicable criteria are met.

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.

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

The Company 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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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.

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.

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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 73 %, 77 % and 79 % of revenues in the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 58 %, 73 % and 77 % of

revenues in the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019, 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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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.

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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 27 %, 23 % and 21 % of revenues in the fiscal years ended July 3, 2020, June 30, 2019 and 2018, respectively.

Total revenue recognized under long-term contracts over time was 42 %, 27 % and 23 % of revenues in the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 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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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.

The Company had $ 1,098 of deferred sales commissions for contracts where the amortization period is greater than one year as of July 2, 2021.

Prior to fiscal 2021, the Company had not deferred sales commissions for contracts where the amortization period was greater than one year because such amounts were not deemed significant.

The Company has elected to treat shipping and handling activities performed after the customer has obtained control of the related goods as a fulfillment cost.

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

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 asset balances were $ 162,921 and $ 90,289 as of July 2, 2021 and July 3, 2020, respectively.

The contract asset balance increased due to growth in revenue recognized under long-term contracts over time during the fiscal year ended July 2, 2021.

The contract liability balances were $ 35,201 and $ 19,892 as July 2, 2021 and July 3, 2020, 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 .

Revenue recognized during fiscal 2021 that was included in the contract liability balance at July 3, 2020 was $ 16,846 .

R EMAINING P ERFORMANCE O BLIGATIONS

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

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.

As of July 2, 2021 and July 3, 2020, the Company had $ 113,839 and $ 226,838 , 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.

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As of July 2, 2021, five customers accounted for 60 % 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.

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

The Company maintains an allowance for credit losses 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.

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.

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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.

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.

The Company manages its business on the basis of one reportable segment, as a leading technology company serving the aerospace and defense industry, positioned at the intersection of high-tech and defense.

G OODWILL AND I NTANGIBLE A SSETS

Goodwill is the amount by which the cost of the net assets obtained in a business acquisition exceeded the fair values of the net identifiable assets on the date of purchase (see Note G).

Goodwill is not amortized in accordance with the requirements of ASC 350, Intangibles-Goodwill and Other (“ASC 350”).

Goodwill is the amount by which the purchase price of a business acquisition exceeded the fair values of the net identifiable assets on the date of purchase (see Note G).

In accordance with the requirements of Intangibles-Goodwill and Other (“ASC 350”) Goodwill is not amortized.

Goodwill is assessed for impairment at least annually, on a reporting unit basis, or when events and circumstances occur indicating that the recorded goodwill may be impaired.

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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.

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Warranty assumed from Germane — — 169

Warranty assumed from Themis — — 117

Accruals for warranties issued during the period 2,446 2,839 2,274

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

The Company uses the Black-Scholes valuation model for estimating the fair value on the date of grant of stock options.

R ETIREMENT OF C OMMON S TOCK

Stock that is repurchased or received in connection with the exercise of stock options or in order to cover tax payment obligations triggered by exercise of stock options or the vesting of restricted stock is retired immediately upon the Company’s repurchase.

Stock that is repurchased or received in connection with the vesting of restricted stock is retired immediately upon the Company’s repurchase.

The Company accounts for this under the cost method and upon retirement the excess amount over par value is charged against additional paid-in capital.

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Basic and diluted weighted average shares outstanding were as follows:

2020 2019 2018

Fiscal 2021 Fiscal 2020 Fiscal 2019

Basic weighted-average shares outstanding 55,070 54,546 47,831

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Diluted weighted-average shares outstanding 55,474 55,115 48,500

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.

Equity instruments to purchase 42 , 8 and 32 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019, 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 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.

The components of AOCI included $( 739 ), $ 174 and $( 232 ) of foreign currency translation adjustments for the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019, respectively.

In addition, pension benefit plan adjustments totaled $ 3,285 , $( 1,768 ) and $( 2,350 ) for the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019, respectively.

F OREIGN C URRENCY

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R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

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.

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 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.

2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , an amendment of the FASB Accounting Standards Codification.

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.

For public business entities, the new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The ASU requires prospective adoption and permits early adoption for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

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

In March 2018, the FASB issued ASU No.

2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects for Accumulated Other Comprehensive Income , an amendment of the FASB Accounting Standards Codification.

This ASU permits a company to reclassify the disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 on items within AOCI to retained earnings.

The amounts applicable for reclassification should include the effect of the change in the U.S.

Federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Cuts and Jobs Act of 2017 related to the items remaining in AOCI.

