UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2017For the quarterly period ended October 2, 2020
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TOFor the transition period from                      to                     
COMMISSION FILE NUMBER: 0-23599

MERCURY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Massachusetts04-2741391
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
MASSACHUSETTS04-2741391
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
50 MINUTEMAN ROAD
ANDOVER, MA
01810
ANDOVERMA
(Address of principal executive offices)(Zip Code)
978-256-1300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company☐
Large accelerated filerxAccelerated filer
¨

Non-accelerated filer¨Smaller reporting company¨
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareMRCYThe Nasdaq Stock Market
Shares of Common Stock outstanding as of JanuaryOctober 31, 2018: 48,242,5902020 56,003,922 shares

1


MERCURY SYSTEMS, INC.
INDEX
 
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1.
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (unaudited)
3
3
4
Consolidated Statements of Shareholders’ Equity for the first quarters ended October 2, 2020 and September 27, 2019
5
56
67
Item 2.
19
Item 3.
3328
Item 4.
3328
PART II. OTHER INFORMATION
Item 1.
3429
Item 1A.
3429
Item 6.
3429
3530




2

PART I. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS
ITEM 1.     FINANCIAL STATEMENTS
MERCURY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
December 31,
2017		 June 30,
2017		October 2, 2020July 3, 2020
Assets   Assets
Current assets:   Current assets:
Cash and cash equivalents$32,035
 $41,637
Cash and cash equivalents$239,122 $226,838 
Accounts receivable, net of allowance for doubtful accounts of $52 and $83 at December 31, 2017 and June 30, 2017, respectively87,315
 76,341
Accounts receivable, net of allowance for credit losses of $1,422 and $1,451 at October 2, 2020 and July 3, 2020, respectivelyAccounts receivable, net of allowance for credit losses of $1,422 and $1,451 at October 2, 2020 and July 3, 2020, respectively99,069 120,438 
Unbilled receivables and costs in excess of billings35,655
 37,332
Unbilled receivables and costs in excess of billings108,754 90,289 
Inventory105,912
 81,071
Inventory206,044 178,093 
Prepaid income taxes15
 1,434
Prepaid income taxes4,760 2,498 
Prepaid expenses and other current assets7,970
 8,381
Prepaid expenses and other current assets18,956 16,613 
Total current assets268,902
 246,196
Total current assets676,705 634,769 
Property and equipment, net51,640
 51,643
Property and equipment, net94,744 87,737 
Goodwill384,785
 380,846
Goodwill614,422 614,076 
Intangible assets, net120,672
 129,037
Intangible assets, net200,830 208,748 
Operating lease right-of-use assetsOperating lease right-of-use assets61,980 60,613 
Other non-current assets9,817
 8,023
Other non-current assets4,501 4,777 
Total assets$835,816
 $815,745
Total assets$1,653,182 $1,610,720 
Liabilities and Shareholders’ Equity   Liabilities and Shareholders’ Equity
Current liabilities:   Current liabilities:
Accounts payable$37,628
 $27,485
Accounts payable$63,057 $41,877 
Accrued expenses10,427
 20,594
Accrued expenses25,123 23,794 
Accrued compensation17,781
 18,406
Accrued compensation31,536 41,270 
Deferred revenues and customer advances8,440
 6,360
Deferred revenues and customer advances26,890 18,974 
Total current liabilities74,276
 72,845
Total current liabilities146,606 125,915 
Deferred income taxes—
 4,856
Deferred income taxes11,009 13,889 
Income taxes payable855
 855
Income taxes payable4,117 4,117 
Operating lease liabilitiesOperating lease liabilities68,274 66,981 
Other non-current liabilities11,454
 11,772
Other non-current liabilities15,284 15,034 
Total liabilities86,585
 90,328
Total liabilities245,290 225,936 
Commitments and contingencies (Note M)

 

Commitments and contingencies (Note M)
Shareholders’ equity:   Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding—
 —
Common stock, $0.01 par value; 85,000,000 shares authorized; 46,833,499 and 46,303,075 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively468
 463
Preferred stock, $0.01 par value; 1,000,000 shares authorized; 0 shares issued or outstandingPreferred stock, $0.01 par value; 1,000,000 shares authorized; 0 shares issued or outstanding0 0 
Common stock, $0.01 par value; 85,000,000 shares authorized; 55,044,702 and 54,702,322 shares issued and outstanding at October 2, 2020 and July 3, 2020, respectivelyCommon stock, $0.01 par value; 85,000,000 shares authorized; 55,044,702 and 54,702,322 shares issued and outstanding at October 2, 2020 and July 3, 2020, respectively550 547 
Additional paid-in capital581,534
 584,795
Additional paid-in capital1,082,044 1,074,667 
Retained earnings166,171
 139,085
Retained earnings328,253 312,455 
Accumulated other comprehensive income1,058
 1,074
Accumulated other comprehensive lossAccumulated other comprehensive loss(2,955)(2,885)
Total shareholders’ equity749,231
 725,417
Total shareholders’ equity1,407,892 1,384,784 
Total liabilities and shareholders’ equity$835,816
 $815,745
Total liabilities and shareholders’ equity$1,653,182 $1,610,720 


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

3


MERCURY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
 Three Months Ended 
 December 31,		 Six Months Ended 
 December 31,		  First Quarters Ended
 2017 2016 2017 2016  October 2, 2020September 27, 2019
Net revenues $117,912
 $98,014
 $223,981
 $185,663
 Net revenues$205,621 $177,304 
Cost of revenues 63,752
 50,625
 119,147
 98,830
 Cost of revenues117,502 98,904 
Gross margin 54,160
 47,389
 104,834
 86,833
 Gross margin88,119 78,400 
Operating expenses:         Operating expenses:
Selling, general and administrative 21,222
 19,320
 41,790
 36,864
 Selling, general and administrative32,904 29,970 
Research and development 15,187
 13,156
 28,929
 25,994
 Research and development27,417 21,870 
Amortization of intangible assets 5,827
 4,888
 11,464
 9,490
 Amortization of intangible assets7,731 7,019 
Restructuring and other charges 313
 69
 408
 366
 Restructuring and other charges1,297 648 
Acquisition costs and other related expenses 723
 998
 984
 1,419
 Acquisition costs and other related expenses0 1,417 
Total operating expenses 43,272
 38,431
 83,575
 74,133
 Total operating expenses69,349 60,924 
Income from operations 10,888
 8,958
 21,259
 12,700
 Income from operations18,770 17,476 
Interest income 3
 10
 22
 50
 Interest income72 1,187 
Interest expense (107) (1,898) (110) (3,720) 
Other (expense) income, net (316) (87) (1,131) 513
 
Other expense, netOther expense, net(846)(1,434)
Income before income taxes 10,468
 6,983
 20,040
 9,543
 Income before income taxes17,996 17,229 
Tax provision (benefit) 1,335
 1,779
 (7,046) 520
 Tax provision (benefit)2,198 (2,018)
Net income $9,133
 $5,204
 $27,086
 $9,023
 Net income$15,798 $19,247 
Basic net earnings per share $0.20
 $0.13
 $0.58
 $0.23
 Basic net earnings per share$0.29 $0.35 
Diluted net earnings per share $0.19
 $0.13
 $0.57
 $0.23
 Diluted net earnings per share$0.29 $0.35 
         
Weighted-average shares outstanding:         Weighted-average shares outstanding:
Basic 46,752
 39,151
 46,701
 39,004
 Basic54,883 54,388 
Diluted 47,447
 39,985
 47,538
 39,920
 Diluted55,339 55,078 
         
Comprehensive income:         Comprehensive income:
Net income $9,133
 $5,204
 $27,086
 $9,023
 Net income$15,798 $19,247 
Foreign currency translation adjustments 22
 (341) (56) (333) Foreign currency translation adjustments(101)75 
Pension benefit plan, net of tax 10
 —
 40
 —
 Pension benefit plan, net of tax31 7 
Total other comprehensive income, net of tax 32
 (341) (16) (333) 
Total other comprehensive (loss) income, net of taxTotal other comprehensive (loss) income, net of tax(70)82 
Total comprehensive income $9,165
 $4,863
 $27,070
 $8,690
 Total comprehensive income$15,728 $19,329 
The accompanying notes are an integral part of the consolidated financial statements.

4


MERCURY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
For the First Quarter Ended October 2, 2020
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
SharesAmount
Balance at July 3, 202054,702 $547 $1,074,667 $312,455 $(2,885)$1,384,784 
Issuance of common stock under employee stock incentive plans344 3 (1)— — 2 
Purchase and retirement of common stock(1)— (66)— — (66)
Stock-based compensation— — 7,444 — — 7,444 
Net income— — — 15,798 — 15,798 
Other comprehensive loss— — — — (70)(70)
Balance at October 2, 202055,045 $550 $1,082,044 $328,253 $(2,955)$1,407,892 

For the First Quarter Ended September 27, 2019
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
SharesAmount
Balance at June 30, 201954,248 $542 $1,058,745 $226,743 $(1,291)$1,284,739 
Issuance of common stock under employee stock incentive plans462 5 (2)— — 3 
Purchase and retirement of common stock(176)(2)(14,560)— — (14,562)
Stock-based compensation— — 5,769 — — 5,769 
Net income— — — 19,247 — 19,247 
Other comprehensive income— — — — 82 82 
Balance at September 27, 201954,534 $545 $1,049,952 $245,990 $(1,209)$1,295,278 


The accompanying notes are an integral part of the consolidated financial statements.
5

MERCURY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended 
 December 31,		 First Quarters Ended
2017 2016 October 2, 2020September 27, 2019
Cash flows from operating activities:   Cash flows from operating activities:
Net income$27,086
 $9,023
Net income$15,798 $19,247 
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense18,939
 15,176
Depreciation and amortization expense12,997 11,381 
Stock-based compensation expense9,448
 7,725
Stock-based compensation expense7,184 5,659 
Benefit for deferred income taxes(4,833) (1,002)
Non-cash interest expense—
 935
(Benefit) provision for deferred income taxes(Benefit) provision for deferred income taxes(2,921)238 
Other non-cash items847
 (341)Other non-cash items268 548 
Changes in operating assets and liabilities, net of effects of businesses acquired:   Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable, unbilled receivables, and costs in excess of billings(9,181) 1,189
Accounts receivable, unbilled receivables, and costs in excess of billings3,496 2,230 
Inventory(22,455) (3,882)Inventory(27,768)298 
Prepaid income taxes1,414
 (1,623)Prepaid income taxes(2,268)(3,087)
Prepaid expenses and other current assets(1,970) 376
Prepaid expenses and other current assets(2,268)(877)
Other non-current assets(2,507) (97)Other non-current assets(1,561)(64)
Accounts payable and accrued expenses11,597
 (1,903)
Accounts payable, accrued expenses, and accrued compensationAccounts payable, accrued expenses, and accrued compensation10,803 (6,275)
Deferred revenues and customer advances1,976
 (1,310)Deferred revenues and customer advances7,598 (826)
Income taxes payable(11,284) 305
Income taxes payable(52)(2,972)
Other non-current liabilities(2,270) (50)Other non-current liabilities1,623 (1,190)
Net cash provided by operating activities16,807
 24,521
Net cash provided by operating activities22,929 24,310 
Cash flows from investing activities:   Cash flows from investing activities:
Purchases of property and equipmentPurchases of property and equipment(10,978)(9,595)
Acquisition of business, net of cash acquired(5,798) (38,764)Acquisition of business, net of cash acquired0 (96,502)
Purchases of property and equipment(7,592) (13,753)
Other investing activities(375) (111)
Net cash used in investing activities(13,765) (52,628)Net cash used in investing activities(10,978)(106,097)
Cash flows from financing activities:   Cash flows from financing activities:
Proceeds from employee stock plans2,049
 2,733
Proceeds from employee stock plans2 3 
Payments for retirement of common stock(14,909) (7,560)
Payments under credit facilities(15,000) (2,500)
Borrowings under credit facilities15,000
 —
Purchase and retirement of common stockPurchase and retirement of common stock(66)(14,562)
Net cash used in financing activities(12,860) (7,327)Net cash used in financing activities(64)(14,559)
Effect of exchange rate changes on cash and cash equivalents216
 (72)Effect of exchange rate changes on cash and cash equivalents397 (287)
Net decrease in cash and cash equivalents(9,602) (35,506)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents12,284 (96,633)
Cash and cash equivalents at beginning of period41,637
 81,691
Cash and cash equivalents at beginning of period226,838 257,932 
Cash and cash equivalents at end of period$32,035
 $46,185
Cash and cash equivalents at end of period$239,122 $161,299 
Cash paid during the period for:   Cash paid during the period for:
Interest$111
 $2,785
Interest$0 $0 
Income taxes$9,928
 $2,731
Income taxes$6,950 $3,647 
Supplemental disclosures—non-cash activities:   Supplemental disclosures—non-cash activities:
Non-cash investing activity$—
 $1,816
Non-cash investing activity$1,369 $0 
The accompanying notes are an integral part of the consolidated financial statements.

6


MERCURY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share data)
(Unaudited)
A.Description of Business
A.Description of Business
Mercury Systems, Inc. (the “Company” or “Mercury”) is a leading commercial providertechnology company serving the aerospace and defense industry, positioned at the intersection of secure sensorhigh-tech and safety critical mission processing subsystems. Optimized for customer and mission success, its solutions power a wide variety of critical defense and intelligence programs.defense. Headquartered in Andover, Massachusetts, it is pioneeringthe Company delivers solutions that power a next-generationbroad range of aerospace and defense electronics business model specifically designedprograms, optimized for mission success in some of the most challenging and demanding environments. The Company envisions, creates and delivers innovative technology solutions purpose-built to meet its customers’ most-pressing high-tech needs, including those specific to the industry's currentdefense community.
As a leading manufacturer of essential components, modules and emerging technology and business needs. Thesubsystems, the Company delivers affordable innovative solutions, rapid time-to-value and service and support primarilysells to defense prime contractorcontractors, the U.S. government and original equipment manufacturer (“OEM”) commercial aerospace companies. The Company has built a trusted, contemporary portfolio of proven product solutions purpose-built for aerospace and defense that it believes meets and exceeds the performance needs of its defense and commercial customers. Customers add their own applications and algorithms to the Company's specialized, secure and innovative pre-integrated solutions. This allows them to complete their full system by integrating with their platform the sensor technology and, in some cases, the processing from Mercury. The Company's products and solutions have beenare deployed in more than 300 programs with over 25 different defense prime contractors. Key programs include Aegis, Patriot, Surface Electronic Warfare Improvement Program ("SEWIP"), Gorgon Stare, Predator, F-16 SABR, F-35, E2D Hawkeye, Reapercontractors and Paveway. commercial aviation customers.
The Company's organizational structure allows ittransformational business model accelerates the process of making new technology profoundly more accessible to deliver capabilities that combineits customers by bridging the gap between commercial technology building blocks and deep domain expertise in the aerospace and defense sector.applications. The Company's long-standing deep relationships with leading high-tech companies, coupled with the Company's high level of research and development (“R&D”) investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model.
The Company's capabilities, technology and R&D investment strategy combine to differentiate Mercury in its industry. The Company's technologies and capabilities include secure embedded processing modules and subsystems, mission computers, secure and rugged rack-mount servers, safety-critical avionics, radio frequency (“RF”) components, multi-function assemblies, subsystems and custom microelectronics. The Company maintains its technological edge by investing in critical capabilities and intellectual property in processing and RF, leveraging open standards and open architectures to adapt quickly those building blocks into solutions for highly data-intensive applications, including emerging needs in areas such as artificial intelligence.
B.Summary of Significant Accounting Policies
The Company's mission critical solutions are deployed by its customers for a variety of applications including command, control, communications, computers, intelligence, surveillance and reconnaissance, electronic intelligence, avionics, electro-optical/infrared, electronic warfare, weapons and missile defense, hypersonics and radar.
Investors and others should note that the Company announces material financial information using its website (www.mrcy.com), Securities and Exchange Commission (“SEC”) filings, press releases, public conference calls, webcasts, and social media, including Twitter (twitter.com/mrcy and twitter.com/mrcy_CEO) and LinkedIn (www.linkedin.com/company/mercury-systems). Therefore, the Company encourages investors and others interested in Mercury to review the information the Company posts on the social media and other communication channels listed on its website.
B.Summary of Significant Accounting Policies
BASISOF PRESENTATION
The accompanying consolidated financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles ("GAAP"(“GAAP”) in the United States of America for interim financial information and with the instructions to the Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations; however, in the opinion of management the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature, necessary for fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended June 30, 2017July 3, 2020 which are contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)SEC on August 18, 2017.2020. The results for the three and six months ended December 31, 2017first quarter are not necessarily indicative of the results to be expected for the full fiscal year.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
7

