What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-08-16 compared with 2021-08-17 · 310 added, 307 removed, 863 unchanged (42% of the section changed)

7 unchanged sentences

Accounts receivable, net of allowance for credit losses of $ 2,074 and $ 1,720 at July 1, 2022 and July 2, 2021, respectively

144,494 128,807

Unbilled receivables and costs in excess of billings 303,356 162,921

6 unchanged sentences

Intangible assets, net 351,538 307,559

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

Operating lease right-of-use assets, net 66,366 66,373

Other non-current assets 6,188 4,675

23 unchanged sentences

Retained earnings 385,774 374,499

Accumulated other comprehensive loss ( 339 ) ( 2,885 )

Accumulated other comprehensive income (loss) 5,531 ( 339 )

Total shareholders’ equity 1,537,185 1,484,146

5 unchanged sentences

For the Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Net revenues $ 988,197 $ 923,996 $ 796,610

11 unchanged sentences

Interest expense ( 5,806 ) ( 1,222 ) ( 1,006 )

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

Other expense, net ( 7,552 ) ( 2,785 ) 1,726

Income before income taxes 18,395 77,173 93,933

15 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

For the Fiscal Years Ended July 1, 2022, July 2, 2021 and July 3, 2020

(In thousands)

2 unchanged sentences

Earnings Accumulated

Comprehensive

Income (Loss) Total

Comprehensive(Loss) Income Total

Shareholders’

4 unchanged sentences

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

1 unchanged sentence

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

3 unchanged sentences

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

11 unchanged sentences

For the Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Cash flows from operating activities:

Net income $ 11,275 $ 62,044 $ 85,712

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

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

Depreciation and amortization expense 93,417 67,083 49,330

2 unchanged sentences

Gain on investments — — ( 5,817 )

Termination of interest rate swap — — 5,420

Other non-cash items ( 497 ) 3,745 3,509

9 unchanged sentences

Other non-current liabilities ( 8,709 ) ( 3,744 ) 7,226

Net cash provided by operating activities 97,247 115,184 97,517

Net cash (used in) provided by operating activities ( 18,869 ) 97,247 115,184

Cash flows from investing activities:

2 unchanged sentences

Proceeds from sale of investment — — 4,310

Other investing activities ( 3,200 ) 1,538 —

Net cash used in investing activities ( 274,320 ) ( 416,887 ) ( 135,486 )

4 unchanged sentences

Borrowings under credit facilities 251,500 200,000 200,000

Proceeds from equity offering, net — — 454,343

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

Payments of deferred financing and offering costs ( 2,911 ) — —

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents ( 750 ) 412 140

Net (decrease) increase in cash and cash equivalents ( 112,999 ) ( 31,094 ) 191,411

Net decrease in cash and cash equivalents ( 48,185 ) ( 112,999 ) ( 31,094 )

Cash and cash equivalents at beginning of year 113,839 226,838 257,932

5 unchanged sentences

Non-cash investing activity $ 6,919 $ ( 1,928 ) $ 2,623

Non-cash financing activity $ — $ — $ 770

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

4 unchanged sentences

Mercury Systems, Inc.

(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.

is a technology company that delivers commercial innovation to rapidly transform the global aerospace and defense industry.

Headquartered in Andover, Massachusetts, the Company's end-to-end processing platform enables a broad range of aerospace and defense programs, optimized for mission success in some of the most challenging and demanding environments.

Processing technologies that comprise the Company's platform include signal solutions, display, software applications, networking, storage and secure processing.

The Company's innovative solutions are mission-ready, trusted and secure, software-defined and open and modular (the Company's differentiators), to meet customers’ most-pressing high-tech needs, including those specific to the defense community.

On February 28, 2022, the Company amended its existing revolving credit facility (the "Revolver") to increase and extend the borrowing capacity to a $ 1,100,000 , 5-year revolving credit line, with the maturity extended to February 28, 2027.

As of July 1, 2022, there was $ 451,500 of outstanding borrowings on the Revolver.

See Note M in the accompanying consolidated financial statements for further discussion of the Revolver.

On November 29, 2021, the Company acquired Atlanta Micro, Inc.

("Atlanta Micro") for a purchase price of $ 90,000 , subject to net working capital and net debt adjustments.

Based in Norcross, Georgia, Atlanta Micro is a leading designer and manufacturer of high-performance RF modules and components, including advanced monolithic microwave integrated circuits ("MMICs") which are critical for high-speed data acquisition applications including electronic warfare, radar and weapons.

The Company funded the acquisition through its Revolver.

On September 27, 2021, the Company signed a definitive agreement to acquire Avalex Technologies (“Avalex”) for a 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.

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.

The Company funded the acquisition with its Revolver.

On May 27, 2021, the Company acquired Pentek for a purchase price of $ 65,000 , prior 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.

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

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

On December 30, 2020, the Company acquired Physical Optics Corporation ("POC") for a purchase price of $ 310,000 , prior to net working capital and net debt adjustments.

Based in Torrance, California, POC more than doubles Mercury'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 its existing Revolver.

