What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-05-11 · 190 added, 263 removed, 394 unchanged (53% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

April 2, 2021 July 3, 2020

October 1, 2021 July 2, 2021

Current assets:

Cash and cash equivalents $ 95,804 $ 113,839

Accounts receivable, net of allowance for credit losses of $ 1,628 and $ 1,451 at April 2, 2021 and July 3, 2020, respectively

Accounts receivable, net of allowance for credit losses of $ 1,728 and $ 1,720 at October 1, 2021 and July 2, 2021, respectively

106,831 128,807

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85,000,000 shares authorized;

55,163,620 and 54,702,322 shares issued and outstanding at April 2, 2021 and July 3, 2020, respectively

55,500,817 and 55,241,120 shares issued and outstanding at October 1, 2021 and July 2, 2021, respectively

Additional paid-in capital 1,111,613 1,109,434

5 unchanged sentences

MERCURY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share data) (Unaudited)

First Quarters Ended

October 1, 2021 October 2, 2020

Net revenues $ 225,013 $ 205,621

8 unchanged sentences

Total operating expenses 93,984 69,349

Income from operations 21,712 26,342 58,595 64,643

(Loss) income from operations ( 5,575 ) 18,770

Interest income 9 72

Interest expense ( 595 ) —

Other (expense) income, net ( 200 ) 2,186 ( 2,027 ) 401

Income before income taxes 20,997 28,928 56,112 66,943

Income tax provision 5,362 5,363 11,993 8,455

Net income $ 15,635 $ 23,565 $ 44,119 $ 58,488

Basic net earnings per share $ 0.28 $ 0.43 $ 0.80 $ 1.07

Diluted net earnings per share $ 0.28 $ 0.43 $ 0.80 $ 1.06

Other expense, net ( 1,420 ) ( 846 )

(Loss) income before income taxes ( 7,581 ) 17,996

Income tax (benefit) provision ( 441 ) 2,198

Net (loss) income $ ( 7,140 ) $ 15,798

Basic net (loss) earnings per share $ ( 0.13 ) $ 0.29

Diluted net (loss) earnings per share $ ( 0.13 ) $ 0.29

Weighted-average shares outstanding:

1 unchanged sentence

Diluted 55,376 55,339

Comprehensive income:

Net income $ 15,635 $ 23,565 $ 44,119 $ 58,488

Comprehensive (loss) income:

Net (loss) income $ ( 7,140 ) $ 15,798

Foreign currency translation adjustments 244 ( 101 )

1 unchanged sentence

Total other comprehensive income (loss), net of tax 292 ( 70 )

Total comprehensive income $ 15,883 $ 23,916 $ 43,670 $ 58,737

Total comprehensive (loss) income $ ( 6,848 ) $ 15,728

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

2 unchanged sentences

(In thousands)

For the Third Quarter Ended April 2, 2021

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance at January 1, 2021 55,129 $ 551 $ 1,092,723 $ 340,939 $ ( 3,582 ) $ 1,430,631

Issuance of common stock under employee stock incentive plans 35 1 10 — — 11

Stock-based compensation — — 7,455 — — 7,455

Net income — — — 15,635 — 15,635

Other comprehensive income — — — — 248 248

Balance at April 2, 2021 55,164 $ 552 $ 1,100,188 $ 356,574 $ ( 3,334 ) $ 1,453,980

For the Third Quarter Ended March 27, 2020

For the First Quarter Ended October 1, 2021

Common Stock Additional

4 unchanged sentences

Shares Amount

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

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

Issuance of common stock under employee stock incentive plans 398 4 ( 4 ) — — —

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

Purchase and retirement of common stock ( 138 ) ( 1 ) ( 7,315 ) — — ( 7,316 )

Stock-based compensation — — 9,498 — — 9,498

Net income — — — 23,565 — 23,565

Net loss — — — ( 7,140 ) — ( 7,140 )