The effect of the change in the U.S.

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

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.

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.

R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS

Effective April 3, 2021, the Company adopted 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.

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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 August 2018, the FASB issued ASU No.

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

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 No.

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.

This adoption did not have a material 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.

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

This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The ASU permits two methods of adoption:

prospectively to all implementation costs incurred after the date of adoption, or retrospectively to each prior reporting period presented.

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, 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:

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

Effective October 3, 2020, the Company adopted SEC Final Rule Release No.

33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses, which includes amendments to the SEC's rules and forms related to the disclosure of financial information regarding acquired or disposed businesses.

The amendments are intended to improve the financial information about acquired or disposed businesses provided to investors, facilitate more timely access to capital and reduce the complexity and costs of preparing disclosures.

Among other changes, the amendments impact SEC rules relating to:

the definition of “significant” subsidiaries;

requirements to provide financial statements for “significant” acquisitions;

and the formulation and usage of pro forma financial information.

The final rule is applicable for fiscal years beginning after December 31, 2020, with early adoption permitted as long as all amendments are adopted in their entirety.

The Company early adopted this final rule in conjunction with its acquisition of Physical Optics Corporation ("POC") on December 30, 2020.

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

P ENTEK A CQUISITION

On May 27, 2021, the Company acquired Pentek for a purchase price of $ 65,000 , subject to net working capital and net debt adjustments.

Based in Upper Saddle River, New Jersey, Pentek is a leading designer and manufacturer of ruggedized, high-performance, commercial off-the-shelf software-defined radio and data acquisition boards, recording systems and subsystems for high-end commercial and defense applications.

The acquisition and associated transaction expenses were funded through a combination of cash on hand and Mercury's existing revolving credit facility (the "Revolver").

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

Consideration transferred

Cash paid at closing $ 65,668

Working capital and net debt adjustment ( 5,952 )

Liabilities assumed 2,454

Less cash acquired ( 746 )

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The amounts above represent the preliminary fair value estimates as of July 2, 2021 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 .

The preliminary identifiable intangible asset estimate includes customer relationships of $ 15,560 with a useful life of 21 years, completed technology of $ 6,340 with a useful life of seven years and backlog of $ 2,210 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.

The goodwill of $ 35,225 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 goodwill from this acquisition is included in the Microelectronics reporting unit.

The deal was split between asset and stock, with the asset portion of goodwill being deductible 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 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:

As of July 2, 2021, the Company ha d $ 30,101 of goodwill deductible for tax purposes.

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

The revenues and income before income taxes from Pentek included in the Company's consolidated results for fiscal year ended July 2, 2021 were $3,207 and $803, respectively.

P HYSICAL O PTICS C ORPORATION A CQUISITION

On December 7, 2020, the Company signed a definitive agreement to acquire POC for a purchase price of $ 310,000 , prior to net working capital and net debt adjustments.

On December 30, 2020, the transaction closed and the Company acquired POC.

Based in Torrance, California, POC more than doubles the Company's global avionics business and expands its collective footprint in the platform and mission management market.

The Company funded the acquisition through a combination of cash on hand and the Revolver.

On May 28, 2021 the Company and representative of the former owners of POC agreed to post closing-adjustments totaling $ 2,641 , which increased the Company’s net purchase price.

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

Consideration transferred

Cash paid at closing $ 251,229

Cash paid post closing 61,626

Working capital and net debt adjustment ( 2,096 )

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Net purchase price $ 307,904

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.

S YNTONIC M ICROWAVE LLC A CQUISITION

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:

Consideration transferred

Cash paid at closing $ 13,118

Less cash acquired ( 1,118 )

Net purchase price $ 12,000

Fair value of tangible assets acquired and liabilities assumed

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable 27,708

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Accrued expenses ( 5,551 )

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

Other current and non-current liabilities ( 32,549 )

Estimated fair value of net tangible assets acquired 39,500

Estimated fair value of identifiable intangible assets 116,000

Estimated goodwill 155,259

Estimated fair value of net assets acquired 310,759

Less cash acquired ( 2,855 )

Net purchase price $ 307,904

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.

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 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 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

Cash paid at closing $ 36,500

Net purchase price $ 36,500

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable $ 1,320

Inventory 1,454

Fixed assets 459

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

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 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 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.

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:

The preliminary identifiable intangible asset estimate includes customer relationships of $ 83,000 with a useful life of 11 years, completed technology of $ 25,000 with a useful life of 9 years and backlog of $ 8,000 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 $ 155,259 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 deductible for tax purposes.