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

4 unchanged sentences

B ASIS OF P RESENTATION

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

The Company's fiscal year is the 52-week or 53-week period ending on the Friday closest to the last day in June.

All references to fiscal 2022 are to the 52-week period from July 3, 2021 to July 1, 2022.

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

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

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

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

13 unchanged sentences

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

The Company 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.

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

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

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

15 unchanged sentences

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

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

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

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

1 unchanged sentence

R EVENUE R ECOGNITION

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

contract, determination of the transaction price, allocation of the transaction price to the previously identified performance obligations and revenue recognition as the performance obligations are satisfied.

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

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.

1 unchanged sentence

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

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue as the performance obligation is satisfied.

Certain contracts with customers require the Company to perform tests of its products prior to shipment to ensure their performance complies with the Company’s published product specifications and, on occasion, with additional customer-requested specifications.

25 unchanged sentences

Standalone selling prices of the Company’s goods and services are generally not directly observable.

Accordingly, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts the expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

Accordingly, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company estimates the expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

The objective of the expected cost plus a margin approach is to determine the price at which the Company would transact if the product or service were sold by the Company on a standalone basis.

3 unchanged sentences

Standalone selling prices will be analyzed on a more frequent basis if a significant change in the Company’s business necessitates a more frequent analysis or if the Company experiences significant variances in its selling prices.

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 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:

(i) customers are only able to consume the benefits provided by the Company upon completion of the product or service;

(ii) customers do not control the product or service prior to completion;

and (iii) the Company does not have an enforceable right to payment at all times for performance completed to date.

Accordingly, there is little judgment in determining when control of the good or service transfers to the customer, and revenue is generally recognized upon shipment (for goods) or completion (for services).

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

These long-term contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services.

Revenue is recognized over time, due to the fact that:

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

These over time contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services.

Revenue is recognized over time, given:

(i) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced;

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

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

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

1 unchanged sentence

The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material (“T&M”) contracts.

For long-term contracts, the Company typically leverages the input method, using a cost-to-cost measure of progress.

For contracts recognized over time, the Company typically leverages the input method, using a cost-to-cost measure of progress.

The Company believes that this method represents the most faithful depiction of the Company’s performance because it directly measures value transferred to the customer.

6 unchanged sentences

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 reimbursable 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.

1 unchanged sentence

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

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

The Company’s estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion.

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

The Company’s estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each over time contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion.

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 42 %, 27 % and 23 % of revenues in the fiscal years ended July 2, 2021, July 3, 2020 and June 30, 2019, respectively.

Total revenue recognized under over time contracts over time was 55 %, 42 % and 27 % of revenues in the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 45 %, 58 % and 73 % of revenues in the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, respectively.

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

(i) customers are only able to consume the benefits provided by the Company upon completion of the product or service;

(ii) customers do not control the product or service prior to completion;

and (iii) the Company does not have an enforceable right to payment at all times for performance completed to date.

Accordingly, there is little judgment in determining when control of the good or service transfers to the customer, and revenue is recognized upon shipment (for goods) or completion (for services).

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.

3 unchanged sentences

The transaction price allocated to extended warranties is recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

On long-term contracts, the portion of the payments retained by the customer is not considered a significant financing component because most contracts have a duration of less than one year and payment is received as progress is made.

Many of the Company's long-term contracts have milestone payments, which align the payment schedule with the progress towards completion on the performance obligation.

On some contracts, the Company may be entitled to receive an advance payment, which is not considered a significant financing component because it is used to facilitate inventory demands at the onset of a contract and to safeguard the Company from the failure of the other party to abide by some or all of their obligations under the contract.

On over time contracts, the portion of the payments retained by the customer is not considered a significant financing component because payment is received as progress is made.

Many of the Company's over time contracts have milestone payments, which align the payment schedule with the progress towards completion on the performance obligation.

On certain contracts, the Company may be entitled to receive an advance payment, which is not considered a significant financing

component because it is used to facilitate inventory demands at the onset of a contract and to safeguard the Company from the failure of the other party to abide by some or all of their obligations under the contract.

All revenues are reported net of government assessed taxes (e.g., sales taxes or value-added taxes).

1 unchanged sentence

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

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.

The Company had $ 1,503 and $ 1,098 of deferred sales commissions for contracts where the amortization period is greater than one year as of July 1, 2022 and July 2, 2021, respectively.

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.

4 unchanged sentences

Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to the passage of time.

Instead, while the Company has an enforceable right to payment as progress is made over performance obligations, billings to customers are generally predicated on (i) completion of defined milestones, (ii) monthly costs incurred or (iii) final delivery of goods or services.

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

4 unchanged sentences

Customer advances represent deposits received from customers on an order.

Contract liabilities are included in deferred revenue and the long-term portion of deferred revenue is included within other non-current liabilities on the Company’s Consolidated Balance Sheets.

Contract liabilities are included in deferred revenue as well as other non-current liabilities on the Company’s Consolidated Balance Sheets.

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

The contract asset balances were $ 303,356 and $ 162,921 as of July 1, 2022 and July 2, 2021, 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 asset balance increased due to growth in revenue recognized under over time contracts as well as industry-wide award delays and supply chain constraints impacting the timing of billing events and cash conversion during the fiscal year ended July 1, 2022.