Other comprehensive income — — — — 292 292

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

For the Nine Months Ended April 2, 2021

Balance at October 1, 2021 55,501 $ 555 $ 1,111,613 $ 367,359 $ ( 47 ) $ 1,479,480

For the First Quarter Ended October 2, 2020

Common Stock Additional

6 unchanged sentences

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

Issuance of common stock under employee stock purchase plan 46 — 3,184 — — 3,184

Purchase and retirement of common stock ( 1 ) — ( 66 ) — — ( 66 )

2 unchanged sentences

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

Balance at April 2, 2021 55,164 $ 552 $ 1,100,188 $ 356,574 $ ( 3,334 ) $ 1,453,980

For the Nine Months Ended March 27, 2020

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

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

Issuance of common stock under employee stock incentive plans 510 5 ( 2 ) — — 3

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

Purchase and retirement of common stock ( 187 ) ( 2 ) ( 15,681 ) — — ( 15,683 )

Stock-based compensation — — 19,244 — — 19,244

Net income — — — 58,488 — 58,488

Other comprehensive income — — — — 249 249

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

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

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

2 unchanged sentences

(In thousands)

Nine Months Ended

April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

Cash flows from operating activities:

Net income $ 44,119 $ 58,488

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

Net (loss) income $ ( 7,140 ) $ 15,798

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization expense 21,490 12,997

Stock-based compensation expense 9,527 7,184

(Benefit) provision for deferred income taxes ( 6,357 ) 1,174

Gain on investment — ( 3,810 )

Benefit for deferred income taxes ( 2,171 ) ( 2,921 )

Other non-cash items ( 1,552 ) 268

7 unchanged sentences

Deferred revenues and customer advances ( 5,991 ) 7,598

Income taxes payable ( 4 ) ( 52 )

Other non-current liabilities ( 315 ) 1,623

Net cash provided by operating activities 70,053 86,458

Net cash (used in) provided by operating activities ( 2,006 ) 22,929

Cash flows from investing activities:

Acquisition of business, net of cash acquired ( 305,263 ) ( 96,502 )

Purchases of property and equipment ( 5,377 ) ( 10,978 )

Proceeds from sale of investment 1,538 4,310

Other investing activities ( 3,237 ) —

Net cash used in investing activities ( 8,614 ) ( 10,978 )

1 unchanged sentence

Proceeds from employee stock plans — 2

Borrowings under credit facilities 160,000 200,000

Purchase and retirement of common stock ( 7,316 ) ( 66 )

Net cash provided by financing activities 163,133 186,713

Net cash used in financing activities ( 7,316 ) ( 64 )

Effect of exchange rate changes on cash and cash equivalents ( 99 ) 397

14 unchanged sentences

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

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

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

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

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

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

Customers add their own applications and algorithms to the Company's specialized, secure and innovative pre-integrated solutions.

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

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

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

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

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

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

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

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

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.

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

6 unchanged sentences

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended July 2, 2021 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 17, 2021.

The results for the third quarter and nine months ended April 2, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.

The results for the first quarter ended October 1, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.

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

All intercompany transactions and balances have been eliminated in consolidation .

All references to the third quarter of fiscal 2021 are to the quarter ended April 2, 2021.

There were 13-weeks during the third quarters ended April 2, 2021 and March 27, 2020, respectively.

There were 39-weeks during the nine months ended April 2, 2021 and March 27, 2020, respectively.

All references to the first quarter of fiscal 2022 are to the quarter ended October 1, 2021.

There were 13 weeks during the first quarters ended October 1, 2021 and October 2, 2020, respectively.

U SE OF E STIMATES

9 unchanged sentences

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

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

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

R EVENUE R ECOGNITION

9 unchanged sentences

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 53 % and 59 % of revenues for the third quarter and nine months ended April 2, 2021, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, total ed 70 % and 74 % o f revenues for the third quarter and nine months ended March 27, 2020, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 47 % and 64 % of revenues for the first quarters ended October 1, 2021 and October 2, 2020, respectively.

