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 ~~December 29, 2017~~October 2, 2020



¨☐			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

~~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.,~~200 Parker Drive, Suite ~~200, Milpitas, California~~C100A,

Austin,

~~95035~~Texas

78728

(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)~~

__________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	AVNW	The Nasdaq Global Select Market

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”~~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 .~~ ¨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 ~~February 1, 2018~~October 30, 2020 was ~~5,340,851 shares.~~

5,461,438.

AVIAT NETWORKS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended ~~December 29, 2017~~October 2, 2020

Table of Contents




	Page
Part I. Financial Information		34
Item 1. Financial Statements		34
Condensed Consolidated Balance Sheets (Unaudited)		34
Condensed Consolidated Statements of Operations (Unaudited)		45
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		56
Condensed Consolidated Statements of Cash Flows (Unaudited)		67
Condensed Consolidated Statements of Equity (Unaudited)		8
Notes to Condensed Consolidated Financial Statements (Unaudited)		79
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1822
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2630
Item 4. Controls and Procedures		2731
Part II. Other Information		2932
Item 1. Legal Proceedings		2932
Item 1A. Risk Factors		2932
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2932
Item 3. Defaults upon Senior Securities		2932
Item 4. Mine Safety Disclosures		2932
Item 5. Other Information		2932
Item 6. Exhibits		2933
Signature s		3034
Exhibit Index		3134

PART I. FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements~~

Item 1.Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share and par value amounts)	December 29, 2017			June 30, 2017			(In thousands, except share and par value amounts)	October 2, 2020		July 3, 2020
ASSETS							ASSETS
Current Assets:							Current Assets:
Cash and cash equivalents	$	40,352		$	35,658		Cash and cash equivalents	$	36,226	$	41,618
Restricted cash	1,772			541
Short-term investments	276			264
Accounts receivable, net	43,098			45,945			Accounts receivable, net	45,027		44,661
Unbilled receivables	9,487			12,110			Unbilled receivables	31,295		28,085
Inventories	24,556			21,794			Inventories	14,356		13,997
Customer service inventories	1,637			1,871			Customer service inventories	1,303		1,234
Other current assets	7,065			6,402			Other current assets	9,751		10,355
Total current assets	128,243			124,585			Total current assets	137,958		139,950
Property, plant and equipment, net	16,931			16,406			Property, plant and equipment, net	16,562		16,911
Deferred income taxes	5,705			6,178			Deferred income taxes	12,548		12,799
Right of use assets							Right of use assets	2,912		3,474
Other assets	9,331			5,407			Other assets	6,793		6,667
TOTAL ASSETS	$	160,210		$	152,576		TOTAL ASSETS	$	176,773	$	179,801
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current Liabilities:							Current Liabilities:
Short-term debt	$	9,000		$	9,000
Accounts payable	33,098			33,606			Accounts payable	$	31,720	$	31,995
Accrued expenses	19,842			21,933			Accrued expenses	24,262		26,920
Advanced payments and unearned income	25,273			20,004
Short-term lease liabilities							Short-term lease liabilities	1,027		1,445
Advance payments and unearned revenue							Advance payments and unearned revenue	25,233		21,872
Short-term debt							Short-term debt	0		9,000
Restructuring liabilities	308			1,475			Restructuring liabilities	1,835		2,738
Total current liabilities	87,521			86,018			Total current liabilities	84,077		93,970
Unearned income	6,509			7,062
Unearned revenue							Unearned revenue	8,182		8,142
Long-term lease liabilities							Long-term lease liabilities	2,147		2,303
Other long-term liabilities	1,052			1,022			Other long-term liabilities	316		401
Reserve for uncertain tax positions	2,473			2,453			Reserve for uncertain tax positions	5,644		5,759
Deferred income taxes	1,743			1,681			Deferred income taxes	510		545
Total liabilities	99,298			98,236			Total liabilities	100,876		111,120
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 12)							Commitments and contingencies (Note 12)
Equity:							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, 5,340,851 shares issued and outstanding at December 29, 2017; 5,317,766 shares issued and outstanding at June 30, 2017	53			53
Preferred stock, $0.01 par value, 50,000,000 shares authorized, NaN issued							Preferred stock, $0.01 par value, 50,000,000 shares authorized, NaN issued	0		0
Common stock, $0.01 par value, 300,000,000 shares authorized, 5,443,362 shares issued and outstanding at October 2, 2020; 5,400,487 shares issued and outstanding at July 3, 2020							Common stock, $0.01 par value, 300,000,000 shares authorized, 5,443,362 shares issued and outstanding at October 2, 2020; 5,400,487 shares issued and outstanding at July 3, 2020	54		54
Additional paid-in-capital	814,898			813,733			Additional paid-in-capital	815,203		814,337
Accumulated deficit	(743,790		)	(748,204		)	Accumulated deficit	(724,805)		(730,741)
Accumulated other comprehensive loss	(11,164		)	(11,785		)	Accumulated other comprehensive loss	(14,555)		(14,969)
Noncontrolling interests	915			543
Total equity	60,912			54,340			Total equity	75,897		68,681
TOTAL LIABILITIES AND EQUITY	$	160,210		$	152,576		TOTAL LIABILITIES AND EQUITY	$	176,773	$	179,801

See accompanying Notes to Unaudited Condensed Consolidated Financial ~~Statements~~

Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended						Six Months Ended							Three Months Ended
(In thousands, except per share amounts)	December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016			(In thousands, except per share amounts)	October 2, 2020		September 27, 2019
Revenues:													Revenues:
Revenue from product sales	$	37,719		$	45,958		$	72,786		$	80,682		Revenue from product sales	$	44,464	$	36,594
Revenue from services	24,004			22,578			45,119			46,061			Revenue from services	21,826		22,020
Total revenues	61,723			68,536			117,905			126,743			Total revenues	66,290		58,614
Cost of revenues:													Cost of revenues:
Cost of product sales	23,784			31,003			47,447			55,863			Cost of product sales	27,909		20,822
Cost of services	16,049			16,417			31,272			32,399			Cost of services	14,132		15,236
Total cost of revenues	39,833			47,420			78,719			88,262			Total cost of revenues	42,041		36,058
Gross margin	21,890			21,116			39,186			38,481			Gross margin	24,249		22,556
Operating expenses:													Operating expenses:
Research and development expenses	5,144			4,475			9,942			9,418			Research and development expenses	4,847		5,216
Selling and administrative expenses	14,104			14,056			27,826			29,243			Selling and administrative expenses	12,837		14,644
Restructuring (recovery) charges	(252		)	72			(250		)	232
Restructuring charges													Restructuring charges	0		1,177
Total operating expenses	18,996			18,603			37,518			38,893			Total operating expenses	17,684		21,037
Operating income (loss)	2,894			2,513			1,668			(412		)
Operating income													Operating income	6,565		1,519
Interest income	42			72			100			126			Interest income	36		86
Interest expense	(13		)	(3		)	(19		)	(21		)	Interest expense	(1)		(3)
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		)

Income before income taxes													Income before income taxes	6,600		1,602
Provision for income taxes													Provision for income taxes	664		1,548
Net income	5,351			1,722			4,786			1,121			Net income	$	5,936	$	54
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:													Net income per share of common stock outstanding:
Basic	$	0.95		$	0.32		$	0.83		$	0.20		Basic	$	1.10	$	0.01
Diluted	$	0.90		$	0.31		$	0.79		$	0.20		Diluted	$	1.07	$	0.01
Weighted average shares outstanding:
Weighted-average shares outstanding:													Weighted-average shares outstanding:
Basic	5,329			5,284			5,323			5,273			Basic	5,411		5,347
Diluted	5,624			5,400			5,616			5,328			Diluted	5,546		5,530

See accompanying Notes to Unaudited Condensed Consolidated Financial ~~Statements~~

Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
Net income	$	5,936	$	54
Other comprehensive income (loss):
Net change in cumulative translation adjustments	414		(513)
Other comprehensive income (loss)	414		(513)
Comprehensive income (loss)	$	6,350	$	(459)

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~~Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
Operating Activities
Net income	$	5,936	$	54
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment	1,254		1,038
Provision for (recovery from) uncollectible receivables	2		(35)
Share-based compensation	571		407
Deferred tax assets, net	216		(634)
Charges for inventory and customer service inventory write-downs	185		337
Loss on disposition of property, plant and equipment, net	6		3
Noncash lease expense	562		1,194
Changes in operating assets and liabilities:
Accounts receivable	(294)		8,570
Unbilled receivables	(3,185)		(2,594)
Inventories	(444)		(2,665)
Customer service inventories	(201)		(326)
Accounts payable	(135)		(3,779)
Accrued expenses	(2,406)		540
Advance payments and unearned revenue	3,350		3,152
Income taxes payable or receivable	101		1,803
Other assets and liabilities	(703)		(125)
Change in lease liabilities	(574)		(1,291)
Net cash provided by operating activities	4,241		5,649
Investing Activities
Payments for acquisition of property, plant and equipment	(1,018)		(1,302)


Net cash used in investing activities	(1,018)		(1,302)
Financing Activities
Proceeds from borrowings	0		9,000
Repayments of borrowings	(9,000)		(9,000)
Payments for repurchase of common stock	0		(748)
Payments for taxes related to net settlement of equity awards	(128)		(746)
Proceeds from issuance of common stock under employee stock plans	423		4
Net cash used in financing activities	(8,705)		(1,490)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	89		(318)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(5,393)		2,539
Cash, cash equivalents, and restricted cash, beginning of period	41,872		32,201
Cash, cash equivalents, and restricted cash, end of period	$	36,479	$	34,740

