UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~December 29, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-33278




AVIAT NETWORKS, INC. (Exact name of registrant as specified in its charter)



Delaware		20-5961564
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

860 N. McCarthy Blvd., Suite 200, Milpitas, California		95035
(Address of principal executive offices)		(Zip Code)

(408) 941-7100

(Registrant’s telephone number, including area code)

No changes

(Former name, former address and former fiscal year, if changed since last report)

__________________________

Indicate by checkmark whether the registrant (l) 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	o
Emerging growth company	o

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 7(a)(2)(B) of the Securities Act . ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the registrant’s Common Stock as of ~~May 4, 2017~~February 1, 2018 was ~~5,315,433~~5,340,851 shares.

AVIAT NETWORKS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended ~~March 31,~~December 29, 2017

Table of Contents




	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets ~~- March 31, 2017 and July 1, 2016~~ (Unaudited)	3
Condensed Consolidated Statements of Operations ~~- Three and Nine Months Ended March 31, 2017 and April 1, 2016~~ (Unaudited)	4
Condensed Consolidated Statements of Comprehensive Income (Loss) ~~- Three and Nine Months Ended March 31, 2017 and April 1, 2016~~ (Unaudited)	5
Condensed Consolidated Statements of Cash Flows ~~- Nine Months Ended March 31, 2017 and April 1, 2016~~ (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2018
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2726
Item 4. Controls and Procedures	2927
Part II. Other Information	3029
Item 1. Legal Proceedings	3029
Item 1A. Risk Factors	3029
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3029
Item 3. Defaults upon Senior Securities	3029
Item 4. Mine Safety Disclosures	3029
Item 5. Other Information	3029
Item 6. Exhibits	3029
Signature	3130
Exhibit Index	3231

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)	March 31, 2017			July 1, 2016
(In thousands, except share and par value amounts)							December 29, 2017			June 30, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	39,910		$	30,479		$	40,352		$	35,658
Restricted cash							1,772			541
Short-term investments	240			222			276			264
Accounts receivable, net	45,177			63,449			43,098			45,945
Unbilled costs	9,777			5,117
Unbilled receivables							9,487			12,110
Inventories	20,338			27,293			24,556			21,794
Customer service inventories	2,178			3,064			1,637			1,871
Other current assets	11,147			10,790			7,065			6,402
Total current assets	128,767			140,414			128,243			124,585
Property, plant and equipment, net	15,713			18,162			16,931			16,406
Deferred income taxes	5,748			6,068			5,705			6,178
Other assets	1,296			1,467			9,331			5,407
TOTAL ASSETS	$	151,524		$	166,111		$	160,210		$	152,576
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt	$	8,000		$	9,000		$	9,000		$	9,000
Accounts payable	29,816			33,217			33,098			33,606
Accrued expenses	22,435			23,205			19,842			21,933
Advance payments and unearned income	23,218			30,615
Advanced payments and unearned income							25,273			20,004
Restructuring liabilities	1,691			3,910			308			1,475
Total current liabilities	85,160			99,947			87,521			86,018
Unearned income	7,561			8,387			6,509			7,062
Other long-term liabilities	1,047			1,409			1,052			1,022
Reserve for uncertain tax positions	1,411			1,414			2,473			2,453
Deferred income taxes	1,497			1,497			1,743			1,681
Total liabilities	96,676			112,654			99,298			98,236
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 10)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding	—			—			—			—
Common stock, $0.01 par value, 300,000,000 shares authorized, 5,314,860 shares issued and outstanding at March 31, 2017; 5,261,041 shares issued and outstanding at July 1, 2016	53			53
Common stock, $0.01 par value, 300,000,000 shares authorized, 5,340,851 shares issued and outstanding at December 29, 2017; 5,317,766 shares issued and outstanding at June 30, 2017							53			53
Additional paid-in-capital	813,120			811,601			814,898			813,733
Accumulated deficit	(746,731		)	(747,381		)	(743,790		)	(748,204		)
Accumulated other comprehensive loss	(12,076		)	(11,157		)	(11,164		)	(11,785		)
Noncontrolling interests	482			341			915			543
Total equity	54,848			53,457			60,912			54,340
TOTAL LIABILITIES AND EQUITY	$	151,524		$	166,111		$	160,210		$	152,576

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Nine Months Ended
(In thousands, except per share amounts) March 31,
2017 April 1,
2016 March 31,
2017 April 1,
2016
Revenues:
Revenue from product sales $ 39,099
$ 36,241
$ 119,781
$ 134,602
Revenue from services 19,601
24,226
65,662
75,836
Total revenues 58,700
60,467
185,443
210,438
Cost of revenues:
Cost of product sales 26,911
28,454
82,774
98,962
Cost of services 14,057
17,600
46,456
59,628
Total cost of revenues 40,968
46,054
129,230
158,590
Gross margin 17,732
14,413
56,213
51,848
Operating expenses:
Research and development expenses 4,264
5,063
13,682
15,749
Selling and administrative expenses 13,284
16,140
42,527
49,430
Restructuring charges 111
804
343
859
Total operating expenses 17,659
22,007
56,552
66,038
Operating income (loss) 73
(7,594 ) (339 ) (14,190 )
Interest income 42
58
168
195
Interest expense (7 ) (5 ) (28 ) (98 )
Other income 341
—
164
—
Income (loss) from continuing operations before income taxes 449
(7,541 ) (35 ) (14,093 )
Provision for (benefit from) income taxes 779
361
(826 ) 856
(Loss) income from continuing operations (330 ) (7,902 ) 791
(14,949 )
Income from discontinued operations, net of tax —
94
—
453
Net (loss) income (330 ) (7,808 ) 791
(14,496 )
Net income attributable to noncontrolling interests, net of tax 69
66
141
260
Net (loss) income attributable to Aviat Networks $ (399 ) $ (7,874 ) $ 650
$ (14,756 )

Amount attributable to Aviat Networks:
Net (loss) income from continuing operations, net of tax $ (399 ) $ (7,968 ) $ 650
$ (15,209 )
Net income from discontinued operations, net of tax $ —
$ 94
$ —
$ 453

Basic (loss) income per share attributable to Aviat Networks’ common stockholders:
Continuing operations $ (0.08 ) $ (1.52 ) $ 0.12
$ (2.91 )
Discontinued operations —
0.02
—
0.09
Net (loss) income $ (0.08 ) $ (1.50 ) $ 0.12
$ (2.82 )
Weighted average shares outstanding, basic 5,310
5,255
5,286
5,230

Diluted (loss) income per share attributable to Aviat Networks’ common stockholders:
Continuing operations $ (0.08 ) $ (1.52 ) $ 0.12
$ (2.91 )
Discontinued operations —
0.02
—
0.09
Net (loss) income $ (0.08 ) $ (1.50 ) $ 0.12
$ (2.82 )
Weighted average shares outstanding, diluted 5,310
5,255
5,392
5,230



	Three Months Ended						Six Months Ended
(In thousands, except per share amounts)	December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016
Revenues:
Revenue from product sales	$	37,719		$	45,958		$	72,786		$	80,682
Revenue from services	24,004			22,578			45,119			46,061
Total revenues	61,723			68,536			117,905			126,743
Cost of revenues:
Cost of product sales	23,784			31,003			47,447			55,863
Cost of services	16,049			16,417			31,272			32,399
Total cost of revenues	39,833			47,420			78,719			88,262
Gross margin	21,890			21,116			39,186			38,481
Operating expenses:
Research and development expenses	5,144			4,475			9,942			9,418
Selling and administrative expenses	14,104			14,056			27,826			29,243
Restructuring (recovery) charges	(252		)	72			(250		)	232
Total operating expenses	18,996			18,603			37,518			38,893
Operating income (loss)	2,894			2,513			1,668			(412		)
Interest income	42			72			100			126
Interest expense	(13		)	(3		)	(19		)	(21		)
Other (expense) income	(136		)	5			(166		)	(177		)
Income (loss) before income taxes	2,787			2,587			1,583			(484		)
(Benefit from) provision for income taxes	(2,564		)	865			(3,203		)	(1,605		)
Net income	5,351			1,722			4,786			1,121
Less: Net income attributable to noncontrolling interests, net of tax	280			44			372			72
Net income attributable to Aviat Networks’ common stockholders	$	5,071		$	1,678		$	4,414		$	1,049

Net income per share of common stock outstanding:
Basic	$	0.95		$	0.32		$	0.83		$	0.20
Diluted	$	0.90		$	0.31		$	0.79		$	0.20
Weighted average shares outstanding:
Basic	5,329			5,284			5,323			5,273
Diluted	5,624			5,400			5,616			5,328

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended Nine Months Ended
(In thousands) March 31,
2017 April 1,
2016 March 31,
2017 April 1,
2016
Net (loss) income $ (330 ) $ (7,808 ) $ 791
$ (14,496 )
Other comprehensive loss:
Cash flow hedges:
Reclassification of realized gain —
—
—
(41 )
Net change in unrealized loss on hedging activities —
—
—
(41 )
Foreign currency translation:
Gain (loss) arising during period 578
380
(570 ) (610 )
Reclassification of gain on liquidation of subsidiary (349 ) —
(349 ) —
Net change in cumulative translation adjustments 229
380
(919 ) (610 )
Other comprehensive income (loss) 229
380
(919 ) (651 )
Comprehensive loss (101 ) (7,428 ) (128 ) (15,147 )
Comprehensive income attributable to noncontrolling interests, net of tax 69
66
141
260
Comprehensive loss attributable to Aviat Networks $ (170 ) $ (7,494 ) $ (269 ) $ (15,407 )



	Three Months Ended					Six Months Ended
(In thousands)	December 29, 2017		December 30, 2016			December 29, 2017		December 30, 2016
Net income	$	5,351	$	1,722		$	4,786	$	1,121
Other comprehensive income (loss):
Net change in cumulative translation adjustments	556		(778		)	621		(1,148		)
Other comprehensive income (loss)	556		(778		)	621		(1,148		)
Comprehensive income (loss)	5,907		944			5,407		(27		)
Less: Comprehensive income attributable to noncontrolling interests, net of tax	280		44			372		72
Comprehensive income (loss) attributable to Aviat Networks	$	5,627	$	900		$	5,035	$	(99	)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended						Six Months Ended
(In thousands)	March 31, 2017			April 1, 2016			December 29, 2017			December 30, 2016
Operating Activities
Net income (loss)	$	791		$	(14,496	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							$	4,786		$	1,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment	4,540			5,044			2,590			3,136
(Recovery) provision for uncollectible receivables	(874		)	1,100
Provision for (recovery from) uncollectible receivables							14			(643		)
Share-based compensation	1,511			1,382			1,154			946
Deferred tax assets, net	320			498			(2,737		)	336
Charges for inventory and customer service inventory write-downs	1,026			3,598			205			1,097
Loss on disposition of property, plant and equipment	116			621			28			137
Gain on liquidation of subsidiary	(349		)	—
Changes in operating assets and liabilities:
Accounts receivable	19,220			16,495			3,490			7,891
Unbilled costs	(4,662		)	9,184
Unbilled receivables							2,626			(2,419		)
Inventories	7,632			(4,367		)	(2,098		)	6,602
Customer service inventories	25			1,946			(83		)	(92		)
Accounts payable	(2,127		)	(12,001		)	(381		)	(120		)
Accrued expenses	(1,591		)	(696		)	(1,672		)	(1,090		)
Advance payments and unearned income	(9,375		)	(1,999		)	3,801			(6,394		)
Income taxes payable or receivable	1,214			(667		)	(232		)	968
Other assets and liabilities	(3,467		)	1,431			(2,320		)	(3,154		)
Net cash provided by operating activities	13,950			7,073			9,171			8,322
Investing Activities
Payments for acquisition of property, plant and equipment	(3,195		)	(1,297		)	(3,342		)	(2,853		)
Net cash used in investing activities	(3,195		)	(1,297		)	(3,342		)	(2,853		)
Financing Activities
Proceeds from borrowings	24,000			27,000			18,000			16,000
Repayments of borrowings	(25,000		)	(27,000		)	(18,000		)	(17,000		)
Proceeds from issuance of common stock under employee stock plans	9			11			11			5
Net cash (used in) provided by financing activities	(991		)	11
Effect of exchange rate changes on cash and cash equivalents	(333		)	(800		)
Net Increase in Cash and Cash Equivalents	9,431			4,987
Cash and Cash Equivalents, Beginning of Period	30,479			34,735
Cash and Cash Equivalents, End of Period	$	39,910		$	39,722
Net cash provided by (used in) financing activities							11			(995		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash							72			(493		)
Net Increase in Cash, Cash Equivalents, and Restricted Cash							5,912			3,981
Cash, Cash Equivalents and Restricted Cash, Beginning of Period							36,569			31,425
Cash, Cash Equivalents and Restricted Cash, End of Period							$	42,481		$	35,406

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

AVIAT NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. The Company and Basis of Presentation

The Company

Aviat Networks, Inc. (the “Company,” “we,” “us,” and “our”) designs, manufactures and sells a range of wireless networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe. Due to the volume of our international sales, especially in developing countries, we may be susceptible to a number of political, economic and geographic risks that could harm our business as outlined in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2016.~~June 30, 2017. Our products include broadband wireless access base stations and customer premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the statements do not include all information and footnotes required by U.S. GAAP for annual consolidated financial statements. In the opinion of our management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods. The results for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2016.~~June 30, 2017.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and accounts have been eliminated. Certain amounts in the consolidated financial statements of the prior period have been reclassified to conform to the presentation for the current period.