The contract liability balances were $ 15,966 and $ 35,201 as July 1, 2022 and July 2, 2021, respectively.

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

The decrease was due to recognition of revenue across multiple programs.

Revenue recognized during fiscal 2022 that was included in the contract liability balance at July 2, 2021 was $ 25,137 .

39 unchanged sentences

G OODWILL AND I NTANGIBLE A SSETS

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).

Goodwill is the amount by which the purchase price of a business acquisition exceeds 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.

39 unchanged sentences

Warranty assumed from APC — — 739

Warranty assumed from Germane — — 169

Accruals for warranties issued during the period 359 2,446 2,839

3 unchanged sentences

Research and development costs are expensed as incurred.

Research and development costs are primarily made up of labor charges and prototype material and development expenses.

Research and development costs are primarily made up of labor charges, including stock-based compensation and prototype material and development expenses.

S TOCK - BASED C OMPENSATION

14 unchanged sentences

Diluted weighted-average shares outstanding 55,901 55,474 55,115

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.

Equity instruments to purchase 39 , 42 and 8 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, 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 $( 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.

The components of AOCI included $ 1,131 , $( 739 ) and $ 174 of foreign currency translation adjustments for the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, respectively.

In addition, pension benefit plan adjustments totaled $ 4,739 , $ 3,285 and $( 1,768 ) for the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, respectively.

F OREIGN C URRENCY

3 unchanged sentences

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

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

currency transactions are included in Other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Income.

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

In December 2019, the FASB issued ASU No.

In March 2020, the FASB issued ASU No.

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 does not expect this adoption to have a material impact to the Company's consolidated financial statements or related disclosures.

In August 2020, the FASB issued ASU No.

2020-06, Debt - Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU simplify the accounting for convertible debt securities.

The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, including adoption in an interim period.

The Company does not expect this adoption to have a material impact to the Company's consolidated financial statements or 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 accordance with ASC 606.

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 ASC 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 may 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.

2019-12, Income Taxes (Topic 740):

1 unchanged sentence

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.

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.

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.

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.

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.

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:

A TLANTA M ICRO A C QUISITION

On November 29, 2021, the Company acquired Atlanta Micro for a purchase price of $ 90,000 , prior to net working capital and net debt adjustments.

The Company funded the acquisition through the Company's existing revolver.

On March 28, 2022, the Company and former owners of Atlanta Micro agreed to post closing adjustments totaling $58, 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 Atlanta Micro on a preliminary basis:

Consideration transferred

Cash paid at closing $ 91,438

Working capital and net debt adjustment ( 416 )

Less cash acquired ( 1,782 )

14 unchanged sentences

Net purchase price $ 89,240

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 $ 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 .

The amounts above represent the preliminary fair value estimates as of July 1, 2022 and are subject to subsequent adjustment as the Company obtains additional information during the measure ment period and finalizes its fair value estimates.

The preliminary identifiable intangible asset estimate includes customer relationships of $ 27,310 with a useful life of 20 years, completed technology of $ 7,260 with a useful life of 8 years and backlog of $ 410 with a useful life of 2 years.

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 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 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:

The estimated goodwill of $ 58,105 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 Microelectronics reporting unit.

The revenues and income before income taxes from Atlanta Micro included in the Company's consolidated results for the fiscal year ended July 1, 2022 were $ 8,625 and $ 1,328 , respectively.

A VALEX A CQUISITION

On September 27, 2021, the Company signed a definitive agreement to acquire Avalex for a purchase price of $ 155,000 , prior to net working capital and net debt adjustments.

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

The Company funded the acquisition with the Company's Revolver.

On March 17, 2022, the Company and former owners of Avalex agreed to post closing adjustments totaling $ 151 , 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 Avalex on a preliminary basis:

Consideration transferred

Cash paid at closing $ 157,367

Cash paid post closing 61,626

Working capital and net debt adjustment ( 1,034 )

15 unchanged sentences

Net purchase price $ 154,145

T he amounts above represent the preliminary fair value estimates as of July 1, 2022 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 $ 41,880 with a useful life of 9 years, completed technology of $ 14,430 with a useful life of 7 years and backlog of $ 5,050 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:

The estimated goodwill of $ 81,705 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 in the Processing reporting unit.

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 1, 2022, the Company had $ 80,102 of goodwill deductible for tax purposes.

The revenues and loss before income taxes from Avalex included in the Company's consolidated results for the fiscal year ended July 1, 2022 were $ 22,993 and $ 496 , respectively.

P ENTEK A CQUISITION

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

The acquisition and associated transaction expenses were funded through a combination of cash on hand and Mercury's existing revolver.

On October 13, 2021, the Company and former owners of Pentek agreed to post closing adjustments totaling $ 79 , 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 Pentek:

Consideration transferred

1 unchanged sentence

Working capital and net debt adjustment 79

Liabilities assumed 2,454

Less cash acquired ( 746 )

14 unchanged sentences

Net purchase price $ 65,001

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 .

