What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-08-13 compared with 2023-08-15 · 392 added, 294 removed, 798 unchanged (46% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Current assets:

Cash and cash equivalents $ 180,521 $ 71,563

Accounts receivable, net of allowance for credit losses of $1,335 and $2,074 at June 30, 2023 and July 1, 2022, respectively 124,729 144,494

Unbilled receivables and costs in excess of billings 382,558 303,356

Accounts receivable, net of allowance for credit losses of $ 2,020 and $ 1,335 at June 28, 2024 and June 30, 2023, respectively

111,441 124,729

Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $ 6,340 and $ 0 at June 28, 2024 and June 30, 2023, respectively

304,029 382,558

Inventory 335,300 337,216

Prepaid income taxes — 7,503

Prepaid expenses and other current assets 22,493 20,952

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Operating lease right-of-use assets, net 60,860 63,015

Deferred tax asset 27,099 —

Deferred tax assets 58,612 27,099

Other non-current assets 6,691 8,537

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Accrued compensation 36,398 30,419

Income tax payable 13,874 —

Income taxes payable 109 13,874

Deferred revenues and customer advances 73,915 56,562

Total current liabilities 234,416 233,264

Deferred income taxes — 32,398

Income taxes payable 7,713 5,166

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Total liabilities 906,130 824,682

Commitments and contingencies (Note L)

Commitments and contingencies (Note K)

Shareholders’ equity:

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85,000,000 shares authorized;

56,961,665 and 55,679,747 shares issued and outstanding at June 30, 2023 and July 1, 2022, respectively 570 557

58,093,528 and 56,961,665 shares issued and outstanding at June 28, 2024 and June 30, 2023, respectively

Additional paid-in capital 1,242,402 1,196,847

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For the Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Net revenues $ 835,275 $ 973,882 $ 988,197

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Pension benefit plan, net of tax ( 1,383 ) 142 4,739

Total other comprehensive income, net of tax 6,298 5,870 2,546

Total other comprehensive (loss) income, net of tax ( 1,836 ) 6,298 5,870

Total comprehensive (loss) income $ ( 139,476 ) $ ( 22,037 ) $ 17,145

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Fiscal Years Ended June 30, 2023, July 1, 2022 and July 2, 2021

For the Fiscal Years Ended June 28, 2024, June 30, 2023 and July 1, 2022

(In thousands)

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Issuance of common stock under employee stock purchase plan 145 2 5,490 — — 5,492

Issuance of common stock under defined contribution plan 400 4 18,366 — — 18,370

Retirement of common stock ( 1 ) — ( 63 ) — — ( 63 )

Stock-based compensation — — 27,738 — — 27,738

Net income — — — 11,275 — 11,275

Net loss — — — ( 28,335 ) — ( 28,335 )

Other comprehensive income — — — — 6,298 6,298

Balance at July 1, 2022 55,680 557 1,145,323 385,774 5,531 1,537,185

Balance at June 30, 2023 56,962 $ 570 $ 1,196,847 $ 357,439 $ 11,829 $ 1,566,685

Issuance of common stock under employee stock incentive plans 476 5 ( 5 ) — — —

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Net loss — — — ( 137,640 ) — ( 137,640 )

Other comprehensive income — — — — 6,298 6,298

Other comprehensive loss — — — — ( 1,836 ) ( 1,836 )

Balance at June 28, 2024 58,094 $ 581 $ 1,242,402 $ 219,799 $ 9,993 $ 1,472,775

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For the Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Cash flows from operating activities:

Net (loss) income $ ( 137,640 ) $ ( 28,335 ) $ 11,275

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

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

Depreciation and amortization expense 88,030 97,329 93,417

Stock-based compensation expense 25,669 27,753 38,293

Share-based matching contributions on defined contribution plan 15,665 — —

Stock-based matching contributions on defined contribution plan 15,853 15,665 —

Benefit for deferred income taxes ( 31,511 ) ( 59,647 ) ( 2,419 )

Provisions for bad debt 15,301 400 106

Other non-cash items 452 ( 1,146 ) ( 603 )

Cash settlement for termination of interest rate swap 7,403 5,995 —

Changes in operating assets and liabilities, net of effects of businesses acquired:

Changes in operating assets and liabilities:

Accounts receivable, unbilled receivables, and costs in excess of billings 76,458 ( 58,718 ) ( 146,477 )

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Other non-current liabilities ( 5,049 ) ( 4,509 ) ( 8,709 )

Net cash (used in) provided by operating activities ( 21,254 ) ( 18,869 ) 97,247

Net cash provided by (used in) operating activities 60,382 ( 21,254 ) ( 18,869 )

Cash flows from investing activities:

Acquisition of businesses, net of cash acquired — ( 243,464 ) ( 372,826 )

Purchases of property and equipment ( 34,291 ) ( 38,796 ) ( 27,656 )

Other investing activities — 235 ( 3,200 )

Acquisition of businesses, net of cash acquired — — ( 243,464 )

Net cash used in investing activities ( 34,291 ) ( 38,561 ) ( 274,320 )

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Cash and cash equivalents at end of year $ 180,521 $ 71,563 $ 65,654

Cash paid during the period for:

Cash paid (received) during the period for:

Interest $ 37,423 $ 27,288 $ 5,492

Income taxes $ 24,243 $ 14,121 $ 8,983

Income taxes (refunded) paid, net $ ( 9,315 ) $ 24,243 $ 14,121

Supplemental disclosures—non-cash activities:

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Mercury Systems, Inc.

is a technology company that delivers processing power for the most demanding aerospace and defense missions.

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.

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

(the Company) is a technology company that delivers mission-critical processing power to the edge - where signals and data are collected - to solve the most pressing aerospace and defense challenges.

Mercury’s products and solutions are deployed in more than 300 programs and across 35 countries.

The Company is headquartered in Andover, Massachusetts, and has over 20 locations worldwide.

The Mercury Processing Platform is the unique advantage the Company provides to its customers.

It comprises the innovative technologies the Company has developed and acquired for more than 40 years that brings integrated, mission-critical processing capabilities to the edge.

The Company's processing platform spans the full breadth of signal processing—from RF front end to the human-machine interface—to rapidly convert meaningful data, gathered in the most remote and hostile environments, into critical decisions.

It allows the Company to offer standard products and custom solutions from silicon to system scale, including components, modules, subsystems, and systems, and it embodies the customer-centric approach the Company takes to delivering capabilities that are mission-ready, trusted and secure, software-defined, and open and modular.

Summary of Significant Accounting Policies

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All references to fiscal 2024 are to the 52-week period from July 1, 2023 to June 28, 2024.

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

All references to fiscal 2023 are to the 52-week period from July 2, 2022 to June 30, 2023.

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

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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, 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.

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

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

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

R EVENUE R ECOGNITION

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In these cases, the Company conducts such tests and, if they are completed successfully, includes a written confirmation with each order shipped.

As a result, at the time of each product shipment, the Company believes that no further customer testing requirements exist and that there is no uncertainty of acceptance by its customer.

As a result, at the time of each product shipment, the Company

believes that no further customer testing requirements exist and that there is no uncertainty of acceptance by its customer.

The Company's contracts with customers generally do not include a right of return relative to delivered products.

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In most cases the pricing of these options are reflective of the standalone selling price of the good or service.

These options do not provide the customer with a material right and are accounted for only when the

customer exercises the option to purchase the additional goods or services.

These options do not provide the customer with a material right and are accounted for only when the customer exercises the option to purchase the additional goods or services.

If the option on the customer contract was not indicative of the standalone selling price of the good or service, the material right would be accounted for as a separate performance obligation.

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(ii) modules and sub-assemblies;

and (iii) integrated subsystems.

and (iii) integrated solutions.

The Company also generates revenues from the performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation.

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Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated subsystems and related system integration or other services.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 44 %, 45 % and 58 % of revenues in the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 45 %, 44 % and 45 % of revenues in the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022, respectively.

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

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

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

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

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.

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

Accounting for contracts recognized over time 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 over time contracts over time was 56 %, 55 % and 42 % of revenues in the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021, respectively.

The aggregate effects of these favorable and unfavorable changes across the Company’s portfolio of programs can have a significant effect upon its reported Loss from operations, Net loss and Diluted net loss per share in each of the reporting periods.