Six Months Ended
(In thousands) December 29,
2017 December 30,
2016
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 2,590
3,136
Provision for (recovery from) uncollectible receivables 14
(643 )
Share-based compensation 1,154
946
Deferred tax assets, net (2,737 ) 336
Charges for inventory and customer service inventory write-downs 205
1,097
Loss on disposition of property, plant and equipment 28
137
Changes in operating assets and liabilities:
Accounts receivable 3,490
7,891
Unbilled receivables 2,626
(2,419 )
Inventories (2,098 ) 6,602
Customer service inventories (83 ) (92 )
Accounts payable (381 ) (120 )
Accrued expenses (1,672 ) (1,090 )
Advance payments and unearned income 3,801
(6,394 )
Income taxes payable or receivable (232 ) 968
Other assets and liabilities (2,320 ) (3,154 )
Net cash provided by operating activities 9,171
8,322
Investing Activities
Payments for acquisition of property, plant and equipment (3,342 ) (2,853 )
Net cash used in investing activities (3,342 ) (2,853 )
Financing Activities
Proceeds from borrowings 18,000
16,000
Repayments of borrowings (18,000 ) (17,000 )
Proceeds from issuance of common stock under employee stock plans 11
5
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~~

Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Three Months Ended October 2, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of July 3, 2020	5,400,487	$	54	$	814,337	$	(730,741)	$	(14,969)	$	68,681
Net income	—	—		—		5,936		—		5,936
Other comprehensive income, net of tax	—	—		—		—		414		414
Issuance of common stock under employee stock plans	48,491	—		423		—		—		423
Shares withheld for taxes related to vesting of equity awards	(5,616)	—		(128)		—		—		(128)

Share-based compensation	—	—		571		—		—		571

Balance as of October 2, 2020	5,443,362	$	54	$	815,203	$	(724,805)	$	(14,555)	$	75,897


	Three Months Ended September 27, 2019
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of June 28, 2019	5,359,695	$	54	$	815,196	$	(730,998)	$	(12,736)	$	71,516
Net income	—	—		—		54		—		54
Other comprehensive loss, net of tax	—	—		—		—		(513)		(513)
Issuance of common stock under employee stock plans	192,812	2		2		—		—		4
Shares withheld for taxes related to vesting of equity awards	(52,384)	(1)		(745)		—		—		(746)
Stock repurchase	(55,452)	(1)		(747)		—		—		(748)
Share-based compensation	—	—		407		—		—		407
Balance as of September 27, 2019	5,444,671	$	54	$	814,113	$	(730,944)	$	(13,249)	$	69,974

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 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.~~information, and we have made estimates, assumptions and judgments affecting the amounts reported in our unaudited condensed consolidated financial statements and the accompanying notes, as discussed in greater detail below. 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 six~~ months ended ~~December 29, 2017~~October 2, 2020 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 ~~June 30, 2017.~~July 3, 2020.

The unaudited condensed consolidated financial statements include the accounts of the Company and its ~~wholly-owned~~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 two quarters~~three months ended October 2, 2020 and September 27, 2019 both consisted of ~~fiscal 2018 and fiscal 2017 included~~ 13 ~~weeks in each quarter.~~weeks. Fiscal year ~~2018~~2021 will be comprised of 52 weeks and will end on ~~June 29, 2018.~~July 2, 2021. Fiscal year 2020 was comprised of 53 weeks and ended on July 3, 2020.

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, lease liabilities, restructuring obligations, product warranty obligations, share-based awards, contingencies, recoverability of long-lived assets and useful lives of property, plant and equipment. The actual results that we experience may differ materially from our estimates.

Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of and for the ~~six~~three months ended ~~December 29, 2017,~~October 2, 2020, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended ~~June 30, 2017.~~July 3, 2020.

Accounting Standards Adopted

In ~~October 2016,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standards~~Standard Update (“ASU”) ~~2016-16 (Topic 740),~~ 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for ~~Income Taxes: Intra-Entity Transfers~~Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 became effective for us in our first quarter of ~~Assets Other than Inventory~~, ~~which requires that an entity recognizes~~fiscal 2021. We adopted this guidance during the ~~tax expense from~~first quarter of fiscal 2021. The adoption had no material impact on our unaudited condensed consolidated financial statements.

In August 2018, the ~~sale of intra-entity sales of assets, other than inventory, in~~FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the ~~seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminate in consolidation.~~Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The update eliminates, adds, and modifies certain disclosure requirements for fair value measurements. We adopted this update during the first quarter of fiscal ~~2018.~~ 2021. The adoption had no material impact on our unaudited condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In ~~July 2015,~~March 2020, the FASB issued ASU ~~2015-11~~2020-04, Reference Rate Reform (Topic ~~330),~~ ~~Simplifying the Measurement of Inventory~~,848). This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance ~~to companies who account~~is applicable for ~~inventory using either~~our borrowing instruments, which use LIBOR as a reference rate, and was effective March 12, 2020 through December 31, 2022. We are currently evaluating 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. We adopted this update prospectively during the first quarter of fiscal 2018. The adoption ~~had no material~~potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.

~~Accounting Standards Not Yet Adopted~~

In ~~May 2014,~~December 2019, the FASB issued ASU ~~2014-09~~ ~~(ASC Topic 606), Revenue from Contracts with Customers~~ ~~with amendments issued~~2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in ~~2015~~tax basis goodwill, separate entity financial statements and ~~2016. This standard update will supersede nearly all current U.S. GAAP guidance on this topic~~interim recognition of enactment of tax laws and eliminate industry-specific guidance. 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. 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 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 statement impact of the new standard and will continue to update that assessment as more information becomes available. We expect the timing of revenue recognition to change in certain areas, including our services segment’s installation revenue, which upon adoptionrate changes. ASU 2019-12 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 ofeffective for us in our contracts under the new revenue recognition standard 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 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.~~2022. We are ~~continuing to assess all potential impacts of the guidance on our unaudited condensed~~ ~~consolidated~~ ~~financial statements and given normal ongoing business dynamics, preliminary conclusions are subject to 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 arecurrently evaluating the ~~effect the adoption of the standard~~potential impact that adopting ASU 2019-12 will have on our unaudited condensed consolidated financial statements.

In ~~January~~June 2016, the FASB issued ASU ~~2016-01,~~ 2016-13,Financial ~~Instruments - Overall (Subtopic 825-10)~~Instruments-Credit Losses (Topic 326): ~~Recognition and~~ Measurement of Credit Losses on Financial ~~Assets~~Instruments (ASU 2016-13) and ~~Financial Liabilities~~also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, Topic 326). ~~This guidance retains the current accounting~~Topic 326 requires measurement and recognition of expected credit losses for ~~classifying and~~

~~measuring investments in debt securities and loans, but requires equity investments to~~financial assets held. Topic 326 will 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 us in our first quarter of fiscal ~~years beginning after December 15, 2017.~~ 2024 and earlier adoption is permitted. We ~~do not expect~~are evaluating the ~~adoption of this standard to~~impact adopting Topic 326 will have ~~a material impact~~ on our unaudited condensed consolidated financial statements.

Note 2. ~~Net Income Per Share of Common Stock~~Balance Sheet Components

~~Net income per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock~~Cash, Cash Equivalents, 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 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.Restricted Cash

The following table ~~presents~~provides a summary of our cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the ~~computation~~corresponding amount in our unaudited condensed consolidated statement of ~~basic~~cash flows:


(In thousands)	October 2, 2020		July 3, 2020
Cash and cash equivalents	$	36,226	$	41,618

Restricted cash included in other assets	253		254
Total cash, cash equivalents, and restricted cash in the Statement of Cash Flows	$	36,479	$	41,872

Accounts Receivable, net

Our net accounts receivable are summarized below:


(In thousands)	October 2, 2020		July 3, 2020
Accounts receivable	$	47,041	$	46,502
Less: Allowances for collection losses	(2,014)		(1,841)
Total accounts receivable, net	$	45,027	$	44,661

Inventories

Our inventories are summarized below:


(In thousands)	October 2, 2020		July 3, 2020
Finished products	$	8,686	$	9,055

Raw materials and supplies	5,670		4,942
Total inventories	$	14,356	$	13,997

Consigned inventories included within raw materials and supplies	$	3,056	$	1,324

We currently rely on a few vendors for substantially all of our inventory purchases.

We record charges to adjust our inventory and ~~diluted~~customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning, or discontinuance. The charges during the three months ended October 2, 2020 and September 27, 2019 were classified in cost of product sales as follows:


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
Excess and obsolete inventory charges	$	63	$	146
Customer service inventory write-downs	122		191
Total inventory charges	$	185	$	337

Property, Plant and Equipment, net ~~income per share attributable to our common stockholders:~~

Our property, plant and equipment, net are summarized below:


(In thousands)	October 2, 2020		July 3, 2020
Land	$	710	$	710
Buildings and leasehold improvements	11,742		11,737
Software	21,205		17,887
Machinery and equipment	50,108		52,293
Total property, plant and equipment, gross	83,765		82,627
Less: Accumulated depreciation and amortization	(67,203)		(65,716)
Total property, plant and equipment, net	$	16,562	$	16,911

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~~Included in the ~~weighted-average equity awards that~~total plant, property and equipment above were ~~excluded~~$0.7 million and $3.5 million of assets in progress which have not been placed in service as of October 2, 2020 and July 3, 2020, respectively. Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:


	Three Months Ended
(In thousands)		October 2, 2020		September 27, 2019
Depreciation and amortization		$	1,254	$	1,038

Accrued Expenses

Our accrued expenses are summarized below:


(In thousands)	October 2, 2020		July 3, 2020
Accrued compensation and benefits	$	9,539	$	11,814
Accrued agent commissions	2,529		2,356
Accrued warranties	3,107		3,196
Other	9,087		9,554
Total accrued expenses	$	24,262	$	26,920

Accrued Warranties

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


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
Balance as of the beginning of the period	$	3,196	$	3,323
Warranty provision recorded during the period	284		504

Consumption during the period	(373)		(415)
Balance as of the end of the period	$	3,107	$	3,412

Advance Payments and Unearned Revenue

Our advance payments and unearned revenue are summarized below:


(In thousands)	October 2, 2020		July 3, 2020
Advance payments	$	2,812	$	2,529
Unearned revenue	22,421		19,343
Total advance payments and unearned revenue	$	25,233	$	21,872

Excluded from the ~~diluted net income per share calculations:~~balances above are $8.2 million and $8.1 million in long-term unearned revenue as of October 2, 2020 and July 3, 2020, respectively.

