QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
x | Accelerated filer | ☐ | ||||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
Emerging growth company |
PAGE NUMBER | ||||||||
PART I. FINANCIAL INFORMATION | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II. OTHER INFORMATION | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 6. | ||||||||
December 31, 2021 | July 2, 2021 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
Unbilled receivables and costs in excess of billings | |||||||||||
Inventory | |||||||||||
Prepaid income taxes | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other non-current assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Accrued compensation | |||||||||||
Deferred revenues and customer advances | |||||||||||
Total current liabilities | |||||||||||
Deferred income taxes | |||||||||||
Income taxes payable | |||||||||||
Long-term debt | |||||||||||
Operating lease liabilities | |||||||||||
Other non-current liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note N) | |||||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Net revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||
Gross margin | ||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Selling, general and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Amortization of intangible assets | ||||||||||||||||||||||||||
Restructuring and other charges | ||||||||||||||||||||||||||
Acquisition costs and other related expenses | ||||||||||||||||||||||||||
Total operating expenses | ||||||||||||||||||||||||||
(Loss) income from operations | ( | ( | ||||||||||||||||||||||||
Interest income | ||||||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
Other expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
(Loss) income before income taxes | ( | ( | ||||||||||||||||||||||||
Income tax (benefit) provision | ( | ( | ||||||||||||||||||||||||
Net (loss) income | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Basic net (loss) earnings per share | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted net (loss) earnings per share | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||||||||
Net (loss) income | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Foreign currency translation adjustments | ( | ( | ( | ( | ||||||||||||||||||||||
Pension benefit plan, net of tax | ||||||||||||||||||||||||||
Total other comprehensive (loss) income, net of tax | ( | ( | ( | |||||||||||||||||||||||
Total comprehensive (loss) income | $ | ( | $ | $ | ( | $ |
For the Second Quarter Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at October 1, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Issuance of common stock under employee stock incentive plans | — | — | — | — | |||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | |||||||||||||||||||||||||||||||||
Purchase and retirement of common stock | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | ( | $ |
For the Second Quarter Ended January 1, 2021 | |||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at October 2, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Issuance of common stock under employee stock incentive plans | — | — | |||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | $ | $ | $ | ( | $ |
For the Six Months Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at July 2, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Issuance of common stock under employee stock incentive plans | ( | — | — | ||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | |||||||||||||||||||||||||||||||||
Purchase and retirement of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | ( | $ |
For the Six Months Ended January 1, 2021 | |||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at July 3, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Issuance of common stock under employee stock incentive plans | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Purchase and retirement of common stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||
December 31, 2021 | January 1, 2021 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net (loss) income | $ | ( | $ | |||||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization expense | ||||||||||||||
Stock-based compensation expense | ||||||||||||||
Benefit for deferred income taxes | ( | ( | ||||||||||||
Other non-cash items | ( | |||||||||||||
Changes in operating assets and liabilities, net of effects of businesses acquired: | ||||||||||||||
Accounts receivable, unbilled receivables, and costs in excess of billings | ( | ( | ||||||||||||
Inventory | ( | ( | ||||||||||||
Prepaid income taxes | ( | |||||||||||||
Prepaid expenses and other current assets | ( | |||||||||||||
Other non-current assets | ||||||||||||||
Accounts payable, accrued expenses, and accrued compensation | ( | |||||||||||||
Deferred revenues and customer advances | ( | |||||||||||||
Income taxes payable | ( | ( | ||||||||||||
Other non-current liabilities | ( | ( | ||||||||||||
Net cash provided by operating activities | ||||||||||||||
Cash flows from investing activities: | ||||||||||||||
Acquisition of businesses, net of cash acquired | ( | ( | ||||||||||||
Purchases of property and equipment | ( | ( | ||||||||||||
Other investing activities | ( | |||||||||||||
Proceeds from sale of investment | ||||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from employee stock plans | ||||||||||||||
Borrowings under credit facilities | ||||||||||||||
Purchase and retirement of common stock | ( | ( | ||||||||||||
Net cash provided by financing activities | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | |||||||||||||
Net decrease in cash and cash equivalents | ( | ( | ||||||||||||
Cash and cash equivalents at beginning of period | ||||||||||||||
Cash and cash equivalents at end of period | $ | $ | ||||||||||||
Cash paid during the period for: | ||||||||||||||
Interest | $ | $ | ||||||||||||
Income taxes | $ | $ | ||||||||||||
Supplemental disclosures—non-cash activities: | ||||||||||||||
Non-cash investing activity | $ | $ | ||||||||||||
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Basic weighted-average shares outstanding | ||||||||||||||||||||||||||
Effect of dilutive equity instruments | ||||||||||||||||||||||||||
Diluted weighted-average shares outstanding |
Amounts | |||||
Consideration transferred | |||||
Cash paid at closing | $ | ||||
Working capital and net debt adjustment | ( | ||||
Less cash acquired | ( | ||||
Net purchase price | $ | ||||
Fair value of tangible assets acquired and liabilities assumed | |||||
Cash | $ | ||||
Accounts receivable | |||||
Inventory | |||||
Fixed assets | |||||
Other current and non-current assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Other current and non-current liabilities | ( | ||||
Fair value of net tangible assets acquired | ( | ||||
Fair value of identifiable intangible assets | |||||
Goodwill | |||||
Fair value of net assets acquired | |||||
Less cash acquired | ( | ||||
Net purchase price | $ |
Amounts | |||||
Consideration transferred | |||||
Cash paid at closing | $ | ||||
Working capital and net debt adjustment | ( | ||||
Less cash acquired | ( | ||||
Net purchase price | $ | ||||
Fair value of tangible assets acquired and liabilities assumed | |||||
Cash | $ | ||||
Accounts receivable and unbilled receivables | |||||
Inventory | |||||
Fixed assets | |||||
Other current and non-current assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Other current and non-current liabilities | ( | ||||
Fair value of net tangible assets acquired | |||||
Fair value of identifiable intangible assets | |||||
Goodwill | |||||
Fair value of net assets acquired | |||||
Less cash acquired | ( | ||||
Net purchase price | $ |
Amounts | |||||
Consideration transferred | |||||
Cash paid at closing | $ | ||||
Working capital and net debt adjustment | |||||
Less cash acquired | ( | ||||
Net purchase price | $ | ||||
Estimated fair value of tangible assets acquired and liabilities assumed | |||||
Cash | $ | ||||
Accounts receivable | |||||
Inventory | |||||
Fixed assets | |||||
Other current and non-current assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Other current and non-current liabilities | ( | ||||
Estimated fair value of net tangible assets acquired | |||||
Estimated fair value of identifiable intangible assets | |||||
Estimated goodwill | |||||
Estimated fair value of net assets acquired | |||||
Less cash acquired | ( | ||||
Net purchase price | $ |
Amounts | |||||
Consideration transferred | |||||
Cash paid at closing | $ | ||||
Cash paid post closing | |||||
Working capital and net debt adjustment | ( | ||||
Less cash acquired | ( | ||||
Net purchase price | $ | ||||
Fair value of tangible assets acquired and liabilities assumed | |||||
Cash | $ | ||||
Accounts receivable and unbilled receivables | |||||
Inventory | |||||
Fixed assets | |||||