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

2 unchanged sentences

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

Total revenue recognized under long-term contracts over t ime was 47 % and 41 % of total revenues for the third quarter and nine months ended April 2, 2021, respectively.

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

Total revenue recognized under long-term contracts over time was 53 % and 36 % of total revenues for the first quarters ended October 1, 2021 and October 2, 2020, 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.

24 unchanged sentences

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

The contract asset balances we re $ 138,378 and $ 90,289 as of April 2, 2021 and July 3, 2020, respectively.

The contract asset balance increased due to growth in revenue recognized over time and timing of billable events under long-term contracts during the nine months ended April 2, 2021.

The contract liabi lity balances were $ 31,954 and $ 19,892 as of April 2, 2021 and July 3, 2020, respectively.

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

Revenue recognized for the third quarter and nine months ended April 2, 2021 that was included in the contract liability balance a t July 3, 2020 was $ 2,133 and $ 15,499 , respectively.

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

The contract asset balances were $ 194,367 and $ 162,921 as of October 1, 2021 and July 2, 2021, respectively.

The contract asset balance increased due to growth in revenue recognized over time and timing of billable events under long-term contracts during the first quarter ended October 1, 2021.

The contract liability balances were $ 29,438 and $ 35,201 as of October 1, 2021 and July 2, 2021, respectively.

The decrease was due to lower billings in excess of revenues.

Revenue recognized for the first quarter ended October 1, 2021 that was included in the contract liability balance a t July 2, 2021 was $ 13,137 .

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

R EMAINING P ERFORMANCE O BLIGATIONS

1 unchanged sentence

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

As of April 2, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 352,229 .

As of October 1, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 373,904 .

The Company expects to recognize approximately 69 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.

1 unchanged sentence

Weighted-average shares were calculated as follows:

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

Basic weighted-average shares outstanding 55,376 54,883

1 unchanged sentence

Diluted weighted-average shares outstanding 55,376 55,339

Equity instruments to purchase 38 and 13 shares of common stock were not included in the calculation of diluted net earnings per share for the third quarter and nine months ended April 2, 2021, respectively, because the equity instruments were anti-dilutive.

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

Equity instruments to purchase 474 and 203 shares of common stock were not included in the calculation of diluted net earnings per share for the first quarters ended October 1, 2021 and October 2, 2020, respectively, because the equity instruments were anti-dilutive.

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

In August 2018, the FASB issued ASU No.

2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715):

Changes to the Disclosure Requirements for Defined Benefit Plans , an amendment of the FASB Accounting Standards Codification.

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

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

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

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

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

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

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and add guidance as to whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction.

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

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

In March 2020, the FASB issued ASU No.

2021-03, Intangibles—Goodwill and Other (Topic 350):

Accounting Alternative for Evaluating Triggering Events, an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU allow companies to elect not to monitor for goodwill impairment triggering events during the reporting period and instead, to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired.

This aligns the triggering event evaluation date with the reporting date, whether that date is an interim or annual reporting date.

This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021.

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

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The amendments in this ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , an amendment of the FASB Accounting Standards

Codification.

The amendments in this ASU address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

Under current U.S.

GAAP, an acquirer generally recognizes assets and liabilities assumed in a business combination, including contract assets and liabilities arising from revenue contracts with customers, at fair value on the acquisition date.

2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under Topic 606.

This ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period.

The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS

Effective July 3, 2021 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.

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

This adoption did not have 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.

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

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

2019-12, Income Taxes (Topic 740):

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

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 has early adopted this final rule in conjunction with our 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 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 , subject 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 Company's existing revolving credit facility (the "Revolver").

As of January 1, 2021, the Company held $ 61,626 of Restricted cash and recorded a Deferred consideration liability for a purchase price payout to the employee shareholders of POC.

This payout was made during the third quarter of fiscal 2021.