On May 27, 2022, the measurement period for Pentek expired.

The identifiable intangible assets include customer relationships of $ 15,560 with a useful life of 21 years, completed technology of $ 6,340 with a useful life of 7 years and backlog of $ 2,210 with a useful life of one year .

The goodwill of $ 35,383 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 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 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 1, 2022, the Company ha d $ 28,038 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 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:

Consideration transferred

Cash paid at closing $ 251,229

Cash paid post closing 61,626

Working capital and net debt adjustment ( 2,096 )

Less cash acquired ( 2,855 )

Net purchase price $ 307,904

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 31,255

Inventory 11,125

Fixed assets 23,236

Other current and non-current assets 18,173

Accounts payable ( 3,777 )

Accrued expenses ( 6,266 )

Other current and non-current liabilities ( 30,107 )

Fair value of net tangible assets acquired 46,494

Fair value of identifiable intangible assets 116,000

Goodwill 148,265

Fair value of net assets acquired 310,759

Less cash acquired ( 2,855 )

Net purchase price $ 307,904

On December 30, 2021, the measurement period for POC expired.

The identifiable intangible assets include 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 .

The goodwill of $ 148,265 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 Processing reporting unit.

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:

Fair Value Measurements

July 3, 2020 Level 1 Level 2 Level 3

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

equity securities 2,007 2,007 — —

Total $ 12,013 $ 2,007 $ 10,006 $ —

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

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

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

The change in fair value of these U.S.

equity securities was the result of an observable price change during the fourth quarter of fiscal 2020.

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

The 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 July 1, 2022, the Company had no financial instruments required to be measured at fair value.

Inventory was comprised of the following:

10 unchanged sentences

Computer equipment and software 3 - 4

$ 113,930 $ 99,190

Furniture and fixtures 5 19,958 17,997

2 unchanged sentences

117,073 105,346

317,078 285,855

accumulated depreciation ( 189,887 ) ( 157,331 )

$ 127,191 $ 128,524

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.

The $ 1,333 decrease in property and equipment was primarily due to depreciation expense and was partially offset by current year additions.

During fiscal 2022 and 2021, the Company retired $ 805 and $ 996 , 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 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.

Depreciation expense related to property and equipment for the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020 was $ 33,150 , $ 25,912 and $ 18,770 , respectively.

During the first quarter of fiscal 2022, the Company announced a companywide effort, called 1MPACT, to lay the foundation for the next phase of the Company's value creation at scale.

The Company realigned its internal organizational structure in the first quarter of fiscal 2022 shifting to two divisions, Processing and Microelectronics.

The Mission division was merged under the Processing division.

There was no change to the Microelectronics division.

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

1 unchanged sentence

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.

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.

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 goodwill for the year ended July 1, 2022:

Balance at July 2, 2021 $ 804,906

Goodwill adjustment for the APC acquisition 346

Goodwill arising from the POC acquisition 155,259

Goodwill arising from the Pentek acquisition 35,225

Goodwill adjustment for the POC acquisition ( 6,994 )

Goodwill adjustment for the Pentek acquisition 158

Goodwill arising from the Avalex acquisition 81,705

Goodwill arising from the Atlanta Micro acquisition 58,105

Balance at July 1, 2022 $ 937,880

6 unchanged sentences

Customer relationships $ 349,710 $ ( 99,219 ) $ 250,491 12.1 years

Licensing agreements and patents 6 — 6 —

Licensing agreements and patents 4,162 ( 592 ) 3,570 5.0 years

Completed technologies 161,023 ( 68,264 ) 92,759 8.5 years

Backlog 7,670 ( 5,880 ) 1,790 1.4 years

Other 3,236 ( 308 ) 2,928 5.0 years

$ 525,801 $ ( 174,263 ) $ 351,538

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

6 unchanged sentences

Total future amortization expense $ 350,146

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

Estimated salvage value of identified intangible assets 1,392

Net carrying amount $ 351,538

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

These assets are included in the Company's gross and net carrying amounts as of July 1, 2022.

6 unchanged sentences

$ 61,360 $ ( 7,964 ) $ 53,396

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

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

These assets are included in the Company's gross and net carrying amounts as of July 1, 2022.

4 unchanged sentences

Completed technologies 7,260 ( 528 ) 6,732 8.0 years

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

Backlog 410 ( 120 ) 290 2.0 years

$ 34,980 $ ( 1,445 ) $ 33,535

1 unchanged sentence

During fiscal 2022, the Company incurred $ 27,445 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 related primarily related to severance costs associated with the acquired Germane business.

The Company incurs restructuring and other charges in connection with management's decision to undertake certain actions to realign operating expenses through workforce reductions and the closure of certain Company facilities, businesses and product lines.

The Company's adjustments reflected in restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post acquisition integration activities.

Consistent with the Company's definition of restructuring and other charges, 1MPACT is an organizational redesign program initiated on the heels of a series of acquisitions since 2014 rather than a single, discrete acquisition.

Since its inception, the Company has selectively engaged with leading consultants to accelerate solution design & implementation for the highest value workstreams.