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Stock options 357
427
341
435
Restricted stock units and performance stock units —
6
—
8
Total potential shares of common stock excluded 357
433
341
443

Note 3. ~~Balance Sheet Components~~Fair Value Measurements of Assets and Liabilities

~~Cash, Cash Equivalents~~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 ~~Restricted Cash~~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 ~~following table provides a summary~~carrying amounts, estimated fair values, and valuation input levels of our ~~cash, cash equivalents~~assets 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~~liabilities that are measured at fair value on a recurring basis as of October 2, 2020 and July 3, 2020 were as follows:


	October 2, 2020				July 3, 2020				Valuation Inputs
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents:
Money market funds	$	18,920	$	18,920	$	18,189	$	18,189	Level 1
Bank certificates of deposit	$	2,538	$	2,538	$	3,250	$	3,250	Level 2


Liabilities:
Other accrued expenses:
Foreign exchange forward contracts	$	0	$	0	$	14	$	14	Level 2

(In thousands) December 29,
2017 June 30,
2017
Accounts receivable $ 46,696
$ 49,864
Less allowances for collection losses (3,598 ) (3,919 )
$ 43,098
$ 45,945
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 October 2, 2020 and July 3, 2020, these money market funds were valued at $1.00 net asset value per share.

~~Inventories~~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.

As of October 2, 2020 and July 3, 2020, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Our ~~inventories were~~policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as ~~follows:~~

(In thousands) December 29,
2017 June 30,
2017
Finished products $ 19,823
$ 16,619
Work in process 2,963
3,088
Raw materials and supplies 1,770
2,087
Total inventories $ 24,556
$ 21,794
Deferred cost of revenue included within finished goods $ 8,354
$ 7,120
Consigned inventories included within raw materials and supplies $ 948
$ 1,268

~~We record recovery~~of the actual date of the events or ~~charges to adjust our inventory and customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance.~~change in circumstances that caused the transfer. During the first three months of fiscal 2021 and ~~six months ended December 29, 2017,~~2020, we ~~recorded a net recovery~~had no transfers between levels of ~~$0.1 million~~the fair value hierarchy of our assets or liabilities measured at fair value.

Note 4. Leases

The Company has facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 20 years and ~~$0.1 million, respectively, related to previously reserved inventory due to sell through. During the~~ ~~three~~contain leasehold improvement incentives, rent holidays 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 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 Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Excess and obsolete inventory (recovery) charges $ 106
$ 94
$ (143 ) $ 568
Customer service inventory write-downs 158
242
348
529
$ 264
$ 336
$ 205
$ 1,097

~~Property, Plant and Equipment, net~~

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

(In thousands) December 29,
2017 June 30,
2017
Land $ 710
$ 710
Buildings and leasehold improvements 11,391
11,442
Software 15,486
14,803
Machinery and equipment 45,924
43,174
73,511
70,129
Less accumulated depreciation and amortization (56,580 ) (53,723 )
$ 16,931
$ 16,406

~~Depreciation and amortization expense related to property, plant and equipment was as follows:~~

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Depreciation and amortization $ 1,308
$ 1,467
$ 2,590
$ 3,136

~~Accrued Expenses~~

~~Our accrued expenses are summarized below:~~

(In thousands) December 29,
2017 June 30,
2017
Accrued compensation and benefits $ 7,342
$ 8,317
Accrued warranties 3,168
3,056
Other 9,332
10,560
$ 19,842
$ 21,933

~~Accrued Warranties~~escalation clauses.

We ~~accrue for the estimated cost to repair or replace products under warranty~~determine if an arrangement contains a lease at ~~the time~~inception. These operating leases are included in "Right of ~~sale. Changes in~~use assets" (“ROU”) on our ~~warranty liability, which is included as a component of accrued expenses in the~~ unaudited condensed consolidated balance sheets and represent our right to use the underlying asset for the lease term. Our obligations to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our unaudited condensed consolidated balance sheets. We did not enter into any finance leases during the three months ended October 2, 2020.

The following summarizes our lease costs (in thousands):


	Three Months Ended
	October 2, 2020		September 27, 2019
	(In thousands)
Operating lease costs	$	313	$	320
Short-term lease costs	458		484
Variable lease costs	68		63
Total lease costs	$	839	$	867

The following summarizes our lease term and discount rate for three months ended October 2, 2020:


Weighted average remaining lease term	7.3 years
Weighted average discount rate	6.9	%

As of October 2, 2020, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as ~~follows:~~follows (in thousands):


	Amount
	(In thousands)
Remainder of 2021	$	875
2022	623
2023	357
2024	230
2025	236
Thereafter	1,952
Total lease payments	4,273
Less: interest	(1,099)
Present value of lease liabilities	$	3,174

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Balance as of the beginning of the period $ 2,964
$ 3,704
$ 3,056
$ 3,944
Warranty provision recorded during the period 797
480
1,228
817
Consumption during the period (593 ) (625 ) (1,116 ) (1,202 )
Balance as of the end of the period $ 3,168
$ 3,559
$ 3,168
$ 3,559

~~Advanced payments and Unearned Income~~

~~Our advanced payments and unearned income are summarized below:~~

(In thousands) December 29,
2017 June 30,
2017
Advanced payments $ 9,870
$ 8,760
Unearned income 15,403
11,244
$ 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 December 29, 2017 and June 30, 2017 were as follows:

December 29, 2017 June 30, 2017 Valuation Inputs
(In thousands) Cost Fair Value Cost Fair Value
Assets:
Cash equivalents:
Money market funds $ 22,423
$ 22,423
$ 22,059
$ 22,059
Level 1
Bank certificates of deposit $ —
$ —
$ 66
$ 66
Level 2
Short term investments:
Bank certificates of deposit $ 276
$ 276
$ 264
$ 264
Level 2
Other current assets:
Foreign exchange forward contracts $ 124
$ 124
$ —
$ —
Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts $ —
$ —
$ 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 December 29, 2017 and 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 December 29, 2017 and 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 six months of fiscal 2018 and 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,~~May 4, 2020, we entered into ~~a Second~~Amendment No. 3 to Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the “SVB Credit Facility”)~~. The SVB Credit Facility expires on~~ which extended the expiration date to June ~~30, 2018.~~28, 2021. The SVB Credit Facility provides for a ~~committed amount of up to $30.0~~$25.0 million accounts receivable formula-based revolving credit facility that can be borrowed by our U.S. company, with a ~~$30.0~~$25.0 million sublimit that can be borrowed by our Singapore subsidiary. ~~Borrowings~~Loans may be advanced under the SVB Credit Facility ~~at the lesser of $30.0 million or~~based on a borrowing base equal to a specified percentage of the value of eligible accounts ~~receivable and U.S. unbilled accounts~~ of the ~~Company,~~borrowers under the SVB Credit Facility. The borrowing base is subject to certain ~~reserves and~~ eligibility criteria. ~~The SVB Credit Facility~~Availability under the accounts receivable formula based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sublimit. IfWe may prepay loans under 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%~~whole or in part at any time without premium or penalty. As 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 highOctober 2, 2020, available 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 $23.5 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $1.5 million. As of July 3, 2020, our outstanding debt balance under the SVB Credit Facility, classified as a current liability, was $9.0 million, ~~as of December 29, 2017~~ and ~~June 30, 2017.~~ the interest rate was 3.75%. We repaid the outstanding debt balance during the quarter ended October 2, 2020.

The SVB Credit Facility carries an interest rate computed, at our option, based on either (i) at the ~~daily~~ prime rate ~~as published~~reported in the Wall Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ~~ratio.~~ratio; or (ii) if we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a spread of 2.75%. Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00% above the

applicable prime or LIBOR rate. During the first ~~six~~three months of fiscal ~~year 2018,~~2021, the ~~weighted average~~weighted-average interest rate on our outstanding loan was ~~4.79%~~3.75%. As of December 29, 2017, available credit under the SVB Credit Facility was $11.7 million reflecting the calculated borrowing base of $23.3 million less existing borrowings of $9.0 million and outstanding letters of credit of $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~~Silicon Valley Bank 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%5.00% above the applicable interest rate. As of ~~December 29, 2017,~~October 2, 2020, we were in compliance with the quarterly financial covenants ~~as amended,~~ contained in the SVB Credit ~~Facility.~~Facility, as amended.

~~In addition, we have~~We also obtained an uncommitted short-term line of credit ~~of $0.4~~$0.3 million from a bank in New Zealand to support the operations of our ~~subsidiary located there.~~New Zealand subsidiary. This line of credit provides for ~~$0.3~~up to $0.2 million in short-term advances at various interest rates, all of which was available as of ~~December 29, 2017~~October 2, 2020 and ~~June 30, 2017.~~July 3, 2020. 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 ~~December 29, 2017.~~October 2, 2020 and July 3, 2020. This ~~facility~~line of credit may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

Note 6. ~~Restructuring Activities~~Revenue Recognition

Contract Balances, Performance Obligations, and Backlog

The following table ~~summarizes~~provides information about receivables and liabilities from contracts with customers (in thousands):


	October 2, 2020		July 3, 2020
Contract Assets
Accounts receivable, net	$	45,027	$	44,661
Unbilled receivables	31,295		28,085
Capitalized commissions	1,328		1,157
Contract Liabilities
Advance payments and unearned revenue	25,233		21,872
Unearned revenue, long-term	8,182		8,142

Significant changes in contract balances may arise as a result of recognition over time for services, transfer of control for equipment, and periodic payments (both in arrears and in advance).

From time to time, we may experience unforeseen events that could result in a change to the scope or price associated with an arrangement. When such events occur, we update the transaction price and measure of progress for the performance obligation and recognize the change as a cumulative catch-up to revenue. Because of the nature and type of contracts we engage in, the timeframe to completion and satisfaction of current and future performance obligations can shift; however, this will have no impact on our ~~restructuring related activities~~future obligation to bill and collect.

As of October 2, 2020, we had $33.4 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 68% is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter. During the three months ended October 2, 2020 we recognized approximately $11.4 million which was included in advance payments and unearned revenue at the beginning of the reporting period.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $75.4 million at October 2, 2020. Of this amount, we expect to recognize approximately 60% as revenue during the next 12 months, with the remaining amount to be recognized as revenue within two to five years.

