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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
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Massachusetts
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04-2741391
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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50 Minuteman Road
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01810
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Andover
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MA
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Trading Symbol
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Name of Each Exchange on Which Registered
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Common Stock, Par Value $0.01 Per Share
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MRCY
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NASDAQ Global Select Market
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PAGE
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 4.1.
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Item 6.
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Item 7.
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Item 7A.
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Item 9.
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Item 9A.
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Item 9B.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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ITEM 1.
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BUSINESS
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Components. 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 subassembly. 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.
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Modules and Subassemblies. Modules and subassemblies 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 subassemblies may in turn be combined to form an integrated subsystem. Examples of modules and subassemblies 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 input-output (“I/O”) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers.
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Integrated Subsystems. Integrated subsystems include multiple modules and/or subassemblies 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 subassemblies sold as part of the same program for use in or with integrated subsystems sold by us.
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The aerospace and defense electronics market is expected to grow in 2019 and beyond. According to Renaissance Strategic Advisors (“RSA”), the global aerospace and defense electronics market is estimated to be $125 billion in 2019, growing to $151 billion by 2023. Within this global market, RSA estimates that the U.S. defense electronics market will be approximately $69 billion in 2019, growing to $85 billion in 2023. The aerospace and defense electronics marketplace consists of two primary subsegments: (i) C4I and (ii) sensor and effector mission systems. C4I encompasses platform and mission management, which include avionics and vetronics, C2I, which includes command and control and intelligence, and dedicated communications processing. Sensor and effector mission systems are primarily different types of sensor modalities such as EW, radar, EO/IR, and acoustics as well as weapons systems such as missiles and munitions. Within the tier 2 C4I market in which we participate, RSA estimates the market for 2019 to be $6.7 billion for platform and mission management, $8.1 billion for C2I, and $8.2 billion for dedicated communications. RSA estimates the compound annual growth rate (“CAGR”) from 2018-2023 for these markets to be 6.5% for platform and mission management, 6.2% for C2I, and 5.8% for dedicated communications. Within the tier 2 sensor and effector mission systems market in which we participate, RSA estimates the market for 2019 to be $4.5 billion for EW, $5.1 billion for radar, $1.9 billion for EO/IR, $1.2 billion for acoustics, and $3.1 billion for weapons systems. RSA estimates the 2018-2023 CAGR for these markets to be 5.2% for EW, 6.2% for radar, 6.5% for EO/IR, 6.5% for acoustics, and 8.1% for weapons systems. Within the context of the overall U.S. defense budget and spending for defense electronics specifically, we believe the C4ISR, EW, guided missiles and precision munitions, and ballistic missile defense market segments have a high priority for future DoD spending. We continue to build on our strengths in the design and development of performance optimized electronic subsystems for these markets, and often team with multiple defense prime contractors as they bid for projects, thereby increasing our chance of a successful outcome. We expect to continue our above industry-average growth.
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The rapidly expanding demand for tactical ISR is leading to significant growth in sensor data being generated, leading to even greater demand for the capability of our products to securely store and process data onboard platforms. An increase in the prevalence and resolution of ISR sensors is generating significant growth in the associated data that needs to be stored and turned into information for the warfighter in a timely manner. In addition, several factors are driving the defense and intelligence industries to demand greater capability to collect, store, and process data onboard the aircraft, UAVs, ships and other vehicles, which we refer to collectively as platforms. These factors include the limited communications bandwidth of existing platforms, the need for platforms that can operate more autonomously and possibly in denied communications environments, the need for platforms with increased persistence to enable them to remain in or fly above the battlefield for extended periods, and the need for greater onboard processing capabilities. In addition, the advent of sophisticated AI algorithms is beginning to revolutionize the ability of sensor processing systems to intelligently and efficiently process and act upon these large data sets. Standard computing architectures and computing platforms currently do not offer the level of performance needed to optimize existing AI algorithms, creating an additional opportunity for advanced processing capabilities onboard the platform.
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Rogue nations’ missile programs and threats from peer nations are causing greater investment in advanced new radar, EW and ballistic missile defense capabilities. There are a number of new and emerging threats, such as peer nations developing stealth technologies, including stealth aircraft, new anti-ship ballistic missiles and a variety of other advanced missile capabilities. Additionally, U.S. armed forces require enhanced signals intelligence and jamming capabilities. In response to these emerging threats, we have participated in key DoD programs, including Aegis, Patriot, SEWIP, a large ground-based radar, F-22, Raptor, F-35 Joint Strike Fighter and upgrade programs for the F-15 and F-16.
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The long-term DoD budget pressure is pushing more dollars toward upgrades of the electronic subsystems on existing platforms, which may increase demand for our products. The DoD is moving from major new weapons systems developments to upgrades of the electronic subsystems on existing platforms. These upgrades are expected to include more sensors, signal processing, ISR algorithms, multi-intelligence fusion and exploitation, computing and communications. We believe that upgrades to provide new urgent war fighting capability, driven by combatant commanders, are occurring more rapidly than traditional defense prime contractors can easily react to. We believe these trends will cause defense prime contractors to increasingly seek out our high-performance, cost-effective open architecture products.
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Defense procurement reform is causing the defense prime contractors to outsource more work to commercial companies and we believe that prime contractor outsourcing is our largest secular growth opportunity. RSA estimates that in 2019 the U.S. defense tier 2 embedded computing and RF market addressable by suppliers such as Mercury is approximately $19 billion. RSA estimates that the U.S. defense prime contractors currently outsource only a small percentage of their work. On a global basis the tier 2 embedded computing and RF market in 2019 is estimated by RSA to be $39 billion. The U.S. government is intensely focused on making systems more affordable and shortening their development time. In addition, the U.S. government is challenging defense prime contractors to leverage commercial technology wherever possible. This trend, along with a scarcity of technical and engineering talent in the market, is causing defense prime contractors to outsource to companies like Mercury, which we believe is our largest secular growth opportunity. As a company that provides commercial items to the defense industry, we believe our products and subsystem solutions are often more affordable than solutions with the same functionality developed by a defense prime contractor. Several factors are providing incentives for defense prime contractors to outsource more work to subcontractors with significant expertise and cost-effective technology capabilities and solutions, and we have transformed our business model over the last several years to address these long-term outsourcing trends and other needs.
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DoD security and program protection requirements are creating new opportunities for domestic sourcing and our advanced secure processing capabilities. The government is focused on ensuring that the U.S. military protects its defense electronic systems and the information held within them from nefarious activities such as tampering, reverse engineering, and other forms of advanced attacks, including cyber. The requirement to add security comes at a time when the commercial technology world continues to offshore more of the design, development, manufacturing, and support of such capabilities, making it more difficult to protect against embedded vulnerabilities, tampering, reverse engineering and other undesired activities. The DoD has a mandate to ensure both the provenance and integrity of the technology and its associated supply chain. These factors have created a unique opportunity for us to expand beyond sensor processing into the provision of technologies ranging from advanced secure processing subsystems to miniaturized custom microelectronics devices and capabilities for other on-board critical computing applications designed, developed, manufactured, and supported in the U.S.A. In addition, advanced systems sold to foreign military buyers also require protection so that the technologies, techniques and data associated with them do not become more widely available, which further enhances our market opportunity.