The net impact of changes in estimates had the following impact on the Company’s operating results:

For the Fiscal Years Ended

(In thousands, except per share data) June 28, 2024 June 30, 2023 July 1, 2022

Loss from operations $ ( 73,245 ) $ ( 56,266 ) $ ( 14,069 )

$ ( 53,469 ) $ ( 41,074 ) $ ( 10,270 )

Diluted net loss per share $ ( 0.93 ) $ ( 0.73 ) $ ( 0.18 )

Diluted Shares 57,738 56,554 55,901

(1) Federal and state statutory rate of 27%

Total revenue recognized under over time contracts over time was 55 %, 56 % and 55 % of revenues in the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022, respectively.

The Company generally does not provide its customers with rights of product return other than those related to assurance warranty provisions that permit repair or replacement of defective goods over a period of 12 to 36 months.

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

The Company had $ 1,328 and $ 1,503 of deferred sales commissions for contracts where the amortization period is greater than one year as of June 30, 2023 and July 1, 2022, respectively.

The Company had $ 837 and $ 1,328 of deferred sales commissions for contracts where the amortization period is greater than one year as of June 28, 2024 and June 30, 2023, respectively.

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

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Contract 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.

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

Contract assets are presented as unbilled receivables and costs in excess of billings, net of allowance for credit losses on the Company’s Consolidated Balance Sheets.

Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue, and customer advances.

Deferred product revenue represents amounts that have been invoiced to customers, but are not yet recognizable as revenue because the Company has not satisfied its performance obligations under the contract.

Billings in excess of revenues represents milestone billing contracts where the billings of the

contract exceed recognized revenues.

Billings in excess of revenues represents milestone billing contracts where the billings of the contract exceed recognized revenues.

Deferred service revenue primarily represents amounts invoiced to customers for annual maintenance contracts or extended warranty contracts, which are recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

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

The contract asset balances were $ 382,558 and $ 303,356 as of June 30, 2023 and July 1, 2022, respectively.

The contract asset balance increased due to growth in revenue recognized under contracts, as well as the timing of program milestone billings during the fiscal year ended June 30, 2023.

The contract liability balances were $ 57,142 and $ 15,966 as of June 30, 2023 and July 1, 2022, respectively.

The contract liability increased due to a higher volume of advanced milestone billing events as well as timing of revenue conversion across multiple programs.

Revenue recognized during fiscal 2023 that was included in the contract liability balance at July 1, 2022 was $ 11,258 .

The contract asset balances were $ 304,029 and $ 382,558 as of June 28, 2024 and June 30, 2023, respectively.

The contract asset balance decreased due to $ 524,655 of billings, offset by revenue recognized under over time contracts of $ 462,143 during the fiscal year ended June 28, 2024.

During the fiscal year ended June 28, 2024, the Company's contract assets were impacted by changes in estimates for contracts recognized over time and $ 16,017 write-offs and reserves as a result of ongoing negotiations of settlement terms with its customers.

The contract liability balances were $ 74,367 and $ 57,142 as of June 28, 2024 and June 30, 2023, respectively.

The contract liability increased due to a higher volume of advanced milestone billing events as well as timing of revenue recognized across multiple programs.

Revenue recognized during fiscal 2024 that was included in the contract liability balance at June 30, 2023 was $ 43,790 .

R EMAINING P ERFORMANCE O BLIGATIONS

The Company includes in its computation of remaining performance obligations customer orders for which it has accepted signed sales orders.

The Company includes in its computation of remaining performance obligations customer orders for which it has accepted executed sales orders.

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

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government agency issues with original maturities of 90 days or less at the date of purchase, are carried at fair market value which approximates cost.

A CCOUNTS R ECEIVABLE

Accounts receivable, net, represents amounts that have been billed and are currently due from customers.

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

The Company provides credit to customers in the normal course of business.

The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended as necessary.

The allowance is based upon an assessment of the customer's credit worthiness, reasonable forecasts about the future, history with the customer, recovery of balances from contract settlements, and the age of the receivable balance.

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

For contracts where revenue is recognized over time, the invoicing events are typically based on specified performance obligation deliverables or milestone events, or quantifiable measures of performance.

A CCOUNTS R ECEIVABLES F ACTORING

On September 27, 2022, the Company executed an uncommitted receivables purchase agreement (“RPA”), pursuant to which the Company may offer to sell certain customer receivables, subject to the terms and conditions of the RPA.

The RPA is an uncommitted arrangement such that the Company is not obligated to sell any receivables and the party has no obligation to purchase any receivables from the Company.

Pursuant to the RPA, the party may pu rchase certain of the Company's customer receivables at a discounted rate, subject to a limit that as of any date, the total amount of purchased receivables held by the party, less the amount of all collections received on such receivables, may not exceed $ 20,000 .

The RPA has an indefinite term and the agreement remains in effect until it is terminated by either party.

Factoring under the RPA Agreement is treated as a true sale of accounts receivable by the Company.

The Company has continued involvement in servicing accounts receivable under the RPA, but no retained interests related to the factored accounts receivable.

On March 14, 2023, the Company amended the RPA to increase the capacity from $ 20,000 to $ 30,600 .

On June 21, 2023, the Company further amended the RPA to increase the capacity from $ 30,600 to $ 60,000 .

Proceeds for amounts factored by the Company are recorded as an incr ease to cash and a reduction to accounts receivable outstanding in the Consolidated Balance Sheets.

Cash Flows attributable to factoring are reflected as cash flows from operating activities in the Company's Consolidated Statements of Cash Flows.

Factoring fees are included as selling, general and administrative expenses in the Company's Consolidated Statements of Operations and Comprehensive (Loss) Income .

The Company had $ 33,777 and $ 30,488 factored accounts receivables as of June 28, 2024 and June 30, 2023, respectively.

The Company incurred factoring fees of approximately $ 1,947 and $ 562 for fiscal years 2024 and 2023, respectively.

See Note R "Subsequent Events" to the consolidated financial statements for discussion of the Company's termination of its uncommitted RPA and entrance into a committed receivables purchase and service agreement ("RPSA") a new party.

F AIR V ALUE OF F INANCIAL I NSTRUMENTS

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C ONCENTRATION OF C REDIT R ISK

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable.

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable, unbilled receivables and costs in excess of billings.

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

As of June 30, 2023 and July 1, 2022, the Company had $ 71,563 and $ 65,654 , respectively, of cash and cash equivalents on deposit or invested with its financial and lending institutions.

As of June 28, 2024 and June 30, 2023, the Company had $ 180,521 and $ 71,563 , respectively, of cash and cash equivalents on deposit or invested with its financial and lending institutions.

The Company provides credit to customers in the normal course of business.

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As of June 28, 2024, five customers accounted for 51 % of the Company's accounts receivable, unbilled receivables and costs in excess of billings.

As of July 1, 2022, five customers accounted for 45 % of the Company’s accounts receivable, unbilled receivables and costs in excess of billings.

As of June 30, 2023, five customers accounted for 48 % of the Company’s accounts receivable, unbilled receivables and costs in excess of billings.

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

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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 exceeded the fair values of the net identifiable assets on the date of purchase (see Note F).

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

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

If the book value of a reporting unit exceeds its fair value, the implied fair value of goodwill is compared with the carrying amount of goodwill.

If the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recorded in an amount equal to that excess.

Intangible assets result from the Company’s various business acquisitions (see Note H) and certain licensed technologies, and consist of identifiable intangible assets, including completed technology, licensing agreements, patents, customer relationships, trademarks, backlog and non-compete agreements.

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

Potential triggering events include macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, and changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors.

Adverse changes to these events and circumstances could require the Company to perform an interim impairment test.

Intangible assets result from the Company’s various business acquisitions (see Note G) and certain licensed technologies, and consist of identifiable intangible assets, including completed technology, licensing agreements, patents, customer relationships, trademarks, backlog and non-compete agreements.

Intangible assets are reported at cost, net of accumulated amortization and are either amortized on a straight-line basis over their estimated useful lives of up to 12.5 years or over the period the economic benefits of the intangible asset are consumed.

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Equipment under capital lease is recorded at the present value of the minimum lease payments required during the lease period.

Depreciation is based on the estimated useful lives of the assets using the straight-line method (see Note F).

Depreciation is based on the estimated useful lives of the assets using the straight-line method (see Note E).

As assets are retired or sold, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations.

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

N ET E ARNINGS P ER S HARE

Basic net earnings (loss) per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period.