The goodwill from this acquisition is included in the Mission reporting unit.

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

The revenues and (loss) before income taxes from POC included in the Company's consolidated results for fiscal year ended July 2, 2021 were $ 76,370 and $( 2,768 ) , respectively.

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:

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

As of July 2, 2021, the Company ha d $ 48,258 of goodwill deductible for tax purposes.

Fair Value of Financial Instruments

During the fiscal year ended July 2, 2021, the Company received gross proceeds and recorded a loss on a cost-method investment of $ 1,538 and $ 426 , respectively.

The loss on sale of investment is included within Other expense (income), net in the Consolidated Statements of Operations and Comprehensive Income for the fiscal year ended July 2, 2021.

The fair value of the investment was based on a quoted price of identical instruments in an active market and was recorded at cost within Other non-current assets in the Consolidated Balance Sheet prior to its sale.

As of July 2, 2021, the Company had no financial instruments required to be measured at fair value.

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

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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.

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, 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 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 July 3, 2020 and June 30, 2019.

The Company determined the carrying value of long-term debt approximated fair value due to variable interest rates charged on the borrowings, which reprice frequently.

Inventory was comprised of the following:

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Raw materials $ 141,774 $ 111,225

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Total $ 221,640 $ 178,093

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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(Years) As of

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Computer equipment and software 3-4 $ 99,190 $ 85,705

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$ 128,524 $ 87,737

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.

The $ 40,787 increase in property and equipment was primarily due to current year additions including property and equipment associated with improvements to the Company's facilities, especially as related to the expansion of its trusted custom microelectronics business and the acquisition of POC.

These increases were partially offset by depreciation expense.

During fiscal 2021 and 2020, the Company retired $ 996 and $ 64 , 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 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

Depreciation expense related to property and equipment for the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019 was $ 25,912 , $ 18,770 and $ 18,478 , respectively.

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 reporting units.

The following table sets forth the changes in the carrying amount of goodwill for the year ended July 2, 2021:

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.

In fiscal 2020, there were no triggering events, which required an interim goodwill impairment test.

Goodwill adjustment for the APC acquisition 346

Goodwill arising from the POC acquisition 155,259

Goodwill arising from the Pentek acquisition 35,225

Balance at July 2, 2021 $ 804,906

The Company performed its annual goodwill impairment test in the fourth quarter of fiscal 2021 with no impairment noted.

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Customer relationships $ 280,520 $ ( 69,474 ) $ 211,046 12.0 years

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

Licensing agreements and patents 6 — 6 —

Completed technologies 139,332 ( 49,126 ) 90,206 9.3 years

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$ 432,268 $ ( 124,709 ) $ 307,559

June 30, 2019

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

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Total future amortization expense $ 307,559

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

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

These assets are included in the Company's gross and net carrying amounts as of July 2, 2021.

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Amortization Net

Amount Weighted

Amount Weighted Average

Customer relationships $ 83,000 $ ( 4,404 ) $ 78,596 11.5 years

Completed technologies 25,000 ( 1,985 ) 23,015 9.0 years

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

Backlog 8,000 ( 4,000 ) 4,000 1.0 year

$ 116,000 $ ( 10,389 ) $ 105,611

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

These assets are included in the Company's gross and net carrying amounts as of July 2, 2021.

Amount Accumulated

Amortization Net

Amount Weighted Average

Customer relationships $ 15,560 $ ( 62 ) $ 15,498 21.0 years

Completed technologies 6,340 ( 86 ) 6,254 6.8 years

Backlog 2,210 ( 184 ) 2,026 1.0 year

$ 24,110 $ ( 332 ) $ 23,778

Restructuring

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

During fiscal 2021, the Company incurred $ 9,222 of restructuring and other charges.

Restructuring and other charges of $ 4,752 related to severance costs associated with the elimination of approximately 90 positions throughout the period, predominantly in manufacturing, SG&A and R&D.

These charges are related to changing market and business conditions as well as talent shifts and resource redundancy resulting from the Company's internal reorganization that was completed during fiscal 2021.

The remaining $ 4,470 of restructuring and other charges related to third-party consulting costs associated with 1MPACT, the Company's value creation initiatives.

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.

During fiscal 2019, the Company incurred $ 560 related primarily related to severance costs associated with the acquired Germane business.