Other current and non-current assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Other current and non-current liabilities | ( | ||||
Fair value of net tangible assets acquired | |||||
Fair value of identifiable intangible assets | |||||
Goodwill | |||||
Fair value of net assets acquired | |||||
Less cash acquired | ( | ||||
Net purchase price | $ |
As of | ||||||||||||||
December 31, 2021 | July 2, 2021 | |||||||||||||
Raw materials | $ | $ | ||||||||||||
Work in process | ||||||||||||||
Finished goods | ||||||||||||||
Total | $ | $ |
Total | |||||
Balance at July 2, 2021 | $ | ||||
Goodwill adjustment for the POC acquisition | ( | ||||
Goodwill adjustment for the Pentek acquisition | |||||
Goodwill arising from the Avalex acquisition | |||||
Goodwill arising from the Atlanta Micro acquisition | |||||
Balance at December 31, 2021 | $ |
Severance & Related | ||||||||
Balance at July 2, 2021 | $ | |||||||
Restructuring charges | ||||||||
Cash paid | ( | |||||||
Balance at December 31, 2021 | $ |
Non-vested Restricted Stock Awards | ||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Outstanding at July 2, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Forfeited | ( | |||||||||||||
Outstanding at December 31, 2021 | $ |
Second Quarters Ended | Six Months Ended | ||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||
Cost of revenues | $ | $ | $ | $ | |||||||||||||||||||
Selling, general and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Stock-based compensation expense before tax | |||||||||||||||||||||||
Income taxes | ( | ( | ( | ( | |||||||||||||||||||
Stock-based compensation expense, net of income taxes | $ | $ | $ | $ |
U.S. | Europe | Asia Pacific | Eliminations | Total | ||||||||||||||||||||||||||||
SECOND QUARTER ENDED DECEMBER 31, 2021 | ||||||||||||||||||||||||||||||||
Net revenues to unaffiliated customers | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Inter-geographic revenues | ( | — | ||||||||||||||||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
SECOND QUARTER ENDED JANUARY 1, 2021 | ||||||||||||||||||||||||||||||||
Net revenues to unaffiliated customers | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Inter-geographic revenues | ( | — | ||||||||||||||||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
SIX MONTHS ENDED DECEMBER 31, 2021 | ||||||||||||||||||||||||||||||||
Net revenues to unaffiliated customers | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Inter-geographic revenues | ( | — | ||||||||||||||||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
SIX MONTHS ENDED JANUARY 1, 2021 | ||||||||||||||||||||||||||||||||
Net revenues to unaffiliated customers | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Inter-geographic revenues | ( | — | ||||||||||||||||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
Second Quarters Ended | Six Months Ended | ||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||
Domestic(1) | $ | $ | $ | $ | |||||||||||||||||||
International/Foreign Military Sales(2) | |||||||||||||||||||||||
Total Net Revenue | $ | $ | $ | $ |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Radar(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Electronic Warfare(2) | ||||||||||||||||||||||||||
Other Sensor & Effector(3) | ||||||||||||||||||||||||||
Total Sensor & Effector | ||||||||||||||||||||||||||
C4I(4) | ||||||||||||||||||||||||||
Other(5) | ||||||||||||||||||||||||||
Total Net Revenue | $ | $ | $ | $ |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Components(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Modules and Sub-assemblies(2) | ||||||||||||||||||||||||||
Integrated Subsystems(3) | ||||||||||||||||||||||||||
Total Net Revenue | $ | $ | $ | $ |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Airborne(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Land(2) | ||||||||||||||||||||||||||
Naval(3) | ||||||||||||||||||||||||||
Other(4) | ||||||||||||||||||||||||||
Total Net Revenues | $ | $ | $ | $ |
U.S. | Europe | Asia Pacific | Eliminations | Total | ||||||||||||||||||||||||||||
December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
July 2, 2021 | $ | $ | $ | $ | $ |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | |||||||||||||||||||||||
Raytheon Technologies | % | % | % | % | ||||||||||||||||||||||
U.S. Navy | % | * | % | * | ||||||||||||||||||||||
Northrop Grumman Corporation | % | * | * | * | ||||||||||||||||||||||
Lockheed Martin Corporation | * | % | % | % | ||||||||||||||||||||||
% | % | % | % |
(In thousands) | December 31, 2021 | As a % of Total Net Revenue | January 1, 2021 | As a % of Total Net Revenue | ||||||||||||||||||||||
Net revenues | $ | 220,380 | 100.0 | % | $ | 210,676 | 100.0 | % | ||||||||||||||||||
Cost of revenues | 133,158 | 60.4 | 122,009 | 57.9 | ||||||||||||||||||||||
Gross margin | 87,222 | 39.6 | 88,667 | 42.1 | ||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Selling, general and administrative | 36,810 | 16.7 | 31,596 | 15.0 | ||||||||||||||||||||||
Research and development | 28,335 | 12.9 | 28,128 | 13.4 | ||||||||||||||||||||||
Amortization of intangible assets | 16,002 | 7.3 | 7,643 | 3.6 | ||||||||||||||||||||||
Restructuring and other charges | 3,802 | 1.7 | 951 | 0.5 | ||||||||||||||||||||||
Acquisition costs and other related expenses | 2,660 | 1.2 | 2,236 | 1.0 | ||||||||||||||||||||||
Total operating expenses | 87,609 | 39.8 | 70,554 | 33.5 | ||||||||||||||||||||||
(Loss) income from operations | (387) | (0.2) | 18,113 | 8.6 | ||||||||||||||||||||||
Interest income | 5 | — | 60 | — | ||||||||||||||||||||||
Interest expense | (1,094) | (0.5) | (73) | — | ||||||||||||||||||||||
Other expense, net | (1,318) | (0.6) | (981) | (0.5) | ||||||||||||||||||||||
(Loss) income before income taxes | (2,794) | (1.3) | 17,119 | 8.1 | ||||||||||||||||||||||
Income tax (benefit) provision | (155) | (0.1) | 4,433 | 2.1 | ||||||||||||||||||||||
Net (loss) income | $ | (2,639) | (1.2) | % | $ | 12,686 | 6.0 | % |
(In thousands) | December 31, 2021 | As a % of Total Net Revenue | January 1, 2021 | As a % of Total Net Revenue | ||||||||||||||||||||||
Net revenues | $ | 445,393 | 100.0 | % | $ | 416,297 | 100.0 | % | ||||||||||||||||||
Cost of revenues | 269,762 | 60.6 | 239,511 | 57.5 | ||||||||||||||||||||||
Gross margin | 175,631 | 39.4 | 176,786 | 42.5 | ||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Selling, general and administrative | 73,766 | 16.5 | 64,500 | 15.5 | ||||||||||||||||||||||
Research and development | 57,217 | 12.8 | 55,545 | 13.3 | ||||||||||||||||||||||
Amortization of intangible assets | 29,736 | 6.7 | 15,374 | 3.7 | ||||||||||||||||||||||
Restructuring and other charges | 16,076 | 3.6 | 2,248 | 0.6 | ||||||||||||||||||||||
Acquisition costs and other related expenses | 4,798 | 1.1 | 2,236 | 0.5 | ||||||||||||||||||||||
Total operating expenses | 181,593 | 40.7 | 139,903 | 33.6 | ||||||||||||||||||||||
(Loss) income from operations | (5,962) | (1.3) | 36,883 | 8.9 | ||||||||||||||||||||||
Interest income | 14 | — | 132 | — | ||||||||||||||||||||||
Interest expense | (1,689) | (0.4) | (73) | — | ||||||||||||||||||||||
Other expense, net | (2,738) | (0.6) | (1,827) | (0.5) | ||||||||||||||||||||||
(Loss) income before income taxes | (10,375) | (2.3) | 35,115 | 8.4 | ||||||||||||||||||||||
Income tax (benefit) provision | (596) | (0.1) | 6,631 | 1.6 | ||||||||||||||||||||||
Net (loss) income | $ | (9,779) | (2.2) | % | $ | 28,484 | 6.8 | % |
As of and For the Six Months Ended, | ||||||||||||||
(In thousands) | December 31, 2021 | January 1, 2021 | ||||||||||||
Net cash provided by operating activities | $ | 4,818 | $ | 46,868 | ||||||||||
Net cash used in investing activities | $ | (259,890) | $ | (266,852) | ||||||||||
Net cash provided by financing activities | $ | 246,517 | $ | 163,122 | ||||||||||
Net decrease in cash and cash equivalents | $ | (8,670) | $ | (56,099) | ||||||||||
Cash and cash equivalents at end of period | $ | 105,169 | $ | 170,739 |
(In thousands) | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||||||||||||||
Purchase obligations | $ | 183,942 | $ | 183,942 | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Operating leases | 105,212 | 15,529 | 27,313 | 22,648 | 39,722 | |||||||||||||||||||||||||||
$ | 289,154 | $ | 199,471 | $ | 27,313 | $ | 22,648 | $ | 39,722 |
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
(In thousands) | December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||||
Net (loss) income | $ | (2,639) | $ | 12,686 | $ | (9,779) | $ | 28,484 | ||||||||||||||||||
Other non-operating adjustments, net | 226 | (3) | 643 | (185) | ||||||||||||||||||||||
Interest expense (income), net | 1,089 | 13 | 1,675 | (59) | ||||||||||||||||||||||
Income tax (benefit) provision | (155) | 4,433 | (596) | 6,631 | ||||||||||||||||||||||
Depreciation | 8,064 | 5,641 | 15,820 | 10,907 | ||||||||||||||||||||||
Amortization of intangible assets | 16,002 | 7,643 | 29,736 | 15,374 | ||||||||||||||||||||||