All references to the first quarter of fiscal 2021 are to the quarter ended October 2, 2020. There were 13-weeks during the first quarters ended October 2, 2020 and September 27, 2019, respectively.
USEOF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
BUSINESS COMBINATIONS
The Company utilizes the acquisition method of accounting under FASB ASC 805, Business Combinations, (“FASB ASC 805”), for all transactions and events in which it obtains control over one or more other businesses, to recognize the fair value of all assets and liabilities acquired, even if less than one hundred percent ownership is acquired, and in establishing the acquisition date fair value as the measurement date for all assets and liabilities assumed. The Company also utilizes FASB ASC 805 for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in business combinations.
FOREIGN CURRENCY
Local currencies are the functional currency for the Company’s subsidiaries in Switzerland, the United Kingdom, France, Japan, Spain and Canada. The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at average exchange rates during the period for results of operations. The related translation adjustments are reported in accumulatedAccumulated other comprehensive incomeloss (“AOCL”) in shareholders’ equity. Gains (losses) resulting from non-U.S. currency transactions are included in other income (expense),Other expense, net in the Consolidated Statements of Operations and Comprehensive Income and were immaterial for all periods presented.

REVENUE RECOGNITION

ACCOUNTS RECEIVABLE FACTORING
On December 21, 2017,The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, (“ASC 606”). Mercury is a leading technology company serving the Company executed a Master Receivables Purchase Agreement (the “Purchase Agreement”) with Bankaerospace and defense industry, positioned at the intersection of America, N.A. (the “Bank”) forhigh-tech and defense. Revenues are derived from the salesales of certain eligible accounts receivable balancesproducts that are grouped into one of the Company, up to a maximum of $30,000. Factoring under the Purchase Agreement is treated as a true sale of accounts receivable by the Company.following three categories: (i) components; (ii) modules and sub-assemblies; and (iii) integrated subsystems. The Company has a continued involvement in servicing accounts receivable underalso generates revenues from the Purchase Agreement, but has no significant retained interests related to the factored accounts receivable.  
Proceeds from amounts factored by the Company are recorded as an increase to cashperformance of services, including systems engineering support, consulting, maintenance 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,other support, testing and administrative expenses in the Company’s consolidated statements of operations and comprehensive income.
The Company factored accounts receivable and incurred factoring fees of $18,821 and $69, respectively, for the three and six months ended December 31, 2017.
REVENUE RECOGNITION
The Company relies upon FASB ASC 605, Revenue Recognition, to account for its revenue transactions. Revenue is recognized upon shipment provided that title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable, collection of the related receivable is reasonably assured, and customer acceptance criteria, if any, have been successfully demonstrated. Out-of-pocket expenses that are reimbursable by the customer are included in revenue and cost of revenue.
Certain contracts with customers require the Company to perform tests of its products prior to shipment to ensure their performance complies with the Company’s published product specifications and, on occasion, with additional customer-requested specifications. 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.
The Company uses FASB Accounting Standards Update ("ASU") No. 2009-13 (“FASB ASU 2009-13”), Multiple-Deliverable Revenue Arrangements. FASB ASU 2009-13 establishes a selling price hierarchy for determining the selling price of a deliverable, which includes: (1) vendor-specific objective evidence (“VSOE”) if available; (2) third-party evidence (“TPE”) if VSOE is not available; and (3) best estimated selling price (“BESP”), if neither VSOE nor TPE is available. Additionally, FASB ASU 2009-13 expands the disclosure requirements related to a vendor’s multiple-deliverable revenue arrangements. 
The Company enters into multiple-deliverable arrangements that may include a combination of hardware components, related integration or other services. These arrangements generally do not include any performance-, cancellation-, termination- or refund-type provisions. Total revenue recognized under multiple-deliverable revenue arrangements was 37% and 38% of total revenue in the three and six months ended December 31, 2017, respectively. Total revenue recognized under multiple-deliverable revenue arrangements was 23% and 29% of total revenues in the three and six months ended December 31, 2016, respectively.
In accordance with the provisions of FASB ASU 2009-13, the Company allocates arrangement consideration to each deliverable in an arrangement based on its relative selling price. The Company generally expects that it will not be able to establish VSOE or TPE due to limited single element transactions and the nature of the markets in which the Company competes, and, as such, the Company typically determines its relative selling price using BESP. The objective of BESP is to determine the price at which the Company would transact if the productinstallation. Each promised good or service were sold by the Company onwithin a standalone basis.
The Company's determination of BESP involves the consideration of several factors based on the specific facts and circumstances of each arrangement. Specifically, the Company considers the cost to produce the deliverable, the anticipated margin on that deliverable, the selling price and profit margin for similar parts, the Company’s ongoing pricing strategy and policies (as evident from the price list established and updated by management on a regular basis), the value of any enhancements that have been built into the deliverable and the characteristics of the varying markets in which the deliverable is sold.
The Company analyzes the selling prices used in its allocation of arrangement consideration at a minimum on an annual basis. Selling prices will be analyzed on a more frequent basis if a significant change in the Company’s business necessitates a more timely analysis or if the Company experiences significant variances in its selling prices.
Each deliverable within the Company’s multiple-deliverable revenue arrangementscontract is accounted for as a separate unit of accountingseparately under the guidance of FASB ASU 2009-13ASC 606 if both of the following criteriathey are met: the delivered itemdistinct. Promised goods or items have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. The Company's revenue arrangements generally do not include a general right of return relative to delivered products. The Company


considers a deliverable to have standalone value if the item is sold separately by the Company or another vendor or if the item could be resold by the customer.
Deliverablesservices not meeting the criteria for being a separate unit of accountingdistinct performance obligation are combinedbundled into a single performance obligation with a deliverableother goods or services that doestogether meet that criterion.the criteria for being distinct. The appropriate allocation of arrangement considerationthe transaction price and recognition of revenue is then determined for the combined unitbundled performance obligation.
Revenue recognized at a point in time generally relates to contracts that include a combination of accounting.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 64% and 73% of revenues for the first quarters ended October 2, 2020 and September 27, 2019, respectively.
The Company also engages in long-term contracts for development, production and servicesservice activities which it accountsand recognizes revenue for consistent with FASB ASC 605-35, Accounting for Performanceperformance obligations over time. These long-term contracts involve the design, development, manufacture, or modification of Construction-Typecomplex modules and Certain Production-Type Contracts,sub-assemblies or integrated subsystems and other relevant revenue recognition accounting literature.related services. Long-term contracts include both fixed-price and cost reimbursable contracts. The Company considers the nature of theseCompany’s cost reimbursable contracts typically include cost-plus fixed fee and the types of products and services provided when determining the proper accounting for a particular contract. Generally for fixed-price contracts, other than service-type contracts, revenue is recognized primarily under the percentage of completion method or, for certain short-term contracts, by the completed contract method. Revenue from service-type fixed-price contracts is recognized ratably over the contract period or by other appropriate input or output methods to measure service provided, and contract costs are expensed as incurred. The Company establishes billing terms at the time project deliverables and milestones are agreed. The risk to the Company on a fixed-price contract is that if estimates to complete the contract change from one period to the next, profit levels will vary from period to period. For time and materialsmaterial contracts.
Total revenue recognized under long-term contracts revenue reflectsover time was 36% and 27% of total revenues for the number of direct labor hours expended in the performance of a contract multiplied by the contract billing rate, as well as reimbursement of other billable direct costs. For all types of contracts, the Company recognizes anticipated contract losses as soon as they become knownfirst quarters ended October 2, 2020 and estimable.September 27, 2019, respectively.
The Company also considers whether contracts should be combined or segmented in accordance with the applicable criteria under GAAP. The Company combines closely related contracts when all the applicable criteria under GAAP are met. The combination of two or more contracts requires judgment in determining whether the intent of entering into the contracts was effectively to enter into a single project, which should be combined to reflect an overall profit rate. Similarly, the Company may separate a project, which may consist of a single contract or group of contracts, with varying rates of profitability, only if the applicable criteria under GAAP are met. Judgment also is involved in determining whether a single contract or group of contracts may be segmented based on how the arrangement was negotiated and the performance criteria. The decision to combine a group of contracts or segment a contract could change the amount of revenue and gross profit recorded in a given period.
The use of contract accounting requires significant judgment relative to estimating total contract revenues and costs, including assumptions relative to the length of time to complete the contract, the nature and complexity of the work to be performed, anticipated increases in wages and prices for subcontractor services and materials, and the availability of subcontractor services and materials. The Company’s estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion. 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.
Contract costs also may include estimated contract recoveries for matters such as contract changes and claims for unanticipated contract costs. The Company records revenue associated with these matters only when the amount of recovery can be estimated reliably and realization is probable.
The Company defines service revenues as revenue from activities that are not associated with the design, development, production, or delivery of tangible assets, software or specific capabilities sold. Examples of the Company's service revenues include: analyst services and systems engineering support, consulting, maintenance and other support, testing and installation. The Company combines its product and service revenues into a single class as service revenues are less than 10 percent of total revenues.
The Companygenerally 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.goods over a period of 12 to 36 months. The Company accrues for anticipated warranty costs upon product shipment. RevenuesThe Company does not consider activities related to such assurance warranties, if any, to be a separate performance obligation. The Company does offer separately priced extended warranties which generally range from product royalties12 to 36 months that are treated as separate performance obligations. The transaction price allocated to extended warranties is recognized upon invoice byover time in proportion to the Company. Additionally, allcosts expected to be incurred in satisfying the obligations under the contract.
All revenues are reported net of government assessed taxes (e.g., sales taxes or value-added taxes). Refer to Note L for disaggregation of revenue for the period.

8


ACCOUNTS RECEIVABLE
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 customers’ credit worthiness, reasonable forecasts about the future, history with the customer, and the age of the receivable balance. The Company typically invoices a customer upon shipment of the product (or completion of a service) for contracts where revenue is recognized at a point in time. 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.
CONTRACT BALANCES
Contract balances result from the timing of revenue recognized, billings and cash collections, and the generation of contract assets and liabilities. 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 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. 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. Customer advances represent deposits received from customers on an order. Contract liabilities are included in deferred revenue and the long-term portion of deferred revenue is included within other non-current liabilities on the Company’s Consolidated Balance Sheets. Contract balances are reported in a net position on a contract-by-contract basis.
The contract asset balances were $108,754 and $90,289 as of October 2, 2020 and July 3, 2020, respectively. The contract asset balance increased due to growth in revenue recognized and timing of billable events under long-term contracts over time during the first quarter ended October 2, 2020. The contract liability balances were $27,655 and $19,892 as of October 2, 2020 and July 3, 2020, respectively. The increase was due to a greater number of long-term contracts with advanced billings across multiple programs.
Revenue recognized for the first quarter ended October 2, 2020 that was included in the contract liability balance at July 3, 2020 was $9,030. Revenue recognized for the first quarter ended September 27, 2019 that was included in the contract liability balance at June 30, 2019 was $5,376.
REMAINING PERFORMANCE OBLIGATIONS
The Company includes in its computation of remaining performance obligations customer orders for which it has accepted signed sales orders. The definition of remaining performance obligations excludes contracts with original expected durations of less than one year, as well as those contracts that provide the customer with the right to cancel or terminate the order with no substantial penalty, even if the Company’s historical experience indicates the likelihood of cancellation or termination is remote. As of October 2, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $287,526. The Company expects to recognize approximately 72% of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.
WEIGHTED-AVERAGE SHARES
Weighted-average shares were calculated as follows:
Three Months Ended December 31, Six Months Ended December 31,First Quarters Ended
2017 2016 2017 2016October 2, 2020September 27, 2019
Basic weighted-average shares outstanding46,752
 39,151
 46,701
 39,004
Basic weighted-average shares outstanding54,883 54,388 
Effect of dilutive equity instruments695
 834
 837
 916
Effect of dilutive equity instruments456 690 
Diluted weighted-average shares outstanding47,447
 39,985
 47,538
 39,920
Diluted weighted-average shares outstanding55,339 55,078 
Equity instruments to purchase 23203 and 162154 shares of common stock were not included in the calculation of diluted net earnings per share for the threefirst quarters ended October 2, 2020 and six months ended December 31, 2017, respectively, because the equity instruments were anti-dilutive. Equity instruments to purchase 9 and 6 shares of common stock were not included in the calculation of diluted net earnings per share for the three and six months ended December 31, 2016,September 27, 2019, respectively, because the equity instruments were anti-dilutive.
9

C. AcquisitionsRECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715) Changes to the Disclosure Requirements for Defined Benefit Plans, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. For public business entities, the standard is effective for fiscal years ending after December 15, 2020. The ASU requires retrospective adoption and permits early adoption for all entities. The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and add guidance as to whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements and related disclosures.
RICHLAND TECHNOLOGIES ECENTLYADOPTED ACCOUNTING PRONOUNCEMENTS
Effective July 4, 2020, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. This ASU requires an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. The Company will rely on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount and will exercise judgment in determining the relevant information and estimation methods that are appropriate in measurement of the credit losses. This adoption did not have a material impact to the Company's consolidated financial statements or related disclosures.
Effective July 4, 2020 the Company adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit, the Step 2 test, from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit. This adoption did not have an impact on the Company's consolidated financial statements or related disclosures.
Effective July 4, 2020 the Company adopted ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), an amendment of the FASB Accounting Standards Codification. The ASU provides guidance to determine whether to capitalize implementation costs of a cloud computing arrangement that is a service contract or expense as incurred. Costs of arrangements that do not include a software license should be accounted for as a service contract and expensed as incurred. This adoption did not have an impact to the Company's consolidated financial statements or related disclosures.
10