We operate on a 52-week or 53-week year ending on the Friday closest to June 30. The first ~~three~~two quarters of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 included 13 weeks in each quarter. Fiscal year ~~2017~~2018 will be comprised of 52 weeks and will end on June ~~30, 2017.~~29, 2018.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates, assumptions and judgments affecting the amounts reported and related disclosures. Estimates are based upon historical factors, current circumstances and the experience and judgment of our management. We evaluate our estimates and assumptions on an ongoing basis and may employ outside experts to assist us in making these evaluations. Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods. Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, restructuring obligations, product warranty obligations, share-based awards, contingencies, recoverability of long-lived assets and useful lives of property, plant and equipment.

~~Reverse Stock Split~~

In June 2016, we effected a reverse stock split of all of the outstanding shares of our common stock at a ratio of 1-for-12 (“Reverse Stock Split”). The authorized shares of 300 million and par value per share of the common stock at $0.01 per share remain unchanged after the reverse stock split. All share and per-share data in our unaudited condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this reverse stock split.

Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of and for the ~~nine~~six months ended ~~March 31,~~December 29, 2017, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2016.~~June 30, 2017.

Accounting Standards Adopted

In ~~April 2015,~~October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2015-03, Interest - Imputation of Interest (Topic 835-30),~~ ~~Simplifying the Presentation of Debt Issuance Costs~~. To simplify the presentation of debt issuance costs, the standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for us beginning in our fiscal year 2017. ~~In August 2015, the FASB issued ASU No. 2015-15,~~ ~~Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements~~. This ASU includes an SEC staff announcement that the SEC staff would not object to an entity deferring and presenting the costs of securing a revolving line of credit as an asset, and amortizing the costs over the term of the line-of-credit arrangement, regardless of there are any outstanding borrowings on the line-of-credit arrangement. The subject of this ASU was not previously addressed by ASU No. 2015-03. We have adopted both accounting guidance during the first quarter of fiscal 2017 and applied its provisions retrospectively. The adoption of this standard had no material impact on our financial statements and related disclosures.

~~Accounting Standards Not Yet Adopted~~

~~In November 2016, the FASB issued ASU 2016-18 Statement of Cash Flows (Topic 230):~~ ~~Restricted Cash~~. The guidance addresses diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ~~The guidance will be effective~~ ~~retrospectively~~ ~~for our fiscal year 2019.~~ E~~arly adoption is permitted.~~ ~~We do not expect the adoption of this standard to have a material impact on our financial statements.~~

~~In October 2016, the FASB issued ASU~~ 2016-16 (Topic 740), Accounting for Income Taxes: Intra-Entity ~~Asset~~ Transfers of Assets Other than Inventory, which requires that an entity recognizes the tax expense from the sale of intra-entity sales of assets, other than inventory, in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminate in consolidation. We adopted this update during the first quarter of fiscal 2018. The ~~guidance will be effective for our fiscal year 2019.~~adoption E~~arly adoption is permitted. The ASU~~ ~~must be adopted using a modified retrospective method.~~ ~~We are evaluating the effect the adoption of the standard will have on our financial statements and related disclosures.~~ ~~We do not expect the adoption of this standard to have a~~had no material impact on our unaudited condensed consolidated financial statements.

In ~~August 2016,~~July 2015, the FASB issued ASU ~~No. 2016-15 Statement~~2015-11 (Topic 330), Simplifying the Measurement of ~~Cash Flows (Topic 230), Clarification of Certain Cash Receipts and Cash Payments~~Inventory, which provides guidance onto companies who account for inventory using either the ~~presentation and classification of eight specific cash flow issues. Those issues are cash payment for debt prepayment~~first-in, first-out or debt extinguishment costs; settlement of zero-coupon debt instrument or other debt instrument with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; cash received from settlement of corporate-owned life insurance policies; distribution received from equity method investees; beneficial interest in securitization transactions; and classification of cash receipts and payments that have aspect of more than one class of cash flows.average cost methods. The guidance states that companies should measure inventory at the lower of cost and net realizable value. Net realizable value is ~~effective for annual periods~~defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and ~~interim periods within those annual periods beginning after December 15, 2017 with early~~transportation. We adopted this update prospectively during the first quarter of fiscal 2018. The adoption ~~permitted.~~ ~~We do not expect the adoption of this standard to have a~~had no material impact on our unaudited condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In May 2014, the FASB issued ASU ~~No.~~ 2014-09 ~~(ASC~~(ASC Topic 606), Revenue from Contracts with Customers~~, which along~~ with amendments issued in 2015 and ~~2016,~~2016. This standard update will supersede nearly all current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. ~~The amendments are based on the principle that revenue should be recognized to~~Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ~~This accounting standard update, as amended, will be effective for us in the first quarter of fiscal year 2019.~~ The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption.

We are on schedule in ~~the early~~

~~stages of evaluating the provisions and transition alternatives of this standard and its impact on our business processes, business and~~establishing new accounting policies, implementing systems and processes (including more extensive use of estimates), and internal controls necessary to support the requirements of the new standard. We have completed our preliminary assessment of the financial ~~statements and related disclosures. Due to the complexity~~statement impact of the new standard and will continue to update that assessment as more information becomes available. We expect the ~~nature~~timing of revenue recognition to change in certain areas, including our services segment’s installation revenue, which upon adoption will be recognized as revenue and costs over a period of time. The performance obligations of certain arrangements are expected to be satisfied at the time of title transfer and risk of loss to the customer which is generally upon shipment, rather than at customer acceptance. Additionally, the analysis of our contracts ~~the actual revenue recognition treatment required~~ under the new revenue recognition standard ~~may vary~~supports the recognition of revenue over time under the cost-to-cost method for some of our contracts, which is consistent with our current revenue recognition model. Revenue on these contracts will continue to be recognized over time because of the continuous transfer of control to the customer. Under the new standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs. In addition, the number of our performance obligations within our financial accounting and reporting model under the existing standard is not expected to be materially different under the new standard. This preliminary assessment is based on the types and number of revenue arrangements currently in place. The exact impact of the new standard will be dependent on ~~contract-specific terms.~~facts and circumstances at adoption and could vary from quarter to quarter.

We currently expense sales commissions as incurred, and the requirement in the new standard is to capitalize certain in-scope sales commissions. This requirement is being evaluated to determine its potential impact on our financial statements in the year of adoption. We expect to adopt the new standard on a modified retrospective basis in the first quarter of fiscal 2019. We are continuing to ~~evaluate~~assess all potential impacts of the ~~impact of this~~ guidance ~~and the transition alternatives~~ on our unaudited condensed consolidated financial ~~statements.~~

~~In March 2016, the FASB issued ASU 2016-09, (Topic 718)~~ ~~Improvements~~statements and given normal ongoing business dynamics, preliminary conclusions are subject to ~~Employee Share-Based Payment Accounting~~, which requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016 with early adoption permitted. ~~We do not expect the adoption of this standard to have a material impact on our financial statements.~~change.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. This standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. We expect that most of our operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon the adoption of ASU 2016-02. We are evaluating the effect the adoption of the standard will have on our unaudited condensed consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance retains the current accounting for classifying and

measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and do not qualify for the practical expedient to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. This ASU is effective for fiscal years beginning after December 15, 2017. We do not expect the adoption of this standard to have a material impact on our ~~financial statements.~~

~~In July 2015, the FASB issued ASU No. 2015-11 (Topic 330),~~ ~~Simplifying the Measurement of Inventory~~unaudited condensed , which provides guidance to companies who account for inventory using either the first-in, first-out or average cost methods. The guidance states that companies should measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. We are evaluating the effect the adoption of the standard will have on ourconsolidated financial statements.

Note 2. Net ~~(Loss)~~ Income Per Share of Common Stock

Net ~~(loss)~~ income per share is computed using the two-class method, by dividing net ~~(loss)~~ income attributable to us by the weighted-average number of shares of our outstanding common ~~stock.~~stock and participating securities outstanding. Our restricted shares contain rights to receive non-forfeitable dividends and therefore are considered to be participating securities and included in the calculations of net income per basic and diluted common share. Undistributed losses are not allocated to unvested restricted shares ~~due to the fact that~~as the unvested restricted shares are not contractually obligated to share our losses. The impact on earnings per share of the participating securities under the two-class method is immaterial.

The following table presents the computation of basic and diluted net income ~~(loss)~~ per share attributable to ~~the~~our common stockholders:

Three Months Ended Nine Months Ended
(In thousands, except per share amounts) March 31,
2017 April 1,
2016 March 31,
2017 April 1,
2016
Numerator:
Net (loss) income from continuing operations, net of tax $ (399 ) $ (7,968 ) $ 650
$ (15,209 )
Net income from discontinued operations, net of tax —
94
—
453
Net (loss) income attributable to Aviat Networks $ (399 ) $ (7,874 ) $ 650
$ (14,756 )

Denominator:
Weighted average shares outstanding, basic 5,310
5,255
5,286
5,230
Effect of potentially dilutive equivalent shares —
—
106
—
Weighted average shares outstanding, diluted 5,310
5,255
5,392
5,230

Basic (loss) income per share attributable to Aviat Networks’ common stockholders:
Continuing operations $ (0.08 ) $ (1.52 ) $ 0.12
$ (2.91 )
Discontinued operations —
0.02
—
0.09
Net (loss) income $ (0.08 ) $ (1.50 ) $ 0.12
$ (2.82 )

Diluted (loss) income per share attributable to Aviat Networks’ common stockholders:
Continuing operations $ (0.08 ) $ (1.52 ) $ 0.12
$ (2.91 )
Discontinued operations —
0.02
—
0.09
Net (loss) income $ (0.08 ) $ (1.50 ) $ 0.12
$ (2.82 )



	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
Numerator:
Net income attributable to Aviat Networks	$	5,071	$	1,678	$	4,414	$	1,049

Denominator:
Weighted average shares outstanding, basic	5,329		5,284		5,323		5,273
Effect of potentially dilutive equivalent shares	295		116		293		55
Weighted average shares outstanding, diluted	5,624		5,400		5,616		5,328

Net income per share of common stock outstanding:
Basic	$	0.95	$	0.32	$	0.83	$	0.20
Diluted	$	0.90	$	0.31	$	0.79	$	0.20

The following table summarizes the weighted-average equity awards that were excluded from the diluted net ~~(loss)~~ income per share calculations:


	Three Months Ended		Nine Months Ended		Three Months Ended		Six Months Ended
(In thousands)	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016	December 29, 2017	December 30, 2016	December 29, 2017	December 30, 2016
Stock options	398	500	423	567	357	427	341	435
Restricted stocks units and performance stock units	455	209	13	150
Restricted stock units and performance stock units					—	6	—	8
Total potential shares of common stock excluded	853	709	436	717	357	433	341	443

Note 3. Balance Sheet Components

Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of our cash, cash equivalents and restricted cash:



(In thousands)	December 29, 2017		June 30, 2017
Cash and cash equivalents	$	40,352	$	35,658
Restricted cash	1,772		541
Restricted cash included in Other assets	357		370
Total cash, cash equivalents, and restricted cash	$	42,481	$	36,569

Accounts Receivable, net

Our net accounts receivable were as follows:


(In thousands)	March 31, 2017			July 1, 2016			December 29, 2017			June 30, 2017
Accounts receivable	$	51,894		$	71,416		$	46,696		$	49,864
Less allowances for collection losses	(6,717		)	(7,967		)	(3,598		)	(3,919		)
	$	45,177		$	63,449		$	43,098		$	45,945

Inventories

Our inventories were as follows:


(In thousands)	March 31, 2017		July 1, 2016		December 29, 2017		June 30, 2017
Finished products	$	14,375	$	20,044	$	19,823	$	16,619
Work in process	3,277		5,104		2,963		3,088
Raw materials and supplies	2,686		2,145		1,770		2,087
Total inventories	$	20,338	$	27,293	$	24,556	$	21,794
Deferred cost of revenue included within finished goods	$	6,614	$	5,984	$	8,354	$	7,120
Consigned inventories included within raw materials and supplies	$	1,701	$	2,035	$	948	$	1,268

We ~~recorded~~record recovery or charges to adjust our inventory and customer service inventory ~~to the lower of cost or market. These charges were primarily~~ due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. During the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017, ~~and April 1, 2016,~~ we recorded a net recovery of ~~$0.4~~$0.1 million and $0.1 million, respectively, related to previously reserved inventory due to sell through. ~~Recovery from sell through~~During the three and six months ended December 30, 2016, we recorded a net write down charge of $0.1 million and $0.6 million, respectively. Such recovery or charges ~~incurred~~during the three and six months ended December 29, 2017 and December 30, 2016 were classified in cost of product sales as follows:


	Three Months Ended					Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	March 31, 2017			April 1, 2016		March 31, 2017		April 1, 2016		December 29, 2017		December 30, 2016		December 29, 2017			December 30, 2016
Excess and obsolete inventory (recovery) charges	$	(399	)	$	1,089	$	168	$	3,046	$	106	$	94	$	(143	)	$	568
Customer service inventory write-downs	328			204		858		552		158		242		348			529
	$	(71	)	$	1,293	$	1,026	$	3,598	$	264	$	336	$	205		$	1,097

Property, Plant and Equipment, net

Our property, plant and equipment, net were as follows:


(In thousands)	March 31, 2017			July 1, 2016			December 29, 2017			June 30, 2017
Land	$	710		$	710		$	710		$	710
Buildings and leasehold improvements	11,362			11,714			11,391			11,442
Software	14,375			14,620			15,486			14,803
Machinery and equipment	41,572			42,960			45,924			43,174
	68,019			70,004			73,511			70,129
Less accumulated depreciation and amortization	(52,306		)	(51,842		)	(56,580		)	(53,723		)
	$	15,713		$	18,162		$	16,931		$	16,406

Depreciation and amortization expense related to property, plant and equipment ~~including amortization of software developed for internal use,~~ was as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016		December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
Depreciation and amortization	$	1,404	$	1,668	$	4,540	$	5,044	$	1,308	$	1,467	$	2,590	$	3,136

Accrued Expenses

Our accrued expenses are summarized below:


(In thousands)	March 31, 2017		July 1, 2016		December 29, 2017		June 30, 2017
Accrued compensation and benefits	$	8,019	$	7,161	$	7,342	$	8,317
Accrued commissions	1,839		3,551
Accrued warranties	3,500		3,944		3,168		3,056
Other	9,077		8,549		9,332		10,560
	$	22,435	$	23,205	$	19,842	$	21,933

Accrued Warranties

We accrue for the estimated cost to repair or replace products under warranty at the time of sale. Changes in our warranty liability, which is included as a component of accrued expenses in the unaudited condensed consolidated balance sheets were as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	March 31, 2017			April 1, 2016			March 31, 2017			April 1, 2016			December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016
Balance as of the beginning of the period	$	3,559		$	4,797		$	3,944		$	4,221		$	2,964		$	3,704		$	3,056		$	3,944
Warranty provision recorded during the period	597			603			1,413			3,016			797			480			1,228			817
Consumption during the period	(656		)	(926		)	(1,857		)	(2,763		)	(593		)	(625		)	(1,116		)	(1,202		)
Balance as of the end of the period	$	3,500		$	4,474		$	3,500		$	4,474		$	3,168		$	3,559		$	3,168		$	3,559

Advanced payments and Unearned Income

Our advanced payments and unearned income are summarized below:


(In thousands)	March 31, 2017		July 1, 2016		December 29, 2017		June 30, 2017
Advanced payments	$	9,940	$	12,124	$	9,870	$	8,760
Unearned income	13,278		18,491		15,403		11,244
	$	23,218	$	30,615	$	25,273	$	20,004

Note 4. Fair Value Measurements of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants as of the measurement date. We maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable market-based inputs or observable inputs that are corroborated by market data; and

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts, estimated fair values and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of ~~March 31,~~December 29, 2017 and ~~July 1, 2016~~June 30, 2017 were as follows:


	March 31, 2017				July 1, 2016				Valuation Inputs	December 29, 2017				June 30, 2017				Valuation Inputs
(In thousands)	Cost		Fair Value		Cost		Fair Value		Valuation Inputs	Cost		Fair Value		Cost		Fair Value		Valuation Inputs
Assets:
Cash equivalents:
Money market funds	$	24,759	$	24,759	$	18,800	$	18,800	Level 1	$	22,423	$	22,423	$	22,059	$	22,059	Level 1
Bank certificates of deposit	$	146	$	146	$	11	$	11	Level 2	$	—	$	—	$	66	$	66	Level 2
Short term investments:
Bank certificates of deposit	$	240	$	240	$	222	$	222	Level 2	$	276	$	276	$	264	$	264	Level 2
Other current assets:
Foreign exchange forward contracts	$	5	$	5	$	5	$	5	Level 2	$	124	$	124	$	—	$	—	Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts	$	5	$	5	$	9	$	9	Level 2	$	—	$	—	$	5	$	5	Level 2

We classify items within Level 1 if quoted prices are available in active markets. Our Level 1 items mainly are money market funds. As of ~~March 31,~~December 29, 2017 and ~~July 1, 2016,~~June 30, 2017, these money market funds were valued at $1.00 net asset value per share.

We classify items in Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources are available with reasonable levels of price transparency. Our bank certificates of deposit and foreign exchange forward contracts are classified within Level 2. Foreign currency forward contracts are measured at fair value using observable foreign currency exchange rates. The changes in fair value related to our foreign currency forward contracts were recorded in cost of revenues on our unaudited condensed consolidated statements of operations.

As of ~~March 31,~~December 29, 2017 and ~~July 1, 2016,~~June 30, 2017, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Our policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the first ~~nine~~six months of fiscal ~~2017~~2018 and ~~2016,~~2017, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

Note 5. Credit Facility and Debt

On March 28, 2014, we entered into a Second Amended and Restated Loan Agreement with Silicon Valley Bank (the “SVB Credit Facility”). The SVB Credit Facility expires on June 30, 2018. The SVB Credit Facility provides for a committed amount of up to ~~$30.0~~$30.0 million,, with a $30.0 million sublimit that can be borrowed by our Singapore subsidiary. Borrowings may be advanced under the SVB Credit Facility at the lesser of ~~$30.0~~$30.0 million or a borrowing base equal to a specified percentage of the value of eligible accounts receivable and U.S. unbilled accounts of the Company, subject to certain reserves and eligibility criteria. The SVB Credit Facility can also be utilized to issue letters of credit with a $12.0 million sublimit. If the SVB Credit Facility is terminated by us in certain circumstances prior to its expiration, we are subject to an early termination fee equal to 1% of the revolving line. In September 2017, the SVB Credit Facility was amended to allow up to 30% of our Singapore subsidiary’s accounts receivable to be included in the calculation of the borrowing base and the inclusion of the accounts receivable of certain high credit quality customers that are aged 90 to 120 days to be included in the calculation of the borrowing base.

Our outstanding debt under the SVB Credit Facility was ~~$8.0 million and~~ $9.0 million as of ~~March 31,~~December 29, 2017 and ~~July 1, 2016, respectively.~~June 30, 2017. The SVB Credit Facility carries an interest rate computed at the daily prime rate as published in the Wall Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio. During the first ~~nine~~six months of fiscal year ~~2017,~~2018, the weighted average interest rate on our outstanding loan was ~~4.10%~~4.79%. As of ~~March 31,~~December 29, 2017, available credit under the SVB Credit Facility was ~~$4.8~~$11.7 million reflecting the calculated borrowing base of ~~$18.1~~$23.3 million less existing borrowings of ~~$8.0~~$9.0 million and outstanding letters of credit of ~~$5.3~~$2.6 million.

The SVB Credit Facility contains quarterly financial covenants including minimum adjusted quick ratio and minimum profitability (EBITDA) requirements. In the event our adjusted quick ratio falls below a certain level, cash

received in our accounts with SVB may be directly applied to reduce outstanding obligations under the SVB Credit Facility. The SVB Credit Facility also imposes certain restrictions on our ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments and enter into transactions with affiliates under certain circumstances. Certain of our assets, including accounts receivable, inventory, and equipment, are pledged as collateral for the SVB Credit Facility. Upon an event of default, outstanding obligations would be immediately due and payable. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest equal to 2% above the applicable interest rate. As of ~~March 31,~~December 29, 2017, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility. However, as we have historically amended the agreement to revise financial covenants and the fact that the SVB Credit Facility contains subjective acceleration clauses that could be triggered by the lender, the $8.0 million and $9.0 million borrowing were classified as a current liability as of March 31, 2017 and July 1, 2016, respectively.

In addition, we have an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support the operations of our subsidiary located there. This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of ~~March 31,~~December 29, 2017 and ~~July 1, 2016~~.June 30, 2017. The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of ~~March 31,~~December 29, 2017. This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

Note 6. Restructuring Activities

The following table summarizes our restructuring related activities during the first ~~nine~~six months of fiscal ~~2017:~~2018:

Severance and Benefits Facilities and Other Total
(In thousands) Fiscal
2016-2017
Plan Fiscal
2015-2016
Plan Fiscal
2013-2014
Plan
Fiscal
2015-2016
Plan

Fiscal
2014-2015
Plan

Fiscal
2013-2014
Plan

Accrual balance, July 1, 2016 $ 1,512
$ 357
$ 68
$ 550
$ 582
$ 1,746
$ 4,815
Charges, net 4
30
—
—
110
16
160
Cash payments (811 ) (313 ) (4 ) 3
(228 ) (369 ) (1,722 )
Accrual balance, September 30, 2016 705
74
64
553
464
1,393
3,253
Charges, net 37
(25 ) —
—
47
13
72
Cash payments (235 ) 23
—
(38 ) (145 ) (306 ) (701 )
Accrual balance as of December 30, 2016 507
72
64
515
366
1,100
2,624
Charges, net 98
—
—
—
3
10
111
Cash payments (423 ) (3 ) —
14
(101 ) (306 ) (819 )
Accrual balance as of March 31, 2017 $ 182
$ 69
$ 64
$ 529
$ 268
$ 804
$ 1,916

In June 2016, we entered into a lease termination agreement to end our headquarters lease in Santa Clara, California and in September 2016 we vacated the building. Under the lease termination agreement, we agreed to pay a termination fee of $1.9 million payable over 14 months. The termination fee was included in the restructuring liabilities as of March 31, 2017 under the Fiscal 2014-2015 Plan and the Fiscal 2013-2014 Plan.



	Severance and Benefits							Facilities and Other									Total
(In thousands)	Fiscal 2016-2017 Plan			Fiscal 2015-2016 Plan		Fiscal 2013-2014 Plan		Fiscal 2015-2016 Plan			Fiscal 2014-2015 Plan			Fiscal 2013-2014 Plan
Accrual balance, June 30, 2017	$	315		$	99	$	64	$	563		$	168		$	505		$	1,714
Charges, net	(3		)	—		—		—			1			4			2
Cash payments	(253		)	—		—		—			(102		)	(306		)	(661		)
Foreign exchange impact	(1		)	2		—		18			—			—			19
Accrual balance, September 29, 2017	$	58		$	101	$	64	$	581		$	67		$	203		$	1,074
Charges (recovery), net	—			—		—		(252		)	—			—			(252		)
Cash payments	(2		)	—		—		—			(67		)	(203		)	(272		)
Foreign exchange impact	—			1		—		7			—			—			8
Accrual balance, December 29, 2017	$	56		$	102	$	64	$	336		$	—		$	—		$	558

As of ~~March 31,~~December 29, 2017, ~~$1.7~~$0.3 million of the accrual balance was in short-term restructuring liabilities while $0.2 million was included in other long-term liabilities on the unaudited condensed consolidated balance sheets.

~~Fiscal 2016-2017 Plan~~

~~During~~ In January 2018, we reached an agreement with a certain foreign government which allowed us to reduce our estimated payments relating to the ~~fourth~~fiscal 2014-2015 restructuring plan by $0.3 million. We recorded this reduction in the second quarter of fiscal ~~2016, we initiated a restructuring plan (the “Fiscal 2016-2017 Plan”) to streamline our operations and align expenses with current revenue levels. Activities under~~2018.