Restructuring and other charges | 3,802 | 951 | 16,076 | 2,248 | ||||||||||||||||||||||
Impairment of long-lived assets | — | — | — | — | ||||||||||||||||||||||
Acquisition, financing and other third party costs | 3,115 | 2,969 | 5,748 | 3,810 | ||||||||||||||||||||||
Fair value adjustments from purchase accounting | (70) | — | (1,731) | — | ||||||||||||||||||||||
Litigation and settlement expense, net | 506 | 251 | 882 | 438 | ||||||||||||||||||||||
COVID related expenses | 274 | 3,309 | 457 | 5,628 | ||||||||||||||||||||||
Stock-based and other non-cash compensation expense | 7,892 | 7,439 | 17,465 | 14,806 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 38,106 | $ | 45,332 | $ | 76,396 | $ | 88,082 |
Second Quarters Ended | ||||||||||||||||||||||||||
(In thousands, except per share data) | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||||||
Net (loss) income and diluted (loss) earnings per share | $ | (2,639) | $ | (0.05) | $ | 12,686 | $ | 0.23 | ||||||||||||||||||
Other non-operating adjustments, net | 226 | (3) | ||||||||||||||||||||||||
Amortization of intangible assets | 16,002 | 7,643 | ||||||||||||||||||||||||
Restructuring and other charges | 3,802 | 951 | ||||||||||||||||||||||||
Impairment of long-lived assets | — | — | ||||||||||||||||||||||||
Acquisition, financing and other third party costs | 3,115 | 2,969 | ||||||||||||||||||||||||
Fair value adjustments from purchase accounting | (70) | — | ||||||||||||||||||||||||
Litigation and settlement expense, net | 506 | 251 | ||||||||||||||||||||||||
COVID related expenses | 274 | 3,309 | ||||||||||||||||||||||||
Stock-based and other non-cash compensation expense | 7,892 | 7,439 | ||||||||||||||||||||||||
Impact to income taxes(1) | (7,144) | (5,275) | ||||||||||||||||||||||||
Adjusted income and adjusted earnings per share | $ | 21,964 | $ | 0.39 | $ | 29,970 | $ | 0.54 | ||||||||||||||||||
Diluted weighted-average shares outstanding | 55,693 | 55,434 | ||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||
(In thousands, except per share data) | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||||||
Net (loss) income and diluted (loss) earnings per share | $ | (9,779) | $ | (0.18) | $ | 28,484 | $ | 0.51 | ||||||||||||||||||
Other non-operating adjustments, net | 643 | (185) | ||||||||||||||||||||||||
Amortization of intangible assets | 29,736 | 15,374 | ||||||||||||||||||||||||
Restructuring and other charges | 16,076 | 2,248 | ||||||||||||||||||||||||
Impairment of long-lived assets | — | — | ||||||||||||||||||||||||
Acquisition, financing and other third party costs | 5,748 | 3,810 | ||||||||||||||||||||||||
Fair value adjustments from purchase accounting | (1,731) | — | ||||||||||||||||||||||||
Litigation and settlement expense, net | 882 | 438 | ||||||||||||||||||||||||
COVID related expenses | 457 | 5,628 | ||||||||||||||||||||||||
Stock-based and other non-cash compensation expense | 17,465 | 14,806 | ||||||||||||||||||||||||
Impact to income taxes(1) | (14,973) | (12,299) | ||||||||||||||||||||||||
Adjusted income and adjusted earnings per share | $ | 44,524 | $ | 0.80 | $ | 58,304 | $ | 1.05 | ||||||||||||||||||
Diluted weighted-average shares outstanding | 55,653 | 55,385 | ||||||||||||||||||||||||
(1) Impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision. | ||||||||||||||||||||||||||
Second Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
(In thousands) | December 31, 2021 | January 1, 2021 | December 31, 2021 | January 1, 2021 | ||||||||||||||||||||||
Cash provided by operating activities | $ | 6,824 | $ | 23,939 | $ | 4,818 | $ | 46,868 | ||||||||||||||||||
Purchase of property and equipment | (8,027) | (13,775) | (13,404) | (24,753) | ||||||||||||||||||||||
Free cash flow | $ | (1,203) | $ | 10,164 | $ | (8,586) | $ | 22,115 |
(In thousands) | December 31, 2021 | As a % of Total Net Revenue | January 1, 2021 | As a % of Total Net Revenue | $ Change | % Change | ||||||||||||||||||||||||||||||||
Organic revenue | $ | 182,857 | 83 | % | $ | 210,459 | 100 | % | $ | (27,602) | (13) | % | ||||||||||||||||||||||||||
Acquired revenue | 37,523 | 17 | % | 217 | — | % | 37,306 | 100 | % | |||||||||||||||||||||||||||||
Total revenues | $ | 220,380 | 100 | % | $ | 210,676 | 100 | % | $ | 9,704 | 5 | % |
(In thousands) | December 31, 2021 | As a % of Total Net Revenue | January 1, 2021 | As a % of Total Net Revenue | $ Change | % Change | ||||||||||||||||||||||||||||||||
Organic revenue | $ | 366,589 | 82 | % | $ | 416,080 | 100 | % | $ | (49,491) | (12) | % | ||||||||||||||||||||||||||
Acquired revenue | 78,804 | 18 | % | 217 | — | % | 78,587 | 100 | % | |||||||||||||||||||||||||||||
Total revenues | $ | 445,393 | 100 | % | $ | 416,297 | 100 | % | $ | 29,096 | 7 | % |
101.INS | eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
MERCURY SYSTEMS, INC. | ||||||||
By: | /S/ MICHAEL D. RUPPERT | |||||||
Michael D. Ruppert | ||||||||
Executive Vice President, | ||||||||
Chief Financial Officer, and Treasurer |
/S/ MARK ASLETT | ||
Mark Aslett | ||
PRESIDENT AND CHIEF EXECUTIVE OFFICER [PRINCIPAL EXECUTIVE OFFICER] |
/S/ MICHAEL D. RUPPERT | ||
Michael D. Ruppert | ||
EXECUTIVE VICE PRESIDENT, | ||
CHIEF FINANCIAL OFFICER, AND TREASURER | ||
[PRINCIPAL FINANCIAL OFFICER] |
/S/ MARK ASLETT | ||
Mark Aslett | ||
PRESIDENT AND CHIEF EXECUTIVE OFFICER | ||
/S/ MICHAEL D. RUPPERT | ||
Michael D. Ruppert | ||
EXECUTIVE VICE PRESIDENT, | ||
CHIEF FINANCIAL OFFICER, AND TREASURER |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Jul. 02, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 1,833 | $ 1,720 |
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 85,000,000 | 85,000,000 |
Common stock, shares issued (shares) | 55,583,012 | 55,241,120 |
Common stock, shares outstanding (shares) | 55,583,012 | 55,241,120 |
Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Income Statement [Abstract] | ||||
Net revenues | $ 220,380 | $ 210,676 | $ 445,393 | $ 416,297 |
Cost of revenues | 133,158 | 122,009 | 269,762 | 239,511 |
Gross margin | 87,222 | 88,667 | 175,631 | 176,786 |
Operating expenses: | ||||
Selling, general and administrative | 36,810 | 31,596 | 73,766 | 64,500 |
Research and development | 28,335 | 28,128 | 57,217 | 55,545 |
Amortization of intangible assets | 16,002 | 7,643 | 29,736 | 15,374 |
Restructuring and other charges | 3,802 | 951 | 16,076 | 2,248 |
Acquisition costs and other related expenses | 2,660 | 2,236 | 4,798 | 2,236 |
Total operating expenses | 87,609 | 70,554 | 181,593 | 139,903 |
(Loss) income from operations | (387) | 18,113 | (5,962) | 36,883 |
Interest income | 5 | 60 | 14 | 132 |
Interest expense | (1,094) | (73) | (1,689) | (73) |
Other expense, net | (1,318) | (981) | (2,738) | (1,827) |
(Loss) income before income taxes | (2,794) | 17,119 | (10,375) | 35,115 |
Income tax (benefit) provision | (155) | 4,433 | (596) | 6,631 |
Net (loss) income | $ (2,639) | $ 12,686 | $ (9,779) | $ 28,484 |
Basic net (loss) earnings per share (in dollars per share) | $ (0.05) | $ 0.23 | $ (0.18) | $ 0.52 |
Diluted net (loss) earnings per share (in dollars per share) | $ (0.05) | $ 0.23 | $ (0.18) | $ 0.51 |
Weighted-average shares outstanding: | ||||
Basic (in shares) | 55,520 | 55,070 | 55,448 | 54,976 |
Diluted (in shares) | 55,520 | 55,434 | 55,448 | 55,385 |
Comprehensive (loss) income: | ||||
Net (loss) income | $ (2,639) | $ 12,686 | $ (9,779) | $ 28,484 |
Foreign currency translation adjustments | (269) | (658) | (25) | (759) |
Pension benefit plan, net of tax | 48 | 31 | 96 | 62 |
Total other comprehensive (loss) income, net of tax | (221) | (627) | 71 | (697) |
Total comprehensive (loss) income | $ (2,860) | $ 12,059 | $ (9,708) | $ 27,787 |
Description of Business |
6 Months Ended |
---|---|
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Mercury Systems, Inc. (the “Company” or “Mercury”) is a leading technology company serving the aerospace and defense industry, positioned at the intersection of high-tech and defense. Headquartered in Andover, Massachusetts, the Company delivers products and solutions that power a broad range of aerospace and defense programs, optimized for mission success in some of the most challenging and demanding environments. The Company envisions, creates and delivers innovative technology solutions that are open, purpose-built and uncompromised to meet our customers’ most-pressing high-tech needs, including those specific to the defense community. Investors and others should note that the Company announces material financial information using its website (www.mrcy.com), Securities and Exchange Commission (“SEC”) filings, press releases, public conference calls, webcasts, and social media, including Twitter (twitter.com/mrcy and twitter.com/mrcy_CEO) and LinkedIn (www.linkedin.com/company/mercury-systems). Therefore, the Company encourages investors and others interested in Mercury to review the information the Company posts on the social media and other communication channels listed on its website.