C. Acquisitions
AMERICAN PANEL CORPORATION ACQUISITION
On July 3, 2017, the Company entered into a membership interest purchase agreement with Richland Technologies, L.L.C. ("RTL"), pursuant to which,September 23, 2019, the Company acquired RTLAmerican Panel Corporation (“APC”). Based in Alpharetta, Georgia, APC is a leading innovator in large area display technology for the aerospace and defense market. APC's capabilities are deployed on a cash-free, debt-free basiswide range of next-generation platforms. The Company acquired APC for a totalan all cash purchase price of $5,798. RTL specializes in safety-critical and high integrity systems, software and hardware development as well as safety-certification services for mission-critical applications. The acquisition had an immaterial impact to the Company’s results of operations (contributed less than one percent of net revenue for the three and six months ended December 31, 2017), and accordingly the disclosures required per FASB ASC 805 have been excluded from the Form 10-Q filing. The Company recognized primarily intangible assets including customer relationships, developed technology and goodwill based on its preliminary purchase price allocation.
DELTA ACQUISITION
On April 3, 2017, the Company entered into a membership interest purchase agreement with Delta Microwave, LLC ("Delta"), pursuant to which the Company acquired Delta on a cash-free, debt-free basis for a total purchase price of $40,500, subject$100,000, prior to net working capital and net debt adjustments. Delta is a designer and manufacturer of high-value RF, microwave and millimeter wave sub-assemblies and components forThe Company funded the military, aerospace and space markets. The acquisition and transaction related expenses were funded with cash on hand.
The following table presents the net purchase price and the preliminary fair values of the assets and liabilities of Delta:APC:
Amounts
Consideration transferred
Cash paid at closing$100,826 
Working capital and net debt adjustment(5,952)
Liabilities assumed2,454 
Less cash acquired(826)
Net purchase price$96,502 
Fair value of tangible assets acquired and liabilities assumed
Cash$826 
Accounts receivable3,726 
Inventory11,233 
Fixed assets690 
Other current and non-current assets3,494 
Accounts payable(1,554)
Accrued expenses(1,457)
Other current and non-current liabilities(5,852)
Fair value of net tangible assets acquired11,106 
Fair value of identifiable intangible assets33,200 
Goodwill53,022 
Fair value of net assets acquired97,328 
Less cash acquired(826)
Net purchase price$96,502 
 Amounts
Consideration transferred 
Cash paid at closing$40,500
Net purchase price$40,500
  
Estimated fair value of tangible assets acquired and liabilities assumed 
Accounts receivable and cost in excess of billings$957
Inventory4,452
Fixed assets1,918
Other current and non-current assets67
Current liabilities(2,055)
Estimated fair value of net tangible assets acquired5,339
Estimated fair value of identifiable intangible assets17,000
Estimated goodwill18,161
Estimated fair value of net assets acquired40,500
Net purchase price$40,500
The amounts above represent the preliminary fair value estimates as of December 31, 2017 and are subject to subsequent adjustment as the Company obtains additional information duringOn September 23, 2020, the measurement period.period for APC expired. The preliminary identifiable intangible asset estimatesassets include customer relationships of $8,000$20,600 with a useful life of 911 years, developedcompleted technology of $5,900 with a useful


life of 7 years and backlog of $3,100$10,400 with a useful life of 211 years and backlog of $2,200 with a useful life of two years. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.
The goodwill of $18,161$53,022 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. The Delta acquisition expands the scale and breadth of the Company’s RF, microwave and millimeter wave capabilities, provides a highly complementary program portfolio in missiles and munitions, deepens market penetration in core radar, electronic warfare ("EW"), and precision-guided munitions markets, and opens new growth opportunities in space launch, GPS, satellite communications and datalinks. The goodwill from this acquisition is reported under the Advanced Microelectronic Solutions (“AMS”)Mission reporting unit.
Since DeltaAPC was a limited liability company,qualified subchapter S subsidiary, the acquisition is treated as an asset purchase for tax purposes. The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes. As of December 31, 2017,October 2, 2020, the Company had $17,615$50,649 of goodwill deductible for tax purposes.
The revenues and income before income taxes from Delta included in the Company's consolidated results for the three months ended December 31, 2017 were $5,229 and $74, respectively. The revenues and income before income taxes from Delta included in the Company's consolidated results for the six months ended December 31, 2017 were $10,761 and $661, respectively. The Company has not furnished pro forma financial information relating to Delta because such information is not material to the Company's financial results.
CES AQUISITION
On November 4, 2016, the Company and the shareholders of CES entered into a Stock Purchase Agreement, pursuant to which, Mercury acquired CES for a total purchase price of $39,123, subject to net working capital and net debt adjustments. The acquisition and associated transaction expenses were funded with cash on hand. Based in Geneva, Switzerland, CES is a leading provider of embedded solutions for military and aerospace mission-critical computing applications. CES specializes in the design, development and manufacture of safety-certifiable product and subsystems solutions including: primary flight control units, flight test computers, mission computers, command and control processors, graphics and video processing and avionics-certified Ethernet and IO. CES has decades of experience designing subsystems deployed in applications certified up to the highest levels of design assurance. CES products and solutions are used on platforms such as aerial refueling tankers and multi-mission aircraft, as well as the several types of unmanned platforms.
The following table presents the net purchase price and the fair values of the assets and liabilities of CES:
 
Amounts 
Consideration transferred 
Cash paid at closing$39,123
Working capital adjustment(330)
Net purchase price$38,793
  
Fair value of tangible assets acquired and liabilities assumed 
Accounts receivable and cost in excess of billings$2,698
Inventory8,950
Fixed assets1,480
Other current and non-current assets748
Current liabilities(3,154)
Non-current liabilities(6,140)
Deferred tax liabilities(1,148)
Fair value of net tangible assets acquired3,434
Fair value of identifiable intangible assets14,722
Goodwill20,637
Fair value of net assets acquired38,793
Net purchase price$38,793
On November 3, 2017, the measurement period for CES expired. The identifiable intangible assets include customer relationships of $9,060 with a useful life of 9 years and developed technology of $5,662 with a useful life of 7 years.


The goodwill of $20,637 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. CES provides the Company with capabilities in mission computing, safety-critical avionics and platform management that are in demand from its customers. These new capabilities will also substantially expand Mercury’s addressable market into commercial aerospace, defense platform management, command, control, communications, computers, and intelligence ("C4I") and mission computing markets that are aligned to Mercury’s existing market focus. The acquisition is directly aligned with the Company's strategy of expanding its capabilities, services and offerings along the sensor processing chain. The goodwill from this acquisition is reported under the Sensor and Mission Processing (“SMP”) reporting unit.
The revenues and income before income taxes from CES included in the Company's consolidated results for the three months ended December 31, 2017 were $7,000 and $2,445, respectively. The revenues and income before income taxes from CES included in the Company's consolidated results for the six months ended December 31, 2017 were $13,319 and $2,093, respectively. The Company has not furnished pro forma financial information relating to CES because such information is not material to the Company's financial results.
THEMIS COMPUTER AQUISITION
On December 21, 2017, the Company and Thunderbird Merger Sub, Inc., a newly formed, wholly-owned subsidiary of Mercury (the “Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ceres Systems (“Ceres”), the holding company that owns Themis Computer (“Themis”, and together with Ceres, collectively the “Acquired Company”). Pursuant to the Merger Agreement, the Merger Sub will merge with and into Ceres with Ceres continuing as the surviving company and a wholly-owned subsidiary of Mercury (the “Merger”). By operation of the Merger, the Company acquired both Ceres and its wholly-owned subsidiary, Themis.
On February 1, 2018, the Company closed the transaction for an aggregate purchase price of $180,000, plus an estimated adjustment for acquired working capital and cash. The merger consideration is subject to post-closing adjustments based on a determination of closing net working capital, transaction expenses and net debt (all as defined in the Merger Agreement). See Note N "Subsequent Events" to the consolidated financial statements for further discussion.
D.Fair Value of Financial Instruments
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2017:October 2, 2020:
 Fair Value Measurements
 October 2, 2020Level 1Level 2Level 3
Assets:
U.S. equity securities$1,964 $1,964 $0 $0 
Total$1,964 $1,964 $0 $0 
11
  Fair Value Measurements
  December 31, 2017 Level 1 Level 2 Level 3
Assets:        
Certificates of deposit $1,048
 $—
 $1,048
 $—
Total $1,048
 $—
 $1,048
 $—

The carrying values of cash and cash equivalents, including money market funds, restricted cash, accounts receivable and payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities.
The Company recorded a loss on the change in fair value of a cost-method investment of $43. The change in fair value of these U.S. equity securities was the Company’s certificatesresult of deposit are determined throughan observable price change during the first quarter ended October 2, 2020. Its fair value is based on a quoted prices forprice of identical or similar instruments in markets that are notan active or are directly or indirectly observable.market and is included within Prepaid expenses and other current assets on the Consolidated Balance Sheet as of October 2, 2020. The cost-method investment, which is presentedloss on investments were included within other non-current assetsOther expense, net in the accompanying consolidated balance sheets, does not have a readily determinable fair value, as suchConsolidated Statements of Operations and Comprehensive Income for the Company recorded the investment at cost and will continue to evaluate the asset for impairment on a quarterly basis.

first quarter ended October 2, 2020.

E.Inventory
E. Inventory
Inventory is stated at the lower of cost (first-in, first-out) or net realizable value, and consists of materials, labor and overhead. On a quarterly basis, the Company uses consistent methodologies to evaluate inventory for net realizable value. Once an item is written down, the value becomes the new inventory cost basis. The Company reduces the value of inventory for excess and obsolete inventory, consisting of on-hand inventory in excess of estimated usage. The excess and obsolete inventory evaluation is based upon assumptions about future demand, history,historical usage, product mix and possible alternative uses. Inventory was comprised of the following:
October 2, 2020July 3, 2020
Raw materials$124,628 $111,225 
Work in process57,066 49,647 
Finished goods24,350 17,221 
Total$206,044 $178,093 
  December 31, 2017 June 30, 2017
Raw materials $67,268
 $48,645
Work in process 25,977
 22,567
Finished goods 12,667
 9,859
Total $105,912
 $81,071

There are no amountsThe $27,951 increase in inventory relatingwas due to contracts having production cycles longer thanan increase in overall demand, especially for larger, more complex integrated subsystems, and advanced purchases intended to mitigate potential disruptions to the supply chain or unforeseen changes in customer behavior resulting from the COVID pandemic.
F.Goodwill
During the first quarter of fiscal 2021, the Company reorganized its internal reporting unit structure to align with the Company's market and brand strategy as well as promote scale as the organization continues to grow.
In accordance with FASB ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company determines its reporting units based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit. A reporting unit is considered to be an operating segment or one year.level below an operating segment also known as a component. Component level financial information is reviewed by management across three divisions: Processing, Microelectronics and Mission. Accordingly, these were determined to be the Company's new reporting units.
The internal reorganization and change in reporting units qualified as a triggering event and required goodwill to be tested for impairment. As required by ASC 350, the Company tested goodwill for impairment immediately before and after the reorganization. As a result of these analyses, it was determined that goodwill was not impaired before or after the reorganization.
F.Goodwill
In the first quarter ended October 2, 2020, the Company assigned goodwill to the new reporting units based on the relative fair value of transferred operations.
The following table sets forth the changes in the carrying amount of goodwill by reporting unit for the six monthsfirst quarter ended December 31, 2017:October 2, 2020:
Total
Balance at July 3, 2020$614,076 
Goodwill adjustment for the APC acquisition346 
Balance at October 2, 2020$614,422 
  SMP AMS MDS Total
Balance at June 30, 2017 $116,003
 $217,956
 $46,887
 $380,846
Goodwill adjustment for the CES acquisition 291
 —
 —
 291
Goodwill adjustment for the Delta acquisition —
 201
 —
 201
Goodwill arising from the RTL acquisition 3,447
 —
 —
 3,447
Balance at December 31, 2017 $119,741
 $218,157
 $46,887
 $384,785
In the six months ended December 31, 2017, there were no triggering events, as defined by FASB ASC 350, Intangibles - Goodwill and Other, which required an interim goodwill impairment test. The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year.
G.Restructuring
The following table presents the detail of activity for the Company’s restructuring plans:
12
  Severance &
Related		 Facilities
& Other		 Total
Restructuring liability at June 30, 2017 $1,365
 $—
 $1,365
Restructuring and other charges 327
 81
 408
Cash paid (575) (81) (656)
Restructuring liability at December 31, 2017 $1,117
 $—
 $1,117

During the six months ended December 31, 2017, the Company incurred net restructuring and other charges of $408. G.Restructuring
Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities.During the first quarter ended October 2, 2020, the Company incurred net restructuring and other charges of $1,297 primarily related to severance costs associated with the elimination of 19 positions, predominantly in the manufacturing, sales and R&D functions. These charges related to talent shifts and resource redundancy resulting from the internal reorganization the Company completed in August which created better alignment with its market and brand strategy as well as promote scale as the Company continues to grow.
All of the restructuring and other charges are classified as operatingOperating expenses in the consolidated statementsConsolidated Statements of operationsOperations and Comprehensive Income and any remaining severance obligations are expected to be paid within the next twelve months. The restructuring liability is classified as accruedAccrued expenses in the consolidated balance sheets.Consolidated Balance Sheets.
The following table presents the detail of activity for the Company’s restructuring plans:
H.Income TaxesSeverance &
Related
Restructuring liability at July 3, 2020$597 
Restructuring and other charges1,297 
Cash paid(898)
Restructuring liability at October 2, 2020$996 
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted by the U.S. government. The Tax Act has impacted the U.S. statutory Federal tax rate that the Company will use going forward, which has been reduced to 21% from 35%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory Federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years.