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:

The following table presents the detail of charges included in the Company’s liability for restructuring and other charges:

Severance & Related Facilities & Other Total

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

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

Restructuring liability at June 30, 2019 4 — 4

Restructuring liability at July 3, 2020 597 — 597

Restructuring charges 4,752 — 4,752

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Restructuring liability at July 2, 2021 $ 1,006 $ — $ 1,006

(*) 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) .

The Company measures its lease obligations in accordance with ASC 842, which requires lessees to record a ROU asset and lease liability for most lease arrangements.

The Company adopted ASC 842 as of July 1, 2019 using the optional transition method and, as a result, there have been no reclassifications of prior comparable periods due to this adoption.

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

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Supplemental operating lease balance sheet information is summarized as follows:

July 2, 2021 July 3, 2020

Operating lease right-of-use assets $ 66,373 $ 60,613

Accrued expenses (1)

$ 10,020 $ 6,950

Operating lease liabilities 71,508 66,981

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Other supplemental operating lease information is summarized as follows:

For the Fiscal Year Ended

For the Fiscal Year Ended For the Fiscal Year Ended

July 2, 2021 July 3, 2020

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

$ 7,923 $ 6,929

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

Weighted average remaining lease term 9.3 years

$ 15,076 $ 19,942

Weighted average remaining lease term 8.2 years 9.3 years

Weighted average discount rate 4.66 % 4.91 %

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Fiscal Year Totals

2022 $ 13,626

Thereafter 40,017

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Present value of operating lease liabilities $ 81,528

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:

As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended July 3, 2020, maturities of operating lease commitments were as follows:

Fiscal Year Totals

2020 $ 10,205

Thereafter 44,763

Total minimum lease payments $ 69,630

Total lease payments 94,037

imputed interest ( 20,106 )

Present value of operating lease liabilities $ 73,931

During fiscal 2021, 2020 and 2019 the Company recognized operating lease expense of $ 11,714 , $ 10,029 and $ 8,710 respectively.

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2021 2020 2019

Income before income taxes:

Income (loss) before income taxes:

United States $ 85,101 $ 93,388 $ 57,281

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Excess tax benefits related to stock compensation ( 3.7 ) ( 7.7 ) ( 4.5 )

Domestic manufacturing deduction — — ( 2.0 )

Deemed repatriation of foreign earnings — — 1.9

Foreign income tax rate differential 0.9 0.1 0.1

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Tax rate changes — ( 0.5 ) —

Impacts related to acquired tax attributes

Valuation allowance 1.9 — —

Other ( 0.3 ) ( 0.8 ) 1.0

19.6 % 8.8 % 21.4 %

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

The Tax Act impacted the U.S.

corporate tax rate that the Company will use going forward, which has been reduced to 21% from 35%.

As the Company has a June 30 fiscal year-end, the lower U.S.

corporate tax rate was phased in, resulting in a U.S.

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 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 2021 and 2020 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 2021, 2020 and 2019 the Company recognized a tax benefit of $ 2,831 , $ 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

July 2, 2021 July 3, 2020

Deferred tax assets:

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Acquired net operating loss carryforward

Foreign net operating loss carryforward 1,703 453

Operating lease liabilities 21,889 20,035

Capital loss carryforwards — 2,354

Deferred revenue 2,899 781

Other 734 642

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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.

In fiscal year 2021, the Company recorded a valuation allowance on the net deferred tax assets of the Company’s subsidiary in Switzerland.

The Company continues to conclude that certain state research and development tax credits carryforwards are not more likely than not to be realized, and as such, continues to maintain a valuation allowance on these carryforwards.

The Company continues to conclude that all other deferred tax assets are more likely than not to be realized.

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

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

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:

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Increases for tax positions taken during the current period 917 854

Increases for tax positions taken by an acquired company 2,348 —

Decreases for tax positions taken related to a prior period ( 27 ) —

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Unrecognized tax benefits, end of period $ 7,467 $ 4,117

The Company is currently under audit by the Internal Revenue Service for fiscal years 2016-2018.

It is reasonably possible that within the next 12 months the Company’s unrecognized tax benefits, exclusive of interest, may decrease by up to $2,061 at the conclusion of the audit.

We expect that the decrease, if recognized, would not affect the effective tax rate.

The $ 7,467 of unrecognized tax benefits as of July 2, 2021, 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 increased its unrecognized income tax benefits primarily due to a tax position previously taken on a tax return of an acquired company.