Diluted net earnings (loss) per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options and the vesting of restricted stock, reduced by the number of shares which are assumed to be purchased by the Company under the treasury stock method.

N ET ( L OSS) E ARNINGS P ER S HARE

Basic net (loss) earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period.

Diluted net earnings per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options and the vesting of restricted stock, reduced by the number of shares which are assumed to be purchased by the Company under the treasury stock method.

For all periods presented, net (loss) income is the control number for determining whether securities are dilutive or not.

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Diluted weighted-average shares outstanding 57,738 56,554 55,901

Equity instruments to purchase 1,852 , 39 and 42 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021, respectively, because the equity instruments were anti-dilutive.

Equity instruments to purchase 2,501 , 1,852 and 39 shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022, respectively, because the equity instruments were anti-dilutive.

A CCUMULATED O THER C OMPREHENSIVE ( L OSS) I NCOME

Accumulated other comprehensive (loss) income (“AOCI”) includes changes in fair value of derivative instruments, foreign currency translation adjustments and pension benefit plan adjustments.

The components of AOCI included the change in fair value of derivative instruments, net of tax adjustments are included and totaled $ 5,856 for the fiscal year ended June 30, 2023 and there were no change in fair value of derivative instruments, net of tax adjustments for the fiscal years ended July 1, 2022 and July 2, 2021, respectively.

Also included are $ 300 , $ 1,131 and $( 739 ) of foreign currency translation adjustments for the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021, respectively, and pension benefit plan adjustments totaled $ 142 , $ 4,739 and $ 3,285 for the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021, respectively.

The components of AOCI included the change in fair value of derivative instruments, net of tax adjustments and totaled $( 833 ) and $ 5,856 for the fiscal years ended June 28, 2024 and June 30, 2023, respectively.

There was no change in fair value of derivative instruments, net of tax adjustments for the fiscal year ended July 1, 2022.

Also included are $ 380 , $ 300 and $ 1,131 of foreign currency translation adjustments for the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022, respectively, and pension benefit plan adjustments totaled $( 1,383 ), $ 142 and $ 4,739 for the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022, respectively.

A summary of the change in component of Accumulated other comprehensive (loss) income, net of tax is provided below:

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Balance at July 2, 2021 $ ( 80 ) $ ( 259 ) $ — $ ( 339 )

Other comprehensive (loss) income, net of tax ( 739 ) 3,285 — 2,546

Balance at July 2, 2021 ( 80 ) ( 259 ) — ( 339 )

Other comprehensive income, net of tax 1,131 4,739 — 5,870

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Balance at June 30, 2023 1,351 4,622 5,856 11,829

Other comprehensive (loss) income, net of tax 380 ( 1,383 ) ( 833 ) ( 1,836 )

Balance at June 28, 2024 $ 1,731 $ 3,239 $ 5,023 $ 9,993

F OREIGN C URRENCY

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R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

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

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

Under current U.S.

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

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

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

The impact to the Company's consolidated financial statements and related disclosures of the adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a business combination in fiscal 2023 and beyond.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (ASC 280):

Improvements to Reportable Segment Disclosures , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU address improvements to reportable segment disclosure requirements, specifically requiring disclosure of significant segment expenses.

The amendment also extends certain annual disclosures to interim periods, and clarifies that single reportable segment entities must apply ASC 280 in its entirety, inclusive of this update.

This ASU is effective for fiscal years beginning after December 15, 2023, as well as all interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, including adoption in an interim period.

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

In December 2023, the FASB issued ASU No.

2023-09, Improvement to Income Tax Disclosures , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU enact new income tax disclosure requirements in addition to modifying existing requirements.

The amendment requires entities to categorize and provide greater disaggregation of information in the rate reconciliation and income taxes paid disclosures.

This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

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

In March 2024, the FASB issued ASU No.

2024-01, Compensation - Stock Compensation (Topic 718) , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU address improvements to clarify the accounting treatment of profits interest awards.

The amendments provide illustrative examples for entities to evaluate whether profits interest awards should be accounted for are share based compensation (Topic 718) or as cash bonus or profit-sharing arrangement (Topic 710).

The Company does not believe this standard will have an impact on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU No.

2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU are related to the removal of various references to FASB Concept Statements from the codification to make clear distinctions between authoritative and non-authoritative literature in the codification.

This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company does not believe this standard will have an impact on its consolidated financial statements and related disclosures.

R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS

Effective July 1, 2023, the company adopted 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.

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

Effective July 2, 2022, the Company adopted 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.

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

Effective December 1, 2022, the Company adopted ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU extend the sunset date under Topic 848 from December 31, 2022 to December 31, 2024 to align the temporary accounting relief guidance with the expected LIBOR cessation date of June 30, 2023.

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

A TLANTA M ICRO A CQUISITION

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.

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 the 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:

Consideration transferred

Cash paid at closing $ 91,438

Working capital and net debt adjustment ( 416 )

Less cash acquired ( 1,782 )

Net purchase price $ 89,240

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 1,568

Inventory 4,475

Fixed assets 434

Other current and non-current assets 2,079

Accounts payable ( 529 )

Accrued expenses ( 845 )

Other current and non-current liabilities ( 11,174 )

Fair value of net tangible assets acquired ( 2,210 )

Fair value of identifiable intangible assets 34,980

Goodwill 58,252

Fair value of net assets acquired 91,022

Less cash acquired ( 1,782 )

Net purchase price $ 89,240

On November 29, 2022, the measurement period for Atlanta Micro expired.

The identifiable intangible assets include customer relationships of $ 27,310 with a useful life of 20 years, completed technology of $ 7,260 with a useful life of eight years and backlog of $ 410 with a useful life of two years .

The goodwill of $ 58,252 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.

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 Revolver.

On March 17, 2022, the Company and former owner 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:

Consideration transferred

Cash paid at closing $ 157,367

Working capital and net debt adjustment ( 1,034 )

Less cash acquired ( 2,188 )

Net purchase price $ 154,145

Fair value of tangible assets acquired and liabilities assumed

Accounts receivable 5,363

Inventory 7,141

Fixed assets 1,245

Other current and non-current assets 5,228

Accounts payable ( 1,755 )

Accrued expenses ( 1,421 )

Other current and non-current liabilities ( 4,788 )

Fair value of net tangible assets acquired 13,201

Fair value of identifiable intangible assets 61,360

Goodwill 81,772

Fair value of net assets acquired 156,333

Less cash acquired ( 2,188 )

Net purchase price $ 154,145

On November 5, 2022, the measurement period for Avalex expired.

The identifiable intangible assets include customer relationships of $ 41,880 with a useful life of nine years , completed technology of $ 14,430 with a useful life of seven years and backlog of $ 5,050 with a useful life of one year .

The goodwill of $ 81,772 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 Mission Systems reporting unit.

The Company is amortizing the amount over 15 years for tax purposes.

As of June 30, 2023, the Compan y had $ 74,676 of goodwill deductible for tax purposes.

2021-08, Business Combinations (ASC 805):

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

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

Fair Value of Financial Instruments

The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of June 28, 2024:

Fair Value Measurements

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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.

On September 7, 2022, the Company entered into an interest rate Swap (the “initial Swap”) with JP Morgan Chase Bank, N.A.

(“JPMorgan”) for a notional amount of $ 300,000 in order to fix the interest rate associated with a portion of the total $ 511,500 existing borrowings on the Revolver.

The initial Swap agreement was designated and qualified for hedge accounting treatment as a cash flow hedge.

The initial Swap matures on February 28, 2027, coterminous with the maturity of the Revolver.

The initial Swap established a fixed interest rate on the first $ 300,000 of the Company's outstanding borrowings against the Revolver obligation at 3.25 %.

On September 29, 2022, the Company terminated the initial Swap.

At the time of termination, the fair value of the initial Swap was an asset of $ 5,995 .

The Company received the cash settlement of $ 5,995 and these proceeds are classified within Operating Activities of the Consolidated Statements of Cash Flows.

During the twelve months ended June 30, 2023, the Company amortized $ 1,017 of the gain, which is included within Accumulated other comprehensive (loss) income.

Following the termination of the initial Swap, the Company entered a new Swap agreement (“the Swap”) on September 29, 2022 with JPMorgan.

The Swap fixes $ 300,000 of the total $ 511,500 existing borrowings of outstanding borrowings under the Revolver at a rate of 3.79 %.