The Tax Act also includes items that the Company expects will increase its tax expense including, but not limited to, the elimination of the domestic manufacturing deduction and increased limitations on executive compensation. In addition, the actual effective tax rate may be materially different than the statutory Federal tax rate (including being higher) based on the availability and impact of various other adjustments including but not limited to state taxes, Federal research and development credits, discrete tax benefits related to stock compensation, and the inclusion or exclusion of various items in taxable income which may differ from GAAP income.
To transition to the reduced U.S. corporate tax rate, an adjustment is required to be made to our U.S. deferred tax assets and liabilities. For the three months ended December 31, 2017, the adjustment to the U.S. deferred tax assets and liabilities resulted in a tax benefit of $1,286. The Tax Act includes a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986, including historical tax information that is not yet available to management. The Company has not recorded any transition tax associated with its accumulated, undistributed foreign earnings given its current U.S. tax attributes, including the availability of foreign tax credits. For the three months ended December 31, 2017, the Company has recorded a provisional tax expense of $415 as it no longer expects to utilize certain foreign tax credits. The Company continues to evaluate its transition tax obligation and expects to finalize its conclusions by the end of fiscal 2018. The Company does not expect the final amounts to be materially different than those recorded within this period. For the three-months ended December 31, 2017, the Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year 2018. In accordance with SEC Staff Accounting Bulletin 118 (“SAB 118”), future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and finalized.H.Income Taxes
The Company recorded an income tax provision of $1,335$2,198 and $1,779 on income from operations before income taxes of $10,468 and $6,983 for the three months ended December 31, 2017 and 2016, respectively. The Company recorded an income tax benefit of $7,046 and an income tax provision of $520$2,018 on income from operations before income taxes of $20,040$17,996 and $9,543$17,229 for the six monthsfirst quarters ended December 31, 2017October 2, 2020 and 2016,September 27, 2019, respectively.
During the three monthsfirst quarters ended December 31, 2017October 2, 2020 and 2016,September 27, 2019, the Company recognized a discrete tax expense and benefit of $294$2,480 and $634,$6,127, respectively, related to excess tax benefits on stock-based compensation. The Company also recognized a discrete tax expense forbenefit of $443 related to foreign tax rate changes during the three months ended December 31, 2017 included the enactment of the Tax Act which revalued the excess tax benefit previously recorded in the three monthsfirst quarter ended September 30, 2017. The excess tax benefit related to stock-based compensation is the result of an increase in value from the stock award between the grant date and the vest date. 27, 2019.
The effective tax rate for the three monthsfirst quarters ended December 31, 2017October 2, 2020 and 2016September 27, 2019 differed from the Federal statutory rate primarily due to Federal and State research and development credits, domestic manufacturing deduction, excess tax benefits related to stockstock-based compensation, non-deductible compensation and state taxes.
During the six monthsfirst quarter ended December 31, 2017 and 2016, the Company recognized a discrete tax benefit of $7,579 and $2,817, respectively, related to excess tax benefits on stock-based compensation. The discrete tax benefit for the six months ended December 31, 2017 included the enactment of the Tax Act which revalued the excess tax benefit previously recorded in the three months ended September 30, 2017. The benefit is the result of the increase in value from the stock award between the grant date and the vest date. The six months ended December 31, 2017 also included discrete tax benefits of $3,716, derived from new information obtained about net operating loss carry-forwards of the entities acquired from Microsemi Corporation in May 2016. The discrete items disclosed above for the six months ended December 31, 2017 included the effect of the Tax Act. The effective tax rate for the six months ended December 31, 2017 and 2016 differed from the Federal statutory rate primarily due to Federal research and development credits, domestic manufacturing deduction, excess tax benefits related to stock compensation, and state taxes.
NoOctober 2, 2020, there were no material changes into the Company’sCompany's unrecognized tax positions occurred during the six months ended December 31, 2017.positions.
I.Debt
I.Debt
REVOLVING CREDIT FACILITY
On June 27, 2017,September 28, 2018, the Company amended its revolving credit facilityCredit Agreement to increase and extend the borrowing capacity of its existing revolving credit facility intoto a $400,000,$750,000, 5-year revolving credit line expiring in June 2022 (“(the “Revolver”), with the Revolver”).maturity extended to September 28, 2023. As of December 31, 2017,October 2, 2020, the Company's outstanding balance of unamortized deferred financing costs was $5,991,$4,033, which is being amortized to other (expense) income,Other expense, net in the Consolidated Statements of Operations and Comprehensive Income on a straight line basis over the new term of the Revolver. The Company drew $195,000 from the Revolver to facilitate the completion of the Merger Agreement for the acquisition of both Ceres and its wholly-owned subsidiary, Themis.
As of December 31, 2017,October 2, 2020, the Company was in compliance with all covenants and conditions under the Revolver and there were no outstanding borrowings against the revolver. Revolver. There were outstanding letters of credit of $2,760$904 as of December 31, 2017.

October 2, 2020.

J.Stock-Based Compensation
STOCK OPTIONJ.Employee Benefit Plan
PLANSENSION PLAN
The Company maintains a defined benefit pension plan (the “Plan”) for its Swiss employees, which is administered by an independent pension fund. The Plan is mandated by Swiss law and meets the criteria for a defined benefit plan under ASC 715, Compensation—Retirement Benefits (“ASC 715”), because participants of the Plan are entitled to a defined rate of return on contributions made. The independent pension fund is a multi-employer plan with unrestricted joint liability for all participating companies for which the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan.
13

The Company recognizes a net asset or liability for the Plan equal to the difference between the projected benefit obligation of the Plan and the fair value of the Plan’s assets as required by ASC 715. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan. The Plan's funded status at October 2, 2020 was a net liability of $12,337, which is recorded in Other non-current liabilities on the Consolidated Balance Sheet. The Company recorded a net gain of $31 and $7 in AOCL during the first quarters ended October 2, 2020 and September 27, 2019, respectively. The Company recognized net periodic benefit costs of $413 and $296 associated with the Plan for the first quarters ended October 2, 2020 and September 27, 2019, respectively. The Company's total expected employer contributions to the Plan during fiscal 2021 are $957.
K.Stock-Based Compensation
STOCK INCENTIVE PLANS
The aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 2,862 shares, with an additional 710 shares rolled into the 2018 Plan that were available for future grant under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”), is 15,252 at the time of shareholder approval of the 2018 Plan. The 2018 Plan replaced the 2005 Plan. The shares at December 31, 2017.authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan. 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. All stock options are granted with an exercise price of not less than 100% of the fair value of the Company’s common stock aton the date of grant and the options generally have a term of seven years. There were 1,4961,698 shares available for future grant under the 20052018 Plan at December 31, 2017.October 2, 2020. On October 28, 2020, the Shareholders of the Company approved 3,000 shares to be added to the 2018 Plan.
As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives and employees pursuant to the 20052018 Plan. Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. 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 include: (i) the achievement of internal performance targets only, and (ii)generally include the achievement of internal performance targets in relation to a peer group of companies.
EMPLOYEE STOCK PURCHASE PLAN
The aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 1,800 shares. Under the ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the ESPP. There were 39 and 500 shares issued under the ESPP during the six monthsfirst quarters ended December 31, 2017October 2, 2020 and 2016,September 27, 2019, respectively. Shares available for future purchase under the ESPP totaled 26329 at December 31, 2017.October 2, 2020. On October 28, 2020, the Shareholders of the Company approved 500 shares to be added to the ESPP.
STOCK OPTIONAND AWARD ACTIVITY
The following table summarizes activity of the Company’s stock option plans since June 30, 2017:July 3, 2020:
 Options Outstanding
Number of
Shares		Weighted Average
Exercise Price		Weighted Average
Remaining
Contractual Term
(Years)
Outstanding at July 3, 20203 $5.52 1.12
Granted0 0 
Exercised(1)5.52 
Canceled0 0 
Outstanding at October 2, 20202 $5.52 0.87
14
  Options Outstanding
  Number of
Shares		 Weighted Average
Exercise Price		 Weighted Average
Remaining
Contractual Term
(Years)
Outstanding at June 30, 2017 51
 $13.53
 0.60
Granted —
 —
  
Exercised (47) 14.12
  
Canceled —
 —
  
Outstanding at December 31, 2017 4
 $5.52
 3.60

The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since June 30, 2017:July 3, 2020:
 Non-vested Restricted Stock Awards
 Number of
Shares		Weighted Average
Grant Date
Fair Value
Outstanding at July 3, 2020957 $61.59 
Granted454 77.26 
Vested(343)51.02 
Forfeited(9)61.95 
Outstanding at October 2, 20201,059 $69.80 
  Non-vested Restricted Stock Awards
  Number of
Shares		 Weighted Average
Grant Date
Fair Value
Outstanding at June 30, 2017 1,564
 $18.93
Granted 453
 47.46
Vested (758) 17.02
Forfeited (42) 26.28
Outstanding at December 31, 2017 1,217
 $30.47
STOCK-BASED COMPENSATION EXPENSE
STOCK-BASED COMPENSATION EXPENSE
The Company recognizes expense for its share-based payment plans in the consolidated statementsConsolidated Statements of operations for the six months ended December 31, 2017Operations and 2016Comprehensive Income in accordance with FASB ASC 718, Compensation - Stock Compensation(“ASC 718”). The Company had $265$802 and $177$542 of capitalized stock-based compensation expense on the consolidated balance sheets as of December 31, 2017Consolidated Balance Sheets for the periods ended October 2, 2020 and 2016,July 3, 2020, respectively. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures.
The following table presents share-based compensation expenses included in the Company’s consolidated statementsConsolidated Statements of operations:Operations and Comprehensive Income:
 First Quarters Ended
 October 2, 2020September 27, 2019
Cost of revenues$295 $141 
Selling, general and administrative5,676 4,643 
Research and development1,213 875 
Stock-based compensation expense before tax7,184 5,659 
Income taxes(1,868)(1,471)
Stock-based compensation expense, net of income taxes$5,316 $4,188 

L.Operating Segment, Geographic Information and Significant Customers
 Three Months Ended December 31, Six Months Ended December 31,
 2017 2016 2017 2016
Cost of revenues$47
 $148
 $195
 $223
Selling, general and administrative4,270
 3,539
 8,246
 6,578
Research and development510
 406
 1,007
 924
Stock-based compensation expense before tax4,827
 4,093
 9,448
 7,725
Income taxes(1,593) (1,575) (3,118) (2,964)
Stock-based compensation expense, net of income taxes$3,234
 $2,518
 $6,330
 $4,761
K.Employee Benefit Plan
PENSION PLAN
With the acquisition of CES on November 4, 2016, the Company assumed a defined benefit pension plan (the "Plan") for its Swiss employees, which is administered by an independent pension fund. The Plan is mandated by Swiss law and meets the criteria for a defined benefit plan under ASC 715, Compensation—Retirement Benefits (“ASC 715”), because participants of the Plan are entitled to a defined rate of return on contributions made. The independent pension fund is a multi-employer plan with unrestricted joint liability for all participating companies for which the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan.
The Company recognizes a net asset or liability for the Plan equal to the difference between the projected benefit obligation of the Plan and the fair value of the Plan’s assets as required by ASC 715. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan. The Plan's funded status at December 31, 2017 was a net liability of $6,647, which is recorded in other non-current liabilities on the consolidated balance sheets. The Company recorded a net gain of $10 and $40 in accumulated other comprehensive income during the three and six months ended December 31, 2017, respectively. The Company recognized net periodic benefit costs of $201 and $407 associated with the Plan for the three and six months ended December 31, 2017, respectively. The Company's total expected employer contributions to the Plan during fiscal 2018 are $516.
L.Operating Segment, Geographic Information and Significant Customers
Operating segments are defined as components of an enterprise evaluated regularly by the Company's chief operating decision maker (“CODM”)CODM in deciding how to allocate resources and assess performance. During the first quarter of fiscal 2021, the Company reorganized its internal reporting unit structure to align with the Company's market and brand strategy as well as promote scale as the organization continues to grow. The Company is comprisedevaluated this reorganization under ASC 280 to determine whether this change has impacted the Company's single operating and reportable segment. The Company concluded this change had no effect given the CODM continues to evaluate and manage the Company on the basis of one1 operating and reportable segment. The Company utilized the management approach for determining its operating segment in accordance with FASB ASC 280, Segment Reporting.


280.
The geographic distribution of the Company’s revenues as determined by order origination based on the country in which the Company's legal subsidiary is domiciled is summarized as follows:
U.S.EuropeAsia PacificEliminationsTotal
FIRST QUARTER ENDED OCTOBER 2, 2020
Net revenues to unaffiliated customers$195,847 $9,663 $111 $— $205,621 
Inter-geographic revenues240 344 0 (584)— 
Net revenues$196,087 $10,007 $111 $(584)$205,621 
FIRST QUARTER ENDED SEPTEMBER 27, 2019
Net revenues to unaffiliated customers$161,996 $14,440 $868 $— $177,304 
Inter-geographic revenues972 651 0 (1,623)— 
Net revenues$162,968 $15,091 $868 $(1,623)$177,304 
15

  U.S. Europe Asia Pacific Eliminations Total
THREE MONTHS ENDED DECEMBER 31, 2017          
Net revenues to unaffiliated customers $105,687
 $9,417
 $2,808
 $—
 $117,912
Inter-geographic revenues 3,169
 43
 —
 (3,212) —
Net revenues $108,856
 $9,460
 $2,808
 $(3,212) $117,912
THREE MONTHS ENDED DECEMBER 31, 2016          
Net revenues to unaffiliated customers $91,407
 $5,809
 $798
 $—
 $98,014
Inter-geographic revenues 1,893
 —
 —
 (1,893) —
Net revenues $93,300
 $5,809
 $798
 $(1,893) $98,014
SIX MONTHS ENDED DECEMBER 31, 2017          
Net revenues to unaffiliated customers $203,402
 $16,895
 $3,684
 $—
 $223,981
Inter-geographic revenues 4,916
 65
 —
 (4,981) —
Net revenues $208,318
 $16,960
 $3,684
 $(4,981) $223,981
SIX MONTHS ENDED DECEMBER 31, 2016          
Net revenues to unaffiliated customers $174,455
 $6,662
 $4,546
 $—
 $185,663
Inter-geographic revenues 5,180
 15
 —
 (5,195) —
Net revenues $179,635
 $6,677
 $4,546
 $(5,195) $185,663
The Company offers a broad family of products designed to meet the full range of requirements in compute-intensive, signal processing, image processing and command and control applications. To maintain a competitive advantage, the Company seeks to leverage technology investments across multiple product lines and product solutions.
The Company’s products are typically compute-intensive and require extremely high bandwidth and high throughput. These systems often must also meet significant SWaP constraints for use in aircraft, unmanned aerial vehicles, ships and other platforms and be ruggedized for use in harsh environments. The Company's products transform the massive streams of digital data created in these applications into usable information in real time. The systems can scale from a few processors to thousands of processors.
In recent years, the Company completed a series of acquisitions that changed its technological capabilities, applications and end markets. As these acquisitions and changes occurred, the Company increased theCompany's proportion of its revenue derived from the sale of components in different technological areas, and also increased the amount of revenue associated with combiningmodules, sub-assemblies and integrated subsystems which combine technologies into more complex and diverse products including modules, sub-assemblies and integrated subsystems.has shifted. The following tables present revenue consistent with the Company's strategy of expanding its technological capabilities and program content. As additional information related to the Company’s products by end user, application, product grouping and/or platform is attained, the categorization of these products can vary over time. When this occurs, the Company reclassifies revenue by end user, application, product grouping and/or platform for prior periods. Such reclassifications typically do not materially change the underlying trends of results within each revenue category.
The following table below presents the Company's net revenue by end user for the periods presented:
  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
Domestic (1) $89,969
 $83,052
 $179,647
 $156,578
International/Foreign Military Sales (2) 27,943
 14,962
 44,334
 29,085
Total Net Revenue $117,912
 $98,014
 $223,981
 $185,663
 First Quarters Ended
 October 2, 2020September 27, 2019
Domestic(1)
$178,743 $157,475 
International/Foreign Military Sales(2)
26,878 19,829 
Total Net Revenue$205,621 $177,304 
(1) Domestic revenues consist of sales where the end user is within the U.S., as well as sales to prime defense contractor customers where the ultimate end user location is not defined. 
(2) International/Foreign Military Sales consist of sales to U.S. prime defense contractor customers where the end user is known to be outside the U.S., foreign military sales through the U.S. government, and direct sales to non-U.S. based customers intended for end use outside of the U.S.