These costs are associated with this discrete transformation initiative and are non-routine and may not be indicative of ongoing results.

Restructuring and other charges primarily related to 1MPACT including $ 17,424 of third-party consulting costs, as well as $ 9,234 of severance costs associated with the elimination of approximately 135 positions across manufacturing, SG&A and R&D based on ongoing talent and workforce optimization efforts.

Fiscal 2022 also includes $ 787 of costs for facility optimization efforts associated with 1MPACT, including $ 544 related to lease asset impairment.

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

Restructuring and other charges primarily related to $ 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 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 related to 1MPACT.

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

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

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

Severance & Related Facilities & Other Total

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

Severance Facilities & Other Total

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

Restructuring charges 4,752 — 4,752

11 unchanged sentences

July 1, 2022 July 2, 2021

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

Operating lease right-of-use assets, net $ 66,366 $ 66,373

Accrued expenses (1)

23 unchanged sentences

Fiscal Year Totals

2022 $ 13,626

Thereafter 40,017

2 unchanged sentences

Present value of operating lease liabilities $ 81,528

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

There were no material restrictions, covenants, sale and leaseback transactions, variable lease payments or residual value guarantees imposed by the Company's leases at July 2, 2021.

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

During fiscal 2022, 2021 and 2020 the Company recognized operating lease expe nse of $ 14,332 , $ 11,714 and $ 10,029 respectively.

There were no material restrictions, covenants, sale and leaseback transactions, variable lease paymen ts or residual value guarantees imposed by the Company's leases at July 1, 2022.

The components of income before income taxes and income tax provision (benefit) were as follows:

2022 2021 2020

20 unchanged sentences

Provision to return 10.3 ( 1.3 ) ( 3.1 )

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

Excess tax provision (benefit) related to stock compensation 5.3 ( 3.7 ) ( 7.7 )

Foreign income tax rate differential 2.3 0.9 0.1

6 unchanged sentences

38.7 % 19.6 % 8.8 %

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 effective tax rate for fiscal 2022 differed from the Federal statutory rate primarily due to additional tax provisions for non-deductible compensation, provision to return adjustments, state taxes and excess tax provisions related to stock compensation, partially offset by benefits related to research and development tax credits.

The effective tax rate for fiscal 2021 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 provisions related to state taxes and non-deductible compensation.

During fiscal 2022, 2021 and 2020 the Company recognized a tax provision (benefit) of $ 977 , $( 2,831 ) and $( 7,259 ) related to stock compensation, respectively.

In fiscal 2022, the Company recorded a provision to return adjustment of $ 2,308 related to an immaterial correction of an error over transfer pricing allocations.

The Company concluded that the impact of the correction was neither quantitatively nor qualitatively material to its Consolidated Balance Sheets or Statement of Operations and Comprehensive Income for fiscal 2022, nor to the impacted prior periods.

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

28 unchanged sentences

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.

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 its net deferred tax assets in Switzerland are not more likely than not to be realized, and as such, continues to maintain a valuation allowance on such net deferred tax assets.

The Company also 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.

Any future changes in the valuation allowance will impact the Company's income tax provision.

The Company has state research and development tax credit carryforwards of $ 18,771 , which will expire starting in fiscal year 2022 through fiscal year 2037.

The Company has acquired Federal net operating loss carryforwards of $6,453, which have an unlimited carryforward period.

The Company has acquired state net operating loss carryforwards of $61,379, which will expire in fiscal year 2040.

Company has foreign net operating loss carryforwards of $12,723, which will expire starting in fiscal year 2028 through fiscal year 2042.

The Company maintains a valuation allowance on the majority of the foreign net operating loss carryforward.

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

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

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

These reserves have been established based upon management’s assessment as to the potential exposures.

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

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

The Company has established income tax reserves for potential additional income taxes based upon management’s assessment, including recognition and measurement.

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

The changes in the Company’s income tax reserves for gross unrecognized income tax benefits, including interest and penalties, are summarized as follows:

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

7 unchanged sentences

Unrecognized tax benefits, end of period $ 9,112 $ 7,467

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

The Company is currently under audit by the Internal Revenue Service for fiscal years 2016 through 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 a tax position previously taken on a tax return of an acquired company.

The $ 9,112 of unrecognized tax benefits as of July 1, 2022, if released, would reduce income tax provision.

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

9 unchanged sentences

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

The Company responded to the complaint in July 2021 and the arbitration proceeding has been scheduled for September 2022.

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

On December 7, 2021, counsel for National Technical Systems, Inc.

(“NTS”) sent the Company an environmental demand letter pursuant to Massachusetts General Laws Chapter 21E, Section 4A, and CERCLA 42 U.S.C.

Section 9601, related to a site that NTS formerly owned at 533 Main Street, Acton, Massachusetts.

NTS received a Notice of Responsibility from the Massachusetts Department of Environmental Protection (“MassDEP”) alleging trichloroethene, freon and 1,4-dioxane contamination in the groundwater emanating from NTS’s former site.