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Subsystem Solutions Provider for the C4ISR and EW Markets. Through our commercially developed, specialized processing subsystem solutions, we address the challenges associated with the collection and processing of massive, continuous streams of data and dramatically shorten the time that it takes to give information to U.S. armed forces at the tactical edge. Our solutions are specifically designed for flexibility and interoperability, allowing our products to be easily integrated into larger system-level solutions. Our ability to integrate subsystem-level capabilities allows us to provide solutions that most effectively address the mission-critical challenges within the C4ISR market, including multi-intelligence data fusion and AI processing onboard the platform. We leverage our deep expertise in embedded multicomputing, embedded sensor processing, with the addition of our RF microwave and millimeter subsystems and components, along with strategic investments in research and development to provide solutions across the sensor processing chain.
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Diverse Mix of Stable, Growth Programs Aligned with DoD Funding Priorities. Our products and solutions have been deployed on more than 300 different programs and over 25 different defense prime contractors. We serve high priority markets for the DoD and foreign militaries, such as UAVs, ballistic missile defense, guided missiles and precision munitions, airborne reconnaissance, EW, and have secured positions on mission-critical programs including Aegis, Predator and Reaper UAVs, F-35 Joint Strike Fighter, Patriot missile, SEWIP, and Paveway. In addition, we consistently leverage our technology and capabilities across multiple programs, providing significant operating leverage and cost savings. Our recent acquisitions allow us to participate in a broader array of programs, many with key strategic customers of ours.
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We are a leading commercial provider of secure processing subsystems designed and made in the U.S.A. We have a portfolio of Open Standards Architecture (“OSA”) technology building blocks across the entire sensor processing chain. We offer embedded secure processing capabilities with advanced packaging and cooling technologies that ruggedize commercial technologies while allowing them to stay cool for reliable operation. These capabilities allow us to help our customers meet the demanding SWaP requirements of today’s defense platforms. Our pre-integrated subsystems improve affordability by substantially reducing customer system integration costs and time-to-market for our solutions. System integration costs are one of the more substantial costs our customers bear in developing and deploying technologies in defense programs and platforms. Our pre-integrated solutions approach allows for more rapid and affordable modernization of existing platforms and faster deployment of new platforms.
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We provide advanced, integrated security features for our products and subsystems, addressing an increasingly prevalent requirement for DoD program security. We offer secure processing expertise that is built-in to our pre-integrated subsystems. By doing this we are able to provide secure building blocks that allow our customers to also incorporate their own security capabilities. This assists our customers in ensuring program protection as they deploy critical platforms and programs, all in support of DoD missions. The acquisition of the Carve-Out Business brought us new security technologies and also allowed us to provide enhanced security capabilities in areas such as memory and storage devices. Our acquisitions of the Carve-Out Business, LIT, and Athena also added to our portfolio of sophisticated firmware and software specifically designed to secure microelectronic devices that can be leveraged across our product portfolio.
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We are pioneering a next generation business model. The DoD and the defense industrial base is currently undergoing a major transformation. Domestic political and budget uncertainty, geopolitical instability and evolving global threats have
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We continue to leverage our expertise in building pre-integrated subsystems in support of critical defense programs, driving out procurement costs by lowering integration expenses of our customers.
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We have been a pioneer in driving OSA for both embedded computing and RF.
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The DoD has asked defense industry participants to invest their own resources into R&D. This approach is a pillar of our business model.
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Security and program protection are now critical considerations for both program modernizations as well as for new program deployment. We are now in our third generation of building secure embedded processing solutions.
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Value-Added Subsystem Solution Provider for Defense Prime Contractors. Because of the DoD’s continuing shift toward a firm fixed price contract procurement model, an increasingly uncertain budgetary and procurement environment, and increased budget pressures from both the U.S. and allied governments, defense prime contractors are accelerating their move toward outsourcing opportunities to help mitigate the increased program and financial risk. Our differentiated secure sensor and safety-critical processing solutions offer meaningful capabilities upgrades for our customers and enable the rapid, cost-effective deployment of systems to the end customer. We believe our open architecture subsystems offer differentiated sensor processing and data analytics capabilities that cannot be easily replicated. Our solutions minimize program risk, maximize application portability, and accelerate customers’ time to market, all within a fixed-pricing contracting environment.
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Delivery of Platform-Ready Solutions for Classified Programs. We believe our integration work through our Cypress, California facility provides us with critical insights as we implement and incorporate key classified government intellectual property, including critical intelligence and signal processing algorithms, into advanced systems. This integration work provides us the opportunity to combine directly and integrate our technology building blocks along with our intellectual property into our existing embedded processing products and solutions, enabling us to deliver more affordable, platform-ready integrated ISR subsystems that leverage our OSA and address key government technology and procurement concerns. Our operations in this environment also help us identify emerging needs and opportunities to influence our future product development, so that critical future needs can be met in a timely manner with commercially-developed products and solutions.
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We have invested in advanced, domestic design and manufacturing capabilities. Over the past several years we have prioritized investments to build our internal capabilities and capacity for defense electronics design and manufacturing in the U.S. These investments include the consolidation of a number of sub-scale microelectronics manufacturing facilities into our modern AMCs as well as the establishment of our USMO in Phoenix, Arizona. In addition to the consolidation of facilities into scalable engineering and manufacturing centers of excellence, we have made the necessary investments to outfit these facilities with modern, scalable, and redundant tools and equipment to promote quality, efficiency, throughput, and redundancy. In addition we invested in our information technology (“IT”) infrastructure and business systems to meet Defense Federal Acquisition Regulation Supplement (“DFARS”) requirements for cybersecurity. These investments taken together are intended to demonstrate our commitment to meeting DoD expectations for a trusted and secure defense industrial base. Our AMCs in Hudson, New Hampshire, West Caldwell, New Jersey, Oxnard, California, Huntsville, Alabama and Phoenix, Arizona are strategically located near key customers and are purpose-built for the design, build and test of RF components and subsystems in support of a variety of key customer programs. Our USMO is built around scalable, repeatable, secure, affordable, and predictable manufacturing. The USMO is a DMEA certified secure trusted site, certified to AS9100 quality standards and it utilizes Lean Six Sigma methodologies throughout manufacturing. The USMO is designed for efficient manufacturing, enabling our customers to access the best proven technology and high performing, secure processing solutions. This allows for the most repeatable product performance, while optimizing affordability and production responsiveness.