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 $ 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 total amount of gross interest and penalties accrued was $ 315 and $ 175 as of July 2, 2021 and July 3, 2020, respectively, and the amount of interest and penalties recognized in fiscal 2021, 2020 and 2019 was $ 139 , $ 91 and $ 101 , respectively.

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

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The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company's cash flows, results of operations, or financial position.

On June 23, 2021, Embedded Reps of America, LLC (“ERA”), a former sales representative, and James Mazzola, a principal of ERA, filed for binding arbitration related to the termination of ERA’s sales representative agreement raising multiple claims that aggregate to approximately $ 9,000 in direct damages, with treble damages requested on a number of those claims.

ERA was a sales representative of Themis when Themis was acquired by Mercury.

The sales representative agreement provided for termination by either party upon 30 days written notice with ERA entitled to commissions for orders obtained by ERA product shipment occurring prior to termination.

The Company responded to the complaint on July 28, 2021.

The Company believes the claims in the complaint are without merit and intends to defend itself vigorously.

I NDEMNIFICATION O BLIGATIONS

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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 Statements of Cash Flows.

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

Revolving Credit Facilities

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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 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.

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 $ 3,025 , are being amortized to Other (expense) income, net on a straight line basis over the new term of the Revolver.

During fiscal 2021, the Company borrowed a total of $ 200,000 on the Revolver to facilitate the acquisitions of POC and Pentek.

The Company incurred interest expense from the Revolver of $ 1,222 and $ 1,006 for the fiscal years ended July 2, 2021 and July 3, 2020, respectively.

There were also outstanding letters of credit of $ 963 as of July 2, 2021.

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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.

On January 1, 2019, the independent pension fund changed the conversion rate for accumulated retirement savings.

In fiscal 2021, the independent pension fund changed the conversion rate for accumulated retirement savings leading to a Plan amendment.

The Company’s results contain the effects of this change in conversion rates by the independent pension fund as prior service costs.

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

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

At July 2, 2021, 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.

The Plan's funded status at July 2, 2021 and July 3, 2020 was a net liability of $ 9,807 and $ 11,877 , respectively, which is recorded in other non-current liabilities on the Consolidated Balance Sheets.

The Company recorded a net gain of $ 3,285 and a net loss of $ 1,768 in AOCI during the fiscal years ended July 2, 2021 and July 3, 2020, respectively.

Total employer contributions to the Plan were $ 1,080 during the year ended July 2, 2021, and the Company's total expected employer contributions to the Plan during fiscal 2022 are $ 1,165 .

3 unchanged sentences

Total $ 14,390

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:

The following table outlines the components of net periodic benefit cost of the Plan for the fiscal years ended July 2, 2021 and July 3, 2020:

Fiscal Years Ended

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Service cost $ 1,708 $ 1,375

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Amortization net of loss 185 33

Settlement loss recognized 318 —

Net periodic benefit cost $ 1,962 $ 1,237

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:

The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the fiscal years ended July 2, 2021 and July 3, 2020:

Fiscal Years Ended

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Discount rate 0.30 % 0.30 %

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Fiscal Years Ended

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Projected benefit obligation, beginning $ 29,955 $ 24,274

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Employee contributions 2,145 1,916

Actuarial loss 2,387 2,859

Actuarial (gain) loss ( 1,345 ) 2,387

Benefits paid ( 256 ) ( 906 )

Plan amendment ( 1,247 ) —

Settlements ( 3,129 ) —

Foreign exchange loss 691 784

2 unchanged sentences

Fiscal Years Ended

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Fair value of Plan assets, beginning $ 18,078 $ 15,088

3 unchanged sentences

Benefits paid ( 256 ) ( 906 )

Settlements ( 3,129 ) —

Foreign exchange gain 415 487

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

July 3, 2020 June 30, 2019

July 2, 2021 July 3, 2020

Projected benefit obligation at end of year $ 28,614 $ 29,955

3 unchanged sentences

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 the years ended July 3, 2020 or June 30, 2019.

The Plan was not subject to material fluctuations during the years ended July 2, 2021 or July 3, 2020.

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

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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 $ 5,954 , $ 4,525 and $ 3,684 during the fiscal years ended July 3, 2020, June 30, 2019, and 2018, respectively.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 7,876 , $ 5,954 , and $ 4,525 during the fiscal years ended July 2, 2021, July 3, 2020, and June 30, 2019, respectively.

Shareholders’ Equity

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S HELF R EGISTRATION S TATEMENT

On August 28, 2017, the Company filed a shelf registration statement on Form S-3ASR with the SEC.