NTS alleges in its demand letter that the operations of a predecessor company to Mercury that was acquired in the Company’s acquisition of the Microsemi carve-out business that once owned and operated a facility at 531 Main Street, Acton, Massachusetts contributed to the groundwater contamination.

NTS is seeking payment by the Company of NTS’s costs for any required environmental remediation.

In April 2022, the Company

engaged in a meet and confer session with NTS pursuant to Massachusetts General Laws Chapter 21E, Section 4A to discuss the status of the environmental review performed by NTS and its licensed site professional.

In addition in November 2021, the Company responded to a request for information from MassDEP regarding the detection of PFAS (per- and polyfluoroakyl substances) in the Acton, Massachusetts Water District’s Conant public water supply wells near the former facility at 531 Main Street, Acton, Massachusetts at a level above the standard that MassDEP published for PFAS in October 2020.

It is too early to determine what responsibility, if any, the Company may have for these matters.

I NDEMNIFICATION O BLIGATIONS

10 unchanged sentences

Revolving Credit Facilities

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

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

Due to the increase in the borrowing capacity of the Revolver, new costs associated with the amendment and the previous balance of unamortized deferred financing costs totaling $ 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.

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

On February 28, 2022, the Company amended the Revolver to increase and extend the borrowing capacity to a $ 1,100,000 , 5 -year revolving credit line, with the maturity extended to February 28, 2027.

As of July 1, 2022, the Company's outstanding balance of unamortized deferred financing costs was $ 4,386 , which is being amortized to Other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Income on a straight line basis over the term of the Revolver.

The Revolver has a 5 -year maturity and will mature on February 28, 2027.

Interest Rates and Fees

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

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

As of July 2, 2021, the applicable percentage was set at LIBOR plus 1.125 % based on the Company's total net leverage ratio.

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

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

As of July 2, 2021, the stated interest rate for unutilized commitments was 0.20 % per annum.

Borrowings under the Revolver bear interest, at the Company’s option, at floating rates tied to Secured Overnight Financing Rate ("SOFR") or the prime rate plus an applicable percentage in the case of dollar denominated loans or, in the case of certain other currencies, such alternative floating rates as agreed.

The interest rate applicable to outstanding loans has initially been set at SOFR plus 1.25 % and in future fiscal quarters will be established pursuant to a pricing grid based on the Company’s total net leverage ratio.

In addition to interest on the aggregate outstanding principal amounts of any borrowings, the Company will also pay a quarterly commitment fee on the unutilized commitments under the Revolver, which fee has initially been set at 0.20 % per annum and in future fiscal quarters will be established pursuant to a pricing grid based on the Company’s total net leverage ratio.

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

Covenants and Events of Default

The Revolver provides for customary negative covenants.

The Revolver provides for customary negative covenants, including, among other things and subject to certain significant exceptions, restrictions on the incurrence of debt or guarantees, the creation of liens, the making of certain investments, loans and acquisitions, mergers and dissolutions, the sale of assets including capital stock of subsidiaries, the payment of dividends, the repayment or amending of junior debt, altering the business conducted, engaging in transactions with affiliates and entering

into agreements limiting subsidiary dividends and distributions.

The Revolver also requires the Company to comply with certain financial covenants, including a quarterly minimum consolidated cash interest charge ratio test and a quarterly maximum consolidated total net leverage ratio test.

The Revolver also provides for customary representations and warranties, affirmative covenants and events of default.

The Revolver also provides for customary representations and warranties, affirmative covenants and events of default (including, among others, the failure to make required payments of principal and interest, certain insolvency events and an event of default upon a change of control).

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

As of July 2, 2021, the Company was in compliance with all covenants and conditions under the Revolver.

Guarantees and Security

The Company's obligations under the Revolver are guaranteed by certain of its material domestic wholly-owned restricted subsidiaries (the “Guarantors”).

The obligations of both the Company and the Guarantors are secured by a perfected security interest in substantially all of the assets of the Company and the Guarantors, in each case, now owned or later acquired, including a pledge of all of the capital stock of substantially all of its domestic wholly-owned restricted subsidiaries and 65 % of the capital stock of certain of its foreign restricted subsidiaries, subject in each case to the exclusion of certain assets and additional exceptions.

The Company’s obligations under the Revolver are guaranteed by certain of the Company’s material domestic wholly-owned restricted subsidiaries (the “Guarantors”).

The obligations of both the Company and the Guarantors are secured by a perfected security interest in substantially all of the assets of the Company and the Guarantors, in each case, now owned or later acquired, including a pledge of all of the capital stock of substantially all of the Company’s domestic wholly-owned restricted subsidiaries and 65 % of the capital stock of certain of its foreign restricted subsidiaries, subject in each case to the exclusion of certain assets and additional exceptions.

As of July 1, 2022, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 451,500 against the Revolver as compared to $ 200,000 for the fiscal year ended July 2, 2021, resulting in interest expense of $ 5,806 and $ 1,222 for fiscal years ended July 1, 2022 and July 2, 2021, respectively.

There were outstanding letters of credit of $ 963 as of July 1, 2022.

Employee Benefit Plans

9 unchanged sentences

The Plan's funded status at July 1, 2022 and July 2, 2021 was a net liability of $ 4,660 and $ 9,807 , 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.