As of June 30, 2023, the fair value of the hedge was an asset of $ 3,523 and is included within Other non-current assets in the Company's Consolidated Balance Sheets.

During the first quarter ended September 29, 2023, the Company entered into an interest rate hedging agreement (the “September 2023 Swap”).

The fair value of the September 2023 Swap is estimated using a discounted cash flow analysis based on the contractual terms of the derivative, leveraging observable inputs other than quoted prices, such as interest rates.

As of June 28, 2024, the fair value of the September 2023 Swap was a liability of $ 2,436 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

The following table summarizes the Company's' financial instruments measured at fair value on a recurring basis as of June 30, 2023

Fair Value Measurements

June 30, 2023 Level 1 Level 2 Level 3

Interest rate swap $ 3,523 $ — $ 3,523 $ —

Total assets measured at fair value $ 3,523 $ — $ 3,523 $ —

The fair value of interest rate hedging agreement entered on September 29, 2022 ("the Swap") is estimated using a discounted cash flow analysis based on the contractual terms of the derivative, leveraging observable inputs other than quoted prices, such as interest rates.

As of June 30, 2023, the fair value of the Swap was an asset of $ 3,523 and was included within Other non-current assets in the Company's Consolidated Balance Sheets.

The Company terminated the Swap during the first quarter ended September 29, 2023.

Refer to Note Q for further information regarding the September 2023 Swap and the termination of the Swap.

Inventory was comprised of the following:

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Raw materials $ 200,501 $ 229,984

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(Years) As of

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Computer equipment and software 3 - 4

$ 138,366 $ 125,297

Furniture and fixtures 5 21,694 20,729

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150,991 136,504

383,471 352,835

accumulated depreciation ( 273,118 ) ( 233,281 )

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During fiscal 2024 and 2023, the Company retired $ 1,308 and $ 1,056 , 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 June 30, 2023, July 1, 2022 and July 2, 2021 was $ 43,777 , $ 33,150 and $ 25,912 , respectively.

Depreciation expense related to property and equipment for the fiscal years ended June 28, 2024, June 30, 2023 and July 1, 2022 was $ 40,369 , $ 43,777 and $ 33,150 , respectively.

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.

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Accordingly, these were determined to be the Company's reporting units which is consistent with the prior period.

The following table sets forth the changes in the carrying amount of goodw ill for the twelve months ended June 30, 2023 :

Balance at July 1, 2022 $ 937,880

Goodwill adjustment for the Avalex acquisition 66

Goodwill adjustment for the Atlanta Micro acquisition 147

Balance at June 30, 2023 $ 938,093

The Company performed its annual goodwill impairment test in the fourth quarter of fiscal 2023 with no impairment noted.

There were no adjustments to the carrying value of Goodwill during fiscal 2024.

The Company performed its annual goodwill impairment test in the fourth quarter of fiscal 2024.

In making this assessment, management relies on a number of factors including expected future operating results, business plans, economic projections, anticipated future cash flows, business trends, and changes in the Company's market capitalization.

The Company determined the fair values of the reporting units by using a discounted cash flow ("DCF") approach.

Under the DCF approach, the Company estimated the future cash flows, as well as selected a risk-adjusted Weighted Average Cost of Capital ("WACC") of 9.0% and 8.5% for Microelectronics and Missions Systems, respectively, to measure the present value of the anticipated cash flows.

When determining future cash flow estimates, the Company considered historical results adjusted to reflect current and anticipated future operating conditions.

The Company estimated cash flows for the reporting units over a discrete period and a terminal period (considering expected long-term growth rates and trends).

The Company then used the market approach to corroborate the results of the DCF approach.

Under the market approach, the Company used revenue and earnings multiples based on comparable industry multiples to estimate the fair value of the reporting units.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the amount by which the carrying value exceeds the fair value is recognized as an impairment loss.

Based on the quantitative evaluation, the Company determined that the Mission Systems reporting unit had an estimated fair value in excess of their carrying value of 5.0 % and the Microelectronics reporting unit had an estimated fair value that substantially exceeded its carrying value.

The Company concluded that its goodwill was not impaired.

In order to evaluate the sensitivity of the estimated fair value for Mission Systems, the Company assessed an increase of 1.0% in the WACC under the DCF approach would have a material impact to the Mission Systems reporting unit's fair value determination.

If there are adverse trends in the Mission Systems reporting unit's expected future operating results, business plans, economic projections, anticipated future cash flows, business trends, and Company's market capitalization, then it could result in the carrying value of the Mission Systems reporting unit exceeding its estimated fair value and impairment charges.

The Company also assesses potential triggering events during interim reporting periods.

During the third quarter ended March 29, 2024, the Company assessed events and circumstances to consider its reporting units for a potential triggering event, including:

macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors.

As a result of the sustained decline in the Company's stock and overall market capitalization during the third quarter ended March 29, 2024, along with other qualitative considerations the Company concluded that there was a triggering event for its Mission Systems reporting unit that would require an interim impairment test.

As of March 29, 2024, the Company completed a quantitative goodwill impairment analysis related to its Mission Systems reporting unit by comparing the fair value of the reporting unit with its carrying amount.

Under the DCF approach, the Company estimated the future cash flows, as well as selected a risk-adjusted WACC of 8.5% to measure the present value of the anticipated cash flows.

The Company then used the market approach to corroborate the results of the DCF approach.

Under the market approach, the Company used revenue and earnings multiples based on comparable industry multiples to estimate the fair value of the reporting unit.

Based on the interim quantitative evaluation, the Company determined that the Mission Systems reporting unit had an estimated fair value in excess of their carrying value of 2.5 %.

The Company concluded that the Mission Systems reporting unit's goodwill was not impaired.

The Company is required to perform the next annual goodwill impairment analysis during the fourth quarter of fiscal year 2025.

Adverse changes to the underlying information assumptions used in its assessment of potential triggering events could require the Company to perform an interim impairment test.

If assumed revenue growth rate and cash flow projections are not achieved in future periods or the Company’s common stock price significantly declines from current levels, among other factors, its Mission Systems and Microelectronics reporting units could be at risk of failing the quantitative assessment and goodwill assigned to the respective reporting units could be impaired.

Any impairment charges that the Company may record in the future could be material to its results of operations and financial condition.

Intangible Assets

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Completed technologies 122,680 ( 62,975 ) 59,705 9.4 years

Backlog 410 ( 325 ) 85 2.0 years

Other 3,238 ( 1,046 ) 2,192 5.0 years

$ 472,690 $ ( 222,178 ) $ 250,512

June 30, 2023

Customer relationships $ 349,120 $ ( 130,756 ) $ 218,364 12.1 years

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Net carrying amount $ 250,512

The Company reviews net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment.

Based on the Company’s last assessment, the Company believes that the carrying values of net intangible assets were recoverable as of June 28, 2024.

However, if business conditions deteriorate, the Company may be required to record impairment losses, and or increase the amortization of intangibles in the future.

Any impairment charges that the Company may record in the future could be material to the results of operations and financial condition.

Restructuring

During fiscal 2023, the Company incurred $ 6,981 of restructuring and other charges.

Restructuring and other charges primarily related to $ 3,415 of severance costs, 1MPACT related costs consisting of $ 1,804 for facility optimization efforts, including $ 1,339 related to lease asset impairment, and $ 1,762 of third party consulting costs.

During fiscal 2024, the Company initiated several immediate cost savings measures that simplify the Company’s organizational structure, facilitate clearer accountability, and align to the Company’s priorities, including:

(i) embedding the 1MPACT value creation initiatives and execution into the Company’s operations;

(ii) streamlining organizational structure and removing areas of redundancy between corporate and divisional organizations;

and (iii) reducing selling, general, and administrative headcount and rebalancing discretionary and third party spending to better align with the Company’s priority areas.

On July 20, 2023, the Company executed the plan to embed the 1MPACT value creation initiatives into operations.

On August 9, 2023, the Company approved and initiated a workforce reduction that, together with the 1MPACT related action, eliminated approximately 150 positions resulting in $ 9,548 of severance costs during fiscal 2024.

On January 12, 2024, the Company approved and initiated workforce reductions that eliminated approximately 100 positions resulting in an additional $ 9,841 of severance costs during fiscal 2024.

On June 17, 2024, the Company approved and initiated workforce reductions that eliminated an additional 100 positions, resulting in an additional $ 6,781 of severance costs in fiscal 2024.