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Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America for interim financial information and with the instructions to the Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations; however, in the opinion of management the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature, necessary for fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended July 2, 2021 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 17, 2021. The results for the second quarter and six months ended December 31, 2021 are not necessarily indicative of the results to be expected for the full fiscal year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. All references to the second quarter of fiscal 2022 are to the quarter ended December 31, 2021. There were 13 weeks during the second quarters ended December 31, 2021 and January 1, 2021, respectively. There were 26 weeks during the six months ended December 31, 2021 and January 1, 2021, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. BUSINESS COMBINATIONS The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations, (“ASC 805”), for all transactions and events in which it obtains control over one or more other businesses, to recognize the fair value of all assets and liabilities acquired, even if less than one hundred percent ownership is acquired, and in establishing the acquisition date fair value as the measurement date for all assets and liabilities assumed. The Company also utilizes ASC 805 for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in business combinations. FOREIGN CURRENCY Local currencies are the functional currency for the Company’s subsidiaries in Switzerland, the United Kingdom, France, Japan, Spain and Canada. The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at average exchange rates during the period for results of operations. The related translation adjustments are reported in Accumulated other comprehensive loss (“AOCL”) in shareholders’ equity. Gains (losses) resulting from non-U.S. currency transactions are included in Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income and were immaterial for all periods presented. REVENUE RECOGNITION The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, (“ASC 606”). Revenues are derived from the sales of products that are grouped into one of the following three categories: (i) components; (ii) modules and sub-assemblies; and (iii) integrated subsystems. The Company also generates revenues from the performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation. Each promised good or service within a contract is accounted for separately under the guidance of ASC 606 if they are distinct. Promised goods or services not meeting the criteria for being a distinct performance obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct. The appropriate allocation of the transaction price and recognition of revenue is then determined for the bundled performance obligation. Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated subsystems and related system integration or other services. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 52% and 49% of revenues for the second quarter and six months ended December 31, 2021, respectively. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 61% and 62% of revenues for the second quarter and six months ended January 1, 2021, respectively. The Company also engages in long-term contracts for development, production and service activities and recognizes revenue for performance obligations over time. These long-term contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services. Long-term contracts include both fixed-price and cost reimbursable contracts. The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material contracts. Total revenue recognized under long-term contracts over time was 48% and 51% of total revenues for the second quarter and six months ended December 31, 2021, respectively. Total revenue recognized under long-term contracts over time was 39% and 38% of total revenues for the second quarter and six months ended January 1, 2021, respectively. The Company generally does not provide its customers with rights of product return other than those related to assurance warranty provisions that permit repair or replacement of defective goods over a period of 12 to 36 months. The Company accrues for anticipated warranty costs upon product shipment. The Company does not consider activities related to such assurance warranties, if any, to be a separate performance obligation. The Company does offer separately priced extended warranties which generally range from 12 to 36 months that are treated as separate performance obligations. The transaction price allocated to extended warranties is recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. All revenues are reported net of government assessed taxes (e.g., sales taxes or value-added taxes). Refer to Note M for disaggregation of revenue for the period. ACCOUNTS RECEIVABLE Accounts receivable, net, represents amounts that have been billed and are currently due from customers. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected. The Company provides credit to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended as necessary. The allowance is based upon an assessment of the customer's credit worthiness, reasonable forecasts about the future, history with the customer, and the age of the receivable balance. The Company typically invoices a customer upon shipment of the product (or completion of a service) for contracts where revenue is recognized at a point in time. For contracts where revenue is recognized over time, the invoicing events are typically based on specified performance obligation deliverables or milestone events, or quantifiable measures of performance. CONTRACT BALANCES Contract balances result from the timing of revenue recognized, billings and cash collections, and the generation of contract assets and liabilities. Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to the passage of time. Contract assets are presented as unbilled receivables and costs in excess of billings on the Company’s Consolidated Balance Sheets. Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue, and customer advances. Deferred product revenue represents amounts that have been invoiced to customers, but are not yet recognizable as revenue because the Company has not satisfied its performance obligations under the contract. Billings in excess of revenues represents milestone billing contracts where the billings of the contract exceed recognized revenues. Deferred service revenue primarily represents amounts invoiced to customers for annual maintenance contracts or extended warranty contracts, which are recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. Customer advances represent deposits received from customers on an order. Contract liabilities are included in deferred revenue and the long-term portion of deferred revenue is included within other non-current liabilities on the Company’s Consolidated Balance Sheets. Contract balances are reported in a net position on a contract-by-contract basis. The contract asset balances were $193,803 and $162,921 as of December 31, 2021 and July 2, 2021, respectively. The contract asset balance increased due to growth in revenue recognized over time and timing of milestone billings under long-term contracts during the six months ended December 31, 2021. The contract liability balances were $34,410 and $35,201 as of December 31, 2021 and July 2, 2021, respectively. The decrease was due to timing of milestone billings across multiple programs. Revenue recognized for the second quarter and six months ended December 31, 2021 that was included in the contract liability balance at July 2, 2021 was $5,151 and $18,288, respectively. Revenue recognized for the second quarter and six months ended January 1, 2021 that was included in the contract liability balance at July 3, 2020 was $4,336 and $13,366, respectively. REMAINING PERFORMANCE OBLIGATIONS The Company includes in its computation of remaining performance obligations customer orders for which it has accepted signed sales orders. The definition of remaining performance obligations excludes contracts with original expected durations of less than one year, as well as those contracts that provide the customer with the right to cancel or terminate the order with no substantial penalty, even if the Company’s historical experience indicates the likelihood of cancellation or termination is remote. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $441,675. The Company expects to recognize approximately 59% of its remaining performance obligations as revenue in the next 12 months and the balance thereafter. WEIGHTED-AVERAGE SHARES Weighted-average shares were calculated as follows:
Equity instruments to purchase 408 and 434 shares of common stock were not included in the calculation of diluted net earnings per share for the second quarter and six months ended December 31, 2021, respectively, because the equity instruments were anti-dilutive. Equity instruments to purchase 114 and 2 shares of common stock were not included in the calculation of diluted net earnings per share for the second quarter and six months ended January 1, 2021, respectively, because the equity instruments were anti-dilutive. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect this adoption to have a material impact to the Company's consolidated financial statements or related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU simplify the accounting for convertible debt securities. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, including adoption in an interim period. The Company does not expect this adoption to have a material impact to the Company's consolidated financial statements or related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. Under current U.S. GAAP, an acquirer generally recognizes assets and liabilities assumed in a business combination, including contract assets and liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. This ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating the effect that this standard may have on its consolidated financial statements and related disclosures. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS Effective July 3, 2021 the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and add guidance as to whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This adoption did not have a material impact to the Company's consolidated financial statements or related disclosures.
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Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions ATLANTA MICRO ACQUISITION On November 29, 2021, the Company acquired Atlanta Micro, Inc. ("Atlanta Micro") for a purchase price of $90,000, subject to net working capital and net debt adjustments. Based in Norcross, Georgia, Atlanta Micro is a leading designer and manufacturer of high-performance RF modules and components, including advanced monolithic microwave integrated circuits (MMICs) which are critical for high-speed data acquisition applications including electronic warfare, radar and weapons. The Company funded the acquisition through the Company's existing revolving credit facility (the "Revolver"). The following table presents the net purchase price and the fair values of the assets and liabilities of Atlanta Micro on a preliminary basis:
The amounts above represent the preliminary fair value estimates as of December 31, 2021 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates. The preliminary identifiable intangible asset estimate includes customer relationships of $18,450 with a useful life of 11 years, completed technology of $9,450 with a useful life of 10 years and backlog of $2,363 with a useful life of two years. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill. The estimated goodwill of $61,640 largely reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to the Company’s existing products and markets and is not deductible for tax purposes. The goodwill from this acquisition is reported in the Microelectronics reporting unit. The revenues and loss before income taxes from Atlanta Micro included in the Company's consolidated results for the second quarter ended December 31, 2021 were $1,617 and $(220), respectively. AVALEX ACQUISITION On September 27, 2021, the Company signed a definitive agreement to acquire Avalex Technologies (“Avalex”) for a purchase price of $155,000, subject to net working capital and net debt adjustments. On November 5, 2021, the transaction closed and the Company acquired Avalex. Based in Gulf Breeze, Florida, Avalex is a provider of mission-critical avionics, including rugged displays, integrated communications management systems, digital video recorders, and warning systems. The Company funded the acquisition with the Company's Revolver. The following table presents the net purchase price and the fair values of the assets and liabilities of Avalex on a preliminary basis:
The amounts above represent the preliminary fair value estimates as of December 31, 2021 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates. The preliminary identifiable intangible asset estimate includes customer relationships of $41,880 with a useful life of 9 years, completed technology of $14,430 with a useful life of 7 years and backlog of $5,050 with a useful life of one year. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill. The estimated goodwill of $82,456 largely reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to the Company’s existing products and markets. The goodwill from this acquisition is reported in the Processing reporting unit. The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes. As of December 31, 2021, the Company had $82,700 of goodwill deductible for tax purposes. The revenues and loss before income taxes from Avalex included in the Company's consolidated results for the second quarter ended December 31, 2021 were $4,427 and $(1,097), respectively. PENTEK ACQUISITION On May 27, 2021, the Company acquired Pentek Technologies, LLC and Pentek Systems, Inc. (collectively, "Pentek"). for a purchase price of $65,000, subject to net working capital and net debt adjustments. Based in Upper Saddle River, New Jersey, Pentek is a leading designer and manufacturer of ruggedized, high-performance, commercial off-the-shelf software-defined radio and data acquisition boards, recording systems and subsystems for high-end commercial and defense applications. The acquisition and associated transaction expenses were funded through a combination of cash on hand and the Company's Revolver. On October 13, 2021, the Company and former owners of Pentek agreed to post closing adjustments totaling $79, which increased the Company's net purchase price. The following table presents the net purchase price and the fair values of the assets and liabilities of Pentek on a preliminary basis:
The amounts above represent the preliminary fair value estimates as of December 31, 2021 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates. The preliminary identifiable intangible asset estimate includes customer relationships of $15,560 with a useful life of 21 years, completed technology of $6,340 with a useful life of seven years and backlog of $2,210 with a useful life of one year. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill. The goodwill of $35,563 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. The goodwill from this acquisition is included in the Microelectronics reporting unit. The transaction was a combination of asset and stock, with the asset portion of goodwill being deductible for tax purposes. The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes. As of December 31, 2021, the Company had $29,216 of goodwill deductible for tax purposes. PHYSICAL OPTICS CORPORATION ACQUISITION On December 7, 2020, the Company signed a definitive agreement to acquire Physical Optics Corporation ("POC") for a purchase price of $310,000, subject to net working capital and net debt adjustments. On December 30, 2020, the transaction closed and the Company acquired POC. Based in Torrance, California, POC expands the Company's global avionics business and its collective footprint in the platform and mission management market. The Company funded the acquisition through a combination of cash on hand and the Company's Revolver. On May 28, 2021, the Company and representative of the former owners of POC agreed to post closing-adjustments totaling $2,641, which increased the Company’s net purchase price. The following table presents the net purchase price and the fair values of the assets and liabilities of POC:
On December 30, 2021, the measurement period for POC expired. The identifiable intangible assets include customer relationships of $83,000 with a useful life of 11 years, completed technology of $25,000 with a useful life of 9 years and backlog of $8,000 with a useful life of one year. The goodwill of $148,265 largely reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to the Company’s existing products and markets and is not deductible for tax purposes. The goodwill from this acquisition is reported in the Processing reporting unit.