The Company recorded a net gain of $ 4,739 and $ 3,285 in AOCI during the fiscal years ended July 1, 2022 and July 2, 2021, respectively.

Total employer contributions to the Plan were $ 1,056 during the year ended July 1, 2022, and the Company's total expected employer contributions to the Plan during fiscal 2023 are $ 1,093 .

33 unchanged sentences

Settlements — ( 3,129 )

Foreign exchange loss 691 784

Foreign exchange (loss) gain ( 1,035 ) 691

Projected benefit obligation at end of year $ 25,509 $ 28,614

8 unchanged sentences

Settlements — ( 3,129 )

Foreign exchange gain 415 487

Foreign exchange (loss) gain ( 690 ) 415

Fair value of Plan assets at end of year $ 20,849 $ 18,807

13 unchanged sentences

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 $ 7,876 , $ 5,954 , and $ 4,525 during the fiscal years ended July 2, 2021, July 3, 2020, and June 30, 2019, respectively.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 7,603 , $ 7,876 and $ 5,954 during the fiscal years ended July 1, 2022, July 2, 2021 and July 3, 2020, respectively.

Shareholders’ Equity

8 unchanged sentences

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.

S TOCKHOLDER R IGHTS P LAN

On December 27, 2021, the Company's Board of Directors authorized and declared a dividend of one preferred share purchase right (a “Right”), payable on January 10, 2022, for each outstanding share of common stock par value $ 0.01 per share to the stockholders of record on that date.

Each Right entitles the registered holder to purchase from the Company a unit of Series A Junior Preferred Stock, par value $ 0.01 per share, of the Company at a designated price per unit, subject to adjustment.

The Rights will initially trade with, and will be inseparable from, the shares of common stock.

The Rights will generally become exercisable if any person or group, other than certain exempt persons, acquires beneficial ownership of 7.5 % (or 10 % in the case of certain passive investors) or more of common stock outstanding (an “Acquiring Person”).

If a person or group becomes an Acquiring Person, then each Right, other than those held by the Acquiring Person, will entitle its holder to purchase units of Series A Junior Preferred Stock (or, in certain circumstances, cash, assets or other securities of the Company) having a market value equal to twice the then-current market price per unit of Preferred Stock.

In certain other circumstances including consolidation or merger with the Company, each Right, other than those held by the Acquiring Person, will entitle its holder to receive common stock of the person acquiring the Company or its ultimate parent entity, as applicable, having a value equal to two times then-current market price per share of common stock.

Each Unit of Preferred Stock, if issued:

• will entitle holders to certain dividend and liquidation payments;

• will not be redeemable;

• will entitle holders to one vote, voting together with shares of common stock;

• will entitle holders, if shares of common stock are exchanged via merger, consolidation, or a similar transaction, to a per share payment equal to the payment made on one share of Company Common Stock;

• will be protected by customary anti-dilution provisions with respect to dividends, liquidation and voting rights and in the event of mergers and consolidations.

On June 24, 2022, the Company amended the Rights Agreement, dated as of December 27, 2021, to increase the ownership threshold for a person to be an “Acquiring Person” (as defined in the Rights Agreement) from 7.5 % of common stock to 10 % of common stock ( 10 % of common stock to 20 % of common stock in the case of a passive institutional investor).

Following this amendment, the Rights Agreement will now expire no later than the 2022 Annual Meeting, or unless earlier redeemed or terminated by the Company's Board of Directors, as provided in the Rights Agreement.

The Board of Directors shall have the right to adjust, among other things, the exercise price, as well as the number of Units of Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur from a share dividend, a share split, or a reclassification of the Preferred Stock.

The Rights have no voting or dividend privileges, and unless and until they become exercisable, have no dilutive effect on the earnings of the Company.

Additional details about the Rights Agreement are contained in the Current Report on Form 8-K filed by the Company with the SEC on December 29, 2021 and June 24, 2022.

Stock-Based Compensation

3 unchanged sentences

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.

The 2018 Plan

replaced 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.

7 unchanged sentences

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

On February 7, 2022, the Company’s Board of Directors approved an equity retention plan at the recommendation of the Company’s Human Capital and Compensation Committee, after consultation with its independent compensation consultant.

Employees participating in the equity retention plan were granted their annual equity awards for fiscal 2023 on February 15, 2022, which is approximately six months earlier than the Company’s typical annual cycle for such grants.

The plan is intended to encourage leaders to remain focused on the mission and drive long-term performance, to retain the recipients in the current challenging industry environment and labor market, and to reinforce the alignment of the recipients’ interests with the Company’s shareholders.

On February 15, 2022, the Human Capital and Compensation Committee expanded the scope of the equity retention plan by approving a pool of restricted stock unit awards for non-executive employees.

These awards were intended to recognize the recipients’ substantial contributions, to retain and motivate the recipients in the current challenging industry environment and labor market and to reinforce the alignment of the recipients’ interests with the Company’s shareholders.