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Long-Standing Industry Relationships. We have established long-standing relationships with defense prime contractors, the U.S. government and other key organizations in the defense industry over our 30 years in the defense electronics industry. Our customers include Airbus, BAE Systems, Boeing, General Atomics, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin, Northrop Grumman, and Raytheon. Over this period, we have become recognized for our ability to develop new technologies and meet stringent program requirements. We believe we are well-positioned to maintain these high-level customer engagements and enhance them through the additional relationships that our recently acquired businesses have with many of the same customers.
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Proven Management Team. Our senior management team has developed a long-term compelling strategy for the aerospace and defense markets. Our senior management team has a history of identifying and evaluating successful business acquisition opportunities, performing in-depth due diligence, negotiating with owners and management, structuring, financing, and closing transactions and then integrating the acquired business resulting in the creation of synergies and enhanced overall returns. Having completed these critical steps with a senior management team with significant experience in growing, scaling and acquiring businesses, we believe that we have demonstrated our operational capabilities and we are well-positioned to continue growing and scaling our business.
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Leading M&A Origination and Execution Capability. We have a strong track-record of identifying and executing strategic acquisitions. Since July 1, 2015 we have acquired ten businesses, successfully completing integration of the earlier acquired businesses with the integration of the more recent acquisitions progressing well, which are strategically aligned with Mercury. We have established an internal team that brings decades of experience across more than 100 transactions. We have developed internal processes to identify and source strategic acquisitions on a proprietary basis. A number of our acquisitions have been sourced on a proprietary basis and negotiated directly with owners. In addition, we have developed relationships with a number of investment banks and other sell-side advisors, as well as a reputation as a preferred acquirer, which allow us access to targeted or widely-marketed M&A processes. Our internal capabilities include financial, legal, and other transaction diligence, deal valuation, and deal negotiations. Where appropriate, we leverage third party advisors to supplement our internal diligence. We have a proven ability to execute numerous transactions simultaneously effectively and efficiently.
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Proven M&A Integration Capability. We have developed the internal processes and capability to integrate acquired businesses to deliver value through revenue and cost synergies. We leverage our common cultures and values as well as common processes, business systems, tools, channels and manufacturing infrastructure to accelerate growth and improve profitability in our acquired businesses.
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reduced and delayed demand for our products;
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increased risk of order cancellations or delays;
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downward pressure on the prices of our products;
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greater difficulty in collecting accounts receivable; and
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risks to our liquidity, including the possibility that we might not have access to our cash and short-term investments or to our line of credit when needed.
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Changes in government administration and national and international priorities, including developments in the geo-political environment, could have a significant impact on national or international defense spending priorities and the efficient handling of routine contractual matters. These changes could have a negative impact on our business in the future.
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Our contracts with the U.S. and foreign governments and their defense prime contractors and subcontractors are subject to termination either upon default by us or at the convenience of the government or contractor if, among other reasons, the program itself has been terminated. Termination for convenience provisions generally entitle us to recover costs
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Because we contract to supply goods and services to the U.S. and foreign governments and their prime and subcontractors, we compete for contracts in a competitive bidding process. We may compete directly with other suppliers or align with a prime or subcontractor competing for a contract. We may not be awarded the contract if the pricing or product offering is not competitive, either at our level or the prime or subcontractor level. In addition, in the event we are awarded a contract, we are subject to protests by losing bidders of contract awards that can result in the reopening of the bidding process and changes in governmental policies or regulations and other political factors. In addition, we may be subject to multiple rebid requirements over the life of a defense program in order to continue to participate on such program, which can result in the loss of the program or significantly reduce our revenue or margin from the program. The government’s requirements for more frequent technology refreshes on defense programs may lead to increased costs and lower long term revenues.
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Consolidation among defense industry contractors has resulted in a few large contractors with increased bargaining power relative to us. The increased bargaining power of these contractors may adversely affect our ability to compete for contracts and, as a result, may adversely affect our business or results of operations in the future.
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Our customers include U.S. government contractors who must comply with and are affected by laws and regulations relating to the formation, administration, and performance of U.S. government contracts. In addition, when we contract with the U.S. government, we must comply with these laws and regulations, including the organizational conflict-of-interest regulations. A violation of these laws and regulations could result in the imposition of fines and penalties to us or our customers or the termination of our or their contracts with the U.S. government. As a result, there could be a delay in our receipt of orders from our customers, a termination of such orders, or a termination of contracts between us and the U.S. government.
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We sell many products and services to U.S. and international defense contractors or directly to the U.S. government on a commercial item basis, eliminating the requirement to disclose and certify cost data. To the extent that there are interpretations or changes in the Federal Acquisition Regulations (“FAR”) regarding the qualifications necessary to sell commercial items, there could be a material impact on our business and operating results. For example, there have been legislative proposals to narrow the definition of a “commercial item” (as defined in the FAR) or to require cost and pricing data on commercial items that could limit or adversely impact our ability to contract under commercial item terms. Changes could be accelerated in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency (“DCAA”) for certain of our products or services. Such changes could also trigger contract coverage under the Cost Accounting Standards (“CAS”), further impacting the commercial operating model and requiring compliance with a defined set of business systems criteria. Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts.
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We are subject to the DFARS, in connection with our defense work for the U.S. government and defense prime contractors. Amendments to the DFARS, such as the DFARS cybersecurity requirements, may increase our costs or delay the award of contracts if we are unable to certify that we satisfy such cybersecurity requirements at our Company level and into our supply chain.
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The U.S. government or a defense prime contractor customer could require us to relinquish data rights to a product in connection with performing work on a defense contract, which could lead to a loss of valuable technology and intellectual property in order to participate in a government program.
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The U.S. government or a defense prime contractor customers could require us to enter into cost reimbursable contracts that could offset our cost efficiency initiatives.
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We are subject to various U.S. federal export-control statutes and regulations which affect our business with, among others, international defense customers. In certain cases the export of our products and technical data to foreign persons, and the provision of technical services to foreign persons related to such products and technical data, may require licenses from the U.S. Department of Commerce or the U.S. Department of State. The time required to obtain these licenses, and the restrictions that may be contained in these licenses, may put us at a competitive disadvantage with respect to competing with international suppliers who are not subject to U.S. federal export control statutes and regulations. In addition, violations of these statutes and regulations can result in civil and, under certain circumstances, criminal liability as well as administrative penalties which could have a material adverse effect on our business and operating results.
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We anticipate that sales to our U.S. prime defense contractor customers as part of foreign military sales (“FMS”) programs will be an increasing part of our business going forward. These FMS sales combine several different types of risks and uncertainties highlighted above, including risks related to government contracts, risks related to defense contracts, timing and budgeting of foreign governments, and approval from the U.S. and foreign governments related to the programs, all of which may be impacted by macroeconomic and geopolitical factors outside of our control.