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Fair Value of Financial Instruments |
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Dec. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial InstrumentsThe carrying values of cash and cash equivalents, including money market funds, restricted cash, accounts receivable and payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The Company determined the carrying value of long-term debt approximated fair value due to variable interest rates charged on the borrowings, which reprice frequently. As of December 31, 2021, the Company had no material financial instruments required to be measured at fair value. |
Inventory |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value, and consists of materials, labor and overhead. On a quarterly basis, the Company uses consistent methodologies to evaluate inventory for net realizable value. Once an item is written down, the value becomes the new inventory cost basis. The Company reduces the value of inventory for excess and obsolete inventory, consisting of on-hand inventory in excess of estimated usage. The excess and obsolete inventory evaluation is based upon assumptions about future demand, historical usage, product mix and possible alternative uses. Inventory was comprised of the following:
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Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill On August 3, 2021, Mercury announced a companywide effort, called 1MPACT, to lay the foundation for the next phase of the Company's value creation at scale. The goal of 1MPACT is to achieve Mercury's full growth, margin expansion and adjusted EBITDA potential over the next five years. In connection with 1MPACT, the Company realigned its internal organizational structure in the first quarter of fiscal 2022 shifting to two divisions, Processing and Microelectronics. The Mission division has now merged under the Processing division. There was no change to the Microelectronics division. In accordance with FASB ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company determines its reporting units based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit. A reporting unit is considered to be an operating segment or one level below an operating segment also known as a component. Component level financial information is reviewed by management across two divisions: Processing and Microelectronics. Accordingly, these were determined to be the Company's new reporting units. The internal reorganization and change in reporting units qualified as a triggering event and required goodwill to be tested for impairment. As required by ASC 350, the Company tested goodwill for impairment immediately before and after the reorganization. As a result of these analyses, it was determined that goodwill was not impaired before or after the reorganization. In the first quarter ended October 1, 2021, the Company assigned goodwill to the new reporting units based on the relative fair value of transferred operations. The following table sets forth the changes in the carrying amount of goodwill for the six months ended December 31, 2021:
The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year.
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Restructuring |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | Restructuring During the six months ended December 31, 2021, the Company incurred $16,076 of restructuring and other charges. Restructuring and other charges of $8,667 related to third-party consulting costs associated with 1MPACT. The remaining $7,409 related to severance costs associated with the elimination of approximately 100 employees in manufacturing, SG&A and R&D based on changes in the business environment and to align with the internal organizational changes completed under 1MPACT. All of the restructuring and other charges are classified as Operating expenses in the Consolidated Statements of Operations and Comprehensive (Loss) Income and any remaining severance obligations are expected to be paid within the next twelve months. The restructuring liability is classified as Accrued expenses in the Consolidated Balance Sheets. The following table presents the detail of activity for the Company’s restructuring plans:
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Income Taxes |
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Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recorded an income tax (benefit) provision of $(155) and $4,433 on a (loss) income before income taxes of $(2,794) and $17,119 for the second quarters ended December 31, 2021 and January 1, 2021, respectively. The Company recorded an income tax (benefit) provision of $(596) and $6,631 on (loss) income before income taxes of $(10,375) and $35,115 for the six months ended December 31, 2021 and January 1, 2021, respectively. During the second quarters ended December 31, 2021 and January 1, 2021, the Company recognized a discrete tax provision (benefit) of $163 and $(130) related to stock-based compensation shortfalls and windfalls, respectively. During the six months ended December 31, 2021 and January 1, 2021, the Company recognized a discrete tax provision (benefit) of $878 and $(2,610) related to stock-based compensation shortfalls and windfalls, respectively. The effective tax rate for the second quarters and six months ended December 31, 2021 and January 1, 2021 differed from the Federal statutory rate primarily due to Federal and State research and development credits, non-deductible compensation, stock-based compensation, and state taxes. In addition, during the second quarter ended December 31, 2021, the Company had certain unbenefited deferred tax assets. During the second quarter ended December 31, 2021, the Company recorded an unrecognized tax benefit of $693 related to acquired research and development carryforward credits. Within the calculation of the Company's annual effective tax rate, the Company has used assumptions and estimates that may change as a result of future guidance and interpretation from the Internal Revenue Service (“IRS”).
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Debt |
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Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Debt REVOLVING CREDIT FACILITY On September 28, 2018, the Company amended the Revolver to increase and extend the borrowing capacity to a $750,000, 5-year revolving credit line, with the maturity extended to September 28, 2023. As of December 31, 2021, the Company's outstanding balance of unamortized deferred financing costs was $2,353, which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income on a straight line basis over the term of the Revolver. As of December 31, 2021, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $451,500 against the Revolver, resulting in interest expense of $1,094 and $1,689 for the second quarter and six months ended December 31, 2021, respectively. There were outstanding letters of credit of $963 as of December 31, 2021.
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Employee Benefit Plan |
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Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plan | Employee Benefit Plan PENSION PLAN The Company maintains a defined benefit pension plan (the “Plan”) for its Swiss employees, which is administered by an independent pension fund. The Plan is mandated by Swiss law and meets the criteria for a defined benefit plan under ASC 715, Compensation—Retirement Benefits (“ASC 715”), because participants of the Plan are entitled to a defined rate of return on contributions made. The independent pension fund is a multi-employer plan with unrestricted joint liability for all participating companies for which the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan. The Company recognizes a net asset or liability for the Plan equal to the difference between the projected benefit obligation of the Plan and the fair value of the Plan’s assets as required by ASC 715. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan. The Plan's funded status at December 31, 2021 was a net liability of $9,833, which is recorded in Other non-current liabilities on the Consolidated Balance Sheet. The Company recorded a net gain of $48 and $96 in AOCL during the second quarter and six months ended December 31, 2021. The Company recorded a net gain of $31 and $62 in AOCL during the second quarter and six months ended January 1, 2021. The Company recognized net periodic benefit costs of $269 and $538 associated with the Plan for the second quarter and six months ended December 31, 2021. The Company recognized net periodic benefit costs of $420 and $833 associated with the Plan for the second quarter and six months ended January 1, 2021, respectively. The Company's total expected employer contributions to the Plan during fiscal 2022 are $1,165.
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Shareholders' Equity |
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Dec. 31, 2021 | |
Text Block [Abstract] | |
Stockholders' Equity Note Disclosure | STOCKHOLDER RIGHTS PLAN On December 27, 2021, the Company's Board of Directors authorized and declared a dividend of one preferred share purchase right (a “Right”), payable on January 10, 2022, for each outstanding share of common stock par value $0.01 per share to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company a unit of Series A Junior Preferred Stock, par value $0.01 per share, of the Company at a designated price per unit, subject to adjustment. The Rights will initially trade with, and will be inseparable from, the shares of common stock. The Rights will generally become exercisable if any person or group, other than certain exempt persons, acquires beneficial ownership of 7.5% (or 10% in the case of certain passive investors) or more of common stock outstanding (an “Acquiring Person”). If a person or group becomes an Acquiring Person, then each Right, other than those held by the Acquiring Person, will entitle its holder to purchase units of Series A Junior Preferred Stock (or, in certain circumstances, cash, assets or other securities of the Company) having a market value equal to twice the then-current market price per unit of Preferred Stock. In certain other circumstances including consolidation or merger with the Company, each Right, other than those held by the Acquiring Person, will entitle its holder to receive common stock of the person acquiring the Company or its ultimate parent entity, as applicable, having a value equal to two times then-current market price per share of common stock. Each Unit of Preferred Stock, if issued: • will entitle holders to certain dividend and liquidation payments; • will not be redeemable; • will entitle holders to one vote, voting together with shares of common stock; • will entitle holders, if shares of common stock are exchanged via merger, consolidation, or a similar transaction, to a per share payment equal to the payment made on one share of Company Common Stock; and • will be protected by customary anti-dilution provisions with respect to dividends, liquidation and voting rights, and in the event of mergers and consolidations. The Rights Agreement will continue in effect until December 26, 2022, or unless earlier redeemed or terminated by the Company's Board of Directors, as provided in the Rights Agreement. The Board of Directors shall have the right to adjust, among other things, the exercise price, as well as the number of Units of Preferred Stock issuable, and the number of outstanding Rights to prevent dilution that may occur from a share dividend, a share split, or a reclassification of the Preferred Stock. The Rights have no voting or dividend privileges, and, unless and until they become exercisable, have no dilutive effect on the earnings of the Company. Additional details about the Rights Agreement are contained in the Current Report on Form 8-K filed by the Company with the SEC on December 29, 2021.