On September 14, 2020, the Company filed a shelf registration statement on Form S-3ASR with the SEC.

The shelf registration statement, which was effective upon filing with the SEC, registered each of the following securities:

debt securities, preferred stock, common stock, warrants and units.

debt securities;

preferred stock;

common stock;

The Company has an unlimited amount available under the shelf registration statement.

Additionally, as part of the shelf registration statement, the Company has entered into an equity distribution agreement, which allows the Company to sell an aggregate of up to $ 200,000 of its common stock from time to time through its agents.

F OLLOW-ON E QUITY O FFERING

On May 20, 2019 the Company announced the commencement of an underwritten public offering of 5,000 shares of its common stock, par value $ 0.01 , with an over-allotment allocation of an additional 750 shares.

On May 23, 2019, the Company announced it upsized the initial 5,000 share public offering to 6,000 shares, with an over-allotment allocation of 900 shares.

Stock-Based Compensation

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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 6,782 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”) and 3,000 shares approved by the Company's shareholders on October 28, 2020.

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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The 2018 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees.

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 4,604 shares available for future grant under the 2018 Plan at July 2, 2021.

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E MPLOYEE S TOCK P URCHASE P LAN

The number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 1,800 shares.

The number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020.

Under the ESPP, rights are granted to purchase shares of common stock at 85 % of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period.

13 unchanged sentences

Cancelled — —

Outstanding at June 30, 2019 4 $ 5.52 2.13

Granted — $ —

Outstanding at July 3, 2020 3 $ 5.52 1.12

Exercised ( 3 ) 5.52

6 unchanged sentences

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

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.

As of July 2, 2021, July 3, 2020 and June 30, 2019, 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 2021, 2020 or 2019.

6 unchanged sentences

Forfeited ( 49 ) 54.96

Outstanding at June 30, 2019 1,046 $ 39.62

Outstanding at July 3, 2020 957 $ 61.59

Granted 570 76.03

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As of July 2, 2021, there was $ 48,629 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 2, 2021.

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.

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.

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.

The Company had $ 796 and $ 562 of capitalized stock-based compensation expense on the Consolidated Balance Sheets as of July 2, 2021 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.

1 unchanged sentence

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Cost of revenues $ 2,037 $ 989 $ 820

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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 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 order origination based on the country in which the Company's legal subsidiary is domiciled is summarized as follows:

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Identifiable long-lived assets (1) $ 123,009 $ 5,509 $ 6 $ — $ 128,524

YEAR ENDED JUNE 30, 2019

YEAR ENDED JULY 3, 2020

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

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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 market for the periods presented:

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Domestic (1) $ 795,988 $ 704,722 $ 580,935

8 unchanged sentences

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Radar (1) $ 289,172 $ 233,967 $ 164,046

12 unchanged sentences

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Components (1) $ 176,234 $ 227,364 $ 184,870

12 unchanged sentences

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Airborne (1) $ 416,877 $ 397,553 $ 306,412

9 unchanged sentences

Fiscal Years Ended

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

July 2, 2021 July 3, 2020 June 30, 2019

Raytheon Technologies 19 % 16 % 20 %

Lockheed Martin Corporation 15 % 16 % 17 %

Navy 12 % — % — %

46 % 32 % 37 %

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 years ended July 3, 2020, June 30, 2019 and 2018.

There were no programs comprising 10% or more of the Company's revenues for the years ended July 2, 2021, July 3, 2020 and June 30, 2019.

Subsequent Events

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

On August 2, 2021, the Company initiated a workforce reduction of approximately 90 employees based on changes in the business environment and to align with 1MPACT, the Company’s value creation initiative, resulting in expected charges of $ 9,400 in the fiscal quarter ending October 1, 2021.

These charges include $ 5,800 of employee separation costs and $ 3,600 of third-party consulting costs.

These costs will be classified as restructuring and other charges within the Company’s statement of operations and other comprehensive income for the fiscal quarter ending October 1, 2021.

S UPPLEMENTARY I NFORMATION (U NAUDITED )

7 unchanged sentences

Income before income taxes $ 17,996 $ 17,119 $ 20,997 $ 21,061

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

Income tax provision $ 2,198 $ 4,433 $ 5,362 $ 3,136

Net income $ 15,798 $ 12,686 $ 15,635 $ 17,925

7 unchanged sentences

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

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

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

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

5 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 8. Financial Statements and Supplementary Data