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Certain of our employees with appropriate security clearances may require access to classified information in connection with the performance of a U.S. government contract. We must comply with security requirements pursuant to the National Industrial Security Program Operating Manual, or NISPOM, and other U.S. government security protocols when accessing sensitive information. Failure to comply with the NISPOM or other security requirements may subject us to civil or criminal penalties, loss of access to sensitive information, loss of a U.S. government contract, or potentially debarment as a government contractor. Further, the Defense Counterintelligence and Security Agency ("DCSA") is transitioning its review of a contractor's security program to focus on the protection of critical unclassified information and assets. Failure to meet DCSA's new, broader requirements could adversely impact the ability to win new business as a government contractor.
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We may need to invest additional capital to build out higher level security infrastructure at certain of our facilities to capture new design wins on defense programs with higher level security requirements. Failure to invest in such infrastructure may limit our ability to obtain new design wins on defense programs. In addition, we may need to invest in additional secure laboratory space to integrate efficiently subsystem level solutions and maintain quality assurance on current and future programs.
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our ability to create demand for products in new markets;
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our ability to respond to changes in our customers’ businesses by updating existing products and introducing, in a timely fashion, new products which meet the needs of our customers;
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our ability to increase our market visibility and penetration with the prime defense contractors;
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the quality of our new products;
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our ability to respond rapidly to technological change;
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our ability to increase our in-house manufacturing capacity and utilization; and
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our ability to successfully integrate any acquisitions that we make and achieve revenue and cost synergies and economies of scale.
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problems and increased costs in connection with the integration of the personnel, operations, technologies, IT infrastructure, or products of the acquired businesses;
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layering of integration activity due to multiple overlapping acquisitions;
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unanticipated costs;
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failure to achieve anticipated increases in revenues and profitability;
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diversion of management’s attention from our organic business;
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adverse effects on business relationships with suppliers and customers and those of the acquired company;
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acquired assets becoming impaired as a result of technical advancements or worse-than-expected performance by the acquired company;
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failure to rationalize manufacturing capacity, locations, and operating models to achieve anticipated economies of scale, or disruptions to manufacturing and product design operations during the combination of facilities;
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failure to rationalize business and information systems and to expand the IT infrastructure and security protocols throughout the enterprise;
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volatility associated with accounting for earn-outs in a given transaction;
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entering markets in which we have no, or limited, prior experience;
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poor export control programs pre-acquisition at acquired companies, which may lead to liabilities for export violation, or impact the business acquired when placed under our export compliance program;
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potential loss of key employees; and
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adversely affect our internal control over financial reporting before the acquiree's complete integration into our control environment.
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issue stock that would dilute our existing shareholders’ ownership percentages;
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incur debt and assume liabilities;
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obtain financing on unfavorable terms, or not be able to obtain financing on any terms at all;
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incur amortization expenses related to acquired intangible assets or incur large and immediate write-offs;
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incur large expenditures related to office closures of the acquired companies, including costs relating to the termination of employees and facility and leasehold improvement charges resulting from our having to vacate the acquired companies’ premises; and
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reduce the cash that would otherwise be available to fund operations or for other purposes.
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failure to implement our business plan for the combined business;
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unanticipated issues in integrating manufacturing, logistics, business systems, information and communications systems, and other infrastructure items;
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unanticipated changes in applicable laws and regulations;
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failure to retain key employees;
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failure to retain key customers;
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failure to rationalize our supply chain;
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operating risks inherent in these companies and our organic business;
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the impact of any assumed legal proceedings;
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the impact of our export compliance program on these companies;
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the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and
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unanticipated issues, expenses, charges, and liabilities related to the acquisitions.
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making it more difficult for us to satisfy our obligations under our debt instruments, including, without limitation, the Revolver; and if we fail to comply with these requirements, an event of default could result;
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements;
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions, and other general corporate purposes;
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increasing our vulnerability to general adverse economic and industry conditions;
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•
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exposing us to the risk of increased interest rates as certain of our borrowings may have variable interest rates, which could increase the cost of servicing our financial instruments and could materially reduce our profitability and cash flows;
|
|
•
|
limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
|
|
•
|
placing us at a disadvantage compared to other, less leveraged competitors; and
|
|
•
|
increasing our cost of borrowing.
|
|
•
|
changes in applicable laws and regulatory requirements;
|
|
•
|
export and import restrictions;
|
|
•
|
export controls relating to technology;
|
|
•
|
tariffs and other trade barriers;
|
|
•
|
less favorable intellectual property laws;
|
|
•
|
difficulties in staffing and managing foreign operations;
|
|
•
|
longer payment cycles;
|
|
•
|
problems in collecting accounts receivable;
|
|
•
|
adverse economic conditions in foreign markets;
|
|
•
|
political instability;
|
|
•
|
fluctuations in currency exchange rates;
|
|
•
|
expatriation controls; and
|
|
•
|
potential adverse tax consequences.
|
|
•
|
delays in completion of internal product development projects;
|
|
•
|
delays in shipping hardware and software;
|
|
•
|
delays in acceptance testing by customers;
|
|
•
|
a change in the mix of products sold to our served markets;
|
|
•
|
changes in customer order patterns;
|
|
•
|
production delays due to quality problems with outsourced components;
|
|
•
|
inability to scale quick reaction capability products due to low product volume;
|
|
•
|
shortages and costs of components;
|
|
•
|
delays due to the implementation of new tariffs or other trade barriers;
|
|
•
|
the timing of product line transitions;
|
|
•
|
declines in quarterly revenues from previous generations of products following announcement of replacement products containing more advanced technology;
|
|
•
|
inability to realize the expected benefits from acquisitions and restructurings, or delays in realizing such benefits;
|
|
•
|
potential asset impairment, including goodwill and intangibles, or restructuring charges; and
|
|
•
|
changes in estimates of completion on fixed price service engagements.
|
|
•
|
investors’ perception of, and demand for, securities of technology and aerospace and defense companies;
|
|
•
|
conditions of the United States and other capital markets in which we may seek to raise funds;
|
|
•
|
our future results of operations, financial condition, and cash flows; and
|
|
•
|
prevailing interest rates.
|
|
•
|
further develop or enhance our customer base;
|
|
•
|
acquire necessary technologies, products, or businesses;
|
|
•
|
expand operations in the United States and elsewhere;
|
|
•
|
hire, train, and retain employees;
|
|
•
|
market our software solutions, services, and products; or
|
|
•
|
respond to competitive pressures or unanticipated capital requirements.
|
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
|
ITEM 2.
|
PROPERTIES
|
|
Location
|
|
Size in
Sq. Feet |
|
Commitment
|
|
Andover, MA
|
|
145,262
|
|
Leased, expiring 2032
|
|
Hudson, NH
|
|
121,553
|
|
Leased, expiring 2024
|
|
Phoenix, AZ
|
|
73,729
|
|
Leased, expiring 2020
|
|
Oxnard, CA
|
|
72,673
|
|
Leased, expiring 2025
|
|
Fremont, CA
|
|
53,713
|
|
Leased, expiring 2023
|
|
Cypress, CA
|
|
42,770
|
|
Leased, expiring 2021
|
|
Chantilly, VA
|
|
32,789
|
|
Leased, expiring 2025
|
|
Mesa, AZ
|
|
31,820
|
|
Leased, expiring 2022
|
|
Geneva, CH
|
|
27,287
|
|
Leased, expiring 2027
|
|
Camarillo, CA
|
|
25,017
|
|
Leased, expiring 2020
|
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
|
ITEM 4.1.