The following table below presents the Company's net revenue by end application for the periods presented:
  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
Radar (1) $44,678
 $44,803
 $81,218
 $82,292
Electronic Warfare (2) 29,411
 21,304
 57,419
 42,284
Other Sensor & Effector (3) 10,992
 4,661
 20,741
 9,307
Total Sensor & Effector 85,081
 70,768
 159,378
 133,883
C4I (4) 13,562
 6,613
 26,388
 10,953
Other (5) 19,269
 20,633
 38,215
 40,827
Total Net Revenue $117,912
 $98,014
 $223,981
 $185,663
First Quarters Ended
 October 2, 2020September 27, 2019
Radar(1)
$72,409 $37,919 
Electronic Warfare(2)
39,075 36,057 
Other Sensor & Effector(3)
23,095 27,890 
Total Sensor & Effector134,579 101,866 
C4I(4)
53,781 49,011 
Other(5)
17,261 26,427 
Total Net Revenue$205,621 $177,304 
(1) Radar includes end-use applications where radio frequency signals are utilized to detect, track, and identify objects.
(2) Electronic Warfare includes end-use applications comprising the offensive and defensive use of the electromagnetic spectrum.
(3) Other Sensor & Effector products include all Sensor & Effector end markets other than Radar and Electronic Warfare.
(4) C4I includes rugged secure rackmount servers that are designed to drive the most powerful military processing applications.
(5) Other products include all component and other sales where the end use is not specified.
The following table below presents the Company's net revenue by product grouping for the periods presented:
First Quarters Ended
 October 2, 2020September 27, 2019
Components(1)
$50,296 $53,419 
Modules and Sub-assemblies(2)
17,466 35,240 
Integrated Subsystems(3)
137,859 88,645 
Total Net Revenue$205,621 $177,304 
16
  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
Components (1) $39,908
 $24,636
 $72,720
 $44,468
Modules and Sub-assemblies (2) 41,728
 38,560
 89,460
 75,152
Integrated Subsystems (3) 36,276
 34,818
 61,801
 66,043
Total Net Revenue $117,912
 $98,014
 $223,981
 $185,663

(1) Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or sub-assembly. Examples include, but are not limited to, power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.
(2) Modules and Sub-assemblies include combinations of multiple functional technology elements and/or components that work together to perform multiple functions but are typically resident on or within a single board or housing. Modules and sub-assemblies may in turn be combined to form an integrated subsystem. Examples of modules and sub-assemblies include, but are not limited to, embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and IO (input-output) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners and transceivers.
(3) Integrated Subsystems include multiple modules and/or subassembliessub-assemblies combined with a backplane or similar functional element and software to enable a solution. These are typically but not always integrated within a chassis and with cooling, power and other elements to address various requirements and are also often combined with additional technologies for interaction with other parts of a complete system or platform. Integrated subsystems also include spare and replacement modules and sub-assemblies sold as part of the same program for use in or with integrated subsystems sold by the Company.
The following table presents the Company's net revenue by platform for the periods presented:
First Quarters Ended
October 2, 2020September 27, 2019
Airborne(1)
$89,436 $86,157 
Land(2)
37,551 16,310 
Naval(3)
46,282 39,710 
Other(4)
32,352 35,127 
Total Net Revenues$205,621 $177,304 

(1) Airborne platform includes products that relate to personnel, equipment, or pieces of equipment designed for airborne applications.
(2) Land platform includes products that relate to fixed or mobile equipment, or pieces of equipment for personnel, weapon systems, vehicles and support elements operating on land.
(3) Naval platform includes products that relate to personnel, equipment, or pieces of equipment designed for naval operations.
(4) All platforms other than Airborne, Land or Naval.
The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows:
  U.S. Europe Asia Pacific Eliminations Total
December 31, 2017 $50,305
 $1,323
 $12
 $—
 $51,640
June 30, 2017 $50,340
 $1,288
 $15
 $—
 $51,643
U.S.EuropeAsia PacificEliminationsTotal
October 2, 2020$89,261 $5,479 $4 $0 $94,744 
July 3, 2020$82,588 $5,144 $5 $0 $87,737 
Identifiable long-lived assets exclude ROU assets, goodwill, and intangible assets.


Customers comprising 10% or more of the Company’s revenues for the periods shown below are as follows:
 First Quarters Ended
 October 2, 2020September 27, 2019
Raytheon Technologies23 %13 %
Lockheed Martin Corporation
19 %18 %
Northrop Grumman Corporation*11 %
L3Harris Technologies*13 %
42 %55 %
  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
Lockheed Martin Corporation
 20% 13% 19% 19%
Raytheon Company 17% 22% 19% 19%
Northrop Grumman Corporation 12% 10% 11% *
  49% 45% 49% 38%
*    Indicates that the amount is less than 10% of the Company's revenue for the respective period.
*Indicates that the amount is less than 10% of the Company’s revenues for the respective period.
While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms. ProgramsThere were no programs comprising 10% or more of the Company’sCompany's revenues for the periods shown below are as follows:first quarters ended October 2, 2020 and September 27, 2019.
  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
F-35 *
 11% *
 *
Aegis *
 *
 *
 10%
  —% 11% —% 10%
M.Commitments and Contingencies
*Indicates that the amount is less than 10% of the Company’s revenues for the respective period.
M.Commitments and Contingencies
LEGAL CLAIMS
The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of its business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. 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.
17

INDEMNIFICATION OBLIGATIONS
The Company’s standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments the Company could be required to make under these indemnification provisions is, in some instances, unlimited.
PURCHASE COMMITMENTS
As of December 31, 2017,October 2, 2020, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations. The purchase commitments covered by these agreements are for less than one year and aggregate to $50,653.$113,227.
OTHER
As part of the Company's strategy for growth, the Company continues to explore acquisitions or strategic alliances. The associated acquisition costs incurred in the form of professional fees and services may be material to the future periods in which they occur, regardless of whether the acquisition is ultimately completed.
The Company may elect from time to time to purchase and subsequently retire shares of common stock in order to settle employees’ tax liabilities associated with vesting of a restricted stock award or exercise of stock options. These transactions would be treated as a use of cash in financing activities in the Company's statementConsolidated Statements of cash flows.Cash Flows.
N.Subsequent Events
THEMISCOMPUTERAQUISITION
On December 21, 2017, the Merger Sub, entered into the Merger Agreement with Ceres, the holding company that owns Themis. Pursuant to the Merger Agreement, the Merger Sub will merge with and into Ceres with Ceres continuing as the surviving company and a wholly-owned subsidiary of Mercury. By operation of the Merger, the Company acquired both Ceres and its wholly-owned subsidiary, Themis.
Based in Fremont, California, Themis is a leading designer and manufacturer of commercial, SWaP-optimized rugged servers, computers, and storage systems for U.S. and international defense programs.
Under the terms of the Merger Agreement, the merger consideration (including payments with respect to outstanding stock options) consisted of an all cash purchase price of $180,000, without interest. The merger consideration is subject to post-closing


adjustments based on a determination of closing net working capital, transaction expenses and net debt (all as defined in the Merger Agreement). A related escrow agreement establishes an escrow amount of $1,500 in respect of post-closing adjustments owed to the Company and an escrow amount of $900 in respect of indemnification obligations to the Company.
On February 1, 2018, the Company closed the transaction for an aggregate purchase price of $180,000, plus an estimated adjustment for acquired working capital and cash. The Company drew $195,000 on the Revolver to facilitate the closing of the acquisition, with the higher amount reflecting an estimated adjustment for working capital, including cash, expected to be received with the Acquired Company at closing.
The Company has not completed its preliminary purchase price allocation for Ceres as not all information required for the analysis was available.
GENERALN.Subsequent Events
The Company has evaluated subsequent events from the date of the consolidated balance sheetConsolidated Balance Sheet through the date the consolidated financial statements were issued.

18


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
From time to time, information provided, statements made by our employees or information included in our filings with the Securities and Exchange Commission ("SEC"(“SEC”) may contain statements that are not historical facts but that are “forward-looking statements,” which involve risks and uncertainties. You can identify these statements by the use of the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of epidemics and pandemics such as COVID, effects of any U.S. Federal government shutdown or extended continuing resolution, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. Government’s interpretation of, federalFederal export control or procurement rules and regulations, market acceptance of the Company's products, shortages in components, production delays or unanticipated expenses due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings, or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, increases in interest rates, changes to interest rate swaps or other cash flow hedging arrangements, changes to industrial security and cyber-security regulations and requirements, changes in tax rates or tax regulations, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as set forth under Part I-Item 1A (Risk Factors) in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017.July 3, 2020. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
OVERVIEW
Mercury Systems, Inc. is a leading commercial providertechnology company serving the aerospace and defense industry, positioned at the intersection of secure sensorhigh-tech and safety critical mission processing subsystems. Optimized for customer and mission success, our solutions power a wide variety of critical defense and intelligence programs.defense. Headquartered in Andover, Massachusetts, we are pioneeringdeliver solutions that power a next-generationbroad range of aerospace and defense electronics business model designedprograms, optimized for mission success in some of the most challenging and demanding environments. We envision, create and deliver innovative technology solutions purpose-built to meet our customers’ most-pressing high-tech needs, including those specific to the industry’s currentdefense community.
As a leading manufacturer of essential components, modules and emerging business needs. We deliver affordable innovative solutions, rapid time-to-value and service and support primarilysubsystems, we sell to defense prime contractorcontractors, the U.S. government and OEM commercial aerospace companies. We have built a trusted, contemporary portfolio of proven product solutions purpose-built for aerospace and defense that we believe meets and exceeds the performance needs of our defense and commercial customers. Customers add their own applications and algorithms to our specialized, secure and innovative pre-integrated solutions. This allows them to complete their full system by integrating with their platform the sensor technology and, in some cases, the processing from Mercury. Our products and solutions have beenare deployed in more than 300 programs with over 25 different defense prime contractors. Key programs include Aegis, Patriot, Surface Electronic Warfare Improvement Program (“SEWIP”), Gorgon Stare, Predator, F-35, F-16 SABR, E2D Hawkeye, Reaper,contractors and Paveway.commercial aviation customers.
Mercury’s transformational business model accelerates the process of making new technology profoundly more accessible to our customers by bridging the gap between commercial technology and aerospace and defense applications. Our organizational structure allows uslong-standing deep relationships with leading high-tech companies, coupled with our high level of R&D investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model.
Our capabilities, technology and R&D investment strategy combine to deliver capabilities that combine technology building blocks and deep domain expertisedifferentiate Mercury in defense sector.
our industry. Our technologies and capabilities include secure embedded processing modules and subsystems, mission computers, secure and rugged rack-mount servers, safety-critical avionics, radio frequency (“RF”)RF components, multi-function assemblies, subsystems and subsystems.custom microelectronics. We utilize leadingmaintain our technological edge high performance computing technologies architected by investing in critical capabilities and IP in processing and RF, leveraging open standards and open architectures to addressadapt quickly those building blocks into solutions for highly data-intensive applications, that include data signal, sensor and image processing while addressing the packaging challenges, often referred toincluding emerging needs in areas such as “SWaP” (size, weight, and power), thatAI.
Our mission critical solutions are common in military applications. We have design, development, and manufacturing capabilities in mission computing, safety-criticaldeployed by our customers for a variety of applications including C4ISR, electronic intelligence, avionics, and platform management. In addition, we design and manufacture RF, microwave and millimeter wave components and subsystems to meet the needs of the radar,EO/IR, electronic warfare, (“EW”), signals intelligence (“SIGINT”)weapons and other high bandwidth communications requirementsmissile defense, hypersonics and applications.
We also provide significant capabilities relating to pre-integrated electronic warfare, electronic attack (“EA”) and electronic counter measure (“ECM”) subsystems, SIGINT and electro-optical/infrared (“EO/IR”) processing technologies, and radar environment test and simulation systems. We deploy these solutions on behalf of defense prime contractors and the Department of Defense (“DoD”), leveraging commercially available technologies and solutions (or “building blocks”) from our business and other commercial suppliers. We leverage this technology to design and build integrated sensor processing subsystems, often including classified application-specific software and intellectual property (“IP”) for the C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance), EW, and ECM markets. We bring significant domain expertise to customers, drawing on over 25 years of experience in EW, SIGINT, and radar environment test and simulation.


radar.
Since we conduct much of our business with our defense customers via commercial item sales,items, requests by customers are a primary driver of revenue fluctuations from quarter to quarter. Customers specify delivery date requirements that coincide with their need for our products. Because these customers may use our products in connection with a variety of defense programs or
19

other projects of different sizes and durations, a customer’s orders for one quarter generally do not indicate a trend for future orders by that customer. Additionally, order patterns do not necessarily correlate amongst customers and, therefore, we generally cannot identify sequential quarterly trends.
As of December 31, 2017,October 2, 2020, we had 1,2051,979 employees. Our consolidated revenues, acquired revenues, net income, diluted net earnings per share, adjusted earnings per share ("(“adjusted EPS"EPS”), and adjusted EBITDA for the three monthsfirst quarter ended December 31, 2017October 2, 2020 were $117.9$205.6 million, $9.1$8.8 million, $0.19, $0.28,$15.8 million, $0.29, $0.51, and $26.9 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures. Our consolidated revenues, net income, net earnings per share, adjusted earnings per share ("adjusted EPS"), and adjusted EBITDA for the six months ended December 31, 2017 were $224.0 million, $27.1 million, $0.57, $0.65, and $51.9$42.8 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.
OUR RESPONSE TO COVID

The COVID pandemic continues to impact people and countries around the world. This is a time of extraordinary uncertainty. It is also a time when the work we do in support of strategic national priorities is recognized as critical.

At Mercury, we remain focused on the four goals we established at the outset of the COVID crisis: to protect the health, safety, and livelihoods of our people; to mitigate or reduce operational and financial risks to the Company; to continue to deliver on our commitments to customers and shareholders; and to continue the mission-critical work Mercury does every day to support the ongoing security of our nation, our brave men and women in uniform, and the communities in which we all live.