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

P ENTEK A CQUISITION

On May 27, 2021, the Company acquired Pentek Technologies, LLC and Pentek Systems, Inc.

(collectively, "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

Cash paid post closing 61,626

Working capital and net debt adjustment ( 4,737 )

Less cash acquired ( 746 )

14 unchanged sentences

Net purchase price $ 64,922

The amounts above represent the preliminary fair value estimates as of April 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 identifia ble intangible asset estimate includes customer relationships of $ 81,000 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 .

The amounts above represent the preliminary fair value estimates as of October 1, 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 $ 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 estimated goodwill of $ 168,234 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 reported 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 income before income taxes from POC included in the Company's consolidated results for the third quarter ended April 2, 2021, were $ 38,492 and $ 1,065 , respectively.

The revenues and income before income taxes from POC included in the Company's consolidated results for the nine months ending April 2, 2021 were $ 38,709 and $ 782 , respectively.

A MERICAN P ANEL C ORPORATION A CQUISITION

On September 23, 2019, the Company acquired American Panel Corporation (“APC”).

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:

The goodwill of $ 35,477 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 included in the Microelectronics reporting unit.

The transaction was a combination of 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 October 1, 2021, the Company ha d $ 29,703 of goodwill deductible for tax purposes.

P HYSICAL O PTICS C ORPORATION A CQUISITION

On December 7, 2020, the Company signed a definitive agreement to acquire Physical Optics Corporation ("POC") for a purchase price of $ 310,000 , subject 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 expands the Company's global avionics business and its collective footprint in the platform and mission management market.

The Company funded the acquisition through a combination of cash on hand and the Company's existing revolving credit facility (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 )

Liabilities assumed 2,454

Less cash acquired ( 2,855 )

Net purchase price $ 307,904

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 3,726

Estimated fair value of tangible assets acquired and liabilities assumed

Accounts receivable and Unbilled Receivables 28,022

Inventory 11,125

4 unchanged sentences

Other current and non-current liabilities ( 32,999 )

Fair value of net tangible assets acquired 11,106

Fair value of identifiable intangible assets 33,200

Goodwill 53,022

Fair value of net assets acquired 97,328

Estimated fair value of net tangible assets acquired 39,343

Estimated fair value of identifiable intangible assets 116,000

Estimated goodwill 155,416

Estimated fair value of net assets acquired 310,759

Less cash acquired ( 2,855 )

Net purchase price $ 307,904

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 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 o ver 15 years for tax purposes.

As of April 2, 2021, the Company had $ 48,840 of goodwill deductible for tax purposes.

T he preliminary identifia ble 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 estimated goodwill of $ 155,416 largely reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to the Co mpany’s existing products and markets and is not deductible for tax purposes.

The goodwill from this acquisition is reported in the Processing reporting unit.

A VALEX A CQUISITION

On September 27, 2021, the Company announced that it had signed a definitive agreement to acquire Avalex Technologies Corporation (“Avalex”).

Based in Gulf Breeze, Florida.

Avalex is a provider of mission-critical avionics, including rugged displays, integrated communications management systems, digital video recorders, and warning systems.

Pursuant to the terms of the agreement, the Company will acquire Avalex for an all-cash purchase price of $ 155,000 , subject to net working capital and net debt adjustments.

On November 5, 2021, the transaction closed and the Company acquired Avalex.

See Note N "Subsequent Events" to the consolidated financial statements for further discussion.

Fair Value of Financial Instruments

During the nine months ended April 2, 2021, the Company received gross proceeds and recorded a loss on sale of a cost-method investmen t of $ 1,538 and $ 426 , respe ctively.

The loss on sale of investment is included within Other expense, net in the Consolidated Statements of Operations and Comprehensive Income for the nine months ended April 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.

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

As of October 1, 2021, the Company had no financial instruments required to be measured at fair value.