|
EXECUTIVE OFFICERS OF THE REGISTRANT
|
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
High
|
|
Low
|
||||
|
2019 Fourth quarter
|
$
|
79.83
|
|
|
$
|
63.39
|
|
|
Third quarter
|
$
|
67.85
|
|
|
$
|
43.01
|
|
|
Second quarter
|
$
|
55.82
|
|
|
$
|
41.16
|
|
|
First quarter
|
$
|
57.26
|
|
|
$
|
37.55
|
|
|
2018 Fourth quarter
|
$
|
49.35
|
|
|
$
|
30.11
|
|
|
Third quarter
|
$
|
52.59
|
|
|
$
|
41.64
|
|
|
Second quarter
|
$
|
55.00
|
|
|
$
|
47.69
|
|
|
First quarter
|
$
|
52.00
|
|
|
$
|
39.96
|
|
|
Period of Net Share Settlement
|
|
Total Number of Shares Net Settled (1)
|
|
Average Price Per Share
|
|||
|
July 1, 2018 - September 30, 2018
|
|
136
|
|
|
$
|
49.30
|
|
|
October 1, 2018 - December 31, 2018
|
|
4
|
|
|
$
|
49.62
|
|
|
January 1, 2019 - March 31, 2019
|
|
9
|
|
|
$
|
58.96
|
|
|
April 1, 2019 - June 30, 2019
|
|
7
|
|
|
$
|
70.78
|
|
|
Total
|
|
156
|
|
|
|
||
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
|
For the Years Ended June 30,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net revenues
|
$
|
654,744
|
|
|
$
|
493,184
|
|
|
$
|
408,588
|
|
|
$
|
270,154
|
|
|
$
|
234,847
|
|
|
Income from operations
|
$
|
76,584
|
|
|
$
|
46,985
|
|
|
$
|
37,403
|
|
|
$
|
23,973
|
|
|
$
|
18,355
|
|
|
Net income (1)
|
$
|
46,775
|
|
|
$
|
40,883
|
|
|
$
|
24,875
|
|
|
$
|
19,742
|
|
|
$
|
10,369
|
|
|
Adjusted EBITDA(2) (3)
|
$
|
145,326
|
|
|
$
|
114,567
|
|
|
$
|
92,575
|
|
|
$
|
56,137
|
|
|
$
|
43,628
|
|
|
Adjusted EPS(2)
|
$
|
1.84
|
|
|
$
|
1.42
|
|
|
$
|
1.15
|
|
|
$
|
0.96
|
|
|
$
|
0.82
|
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Basic
|
$
|
0.98
|
|
|
$
|
0.88
|
|
|
$
|
0.59
|
|
|
$
|
0.58
|
|
|
$
|
0.45
|
|
|
Diluted
|
$
|
0.96
|
|
|
$
|
0.86
|
|
|
$
|
0.58
|
|
|
$
|
0.56
|
|
|
$
|
0.44
|
|
|
|
As of June 30,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Working capital
|
$
|
484,140
|
|
|
$
|
260,063
|
|
|
$
|
173,351
|
|
|
$
|
177,748
|
|
|
$
|
142,472
|
|
|
Total assets
|
$
|
1,416,977
|
|
|
$
|
1,064,480
|
|
|
$
|
815,745
|
|
|
$
|
736,496
|
|
|
$
|
386,880
|
|
|
Long-term obligations
|
$
|
34,206
|
|
|
$
|
220,909
|
|
|
$
|
17,483
|
|
|
$
|
195,808
|
|
|
$
|
3,457
|
|
|
Total shareholders’ equity
|
$
|
1,284,739
|
|
|
$
|
771,891
|
|
|
$
|
725,417
|
|
|
$
|
473,044
|
|
|
$
|
350,138
|
|
|
(1)
|
Fiscal year 2015 net income of $10.4 million includes a $4.0 million impact from discontinued operations. Net income from continuing operations for the fiscal year ended June 30, 2015 was $14.4 million.
|
|
(2)
|
In our periodic communications, we discuss key measures that are not calculated according to U.S. generally accepted accounting principles (“GAAP”), adjusted EBITDA and adjusted EPS. Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense. We define adjusted income, a non-GAAP financial measure, as net income before amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision. Adjusted EPS, a non-GAAP financial measure, expresses adjusted income from continuing operations on a per share basis using weighted average diluted shares outstanding. We use adjusted EBITDA and adjusted EPS as important indicators of the operating performance of our business. We use adjusted EBITDA and adjusted EPS in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining the portion of bonus compensation for executive officers and other key employees based on operating performance, evaluating short-term and long-term operating trends in our operations and allocating resources to various initiatives and operational requirements. We believe that adjusted EBITDA and adjusted EPS permit a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period to period without any correlation to underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because it allows investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our adjusted EBITDA and adjusted EPS are valuable indicators of our operating performance.
|
|
(3)
|
As of July 1, 2018, the Company has revised its definition of adjusted EBITDA to incorporate other non-operating adjustments, net, which includes gains or losses on foreign currency remeasurement and fixed assets sales and disposals among other adjustments. Adjusted EBITDA for prior periods has been recast for comparative purposes.
|
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
(In thousands)
|
Fiscal 2019
|
|
As a % of
Total Net Revenue |
|
Fiscal 2018
|
|
As a % of
Total Net Revenue |
||||||
|
Net revenues
|
$
|
654,744
|
|
|
100.0
|
%
|
|
$
|
493,184
|
|
|
100.0
|
%
|
|
Cost of revenues
|
368,588
|
|
|
56.3
|
|
|
267,326
|
|
|
54.2
|
|
||
|
Gross margin
|
286,156
|
|
|
43.7
|
|
|
225,858
|
|
|
45.8
|
|
||
|
Operating expenses:
|
|
|
|
|
|
|
|
||||||
|
Selling, general and administrative
|
110,717
|
|
|
16.9
|
|
|
88,365
|
|
|
17.9
|
|
||
|
Research and development
|
68,925
|
|
|
10.5
|
|
|
58,807
|
|
|
11.9
|
|
||
|
Amortization of intangible assets
|
27,914
|
|
|
4.3
|
|
|
26,004
|
|
|
5.3
|
|
||
|
Restructuring and other charges
|
560
|
|
|
0.1
|
|
|
3,159
|
|
|
0.7
|
|
||
|
Acquisition costs and other related expenses
|
1,456
|
|
|
0.2
|
|
|
2,538
|
|
|
0.5
|
|
||
|
Total operating expenses
|
209,572
|
|
|
32.0
|
|
|
178,873
|
|
|
36.3
|
|
||
|
Income from operations
|
76,584
|
|
|
11.7
|
|
|
46,985
|
|
|
9.5
|
|
||
|
Interest income
|
932
|
|
|
0.1
|
|
|
32
|
|
|
—
|
|
||
|
Interest expense
|
(9,109
|
)
|
|
(1.4
|
)
|
|
(2,850
|
)
|
|
(0.6
|
)
|
||
|
Other expense, net
|
(8,880
|
)
|
|
(1.3
|
)
|
|
(1,594
|
)
|
|
(0.3
|
)
|
||
|
Income before income taxes
|
59,527
|
|
|
9.1
|
|
|
42,573
|
|
|
8.6
|
|
||
|
Tax provision
|
12,752
|
|
|
2.0
|
|
|
1,690
|
|
|
0.3
|
|
||
|
Net income
|
$
|
46,775
|
|
|
7.1
|
%
|
|
$
|
40,883
|
|
|
8.3
|
%
|
|
•
|
the acquisition of other companies or businesses;
|
|
•
|
the repayment and refinancing of debt;
|
|
•
|
capital expenditures;
|
|
•
|
working capital; and
|
|
•
|
other purposes as described in the prospectus supplement.