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation STOCK INCENTIVE PLANS At December 31, 2021, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 6,782 shares, including 710 shares rolled into the 2018 Plan that were available for future grant under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”) and 3,000 shares approved by the Company's shareholders on October 28, 2020. The 2018 Plan replaced the 2005 Plan. The shares authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan. The foregoing does not affect any outstanding awards under the 2005 Plan, which remain in full force and effect in accordance with their terms. The 2018 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees. Stock options must be granted with an exercise price of not less than 100% of the fair value of the Company’s common stock on the date of grant and the options generally have a term of seven years. There were 3,380 shares available for future grant under the 2018 Plan at December 31, 2021. As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives and employees pursuant to the 2018 Plan. Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets. The performance targets generally include the achievement of internal performance targets in relation to a peer group of companies. EMPLOYEE STOCK PURCHASE PLAN At December 31, 2021, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020. Under the ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the ESPP. There were 54 and 46 shares issued under the ESPP during the six months ended December 31, 2021 and January 1, 2021, respectively. Shares available for future purchase under the ESPP totaled 374 at December 31, 2021. STOCK AWARD ACTIVITY The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since July 2, 2021:
STOCK-BASED COMPENSATION EXPENSE The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive (Loss) Income in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). The Company had $1,087 and $796 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended December 31, 2021 and July 2, 2021, respectively. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures. The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income:
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Operating Segment, Geographic Information and Significant Customers |
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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. During the first quarter of fiscal 2022, the Company announced its 1MPACT value creation initiative to promote scale as the organization continues to grow. The Company evaluated this internal reorganization under FASB ASC 280, Segment Reporting ("ASC 280") to determine whether this change has impacted the Company's single operating and reportable segment. The Company concluded this change had no effect given the CODM continues to evaluate and manage the Company on the basis of one operating and reportable segment. The Company utilized the management approach for determining its operating segment in accordance with ASC 280. The geographic distribution of the Company’s revenues as determined by country in which the Company's legal subsidiary is domiciled is summarized as follows:
The Company offers a broad family of products designed to meet the full range of requirements in compute-intensive, signal processing, image processing and command and control applications. To maintain a competitive advantage, the Company seeks to leverage technology investments across multiple product lines and product solutions. The Company’s products are typically compute-intensive and require extremely high bandwidth and high throughput. These systems often must also meet significant SWaP constraints for use in aircraft, unmanned aerial vehicles, ships and other platforms and be ruggedized for use in harsh environments. The Company's products transform the massive streams of digital data created in these applications into usable information in real time. The systems can scale from a few processors to thousands of processors. In recent years, the Company completed a series of acquisitions that changed its technological capabilities, applications and end markets. As these acquisitions and changes occurred, the Company's proportion of revenue derived from the sale of components in different technological areas, and modules, sub-assemblies and integrated subsystems which combine technologies into more complex diverse products has shifted. The following tables present revenue consistent with the Company's strategy of expanding its technological capabilities and program content. As additional information related to the Company’s products by end user, application, product grouping and/or platform is attained, the categorization of these products can vary over time. When this occurs, the Company reclassifies revenue by end user, application, product grouping and/or platform for prior periods. Such reclassifications typically do not materially change the underlying trends of results within each revenue category. The following table presents the Company's net revenue by end user for the periods presented:
(1) Domestic revenues consist of sales where the end user is within the U.S., as well as sales to prime defense contractor customers where the ultimate end user location is not defined. (2) International/Foreign Military Sales consist of sales to U.S. prime defense contractor customers where the end user is known to be outside the U.S., foreign military sales through the U.S. government, and direct sales to non-U.S. based customers intended for end use outside of the U.S. The following table presents the Company's net revenue by end application for the periods presented:
(1) Radar includes end-use applications where radio frequency signals are utilized to detect, track, and identify objects. (2) Electronic Warfare includes end-use applications comprising the offensive and defensive use of the electromagnetic spectrum. (3) Other Sensor & Effector products include all Sensor & Effector end markets other than Radar and Electronic Warfare. (4) C4I includes rugged secure rackmount servers that are designed to drive the most powerful military processing applications. (5) Other products include all component and other sales where the end use is not specified. The following table presents the Company's net revenue by product grouping for the periods presented:
(1) Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or sub-assembly. Examples include, but are not limited to, power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices. (2) Modules and Sub-assemblies include combinations of multiple functional technology elements and/or components that work together to perform multiple functions but are typically resident on or within a single board or housing. Modules and sub-assemblies may in turn be combined to form an integrated subsystem. Examples of modules and sub-assemblies include, but are not limited to, embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and IO (input-output) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners and transceivers. (3) Integrated Subsystems include multiple modules and/or sub-assemblies combined with a backplane or similar functional element and software to enable a solution. These are typically but not always integrated within a chassis and with cooling, power and other elements to address various requirements and are also often combined with additional technologies for interaction with other parts of a complete system or platform. Integrated subsystems also include spare and replacement modules and sub-assemblies sold as part of the same program for use in or with integrated subsystems sold by the Company. The following table presents the Company's net revenue by platform for the periods presented:
(1) Airborne platform includes products that relate to personnel, equipment, or pieces of equipment designed for airborne applications. (2) Land platform includes products that relate to fixed or mobile equipment, or pieces of equipment for personnel, weapon systems, vehicles and support elements operating on land. (3) Naval platform includes products that relate to personnel, equipment, or pieces of equipment designed for naval operations. (4) All platforms other than Airborne, Land or Naval. The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows:
Identifiable long-lived assets exclude right-of-use assets, goodwill, and intangible assets. Customers comprising 10% or more of the Company’s revenues for the periods shown are as follows:
* Indicates that the amount is less than 10% of the Company's revenue for the respective period. While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms. There were no programs comprising 10% or more of the Company's revenues for the second quarter and six months ended December 31, 2021 and January 1, 2021.
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Commitments and Contingencies |
6 Months Ended |
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Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies LEGAL CLAIMS The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of its business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company’s cash flows, results of operations, or financial position. On June 23, 2021, Embedded Reps of America, LLC (“ERA”), a former sales representative, and James Mazzola, a principal of ERA, filed for binding arbitration related to the termination of ERA’s sales representative agreement raising multiple claims that aggregate to approximately $9,000 in direct damages, with treble damages requested on a number of those claims. ERA was a sales representative of Themis when Themis was acquired by Mercury. The sales representative agreement provided for termination by either party upon 30 days written notice with ERA entitled to commissions for orders obtained by ERA with product shipment occurring prior to termination. The Company responded to the complaint on July 28, 2021. The Company believes the claims in the complaint are without merit and intends to defend itself vigorously. On December 7, 2021, counsel for National Technical Systems, Inc. (“NTS”) sent the Company an environmental demand letter pursuant to Massachusetts General Laws Chapter 21E, Section 4A, and CERCLA 42 U.S.C. Section 9601, related to a site that NTS formerly owned at 533 Main Street, Acton, Massachusetts. NTS received a Notice of Responsibility from the Massachusetts Department of Environmental Protection (“MassDEP”) alleging trichloroethene, freon and 1,4-dioxane contamination in the groundwater emanating from NTS’s former site. NTS alleges in its demand letter that the operations of a predecessor company to Mercury that was acquired in the Company’s acquisition of the Microsemi carve-out business that once owned and operated a facility at 531 Main Street, Acton, Massachusetts contributed to the groundwater contamination. NTS is seeking payment by the Company of NTS’s costs for any required environmental remediation. In November 2021, the Company responded to a request for information from MassDEP regarding the detection of PFAS (per- and polyfluoroakyl substances) in the Acton, Massachusetts Water District’s Conant public water supply wells near the former facility at 531 Main Street, Acton, Massachusetts at a level above the standard that MassDEP published for PFAS in October 2020. It is too early to determine what responsibility, if any, the Company may have for these matters. INDEMNIFICATION OBLIGATIONS The Company’s standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments the Company could be required to make under these indemnification provisions is, in some instances, unlimited. PURCHASE COMMITMENTS As of December 31, 2021, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations. The purchase commitments covered by these agreements are for less than one year and aggregate to $183,942. OTHER As part of the Company's strategy for growth, the Company continues to explore acquisitions or strategic alliances. The associated acquisition costs incurred in the form of professional fees and services may be material to the future periods in which they occur, regardless of whether the acquisition is ultimately completed. The Company may elect from time to time to purchase and subsequently retire shares of common stock in order to settle employees’ tax liabilities associated with vesting of a restricted stock award or exercise of stock options. These transactions would be treated as a use of cash in financing activities in the Company's Consolidated Statements of Cash Flows.