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

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Inventory was comprised of the following:

April 2, 2021 July 3, 2020

October 1, 2021 July 2, 2021

Raw materials $ 148,747 $ 141,774

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Total $ 234,403 $ 221,640

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.

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended April 2, 2021:

On August 3, 2021, Mercury announced a companywide effort, called 1MPACT, to lay the foundation for the next phase of the Company's value creation at scale.

The goal of 1MPACT is to achieve Mercury's full growth, margin expansion and adjusted EBITDA potential over the next five years.

In connection with 1MPACT, the Company realigned its internal organizational structure in the first quarter of fiscal 2022 shifting to two divisions, Processing and Microelectronics.

The Mission division has now merged under the Processing division.

There was no change to the Microelectronics division.

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 two divisions:

Processing and Microelectronics.

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 1, 2021, the Company assigned goodwill to the new reporting units based on the relative fair value of transferred operations.

The following table sets forth the changes in the carrying amount of goodw ill for the first quarter ended October 1, 2021 :

Balance at July 2, 2021 $ 804,906

Goodwill adjustment for the APC acquisition 346

Goodwill arising from the POC acquisition 168,234

Balance at April 2, 2021 $ 782,656

Goodwill adjustment for the POC acquisition 157

Goodwill adjustment for the Pentek acquisition 252

Balance at October 1, 2021 $ 805,315

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

Restructuring

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

During the nine months ended April 2, 2021, the Company incurred net restructuring and other charges of $ 2,244 primarily related to severance costs associated with the elimination of 42 positions across the manufacturing, SG&A and R&D functions.

These charges related to changing market and business conditions including talent shifts and resource redundancy resulting from the internal reorganization the Company completed in the first quarter.

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.

During the first quarter ended October 1, 2021, the Company incurred $ 12,274 of restructuring and other charges.

Restructuring and other charges of $ 7,338 related to severance costs associated with the elimination of 100 employees in manufacturing, SG&A and R&D based on changes in the business environment and to align with the internal organizational changes completed under 1MPACT.

The remaining $ 4,936 of restructuring and other charges related to third-party consulting costs associated with 1MPACT.

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

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

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

Restructuring liability at July 3, 2020 $ 597

Balance at July 2, 2021 $ 1,006

Restructuring and other charges 7,338

Cash paid ( 2,009 )

Restructuring liability at April 2, 2021 $ 508

The Company recorded an income tax provision of $ 5,362 and $ 5,363 on income before income taxes of $ 20,997 and $ 28,928 for the third quarters ended April 2, 2021 and March 27, 2020, respectively.

The Company recorded an income tax provision of $ 11,993 and $ 8,455 on income before income taxes of $ 56,112 and $ 66,943 for the nine months ended April 2, 2021 and March 27, 2020, respectively.

During the third quarters ended April 2, 2021 and March 27, 2020, the Company recognized a discrete tax benefit of $ 175 and $ 159 , respectively, related to excess tax benefits on stock-based compensation.

During the nine months ended April 2, 2021 and March 27, 2020, the Company recognized a discrete tax benefit of $ 2,785 and $ 6,639 , respectively, related to excess tax benefits on stock-based compensation.

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

The effective tax rate for the third quarter and nine months ended April 2, 2021 differed from the Federal statutory rate primarily due to Federal and State research and development credits, excess tax benefits related to stock-based compensation, non-deductible compensation and state taxes.

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

During the third quarter ended April 2, 2021, there were no material changes to the Company's unrecognized tax positions.

Balance at October 1, 2021 $ 6,335

The Company recorded an income tax (benefit) provision of $( 441 ) and $ 2,198 on a (loss) income before income taxes of $( 7,581 ) and $ 17,996 for the first quarters ended October 1, 2021 and October 2, 2020, respectively.

During the first quarters ended October 1, 2021 and October 2, 2020, the Company recognized a discrete tax provision of $ 715 related to stock-based compensation shortfalls and a discrete tax benefit of $ 2,480 related to excess benefits on stock-based compensation.