Note 7. Segment and Geographic Information

We operate in 1 reportable business segment: the design, manufacturing, and sale of a range of wireless networking products, solutions, and services. Our financial performance is regularly reviewed by our chief operating decision maker who is our chief executive officer.

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 months ended October 2, 2020 and September 27, 2019 was as follows:


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
North America	$	45,499	$	39,767
Africa and the Middle East	10,571		10,593
Europe and Russia	2,262		3,407
Latin America and Asia Pacific	7,958		4,847
Total revenue	$	66,290	$	58,614

The loss of a significant portion of business from any significant customers could adversely affect our unaudited condensed consolidated financial statements.

Customers accounting for 10% or more of our total revenue was as follows:

Three Months Ended

October 2, 2020

September 27, 2019

Mobile Telephone Networks Group (MTN Group)

•Less than 10%

Customers accounting for 10% or more of our accounts receivable was as follows:


	October 2, 2020		July 3, 2020
MTN Group	12	%	21	%

Note 8. Equity

Stock Repurchase Program

In May 2018, our board of directors approved a stock repurchase program, which does not have an expiration date, for the repurchase of up to $7.5 million of our common stock.

All repurchased shares were retired. As of October 2, 2020, $3.4 million remained available under our stock repurchase program. The repurchase program has been suspended temporarily since February 2020. Therefore, during the first ~~six~~three months of fiscal ~~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, 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

As2021, we did not repurchase any shares of December 29, 2017, $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. In January 2018, we reached an agreement with a certain foreign government which allowed us to reduce our ~~estimated payments relating to the fiscal 2014-2015 restructuring plan by $0.3 million. We recorded this reduction~~common stock in the ~~second quarter of fiscal 2018.~~open market.

~~We have completed the restructuring activities under each of the plans referenced in the table above. Remaining payments for these plans will be paid through fiscal year 2020.~~

Stock Incentive Programs

~~Note 7. Equity~~

~~As of December 29, 2017,~~At October 2, 2020, we had ~~one~~1 stock incentive plan for our employees and ~~nonemployee~~non-employee directors, the ~~2007 Stock Equity~~2018 Incentive Plan ~~as amended and restated effective November 13, 2015~~ (the ~~“2007 Stock~~“2018 Plan”). The 2018 Plan was approved by the stockholders at the fiscal year 2017 Annual Stockholders’ Meeting and it added 500,000 shares to the equity pool of shares available to grant to employees and non-

employee directors. The 2018 Plan also provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

Under the 2018 Plan, option exercise prices are equal to the fair market value of our common stock on the date the options are granted using our closing stock price. After vesting, options generally may be exercised within seven years after the date of grant.

Restricted stock units are not transferable until vested and the restrictions lapse upon the achievement of continued employment or service over a specified time period. Restricted stock units issued to employees generally vest three years from the date of grant (three-year cliff or annually over three years). Restricted stock units issued to non-executive board members annually generally vest on the day before the annual stockholders’ meeting.

Vesting of performance share awards and units is subject to the achievement of predetermined financial performance criteria and continued employment through the end of the applicable period. Market-based stock units vest upon meeting certain predetermined share price performance criteria and continued employment through the end of the applicable period.

During the ~~first six~~three months ~~of fiscal 2018,~~ended October 2, 2020, we ~~issued 524~~granted 37,506 restricted stock units, 35,565 performance restricted stock units and 111,811 stock options to purchase shares of our common ~~stock under the Employee Stock Purchase Plan (ESPP), and 191 shares of common stock for options exercised.~~stock.

Total compensation expense for share-based awards included in our unaudited condensed consolidated statements of operations was as follows:


	Three Months Ended				Six Months Ended					Three Months Ended
(In thousands)	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016		(In thousands)	October 2, 2020		September 27, 2019
By Expense Category:									By Expense Category:
Cost of revenues	$	55	$	62	$	99	$	102	Cost of revenues	$	72	$	44
Research and development	39		38		78		62		Research and development	40		27
Selling and administrative	486		388		977		782		Selling and administrative	459		336
Total share-based compensation expense	$	580	$	488	$	1,154	$	946	Total share-based compensation expense	$	571	$	407
By Types of Award:									By Types of Award:
Options	$	34	$	43	$	68	$	189	Options	$	167	$	110
Restricted and performance stock awards and units	546		445		1,086		757		Restricted and performance stock awards and units	404		297
Total share-based compensation expense	$	580	$	488	$	1,154	$	946	Total share-based compensation expense	$	571	$	407

As of ~~December 29, 2017,~~October 2, 2020, there was ~~$0.1~~approximately $1.5 million of total unrecognized compensation expense related to ~~nonvested~~non-vested stock options granted ~~under our 2007 Stock Plan. This expense is~~which are expected to be recognized over a ~~weighted average~~weighted-average period of ~~0.59~~2.3 years. As of ~~December 29, 2017,~~October 2, 2020, there was ~~$2.5~~$3.1 million of total unrecognized compensation expense related to

~~nonvested~~ non-vested stock awards ~~and units granted under our 2007 Stock Plan. This expense is~~which are expected to be recognized over a ~~weighted average~~weighted-average period of ~~1.21~~2.1 years.

On September 6, 2016, our Board of Directors authorized and declared a dividend distribution of 1 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 (the “Record Date”). 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”), dated 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. The Plan expired on September 6, 2019. On March 3, 2020, our Board of Directors reauthorized the Plan at the same term with a Record Date of March 13, 2020. On August 27, 2020, we entered into the Amended and Restated Tax Benefit Preservation Plan (the “Amended and Restated Plan”) with Computershare Inc. as Rights Agent.

The Amended and Restated Plan, reauthorized by our Board of Directors on March 3, 2020, will be subject to our shareholders approval at our upcoming Annual Shareholders’ Meeting to be held on November 11, 2020.

Note ~~8. Segment and Geographic Information~~9. Restructuring Activities

~~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~~The following table summarizes our ~~sales and support~~restructuring-related 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~~during the three ~~and six~~ months ended ~~December 29, 2017 and December 30, 2016~~October 2, 2020:


	Severance and Benefits										Facilities and Other		Total
(In thousands)	Q4 2020 Plan		Q3 2020 Plan		Fiscal 2020		Fiscal 2018-2019 Plan		Prior Years' Plan		Fiscal 2015-2016 Plan
Accrual balance, July 3, 2020	$	1,557	$	431	$	360	$	90	$	64	$	236	$	2,738

Cash payments	(345)		(170)		(269)		(90)		(39)		0		(913)
Foreign exchange impact	0		0		0		0		0		10		10
Accrual balance, October 2, 2020	$	1,212	$	261	$	91	$	0	$	25	$	246	$	1,835

As of October 2, 2020, the accrual balance of $1.8 million was ~~as follows:~~in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
North America $ 36,985
$ 39,353
$ 67,987
$ 67,937
Africa and Middle East 12,682
16,770
26,144
31,119
Europe and Russia 3,814
2,810
8,260
7,317
Latin America and Asia Pacific 8,242
9,603
15,514
20,370
Total Revenue $ 61,723
$ 68,536
$ 117,905
$ 126,743
Q4 2020 Plan

During the ~~three~~fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”) in order to continue to reduce our operating costs and ~~six months ended December 29, 2017, Mobile Telephone Networks Group (MTN Group) accounted 11%~~improve profitability to optimize our business model and ~~13%, respectively,~~increase efficiencies. The Q4 2020 Plan is being implemented starting with our fourth fiscal quarter of 2020 through the second fiscal quarter of 2021. Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Q3 2020 Plan

During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”) in order to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies. Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Fiscal 2020 Plan

During the fourth quarter of fiscal 2019, our Board of Directors approved a restructuring plan (the “Fiscal 2020 Plan”) to primarily consolidate product development, right size our resources to support our international business and other support functions. Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Fiscal 2018-2019 Plan

During the fourth quarter of fiscal 2018, our Board of Directors approved a restructuring plan (the “Fiscal 2018-2019 Plan”) to consolidate back-office support functions and align resources by geography to lower our expense structure. We completed the restructuring activities under the Fiscal 2018-2019 Plan at the end of fiscal 2019. Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2021.

Fiscal 2015-2016 Plan

In January 2018, we reached a settlement with certain foreign government for grant liabilities which allowed us to reduce our estimated payments relating to prior years’ restructuring plan by $0.3 million. 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 included reductions in workforce across the Company, but primarily in operations outside the United States. We 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 are expected to be paid in fiscal 2021.

For further information, see “Note 7. Restructuring Activities” in Part II, Item 8 of our total revenue. During the three and six months ended December 30, 2016, MTN Group accounted for 12% and 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 and Motorola, as well as separate arrangements with their various subsidiaries. The loss of all business from MTN Group, Motorola, or any other significant customers, could adversely affect our results of operations, cash flows and financial position.2020 Form 10-K.

Note 9.10. Income Taxes

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 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 certain unrepatriated earnings of foreign subsidiaries that is payable over eight years, and (3) elimination of the corporate Alternative Minimum Tax (“AMT”). The Tax Act reduces the federal corporate tax rate to 21.0% in the fiscal year ending June 29, 2018. Section 15 of the 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 year.

Our effective tax rate varies from the U.S. federal statutory rate of ~~28.1%~~21% primarily 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 partial valuation allowance against US federal and state deferred tax ~~benefit from a foreign tax refund and release of valuation allowance.~~assets. During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal ~~2018.~~2021.

The determination of our ~~tax benefit~~income taxes for the ~~first six~~three months ~~of fiscal 2018~~ended October 2, 2020 and ~~2017~~September 27, 2019 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized. ~~The~~Our tax ~~benefit~~expense for the ~~first six~~three months ~~of fiscal 2018~~ended October 2, 2020 was primarily ~~attributable~~due 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~~expense for the ~~first six~~three months ~~of fiscal 2017~~ended September 27, 2019 was

primarily ~~attributable~~due to ~~the foreign tax refund received from the IRAS, offset by the~~ tax expense related to profitable ~~subsidiaries.~~subsidiaries and $0.6 million increase in our reserves for uncertain tax positions.