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Subsequent Events - $ / shares |
6 Months Ended | |
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Feb. 15, 2022 |
Dec. 31, 2021 |
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Subsequent Events [Abstract] | ||
Subsequent Events | Subsequent Events On February 7, 2022, the Board of Directors approved an equity retention plan for Mercury’s executive leadership team and over 100 additional leaders. Employees participating in the equity retention plan will be granted equity awards on February 15, 2022. Consistent with the Company’s prior practice for granting equity awards, the number of shares to be granted on February 15, 2022 will be determined by dividing the target value for grantees by the average closing price of Mercury’s common stock during the 30 calendar days prior to February 15, 2022. However, if the average closing price is lower than $55.00 per share, then a minimum of $55.00 per share will be used to calculate the number of shares to be granted. Additional details about the equity retention plan are contained in the Current Report on Form 8-K filed by the Company with the SEC on February 8, 2022.
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Subsequent Event | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Payment Arrangement, Option, Exercise Price Range, Lower Range Limit | $ 55 |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America for interim financial information and with the instructions to the Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations; however, in the opinion of management the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature, necessary for fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended July 2, 2021 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 17, 2021. The results for the second quarter and six months ended December 31, 2021 are not necessarily indicative of the results to be expected for the full fiscal year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation
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Use of Estimates | USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
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Business Combinations | BUSINESS COMBINATIONS The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations, (“ASC 805”), for all transactions and events in which it obtains control over one or more other businesses, to recognize the fair value of all assets and liabilities acquired, even if less than one hundred percent ownership is acquired, and in establishing the acquisition date fair value as the measurement date for all assets and liabilities assumed. The Company also utilizes ASC 805 for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in business combinations.
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Foreign Currency | FOREIGN CURRENCY Local currencies are the functional currency for the Company’s subsidiaries in Switzerland, the United Kingdom, France, Japan, Spain and Canada. The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at average exchange rates during the period for results of operations. The related translation adjustments are reported in Accumulated other comprehensive loss (“AOCL”) in shareholders’ equity. Gains (losses) resulting from non-U.S. currency transactions are included in Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income and were immaterial for all periods presented.
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Revenue Recognition | REVENUE RECOGNITION The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, (“ASC 606”). Revenues are derived from the sales of products that are grouped into one of the following three categories: (i) components; (ii) modules and sub-assemblies; and (iii) integrated subsystems. The Company also generates revenues from the performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation. Each promised good or service within a contract is accounted for separately under the guidance of ASC 606 if they are distinct. Promised goods or services not meeting the criteria for being a distinct performance obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct. The appropriate allocation of the transaction price and recognition of revenue is then determined for the bundled performance obligation. Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated subsystems and related system integration or other services. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 52% and 49% of revenues for the second quarter and six months ended December 31, 2021, respectively. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 61% and 62% of revenues for the second quarter and six months ended January 1, 2021, respectively. The Company also engages in long-term contracts for development, production and service activities and recognizes revenue for performance obligations over time. These long-term contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services. Long-term contracts include both fixed-price and cost reimbursable contracts. The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material contracts. Total revenue recognized under long-term contracts over time was 48% and 51% of total revenues for the second quarter and six months ended December 31, 2021, respectively. Total revenue recognized under long-term contracts over time was 39% and 38% of total revenues for the second quarter and six months ended January 1, 2021, respectively. The Company generally does not provide its customers with rights of product return other than those related to assurance warranty provisions that permit repair or replacement of defective goods over a period of 12 to 36 months. The Company accrues for anticipated warranty costs upon product shipment. The Company does not consider activities related to such assurance warranties, if any, to be a separate performance obligation. The Company does offer separately priced extended warranties which generally range from 12 to 36 months that are treated as separate performance obligations. The transaction price allocated to extended warranties is recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. All revenues are reported net of government assessed taxes (e.g., sales taxes or value-added taxes). Refer to Note M for disaggregation of revenue for the period. Contract balances result from the timing of revenue recognized, billings and cash collections, and the generation of contract assets and liabilities. Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to the passage of time. Contract assets are presented as unbilled receivables and costs in excess of billings on the Company’s Consolidated Balance Sheets. Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue, and customer advances. Deferred product revenue represents amounts that have been invoiced to customers, but are not yet recognizable as revenue because the Company has not satisfied its performance obligations under the contract. Billings in excess of revenues represents milestone billing contracts where the billings of the contract exceed recognized revenues. Deferred service revenue primarily represents amounts invoiced to customers for annual maintenance contracts or extended warranty contracts, which are recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. Customer advances represent deposits received from customers on an order. Contract liabilities are included in deferred revenue and the long-term portion of deferred revenue is included within other non-current liabilities on the Company’s Consolidated Balance Sheets. Contract balances are reported in a net position on a contract-by-contract basis.
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Accounts Receivables | ACCOUNTS RECEIVABLEAccounts receivable, net, represents amounts that have been billed and are currently due from customers. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected. The Company provides credit to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended as necessary. The allowance is based upon an assessment of the customer's credit worthiness, reasonable forecasts about the future, history with the customer, and the age of the receivable balance. The Company typically invoices a customer upon shipment of the product (or completion of a service) for contracts where revenue is recognized at a point in time. For contracts where revenue is recognized over time, the invoicing events are typically based on specified performance obligation deliverables or milestone events, or quantifiable measures of performance. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-Average Shares | WEIGHTED-AVERAGE SHARES Weighted-average shares were calculated as follows: Equity instruments to purchase 408 and 434 shares of common stock were not included in the calculation of diluted net earnings per share for the second quarter and six months ended December 31, 2021, respectively, because the equity instruments were anti-dilutive. Equity instruments to purchase 114 and 2 shares of common stock were not included in the calculation of diluted net earnings per share for the second quarter and six months ended January 1, 2021, respectively, because the equity instruments were anti-dilutive.
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Recently Adopted Accounting Pronouncements | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect this adoption to have a material impact to the Company's consolidated financial statements or related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU simplify the accounting for convertible debt securities. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, including adoption in an interim period. The Company does not expect this adoption to have a material impact to the Company's consolidated financial statements or related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. Under current U.S. GAAP, an acquirer generally recognizes assets and liabilities assumed in a business combination, including contract assets and liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. This ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating the effect that this standard may have on its consolidated financial statements and related disclosures. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS Effective July 3, 2021 the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and add guidance as to whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This adoption did not have a material impact to the Company's consolidated financial statements or related disclosures.
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Stock-Based Compensation | STOCK INCENTIVE PLANS At December 31, 2021, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 6,782 shares, including 710 shares rolled into the 2018 Plan that were available for future grant under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”) and 3,000 shares approved by the Company's shareholders on October 28, 2020. The 2018 Plan replaced the 2005 Plan. The shares authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan. The foregoing does not affect any outstanding awards under the 2005 Plan, which remain in full force and effect in accordance with their terms. The 2018 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees. Stock options must be granted with an exercise price of not less than 100% of the fair value of the Company’s common stock on the date of grant and the options generally have a term of seven years. There were 3,380 shares available for future grant under the 2018 Plan at December 31, 2021. As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives and employees pursuant to the 2018 Plan. Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets. The performance targets generally include the achievement of internal performance targets in relation to a peer group of companies. EMPLOYEE STOCK PURCHASE PLAN At December 31, 2021, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020. Under the ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the ESPP. There were 54 and 46 shares issued under the ESPP during the six months ended December 31, 2021 and January 1, 2021, respectively. Shares available for future purchase under the ESPP totaled 374 at December 31, 2021.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Weighted Average Shares Outstanding | Weighted-average shares were calculated as follows:
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Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table presents the net purchase price and the fair values of the assets and liabilities of Atlanta Micro on a preliminary basis:
The following table presents the net purchase price and the fair values of the assets and liabilities of Avalex on a preliminary basis:
The following table presents the net purchase price and the fair values of the assets and liabilities of Pentek on a preliminary basis:
The following table presents the net purchase price and the fair values of the assets and liabilities of POC:
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Inventory (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory was comprised of the following:
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Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill | The following table sets forth the changes in the carrying amount of goodwill for the six months ended December 31, 2021:
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Restructuring (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses by Reportable Segment for Restructuring Plans | The following table presents the detail of activity for the Company’s restructuring plans:
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Stock-Based Compensation (Tables) |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Nonvested Restricted Stock | The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since July 2, 2021:
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Stock Based Compensation Expenses | The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income:
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Operating Segment, Geographic Information and Significant Customers (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Distribution of Revenues and Long Lived Assets from Continuing Operations | The geographic distribution of the Company’s revenues as determined by country in which the Company's legal subsidiary is domiciled is summarized as follows:
The following table presents the Company's net revenue by end user for the periods presented:
(1) Domestic revenues consist of sales where the end user is within the U.S., as well as sales to prime defense contractor customers where the ultimate end user location is not defined. (2) International/Foreign Military Sales consist of sales to U.S. prime defense contractor customers where the end user is known to be outside the U.S., foreign military sales through the U.S. government, and direct sales to non-U.S. based customers intended for end use outside of the U.S. The following table presents the Company's net revenue by end application for the periods presented:
(1) Radar includes end-use applications where radio frequency signals are utilized to detect, track, and identify objects. (2) Electronic Warfare includes end-use applications comprising the offensive and defensive use of the electromagnetic spectrum. (3) Other Sensor & Effector products include all Sensor & Effector end markets other than Radar and Electronic Warfare. (4) C4I includes rugged secure rackmount servers that are designed to drive the most powerful military processing applications. (5) Other products include all component and other sales where the end use is not specified. The following table presents the Company's net revenue by product grouping for the periods presented:
(1) Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or sub-assembly. Examples include, but are not limited to, power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices. (2) Modules and Sub-assemblies include combinations of multiple functional technology elements and/or components that work together to perform multiple functions but are typically resident on or within a single board or housing. Modules and sub-assemblies may in turn be combined to form an integrated subsystem. Examples of modules and sub-assemblies include, but are not limited to, embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and IO (input-output) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners and transceivers. (3) Integrated Subsystems include multiple modules and/or sub-assemblies combined with a backplane or similar functional element and software to enable a solution. These are typically but not always integrated within a chassis and with cooling, power and other elements to address various requirements and are also often combined with additional technologies for interaction with other parts of a complete system or platform. Integrated subsystems also include spare and replacement modules and sub-assemblies sold as part of the same program for use in or with integrated subsystems sold by the Company. The following table presents the Company's net revenue by platform for the periods presented:
(1) Airborne platform includes products that relate to personnel, equipment, or pieces of equipment designed for airborne applications. (2) Land platform includes products that relate to fixed or mobile equipment, or pieces of equipment for personnel, weapon systems, vehicles and support elements operating on land. (3) Naval platform includes products that relate to personnel, equipment, or pieces of equipment designed for naval operations. (4) All platforms other than Airborne, Land or Naval. The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows:
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Customers Comprising Ten Percent or More Revenues | Customers comprising 10% or more of the Company’s revenues for the periods shown are as follows:
* Indicates that the amount is less than 10% of the Company's revenue for the respective period.