The workforce reductions that eliminated approximately 350 positions in fiscal 2024 were across manufacturing, SG&A and R&D based on ongoing talent and workforce optimization efforts.

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 organizational redesign programs or discrete post-acquisition integration activities initiated as part of discrete post acquisition integration activities.

During fiscal 2022, 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 2023, the Company incurred $ 6,981 of restructuring and other charges.

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

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Cash paid ( 6,608 ) ( 444 ) ( 7,052 )

Restructuring liability at July 1, 2022 4,722 — 4,722

Reversals (*) ( 21 ) ( 21 )

Restructuring liability at June 30, 2023 1,529 — 1,529

Restructuring charges 26,170 — 26,170

Cash paid ( 18,941 ) — ( 18,941 )

Reversals (*) — ( 21 ) ( 21 )

Restructuring liability at June 28, 2024 $ 8,758 $ — $ 8,758

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Supplemental operating lease balance sheet information is summarized as follows:

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Operating lease right-of-use assets, net $ 60,860 $ 63,015

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For the Fiscal Year Ended For the Fiscal Year Ended

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

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

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There were no material restrictions, covenants, sale and leaseback transactions, variable lease payments or residual value guarantees imposed by the Company's leases at June 28, 2024.

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

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

2024 2023 2022

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$ ( 51,635 ) $ ( 20,207 ) $ 7,120

The following is the reconciliation between the statutory Federal income tax rate and the Company’s effective income tax rate:

The following is the reconciliation between the federal statutory income tax rate and the Company’s effective income tax rate:

2024 2023 2022

Tax provision (benefit) at federal statutory rates ( 21.0 ) % 21.0 % 21.0 %

Tax (benefit) provision at federal statutory rates ( 21.0 ) % ( 21.0 ) % 21.0 %

State income tax, net of federal tax benefit ( 5.9 ) ( 5.4 ) 8.1

1 unchanged sentence

Provision to return ( 0.1 ) ( 0.7 ) 10.3

Excess tax (benefit) provision related to stock compensation 2.6 5.3 ( 3.7 )

Excess tax provision related to stock compensation 1.4 2.6 5.3

Foreign income tax rate differential 0.2 0.2 2.3

4 unchanged sentences

Foreign derived intangible income — ( 1.4 ) ( 1.6 )

Meals and entertainment 0.6 0.8 0.1

Other — 1.3 1.0

( 27.3 ) % ( 41.6 ) % 38.7 %

The effective tax rate for fiscal 2023 differed from the Federal statutory rate primarily due to Federal and state research and development tax credits, releases to reserves for unrecognized income tax benefits and state taxes, partially offset by valuation allowances recorded and excess tax provisions related to stock compensation.

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 2023, 2022 and 2021 the Company recognized a tax provision (benefit) of $ 1,244 , $ 977 and $( 2,831 ) related to stock compensation, respectively.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law which contained provisions that include a 15% corporate minimum tax effective for taxable years beginning after December 31, 2022 and a 1% excise tax on certain stock buybacks after December 31, 2022.

We expect the impact of this legislation to be immaterial.

Effective for tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act of 2017 ("TCJA") requires companies to capitalize and amortize domestic research and development expenditures over five years for tax purposes, and foreign research and development expenditures over fifteen years for tax purposes.

The cash outflow from this provision was $ 26,400 in fiscal 2023.

The effective tax rate for fiscal 2024 differed from the Federal statutory rate primarily due to Federal and state research and development tax credits and state taxes, partially offset by tax provisions related to stock compensation.

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

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Deferred tax assets:

Inventory valuation and receivable allowances $ 23,799 $ 18,095

Accrued compensation 3,127 5,970

Accruals 10,852 6,762

Stock compensation 6,700 5,149

Federal and state tax credit carryforwards 14,287 20,294

Other accruals 2,705 1,503

Federal and state research and development tax credit carryforwards 17,762 14,287

Research and development expenditures 68,728 63,114

Deferred compensation 930 930

Interest expense carryforward 5,289 —

Federal and state net operating loss carryforward

1 unchanged sentence

Operating lease liabilities 20,107 19,968

Deferred revenue 1,260 743

Other 1,339 2,325

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Deferred tax liabilities:

Prepaid expenses ( 1,710 ) ( 1,815 )

Property and equipment ( 13,647 ) ( 15,798 )

1 unchanged sentence

Operating lease right-of-use assets, net ( 16,493 ) ( 17,077 )

Gain on interest rate swap ( 2,400 ) —

Other ( 3,675 ) ( 4,331 )

Total deferred tax liabilities ( 84,750 ) ( 91,756 )

Net deferred tax assets (liabilities) $ 27,099 $ ( 32,398 )

At June 30, 2023, the Company evaluated the need for a valuation allowance on deferred tax assets.

In assessing whether the deferred tax assets are realizable, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the Company's past and recent operating performance and results, future taxable income including the reversal of existing deferred tax liabilities, and tax planning strategies.

The Company continues to conclude that its 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.

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 the Company's income tax provision.

Fiscal 2023 includes the impact of the TCJA, which requires companies to capitalize and amortize domestic research and development expenditures over five years for tax purposes, and foreign research and development expenditures over fifteen years for tax purposes.

The Company has state research and development tax credit carryforwards of $ 11,697 , which will expire starting in fiscal year 2024 through fiscal year 2038 .

The Company has acquired Federal net operating loss carryforwards of $ 188 , which have an unlimited carryforward period.

The Company has acquired state net operating loss carryforwards of $ 11,170 , which will expire starting in fiscal year 2040.

The Company has foreign net operating loss carryforwards of $ 21,551 , which will expire starting in fiscal year 2028 through fiscal year 2043.

Net deferred tax assets $ 58,612 $ 27,099

At June 28, 2024, the Company has gross state research and development tax credit carryforwards of $ 17,385 , $ 13,734 net of federal benefit, of which a portion will expire each fiscal year through fiscal year 2039.

The Company maintains a valuation allowance on the majority of the Company’s state research and development tax credit carryforwards.

The Company has gross federal research and development tax credit carryforwards of $ 3,887 , of which a portion will expire starting in fiscal year 2040.

At June 28, 2024, the Company has gross interest expense carryforwards of $ 19,518 , which have an indefinite life, gross state net operating loss carryforwards of $ 33,802 , which will expire starting in fiscal year 2040 and gross foreign net operating loss carryforwards of $ 25,742 which will expire starting in fiscal year 2028.

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

Based on forecasted taxable income and the scheduled reversal of the remaining deferred tax assets, the Company believes it is more likely than not that all other deferred tax assets will be realized.

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

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Unrecognized tax benefits, end of period $ 7,713 $ 5,165

The $ 5,165 of unrecognized tax benefits as of June 30, 2023, if released, would reduce the Company's income tax provision.

The Company has $ 7,713 of unrecognized tax benefits as of June 28, 2024.

If released, $ 5,543 of these unrecognized income tax benefits would reduce the Company's income tax provision.

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

The total amount of gross interest and penalties accrued was $ 583 and $ 488 as of June 30, 2023 and July 1, 2022, respectively, and the amount of interest and penalties recognized in fiscal 2023 and 2022 was $ 96 and $ 172 , respectively.

The total amount of interest and penalties accrued was $ 1,374 and $ 583 as of June 28, 2024 and June 30, 2023, respectively, and the amount of interest and penalties accrued and recognized was $ 791 and $ 96 during June 28, 2024 and June 30, 2023, respectively.

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

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

We are subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of our business.

Although legal proceedings are inherently unpredictable, we believe that we have valid defenses with respect to those matters currently pending against us and intend to defend ourself vigorously.

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

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

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

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

The Company responded to the complaint in July 2021.

An arbitration proceeding was held during September 2022 with final motions in October 2022, and oral arguments in November 2022.

The arbitrator issued its final ruling in January 2023, awarding ERA $72 in damages and fees.

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

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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.

The Company subsequently delivered a letter to NTS outlining the deficiencies in their claim and reiterated that the Company is not obligated to tender a substantive response to their demand without first having received the responsive information requested in connection with the meet and confer session.

In April 2024, counsel for NTS sent additional communications on their demand that the Company participate in their environmental monitoring and remediation planning, and in May 2024, the Company responded with a rebuttal of the allegations.

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

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.

The Company has not been contacted by NTS or MassDEP since the dates discussed above.

The Company has not been contacted by MassDEP since the response was provided in November 2021.