We have completed the ~~Fiscal 2016-2017 Plan primarily include reductions in workforce in marketing, selling and general and administrative functions. We expect to complete the remaining~~ restructuring activities under each of the ~~Fiscal 2016-2017 Plan by~~plans referenced in the ~~end of fiscal 2017. Payments related to the accrued restructuring liability balance~~table above. Remaining payments for ~~this plan~~these plans will be paid through fiscal ~~2018.~~

~~Fiscal 2015-2016 Plan~~

During the third quarter of fiscal 2015, with the intent to bring our operational cost structure in line with the changing dynamics of the microwave radio and telecommunications markets, we initiated a restructuring plan (the “Fiscal 2015-2016 Plan”) to lower fixed overhead costs and operating expenses and to preserve cash flow. Activities under the Fiscal 2015-2016 Plan primarily include reductions in workforce across the Company, but primarily in operations outside the United States. We substantially completed the restructuring activities under the Fiscal 2015-2016 Plan as of July 1, 2016. Payments related to the accrued restructuring liability balance for this plan will be paid through fiscalyear 2020.

~~Fiscal 2014-2015 Plan~~

During the third quarter of fiscal 2014, in line with the decrease in revenue that we experienced and our reduced forecast for the immediate future, we initiated a restructuring plan (the “Fiscal 2014-2015 Plan”) to reduce our operating costs, primarily in North America, Europe and Asia. Activities under the Fiscal 2014-2015 Plan primarily include reductions in workforce and additional facility downsizing of our Santa Clara, California headquarters. We substantially completed the restructuring activities under the Fiscal 2014-2015 Plan as of July 1, 2016. Payments related to the accrued restructuring liability balance for this plan will be paid through fiscal 2018.

~~Fiscal 2013-2014 Plan~~

During the fourth quarter of fiscal 2013, we initiated a restructuring plan (the “Fiscal 2013-2014 Plan”) that was intended to reduce our operating expenses primarily in North America, Europe and Asia. Activities under the Fiscal 2013-2014 Plan included reductions in workforce and facility downsizing of our Santa Clara, California headquarters and certain international field offices. We substantially completed the restructuring activities under the Fiscal 2013-2014 Plan as of June 27, 2014. Payments related to the accrued restructuring liability balance for this plan will be paid through fiscal 2018.

Note 7. ~~Stockholders’~~ Equity

~~2007 Stock Equity Plan and Activities~~

~~We have~~As of December 29, 2017, we had one stock incentive plan for our employees and nonemployee directors, the 2007 Stock Equity Plan, as amended and restated effective November 13, 2015 (the “2007 Stock Plan”). During the ~~nine~~first six months ~~ended~~ ~~March 31, 2017,~~of fiscal 2018, we ~~awarded 72,941 performance~~issued 524 shares of common stock ~~units, 50,000 market-based stock units and 237,874 restricted stock units associated with our fiscal 2017 Long-Term Incentive Plan~~ under the ~~2007~~Employee Stock ~~Plan. For the performance share units, the performance criteria is ending the fiscal year 2017 with positive adjusted~~ ~~earnings before interest, taxes, depreciation~~Purchase Plan (ESPP), and ~~amortization. Once the performance share units are earned, they will be vested three years after the grant date. For the market-based stock units, the performance goal is based on the Company’s~~191 shares of common stock ~~price at the end of calendar year 2018. The award units will be vested on the date that the Compensation Committee certifies achievement of the performance measure.~~for options exercised.

~~During the~~ ~~nine months ended~~ March 31, 2017, we cancelled 7,219 market-based stock units, 14,277 restricted stock units, 983 shares of stock appreciation rights, and options to purchase 37,999 shares of our common stock due to employee terminations. In the same period, we cancelled 48,626 market-based stock units due to the non-achievement of specified market conditions and options to purchase 34,826 shares of our common stock expired.

We issue new shares of our common stock to our employees upon the exercise of stock options, vesting of restricted stock awards and units or vesting of performance share awards and units. All awards that are cancelled prior to vesting or expire unexercised are returned to the approved pool of reserved shares under the 2007 Stock Plan and made available for future grants. Shares of our common stock remaining available for future issuance under the 2007 Stock Plan totaled 268,191 as of March 31, 2017.

On September 6, 2016, our Board of Directors (the “Board”) authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $0.01 per share (the “Common Shares”), to our stockholders of record as of the close of business on September 16, 2016. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $35.00 (the “Exercise Price”) per one one-thousandth of a Preferred Share, subject to adjustment. Until the rights become exercisable, they will not be evidenced

by separate certificates and will trade automatically with shares of the Company’s common stock. The Rights have a de minimis fair value. The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), effective as of September 6, 2016, between the Company and Computershare Inc., as rights agent. By adopting the Plan, we are helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended. The Plan reduces the likelihood that changes in our investor base have the unintended effect of limiting our use of the Tax Benefits.

Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”). The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of our common stock.

~~Both the Plan and the Charter Amendments were approved at our 2016 annual meeting of stockholders on November 16, 2016. No actions were taken under the Plan as of March 31, 2017.~~

~~Share-Based Compensation~~

Total compensation expense for share-based awards included in our unaudited condensed consolidated statements of operations ~~for the~~ ~~three and nine months ended March 31, 2017 and April 1, 2016~~was as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016		December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
By Expense Category:
Cost of revenues	$	48	$	44	$	151	$	125	$	55	$	62	$	99	$	102
Research and development	38		28		100		92		39		38		78		62
Selling and administrative	479		388		1,260		1,165		486		388		977		782
Total share-based compensation expense	$	565	$	460	$	1,511	$	1,382	$	580	$	488	$	1,154	$	946
By Types of Award:
Options	$	36	$	186	$	225	$	668	$	34	$	43	$	68	$	189
Restricted and performance stock awards and units	529		274		1,286		714		546		445		1,086		757
Total share-based compensation expense	$	565	$	460	$	1,511	$	1,382	$	580	$	488	$	1,154	$	946

As of ~~March 31,~~December 29, 2017, there was ~~$0.2~~$0.1 million of total unrecognized compensation expense related to nonvested stock options granted under our 2007 Stock Plan. This expense is expected to be recognized over a weighted average period of ~~1.3~~0.59 years. As of ~~March 31,~~December 29, 2017, there was ~~$3.8~~$2.5 million of total unrecognized compensation expense related to

nonvested stock awards and units granted under our 2007 Stock Plan. This expense is expected to be recognized over a weighted average period of ~~1.9~~1.21 years.

Note 8. Segment and Geographic Information

We operate in one reportable business segment: the design, manufacturing and sale of a range of wireless networking products, solutions and services. We conduct business globally and our sales and support activities are managed on a geographic basis. Our Chief Executive Officer is our Chief Operating Decision Maker.

We report revenue by region and country based on the location where our customers accept delivery of our products and services. Revenue by region for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017 and ~~April 1,~~December 30, 2016 ~~were~~was as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016		December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
North America	$	29,188	$	27,151	$	97,125	$	94,215	$	36,985	$	39,353	$	67,987	$	67,937
Africa and Middle East	17,335		18,178		48,454		69,169		12,682		16,770		26,144		31,119
Europe and Russia	4,012		4,383		11,329		16,442		3,814		2,810		8,260		7,317
Latin America and Asia Pacific	8,165		10,755		28,535		30,612		8,242		9,603		15,514		20,370
Total Revenue	$	58,700	$	60,467	$	185,443	$	210,438	$	61,723	$	68,536	$	117,905	$	126,743

During the three and six months ended December 29, 2017, Mobile Telephone Networks Group (MTN Group) ~~and Bharti Airtel (Airtel)~~ accounted ~~for 18% and 15%, respectively, of our accounts receivable as of March 31, 2017. MTN Group and~~ ~~Motorola Solutions, Inc. (Motorola) accounted for 22%~~ ~~and~~ 11%~~, respectively, of our accounts receivable as of July 1, 2016. During the~~ ~~three and nine months ended March 31, 2017, MTN Group accounted for 19%~~ and 13%, respectively, of our total revenue. During the three and ~~nine~~six months ended ~~April 1,~~December 30, 2016,, MTN Group accounted for ~~20%~~12% and ~~18%~~11%, respectively, of our total revenue. Motorola Solutions, Inc. (Motorola) and MTN Group and T-Mobile accounted for 16%, 11% and 11%, respectively, of our accounts receivable as of December 29, 2017. MTN Group also accounted for 26% of our accounts receivable as of June 30, 2017. We have entered into separate and distinct contracts with MTN Group ~~Motorola~~ and ~~Airtel,~~Motorola, as well as separate arrangements with their various subsidiaries. The loss of all business from MTN Group, Motorola, ~~Airtel,~~ or any other significant customers, could adversely affect our results of operations, cash flows and financial position.

Note 9. ~~Divestiture~~Income Taxes

~~We sold~~On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will affect our ~~WiMAX business~~fiscal year ending June 29, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, (2) requiring a one-time transition tax on ~~September 2, 2011~~certain unrepatriated earnings of foreign subsidiaries that is payable over eight years, and ~~began accounting for~~(3) elimination of the ~~WiMAX business as a discontinued operation.~~corporate Alternative Minimum Tax (“AMT”). The ~~operating results of our WiMAX business were included in discontinued operations in our unaudited condensed consolidated financial statements for all periods presented. The income recognized~~Tax Act reduces the federal corporate tax rate to 21.0% in the ~~first nine months of~~ fiscal ~~2016 of $0.5 million, net of income taxes, was primarily due to recovery of certain WiMAX customer receivables that were previously written down. No income was recognized in respect~~year ending June 29, 2018. Section 15 of the ~~WiMAX business~~Internal Revenue Code stipulates that our fiscal year ending June 29, 2018 will have a blended corporate tax rate of 28.1%, which is based on the applicable tax rates before and after the Tax Act and the number of days in the ~~first nine months~~ ~~of fiscal 2017.~~

~~Note 10. Income Taxes~~year.

Our effective tax rate varies from the U.S. federal statutory rate of ~~35%~~28.1% due to results of foreign operations that are subject to income taxes at different statutory rates, certain jurisdictions where we cannot recognize tax benefits on current losses, ~~and~~ tax benefit from a foreign tax ~~refund.~~refund and release of valuation allowance. During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal ~~2017.~~2018.

The determination of our ~~provision~~tax benefit for the first ~~nine~~six months of fiscal ~~2017~~2018 and ~~2016~~2017 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized. The tax ~~expense~~benefit for the first ~~nine~~six months of fiscal 2018 was primarily attributable to the foreign tax refunds received from the Inland Revenue Authority of Singapore (“IRAS”) and release of valuation allowance related to the refundable AMT credit as provided under the Tax Act, offset by tax expense related to profitable subsidiaries. The tax benefit for the first six months of fiscal 2017 ~~and 2016 were~~ was

primarily attributable to the foreign tax refund received from the IRAS, offset by the tax expense related to profitable subsidiaries.

During the fiscal year 2014, we received an assessment letter from ~~the Inland Revenue Authority of Singapore (“IRAS”)~~IRAS related to deductions claimed in prior years and made a payment of $13.2 million related to tax years 2007 through 2010, reflecting all the taxes incrementally assessed by IRAS. Since the initial assessment, we ~~continue to pursue remedies~~continued to challenge this assessment. During the first quarter of fiscal 2017, we received an initial refund of $3.7 million from IRAS. During the first quarter of fiscal 2018, we received an additional refund of $1.3 million from IRAS which ~~was~~represents a final settlement. These refunds were recorded as a discrete tax benefit during the ~~quarter. We will continue our discussion with IRAS to resolve~~quarter the ~~remaining tax positions. We believe that~~respective payment was received. During the second quarter of fiscal 2018, we ~~have adequately provided for any reasonably foreseeable outcomes~~recorded a valuation allowance release of $3.3 million related to refundable AMT credit under the Tax Act as a discrete benefit and recorded as a long-term receivable in our Other Assets in the unaudited condensed consolidated balance sheet. Under the Tax Act, any carryforward AMT tax ~~audits.~~credits can be refunded if not fully utilized by fiscal year 2022. We expect to receive the refund of this tax benefit starting in our fiscal year 2020.

We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax jurisdictions include the U.S., Singapore, Nigeria and ~~Nigeria.~~the Ivory Coast. The earliest years that are open and subject to potential audits for these jurisdictions are as follows: U.S. — 2003; Singapore — ~~2006; and~~2011; Nigeria — ~~2011.~~

2011, and Ivory Coast — 2016.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign and state income taxes. Such interest expense was not material for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017 and ~~April~~December 30, 2016.

The SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit of $3.3 million in the period ended December 29, 2017. This net benefit relates to a valuation allowance release of refundable AMT credit. For various reasons that are discussed more fully below, we have not fully completed our accounting for the income tax effects of certain elements of the Tax Act. If we were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we recorded provisional adjustments. If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

Our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:

Reduction of U.S. Federal Corporate Tax Rate: The Tax Act reduces the corporate tax rate to 21.0%, effective January 1, ~~2016.~~2018. For certain deferred tax assets and deferred tax liabilities, we have recorded a provisional decrease of $53.8 million, respectively, with a corresponding net adjustment to valuation allowance of $53.8 million for the period ended December 29, 2017. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other analyses related to the Tax Act, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and currently do not believe we will be charged this tax, due to preliminary calculations of net negative E&P for our foreign subsidiaries subjected to this tax. However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax.

Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded.

Global Intangible Low Taxed Income (“GILTI”): The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of, (1) 10.0% of the aggregate of the U.S. shareholder’s pro-rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder, (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either, (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or, (2) factoring such amounts into a company’s measurement of its deferred taxed (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, we have not made any adjustments related to the potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI.

Valuation Allowances: The company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, GILTI inclusions, new categories of FTCs, AMT repeal). During the second quarter of fiscal 2018, we recorded a valuation allowance release of $3.3 million related to refundable AMT credit under the Tax Act as a discrete benefit. Under the Tax Act, any carryforward AMT tax credits can be refunded if not fully utilized by fiscal year 2022.

Note ~~11.~~10. Commitments and Contingencies

Operating Lease Commitments

We lease office and manufacturing facilities under non-cancelable operating leases expiring at various dates through 2024. We lease approximately 19,000 square feet of office space in Milpitas, California ~~with a term of 60 months~~ as our corporate headquarters. In June 2016, we entered into a lease termination agreement for our previous headquarters lease in Santa Clara, California and the termination fees are included in the restructuring liabilities in the unaudited condensed consolidated balance sheets.

As of ~~March 31,~~December 29, 2017, our future minimum lease payments under all non-cancelable operating leases with an initial lease term in excess of one year were as follows:


Fiscal Years Ending in June	Amounts
Fiscal Years			Amounts
	(In thousands)		(In thousands)
2017 (one quarter remaining)	$	549
2018	1,769
2018 (two quarters remaining)			$	1,244
2019	1,284		1,692
2020	885		1,204
2021	907		962
2022			208
Thereafter	2,231		2,022
Total	$	7,625	$	7,332

These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent concessions, leasehold improvement incentives or unusual provisions or conditions. We sublease a portion of our facilities to third parties and the total minimum rents to be received in the future under our non-cancelable subleases were ~~$0.1~~$0.1 million as of ~~March 31, 2017~~.December 29, 2017. The future minimum lease payments are not reduced by the minimum sublease rents.

Rental expense for operating leases, including rentals on a month-to-month basis, was as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016		December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
Rent expense	$	878	$	1,277	$	3,130	$	4,019	$	959	$	987	$	1,898	$	2,134

Purchase Orders and Other Commitments

From time to time in the normal course of business we may enter into purchasing agreements with our suppliers that require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products that we requested be held as safety stock, and work in process started on our behalf, in the event we cancel or terminate the purchasing agreement. Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements. As of ~~March 31,~~December 29, 2017, we had outstanding purchase obligations with our suppliers or contract manufacturers of ~~$21.7~~$20.4 million. In addition, we had contractual obligations of approximately ~~$1.4~~$0.7 million associated with software licenses as of ~~March 31,~~December 29, 2017.

Financial Guarantees and Commercial Commitments

Guarantees issued by banks, insurance companies or other financial institutions are contingent commitments issued to guarantee our performance under borrowing arrangements, such as bank overdraft facilities, tax and customs obligations and similar transactions or to ensure our performance under customer or vendor contracts. The terms of the guarantees are generally equal to the remaining term of the related debt or other obligations and are generally limited to two years or less. As of ~~March 31,~~December 29, 2017, we had no guarantees applicable to our debt arrangements.

We have entered into commercial commitments in the normal course of business including surety bonds, standby letters of credit agreements and other arrangements with financial institutions primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers. As of ~~March 31,~~December 29, 2017, we had commercial commitments of ~~$33.8~~$51.9 million outstanding that were not recorded in our unaudited condensed consolidated balance sheets. During the second fiscal quarter, we recorded a payout in cost of revenues of $0.4 million on the performance guarantees to a contractor in the Middle East region. We believe the customer improperly drew on the performance bond and intend to pursue all remedies available to recover the payment. We do not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on the performance guarantees in the future.

Indemnifications

Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment against our customers arising from claims against such customers that our ~~software~~ products infringe the intellectual property rights of a third party. As of ~~March 31,~~December 29, 2017, we have not received any ~~notice~~notices that any customer is subject to an infringement claim arising from the use of our ~~software~~ products; we have not received any ~~request~~requests to defend any customers from infringement claims arising from the use of our ~~software~~ products; and we have not paid any final judgment on behalf of any customer related to an infringement claim arising from the use of our ~~software~~ products. Because the outcome of infringement disputes is related to the specific facts of each case, and given the lack of previous or current indemnification claims, we cannot estimate the maximum amount of potential future payments, if any, related to our indemnification provisions. As of ~~March 31,~~December 29, 2017, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

We are subject from time to time to disputes with customers concerning our products and services. In May 2016, we received notification of a claim for $1.0 million in damages from a customer in Austria alleging that certain of our products were defective. We are continuing to investigate this claim, and at this time an estimate of the reasonably possible loss or range of loss cannot be made. We believe that we have numerous contractual and legal defenses to these disputes, and we intend to dispute them vigorously.

In August 2016, we received correspondence from a customer in Africa demanding that certain inventory be repurchased under the terms of an inventory management agreement that we believed had expired. We settled this matter for $0.2 million.

From time to time, we may be involved in various other legal claims and litigation that arise in the normal course of our operations. We are aggressively defending all current litigation matters. Although there can be no assurances and the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings are likely to have a material adverse effect on our financial position. We expect to defend each of these disputes vigorously. There are many uncertainties associated with any litigations and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges. As a result, our business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from our estimates, if any.

We record accruals for our outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. We have not recorded any accrual for loss contingencies associated with such legal claims or litigation discussed above.

Contingent Liabilities

We record a loss contingency as a charge to operations when (i) it is probable that an asset has been impaired or a liability has been incurred at the date of the unaudited condensed consolidated financial statements; and (ii) the amount of the loss can be reasonably estimated. Disclosure in the notes to the unaudited condensed consolidated financial statements is required for loss contingencies that do not meet both those conditions if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until realized. We expense all legal costs incurred to resolve regulatory, legal and tax matters as incurred.

Periodically, we review the status of each significant matter to assess the potential financial exposure. If a potential loss is considered probable and the amount can be reasonably estimated, we reflect the estimated loss in our results of operations. Significant judgment is required to determine the probability that a liability has been incurred or an asset impaired and whether such loss is reasonably estimable. Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in our unaudited condensed consolidated financial statements. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise estimates accordingly. Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

~~Note 12. Subsequent Event~~

In April 2017, we recovered a deposit previously written off of $0.4 million for Canada’s non-Resident Goods and Services Tax/Harmonized Tax. The deposit was made to the Canadian tax agency in 2007. The refund will be recorded in our financial results for the fourth quarter of fiscal year 2017.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that

could be deemed to be forward-looking statements, including statements of, about, concerning or regarding: our plans, strategies and objectives for future operations,, including with respect to growing our business and sustaining ~~profitability~~;profitability; our restructuring efforts; our research and development efforts and new product releases and services; trends in revenue; drivers of our business and the markets in which we operate; future economic conditions, performance or outlook and changes in our industry and the markets we serve; the outcome of contingencies; the value of our contract awards; beliefs or expectations; the sufficiency of our cash and our capital needs and expenditures; our intellectual property protection; our compliance with regulatory requirements and the associated expenses; expectations regarding litigation; our intention not to pay cash dividends; seasonality of our business; the impact of foreign exchange and inflation; taxes; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by the use of forward-looking terminology, such as “anticipates,” “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “strategy,” “projects,” “targets,” “goals,” “seeing,” “delivering,” “continues,” “forecasts,” “future,” “predict,” “might,” “could,” “potential,” or the negative of these terms, and similar words or expressions.

These forward-looking statements are based on estimates reflecting the current beliefs of the senior management of the Company. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this document. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to, the following:

continued price and margin erosion as a result of increased competition in the microwave transmission industry;

the impact of the volume, timing and customer, product and geographic mix of our product orders;

our ability to meet financial covenant requirements which could impact, among other things, our liquidity;

the timing of our receipt of payment for products or services from our customers;

our ability to meet projected new product development dates or anticipated cost reductions of new products;

our suppliers’ inability to perform and deliver on time as a result of their financial condition, component shortages or other supply chain constraints;

customer acceptance of new products;

the ability of our subcontractors to timely perform;

continued weakness in the global economy affecting customer spending;

retention of our key personnel;

our ability to manage and maintain key customer relationships;

uncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation;

our failure to protect our intellectual property rights or defend against intellectual property infringement claims by others;

the results of our restructuring efforts;

the ability to preserve and use our net operating loss carryforwards;

the effects of currency and interest rate risks;

the conduct of unethical business practices in developing countries; and

the impact of political turmoil in countries where we have significant business.

Other factors besides those listed here also could adversely affect us. See “Item 1A. Risk Factors” in our fiscal ~~2016~~2017 Annual Report on Form 10-K filed with the SEC on September ~~9, 2016~~6, 2017 for more information regarding factors that may cause our results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q. Forward-looking statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), along with provisions of the Private Securities Litigation Reform Act of 1995, and we undertake no obligation, other than as imposed by law, to update any forward-looking statements to

reflect further developments or information obtained after the date of filing of this Quarterly Report on Form 10-Q or, in the case of any document incorporated by reference, the date of that document.

Overview of Business; Operating Environment and Key Factors Impacting Fiscal ~~2016~~2018 and 2017 Results

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying notes. In the discussion ~~below,~~herein, our fiscal year ending June 29, 2018 is referred to as “fiscal 2018” or “2018” and our fiscal year ended June 30, 2017 is referred to as “fiscal 2017” or “2017” ~~and our fiscal year ended July 1, 2016 is referred to as “fiscal 2016” or “2016”~~.

We ~~generate revenue by designing, developing, manufacturing~~design, manufacture and ~~supporting~~sell a range of wireless networking products, solutions and services ~~for~~to mobile and fixed ~~communications service providers, private~~public network operators, federal, state and local government agencies, transportation, energy and utility companies, public safety agencies and broadcast network ~~operators~~operations around the world. Our products ~~include point-to-point digital~~utilize microwave ~~transmission systems designed~~and millimeter wave technologies to create point to point wireless links for ~~first/last mile access, middle mile/backhaul,~~short, medium and long distance ~~trunking applications.~~interconnections. Our wireless systems deliver urban, suburban, regional and country-wide communication links as the primary alternative to fiber optic connections. In dense urban and suburban areas, short range wireless solutions are faster to deploy and lower cost per mile than new fiber deployments. In developing nations, fiber infrastructure is scarce and wireless systems are used for both long and short distance connections. Wireless systems are easier to implement than optical fiber in areas with rugged terrain, and are able to provide connections over bodies of water, such as between islands or between oil and gas production platforms. We also provide network management software solutions to enable operators to deploy, monitor and manage our systems, third party equipment such as antennas, routers, optical transmission equipment and other equipment necessary to build and deploy a complete telecommunications transmission network. We provide a full suite of professional services for planning, deployment, operations and maintenance of our customers’ networks.

We work continuously to improve our established brands and to create new products that meet our customers’ evolving needs and preferences. Our fundamental business goal is to generate superior returns for our stockholders over the long term. We believe that increases in revenue, operating profits and earnings per share are the key measures of

financial performance for our business. However, within the industry there continues to be strong price competition for new business and periodic large customer consolidations that intensify competition in all regions.

Our strategic focus is to continue to accelerate innovation and optimize our product portfolio, improve costs and operational efficiencies, grow our revenue and create a sustainable, profitable business model. To do this, we continue to examine our products, markets, facilities, development programs, and operational flows to ensure we are focused on what we do well and what will differentiate us in the future. We will continue working to streamline management processes to attain the efficiency levels required by the markets in which we do business.