The effective tax rate for the first quarters ended October 1, 2021 and October 2, 2020 differed from the Federal statutory rate primarily due to Federal and State research and development credits, non-deductible compensation, stock-based compensation, and state taxes.

In addition, during the first quarter ended October 1, 2021, the Company had certain unbenefited deferred tax assets.

During the first quarter ended October 1, 2021, there were no material changes to the Company's unrecognized tax positions.

Within the calculation of the Company's annual effective tax rate, the Company has used assumptions and estimates that may change as a result of future guidance and interpretation from the Internal Revenue Service (“IRS”).

R EVOLVING C REDIT F ACILITY

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

As of April 2, 2021, the Company's outstanding balance of unamortized deferred financing costs was $ 3,361 , which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive Income on a straight line basis over the term of the Revolver.

During the second quarter ended January 1, 2021, the Company drew $ 160,000 from the Revolver to facilitate the acquisition of POC.

As of April 2, 2021, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 160,000 against the Revolver, resulting in interest expense of $ 549 and $ 622 for the third quarter and nine months ended April 2, 2021, respectively.

There were outstanding letters of credit of $ 799 as of April 2, 2021.

As of October 1, 2021, the Company's outstanding balance of unamortized deferred financing costs was $ 2,689 , which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income on a straight line basis over the term of the Revolver.

As of October 1, 2021, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 200,000 against the Revolver, resulting in interest expense of $ 595 for the first quarter ended October 1, 2021.

There were outstanding letters of credit of $ 963 as of October 1, 2021.

Employee Benefit Plan

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

The Plan's funded status at April 2, 2021 was a net liability of $ 12,261 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net gain of $ 30 and $ 92 in AOCL during the third quarter and nine months ended April 2, 2021.

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

The Company recognized net periodic benefit costs of $ 420 and $ 1,253 associated with the Plan for the third quarter and nine months ended April 2, 2021, respectively.

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

The Plan's funded status at October 1, 2021 was a net liability of $ 9,691 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net gain of $ 48 and $ 31 in AOCL during the first quarters ended October 1, 2021 and October 2, 2020, respectively.

The Company recognized net periodic benefit costs of $ 269 and $ 413 associated with the Plan for the first quarters ended October 1, 2021 and October 2, 2020, respectively.

The Company's total expected employer contributions to the Plan during fiscal 2022 are $ 1,165 .

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S TOCK I NCENTIVE P LANS

At April 2, 2021, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 6,782 shares, including 710 shares r olled 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.

At October 1, 2021, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 6,782 shares, including 710 shares rolle d 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.

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

There were 4,645 shares available for future grant under the 2018 Plan at April 2, 2021 .

There were 3,529 shares available for future grant under the 2018 Plan at October 1, 2021 .

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

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E MPLOYEE S TOCK P URCHASE P LAN

At April 2, 2021, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), i s 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020.

At October 1, 2021, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), i s 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.

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

There were 46 and 41 shares issued under the ESPP during the nine months ended April 2, 2021 and March 27, 2020, respectively.

Shares available for future purchase under the ESPP totaled 483 at April 2, 2021.

S TOCK O PTION AND A WARD A CTIVITY

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

Options Outstanding

Shares Weighted Average

Exercise Price Weighted Average

Contractual Term

Outstanding at July 3, 2020 3 $ 5.52 1.12

Exercised ( 3 ) 5.52

Outstanding at April 2, 2021 — $ — —

There were no shares issued under the ESPP during the first quarters ended October 1, 2021 and October 2, 2020, respectively.

Shares available for future purchase under the ESPP totaled 428 at October 1, 2021.

S TOCK A WARD A CTIVITY

The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since July 2, 2021:

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Forfeited ( 98 ) 70.24

Outstanding at April 2, 2021 1,015 $ 70.92

Outstanding at October 1, 2021 1,197 $ 63.28

S TOCK - BASED C OMPENSATION E XPENSE

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

The Company had $ 1,070 and $ 542 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended April 2, 2021 and July 3, 2020, respectively.