|
|
|
For the Years Ended
|
||||||||||
|
(In thousands)
|
June 30, 2019
|
|
June 30, 2018
|
|
June 30, 2017
|
||||||
|
Net cash provided by operating activities
|
$
|
97,517
|
|
|
$
|
43,321
|
|
|
$
|
59,146
|
|
|
Net cash used in investing activities
|
$
|
(153,774
|
)
|
|
$
|
(200,877
|
)
|
|
$
|
(111,087
|
)
|
|
Net cash provided by financing activities
|
$
|
247,765
|
|
|
$
|
182,937
|
|
|
$
|
11,338
|
|
|
Net increase (decrease) in cash and cash equivalents
|
$
|
191,411
|
|
|
$
|
24,884
|
|
|
$
|
(40,054
|
)
|
|
Cash and cash equivalents at end of year
|
$
|
257,932
|
|
|
$
|
66,521
|
|
|
$
|
41,637
|
|
|
(In thousands)
|
Total
|
|
Less Than
1 Year |
|
1-3
Years |
|
3-5
Years |
|
More Than
5 Years |
||||||||||
|
Operating leases
|
$
|
69,630
|
|
|
$
|
10,205
|
|
|
$
|
17,229
|
|
|
$
|
13,910
|
|
|
$
|
28,286
|
|
|
Purchase obligations
|
73,762
|
|
|
73,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
$
|
143,392
|
|
|
$
|
83,967
|
|
|
$
|
17,229
|
|
|
$
|
13,910
|
|
|
$
|
28,286
|
|
|
|
Year Ended June 30,
|
||||||||||
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
||||||
|
Net income
|
$
|
46,775
|
|
|
$
|
40,883
|
|
|
$
|
24,875
|
|
|
Other non-operating adjustments, net (1)
|
364
|
|
|
(795
|
)
|
|
(1,345
|
)
|
|||
|
Interest expense, net
|
8,177
|
|
|
2,818
|
|
|
7,106
|
|
|||
|
Tax provision
|
12,752
|
|
|
1,690
|
|
|
6,193
|
|
|||
|
Depreciation
|
18,478
|
|
|
16,273
|
|
|
12,589
|
|
|||
|
Amortization of intangible assets
|
27,914
|
|
|
26,004
|
|
|
19,680
|
|
|||
|
Restructuring and other charges (2)
|
560
|
|
|
3,159
|
|
|
1,952
|
|
|||
|
Impairment of long-lived assets
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
Acquisition and financing costs (3)
|
9,628
|
|
|
4,928
|
|
|
2,389
|
|
|||
|
Fair value adjustments from purchase accounting (4)
|
713
|
|
|
1,992
|
|
|
3,679
|
|
|||
|
Litigation and settlement expense (income), net
|
344
|
|
|
—
|
|
|
117
|
|
|||
|
Stock-based and other non-cash compensation expense
|
19,621
|
|
|
17,615
|
|
|
15,341
|
|
|||
|
Adjusted EBITDA
|
$
|
145,326
|
|
|
$
|
114,567
|
|
|
$
|
92,576
|
|
|
|
Year Ended June 30,
|
||||||||||||||||||||||
|
(In thousands, except per share data)
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
|
Net income and diluted earnings per share
|
$
|
46,775
|
|
|
$
|
0.96
|
|
|
$
|
40,883
|
|
|
$
|
0.86
|
|
|
$
|
24,875
|
|
|
$
|
0.58
|
|
|
Amortization of intangible assets
|
27,914
|
|
|
|
|
26,004
|
|
|
|
|
19,680
|
|
|
|
|||||||||
|
Restructuring and other charges (1)
|
560
|
|
|
|
|
3,159
|
|
|
|
|
1,952
|
|
|
|
|||||||||
|
Impairment of long-lived assets
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|||||||||
|
Acquisition and financing costs (2)
|
9,628
|
|
|
|
|
4,928
|
|
|
|
|
2,389
|
|
|
|
|||||||||
|
Fair value adjustments from purchase accounting (3)
|
713
|
|
|
|
|
1,992
|
|
|
|
|
3,679
|
|
|
|
|||||||||
|
Litigation and settlement expense (income), net
|
344
|
|
|
|
|
—
|
|
|
|
|
117
|
|
|
|
|||||||||
|
Stock-based and other non-cash compensation expense
|
19,621
|
|
|
|
|
17,615
|
|
|
|
|
15,341
|
|
|
|
|||||||||
|
Impact to income taxes (4)
|
(16,552
|
)
|
|
|
|
(27,269
|
)
|
|
|
|
(18,602
|
)
|
|
|
|||||||||
|
Adjusted income and adjusted earnings per share
|
$
|
89,003
|
|
|
$
|
1.84
|
|
|
$
|
67,312
|
|
|
$
|
1.42
|
|
|
$
|
49,431
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Diluted weighted-average shares outstanding
|
|
|
48,500
|
|
|
|
|
47,471
|
|
|
|
|
43,018
|
|
|||||||||
|
|
Year Ended June 30,
|
||||||||||
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
||||||
|
Cash provided by operating activities
|
$
|
97,517
|
|
|
$
|
43,321
|
|
|
$
|
59,146
|
|
|
Purchase of property and equipment
|
(26,691
|
)
|
|
(15,106
|
)
|
|
(32,844
|
)
|
|||
|
Free cash flow
|
$
|
70,826
|
|
|
$
|
28,215
|
|
|
$
|
26,302
|
|
|
(In thousands)
|
Fiscal 2019
|
|
As a % of
Total Net Revenue |
|
Fiscal 2018
|
|
As a % of
Total Net Revenue |
|
$ Change
|
|
% Change
|
|||||||||
|
Organic revenue
|
$
|
541,487
|
|
|
83
|
%
|
|
$
|
433,438
|
|
|
88
|
%
|
|
$
|
108,049
|
|
|
25
|
%
|
|
Acquired revenue (1)
|
113,257
|
|
|
17
|
%
|
|
59,746
|
|
|
12
|
%
|
|
53,511
|
|
|
90
|
%
|
|||
|
Total revenues
|
$
|
654,744
|
|
|
100
|
%
|
|
$
|
493,184
|
|
|
100
|
%
|
|
$
|
161,560
|
|
|
33
|
%
|
|
•
|
estimated step-ups for the fixed assets and inventory;
|
|
•
|
estimated fair values of intangible assets; and
|
|
•
|
estimated income tax assets and liabilities assumed from the acquiree.