Although the general trend of increasing demand for bandwidth to support mobile networks applies in all markets and creates demand for our solutions, we expect to see quarter-to-quarter fluctuations within markets and with individual customers based on customers’ past purchasing patterns. Seasonality is also a factor that impacts our business. Our fiscal third quarter revenue and orders have historically been lower than the revenue and orders in our second fiscal quarter because many of our customers utilize a significant portion of their capital budgets at the end of their fiscal years, which is typically the calendar year end and coincides with our second fiscal quarter. The majority of our customers begin a new fiscal year on January 1, and capital expenditures tend to be lower in an organization’s first quarter than in its fourth quarter. We anticipate that this seasonality will continue. The seasonality between the second quarter and third quarter may be affected by a variety of additional factors, including changes in the global economy.

In line with industry trends, we expect to provide increased managed services, including network design, inventory management, final configuration and warehousing services, to certain customers in certain geographies. Our operating results may be impacted by providing these services to the extent that we may need to postpone the recognition of revenue and incur upfront and ongoing expenses that are not offset with additional revenue from product sales associated with these services until a future period.

We continue to explore strategic alternatives to improve the market position and profitability of our product offerings in the marketplace, generate additional liquidity and enhance our valuation. We ~~expect to~~may pursue our goals during the next twelve months ~~principally~~ through organic growth and through ~~other~~ strategic alternatives. Some of these alternatives have included, and could continue to include, selective acquisitions of business segments or entire businesses, divestitures, ~~and~~ the sale of ~~assets.~~assets or securities, a sale or merger of our company or a restructuring of our company. We have also provided, and may from time to time in the future provide, information to interested parties.

Operations Review

The market for mobile backhaul continues to be our primary addressable market segment and, over the long term, the demand for increasing the backhaul capacity in our customers’ networks continues to grow. In North America, we supported long-term evolution (“LTE”) deployments of our mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers. In international markets, our business continued to rely on a combination of customers increasing their capacity to handle subscriber growth, the ongoing build-out of some large 3G deployments, and the emergence of early stage LTE deployments. Our international business ~~was~~continues to be adversely affected ~~in fiscal 2016~~ by constrained availability of U.S. dollars in countries with economies highly dependent on resource exports, particularly oil. This condition, ~~limited~~along with decline in local purchasing power because of currency devaluations relative to the U.S. dollar, limits capital spending and ~~slowed~~slows payments from customers in those locations. ~~Those conditions are continuing in fiscal 2017.~~ Our position continues to be to support our customers for LTE readiness and ensure that our technology roadmap is well aligned with evolving market requirements. We continue to find that our strength in turnkey and after-sale support services is a differentiating factor that wins business for us and enables us to expand our business with existing customers in all markets. However, as disclosed above and in the “Risk Factors” section in Item 1A of our fiscal ~~2016~~2017 Annual Report on Form 10-K, a number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that we service.

Revenue

We manage our sales activities primarily on a geographic basis in North America and three international geographic regions: (1) Africa and the Middle East, (2) Europe and Russia, and (3) Latin America and Asia Pacific. Revenue by region for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017 and ~~April 1,~~December 30, 2016 and the related changes were shown in the table below:


	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
(In thousands, except percentages)	March 31, 2017		April 1, 2016		$ Change			% Change		March 31, 2017		April 1, 2016		$ Change			% Change		December 29, 2017		December 30, 2016		$ Change			% Change		December 29, 2017		December 30, 2016		$ Change			% Change
North America	$	29,188	$	27,151	$	2,037		7.5	%	$	97,125	$	94,215	$	2,910		3.1	%	$	36,985	$	39,353	$	(2,368	)	(6.0	)%	$	67,987	$	67,937	$	50		0.1	%
Africa and Middle East	17,335		18,178		(843		)	(4.6	)%	48,454		69,169		(20,715		)	(29.9	)%	12,682		16,770		(4,088		)	(24.4	)%	26,144		31,119		(4,975		)	(16.0	)%
Europe and Russia	4,012		4,383		(371		)	(8.5	)%	11,329		16,442		(5,113		)	(31.1	)%	3,814		2,810		1,004			35.7	%	8,260		7,317		943			12.9	%
Latin America and Asia Pacific	8,165		10,755		(2,590		)	(24.1	)%	28,535		30,612		(2,077		)	(6.8	)%	8,242		9,603		(1,361		)	(14.2	)%	15,514		20,370		(4,856		)	(23.8	)%
Total Revenue	$	58,700	$	60,467	$	(1,767	)	(2.9	)%	$	185,443	$	210,438	$	(24,995	)	(11.9	)%	$	61,723	$	68,536	$	(6,813	)	(9.9	)%	$	117,905	$	126,743	$	(8,838	)	(7.0	)%

Our revenue in North America ~~increased $2.0~~decreased $2.4 million, or ~~7.5%~~6.0%, during the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter~~period of fiscal ~~2016. North America revenue increased primarily due~~2017. The volume of private network projects coming to ancompletion decreased year-to-year but that was partially offset by a year-to-year increase in revenue ~~from private network projects. Revenue from~~with mobile ~~operators was flat relative to~~operator customers in the ~~third quarter of fiscal 2016.~~sector. On a year-to-date basis, North America revenue increased ~~$2.9~~slightly by $0.1 million, or ~~3.1%~~0.1%, compared with the same period in fiscal ~~2016. The year-to-date increase in North America was from private network customers, offset by a decrease in revenue from mobile operators.~~2017.

Our revenue in Africa and the Middle East decreased ~~$0.8~~$4.1 million, or ~~4.6%~~24.4%, for the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter~~period of fiscal ~~2016.~~2017. The decrease in revenue was primarily due to lower sales volume to our large operator customers in ~~Africa, including the MTN Group.~~Africa. On a year-to-date basis, Africa and the Middle East revenue decreased ~~$20.7~~$5.0 million, or ~~29.9%~~16.0%, compared with the same period in fiscal ~~2016~~.2017. The year-to-date decrease in the region was also from lower sales to mobile operator customers in ~~Africa and a decrease in revenue from private networks in the Middle East.~~Africa.

Revenue in Europe and Russia ~~decreased $0.4~~increased $1.0 million, or ~~8.5%~~35.7%, for the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same quarter of fiscal ~~2016.~~ 2017. The ~~decrease~~increase was ~~primarily due to lower~~from sales to ~~some of our large~~a new mobile operator ~~customers~~customer in the ~~region, offset in part by an increase in sales to private network customers.~~region. On a year-to-date basis, revenue in Europe and Russia was ~~down $5.1~~up $0.9 million, or ~~31.1%~~12.9%, from the same period in fiscal ~~2016.~~2017. The ~~decrease came~~increase was from ~~lower~~ sales to ~~our large customers~~a new mobile operator customer in the ~~region compared with the same periods in fiscal 2016.~~region.

Revenue in Latin America and Asia Pacific decreased ~~$2.6~~$1.4 million, or ~~24.1%~~14.2%, during the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter~~period in fiscal ~~2016.~~ 2017. The decrease was primarily due to decreased deliveries to our larger customers in Latin America. On a year-to-date basis, revenue in Latin America and Asia Pacific decreased ~~$2.1~~$4.9 million, or ~~6.8%~~23.8%, from the same period in fiscal ~~2016 for the same reasons.~~2017 mainly due to decreased sales to large mobile operator customers in Asia Pacific.


	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
(In thousands, except percentages)	March 31, 2017		April 1, 2016		$ Change			% Change		March 31, 2017		April 1, 2016		$ Change			% Change		December 29, 2017		December 30, 2016		$ Change			% Change		December 29, 2017		December 30, 2016		$ Change			% Change
Product sales	$	39,099	$	36,241	$	2,858		7.9	%	$	119,781	$	134,602	$	(14,821	)	(11.0	)%	$	37,719	$	45,958	$	(8,239	)	(17.9	)%	$	72,786	$	80,682	$	(7,896	)	(9.8	)%
Services	19,601		24,226		(4,625		)	(19.1	)%	65,662		75,836		(10,174		)	(13.4	)%	24,004		22,578		1,426			6.3	%	45,119		46,061		(942		)	(2.0	)%
Total Revenue	$	58,700	$	60,467	$	(1,767	)	(2.9	)%	$	185,443	$	210,438	$	(24,995	)	(11.9	)%	$	61,723	$	68,536	$	(6,813	)	(9.9	)%	$	117,905	$	126,743	$	(8,838	)	(7.0	)%

Our revenue from product sales ~~increased $2.9~~decreased $8.2 million, or ~~7.9%~~17.9%, for the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter~~period in fiscal ~~2016.~~2017. Product volumes were ~~$4.5~~$2.5 million ~~higher~~lower in North America ~~Africa~~ and ~~the Middle East, overcoming a $1.6~~$5.7 million ~~decrease~~lower in other regions. Our services revenue ~~was down~~increased by ~~$4.6~~$1.4 million, or ~~19.1%~~6.3%, during the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter~~period of fiscal ~~2016,~~2017, due to ~~reduced~~increased service activities in all ~~regions.~~regions except for Latin America.

Our revenue from product sales decreased by ~~$14.8~~$7.9 million, or ~~11.0%~~9.8%, for the first ~~nine~~six months of fiscal ~~2017~~2018 compared with the same period in fiscal ~~2016.~~2017. The decrease came primarily from ~~$19.8 million less~~weaker product sales in Africa, ~~and~~ the Middle East, Latin America and Asia ~~and Europe,~~Pacific, offset in part by ~~$5.0 million~~ stronger sales in North America. and Europe. Our services revenue ~~was down~~decreased by ~~$10.2~~$0.9 million, or ~~13.4%~~2.0%, during the first ~~nine~~six months of fiscal ~~2017~~2018 compared with the same period of fiscal ~~2016,~~2017, due to reduced service activities in ~~all regions.~~

most regions, except for the Middle East Africa and Europe where we had a small increase in service sales.

Gross Margin


	Three Months Ended											Nine Months Ended											Three Months Ended											Six Months Ended
(In thousands, except percentages)	March 31, 2017			April 1, 2016			$ Change			% Change		March 31, 2017			April 1, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change
Revenue	$	58,700		$	60,467		$	(1,767	)	(2.9	)%	$	185,443		$	210,438		$	(24,995	)	(11.9	)%	$	61,723		$	68,536		$	(6,813	)	(9.9	)%	$	117,905		$	126,743		$	(8,838	)	(7.0	)%
Cost of revenue	40,968			46,054			(5,086		)	(11.0	)%	129,230			158,590			(29,360		)	(18.5	)%	39,833			47,420			(7,587		)	(16.0	)%	78,719			88,262			(9,543		)	(10.8	)%
Gross margin	$	17,732		$	14,413		$	3,319		23.0	%	$	56,213		$	51,848		$	4,365		8.4	%	$	21,890		$	21,116		$	774		3.7	%	$	39,186		$	38,481		$	705		1.8	%
% of revenue	30.2		%	23.8		%						30.3		%	24.6		%						35.5		%	30.8		%						33.2		%	30.4		%
Product margin %	31.2		%	21.5		%						30.9		%	26.5		%						36.9		%	32.5		%						34.8		%	30.8		%
Service margin %	28.3		%	27.4		%						29.2		%	21.4		%						33.1		%	27.3		%						30.7		%	29.7		%

Gross margin for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2017 in~~creased~~ increased by ~~$3.3~~$0.8 million,, or ~~23.0%~~3.7%, and ~~$4.4~~$0.7 million, or ~~8.4%~~1.8%, respectively, compared with the three and ~~nine~~six months ended ~~April 1, 2016. On a quarter-to-date and on a year-to-date basis, the~~December 30, 2016. The margin increase ~~was~~resulted from ~~lower supply chain costs, a~~ ~~recovery of $0.4 million related to sell through of previously reserved inventory~~improved product margins primarily in Africa and improved ~~sales margin rates from both product and services businesses.~~profitability of service projects in Africa, as well as an increase share of business in the North America market.

Gross margin as a percentage of revenue increased in the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same ~~quarter of~~period in fiscal ~~2016 primarily~~2017 due to improved product and service ~~sales~~ margins, ~~and lower supply chain costs.~~as well as an increase in the share of business in North America. Product margin as a percentage of product revenue increased from the prior year quarter primarily due to ~~lower~~ ~~supply chain costs and a~~ ~~recovery~~improvements of ~~$0.4 million related to sell through~~product margins in Africa facilitated by relative stability in exchange rates as well as the increased share of ~~previously reserved inventory~~.business in North America. Service margin as a percentage of service revenue increased ~~primarily~~ due to ~~lower service costs leading~~continued efforts to ~~more profitable service business.~~improve execution of our field services projects, primarily in Africa.