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

The Company had $ 767 and $ 796 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended October 1, 2021 and July 2, 2021, respectively.

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

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

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

First Quarters Ended

October 1, 2021 October 2, 2020

Cost of revenues $ 559 $ 295

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Operating Segment, Geographic Information and Significant Customers

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

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

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.

During the first quarter of fiscal 2022, the Company announced its 1MPACT value creation initiative to promote scale as the organization continues to grow.

The Company evaluated this internal reorganization under FASB ASC 280, Segment Reporting ("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.

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Europe Asia Pacific Eliminations Total

THIRD QUARTER ENDED APRIL 2, 2021

Net revenues to unaffiliated customers $ 246,231 $ 10,482 $ 144 $ — $ 256,857

Inter-geographic revenues 51 734 — ( 785 ) —

Net revenues $ 246,282 $ 11,216 $ 144 $ ( 785 ) $ 256,857

THIRD QUARTER ENDED MARCH 27, 2020

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

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

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

NINE MONTHS ENDED APRIL 2, 2021

FIRST QUARTER ENDED OCTOBER 1, 2021

Net revenues to unaffiliated customers $ 213,741 $ 11,187 $ 85 $ — $ 225,013

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Net revenues $ 215,300 $ 11,916 $ 85 $ ( 2,288 ) $ 225,013

NINE MONTHS ENDED MARCH 27, 2020

FIRST QUARTER ENDED OCTOBER 2, 2020

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

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

$ 189,248 $ 178,743

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

$ 58,904 $ 72,409

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

Components (1)

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(1) Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or sub-assembly.

Examples include, but are not limited to, power amplifiers and limiters,

switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.

Examples include, but are not limited to, power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.

(2) Modules and Sub-assemblies include combinations of multiple functional technology elements and/or components that work together to perform multiple functions but are typically resident on or within a single board or housing.

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

$ 116,564 $ 87,249

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Europe Asia Pacific Eliminations Total

April 2, 2021 $ 122,461 $ 5,876 $ 6 $ — $ 128,343

October 1, 2021 $ 123,581 $ 5,108 $ 5 $ — $ 128,694

July 2, 2021 $ 123,009 $ 5,509 $ 6 $ — $ 128,524

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

Third Quarters Ended Nine Months Ended

April 2, 2021 March 27, 2020 April 2, 2021 March 27, 2020

First Quarters Ended

October 1, 2021 October 2, 2020

Raytheon Technologies 14 % 23 %

Navy 16 % * * *

Lockheed Martin Corporation

14 % 17 % 15 % 17 %

L3Harris Technologies * * * 10 %

48 % 34 % 37 % 42 %

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

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

There were no programs comprising 10% or more of the Company's revenues for the third quarters and nine months ended April 2, 2021 and March 27, 2020.

There were no programs comprising 10% or more of the Company's revenues for the first quarters ended October 1, 2021 and October 2, 2020.

Commitments and Contingencies

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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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P URCHASE C OMMITMENTS

As of April 2, 2021, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

As of October 1, 2021, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

The purchase commitments covered by these agreements are for less than one year and aggregate to $ 154,689 .

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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.

A VALEX ACQUISITION

On September 27, 2021, the Company announced that it has signed a definitive agreement to acquire Avalex.

On November 5, 2021, the Company closed its acquisition of Avalex for an all-cash purchase of $ 155,000 subject to net working capital and net debt adjustments.

Based in Gulf Breeze, Florida.

Avalex is a provider of mission-critical avionics, including rugged displays, integrated communications management systems, digital video recorders, and warning systems.

Upon completion of the acquisition, Avalex will become part of the Company's Processing division.

The Company has not completed its preliminary purchase price allocation for Avalex as not all information required for the analysis was available.

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

What changed 10-Q

Item 1. Financial Statements