~~During~~We continue to record a partial valuation allowance on our U.S. deferred tax assets which primarily represent future income tax benefits associated with our operating losses. Realization of our deferred tax assets is dependent on generating sufficient pre-tax book income in future periods. Although we believe it is more likely than not that future income will be sufficient to allow us to recover the ~~fiscal year 2014,~~value of a portion of our U.S. deferred tax assets, realization is not assured and future events could cause us to change our judgment. If future events cause us to conclude that it is not more likely than not that we ~~received an assessment letter from IRAS related~~will be able to ~~deductions claimed~~recover more or less of the current anticipated portion of deferred tax assets, we would be required to either decrease or increase the valuation allowance on our deferred tax assets at that time, which would result in ~~prior years~~a charge to income tax expense and ~~made~~ a ~~payment of $13.2 million related to tax years 2007 through 2010, reflecting all~~material increase or decrease in net income in the ~~taxes incrementally assessed by IRAS. Since the initial assessment,~~period in which we ~~continued to challenge this assessment.~~change our judgment. During the first quarter of fiscal ~~2017,~~2021, 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 represents a final settlement. These refunds were recorded as a discrete tax benefit during the quarter the respective payment was received. During the second quarter of fiscal 2018, we recorded adid not record any adjustment to valuation allowance ~~release~~on our U.S. deferred tax assets.

We entered into a tax sharing agreement with Harris Corporation (“Harris”) effective on January 26, 2007, the acquisition date of ~~$3.3 million related~~Stratex Networks, Inc. (“Stratex”). The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and tax attributes that were attributable to ~~refundable AMT credit under~~ the ~~Tax Act as~~Microwave Communication Division when it was a ~~discrete benefit and~~division of Harris. There have been no settlement payments recorded ~~as a long-term receivable in our Other Assets in~~since the unaudited condensed consolidated balance sheet. Under the Tax Act, any carryforward AMT tax 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.acquisition date.

We have a number of ~~years with~~ open income tax audits covering various tax years, which vary from jurisdiction to jurisdiction. Our major tax jurisdictions ~~include the U.S., Singapore, Nigeria and the Ivory Coast. The earliest years~~ that are open and subject to potential audits include the U.S., Singapore, Nigeria, Saudi Arabia and the Ivory Coast. The earliest years for these jurisdictions are as follows: U.S. —- 2003; Singapore ~~— 2011;~~- 2015; Nigeria ~~— 2011,~~- 2006: Saudi Arabia - 2014, and Ivory Coast ~~— 2016.~~- 2017.

During the first quarter of 2021, we received a tax refund of $1.2 million from the Federal Revenue of Brazil related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.

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 six~~ months ended ~~December 29, 2017~~October 2, 2020 and ~~December 30, 2016.~~September 27, 2019.

On March 27, 2020, the US enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act which provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes in the deduction of interest, (3) acceleration of alternative minimum tax credit (AMT) refunds, and (4) a technical correction to allow accelerated deductions for qualified improvement property. The ~~SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting~~Tax Cuts and Jobs Act repealed the corporate AMT credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year 2018. The CARES Act allows for ~~the tax effects~~acceleration 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~~refundable AMT credit up to ~~complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects~~100% 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 estimateAMT credit to be ~~included~~refunded in tax year 2018. During the ~~financial statements, it should continue to apply ASC 740 on the basis~~third quarter of ~~the provisions of the tax laws that were~~fiscal 2020, in ~~effect immediately before the enactment of the Tax Act.~~

In connection with our ~~initial~~ analysis of the impact of the ~~Tax~~CARES Act, we ~~have recorded a discrete net tax benefit of $3.3 million in~~reclassified 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~~credit of $3.4 million from long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of ~~certain~~the CARES Act. We continue to examine the 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 ofCARES Act and the impact they may have on our future business.

Note 11. Net Income Per Share of ~~certain elements, we have not recorded any adjustments related~~Common Stock

Net income per share is computed using the two-class method, by dividing net income attributable to ~~those elements~~us by the weighted-average number of shares of our outstanding common stock and ~~have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.~~

participating securities outstanding. Our ~~accounting for the following elements of the Tax Act is incomplete. However, we were able~~restricted shares contain rights to ~~make reasonable estimates of certain effects~~receive non-forfeitable dividends and therefore ~~recorded provisional adjustments as follows:~~

~~Reduction of U.S. Federal Corporate Tax Rate:~~ ~~The Tax Act reduces~~are considered to be participating securities and included in the corporate tax rate to 21.0%, effective January 1, 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~~income per basic and diluted common share. Undistributed losses are not allocated 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 definedunvested restricted shares as the ~~excess of, (1) 10.0% of the aggregate of the U.S. shareholder’s pro-rata~~unvested restricted shares are not contractually obligated to share our losses. The impact on earnings per 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 creditparticipating securities under the ~~Tax Act as a discrete benefit. Under~~two-class method was immaterial.

The following table presents the ~~Tax Act, any carryforward AMT tax credits can be refunded if not fully utilized by fiscal year 2022.~~computation of basic and diluted net income per share:


	Three Months Ended
(In thousands, except per share amounts)	October 2, 2020		September 27, 2019
Numerator:
Net income	$	5,936	$	54

Denominator:
Weighted-average shares outstanding, basic	5,411		5,347
Effect of potentially dilutive equivalent shares	135		183
Weighted-average shares outstanding, diluted	5,546		5,530

Net income per share of common stock outstanding:
Basic	$	1.10	$	0.01
Diluted	$	1.07	$	0.01

~~Note 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 as our corporate headquarters.

~~As of 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 Amounts
(In thousands)
2018 (two quarters remaining) $ 1,244
2019 1,692
2020 1,204
2021 962
2022 208
Thereafter 2,022
Total $ 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 andThe following table summarizes the total minimum rents to be received in the future under our non-cancelable subleases were $0.1 million as of 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 Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Rent expense $ 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 December 29, 2017, we had outstanding purchase obligations with our suppliers or contract manufacturers of $20.4 million. In addition, we had contractual obligations of approximately $0.7 million associated with software licenses as of 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 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 December 29, 2017, we had commercial commitments of $51.9 million outstandingweighted-average equity awards that were not recorded in our unaudited condensed consolidated balance sheets. 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 products infringe the intellectual property rights of a third party. As of December 29, 2017, we have not received any notices that any customer is subject to an infringement claim arisingexcluded from the use of our products; we have not received any requests to defend any customers from infringement claims arising from the use of our 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 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 December 29, 2017, we had not recorded any liabilities related to these indemnifications.diluted net income per share calculations since they were anti-dilutive:

~~Legal Proceedings~~


	Three Months Ended
(In thousands)	October 2, 2020	September 27, 2019
Stock options	171	378
Restricted stock units and performance stock units	25	35
Total shares of common stock excluded	196	413

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.

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. Commitments and Contingencies

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 October 2, 2020, we had outstanding purchase obligations with our suppliers or contract manufacturers of $23.5 million. In addition, we had contractual obligations of approximately $1.4 million associated with software licenses as of October 2, 2020.

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 October 2, 2020, 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 October 2, 2020, we had commercial commitments of $58.7 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets. 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 these 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 products infringe the intellectual property rights of a third party. As of October 2, 2020, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products; we have not received any request to defend any customers from infringement claims arising from the use of our 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 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 October 2, 2020, 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 damages from a customer alleging that certain of our products were defective. Although we believe that we have numerous contractual and legal defenses to these disputes, at this time we have accrued an immaterial amount representing the estimated probable loss for which we would settle the matter. We currently cannot form an estimate of the range of loss in excess of our amounts already accrued. If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.

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 litigation 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.

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.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act ("FEMA"). In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009. In September 2019, our directors of Aviat India appeared before the Ministry of Finance Enforcement Directorate. No settlement offers were discussed at the meeting and the matter is still ongoing with no subsequent hearing date currently scheduled. We have accrued an immaterial amount representing the estimated probable loss for which we would settle the matter. We currently cannot form an estimate of the range of loss in excess of our amounts already accrued. If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.

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 unaudited condensed consolidated statement 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.

COVID-19

In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. The COVID-19 pandemic may have an impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring. The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Management is actively monitoring the impact of COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be done off-site have been instructed to work from home. Our manufacturing sites support essential businesses and remain operational. We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three months ended October 2, 2020. However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods. We continue to monitor, assess and adapt to the situation and prepare for implications to our business, supply chain and customer demand. We expect these challenges to continue until business and economic activities return to more normal levels. The financial results for the three months ended October 2, 2020 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

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; 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.~~Quarterly Report on Form 10-Q. 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:

•the impact of COVID-19 on our business, operations and cash flows;

•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, the effects of COVID-19 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 effects of current and future government regulations, including the effects of current restrictions on various commercial and economic activities in response to the COVID-19 pandemic;

•general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States and other countries where we conduct business;

•the conduct of unethical business practices in developing countries; ~~and~~

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

•the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships; and

•our ability to implement our stock repurchase program or that it will enhance long-term stockholder value.

Other factors besides those listed here also could adversely affect us. See “Item 1A. Risk Factors” in our fiscal ~~2017~~2020 Annual Report on Form 10-K filed with the SEC on ~~September 6, 2017~~August 27, 2020 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~~expressly disclaim any obligation, other than as ~~imposed~~required 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 ~~2018~~2021 and ~~2017~~2020 Results

The following Management’s Discussion and Analysis ~~(“MD&A”)~~(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 herein, our fiscal year ending ~~June 29, 2018~~July 2, 2021 is referred to as “fiscal ~~2018”~~2021” or ~~“2018”~~“2021” and our fiscal year ended ~~June 30, 2017~~July 3, 2020 is referred to as “fiscal ~~2017”~~2020” or ~~“2017”.~~“2020.”

Overview

We ~~design, manufacture~~anticipate modest growth in revenue in fiscal 2021. We have a healthy backlog entering fiscal 2021 for North American private network projects and ~~sell~~we anticipate continuing our strong momentum across these verticals. We have made inroads into the U.S. rural broadband and wireless internet service provider areas and there is now further evidence now of investment to support 5G deployments with our U.S. service provider customers. Internationally, we are continuing a ~~range~~more conservative view of ~~wireless networking products, solutions~~our revenue opportunity based on a variety of factors that have led to an overall capital spending decline and ~~services~~increased competitive intensity.