To protect the health, safety, and livelihoods of our employees, we took immediate action on several fronts, instituting a variety of new policies and programs including, but not limited to, additional sick leave for COVID-related circumstances, a work-from-home policy for all employees who can perform their duties remotely as well as increasing overtime pay for eligible employees. We also established a relief fund, with an initial $1 million budget, to assist eligible Mercury employees, including temporary agency employees, experiencing unexpected financial burdens as a result of the COVID crisis. The intent of the Mercury COVID Relief Fund is to provide financial assistance to employees who may otherwise be unable to pay for basic necessities, unexpected care for immediate family members, or other urgent needs that promote their health and safety during the current COVID crisis.
As we have been designated an “essential business” as a part of the defense industrial base, during the year, our facilities continued to operate while complying with social distancing requirements consistent with Centers for Disease Control and Prevention (“CDC”) guidelines and requirements. We implemented numerous preventive measures to maximize the safety of our facilities, including but not limited to, establishing physical segregation areas, implementing environmental cleaning and disinfection protocols in compliance with CDC guidelines and requirements, temperature and COVID testing at our facilities, and limiting non-essential site visits by internal and external visitors.
We will continue to monitor and assess our response to protect the health, safety and livelihoods of our people.
RESULTS OF OPERATIONS:
Results of operations for the three and six monthfirst quarter ended October 2, 2020 includes full period results from the acquisition of American Panel Corporation (“APC”). Results of operations for the first quarter ended December 31, 2016 do notSeptember 27, 2019, include only results from the acquisition date for Delta Microwave, LLC ("Delta") or Richland Technologies, L.L.C. ("RTL") since these businesses were acquired subsequent to December 31, 2016 and includes approximately two months results for CES Creative Electronic Systems, S.A. ("CES"), which was acquired on November 4, 2016.APC. Accordingly, the periods presented below are not directly comparable.
Three months
20

The first quarter ended December 31, 2017October 2, 2020 compared to the three monthsthe first quarter ended December 31, 2016September 27, 2019
The following tables settable sets forth, for the three month periodsfirst quarter ended indicated, financial data from the consolidated statementsConsolidated Statements of operations:Operations and Comprehensive Income:
(In thousands)October 2, 2020As a % of
Total Net
Revenue		September 27, 2019As a % of
Total Net
Revenue
Net revenues$205,621 100.0 %$177,304 100.0 %
Cost of revenues117,502 57.1 98,904 55.8 
Gross margin88,119 42.9 78,400 44.2 
Operating expenses:
Selling, general and administrative32,904 16.0 29,970 16.9 
Research and development27,417 13.3 21,870 12.3 
Amortization of intangible assets7,731 3.8 7,019 4.0 
Restructuring and other charges1,297 0.6 648 0.4 
Acquisition costs and other related expenses— — 1,417 0.8 
Total operating expenses69,349 33.7 60,924 34.4 
Income from operations18,770 9.1 17,476 9.8 
Interest income72 — 1,187 0.7 
Other expense, net(846)(0.3)(1,434)(0.8)
Income before income taxes17,996 8.8 17,229 9.7 
Tax provision (benefit)2,198 1.1 (2,018)(1.2)
Net income$15,798 7.7 %$19,247 10.9 %
(In thousands) December 31, 2017 As a % of
Total Net
Revenue		 December 31, 2016 As a % of
Total Net
Revenue
Net revenues $117,912
 100.0 % $98,014
 100.0 %
Cost of revenues 63,752
 54.1
 50,625
 51.7
Gross margin 54,160
 45.9
 47,389
 48.3
Operating expenses:        
Selling, general and administrative 21,222
 18.0
 19,320
 19.7
Research and development 15,187
 12.9
 13,156
 13.4
Amortization of intangible assets 5,827
 4.9
 4,888
 5.0
Restructuring and other charges 313
 0.3
 69
 0.1
Acquisition costs and other related expenses 723
 0.6
 998
 1.0
Total operating expenses 43,272
 36.7
 38,431
 39.2
Income from operations 10,888
 9.2
 8,958
 9.1
Interest income 3
 —
 10
 —
Interest expense (107) (0.1) (1,898) (1.9)
Other expense, net (316) (0.3) (87) (0.1)
Income before income taxes 10,468
 8.8
 6,983
 7.1
Tax provision 1,335
 1.1
 1,779
 1.8
Net income $9,133
 7.7 % $5,204
 5.3 %
REVENUES
(In thousands) December 31, 2017 As a % of
Total Net
Revenue		 December 31, 2016 As a % of
Total Net
Revenue		 $ Change % Change
Organic revenue $104,957
 89% $94,058
 96% $10,899
 12%
Acquired revenue 12,955
 11% 3,956
 4% 8,999
 227%
Total revenues $117,912
 100% $98,014
 100% $19,898
 20%
Total revenues increased $19.9$28.3 million, or 20%16.0%, to $117.9$205.6 million during the three monthsfirst quarter ended December 31, 2017October 2, 2020, as compared to $177.3 million during the same period in fiscal 2017first quarter ended September 27, 2019 including "Acquired revenue"“acquired revenue” which represents net revenue from acquired businesses that have been part of Mercury for completion of four full quarters or less (and excludes any intercompany transactions). After the completion of four fiscal quarters, acquired businesses will be treated as organic for current and comparable historical periods. The increase in total revenues iswas primarily attributeddue to the Falcon Edge, SEWIP and E2D Hawkeye programs and the increase of $9.0$20.4 million of Acquired revenue. Theseadditional organic revenues which were predominantly driven by increased demand for integrated subsystems, across radar, electronic warfare and C4I applications, within land and naval platforms. The increases in demand for integrated subsystems were partially offset by lowerdecreases to modules and sub-assemblies and components. The organic revenues from the F-35 program and a large ground based radar program.
International revenues, which consist of foreign military sales through the U.S. government, sales to prime defense contractor customers where the end user is known to be outside of the U.S., and direct sales to non-U.S. based customers, increased $12.9 million to $27.9 million during the three months ended December 31, 2017, compared to $15.0 million in the same period in the prior fiscal year. International revenues represented 24% and 15% of total revenues during the three months ended December 31, 2017 and 2016, respectively.


Revenues from EW, C4I, and Other Sensor and Effector increased by $8.1 million, $6.9 million and $6.3 million, respectively, during the three months ended December 31, 2017 as compared to the same period in fiscal 2017. The EW increase was driven primarily by a classified radar program, as well as the SEWIPPatriot, CDS, Galaxie and LTAMDS programs, which were partially offset by decreases in a classified missile program whileand the increase in C4I was driven by the F-35CPS program. The increase in Other Sensor and Effector was primarilyTotal revenues also increased $7.9 million from acquired revenue due to higher revenue froma full period of results for APC, which was acquired on September 23, 2019. See the Precision Guidance Kit ("PGK") program. Additionally, revenues from components, modules & sub-assemblies, and integrated subsystems increased by $15.3 million, $3.2 million, and $1.4 million, respectively, during the three months ended December 31, 2017 as comparedNon-GAAP Financial Measures section for a reconciliation to the same period in fiscal 2017. The components increase was driven primarily by the Falcon Edge program, while the increase in modules and sub-assemblies was driven primarily by the SEWIP program. The increase in integrated subsystems was primarily due to higher revenue from the E2D Hawkeye and Aegis programs.our most directly comparable GAAP financial measures.
GROSS MARGIN
Gross margin was 45.9%42.9% for the three monthsfirst quarter ended December 31, 2017,October 2, 2020, a decrease of 240130 basis points from the 48.3%44.2% gross margin achieved during the same period in fiscal 2017.first quarter ended September 27, 2019. The lower gross margin between years was primarily driven by program mix, higher Customer Funded Research and Development (“CRAD”) and $1.8 million of COVID related expenses. CRAD primarily represents engineering labor associated with long-term contracts for customized development, production and service activities. Due to the nature of these efforts, they typically carry a large last-time component buy bylower margin. These products are predominately grouped within integrated subsystems and to a customerlesser extent modules and less F-35 royalty revenue. Lowersub-assemblies. The gross margins for the three months ended December 31, 2017margin decreases were partially offset by lower inventory step-up amortization of $0.8 million as compared to the same period in fiscal 2017.operational efficiencies.
SELLING, GENERALAND ADMINISTRATIVE
Selling, general and administrative expenses increased $1.9$2.9 million, or 10%9.8%, to $21.2$32.9 million during the three monthsfirst quarter ended December 31, 2017,October 2, 2020, as compared to $19.3$30.0 million in the same period in fiscal 2017.first quarter ended September 27, 2019. The increase was primarily related to higher compensation related costs due to addedadditional headcount from organic growth and a full quarter of expenses related to the acquisitions of Delta and RTL, as well as the full period impact of the CESAPC acquisition. Selling, general and administrative expenses decreased as a percentage of revenues decreased slightlyrevenue to 16.0% for the three monthsfirst quarter ended December 31, 2017 as compared toOctober 2, 2020 from 16.9% for the same period in fiscal 2017. The decrease was primarilyfirst quarter ended September 27, 2019 due to higher revenues in the three months ended December 31, 2017, as compared to the same period in fiscal 2017.improved operating leverage.
21

RESEARCHAND DEVELOPMENT
Research and development expenses increased approximately $2.0$5.5 million, or 15%25.4%, to $15.2$27.4 million during the three monthsfirst quarter ended December 31, 2017,October 2, 2020, as compared to $13.2$21.9 million during the same period in fiscal 2017.first quarter ended September 27, 2019. The increase was primarily due to increasedadditional headcount from organic growth and a full quarter of expenses related to the acquisitionsAPC acquisition. Research and development expenses accounted for 13.3% and 12.3% of CES, Deltaour revenues for the first quarters ended October 2, 2020 and RTL driving higher compensation related costs,September 27, 2019, respectively. The increase as a percentage of revenue during the first quarter ended October 2, 2020 was primarily driven by the continued investment in additioninternal R&D to decreased customer funded development.promote future growth, including new opportunities in avionics, secure processing, radar modernization and our trusted custom microelectronics business.
RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges increased $0.2 million to $0.3 million during the three months ended December 31, 2017, compared to $0.1 million during the same period in fiscal 2017. Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. Restructuring and other charges were $1.3 million, during the first quarter ended October 2, 2020, as compared to $0.6 million during the first quarter ended September 27, 2019. Restructuring and other charges during the first quarter ended October 2, 2020 primarily related to severance costs associated with the elimination of 19 positions, predominantly in the manufacturing, sales and R&D functions. These charges related to talent shifts and resource redundancy resulting from the internal reorganization we completed in August which created better alignment with our market and brand strategy as well as promote scale as we continue to grow.
ACQUISITION COSTSAND OTHER RELATED EXPENSES
We incurred $0.7 million ofdid not incur any acquisition costs and other related expenses during the three monthsfirst quarter ended December 31, 2017, compared to $1.0October 2, 2020. The first quarter ended September 27, 2019 included $1.4 million during the same period in fiscal 2017. Theof acquisition costs and other related expenses incurred during the three months ended December 31, 2017 relate to the acquisition of Ceres Systems, the holding company that owns Themis Computer (“Themis”, and together with Ceres, collectively the “Acquired Company”), while fiscal 2017 expenses related to the acquisition of CES.APC. We expect to incur acquisition costs and other related expenses periodically in the future as we continue to seek acquisition opportunities to expand our technological capabilities, and new end marketsespecially within the sensor processing chain.and effector and C4I markets. Transaction costs incurred by the acquiree prior to the consummation of an acquisition would not be reflected in our historical results of operations.
INTEREST EXPENSEINCOME
We incurredInterest income decreased to $0.1 million of interest expense during the three months ended December 31, 2017 compared to $1.9 million during the same period in fiscal 2017. The decreasefirst quarter ended October 2, 2020, as compared to $1.2 million for the first quarter ended September 27, 2019. This was driven by $1.4 millionthe lower rate earned on cash interest expense and $0.5 million of non-cash interest expense relatedon hand during the first quarter ended October 2, 2020, as compared to the amortization of debt issuance costs related to our former term loan, which was repaid in the fourth quarter of fiscal 2017.prior year.
OTHER EXPENSE, NET
Other expense, net decreased $0.2 million to $(0.3)$0.8 million during the three monthsfirst quarter ended December 31, 2017,October 2, 2020, as compared to $(0.1)$1.4 million infor the same period in fiscal 2017.first quarter ended September 27, 2019. The decrease was primarily duedriven by foreign currency translation gains of $0.3 million as compared to $0.6foreign currency translation losses of $0.3 million induring the first quarters ended October 2, 2020 and September 27, 2019, respectively. Both periods include $0.8 million of financing and registration fees during the three months ended December 31, 2017 compared to $0.1fees.
INCOME TAXES
We recorded an income tax provision of $2.2 million and an income tax benefit of $2.0 million on income before income taxes of $18.0 million and $17.2 million for the same period in fiscal 2017. The decrease was also driven by a $0.3 million gain related to the amortization of the gain on the sale leaseback of our former headquarters in fiscal 2017, which was fully amortized in fiscal 2017. The decrease was partially offset by a less than $0.1 million foreign exchange


gain during the three monthsfirst quarters ended December 31, 2017, as compared to $0.2 million foreign exchange loss during the same period in fiscal 2017.
INCOME TAXES
On December 22, 2017, the Tax CutsOctober 2, 2020 and Jobs Act of 2017 (the “Tax Act”) was enacted by the U.S. government. The Tax Act has impacted the statutory Federal tax rate that the Company will use going forward, which has been reduced to 21% from 35%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory Federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. In addition to the reduced corporate rate we also expect to benefit from the immediate deduction for certain new investments. The Tax Act also includes items that we expect will increase our tax expense including, but not limited to, the elimination of the domestic manufacturing deduction and increased limitations on executive compensation. In addition, the actual effective tax rate may be materially different than the statutory Federal tax rate (including being higher) based on the availability and impact of various other adjustments including but not limited to state taxes, Federal research and development credits, discrete tax benefits related to stock compensation, and the inclusion or exclusion of various items in taxable income which may differ from GAAP income.September 27, 2019, respectively.
During the three monthsfirst quarters ended December 31, 2017October 2, 2020 and 2016,September 27, 2019, we recognized a discrete tax expense and benefit of $0.3$2.5 million and $0.6$6.1 million, respectively, related to excess tax benefits on stock-based compensation. The Company also recognized a discrete tax expense forbenefit of $0.5 million related to foreign tax rate changes during the three months ended December 31, 2017 included the enactment of the Tax Act which revalued the excess tax benefit previously recorded in the three monthsfirst quarter ended September 30, 2017. The excess tax benefit related to stock-based compensation is the result of an increase in value from the stock award between the grant date and the vest date.27, 2019.
OurThe effective tax rate for the three monthsfirst quarters ended December 31, 2017October 2, 2020 and September 27, 2019 differed from the Federal statutory tax rate of 28% primarily due to the one-time impact of the Tax Act, Federal and State research and development credits, domestic manufacturing deduction, excess tax benefits related to stockstock-based compensation, and state taxes. Our effective tax rate for the three months ended December 31, 2016 differed from the Federal statutory tax rate of 35% primarily due to Federal research and development credits, domestic manufacturing deduction, excess tax benefits related to stocknon-deductible compensation, and state taxes.
Within the calculation of our annual effective tax rate, we have used assumptions and estimates that may change as a result of future guidance and interpretation from the Internal Revenue Service the SEC, and the FASB. The Tax Act contains many significant changes to the U.S. tax laws, the consequences of which have not yet been fully determined. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating to our U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Tax Act could have a material impact on the Company’s future U.S. tax expense.