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Summary of Significant Accounting Policies - Basic and Diluted Weighted Average Shares Outstanding (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Earnings Per Share [Abstract] | ||||
Basic weighted-average shares outstanding (in shares) | 55,520 | 55,070 | 55,448 | 54,976 |
Effect of dilutive equity instruments (in shares) | 0 | 364 | 0 | 409 |
Diluted weighted-average shares outstanding (in shares) | 55,520 | 55,434 | 55,448 | 55,385 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 408 | 114 | 434 | 2 |
Inventory (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Jul. 02, 2021 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 159,780 | $ 141,774 |
Work in process | 64,706 | 58,087 |
Finished goods | 26,786 | 21,779 |
Total | $ 251,272 | $ 221,640 |
Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Dec. 31, 2021
USD ($)
reporting_unit
| |
Goodwill [Line Items] | |
Number of reporting units | reporting_unit | 2 |
Goodwill [Roll Forward] | |
Beginning Balance | $ 804,906 |
Ending Balance | 942,346 |
Physical Optics Corporation | |
Goodwill [Roll Forward] | |
Goodwill adjustment | (6,994) |
Pentek | |
Goodwill [Roll Forward] | |
Goodwill adjustment | 338 |
Avalex | |
Goodwill [Roll Forward] | |
Goodwill adjustment | 82,456 |
Atlanta Micro | |
Goodwill [Roll Forward] | |
Goodwill adjustment | $ 61,640 |
Restructuring - Additional Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Jan. 01, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
position
|
Jan. 01, 2021
USD ($)
|
|
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring and other charges | $ 3,802 | $ 951 | $ 16,076 | $ 2,248 |
Number of positions eliminated | position | 100 | |||
Other Members | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring and other charges | $ 8,667 | |||
Severance & Related | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 7,409 |
Restructuring - Expenses by Reportable Segment for Restructuring Plans (Details) - Severance & Related $ in Thousands |
6 Months Ended |
---|---|
Dec. 31, 2021
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Balance at July 2, 2021 | $ 1,006 |
Restructuring charges | 7,409 |
Cash paid | (2,710) |
Balance at December 31, 2021 | $ 5,705 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Income Tax Examination [Line Items] | ||||
Income tax (benefit) expense | $ (155) | $ 4,433 | $ (596) | $ 6,631 |
(Loss) income before income taxes | (2,794) | 17,119 | (10,375) | 35,115 |
Discrete tax provision (benefit) | (163) | $ 130 | (878) | $ 2,610 |
Research Tax Credit Carryforward | ||||
Income Tax Examination [Line Items] | ||||
Carryforward credit | $ 693 | $ 693 |
Debt (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 28, 2018 |
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
Jul. 02, 2021 |
|
Debt Instrument [Line Items] | ||||||
Long-term debt | $ 451,500,000 | $ 451,500,000 | $ 200,000,000 | |||
Interest expense | 1,094,000 | $ 73,000 | 1,689,000 | $ 73,000 | ||
Amount of outstanding letter of credit | 963,000 | 963,000 | ||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 750,000,000 | |||||
Term of revolving credit facility | 5 years | |||||
Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Debt issuance costs | $ 2,353,000 | $ 2,353,000 |
Employee Benefit Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Pension benefit plan, net of tax | $ 48 | $ 31 | $ 96 | $ 62 |
Net periodic benefit cost | 269 | $ 420 | 538 | $ 833 |
Pension Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Expected employer contributions | 1,165 | 1,165 | ||
Pension Plan | Other Noncurrent Liabilities | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Net funded status of plan, liability position | $ 9,833 | $ 9,833 |
Shareholders' Equity - Additional Information (Details) - $ / shares |
Dec. 27, 2021 |
Dec. 31, 2021 |
Jul. 02, 2021 |
---|---|---|---|
Equity [Abstract] | |||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 | |
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 | |
Beneficial ownership threshold, passive investor | 10.00% | ||
Beneficial ownership threshold | 7.50% |
Stock-Based Compensation - Summary of Nonvested Restricted Stock (Details) - Restricted Stock shares in Thousands |
6 Months Ended |
---|---|
Dec. 31, 2021
$ / shares
shares
| |
Number of Shares | |
Beginning Balance (in shares) | shares | 1,013 |
Granted (in shares) | shares | 828 |
Vested (in shares) | shares | (429) |
Forfeited (in shares) | shares | (157) |
Ending Balance (in shares) | shares | 1,255 |
Weighted Average Grant Date Fair Value | |
Beginning Balance (usd per share) | $ / shares | $ 70.77 |
Granted (usd per share) | $ / shares | 51.37 |
Vested (usd per share) | $ / shares | 52.91 |
Forfeited (usd per share) | $ / shares | 68.62 |
Ending Balance (usd per share) | $ / shares | $ 64.31 |
Stock-Based Compensation - Stock-Based Compensation Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense before tax | $ 7,848 | $ 7,270 | $ 17,375 | $ 14,454 |
Income taxes | (2,040) | (1,890) | (4,691) | (3,758) |
Net compensation expense | 5,808 | 5,380 | 12,684 | 10,696 |
Cost of revenues | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense before tax | 322 | 369 | 881 | 664 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense before tax | 6,032 | 5,619 | 13,593 | 11,295 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense before tax | $ 1,494 | $ 1,282 | $ 2,901 | $ 2,495 |
Operating Segment, Geographic Information and Platform - Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Revenue from External Customer [Line Items] | ||||
Net revenues | $ 220,380 | $ 210,676 | $ 445,393 | $ 416,297 |
Airborne | ||||
Revenue from External Customer [Line Items] | ||||
Net revenues | 110,990 | 91,662 | 227,554 | 178,911 |
Land | ||||
Revenue from External Customer [Line Items] | ||||
Net revenues | 25,976 | 58,004 | 61,833 | 95,555 |
Naval | ||||
Revenue from External Customer [Line Items] | ||||
Net revenues | 34,236 | 36,559 | 74,213 | 82,841 |
Other | ||||
Revenue from External Customer [Line Items] | ||||
Net revenues | $ 49,178 | $ 24,451 | $ 81,793 | $ 58,990 |
Operating Segment, Geographic Information and Significant Customers - Customers Comprising Ten Percent or more Revenues (Details) - Customer Concentration Risk - Sales Revenue, Net |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2021 |
Jan. 01, 2021 |
Dec. 31, 2021 |
Jan. 01, 2021 |
|
Raytheon Technologies | ||||
Revenue, Major Customer [Line Items] | ||||
Concentration risk, percentage | 15.00% | 25.00% | 15.00% | 24.00% |
U.S. Navy | ||||
Revenue, Major Customer [Line Items] | ||||
Concentration risk, percentage | 14.00% | 15.00% | ||
Northrop Grumman Corporation | ||||
Revenue, Major Customer [Line Items] | ||||
Concentration risk, percentage | 10.00% | |||
Lockheed Martin Corporation | ||||
Revenue, Major Customer [Line Items] | ||||
Concentration risk, percentage | 12.00% | 10.00% | 15.00% | |
Three Major Customers, Cumulative | ||||
Revenue, Major Customer [Line Items] | ||||
Concentration risk, percentage | 39.00% | 37.00% | 40.00% | 39.00% |
Commitments And Contingencies (Details) - USD ($) $ in Thousands |
Jun. 23, 2021 |
Dec. 31, 2021 |
---|---|---|
Embedded Reps of America, LLC Legal Claim | ||
Long-term Purchase Commitment [Line Items] | ||
Damages sought, value | $ 9,000 | |
Non-cancelable purchase commitments | ||
Long-term Purchase Commitment [Line Items] | ||
Purchase commitments for less than one year | $ 183,942 |
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