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

On June 19, 2023, the Board of Directors received notice of our former CEO's resignation from the positions of President and Chief Executive Officer.

The Board accepted the resignation effective June 24, 2023.

In the notice, the former CEO claimed entitlement to certain benefits, including equity vesting, severance, and other benefits, under the change in control severance agreement (the "CIC Agreement") because the former CEO had resigned with good reason during a potential change in control period.

The Company disputes these claims and maintain that the former CEO resigned without good reason.

The parties must submit any dispute under the CIC Agreement to binding arbitration.

The Company intends to contest vigorously any claims under the CIC Agreement and believe that the Company has strong arguments that our former CEO's claims lack merit.

If the arbitrator rules in the Company's favor, the Company may still need to pay the former CEO's reasonable legal fees.

If instead the arbitrator rules for the former CEO, the Company could be liable for up to approximately $ 12,900 , based on the closing price of our common stock on June 26, 2023, plus legal fees and expenses, for accelerated equity vesting, severance, and other benefits under the CIC Agreement.

On June 19, 2023, the Board of Directors received notice of the Company's former CEO’s resignation from his positions of President and Chief Executive Officer.

The Board accepted his resignation effective June 24, 2023.

In his notice, the former CEO claimed he was entitled to certain benefits, including equity vesting, severance, and other benefits, under his change in control severance agreement (the “CIC Agreement”) because he had resigned with good reason during a potential change in control period.

The Company disputes these claims and maintains that he resigned without good reason.

On September 19, 2023, the former CEO filed for binding arbitration under the employment rules of the American Arbitration Association

An arbitrator was appointed on November 29, 2023, and the arbitration trial has been scheduled for mid-December 2024.

On March 25, 2024, the arbitrator denied Mr.

Aslett’s motion for compensation during the dispute and payment of his legal fees, preserving those matters for the arbitration trial.

The Company intends to contest vigorously the claims under the CIC Agreement and believes that the Company has strong arguments that the former CEO’s claims lack merit.

If the arbitrator rules in the Company's favor, the Company may still need to pay the former CEO’s reasonable legal fees, interest, and compensation during the dispute.

If instead the arbitrator rules for the former CEO, the Company could be liable for up to approximately $ 14,100 , based on the closing price of the Company's common stock on June 26, 2023, for accelerated equity vesting, severance, and other benefits under the CIC Agreement, plus interest, legal fees and expenses and compensation during dispute, which could include Mr.

Aslett's base salary and other amounts based on the compensation, benefit and insurance plans in which he participated.

The Company categorically denies any wrongdoing or liability under the CIC Agreement, but the outcome of potential arbitration is inherently uncertain.

Accordingly, it is reasonably possible that the Company will incur a liability in this matter and estimate the potential range of exposure from $ 0 to $ 12,900 , plus costs and attorneys' fees.

Accordingly, it is reasonably possible that the Company will incur a liability in this matter, and the Company estimates the potential range of exposure from $ 0 to $ 14,100 , plus costs and attorneys’ fees and compensation to the former CEO during the dispute.

On December 13, 2023, a securities class action complaint was filed against the Company, Mark Aslett, and Michael Ruppert in the U.S.

District Court for the District of Massachusetts.

The complaint asserted Section 10(b) and 20(a) securities fraud claims on behalf of a purported class of purchasers and sellers of the Company's stock from December 7, 2020, through June 23, 2023.

The complaint alleged that the Company's public disclosures in SEC filings and on earnings calls were false and/or misleading.

On February 27, 2024, the Court entered an order appointing Carpenters Pension Trust Fund for Northern California as lead plaintiff.

On April 18, 2024, the lead plaintiff filed an amended complaint including William Ballhaus and David Farnsworth as additional defendants and amended the class period to February 3, 2021 through February 6, 2024.

The Company filed a motion to dismiss on May 24, 2024, and after the plaintiffs’ filed their opposition motion and the Company filed its reply to their opposition, a hearing on the motion was conducted by the Court on July 24, 2024.

On July 24, 2024, the Court dismissed the case without prejudice and permitted the plaintiffs 30 days to file an amended complaint.

Subject to the terms of the Company's by-laws and applicable Massachusetts law, Mr.

Aslett, the former Chief Executive Officer, Mr.

Ruppert, the former Chief Financial Officer, Mr.

Ballhaus, the current Chief Executive Officer, and Mr.

Farnsworth, the current Chief Financial officer, are indemnified by the Company for this matter.

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

It is too early to determine what responsibility, if any, the Company will have for this matter.

On January 31, 2024, a former employee at the Company's Torrance, California location, filed a wage and hour class action lawsuit in California state court in Los Angeles County, along with a companion Private Attorneys General Act (“PAGA”) lawsuit, to act in a representative capacity for other Mercury Mission Systems, LLC employees in California, alleging a range of violations of California wage and hour regulations.

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

It is too early to determine what responsibility, if any, the Company will have for this matter.

I NDEMNIFICATION O BLIGATIONS

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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 June 30, 2023, the Company's outstanding balance of unamortized deferred financing costs was $ 3,446 , which is being amortized to Other (expense) income, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

As of June 28, 2024, the Company's outstanding balance of unamortized deferred financing costs was $ 4,051 , which is being amortized to Other (expense) income, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income over the term of the Revolver and includes the costs incurred in conjunction with the November 2023 amendment to the Revolver.

On November 7, 2023, due to the uncertainty surrounding a government shutdown or prolonged continuing resolution and the potential impact on the second quarter and fiscal 2024 results, the Company proactively executed Amendment No.

5 to the Revolver, as amended to date, with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent allowing for a temporary increase in the Consolidated Total Net Leverage Ratio covenant requirement from 4.50 to 5.25 for the second quarter ended December 29, 2023.

In conjunction with Amendment No.

5 to the Revolver, the Company incurred $ 1,931 of new deferred financing costs that will be amortized over the remaining term of the Revolver.

Refer to exhibit 10.7.5 included herein.

See Note R "Subsequent Events" to the consolidated financial statements for discussion of the Company's Amendment No.

6 to the Revolver.

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

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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 June 30, 2023, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 511,500 against the Revolver as compared to $ 451,500 for the fiscal year ended July 1, 2022, resulting in interest expense of $ 25,159 and $ 5,806 for fiscal years ended June 30, 2023 and July 1, 2022, respectively.

As of June 28, 2024, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 591,500 against the Revolver as compared to $ 511,500 for the fiscal year ended June 30, 2023, resulting in interest expense of $ 35,015 and $ 25,159 for fiscal years ended June 28, 2024 and June 30, 2023, respectively.

The current borrowing capacity as defined under the Revolver as of June 28, 2024 is approximately $ 986,000 , of which we had outstanding borrowings against of $ 591,500 .

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At June 28, 2024, the accumulated benefit obligation of the Plan equals the fair value of the Plan's assets.

The Plan's funded status at June 30, 2023 and July 1, 2022 was a net liability of $ 4,151 and $ 4,660 , respectively, which is recorded in other non-current liabilities on the Consolidated Balance Sheets.

The Company recorded a net gain of $ 142 and $ 4,739 in AOCI during the fiscal years ended June 30, 2023 and July 1, 2022, respectively.

The Plan's funded status at June 28, 2024 and June 30, 2023 was a net liability of $ 5,005 and $ 4,151 , respectively, which is recorded in other non-current liabilities on the Consolidated Balance Sheets.

The Company recognized net periodic benefit costs of $ 471 and $ 440 associated with the Plan and a net (loss) gain of $( 1,383 ) and $ 142 in AOCI during the fiscal years ended June 28, 2024 and June 30, 2023, respectively.

Total employer contributions to the Plan were $ 988 during the year ended June 28, 2024, and the Company's total expected employer contributions to the Plan during fiscal 2025 are $ 927 .