Six months ended December 31, 2017 compared to the six months ended December 31, 2016
The following tables set forth, for the six months periods indicated, financial data from the consolidated statements of operations:(“IRS”).
22
(In thousands) December 31, 2017 As a % of
Total Net
Revenue		 December 31, 2016 As a % of
Total Net
Revenue
Net revenues $223,981
 100.0 % $185,663
 100.0 %
Cost of revenues 119,147
 53.2
 98,830
 53.2
Gross margin 104,834
 46.8
 86,833
 46.8
Operating expenses:        
Selling, general and administrative 41,790
 18.7
 36,864
 19.9
Research and development 28,929
 12.9
 25,994
 14.0
Amortization of intangible assets 11,464
 5.1
 9,490
 5.1
Restructuring and other charges 408
 0.2
 366
 0.2
Acquisition costs and other related expenses 984
 0.4
 1,419
 0.7
Total operating expenses 83,575
 37.3
 74,133
 39.9
Income from operations 21,259
 9.5
 12,700
 6.9
Interest income 22
 —
 50
 —
Interest expense (110) —
 (3,720) (2.0)
Other (expense) income, net (1,131) (0.5) 513
 0.3
Income before income taxes 20,040
 9.0
 9,543
 5.2
Tax (benefit) provision (7,046) (3.1) 520
 0.3
Net income $27,086
 12.1 % $9,023
 4.9 %
REVENUES

(In thousands) December 31, 2017 As a % of
Total Net
Revenue		 December 31, 2016 As a % of
Total Net
Revenue		 $ Change % Change
Organic revenue $198,456
 89% $181,707
 98% $16,749
 9%
Acquired revenue 25,525
 11% 3,956
 2% 21,569
 545%
Total revenues $223,981
 100% $185,663
 100% $38,318
 21%
Total revenues increased $38.3 million, or 21%, to $224.0 million during the six months ended December 31, 2017 as compared to the same period in fiscal 2017. The increase in total revenues is primarily attributed to $21.6 million of higher Acquired revenue during the six months ended December 31, 2017. The $16.7 million organic revenue increase was primarily attributed to the SEWIP, F-16 SABR and PGK programs, partially offset by lower revenues from a large ground based radar program and the Digital Electronic Warfare System ("DEWS") and PAC 3 programs.
International revenues, which consist of foreign military sales through the U.S. government, sales to prime defense contractor customers where the end user is known to be outside of the U.S., and direct sales to non-U.S. based customers, increased $15.2 million to $44.3 million during the six months ended December 31, 2017, compared to $29.1 million in the same period in the prior fiscal year. International revenues represented 20% and 16% of total revenues during the six months ended December 31, 2017 and 2016, respectively.
Revenues from C4I, EW, and Other Sensor and Effector increased by $15.4 million, $15.1 million, and $11.4 million, respectively, during the three months ended December 31, 2017 as compared to the same period in fiscal 2017. The C4I increase was driven primarily by the F-35 program, while the increase in EW was driven by the SEWIP program. The increase in Other Sensor and Effector was primarily due to higher revenue from the PGK program. Additionally, revenues from components and modules & sub-assemblies increased by $28.2 million and $14.3 million, respectively, offset by a $4.2 million reduction to integrated subsystems during the six months ended December 31, 2017 as compared to the same period in fiscal 2017. The components increase was driven primarily by the UAV T-Series and Falcon Edge programs, while the increase in modules and sub-assemblies was driven by the SEWIP program. The decrease in integrated subsystems was primarily due to lower revenues from a large ground based radar program.


GROSS MARGIN
Gross margin was 46.8% for the six months ended December 31, 2017 and 2016. The gross margin during the six months ended December 31, 2017 was impacted by lower margin product mix, which was offset by lower inventory step-up amortization of $2.3 million related to our acquired businesses compared to the same period in fiscal 2017.
SELLING, GENERALLIQUIDITYAND ADMINISTRATIVE
Selling, general and administrative expenses increased $4.9 million, or 13%, to $41.8 million during the six months ended December 31, 2017, compared to $36.9 million in the same period in fiscal 2017. The increase was primarily due to higher compensation expense due to increased headcount from the acquisitions of Delta and RTL, as well as the full period impact of CES. Selling, general and administrative expenses decreased as a percentage of revenues to 18.7% during the six months ended December 31, 2017 from 19.9% during the same period in fiscal 2017. The decrease was primarily due to higher revenues in the six months ended December 31, 2017, as compared to the same period in fiscal 2017.
CAPITALRESEARCHAND DEVELOPMENT
Research and development expenses increased $2.9 million, or 11%, to $28.9 million during the six months ended December 31, 2017, compared to $26.0 million during the same period in fiscal 2017. The increase was primarily due to increased headcount from the acquisitions of Delta and RTL, in addition to the full period impact of the CES acquisition, driving higher compensation related costs in addition to increased prototype expenditures.
RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges were $0.4 million for the six months ended December 31, 2017 and 2016. Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities.
ACQUISITION COSTSAND OTHER RELATED EXPENSES
We incurred $1.0 million of acquisition costs and other related expenses during the six months ended December 31, 2017, compared to $1.4 million during the same period in fiscal 2017. The acquisition costs and other related expenses we incurred during the six months ended December 31, 2017 relate to the acquisitions of RTL and Themis, while fiscal 2017 expenses related to the acquisition of CES. We expect to incur acquisition costs and other related expenses periodically in the future as we continue to seek acquisition opportunities to expand our capabilities and new end markets within the sensor processing chain.
INTEREST EXPENSE
We incurred $0.1 million of interest expense during the six months ended December 31, 2017 compared to $3.7 million in the same period in fiscal 2017. The decrease was driven by $2.8 million cash interest expense and $0.9 million of amortization of debt issuance costs on the term loan, which was repaid during the fourth quarter of fiscal 2017.
OTHER (EXPENSE) INCOME, NET
Other (expense) income, net was $(1.1) million during the six months ended December 31, 2017, compared to $0.5 million during the same period in fiscal 2017. The decrease was primarily due to $1.2 million in financing and registration fees during the six months ended December 31, 2017 compared to $0.2 million for the same period in fiscal 2017. The six months ended December 31, 2016 included $0.6 million related to the amortization of the gain on the sale leaseback of our former corporate headquarters, partially offset by $0.2 million of foreign exchange losses.
INCOME TAXES
On December 22, 2017, the Tax Act was enacted by the U.S. government. The Tax Act has impacted the statutory Federal tax rate that the Company will use going forward, which has been reduced to 21% from 35%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory Federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. In addition to the reduced corporate rate we also expect to benefit from the immediate deduction for certain new investments. The Tax Act also includes items that we expect will increase our tax expense including, but not limited to, the elimination of the domestic manufacturing deduction and increased limitations on executive compensation. In addition, the actual effective tax rate may be materially different than the statutory Federal tax rate (including being higher) based on the availability and impact of various other adjustments including but not limited to state taxes, Federal research and development credits, discrete tax benefits related to stock compensation, and the inclusion or exclusion of various items in taxable income which may differ from GAAP income.
We recorded an income tax benefit of $7.0 million during the six months ended December 31, 2017 as compared to an income tax provision of $0.5 million for the same period in fiscal 2017. During the six months ended December 31, 2017 and


2016, we recognized discrete tax benefits of $7.6 million and $2.8 million, respectively, related to excess tax benefits on stock-based compensation. The discrete tax benefit for the six months ended December 31, 2017 included the enactment of the Tax Act which revalued the excess tax benefit previously recorded in the three months ended September 30, 2017. The benefit is the result of the increase in value from the stock award between the grant date and the vest date. The six months ended December 31, 2017 also included a discrete tax benefit of $3.7 million derived from new information obtained about net operating loss carry-forwards of the entities acquired from Microsemi Corporation (the “Carve-Out Business”) in May 2016. The discrete items disclosed above for the six months ended December 31, 2017 included the effect of the Tax Act.
Our effective tax rate for the six months ended December 31, 2017 differed from the Federal statutory tax rate of 28% primarily due to the one-time impact of the Tax Act, Federal research and development credits, domestic manufacturing deduction, excess tax benefits related to stock compensation, and state taxes. Our effective tax rate for the six months ended December 31, 2016 differed from the Federal statutory tax rate of 35% primarily due to Federal research and development credits, domestic manufacturing deduction, excess tax benefits related to stock compensation, and state taxes.
Within the calculation of our annual effective tax rate we have used assumptions and estimates that may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, and the FASB. The Tax Act contains many significant changes to the U.S. tax laws, the consequences of which have not yet been fully determined. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating to our U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Tax Act could have a material impact on the Company’s future U.S. tax expense.
LIQUIDITYAND CAPITAL RESOURCES
Our primary sources of liquidity come from existing cash and cash generated from operations, including our accounts receivable factoring program, our revolving credit facilityRevolver and our ability to raise capital under our universal shelf registration statement. Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments. We do not currently have any material commitments for capital expenditures.plan to continue to invest in improvements to our facilities and internal R&D to promote future growth, including new opportunities in avionics, secure processing, radar modernization and our trusted custom microelectronics. Our facilities improvements include buildouts in Andover, Massachusetts, Cypress, California and Hudson, New Hampshire, along with the ongoing expansion of our trusted custom microelectronics business during fiscal 2021.
Based on our current plans, and business conditions, including the COVID pandemic, and essential business status, we believe that existing cash and cash equivalents, our available revolving credit facility,Revolver, cash generated from operations, and our financing capabilities will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months.
Shelf Registration Statement
On August 28, 2017,September 14, 2020, we filed a shelf registration statement on Form S-3ASR with the SEC. The shelf registration statement, which was effective upon filing with the SEC, registered each of the following securities: debt securities, preferred stock, common stock, warrants and units. We intend to use the proceeds from financings usingunder the shelf registration statement for general corporate purposes, which may include the following:
•the acquisition of other companies or businesses;
•the repayment and refinancing of debt;
•capital expenditures;
•working capital; and
•other purposes as described in the prospectus supplement.
We have an unlimited amount available under the shelf registration statement. Additionally, as part of the shelf registration statement, we have entered into an equity distribution agreement which allows us to sell an aggregate of up to $200.0 million of our common stock from time to time through our agents. The actual dollar amount and number of shares of common stock we sell pursuant to the equity distribution agreement will be dependent on, among other things, market conditions and our fund raising requirements. The agents may sell the common stock by any method deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on NASDAQ,Nasdaq, on any other existing trading market for the common stock or to or through a market maker. In addition, our common stock may be offered and sold by such other methods, including privately negotiated transactions, as we and the agents may agree.
Revolving Credit Facility
In June 2017,On September 28, 2018, we amended our revolving credit facility ("the Revolver"), increasingRevolver to increase and extendingextend the facility intoborrowing capacity to a $400.0$750.0 million, 5-year revolving credit line, expiring in June 2022. In connection with the amendment,maturity extended to September 2023. As of October 2, 2020, we repaidhad no outstanding borrowings on the remaining outstanding principal of and interest on our term loan using cash on hand. The Revolver had an outstanding balance of $0 at December 31, 2017, other than for outstanding letters of credit.Revolver. See Note I in the accompanying consolidated financial statements for further discussion of the Revolver.
On February 1, 2018, upon the terms and subject to the conditions set forth in a Merger Agreement, we completed the acquisition of Ceres, the holding company that owns Themis. Under the terms of the Merger Agreement, we paid an aggregate

CASH FLOWS

purchase price of $180.0 million, plus an estimated adjustment for acquired working capital and cash for the Acquired Company, subject to post-closing adjustments based on a determination of closing net working capital, transaction expenses and net debt (all as defined in the Merger Agreement). To facilitate the completion of the Merger Agreement, we drew $195.0 million from the Revolver, with the higher amount reflecting an estimated adjustment for working capital, including cash, expected to be received with the Acquired Company at closing.
CASH FLOWS
 As of and For the Six
Month Period Ended
December 31,		 As of and For the First Quarters Ended,
(In thousands) 2017 2016(In thousands)October 2, 2020September 27, 2019
Net cash provided by operating activities $16,807
 $24,521
Net cash provided by operating activities$22,929 $24,310 
Net cash used in investing activities $(13,765) $(52,628)Net cash used in investing activities$(10,978)$(106,097)
Net cash used in financing activities $(12,860) $(7,327)Net cash used in financing activities$(64)$(14,559)
Net decrease in cash and cash equivalents $(9,602) $(35,506)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents$12,284 $(96,633)
Cash and cash equivalents at end of period $32,035
 $46,185
Cash and cash equivalents at end of period$239,122 $161,299 
Our cash and cash equivalents decreasedincreased by $9.6$12.3 million from June 30, 2017July 3, 2020 to December 31, 2017,October 2, 2020, primarily as the result of $14.9$22.9 million used in the retirement of common stock used to settle individual employees' tax liabilities associated with vesting of restricted stock awards, $7.6provided by operating activities, partially offset by $11.0 million invested in purchases of property and equipment, and $5.8 million used in acquisition activities. These decreases were partially offset by $16.8 million provided by operating activities.equipment.
23

Operating Activities
During the six monthsfirst quarter ended December 31, 2017,October 2, 2020, we generated $16.8$22.9 million in cash from operating activities, a decrease of $7.7$1.4 million, whenas compared to the same periodfirst quarter ended September 27, 2019. The decrease was primarily the result of higher inventory purchases intended to mitigate potential disruptions to the supply chain or unforeseen changes in fiscal 2017.customer behavior resulting from the COVID pandemic and to support growth of the business as well as lower comparable net income. This decrease was partially offset by higher accounts payable, accrued expenses, and accrued compensation, deferred revenues and customer advances.
Investing Activities
During the first quarter ended October 2, 2020, we invested $11.0 million, a decrease of $95.1 million, as compared to the first quarter ended September 27, 2019. The decrease was driven by $96.5 million in cash used for the acquisition of APC during the first quarter ended September 27, 2019. This decrease in cash generated by operating activities was primarily a result of $18.6 million higher inventory purchases, $11.6 million decreaseused in income taxes payable, and $10.4 million less collections from accounts receivables. The decrease in cash generated by operatinginvesting activities was partially offset by generating$18.1an additional $1.4 million of higher net income and $13.5 million more cash from the timing of payables. Our ability to generate cash from operationsinvested in future periods will depend in large part on profitability, cash flows attributable to factoring, the rate and timing of collections of accounts receivable, our inventory turns and our ability to manage other areas of working capital.
Investing Activities
During the six months ended December 31, 2017, we used $13.8 million in investing activities compared to $52.6 million during the same period in fiscal 2017. The decrease was primarily driven by $5.8 million used in the acquisition of RTL for the six months ended December 31, 2017 compared to $38.8 million used in the acquisition of CES in the same period of fiscal 2017. The decrease was also driven by $6.2 million in lower purchases of property and equipment during fiscal 2018.first quarter ended October 2, 2020, primarily related to improvements to our facilities.
Financing Activities
During the six monthsfirst quarter ended December 31, 2017,October 2, 2020, we had $0.1 million in cash used $12.9 million in financing activities, a decrease of $14.5 million, as compared to $7.3the first quarter ended September 27, 2019. During the first quarter ended September 27, 2019, we had $14.5 million duringof additional payments related to the same period in fiscal 2017. The $5.5 million increase in cash used by financing activities was primarily due to $14.9 million used in thepurchase and retirement of common stock used to settle individual employees’ tax liabilities associated with vesting of restricted stock awards, as compared to $7.6 million usedthe three months ended October 2, 2020. The decrease in the same periodpayments related to the purchase and retirement of fiscal 2017, primarily driven by the increasecommon stock used to settle individual employees’ tax liabilities associated with vesting of restricted stock awards is due to a change in our incentive stock price as of the vesting date.plan tax withholding methods.
COMMITMENTS, CONTRACTUAL OBLIGATIONS AND CONTINGENCIES
The following is a schedule of our commitments and contractual obligations outstanding at December 31, 2017:October 2, 2020:
(In thousands)TotalLess Than
1 Year		1-3
Years		3-5
Years		More Than
5 Years
Purchase obligations$113,227 $113,227 $— $— $— 
Operating leases95,780 9,800 20,875 19,250 45,855 
$209,007 $123,027 $20,875 $19,250 $45,855 
(In thousands) Total Less Than
1 Year		 1-3
Years		 3-5
Years		 More Than
5 Years
Purchase obligations $50,653
 $50,653
 $—
 $—
 $—
Operating leases 70,263
 6,875
 12,450
 9,425
 41,513
  $120,916
 $57,528
 $12,450
 $9,425
 $41,513
Purchase obligations represent open non-cancelable purchase commitments for certain inventory components and services used in normal operations. The purchase commitments covered by these agreements are for less than one year and aggregated approximately $50.7$113.2 million at December 31, 2017.


at October 2, 2020.
We have a liability at December 31, 2017October 2, 2020 of $0.8$4.1 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns. We do not know the ultimate resolution on these uncertain tax positions and as such, do not know the ultimate timing of payments or amount, if any, related to this liability. Accordingly, these amounts are not included in the above table.
Our standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred in connection with certain intellectual property infringement claims by any third party with respect to our products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments we could be required to make under these indemnification provisions is, in some instances, unlimited.
As part of our strategy for growth, we continue to explore acquisitions or strategic alliances. The associated acquisition costs incurred in the form of professional fees and services may be material to the future periods in which they occur, regardless of whether the acquisition is ultimately completed.
We may elect from time to time to purchase and subsequently retire shares of common stock in order to settle employees’ tax liabilities associated with vesting of a restricted stock award or exercise of stock options. These transactions would be treated as a use of cash in financing activities in our statement of cash flows.
OFF-BALANCE SHEET ARRANGEMENTS
Other than our lease commitments incurredcertain indemnification provisions in the normal course of business, and certain indemnification provisions, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not consolidated in the financial statements. Additionally, we do not have an interest in, or relationships with, any special purpose entities.
24

NON-GAAP-GAAP FINANCIAL MEASURES
In our periodic communications, we discuss certain important measures that are not calculated according to U.S. generally accepted accounting principles (“GAAP”), including adjusted EBITDA, adjusted income, adjusted earnings per share ("adjusted EPS") andEPS, free cash flow.flow, organic revenue and acquired revenue.
Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense. We use adjusted EBITDA as an important indicator of the operating performance of our business. We use adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining a componentthe portion of bonus and equity compensation for executive officers and other key employees based on operating performance, and evaluating short-term and long-term operating trends in our operations.operations and allocating resources to various initiatives and operational requirements. We believe thethat adjusted EBITDA financial measure assists in providingpermits a more complete understandingcomparative assessment of our underlying operational measuresoperating performance, relative to manage our business, to evaluate our performance comparedbased on our GAAP results, while isolating the effects of charges that may vary from period to prior periods and the marketplace, andperiod without any correlation to establish operational goals.underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our adjusted EBITDA are valuable indicators of our operating performance.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the adjusted EBITDA financial adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.