In March 2020, the World Health Organization characterized the current respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities implementing numerous measures to ~~mobile~~try to contain the virus, such as travel bans and ~~fixed~~restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. Our global operations expose us to risks associated with public ~~network operators, federal, state~~health crises and local government agencies, transportation, energy and utility companies, public safety agencies and broadcast network operations around the world. Our products utilize microwave and millimeter wave technologies to create point to point wireless links for short, medium and long distance interconnections. Our wireless systems deliver urban, suburban, regional and country-wide communication linksepidemics/pandemics, such as the ~~primary alternative to fiber optic connections. In dense urban~~COVID-19 pandemic. The COVID-19 pandemic has had 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~~likely to continue to ~~accelerate innovation~~have an impact on our operations, supply chains and ~~optimize~~distribution systems. COVID-19 pandemic has led to an increase in our ~~product portfolio, improve costs~~expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring. The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Management is actively

monitoring the impact of COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be done offsite have been instructed to work from home. Our manufacturing sites remain 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~~maintaining social distancing and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three months ended October 2, 2020. However, depending on ~~what~~pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we ~~do well~~could experience constraints and ~~what will differentiate us~~delays 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 andfulfilling customer 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~~future periods. We are monitoring, assessing 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 servicesadapting to the ~~extent that we may need~~situation and preparing for implications to ~~postpone~~our business, supply chain and customer demand. We expect these challenges to continue until business and economic activities return to more normal levels. The financial results for the ~~recognition~~three months ended October 2, 2020 reflect some of ~~revenue~~the reduced activity experienced during the period in various locations around the world and ~~incur upfront and ongoing expenses that~~ are not ~~offset with additional revenue from product sales associated with these services until a future period.~~necessarily indicative of the results for the full year.

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 may pursue our goals during the next twelve months through organic growth and through strategic alternatives. Some of these alternatives have included, and could continue to include, selective acquisitions of business segments or entire businesses, divestitures, the sale of 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~~continued to be our primary addressable market segment ~~and, over~~globally in the ~~long term, the demand for increasing the backhaul capacity in our customers’ networks continues to grow.~~first quarter of fiscal 2021. 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 continues to be adversely affected by constrained availability of U.S. dollars in countries with economies highly dependent on resource exports, particularly oil. This condition, along with decline in local purchasing power because of currency devaluations relative to the U.S. dollar, limits capital spending and slows payments from customers in those locations. Our position continues to be to support our customers for 5G and 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 2017~~ Annual Report on Form 10-K filed with the SEC on August 27, 2020, 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 six~~ months ended ~~December 29, 2017~~October 2, 2020 and ~~December 30, 2016~~September 27, 2019 and the related changes were ~~shown in the table below:~~as follows:


	Three Months Ended									Six Months Ended										Three Months Ended
(In thousands, except percentages)	December 29, 2017		December 30, 2016		$ Change			% Change		December 29, 2017		December 30, 2016		$ Change			% Change		(In thousands, except percentages)	October 2, 2020		September 27, 2019		$ Change		% Change
North America	$	36,985	$	39,353	$	(2,368	)	(6.0	)%	$	67,987	$	67,937	$	50		0.1	%	North America	$	45,499	$	39,767	$	5,732	14.4	%
Africa and Middle East	12,682		16,770		(4,088		)	(24.4	)%	26,144		31,119		(4,975		)	(16.0	)%
Africa and the Middle East																			Africa and the Middle East	10,571		10,593		(22)		(0.2)	%
Europe and Russia	3,814		2,810		1,004			35.7	%	8,260		7,317		943			12.9	%	Europe and Russia	2,262		3,407		(1,145)		(33.6)	%
Latin America and Asia Pacific	8,242		9,603		(1,361		)	(14.2	)%	15,514		20,370		(4,856		)	(23.8	)%	Latin America and Asia Pacific	7,958		4,847		3,111		64.2	%
Total Revenue	$	61,723	$	68,536	$	(6,813	)	(9.9	)%	$	117,905	$	126,743	$	(8,838	)	(7.0	)%
Total revenue																			Total revenue	$	66,290	$	58,614	$	7,676	13.1	%

Our revenue in North America ~~decreased $2.4~~increased by $5.7 million, or ~~6.0%~~14.4%, during the ~~second~~first quarter of fiscal ~~2018~~2021 compared with the same period of fiscal ~~2017. The volume of~~2020 primarily due to an increase in private network projects ~~coming to completion decreased year-to-year but that was partially offset by a year-to-year~~as well as an increase in ~~revenue with~~ mobile operator ~~customers in the sector. On a year-to-date basis, North America revenue increased slightly by $0.1 million, or 0.1%, compared with the same period in fiscal 2017.~~sales.

Our revenue in Africa and the Middle East ~~decreased $4.1 million, or 24.4%,~~was consistent for the ~~second~~first quarter of fiscal ~~2018~~2021 compared with the same period of fiscal 2017. The decrease in revenue was primarily due to lower sales volume to our large operator customers in Africa. On a year-to-date basis, Africa and the Middle East revenue decreased $5.0 million, or 16.0%, compared with the same period in fiscal 2017. The year-to-date decrease in the region was also from lower sales to mobile operator customers in Africa.2020.

Revenue in Europe and Russia ~~increased $1.0~~decreased by $1.1 million, or ~~35.7%~~33.6%, for the ~~second~~first quarter of fiscal ~~2018~~2021 compared with the same ~~quarter~~period of fiscal ~~2017. The increase was from~~2020 primarily due to lower sales to ~~a new~~ mobile operator customer in the region. On a year-to-date basis, revenue in Europe and Russia was up $0.9 million, or 12.9%, from the same period in fiscal 2017. The increase was from sales to a new mobile operator customercustomers in the region.

Revenue in Latin America and Asia Pacific ~~decreased $1.4~~increased by $3.1 million, or ~~14.2%~~64.2%, during the ~~second~~first quarter of fiscal 2018 compared with the same period in fiscal 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 $4.9 million, or 23.8%, from the same period in fiscal 2017 mainly due to decreased sales to large mobile operator customers in Asia Pacific.

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
Product sales $ 37,719
$ 45,958
$ (8,239 ) (17.9 )% $ 72,786
$ 80,682
$ (7,896 ) (9.8 )%
Services 24,004
22,578
1,426
6.3 % 45,119
46,061
(942 ) (2.0 )%
Total Revenue $ 61,723
$ 68,536
$ (6,813 ) (9.9 )% $ 117,905
$ 126,743
$ (8,838 ) (7.0 )%

Our revenue from product sales decreased $8.2 million, or 17.9%, for the second quarter of fiscal 2018 compared with the same period in fiscal 2017. Product volumes were $2.5 million lower in North America and $5.7 million lower in other regions. Our services revenue increased by $1.4 million, or 6.3%, during the second quarter of fiscal 20182021 compared with the same period of fiscal ~~2017,~~2020 primarily due to ~~increased service activities~~higher sales to mobile operator customers in ~~all regions except for Latin America.~~the region.


	Three Months Ended
(In thousands, except percentages)	October 2, 2020		September 27, 2019		$ Change		% Change
Product sales	$	44,464	$	36,594	$	7,870	21.5	%
Services	21,826		22,020		(194)		(0.9)	%
Total revenue	$	66,290	$	58,614	$	7,676	13.1	%

Our revenue from product sales ~~decreased~~increased by $7.9 million, or ~~9.8%~~21.5%, for the first ~~six months~~quarter of fiscal ~~2018~~2021 compared with the same quarter of fiscal 2020. Product sales increased compared to the same period in fiscal ~~2017. The decrease came primarily from weaker product sales~~2020 in Africa, the Middle East, Latin America and Asia Pacific, offset in part by stronger sales in North America and Europe. Our services revenue decreased by $0.9 million, or 2.0%, during the first six months of fiscal 2018 compared with the same period of fiscal 2017, due to reduced service activities in mostall regions, except for ~~the Middle East Africa~~Europe and ~~Europe where we had a small increase in service sales.~~Russia.

Gross Margin


	Three Months Ended											Six Months Ended												Three Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change		(In thousands, except percentages)	October 2, 2020			September 27, 2019			$ Change		% Change
Revenue	$	61,723		$	68,536		$	(6,813	)	(9.9	)%	$	117,905		$	126,743		$	(8,838	)	(7.0	)%	Revenue	$	66,290		$	58,614		$	7,676	13.1	%
Cost of revenue	39,833			47,420			(7,587		)	(16.0	)%	78,719			88,262			(9,543		)	(10.8	)%	Cost of revenue	42,041			36,058			5,983		16.6	%
Gross margin	$	21,890		$	21,116		$	774		3.7	%	$	39,186		$	38,481		$	705		1.8	%	Gross margin	$	24,249		$	22,556		$	1,693	7.5	%
% of revenue	35.5		%	30.8		%						33.2		%	30.4		%						% of revenue	36.6		%	38.5		%
Product margin %	36.9		%	32.5		%						34.8		%	30.8		%						Product margin %	37.2		%	43.1		%
Service margin %	33.1		%	27.3		%						30.7		%	29.7		%						Service margin %	35.3		%	30.8		%

Gross margin for the ~~three and six months ended December 29, 2017~~first quarter of fiscal 2021 increased by ~~$0.8~~$1.7 million, or ~~3.7%, and $0.7 million, or 1.8%, respectively,~~7.5% compared with the ~~three and six months ended December 30, 2016. The~~same quarter of fiscal 2020. Our gross margin ~~increase resulted~~increased from ~~improved~~the same period last year primarily due to the increased volume of product ~~margins primarily in Africa~~sales and improved profitability of ~~service projects in Africa, as well as an increase share of business in the North America market.~~services.