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Total $ 11,781

The following table outlines the components of net periodic benefit cost of the Plan for the fiscal years ended June 30, 2023 and July 1, 2022:

The following table outlines the components of net periodic benefit cost of the Plan for the fiscal years ended June 28, 2024 and June 30, 2023:

Fiscal Years Ended

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Service cost $ 965 $ 1,068

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Net periodic benefit cost $ 471 $ 440

The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the fiscal years ended June 30, 2023 and July 1, 2022:

The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the fiscal years ended June 28, 2024 and June 30, 2023:

Fiscal Years Ended

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Discount rate 1.30 % 1.95 %

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Fiscal Years Ended

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Projected benefit obligation, beginning $ 24,710 $ 25,509

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Employee contributions 1,235 1,439

Actuarial gain ( 516 ) ( 4,720 )

Actuarial (loss) gain 629 ( 516 )

Benefits paid ( 881 ) ( 246 )

Settlements ( 5,239 ) ( 4,770 )

Plan amendment 20 —

Foreign exchange (gain) loss ( 42 ) 1,763

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Fiscal Years Ended

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Fair value of Plan assets, beginning $ 20,559 $ 20,849

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Settlements ( 5,239 ) ( 4,770 )

Foreign exchange gain (loss) 1,429 ( 690 )

Foreign exchange (loss) gain ( 35 ) 1,429

Fair value of Plan assets at end of year $ 16,873 $ 20,559

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

June 30, 2023 July 1, 2022

June 28, 2024 June 30, 2023

Projected benefit obligation at end of year $ 21,878 $ 24,710

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Funded status $ ( 5,005 ) $ ( 4,151 )

The fair value of Plan assets were $ 20,559 at June 30, 2023.

The fair value of Plan assets was $ 16,873 at June 28, 2024.

The Plan is denominated in a foreign currency, the Swiss Franc, which can have an impact on the fair value of Plan assets.

The Plan was not subject to material fluctuations during the years ended June 30, 2023 or July 1, 2022.

The Plan was not subject to material fluctuations during the years ended June 28, 2024 or June 30, 2023.

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

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Stock-based 401(k) matching compensation cost is measured based on the value of the matching amount and is recognized as expense as incurred.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 15,665 , $ 7,603 , and $ 7,876 during the fiscal years ended June 30, 2023, July 1, 2022, and July 2, 2021, respectively.

Expense recognized by the Company for matching contributions related to the 401(k) plan was $ 15,853 , $ 15,665 , and $ 7,603 during the fiscal years ended June 28, 2024, June 30, 2023, and July 1, 2022, respectively.

Deferred Compensation Plan

The Company implemented a nonqualified deferred compensation plan as of January 1, 2024, under which eligible employees may defer up to 50% of their base salaries and up to 100% of their annual incentive bonuses.

The Company may also make employer contributions to participant accounts in its sole discretion, and for calendar year 2024, will match participants’ deferrals under the plan of up to 6% of their eligible annual compensation in the form of deferred stock units (or at the Company’s election, a cash deferral credited to participants’ account balances).

The Company’s matching obligation for 2024 is subject to the satisfaction of a financial performance condition for the 2024 calendar year.

Participant deferrals under the plan are held in a Rabbi trust and are subject to the claims of the Company’s creditors.

Assets held by the rabbi trust are classified as trading securities and are recorded at fair value, with changes in value recorded as adjustments to other income.

All deferrals or employer contributions under the plan, and all earnings thereon, are fully vested as and when made or credited to plan participants.

As of June 28, 2024, the Company held assets under the rabbi trust of $ 88 , was subject to liabilities for amounts payable under the plan to participants (including accrued employer matching contributions not yet credited to plan participants) of $ 88 .

Assets related to this plan are included in Other assets, and liabilities related to this plan are included in Other long-term liabilities in the Consolidated Balance Sheets.

During the fiscal year ended June 28, 2024, the Company recognized an immaterial value of compensation expense as a result of changes in the value of notional investments selected by plan participants for the investment of their plan account balances, with the same amount being recorded as other income attributable to changes in the market value of the assets held by the Rabbi trust.

The nonqualified deferred compensation plan was not in place as of June 30, 2023.

Shareholders’ Equity

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S HELF R EGISTRATION S TATEMENT

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

On October 4, 2023, the Company filed a shelf registration statement on Form S-3ASR with the SEC.

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

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

The Company intends to file a renewal of the S-3ASR in September 2023 upon the expiration of the three-year term of the current shelf registration statement.

S TOCKHOLDER R IGHTS P LAN

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S TOCK I NCENTIVE P LANS

The Board of Directors approved the Company’s 2018 Stock Incentive Plan (the “2018 Plan”) on July 23, 2018.

The 2018 Plan became effective upon the approval of shareholders at the Company’s annual meeting held on October 24, 2018.

The aggregate number of shares authorized for issuance under the 2018 Plan is 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 increases of 3,000 and 2,000 shares approved by the Company's shareholders on October 28, 2020 and October 26, 2022, respectively.

At June 28, 2024, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 7,862 shares, including 3,000 shares approved by the Company's shareholders on October 28, 2020 and 2,000 shares approved for future grant under the 2018 Plan by the company's shareholders on October 26, 2022.

On October 25, 2023, the Company's shareholders approved an additional 3,450 shares to be added to the 2018 plan.

The 2018 Plan shares available for issuance also include 948 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”).

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 of awards under the 2005 Plan.

The foregoing does not affect any outstanding awards under the 2005 Plan, which remain in full force and effect in accordance with their terms.

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

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

There were 4,820 shares available for future grant under the 2018 Plan at June 28, 2024.

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The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets.

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

The performance targets generally include the achievement of financial performance goals, either on an absolute basis or relative to a peer group of companies.

Payouts under performance-based restricted stock awards may also be subject to modification based on Mercury's total shareholder return relative to the component companies within the Spade Defensive Index.

E MPLOYEE S TOCK P URCHASE P LAN

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

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

Under the 1997 ESPP, rights are granted to purchase shares of common stock at 85 % of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period.

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The number of shares issued under the 1997 ESPP during fiscal years 2024, 2023 and 2022 was 167 , 145 and 115 , respectively.

Shares available for future purchase under the ESPP totaled 168 at June 30, 2023.

S TOCK A WARD A CTIVITY

The 1997 ESPP terminated in accordance with its terms effective May 14, 2024.

The Company adopted a new employee stock purchase plan (the “2024 ESPP”) in April 2024.

Subject to shareholder approval at the Company’s 2024 annual meeting of shareholders, the number of shares authorized for issuance under the 2024 ESPP is 1,000 shares.

Under the 2024 ESPP, rights are granted to purchase shares of common stock at 85 % of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period.

The 2024 ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10 % of an employee’s compensation as defined in the 2024 ESPP.

As of June 28, 2024, no shares have been issued under the 2024 ESPP.

S TOCK O PTION A ND A WARD A CTIVITY

On August 15, 2023, the Company announced that William L.

Ballhaus was appointed as the Company’s President and Chief Executive Officer.

Ballhaus received an onboarding grant of premium-priced stock options ("New Hire Option") under the 2018 Plan.

The Company and Mr.

Ballhaus are parties to an employment agreement, which is included in exhibit 10.1 on Form 8-K filed by the Company with the SEC on August 15, 2023.

The New Hire Option is granted in four (4) tranches as follows:

(w) 233,500 shares of the Company’s common stock with an exercise price equal to $ 42.00 (“Tranche 1”);

(x) 233,500 shares of the Company’s common stock with an exercise price equal to $ 43.00 (“Tranche 2”);

(y) 233,500 shares of the Company’s common stock with an exercise price equal to $ 46.00 (“Tranche 3”);

and (z) 233,500 shares of the Company’s common stock with an exercise price equal to $ 49.00 (“Tranche 4”).

Tranche 1 and Tranche 2 shall become vested and exercisable on the third anniversary of August 17, 2023 ("the Initial Grant Date") (subject to the Executive’s continued employment through such date) and shall expire on the fourth anniversary of the Initial Grant Date.

Tranche 3 and Tranche 4 shall become vested and exercisable on the fourth anniversary of the Initial Grant Date (subject to the Executive’s continued employment through such date) and shall expire on the fifth anniversary of the Initial Grant Date.

The following table summarizes activity of the Company's stock option plans since July 1, 2022:

Options Outstanding

Shares Weighted

Fair Value Weighted

Exercise Price Weighted

Term (Years) Aggregate

Intrinsic Value as of 6/28/2024

Granted 934 $ 12.71 $ 45.00

Exercised — $ —

Cancelled — $ —

Outstanding at June 28, 2024 934 $ 12.71 $ 45.00 3.69 years $ —

Exercisable at June 28, 2024 — $ — $ — — $ —

There were no options vested or exercised during fiscal year 2024.

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

As of June 28, 2024, there was $ 9,244 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period 2.69 years from June 28, 2024.

