Operating Segment, Geographic Information and Significant Customers

3 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Operating Segment, Geographic Information and Significant Customers

Operating Segment, Geographic Information and Significant Customers

Operating segments are defined as components of an enterprise evaluated regularly by the Company's chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company utilizes the management approach for determining reportable segments in accordance with the authoritative guidance. The following operating segments were determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company's management structure:

• Mercury Commercial Electronics (“MCE”): this operating segment designs, develops and builds open sensor processing products and subsystems that include embedded processing modules and subsystems, RF and microwave multi-function assemblies as well as subsystems, and RF and microwave components. MCE also provides technology building blocks to Mercury Defense Systems on key classified and unclassified programs.

• Mercury Defense Systems (“MDS”): this operating segment provides significant capabilities relating to pre-integrated, open, more affordable EW, EA and ECM subsystems, significant capabilities in signals intelligence, EO/IR processing technologies, and radar environment test and simulation systems, leveraging commercially available technologies and solutions (or “building blocks”) from the MCE business and other commercial suppliers.

The Company's operating segments were evaluated in accordance with FASB ASC 280 “Segment Reporting” in order to determine which operating segments qualified as reportable segments. The Company determined that both MCE and MDS met the quantitative thresholds for reporting.

The accounting policies of the reportable segments are the same as those described in “Note B: Summary of Significant Accounting Policies.” The profitability measure employed by the Company and its CODM as the basis for allocating resources to segments and assessing segment performance is adjusted EBITDA. The Company believes the adjusted EBITDA financial measure assists in providing an enhanced understanding of its underlying operational measures to manage its business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals.

Adjusted EBITDA is defined as income from continuing operations before interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement expenses, and stock-based compensation expense. Additionally, asset information by reportable segment is not reported because the Company and its CODM utilize consolidated asset information when making business decisions. The following is a summary of the performance of the Company's operations by reportable segment:

	MCE		MDS		Eliminations			Total
THREE MONTHS ENDED SEPTEMBER 30, 2015
Net revenues to unaffiliated customers	$	50,005	$	8,017	$	387		$	58,409
Intersegment revenues	3,017		28		(3,045		)	—
Net revenues	$	53,022	$	8,045	$	(2,658	)	$	58,409
Adjusted EBITDA	$	11,456	$	482	$	(97	)	$	11,841
THREE MONTHS ENDED SEPTEMBER 30, 2014
Net revenues to unaffiliated customers	$	48,556	$	5,379	$	126		$	54,061
Intersegment revenues	501		140		(641		)	—
Net revenues	$	49,057	$	5,519	$	(515	)	$	54,061
Adjusted EBITDA	$	7,289	$	486	$	228		$	8,003

The following table reconciles the Company’s income from continuing operations, the most directly comparable GAAP financial measure, to its adjusted EBITDA:

	Three Months Ended September 30,
	2015			2014
Income from continuing operations	$	1,960		$	717
Interest (income) expense, net	(22		)	5
Income taxes	1,264			—
Depreciation	1,588			1,700
Amortization of intangible assets	1,713			1,762
Restructuring and other charges	338			1,268
Impairment of long-lived assets	—			—
Acquisition and financing costs	2,298			—
Fair value adjustments from purchase accounting	—			—
Litigation and settlement expenses	—			—
Stock-based compensation expense	2,702			2,551
Adjusted EBITDA	$	11,841		$	8,003

The geographic distribution of the Company’s revenues is summarized as follows:

	US		Europe		Asia Pacific		Eliminations			Total
THREE MONTHS ENDED SEPTEMBER 30, 2015
Net revenues to unaffiliated customers	$	57,362	$	458	$	589	$	—		$	58,409
Inter-geographic revenues	1,254		31		—		(1,285		)	—
Net revenues	$	58,616	$	489	$	589	$	(1,285	)	$	58,409
THREE MONTHS ENDED SEPTEMBER 30, 2014
Net revenues to unaffiliated customers	$	53,085	$	346	$	630	$	—		$	54,061
Inter-geographic revenues	583		—		—		(583		)	—
Net revenues	$	53,668	$	346	$	630	$	(583	)	$	54,061

Foreign revenue is based on the country in which the Company’s legal subsidiary is domiciled.

The geographic distribution of the Company’s long-lived assets is summarized as follows:

	US		Europe		Asia Pacific		Eliminations		Total
September 30, 2015	$	13,378	$	86	$	29	$	—	$	13,493
June 30, 2015	$	13,127	$	68	$	31	$	—	$	13,226

Identifiable long-lived assets exclude goodwill and intangible assets.

Customers comprising 10% or more of the Company’s revenues for the periods shown below are as follows:

	Three Months Ended September 30,
	2015		2014
Raytheon Company	38	%	35	%
Lockheed Martin Corporation	16	%	30	%
	54	%	65	%

While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms. Programs comprising 10% or more of the Company’s revenues for the periods shown below are as follows:

	Three Months Ended September 30,
	2015		2014
Patriot	17	%	18	%
SEWIP	*		18	%
F-35	*		10	%
Aegis	*		11	%
	17	%	57	%

* Indicates that the amount is less than 10% of the Company’s revenues for the respective period.