Gross margin as a percentage of revenue increased in the second quarter of fiscal 2018 compared with the same period in fiscal 2017 due to improved product and service margins, as well as an increase in the share of business in North America. Product margin as a percentage of product revenue ~~increased from~~decreased in the ~~prior year~~first quarter of fiscal 2021 compared with the same period of fiscal 2020 primarily due to ~~improvements of~~ product ~~margins in Africa facilitated by relative stability in exchange rates as well as the increased share of business in North America.~~and regional mix. Service margin as a percentage of service revenue increased ~~due to continued efforts to improve execution~~in the first quarter 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 and higher margin on both product and service. Gross margin rates in our services businesses in most international sectors improvedfiscal 2021 compared with the same period in fiscal 2017. Product margin as a percentage of product revenue increased in the first six months of fiscal 2018 over the same period in fiscal 2017 primarily due to reduced supply chain costs as well as the above-mentioned shift in the portion of our business coming from North America relative to international markets, and2020 from improved ~~product margins~~profitability in ~~Africa and Asia-Pacific.~~

most regions.

Research and Development Expenses


	Three Months Ended										Six Months Ended											Three Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016			$ Change		% Change		December 29, 2017			December 30, 2016			$ Change		% Change		(In thousands, except percentages)	October 2, 2020			September 27, 2019			$ Change		% Change
Research and development	$	5,144		$	4,475		$	669	14.9	%	$	9,942		$	9,418		$	524	5.6	%	Research and development	$	4,847		$	5,216		$	(369)	(7.1)	%
% of revenue	8.3		%	6.5		%					8.4		%	7.4		%					% of revenue	7.3		%	8.9		%

Our research and development expenses ~~increased $0.7~~decreased by $0.4 million, or ~~14.9%~~7.1%, in the ~~second~~first quarter of fiscal ~~2018~~2021 compared with the same period of fiscal 2020 primarily due to cost savings initiatives implemented in the second half of fiscal 2020.

Selling and Administrative Expenses


	Three Months Ended
(In thousands, except percentages)	October 2, 2020			September 27, 2019			$ Change		% Change
Selling and administrative	$	12,837		$	14,644		$	(1,807)	(12.3)	%
% of revenue	19.4		%	25.0		%

Our selling and administrative expenses decreased by $1.8 million, or 12.3%, in the first quarter of fiscal 2021 compared with the same period in fiscal ~~2017. The increase was due to a $0.5 million increase in professional service expense and a $0.2 million increase in compensation and related employee expenses.~~

~~Our research and development expenses increased $0.5 million, or 5.6%, in the first six months of fiscal 2018 compared with the same period in fiscal 2017. The increase was~~2020 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%,~~cost savings initiatives implemented in the second ~~quarter~~half 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 six months of fiscal 2018 compared with the same period in fiscal 2017 was primarily due to a $1.0 million 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 six months of fiscal 2017 that was not repeated in the first six months of fiscal 2018.2020.

Restructuring Charges


	Three Months Ended										Six Months Ended											Three Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016		$ Change			% Change		December 29, 2017			December 30, 2016		$ Change			% Change		(In thousands, except percentages)	October 2, 2020		September 27, 2019		$ Change		% Change
Restructuring (recovery) charges	$	(252	)	$	72	$	(324	)	(450.0	)%	$	(250	)	$	232	$	(482	)	(207.8	)%
Restructuring charges																					Restructuring charges	$	—	$	1,177	$	(1,177)	—	%

~~Our restructuring expenses~~We recognized in the ~~three and six months ended December 30, 2016 consisted primarily of the facility costs related to our previous headquarters in Santa Clara. During the second~~first quarter of fiscal ~~2018, based on communications with certain foreign government, we reduced our estimated payments relating~~2020 restructuring charges of $1.2 million related to the ~~fiscal 2014-2015 restructuring plan by $0.3 million.~~Fiscal 2020 Plan, which was primarily to consolidate product development, right size our resources to support our International business and other support functions.

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


	Three Months Ended											Six Months Ended												Three Months Ended
(In thousands, except percentages)	December 29, 2017			December 30, 2016			$ Change			% Change		December 29, 2017			December 30, 2016			$ Change			% Change		(In thousands, except percentages)	October 2, 2020		September 27, 2019		$ Change		% Change
Interest income	$	42		$	72		$	(30	)	(41.7	)%	$	100		$	126		$	(26	)	(20.6	)%	Interest income	$	36	$	86	$	(50)	(58.1)	%
Interest expense	$	(13	)	$	(3	)	$	(10	)	333.3	%	$	(19	)	$	(21	)	$	2		(9.5	)%	Interest expense	$	(1)	$	(3)	$	2	(66.7)	%
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 bank 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 were primarily comprised of a foreign exchange loss related to a dividend declared by our Nigeria entity (a partnership for U.S. tax purposes) to our Aviat U.S. entity.~~

Income Taxes

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 %


	Three Months Ended
(In thousands, except percentages)	October 2, 2020		September 27, 2019		$ Change		% Change
Income before income taxes	$	6,600	$	1,602	$	4,998	312.0	%
Provision for income taxes	$	664	$	1,548	$	(884)	(57.1)	%

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.

The tax expense for the first quarter of fiscal 2021 was primarily due to tax expense related to profitable subsidiaries. The tax expense for the first quarter of fiscal 2020 was primarily due to tax expense related to profitable subsidiaries and a $0.6 million increase in our reserves for uncertain tax positions.

During the first quarter of ~~fiscal 2017,~~2021, we received a tax refund of ~~$3.7~~$1.2 million from the ~~IRAS~~Federal Revenue of Brazil related to ~~an assessment we paid in fiscal year 2014~~our withholding tax refund claim and recorded minimal tax expense related to deductions claimed in tax years 2007 through 2010. 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 refunds were recordedinterest as a discrete tax benefit during the 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.item.

~~Due to the uncertainty regarding the timing and extent of our future profitability, we~~We continue to record a ~~full~~partial valuation allowance ~~to offset~~on our U.S. deferred tax assets which primarily represent future income tax benefits associated with our operating ~~losses because~~losses. Realization of our deferred tax assets is dependent on generating sufficient pre-tax book income in future periods. Although we ~~do not currently~~ believe ~~that~~ it is more likely than not that ~~these assets~~future income will be ~~realized. In~~sufficient to allow us to recover the ~~future, if we conclude that sufficient positive evidence (including our estimate~~value of ~~future taxable income) exists to support a reversal of all or~~ a portion of our U.S. deferred tax assets, realization is not assured and future events could cause us to change our judgment. If future events cause us to conclude that it is not more likely than not that we will be able to recover more or less of the current anticipated portion of deferred tax assets, we would be required to either decrease or increase the valuation allowance on our deferred tax assets at that time, which would result in a charge to income tax expense and a material increase or decrease in net income in the period in which we ~~expect that a significant portion~~change our judgment. During the first quarter of fiscal 2021, we did not record any ~~release of the~~adjustment to valuation allowance ~~will be recorded as an income~~on our U.S. deferred tax ~~benefit at the time of release.~~assets.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of ~~December 29, 2017,~~October 2, 2020, our total cash and cash equivalents ~~restricted cash, and short-term investments~~ were ~~$42.8~~$36.2 million. Approximately ~~$19.2~~$21.3 million, or ~~44.9%~~58.9%, was held in the United States. The remaining balance of ~~$23.5~~$14.9 million, or ~~55.1%~~41.1%, was held by entities outside the United States. AsOf the amount of ~~December 29, 2017, $1.0~~cash and cash equivalents held by our foreign subsidiaries at October 2, 2020, $14.4 million was ~~classified as restricted cash as it was being~~ held ~~by the bank under forward contracts specifically for the repayment of a dividend declared by~~in jurisdictions where our ~~Nigeria entity (a partnership for U.S. tax purposes)~~undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to ~~our Aviat U.S. entity. These forward contracts were settled in January 2018.~~foreign withholding taxes.

Operating Activities

Cash provided by ~~operating activities was $9.2 million~~or used in ~~the first six months of fiscal 2018 as compared to cash provided by operating activities of $8.3 million in the first six months of fiscal 2017. Cash provided by~~ operating activities is presented as net income adjusted for non-cash items and changes in operating assets and liabilities. Net ~~contribution of non-cash items to~~ cash provided by operating activities ~~decreased~~was $4.2 million for the first three months of fiscal 2021, compared to $5.6 million for the first three months of fiscal 2020; this difference was primarily related to a net change in Accounts receivable and partially offset by ~~$3.8~~the net change in Net income. Net cash provided by noncash items was $2.8 million ~~and~~for the first three months 2021, compared to $2.3 million for the comparable period in Fiscal 2020. The net ~~contribution of~~ changes in operating assets and liabilities toresulted in a net use of cash ~~provided by operating activities increased by $0.9~~of $4.5 million for the first ~~six~~three months of fiscal ~~2018 as~~2021, compared to net cash provided by $3.3 million for the same period in fiscal ~~2017.~~

The $3.8 million decrease in the net contribution of non-cash items to cash provided by operating activities was primarily due to a $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 $0.5 million decrease in depreciation and amortization of property, plant and equipment, offset by a $0.7 million decrease in bad debt recovery, and a $0.2 million increase in share-based compensation expense.

2020.

Changes in operating assets and liabilities resulted in a net ~~increase~~use of ~~$0.9 million to~~ cash ~~provided by operating activities~~ for the first ~~six~~three months of fiscal ~~2018 as compared~~2021 was primarily related to ~~the same period in 2017.~~ Accounts receivable ~~and unbilled costs~~that fluctuate from period to period, depending on the amount, timing of sales and billing activities ~~as well as~~and cash ~~collections. The fluctuations in accounts payable~~collections; and ~~accrued expenses were primarily due to~~ the timing of Accrued expenses. The use of cash from assets and liabilities ~~incurred~~was partially offset by cash provided by the timing of payments of Accounts payable and ~~vendor payments. The change~~changes in ~~inventories and in customer service inventories were primarily~~Inventory due to demand and our focus on ~~improving our~~ inventory management. ~~The decrease~~

Investing Activities

Net cash used in ~~customer advance payments~~investing activities was $1.0 million and ~~unearned income was due to the timing of payment from customers and revenue recognition. We used $0.9~~$1.3 million ~~in cash during~~for the first ~~six~~three months of fiscal ~~2018 on expenses related to restructuring liabilities.~~

2021 and 2020, respectively, which consisted of capital expenditures. During the remainder of fiscal year ~~2018,~~2021, we expect to spend approximately ~~$2.3~~$4.0 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Financing Activities

Financing cash flows consist primarily of proceeds and repayments of short-term debt, repurchase of stock and proceeds from sale of share of common stock through employee equity plans. Net cash used in financing activities was $8.7 million for the first three months of fiscal 2021, primarily due to ~~support customer managed services.~~$9.0 million repayment of short-term debt.