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

The Company calculated the fair values of the options grants using the following weighted-average assumptions:

Fiscal Year Ended

June 28, 2024

Expected volatility 45 %

Expected term 4 years

Risk-free interest rate 4.44 %

Expected dividend yield — %

Weighted-average grant date fair value per share $ 12.71

The expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s stock for a period equal to the expected term of the option.

The expected term of options has been determined using the average of the contractual term and the weighted average vesting term of the options.

The risk-free interest rate is based on a zero-coupon U.S.

treasury instrument whose term is consistent with the expected term of the stock options.

The Company has not paid and does not anticipate paying cash dividends on its shares of common stock;

therefore, the expected dividend yield is assumed to be zero .

The Company applied an estimated annual forfeiture rate based on historical averages in determining the expense recorded in each period.

There were 934 stock options granted during fiscal year ended June 28, 2024.

The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since July 1, 2022:

Non-Vested Restricted Stock Awards

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Forfeited ( 526 ) 55.66

Outstanding at July 1, 2022 2,305 $ 57.47

Outstanding at June 30, 2023 1,339 $ 54.45

Granted 1,334 36.38

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The total fair value of restricted stock awards vested during fiscal years 2024, 2023 and 2022 was $ 15,994 , $ 25,587 and $ 25,533 , respectively.

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

As of June 30, 2023, there was $ 50,292 of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of 1.8 years from June 30, 2023.

S TOCK - BASED C OMPENSATION E XPENSE

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

The Company had $ 1,215 and $ 1,229 of capitalized stock-based compensation expense on the Consolidated Balance Sheets as of June 30, 2023 and July 1, 2022, respectively.

The Company had $ 456 and $ 1,215 of capitalized stock-based compensation expense on the Consolidated Balance Sheets as of June 28, 2024 and June 30, 2023, respectively.

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

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Cost of revenues $ 2,919 $ 2,926 $ 2,161

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

The Company 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.

The Company evaluated its internal organization under FASB ASC 280, Segment Reporting ("ASC 280") to determine whether there has been a change to its conclusion of a single operating and reportable segment.

The Company concluded there has been no changes given the CODM continues to evaluate and manage the Company on the basis of one operating and reportable segment.

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

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Identifiable long-lived assets (1) $ 107,655 $ 2,698 $ — $ — $ 110,353

YEAR ENDED JULY 1, 2022

YEAR ENDED JUNE 30, 2023

Net revenues to unaffiliated customers $ 927,003 $ 46,857 $ 22 $ — $ 973,882

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Domestic (1) $ 704,132 $ 865,216 $ 861,125

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Radar (1) $ 110,371 $ 229,467 $ 251,126

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 1, 2022

Components (1) $ 192,758 $ 197,180 $ 167,333

Modules and Sub-assemblies (2) 181,881 200,281 167,242

Integrated Subsystems (3) 576,421 653,622 591,205

Integrated Solutions (3) 460,636 576,421 653,622

Total Net Revenues $ 835,275 $ 973,882 $ 988,197

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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.

Additional examples include integrated radio frequency and microwave multi-function assemblies and radio frequency tuners and transceivers.

(3) Integrated solutions 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.

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

June 28, 2024 June 30, 2023 July 2, 2021

Airborne (1) $ 445,330 $ 506,264 $ 506,549

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Fiscal Years Ended

June 30, 2023 July 1, 2022 July 2, 2021

RTX Corporation 14 % 14 % 19 %

June 28, 2024 June 30, 2023 July 1, 2022

L3Harris 12 % * *

Lockheed Martin Corporation 11 % 13 % 10 %

RTX Corporation 10 % 14 % 14 %

Northrop Grumman * 11 % *

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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 June 30, 2023, July 1, 2022 and July 2, 2021.

There were no programs comprising 10% or more of the Company's revenues for the years ended June 28, 2024, June 30, 2023 and July 1, 2022.

The Company utilizes interest rate derivatives to mitigate interest rate exposure with respect to its financing arrangements.

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On September 29, 2022, the Company terminated the initial Swap.

At the time of termination, the fair value of the initial Swap was an asset of $ 5,995 .

The Company received the cash settlement of $ 5,995 and these proceeds are classified within Operating Activities of the Consolidated Statements of Cash Flows.

The Company is amortizing the gain over the term of the Revolver and during the twelve months ended June 30, 2023, the Company amortized $ 1,017 of the gain, which is included within Accumulated other comprehensive (loss) income.

Following the termination of the initial Swap, the Company entered a new Swap agreement (“the Swap”) on September 29, 2022 with JPMorgan.

The Swap fixes $ 300,000 of the total $ 511,500 existing borrowings of outstanding borrowings under the Revolver at a rate of 3.79 %.

The Swap matures on February 28, 2027, coterminous with the maturity of the Revolver.

As of June 30, 2023, the fair value of the hedge was an asset of $ 3,523 and is included within Other non-current assets in the Company's Consolidated Balance Sheets.

At the time of termination, the fair value of the Swap was an asset of $ 5,995 .

The Company received the cash settlement of $ 5,995 and these proceeds are classified within Operating Activities of the Consolidated Statements of Cash Flows for the year ended June 30, 2023.

Following the termination of the initial Swap, the Company entered into the Swap agreement with JPMorgan on September 29, 2022.

The Swap fixes $ 300,000 of total $ 511,500 existing borrowings on the Revolver at the time of the Swap.

The Swap agreement was designated and qualified for hedge accounting treatment as a cash flow hedge.

The Swap was scheduled to mature on February 28, 2027, coterminous with the maturity of the Revolver.

The Swap established a fixed interest rate on the first $ 300,000 of 3.79 %.

On September 28, 2023, the Company terminated the Swap.

At the time of termination, the fair value of the Swap was an asset of $ 7,403 .

The Company received the cash settlement of $ 7,403 and these proceeds are classified within Operating Activities of the Consolidated Statements of Cash Flows for the year ended June 30, 2024.

Following the termination of the Swap, the Company entered into the September 2023 Swap agreement on September 28, 2023 with JPMorgan for a notional amount of $ 300,000 in order to fix the interest rate associated with a portion of the total $ 576,500 existing borrowings on Company's Revolver at the time of the Swap at 4.66 %.

The September 2023 Swap agreement was designated and qualified for hedge accounting treatment as a cash flow hedge.

The September 2023 Swap matures on February 28, 2027, coterminous with the maturity of the Revolver.

As of June 28, 2024, the fair value of the September 2023 Swap was a liability of $ 2,436 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

During fiscal year 2024, the Company amortized $ 2,982 of the gains associated with the interest swaps terminated on September 29, 2022 and September 28, 2023, which is included within Accumulated other comprehensive income.

The market risk associated with the Company’s derivative instrument is the result of interest rate movements that are expected to offset the market risk of the underlying arrangement.

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Subsequent Events

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

The Company has initiated several immediate cost savings measures that simplify the Company’s organizational structure, facilitate clearer accountability, and align to the Company’s priorities, including:

(i) embedding the 1MPACT value creation initiatives and execution into the Company’s operations;

(ii) streamlining organizational structure and removing areas of redundancy between corporate and divisional organizations;

and (iii) reduce selling, general, and administrative headcount and rebalancing discretionary and third party spending to better align with the Company’s priority areas.

On July 20, 2023, the Company executed the plan to embed the 1MPACT value creation initiatives into operations, and on August 9, 2023, the Company approved and initiated a workforce reduction that, together with the 1MPACT related action, eliminates approximately 150 positions, resulting in expected restructuring charges of approximately $ 9,000 .

These charges are for employee separation costs and will be classified as restructuring and other charges within the Company’s Statement of Operations and Other Comprehensive Income for the fiscal quarter ending September 29, 2023.

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.

On August 13, 2024, the Company entered into a $ 60,000 committed receivables purchase and servicing agreement (“RPSA”) with a new party.

The RPSA has an initial term of two years.

Pursuant to the RPSA, the new party has committed to purchase receivables at a discount rate from a list of the Company’s customers, maintaining a balance of purchased receivables at or below $ 60,000 .

On August 13, 2024, the Company executed Amendment No.

6 to the Revolver, decreasing the permanent borrowing capacity to $ 900,000 , with a temporary reduction in credit availability to $750,000 until the Company meets a minimum consolidated EBITDA level, as defined in the Amendment No.

6 to the Revolver, of $75,000 excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) EAC charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.

Refer to exhibit 10.7.6 included herein.

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