The following table reconciles our net income, the most directly comparable GAAP financial measure, to our adjusted EBITDA:
  Three Months Ended 
 December 31,		 Six Months Ended 
 December 31,
(In thousands) 2017 2016 2017 2016
Net income $9,133
 $5,204
 $27,086
 $9,023
Interest (income) expense, net 104
 1,888
 88
 3,670
Income taxes 1,335
 1,779
 (7,046) 520
Depreciation 3,775
 2,968
 7,475
 5,686
Amortization of intangible assets 5,827
 4,888
 11,464
 9,490
Restructuring and other charges (1) 313
 69
 408
 366
Impairment of long-lived assets —
 —
 —
 —
Acquisition and financing costs 1,366
 1,114
 2,220
 1,667
Fair value adjustments from purchase accounting (2) 84
 868
 593
 2,945
Litigation and settlement expense (income), net —
 100
 —
 100
Stock-based and other non-cash compensation expense 4,941
 4,093
 9,637
 7,725
Adjusted EBITDA $26,878
 $22,971
 $51,925
 $41,192
(1) Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. The Company believes these items are non-routine and may not be indicative of ongoing operating results.
(2) Fair value adjustments from purchase accounting for the three and six months ended December 31, 2017 relate to CES and Delta inventory step-up amortization. Fair value adjustments from purchase accounting for the three and six months ended December 31, 2016 relate to the Carve-Out Business and CES inventory step-up amortization.
 First Quarters Ended
(In thousands)October 2, 2020September 27, 2019
Net income$15,798 $19,247 
Other non-operating adjustments, net(182)301 
Interest income, net(72)(1,187)
Income tax provision (benefit)2,198 (2,018)
Depreciation5,266 4,362 
Amortization of intangible assets7,731 7,019 
Restructuring and other charges1,297 648 
Impairment of long-lived assets— — 
Acquisition and financing costs841 2,236 
Fair value adjustments from purchase accounting— — 
Litigation and settlement expense, net187 313 
COVID related expenses2,319 — 
Stock-based and other non-cash compensation expense7,367 5,776 
Adjusted EBITDA$42,750 $36,697 
Adjusted income and adjusted EPS exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. We believe that exclusion of these items assists in providing a more complete understanding of our underlying results and trends and allows for comparability with our peer company index and industry. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We use these measures along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace. We define adjusted income as net income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision. Adjusted EPS expresses adjusted income on a per share basis using weighted average diluted shares outstanding.
25

Adjusted income and adjusted EPS are non-GAAP financial measures and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the adjusted income and adjusted EPS financial adjustments described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring.


The following table reconciles net income and diluted earnings per share, the most directly comparable GAAP measures, to adjusted income and adjusted EPS:

Three Months Ended
December 31,		First Quarters Ended
(In thousands, except per share data) 2017 2016(In thousands, except per share data)October 2, 2020September 27, 2019
Net income and diluted earnings per share $9,133
 $0.19
 $5,204
 $0.13
Net income and diluted earnings per share$15,798 $0.29 $19,247 $0.35 
Other non-operating adjustments, net(1)
Other non-operating adjustments, net(1)
(182)301 
Amortization of intangible assets 5,827
   4,888
  Amortization of intangible assets7,731 7,019 
Restructuring and other charges (1) 313
   69
  1,297 648 
Impairment of long-lived assets —
   —
  Impairment of long-lived assets— — 
Acquisition and financing costs 1,366
   1,114
  Acquisition and financing costs841 2,236 
Fair value adjustments from purchase accounting (2) 84
   868
  — — 
Litigation and settlement expenses (income), net —
   100
  
Litigation and settlement expense, netLitigation and settlement expense, net187 313 
COVID related expensesCOVID related expenses2,319 — 
Stock-based and other non-cash compensation expense 4,941
   4,093
  Stock-based and other non-cash compensation expense7,367 5,776 
Impact to income taxes (3) (8,615)   (4,439)  
Impact to income taxes(2)
Impact to income taxes(2)
(7,024)(10,925)
Adjusted income and adjusted earnings per share $13,049
 $0.28
 $11,897
 $0.30
Adjusted income and adjusted earnings per share$28,334 $0.51 $24,615 $0.45 
        
Diluted weighted-average shares outstanding   47,447
   39,985
Diluted weighted-average shares outstanding55,339 55,078 
(1) RestructuringEffective as of the third quarter of fiscal 2020, the Company has revised its definition of adjusted income and adjusted earnings per share to incorporate other charges are typically related to acquisitionsnon-operating adjustments, which includes gains or losses on foreign currency remeasurement, investments and organizational redesign programs initiated as part of discrete post-acquisition integration activities. The Company believes these items are non-routine and may not be indicative of ongoing operating results.fixed assets sales or disposals among other adjustments. Adjusted EPS for prior periods has been recast for comparative purposes.
(2) Fair value adjustments from purchase accounting for the three months ended December 31, 2017 relate to CES inventory step-up amortization. Fair value adjustments from purchase accounting for the three months ended December 31, 2016 relate to the Carve-Out Business and CES inventory step-up amortization.
(3) Impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision.
  Six Months Ended
December 31,
(In thousands, except per share data) 2017 2016
Net income and diluted earnings per share $27,086
 $0.57
 $9,023
 $0.23
   Amortization of intangible assets 11,464
   9,490
  
   Restructuring and other charges (1) 408
   366
  
   Impairment of long-lived assets —
   —
  
   Acquisition and financing costs 2,220
   1,667
  
   Fair value adjustments from purchase accounting (2) 593
   2,945
  
   Litigation and settlement expenses (income), net —
   100
  
   Stock-based and other non-cash compensation expense 9,637
   7,725
  
   Impact to income taxes (3) (20,566)   (10,524)  
Adjusted income and adjusted earnings per share $30,842
 $0.65
 $20,792
 $0.52
         
Diluted weighted-average shares outstanding   47,538
   39,920

(1) Restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. The Company believes these items are non-routine and may not be indicative of ongoing operating results.
(2) Fair value adjustments from purchase accounting for the six months ended December 31, 2017 relate to CES and Delta inventory step-up amortization. Fair value adjustments from purchase accounting for the six months ended December 31, 2016 relate to the Carve-Out Business and CES inventory step-up amortization.
(3) Impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision.
Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash provided by operating activities less capital expenditures for property and equipment, which includes capitalized software development costs. We believe free cash flow provides investors with an important perspective on cash available for investments and acquisitions after making capital investments


required to support ongoing business operations and long-term value creation. We believe that trends in our free cash flow can be valuable indicators of our operating performance and liquidity.
Free cash flow is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenditures similar to the free cash flow adjustment described above, and investors should not infer from our presentation of this non-GAAP financial measure that these expenditures reflect all of our obligations which require cash.
The following table reconciles cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow:
 First Quarters Ended
(In thousands)October 2, 2020September 27, 2019
Cash provided by operating activities$22,929 $24,310 
Purchase of property and equipment(10,978)(9,595)
Free cash flow$11,951 $14,715 
26

  Three Months Ended 
 December 31,		 Six Months Ended 
 December 31,
(In thousands) 2017 2016 2017 2016
Cash provided by operating activities $8,779
 $14,238
 $16,807
 $24,521
Purchase of property and equipment (3,964) (7,703) (7,592) (13,753)
Free cash flow $4,815
 $6,535
 $9,215
 $10,768
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09, RevenueOrganic revenue and acquired revenue are non-GAAP measures for reporting financial performance of our business. We believe this information provides investors with insight as to our ongoing business performance. Organic revenue represents total company revenue excluding net revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitledacquired companies for the transfer of promised goods or services to customers. The ASU will replace most existingfirst four full quarters since the entities’ acquisition date (which excludes intercompany transactions). Acquired revenue recognition guidance in GAAP when it becomes effective. The new standard is effectiverepresents revenue from acquired companies for the Company on July 1, 2018,first four full quarters since the entities' acquisition date (which excludes intercompany transactions). After the completion of four full fiscal quarters, acquired revenue is treated as organic for current and we do not plancomparable historical periods.
The following table reconciles the most directly comparable GAAP financial measure to early adopt this ASU. The standard permits the use of eithernon-GAAP financial measure for the retrospective or cumulative effect transition method. We currently intendfirst quarters ended October 2, 2020 and September 27, 2019, respectively:
(In thousands)October 2, 2020As a % of
Total Net
Revenue		September 27, 2019As a % of
Total Net
Revenue		$ Change% Change
Organic revenue$196,785 96 %$176,361 99 %$20,424 12 %
Acquired revenue8,836 4 %943 1 %7,893 837 %
Total revenues$205,621 100 %$177,304 100 %$28,317 16 %


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Note B to use the retrospective transition method upon adoption of the standard. We have made significant investments to date in our data reporting infrastructure, and continue to enhance this infrastructure in order to support the reporting and disclosure requirements of the new standard. In addition, we have extensively reviewed our current accounting policies and practices to evaluate the future impact that adoption of the standard will have on our consolidated financial statements and notes. Based on our review procedures(under the caption "Recently Issued Accounting Pronouncements").
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
See Note B to date, the impact of adopting the new standard on our total sales and operating income is not expected to be material. The largest impact as a result of adoption will be to our disclosures relating to revenues, which will significantly expand under the new standard.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an amendment of the FASB Accounting Standards Codification. This ASU requires lessees to recognize a right-of-use asset and lease liability for most lease arrangements. The new standard is effective for the Company on July 1, 2019. The standard mandates a modified retrospective transition method for all entities and early adoption is permitted. We are currently evaluating our population of leases to determine the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures.(under the caption "Recently Adopted Accounting Pronouncements").
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, an amendment of the FASB Accounting Standards Codification. This ASU will reduce diversity in practice for classifying cash payments and receipts in the statement of cash flows for a number of common transactions. It will also clarify when identifiable cash flows should be separated versus classified based on their predominant source or use. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. We are evaluating the effect that ASU 2016-15 will have on our consolidated financial statements and related disclosures.
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In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, an amendment of the FASB Accounting Standards Codification. This ASU requires the seller and buyer to recognize at the transaction date the current and deferred income tax consequences of intercompany asset transfers (except transfers of inventory). Under current U.S. GAAP, the seller and buyer defer the consolidated tax consequences of an intercompany asset transfer from the period of the transfer to a future period when the asset is transferred out of the consolidated group, or otherwise affects consolidated earnings. This standard will cause volatility in companies’ effective tax rates, particularly for those that transfer intangible assets to foreign subsidiaries. For public entities, the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2017. An entity may early adopt the standard but only at the beginning of an annual period for which it has not issued or made available for issuance financial statements (interim or annual). We are evaluating the effect that ASU 2016-16 will have on our consolidated financial statements and related disclosures.



In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, an amendment of the FASB Accounting Standards Codification. This ASU eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (“the Step 2 test”) from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit. For public business entities, the new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The ASU requires prospective adoption and permits early adoption for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect this guidance to have a material impact to our consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment of the FASB Accounting Standards Codification. This ASU requires employers that sponsor defined benefit pension and/or other post-retirement benefit plans to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Employers are required to present the other components of net benefit costs in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component of net periodic pension cost will be eligible for asset capitalization. For public entities, the new standard is effective for annual periods beginning after December 15, 2017, including interim periods within that annual period. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. This ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. We are evaluating the effect that ASU 2017-07 will have on our consolidated financial statements and related disclosures.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2017, we adopted FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, an amendment of the FASB Accounting Standards Codification. This ASU changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value for entities that do not measure inventory using the last-in, first-out or retail inventory method. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. Such adoption has not and will not have any impact to our consolidated financial statements.



ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in our exposure to market risk from June 30, 2017July 3, 2020 to December 31, 2017.October 2, 2020.
ITEM 4.CONTROLS AND PROCEDURES
ITEM 4.     CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2017.October 2, 2020. We continue to review our disclosure controls and procedures and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our Company’s business. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
(b) Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13c-15(f)13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2017October 2, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, management is in the process of integrating the recently acquired DeltaAPC business into our overall internal control over financial reporting environment.

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PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
ITEM 1.     LEGAL PROCEEDINGS
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 our self 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.
ITEM 1A.RISK FACTORS
ITEM 1A.     RISK FACTORS
You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.July 3, 2020. There have been no material changes from the factors disclosed in our 20172020 Annual Report on Form 10-K filed on August 18, 2017,2020, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.
ITEM 6.EXHIBITS
ITEM 6.     EXHIBITS
The following Exhibits are filed or furnished, as applicable, herewith:
101
The following materials from the Company’s Quarterly Report on the Form 10-Q for the quarter ended December 31, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Cash Flows; and (iv) notes to the Consolidated Financial Statements
 +101.INS
Furnished herewith. This certificate shalleXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not be deemed “filed” for purposes of Section 18 ofappear in the Securities Exchange Act of 1934, or otherwise subject toInteractive Data File because its XBRL tags are embedded within the liability of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.Inline XBRL document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


 +    Furnished herewith. This certificate shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
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MERCURY SYSTEMS, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Andover, Massachusetts, on February 2, 2018.
November 10, 2020.
MERCURY SYSTEMS, INC.
By:
/S/    GERALD M. HAINES IIMICHAEL D. RUPPERT
Gerald M. Haines IIMichael D. Ruppert
Executive Vice President,
Chief Financial Officer, and Treasurer


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