On a year-to-date basis, gross margin as a percentage of revenue increased due to lower supply chain costs ~~in the current year~~ and ~~improved~~higher margin on both product and ~~service sales margins. Gross~~service. Gross margin rates in our services businesses in most international sectors improved compared with the same period in fiscal ~~2016.~~2017. Product margin as a percentage of product revenue increased in the first six months of fiscal 2018 over the same period in fiscal ~~2016~~2017 primarily due to reduced supply chain ~~costs.~~ ~~We attributed~~costs as well as the ~~margin improvement~~above-mentioned shift in the ~~service~~portion of our business coming from North America relative to international markets, and ~~our reduced supply chain costs to process improvement programs within the Company along with our restructuring program implemented over the past several quarters.~~from improved product margins in Africa and Asia-Pacific.

Research and Development Expenses


	Three Months Ended											Nine Months Ended											Three Months Ended										Six Months Ended
(In thousands, except percentages)	March 31, 2017			April 1, 2016			$ Change			% Change		March 31, 2017			April 1, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change		% Change		December 29, 2017			December 30, 2016			$ Change		% Change
Research and development	$	4,264		$	5,063		$	(799	)	(15.8	)%	$	13,682		$	15,749		$	(2,067	)	(13.1	)%	$	5,144		$	4,475		$	669	14.9	%	$	9,942		$	9,418		$	524	5.6	%
% of revenue	7.3		%	8.4		%						7.4		%	7.5		%						8.3		%	6.5		%					8.4		%	7.4		%

Our research and development expenses ~~decreased $0.8~~increased $0.7 million, or ~~15.8%~~14.9%, in the ~~third~~second quarter of fiscal ~~2017~~2018 compared with the same period in fiscal ~~2016.~~2017. The ~~decrease~~increase was ~~primarily~~ due to a ~~$0.2~~$0.5 million ~~economic incentive grant credit earned~~increase in ~~the third quarter of fiscal 2017~~professional service expense and a ~~$0.6~~$0.2 million ~~reduction~~increase in ~~product development costs.~~compensation and related employee expenses.

Our research and development expenses ~~decreased $2.1~~increased $0.5 million, or ~~13.1%~~5.6%, in the first ~~nine~~six months of fiscal ~~2017~~2018 compared with the same period in fiscal ~~2016.~~ 2017. The increase was primarily due to a $0.5 million increase in compensation and related employee expenses and $0.2 million additional spending in professional service expense. The increase was offset by $0.1 million due to a higher economic incentive grant credit in the first six months of fiscal 2018.

Selling and Administrative Expenses



	Three Months Ended										Six Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016			$ Change		% Change		December 29, 2017			December 30, 2016			$ Change			% Change
Selling and administrative	$	14,104		$	14,056		$	48	0.3	%	$	27,826		$	29,243		$	(1,417	)	(4.8	)%
% of revenue	22.9		%	20.5		%					23.6		%	23.1		%

Our selling and administrative expenses increased $48.0 thousand, or 0.3%, in the second quarter of fiscal 2018 compared with the same periods in fiscal 2017. The increase for the second quarter of fiscal 2018 compared with the same quarter in fiscal 2017 was primarily due to a $0.8 million bad debt recovery in the second quarter of fiscal 2017 that was not repeated in the current quarter and was offset by $0.2 million in savings in professional services expense and a $0.6 million savings in facilities costs due to our relocation to a new facility in fiscal 2017.

The decrease for the first ~~nine~~six months of fiscal ~~2017~~2018 compared with the same period in fiscal ~~2016~~2017 was primarily due to a $1.0 million ~~economic incentive grant credit earned~~decrease in facility costs, a $0.4 million decrease in professional fees, a $0.3 million decrease in personnel costs and a $0.3 million decrease in depreciation expenses. The decrease was offset by a $0.7 million bad debt recovery in the first ~~nine~~six months of fiscal 2017 ~~and a $1.2 million reduction in product development costs.~~

~~Selling and Administrative Expenses~~

Three Months Ended Nine Months Ended
(In thousands, except percentages) March 31, 2017 April 1, 2016 $ Change % Change March 31, 2017 April 1, 2016 $ Change % Change
Selling and administrative $ 13,284
$ 16,140
$ (2,856 ) (17.7 )% $ 42,527
$ 49,430
$ (6,903 ) (14.0 )%
% of revenue 22.6 % 26.7 % 22.9 % 23.5 %

~~Our selling and administrative expenses declined $2.9 million, or 17.7%, and~~ ~~$6.9 million, or 14.0%, respectively,~~that was not repeated in the ~~three and nine months ended March 31, 2017~~ ~~compared with the same periods in fiscal 2016. The decrease for the~~

third quarter of fiscal 2017 compared with the same quarter in fiscal 2016 was primarily due to a $2.9 million decrease in personnel and related expenses as a result of the restructuring programs we implemented.

~~The decrease for the~~ first ~~nine~~six months of fiscal ~~2017 compared with the same period in fiscal 2016 was primarily due to a $6.6 million decrease in personnel and related expenses, and a~~ ~~$0.6 million decrease in professional fees. The decreases were partially offset by a $0.2 million accelerated depreciation of Santa Clara building leasehold improvements.~~2018.

Restructuring Charges


	Three Months Ended									Nine Months Ended									Three Months Ended										Six Months Ended
(In thousands, except percentages)	March 31, 2017		April 1, 2016		$ Change			% Change		March 31, 2017		April 1, 2016		$ Change			% Change		December 29, 2017			December 30, 2016		$ Change			% Change		December 29, 2017			December 30, 2016		$ Change			% Change
Restructuring Charges	$	111	$	804	$	(693	)	(86.2	)%	$	343	$	859	$	(516	)	(60.1	)%
Restructuring (recovery) charges																			$	(252	)	$	72	$	(324	)	(450.0	)%	$	(250	)	$	232	$	(482	)	(207.8	)%

Our restructuring expenses in the three and six months ended December 30, 2016 consisted primarily of ~~severance and related benefit charges, facilities~~the facility costs related to ~~obligations under non-cancelable leases for facilities that~~our previous headquarters in Santa Clara. During the second quarter of fiscal 2018, based on communications with certain foreign government, we ~~ceased~~reduced our estimated payments relating to ~~use.~~the fiscal 2014-2015 restructuring plan by $0.3 million.

Interest Income, Interest Expense and Other ~~Expense~~(Expense) Income


	Three Months Ended											Nine Months Ended											Three Months Ended											Six Months Ended
(In thousands, except percentages)	March 31, 2017			April 1, 2016			$ Change			% Change		March 31, 2017			April 1, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change
Interest income	$	42		$	58		$	(16	)	(27.6	)%	$	168		$	195		$	(27	)	(13.8	)%	$	42		$	72		$	(30	)	(41.7	)%	$	100		$	126		$	(26	)	(20.6	)%
Interest expense	$	(7	)	$	(5	)	$	(2	)	40.0	%	$	(28	)	$	(98	)	$	70		(71.4	)%	$	(13	)	$	(3	)	$	(10	)	333.3	%	$	(19	)	$	(21	)	$	2		(9.5	)%
Other income	$	341		$	—		$	341		N/A		$	164		$	—		$	164		N/A
Other (expense) income																							$	(136	)	$	5		$	(141	)	N/A		$	(166	)	$	(177	)	$	11		N/A

Interest income reflected interest earned on our cash equivalents which were comprised of money market funds and certificates of deposit.

Interest expense was primarily related to interest associated with borrowings under the SVB Credit Facility and discounts on customer letters of credit.

Other (expense) income ~~in the three and nine months ended March 31, 2017 included a $0.3 million foreign currency translation gain reclassified from accumulated other comprehensive loss upon liquidation~~were primarily comprised of ~~a dormant foreign legal entity. The gain was offset by~~ a foreign exchange loss onrelated to a dividend declared by our Nigeria entity (a partnership for U.S. tax purposes) to our Aviat U.S. ~~entity of an insignificant amount in the three months ended March 31, 2017 and of $0.2 million in the nine months ended March 31, 2017.~~entity.

Income Taxes

Three Months Ended Nine Months Ended
(In thousands, except percentages) March 31, 2017 April 1, 2016 $ Change % Change March 31, 2017 April 1, 2016 $ Change % Change
Income (loss) from continuing operations before income taxes $ 449
$ (7,541 ) $ 7,990
(106.0 )% $ (35 ) $ (14,093 ) $ 14,058
(99.8 )%
Provision for (benefit from) income taxes $ 779
$ 361
$ 418
115.8 % $ (826 ) $ 856
$ (1,682 ) (196.5 )%



	Three Months Ended										Six Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016		$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change
Income (loss) before income taxes	$	2,787		$	2,587	$	200		7.7	%	$	1,583		$	(484	)	$	2,067		(427.1	)%
(Benefit from) provision for income taxes	$	(2,564	)	$	865	$	(3,429	)	N/A		$	(3,203	)	$	(1,605	)	$	(1,598	)	99.6	%

We estimate our annual effective tax rate at the end of each quarterly period, and we record the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances. During the first quarter of fiscal 2017, we received a tax refund of ~~$3.7~~$3.7 million from the ~~Inland Revenue Authority of Singapore~~IRAS related to an assessment we paid in fiscal year 2014 related to deductions claimed in tax years 2007 through 2010. ~~This~~During the first quarter of fiscal 2018, we received an additional refund of $1.3 million from IRAS which represents a final settlement. Both tax ~~refund was~~refunds were recorded as a discrete tax benefit during the ~~quarter.~~ quarter the respective payment was received. During the second quarter of fiscal 2018, we recorded a valuation allowance release of $3.3 million related to refundable AMT credit under the Tax Act as a discrete benefit. We expect to receive the refund of this tax benefit starting in our fiscal year 2020. The determination of the effective tax rate reflects tax expense and benefit generated in certain jurisdictions. However, jurisdictions with a year-to-date loss where no tax benefit can be recognized are excluded from the annual effective tax rate.

~~Income from Discontinued Operations~~

~~Our discontinued operations consist~~Due to the uncertainty regarding the timing and extent of our future profitability, we continue to record a full valuation allowance to offset our U.S. deferred tax assets which primarily represent future income tax benefits associated with our operating losses because we do not currently believe that it is more likely than not that these assets will be realized. In the future, if we conclude that sufficient positive evidence (including our estimate of future taxable income) exists to support a reversal of all or a portion of the ~~WiMAX business, which was sold on September 2, 2011. The $0.5 million~~valuation allowance, we expect that a significant portion of any release of the valuation allowance will be recorded as an income ~~net~~tax benefit at the time of ~~tax recognized in the first nine months of fiscal 2016 was primarily due to recovery of certain WiMAX customer receivables that were previously written down.~~release.

Liquidity, Capital Resources and Financial Strategies

Sources of Cash

As of ~~March 31,~~December 29, 2017, our total cash, ~~and~~ cash equivalents, restricted cash, and short-term investments were ~~$39.9 million of which $15.8~~$42.8 million. Approximately $19.2 million, or ~~40%~~44.9% was held in the United States. The remaining balance of $23.5 million, or 55.1%, was held by entities outside the United States. Of the amount of cash and cash equivalents held by our foreign subsidiaries at March 31, 2017, $11.4 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to U.S. taxes which are currently nominal.

As of ~~March 31,~~December 29, 2017, ~~our principal sources of liquidity consisted of the $40.2~~$1.0 million in cash, cash equivalents and short-term investments, $4.8 million of available credit under our $30.0 million SVB Credit Facility which expires on June 30, 2018 and future collections of receivables from customers. As of March 31, 2017, we were in compliance with the amended financial covenants contained in the SVB Credit Facility. However, as a result of uncertainty on our ability to continue to meet the financial covenants in the future and the fact that the SVB Credit Facility contains subjective acceleration clauses that could be triggered by the lender, the $8.0 million and $9.0 million borrowing was classified as ~~a current liability~~restricted cash as of March 31, 2017 and July 1, 2016. We regularly require letters of credit from some customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce our credit and sovereign risk. Historically our primary sources of liquidity have been cash flows from operations, credit facilities and cash proceeds from sale of our equity securities. Duringit was being held by the first nine months of fiscal 2017, our total cash and cash equivalents increased by $9.4 million primarily due to $14.0 million of cash provided by operating activities, offset by $3.2 million of cash usedbank under forward contracts specifically for ~~capital expenditures, $1.0 million of cash used in net~~the repayment of ~~SVB Credit Facility, and $0.3 million effect of exchange rate changes on cash and cash equivalents.~~a dividend declared by our Nigeria entity (a partnership for U.S. tax purposes) to our Aviat U.S. entity. These forward contracts were settled in January 2018.