The vesting of such awards was conditioned on shareholder approval of sufficient additional shares for the 2018 Plan for the Company to deliver the shares to satisfy the awards, and with awards expiring on the seventh anniversary of the grant date if shareholder approval is not obtained prior to such date.

E MPLOYEE S TOCK P URCHASE P LAN

4 unchanged sentences

Shares available for future purchase under the ESPP totaled 313 at July 1, 2022.

S TOCK O PTION AND A WARD A CTIVITY

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

Options Outstanding

Shares Weighted Average

Exercise Price Weighted Average

Contractual Term

(Years) Aggregate

Intrinsic Value as

Outstanding at June 30, 2019 4 $ 5.52 2.13

Exercised ( 1 ) 5.52

Cancelled — —

Outstanding at July 3, 2020 3 $ 5.52 1.12

Exercised ( 3 ) 5.52

Cancelled — —

Outstanding at July 2, 2021 — $ — — $ —

Vested and expected to vest at July 2, 2021 — $ — — $ —

Exercisable at July 2, 2021 — $ — — $ —

The intrinsic value of the options exercised during fiscal years 2021 and 2020 was $ 183 and $ 67 , respectively.

There were no options exercised during fiscal 2019.

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

As of 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.

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

S TOCK A WARD A CTIVITY

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

Non-Vested Restricted Stock Awards

Shares Weighted Average

Outstanding at June 30, 2019 1,046 $ 39.62

Outstanding at July 3, 2020 957 $ 61.59

Granted 570 76.03

16 unchanged sentences

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Cost of revenues $ 2,161 $ 2,037 $ 989

6 unchanged sentences

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

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.

12 unchanged sentences

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

3 unchanged sentences

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

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

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.

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

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.

3 unchanged sentences

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Domestic (1) $ 861,125 $ 795,988 $ 704,722

8 unchanged sentences

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Radar (1) $ 251,126 $ 289,172 $ 233,967

12 unchanged sentences

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Components (1) $ 160,567 $ 176,234 $ 227,440

2 unchanged sentences

Total Net Revenues $ 988,197 $ 923,996 $ 796,610

(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.

(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.

Modules and sub-assemblies may in turn be combined to form an integrated subsystem.

Examples of modules and sub-assemblies include but are not limited to embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and IO (input-output) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners and transceivers.

(3) Integrated Subsystems include multiple modules and/or sub-assemblies combined with a backplane or similar functional element and software to enable a solution.

These are typically but not always integrated within a chassis and with cooling, power and other elements to address various requirements and are also often combined with additional technologies for interaction with other parts of a complete system or platform.

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

(1) Components represent the basic building blocks of an electronic system.

They generally perform a single function such as switching, storing or converting electronic signals.

Some examples include 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 combine multiple components to serve a range of complex functions, including processing, networking and graphics display.

Typically delivered as computer boards or other packaging, modules and sub-assemblies are usually designed using open standards to provide interoperability when integrated in a subsystem.

Examples of modules and sub-assemblies include embedded processing boards, switched fabrics and boards for high-speed input/output, digital receivers, graphics and video, along with multi-chip modules, integrated radio frequency and microwave multi-function assemblies and radio frequency tuners and transceivers.

(3) Integrated subsystems bring components, modules and/or sub-assemblies into one system, enabled with software.

Subsystems are typically, but not always, integrated within an open standards-based chassis and often feature interconnect technologies to enable communication between disparate systems.

Spares and replacement modules and sub-assemblies are provided for use with subsystems sold by the Company.

The Company’s subsystems are deployed in sensor processing, aviation and mission computing and C4I applications.

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

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Airborne (1) $ 488,028 $ 416,877 $ 397,553

9 unchanged sentences

Fiscal Years Ended

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

July 1, 2022 July 2, 2021 July 3, 2020

Raytheon Technologies 14 % 19 % 16 %

Lockheed Martin Corporation 15 % 16 % 17 %

Navy 14 % 12 % — %

Lockheed Martin Corporation 10 % 15 % 16 %

38 % 46 % 32 %

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

There were no programs comprising 10% or more of the Company's revenues for the years ended July 1, 2022, July 2, 2021 and July 3, 2020.

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 )

The following sets forth certain unaudited consolidated quarterly statements of operations data for each of the Company’s last eight quarters.

In management’s opinion, this quarterly information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation for the periods presented.

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

2021 (In thousands, except per share data) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER

Net revenues $ 205,621 $ 210,676 $ 256,857 $ 250,842

Gross margin $ 88,119 $ 88,667 $ 105,623 $ 102,779

Income from operations $ 18,770 $ 18,113 $ 21,712 $ 22,406

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

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

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

Net income per share:

Basic net income per share $ 0.29 $ 0.23 $ 0.28 $ 0.32

Diluted net income per share $ 0.29 $ 0.23 $ 0.28 $ 0.32

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

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

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

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

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

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

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

Net income per share:

Basic net income per share $ 0.35 $ 0.29 $ 0.43 $ 0.50

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

Due to the effects of rounding, the sum of the four quarters does not equal the annual total.

The Company has evaluated subsequent events from the date of the Consolidated Balance Sheet through the date the consolidated financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosures.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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