As of ~~December 29, 2017,~~October 2, 2020, our principal sources of liquidity consisted of ~~the $40.6~~$36.2 million in cash and cash ~~equivalents and short-term investments, $11.7~~equivalents; $23.5 million of available credit under our ~~$30.0~~$25.0 million credit facility with Silicon Valley Bank (“SVB Credit ~~Facility~~Facility”) which ~~expires~~matures on June ~~30, 2018~~28, 2021, and future collections of receivables from customers. We regularly require letters of credit from ~~some~~certain 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~~On May 4, 2020, we entered into Amendment No. 3 to Third Amended and Restated Loan and Security Agreement which extended the maturity date of the SVB Credit Facility ~~expires on~~to June ~~30, 2018.~~28, 2021. While we intend to continue to renew the SVB Credit Facility ~~and expect the SVB Credit Facility to be renewed,~~annually, 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, that 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.~~facility. If we are not in compliance with the financial covenants or do not have sufficient eligible accounts receivable to support our borrowing base, borrowings under the ~~availability of~~SVB Credit Facility may not be available or our ~~credit facility is not certain or~~borrowing base 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.

As of October 2, 2020, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility. We repaid the outstanding balance of $9.0 million during the first three months of fiscal 2021; therefore, there was no amount outstanding as of October 2, 2020.

In addition, we have an uncommitted short-term line of credit of $0.3 million from a bank in New Zealand to support the operations of our subsidiary located there. This line of credit provides for $0.2 million in short-term advances at various interest rates, all of which was available as of October 2, 2020 and July 3, 2020. 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 October 2, 2020 and July 3, 2020. This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

Restructuring Payments

We had liabilities for restructuring activities totaling ~~$0.6~~$1.8 million as of ~~December 29, 2017, $0.3 million of~~October 2, 2020, which was classified as current 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 ~~2017~~2020 Annual Report on Form 10-K filed with the SEC on ~~September 6, 2017~~August 27, 2020 include our commercial commitments and contractual obligations. During the first ~~six~~three months of fiscal ~~2018,~~2021, no material changes occurred in our contractual obligations to purchase goods and services ~~and~~or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal ~~2017~~2020 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

In accordance with the definition under SEC rules (Item 303(a)(4)(ii) of Regulation S-K), any of the following qualify as off-balance sheet arrangements:

•any obligation under certain guarantee contracts;

•a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

•any obligation, including a contingent obligation, under certain derivative instruments; and

•any obligation, including a contingent obligation, arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

Currently we are not participating in transactions that generate relationships with unconsolidated entities or financial partnerships, including variable interest entities, and we do not have any material retained or contingent interest in assets as defined above. As of ~~December 29, 2017,~~October 2, 2020, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity. In addition, we are not currently a party to any related party transactions that materially affect our results of operations, cash flows or financial condition.

As of October 2, 2020, 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. $58.7 million.

Please refer to ~~Note 10~~“Note 12 Commitments and ~~Contingencies~~Contingencies” of the Notes to ~~Condensed Consolidated Financial Statements (Unaudited)~~unaudited condensed consolidated financial statements in this Quarterly Report on Form ~~10-Q.~~10-Q for Contractual Obligations and Off-Balance Sheet Arrangements.

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 ~~2017~~2020 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. 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.

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 December 29, 2017, we had foreign currency forward contracts outstanding with a total notional amount of $4.7 million consisting of two currencies as follows:~~

Currency
Notional Contract
Amount
(Local Currency)

Notional
Contract
Amount
(USD)
(In thousands)
New Zealand dollar 5,400
$ 3,702
Nigeria Naira 331,200
1,000
Total of all currency forward contracts $ 4,702

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

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Amount included in costs of revenues $ (107 ) $ (64 ) $ (98 ) $ (280 )
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 December 29, 2017 would have an impact of approximately $0.4 million on the fair value of such instruments.

Certain of our international business 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 six months of fiscal 2018 was $0.6 million and was included as a component of stockholders’ equity. As of December 29, 2017 and June 30, 2017, the cumulative translation adjustment decreased our equity by $11.2 million and $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 $42.8 million in total cash, cash equivalents and short-term investments as of December 29, 2017. Cash equivalents and short-term investments totaled $22.7 million as of 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 December 29, 2017 was 156 days, and these investments had an average yield of 7.18% per annum. A 10% change in interest rates on our cash equivalents and 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 six months of fiscal 2018, we had $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 six months of fiscal 2018, our weighted average interest rate was 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~~3. Quantitative and ~~Procedures~~Qualitative Disclosures about Market Risk

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

~~Based~~Exchange Rate Risk

We use foreign exchange forward contracts to hedge forecasted foreign currency transactions relating to forecasted sales and purchase transactions. Beginning the fourth quarter of fiscal 2015, we no longer prepared contemporaneous documentation of hedges for the new foreign exchange forward contracts we entered. 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 ~~management’s evaluation, with participation~~our statements of operations.

As of October 2, 2020, we had no foreign currency forward contracts.

Net foreign exchange income recorded in our unaudited condensed consolidated statements of operations during the three months ended October 2, 2020 and September 27, 2019 was as follows:


	Three Months Ended
(In thousands)	October 2, 2020		September 27, 2019
Amount included in costs of revenues	$	524	$	216

Certain of our ~~Chief Executive Officer (CEO)~~international business is 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 ~~Chief Financial Officer (CFO), as~~liabilities of foreign operations to U.S. dollars for 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 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 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 ~~six~~three months of fiscal ~~2018 that have materially affected, or are reasonably likely to materially affect,~~2021 and 2020 was $(0.4) million and $0.5 million, respectively, and was included as a component of stockholders’ equity. As of October 2, 2020 and July 3, 2020, the cumulative translation adjustment decreased our ~~internal control over financial reporting.~~equity by $14.6 million and $15.0 million, respectively.

~~Inherent Limitations on Effectiveness of Controls~~Interest Rate Risk

Our ~~management, including~~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

We had $36.2 million in total cash and cash equivalents as of October 2, 2020. Cash equivalents totaled $21.5 million as of October 2, 2020 and were comprised of money market funds and bank certificates of deposit. Cash equivalents investments have been recorded at fair value on our balance sheet.

Our cash equivalents 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. The weighted-average days to maturity for cash equivalents held as

of October 2, 2020 was 28 days, and these investments had an average yield of approximately 4.78% per annum. A 10% change in interest rates on our cash equivalents is not expected to have a material impact on our financial position, results of operations, or cash flows.

Exposure on Borrowings

Our borrowings under the ~~CEO and CFO, does not expect that~~SVB Credit Facility incurred interest at the prime rate plus a spread of 0.50% to 1.50% with such spread determined based on our ~~disclosure controls and procedures or~~adjusted quick ratio. During the first three months of fiscal 2021, 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,weighted-average interest rate was 3.75%, and the ~~benefits~~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 ~~controls must be considered relative~~operations, or cash flows since interest on our borrowings is not material 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.our overall financial position.

~~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 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation, with participation of our President and 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 Exchange Act, as of October 2, 2020, 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 CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting

There were no changes to our internal controls over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) that occurred during the quarter ended October 2, 2020 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 our 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~~For a discussion of legal proceedings as of October 2, 2020, please refer to ~~Legal Proceedings~~“Legal Proceedings” and “Contingent Liabilities” under ~~Note 10~~“Note 12 Commitments and ~~Contingencies~~Contingencies” of the Notes to ~~Condensed Consolidated Financial Statements (Unaudited)~~unaudited condensed consolidated financial statements in this Quarterly Report on Form ~~10-Q.~~10-Q, which are incorporated into this item by reference.

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 ~~2017~~2020 Annual Report on Form 10-K filed with the SEC on ~~September 6, 2017.~~August 27, 2020.

~~We do not believe that there~~There have been ~~any other~~no material ~~additions or~~ changes tofrom the risk factors ~~previously disclosed~~described in ~~our fiscal 2017~~such 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.~~In May 2018, our board of directors approved a stock repurchase program, which does not have an expiration date, for the repurchase of up to $7.5 million of our common stock. The repurchase program has been suspended temporarily since February 2020; therefore, during the first three months of fiscal 2021, we did not repurchase any shares of our common stock in the open market. As of October 2, 2020, $3.4 million remained available under our stock repurchase program.

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,~~following exhibits are filed herewith or incorporated by reference ~~in this Form 10-Q.~~to exhibits previously filed with the SEC:


Exhibit Number						Descriptions
3.1						Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Current Report on 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. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on September 24, 2020, File No. 001-33278)
4.1						Amended and Restated Tax Benefit Preservation Plan, dated as of August 27, 2020, 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 August 31, 2020, File No. 011-33278)
31.1*						Rule 13a-14(a)/15d-14(a) Certification of President and 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

*						Filed herewith.
**						Furnished herewith.
+						Constitutes management contracts or compensatory plans or arrangements.

~~SIGNATURE~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




AVIAT NETWORKS, INC. (Registrant)

Date: ~~February 8, 2018~~

November 5, 2020



By:
~~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 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~~Eric Chang Senior Vice President 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~~ (duly authorized officer)



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



Fiscal Years	Amounts
	(In thousands)
2018 (two quarters remaining)	$	1,244
2019	1,692
2020	1,204
2021	962
2022	208
Thereafter	2,022
Total	$	7,332



Currency	Notional Contract Amount (Local Currency)	Notional Contract Amount (USD)
	(In thousands)
New Zealand dollar	5,400	$	3,702
Nigeria Naira	331,200	1,000
Total of all currency forward contracts		$	4,702