Cash provided by operating activities was ~~$14.0~~$9.2 million in the first ~~nine~~six months of fiscal ~~2017~~2018 as compared to cash provided by operating activities of ~~$7.1~~$8.3 million in the first ~~nine~~six months of fiscal ~~2016.~~2017. Cash provided by operating activities is presented as net income ~~(loss)~~ adjusted for non-cash items and changes in operating assets and liabilities. Results from operations improved by $15.3 million as we had a net income of $0.8 million for the first nine months of fiscal 2017 compared to a net loss of $14.5 million for the first nine months of fiscal 2016, netNet contribution of non-cash items to cash provided by operating activities decreased by ~~$6.0~~$3.8 million and net contribution of changes in operating assets and liabilities to cash provided by operating activities ~~decreased~~increased by ~~$2.5~~$0.9 million for the first ~~nine~~six months of fiscal ~~2017~~2018 as compared to the same period in fiscal ~~2016.~~2017.

The ~~$15.3 million increase in net income includes a $3.7 million tax refund~~ ~~from the Inland Revenue Authority of Singapore related to a~~ ~~$13.2 million tax~~ ~~assessment we paid in fiscal year 2014. This tax refund was recorded as a discrete tax benefit when it was received during our first quarter of fiscal~~ ~~2017.~~

~~The $6.0~~$3.8 million decrease in the net contribution of non-cash items to cash provided by operating activities was primarily due to a ~~$2.6~~$3.1 million net decrease in deferred tax expense of which $3.3 million was related to the release of a valuation allowance for Alternative Minimum Tax, a $0.9 million decrease in charges for inventory write-downs, ~~a $2.0 million decrease in bad debt expense,~~ a $0.5 million decrease in depreciation and amortization of property, plant and equipment, offset by a ~~$0.5~~$0.7 million decrease in ~~loss on disposition of property, plant and equipment~~bad debt recovery, and a ~~$0.3~~$0.2 million ~~gain on liquidation of a dormant subsidiary~~ increase in ~~the third quarter of fiscal 2017~~.share-based compensation expense.

Changes in operating assets and liabilities resulted in a net ~~decrease~~increase of ~~$2.5~~$0.9 million to cash provided by operating activities for the first ~~nine~~six months of fiscal ~~2017~~2018 as compared to the same period in ~~2016.~~2017. Accounts receivable and unbilled costs fluctuate from period to period, depending on the amount, timing of sales and billing activities as well as cash collections. The fluctuations in accounts payable and accrued expenses were primarily due to the timing of liabilities incurred and vendor payments. The change in inventories and in customer service inventories were primarily due to demand and our focus on improving our inventory management. The decrease in customer advance payments and unearned income was due to the timing of payment from customers and revenue recognition. We used ~~$3.2~~$0.9 million in cash during the first ~~nine~~six months of fiscal ~~2017~~2018 on expenses related to restructuring liabilities.

During the remainder of fiscal year ~~2017,~~2018, we expect to spend approximately ~~$1.0~~$2.3 million for capital expenditures, primarily on equipment for development and manufacturing of new products and to support customer managed services.

As of December 29, 2017, our principal sources of liquidity consisted of the $40.6 million in cash, cash equivalents and short-term investments, $11.7 million of available credit under our $30.0 million SVB Credit Facility which expires on June 30, 2018 and future collections of receivables from customers. We regularly require letters of credit from some customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce our credit and sovereign risk. Historically our primary sources of liquidity have been cash flows from operations and credit facilities.

We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital expenditures for at least the next 12 months. Our SVB Credit Facility expires on June 30, 2018. While we intend to renew the SVB Credit Facility and expect the SVB Credit Facility to be renewed, there can be no assurance that the SVB Credit Facility will be renewed. In addition, there can be no assurance that our business will generate cash flow from operations, we will be in compliance with the quarterly financial covenants contained in the SVB Credit Facility, or that we will have a sufficient borrowing base under such facility, or that anticipated operational improvements will be achieved. If we are not in compliance with the financial covenants or do not have sufficient eligible accounts receivable to support our borrowing base, the availability of our credit facility is not certain or may be diminished. Over the longer term, if we are unable to maintain cash balances or generate sufficient cash flow from operations to service our obligations that may arise in the future, we may be required to sell assets, reduce capital expenditures, or obtain financing. If we need to obtain additional financing, we cannot be assured that it will be available on favorable terms, or at all. Our ability to make scheduled principal payments or pay interest on or refinance any future indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

Restructuring Payments

We had liabilities for restructuring activities totaling ~~$1.9~~$0.6 million as of ~~March 31,~~December 29, 2017, ~~$1.7~~$0.3 million of which was classified as current ~~liability~~liabilities and expected to be paid out in cash over the next 12 months. We expect to fund these future payments with available cash and cash provided by operations.

Contractual Obligations and Commercial Commitments

The amounts disclosed in our fiscal ~~2016~~2017 Annual Report on Form 10-K filed with the SEC on September ~~9, 2016~~6, 2017 include our commercial commitments and contractual obligations. During the first ~~nine~~six months of fiscal ~~2017,~~2018, no material changes occurred in our contractual obligations to purchase goods and services and to make payments under operating leases or our ~~commercial commitments and~~ contingent liabilities on outstanding letters of credit, guarantees and other arrangements as disclosed in our fiscal ~~2016~~2017 Annual Report on Form 10-K. As of December 29, 2017, we had commercial commitments of $51.9 million outstanding that were not recorded in our unaudited condensed consolidated balance sheets. This is an increase of $17.1 million from the amount disclosed in our fiscal 2017 Annual Report on Form 10-K. Please refer to Note 1110 Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements (Unaudited) in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates

For information about our critical accounting estimates, see the “Critical Accounting Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal ~~2016~~2017 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates. We employ established policies and procedures governing the use of financial instruments to manage our exposure to such risks.

Exchange Rate Risk

We conduct business globally in numerous currencies and are therefore exposed to foreign currency risks. We use derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. We do not hold or issue derivatives for trading purposes or make speculative investments in foreign currencies.

We use foreign exchange forward contracts to hedge forecasted foreign currency transactions relating to forecasted sales and purchase transactions. ~~Prior to the fourth quarter of fiscal 2015, these derivatives were designated as cash flow hedges. The effective portion of the gain or loss was initially reported as a component of accumulated other~~

~~comprehensive income (loss), and upon occurrence of the forecasted transaction, was subsequently reclassified into the income or expense line item to which the hedged transaction relates.~~ Beginning the fourth quarter of fiscal 2015, we no longer prepared contemporaneous documentation of hedges for the new foreign exchange forward contracts we entered into. As a result, the foreign exchange hedges no longer qualified as cash flow hedges. The changes in fair value related to the hedges were recorded in income or expenses line items on our statements of operations. The last qualifying cash flow hedges occurred in the first quarter of fiscal 2016 and we reclassified $41 thousand gain out of accumulated other comprehensive loss into cost of revenues during the first quarter of fiscal 2016.

We also enter into foreign exchange forward contracts to mitigate the change in fair value of specific non-functional currency assets and liabilities on the balance sheet. All balance sheet hedges are marked to market through earnings every period. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities.

As of ~~March 31,~~December 29, 2017, we had foreign currency forward contracts outstanding with a total notional amount of ~~$2.1~~$4.7 million consisting of ~~three different currencies. The following is a summary of the gross notional amount of our outstanding contracts grouped by the underlying foreign currency~~two currencies as ~~of March 31, 2017:~~follows:


Currency	Notional Contract Amount (Local Currency)	Notional Contract Amount (USD)		Notional Contract Amount (Local Currency)	Notional Contract Amount (USD)
	(In thousands)			(In thousands)
Euro	1,200	$	1,284
South Africa rand	6,687	511
New Zealand dollar	450	315		5,400	$	3,702
Nigeria Naira				331,200	1,000
Total of all currency forward contracts		$	2,110		$	4,702

Net foreign exchange income (loss) recorded in our unaudited condensed consolidated statements of operations during the ~~three~~first six months of fiscal 2018 and ~~nine months ended March 31,~~ 2017 ~~and 2016~~ was as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	March 31, 2017			April 1, 2016			March 31, 2017			April 1, 2016			December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016
Amount included in costs of revenues	$	(322	)	$	(127	)	$	(602	)	$	(300	)	$	(107	)	$	(64	)	$	(98	)	$	(280	)
Amount included in other income	$	339		$	—		$	131		$	—
Amount included in other expense													(136		)	2			(137		)	(208		)
Total foreign exchange loss, net													$	(243	)	$	(62	)	$	(235	)	$	(488	)

A 10% adverse change in currency exchange rates for our foreign currency derivatives held as of ~~March 31,~~December 29, 2017 would have an impact of approximately ~~$0.2~~$0.4 million on the fair value of such instruments.

Certain of our international business ~~was~~are transacted in non-U.S. dollar currency. As discussed above, we utilize foreign currency hedging instruments to minimize the currency risk of international transactions. The impact of translating the assets and liabilities of foreign operations to U.S. dollars for the first ~~nine~~six months of fiscal ~~2017~~2018 was ~~$0.9~~$0.6 million and was included as a component of stockholders’ equity. As of ~~March 31,~~December 29, 2017 and ~~July 1, 2016,~~June 30, 2017, the cumulative translation adjustment decreased our ~~stockholders’~~ equity by ~~$12.1~~$11.2 million and ~~$11.2~~$11.8 million, respectively.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our cash equivalents and borrowings under our credit facility.

Exposure on Cash Equivalents and Short-term Investments

We had ~~$39.9~~$42.8 million in total cash, ~~and~~ cash equivalents and short-term investments as of ~~March 31,~~December 29, 2017. Cash equivalents and short-term investments totaled ~~$24.9~~$22.7 million as of ~~March 31,~~December 29, 2017 and were comprised of money market funds and bank certificates of deposit. Cash equivalents and short-term investments have been recorded at fair value on our balance sheet.

Our cash equivalents and short-term investments earn interest at fixed rates; therefore, changes in interest rates will not generate a gain or loss on these investments unless they are sold prior to maturity. Actual gains and losses due to the sale of our investments prior to maturity have been immaterial. The weighted average days to maturity for cash equivalents and short-term investments held as of ~~March 31,~~December 29, 2017 was ~~159~~156 days, and these investments had an average yield of ~~6.64%~~7.18% per annum. A 10% change in interest rates on our cash equivalents and ~~cash equivalents~~short-term investments is not expected to have a material impact on our financial position, results of operations or cash flows.

Exposure on Borrowings

During the first ~~nine~~six months of fiscal ~~2017,~~2018, we had ~~$8.0~~$9.0 million of borrowings outstanding under the SVB Credit Facility that incurred interest at the prime rate plus a spread of 0.50% to 1.50% with such spread determined based on our adjusted quick ratio. During the first ~~nine~~six months of fiscal ~~2017,~~2018, our weighted average interest rate was ~~4.10%~~4.79% and the interest expense on these borrowings was insignificant.

A 10% change in interest rates on the current borrowings or on future borrowings is not expected to have a material impact on our financial position, results of operations or cash flows since interest on our borrowings is not material to our overall financial position.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation, with participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as of the end of the period covered by this report, our CEO and CFO have concluded that 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 ~~March 31,~~December 29, 2017, are effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Controls ~~over~~Over Financial Reporting

There were no changes to our internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) that occurred during our first ~~nine~~six months of fiscal ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Legal Proceedings under Note 1110 Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements (Unaudited) in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Investors should carefully review and consider the information regarding certain factors which could materially affect our business, operating results, cash flows and financial condition set forth under Item 1A, Risk Factors, in our fiscal ~~2016~~2017 Annual Report on Form 10-K filed with the SEC on September ~~9, 2016.~~6, 2017.

We do not believe that there have been any other material additions or changes to the risk factors previously disclosed in our fiscal ~~2016~~2017 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The information required by this Item is set forth on the Exhibit Index (following the Signature section of this report) and is included, or incorporated by reference, in this Form 10-Q.

SIGNATURE

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.

AVIAT NETWORKS, INC.

(Registrant)

Date: ~~May 10, 2017~~February 8, 2018




By:	/s/ Eric Chang
	Eric Chang Vice President, Corporate Controller and Principal Accounting Officer (Principal accounting officer and duly authorized officer)

EXHIBIT INDEX

The following exhibits are filed herewith or incorporated by reference to exhibits previously filed with the SEC:



Exhibit Number		Descriptions
3.1		Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporate by reference to Exhibit 3.1 to the Current Report on ~~our~~ Form 10-Q filed with the SEC on February 10, 2017, File No. 001-33278)
3.2		Amended and Restated Bylaws of Aviat Networks, Inc. (incorporate by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on October 2, 2015, File No. 001-33278)
4.1		Tax Benefit Preservation Plan, dated as of September 6, 2016, by and between Aviat Networks, Inc. and Computershare Inc., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on September 7, 2016, File No. 011-33278)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS		XBRL Instance 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

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