|
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
June 30,
|
||||||
|
2019
|
|
2018
|
|||||
|
Assets
|
|
|
|
||||
|
Current assets:
|
|
|
|
||||
|
Cash and cash equivalents
|
$
|
257,932
|
|
|
$
|
66,521
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,228 and $359 at June 30, 2019 and 2018, respectively
|
118,832
|
|
|
104,040
|
|
||
|
Unbilled receivables and costs in excess of billings
|
57,387
|
|
|
39,774
|
|
||
|
Inventory
|
137,112
|
|
|
108,585
|
|
||
|
Prepaid income taxes
|
90
|
|
|
3,761
|
|
||
|
Prepaid expenses and other current assets
|
10,819
|
|
|
9,062
|
|
||
|
Total current assets
|
582,172
|
|
|
331,743
|
|
||
|
Property and equipment, net
|
60,001
|
|
|
50,980
|
|
||
|
Goodwill
|
562,146
|
|
|
497,442
|
|
||
|
Intangible assets, net
|
206,124
|
|
|
177,904
|
|
||
|
Other non-current assets
|
6,534
|
|
|
6,411
|
|
||
|
Total assets
|
$
|
1,416,977
|
|
|
$
|
1,064,480
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
|
Current liabilities:
|
|
|
|
||||
|
Accounts payable
|
$
|
39,030
|
|
|
$
|
21,323
|
|
|
Accrued expenses
|
18,897
|
|
|
16,386
|
|
||
|
Accrued compensation
|
28,814
|
|
|
21,375
|
|
||
|
Deferred revenues and customer advances
|
11,291
|
|
|
12,596
|
|
||
|
Total current liabilities
|
98,032
|
|
|
71,680
|
|
||
|
Deferred income taxes
|
17,814
|
|
|
13,635
|
|
||
|
Income taxes payable
|
1,273
|
|
|
998
|
|
||
|
Long-term debt
|
—
|
|
|
195,000
|
|
||
|
Other non-current liabilities
|
15,119
|
|
|
11,276
|
|
||
|
Total liabilities
|
132,238
|
|
|
292,589
|
|
||
|
Commitments and contingencies (Note K)
|
|
|
|
|
|
||
|
Shareholders’ equity:
|
|
|
|
||||
|
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding
|
—
|
|
|
—
|
|
||
|
Common stock, $0.01 par value; 85,000,000 shares authorized; 54,247,532 and 46,924,238 shares issued and outstanding at June 30, 2019 and 2018, respectively
|
542
|
|
|
469
|
|
||
|
Additional paid-in capital
|
1,058,745
|
|
|
590,163
|
|
||
|
Retained earnings
|
226,743
|
|
|
179,968
|
|
||
|
Accumulated other comprehensive (loss) income
|
(1,291
|
)
|
|
1,291
|
|
||
|
Total shareholders’ equity
|
1,284,739
|
|
|
771,891
|
|
||
|
Total liabilities and shareholders’ equity
|
$
|
1,416,977
|
|
|
$
|
1,064,480
|
|
|
|
For the Years Ended June 30,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Net revenues
|
$
|
654,744
|
|
|
$
|
493,184
|
|
|
$
|
408,588
|
|
|
Cost of revenues
|
368,588
|
|
|
267,326
|
|
|
217,045
|
|
|||
|
Gross margin
|
286,156
|
|
|
225,858
|
|
|
191,543
|
|
|||
|
Operating expenses:
|
|
|
|
|
|
||||||
|
Selling, general and administrative
|
110,717
|
|
|
88,365
|
|
|
76,491
|
|
|||
|
Research and development
|
68,925
|
|
|
58,807
|
|
|
54,086
|
|
|||
|
Amortization of intangible assets
|
27,914
|
|
|
26,004
|
|
|
19,680
|
|
|||
|
Restructuring and other charges
|
560
|
|
|
3,159
|
|
|
1,952
|
|
|||
|
Acquisition costs and other related expenses
|
1,456
|
|
|
2,538
|
|
|
1,931
|
|
|||
|
Total operating expenses
|
209,572
|
|
|
178,873
|
|
|
154,140
|
|
|||
|
Income from operations
|
76,584
|
|
|
46,985
|
|
|
37,403
|
|
|||
|
Interest income
|
932
|
|
|
32
|
|
|
462
|
|
|||
|
Interest expense
|
(9,109
|
)
|
|
(2,850
|
)
|
|
(7,568
|
)
|
|||
|
Other (expense) income, net
|
(8,880
|
)
|
|
(1,594
|
)
|
|
771
|
|
|||
|
Income before income taxes
|
59,527
|
|
|
42,573
|
|
|
31,068
|
|
|||
|
Tax provision
|
12,752
|
|
|
1,690
|
|
|
6,193
|
|
|||
|
Net income
|
$
|
46,775
|
|
|
$
|
40,883
|
|
|
$
|
24,875
|
|
|
|
|
|
|
|
|
||||||
|
Basic net earnings per share
|
$
|
0.98
|
|
|
$
|
0.88
|
|
|
$
|
0.59
|
|
|
Diluted net earnings per share
|
$
|
0.96
|
|
|
$
|
0.86
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
||||||
|
Weighted-average shares outstanding:
|
|
|
|
|
|
||||||
|
Basic
|
47,831
|
|
|
46,719
|
|
|
41,986
|
|
|||
|
Diluted
|
48,500
|
|
|
47,471
|
|
|
43,018
|
|
|||
|
|
|
|
|
|
|
||||||
|
Comprehensive income:
|
|
|
|
|
|
||||||
|
Net income
|
$
|
46,775
|
|
|
$
|
40,883
|
|
|
$
|
24,875
|
|
|
Foreign currency translation adjustments
|
(232
|
)
|
|
(137
|
)
|
|
(93
|
)
|
|||
|
Pension benefit plan, net of tax
|
(2,350
|
)
|
|
354
|
|
|
220
|
|
|||
|
Total other comprehensive (loss) income, net of tax
|
(2,582
|
)
|
|
217
|
|
|
127
|
|
|||
|
Total comprehensive income
|
$
|
44,193
|
|
|
$
|
41,100
|
|
|
$
|
25,002
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
Shareholders’
Equity
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|||||||||||||||||||
|
Balance at June 30, 2016
|
38,675
|
|
|
$
|
387
|
|
|
$
|
357,500
|
|
|
$
|
114,210
|
|
|
$
|
947
|
|
|
$
|
473,044
|
|
|
Issuance of common stock under employee stock incentive plans
|
976
|
|
|
9
|
|
|
2,747
|
|
|
—
|
|
|
—
|
|
|
2,756
|
|
|||||
|
Issuance of common stock under employee stock purchase plan
|
96
|
|
|
1
|
|
|
2,213
|
|
|
—
|
|
|
—
|
|
|
2,214
|
|
|||||
|
Retirement of common stock
|
(344
|
)
|
|
(3
|
)
|
|
(8,763
|
)
|
|
—
|
|
|
—
|
|
|
(8,766
|
)
|
|||||
|
Follow-on public stock offering
|
6,900
|
|
|
69
|
|
|
215,656
|
|
|
—
|
|
|
—
|
|
|
215,725
|
|
|||||
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
15,442
|
|
|
—
|
|
|
—
|
|
|
15,442
|
|
|||||
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
24,875
|
|
|
—
|
|
|
24,875
|
|
|||||
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|
(93
|
)
|
|||||
|
Pension benefit plan, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
220
|
|
|
220
|
|
|||||
|
Balance at June 30, 2017
|
46,303
|
|
|
463
|
|
|
584,795
|
|
|
139,085
|
|
|
1,074
|
|
|
725,417
|
|
|||||
|
Issuance of common stock under employee stock incentive plans
|
868
|
|
|
8
|
|
|
655
|
|
|
—
|
|
|
—
|
|
|
663
|
|
|||||
|
Issuance of common stock under employee stock purchase plan
|
82
|
|
|
1
|
|
|
2,781
|
|
|
—
|
|
|
—
|
|
|
2,782
|
|
|||||
|
Retirement of common stock
|
(329
|
)
|
|
(3
|
)
|
|
(15,505
|
)
|
|
—
|
|
|
—
|
|
|
(15,508
|
)
|
|||||
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
17,437
|
|
|
—
|
|
|
—
|
|
|
17,437
|
|
|||||
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
40,883
|
|
|
—
|
|
|
40,883
|
|
|||||
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
|
(137
|
)
|
|||||
|
Pension benefit plan, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
354
|
|
|
354
|
|
|||||
|
Balance at June 30, 2018
|
46,924
|
|
|
469
|
|
|
590,163
|
|
|
179,968
|
|
|
1,291
|
|
|
771,891
|
|
|||||
|
Issuance of common stock under employee stock incentive plans
|
478
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
Issuance of common stock under employee stock purchase plan
|
102
|
|
|
1
|
|
|
3,660
|
|
|
—
|
|
|
—
|
|
|
3,661
|
|
|||||
|
Retirement of common stock
|
(156
|
)
|
|
(2
|
)
|
|
(7,966
|
)
|
|
—
|
|
|
—
|
|
|
(7,968
|
)
|
|||||
|
Follow-on public stock offering
|
6,900
|
|
|
69
|
|
|
453,504
|
|
|
—
|
|
|
—
|
|
|
453,573
|
|
|||||
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
19,389
|
|
|
—
|
|
|
—
|
|
|
19,389
|
|
|||||
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
46,775
|
|
|
—
|
|
|
46,775
|
|
|||||
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(232
|
)
|
|
(232
|
)
|
|||||
|
Pension benefit plan, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,350
|
)
|
|
(2,350
|
)
|
|||||
|
Balance at June 30, 2019
|
54,248
|
|
|
$
|
542
|
|
|
$
|
1,058,745
|
|
|
$
|
226,743
|
|
|
$
|
(1,291
|
)
|
|
$
|
1,284,739
|
|
|
|
For the Years Ended June 30,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Cash flows from operating activities:
|
|
|
|
|
|
||||||
|
Net income
|
$
|
46,775
|
|
|
$
|
40,883
|
|
|
$
|
24,875
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
|
Depreciation and amortization expense
|
46,392
|
|
|
42,277
|
|
|
32,269
|
|
|||
|
Stock-based compensation expense
|
19,422
|
|
|
17,314
|
|
|
15,341
|
|
|||
|
Benefit for deferred income taxes
|
(1,557
|
)
|
|
(5,464
|
)
|
|
(7,841
|
)
|
|||
|
Non-cash interest expense
|
—
|
|
|
—
|
|
|
1,810
|
|
|||
|
Termination of interest rate swap
|
5,420
|
|
—
|
|
|
—
|
|
||||
|
Other non-cash items
|
3,779
|
|
|
2,103
|
|
|
(626
|
)
|
|||
|
Changes in operating assets and liabilities, net of effects of businesses acquired:
|
|
|
|
|
|
||||||
|
Accounts receivable, unbilled receivables, and costs in excess of billings
|
(28,096
|
)
|
|
(22,751
|
)
|
|
(14,054
|
)
|
|||
|
Inventory
|
(17,101
|
)
|
|
(16,230
|
)
|
|
(9,318
|
)
|
|||
|
Prepaid income taxes
|
3,843
|
|
|
(2,327
|
)
|
|
1,978
|
|
|||
|
Prepaid expenses and other current assets
|
(1,075
|
)
|
|
(361
|
)
|
|
(1,270
|
)
|
|||
|
Other non-current assets
|
101
|
|
|
296
|
|
|
372
|
|
|||
|
Accounts payable, accrued expenses and accrued compensation
|
17,949
|
|
|
(5,267
|
)
|
|
3,520
|
|
|||
|
Deferred revenues and customer advances
|
(1,531
|
)
|
|
6,035
|
|
|
(1,621
|
)
|
|||
|
Income taxes payable
|
3,152
|
|
|
(11,187
|
)
|
|
9,622
|
|
|||
|
Other non-current liabilities
|
44
|
|
|
(2,000
|
)
|
|
4,089
|
|
|||
|
Net cash provided by operating activities
|
97,517
|
|
|
43,321
|
|
|
59,146
|
|
|||
|
Cash flows from investing activities:
|
|
|
|
|
|
||||||
|
Acquisition of businesses, net of cash acquired
|
(127,083
|
)
|
|
(185,396
|
)
|
|
(77,757
|
)
|
|||
|
Purchases of property and equipment
|
(26,691
|
)
|
|
(15,106
|
)
|
|
(32,844
|
)
|
|||
|
Other investing activities
|
—
|
|
|
(375
|
)
|
|
(486
|
)
|
|||
|
Net cash used in investing activities
|
(153,774
|
)
|
|
(200,877
|
)
|
|
(111,087
|
)
|
|||
|
Cash flows from financing activities:
|
|
|
|
|
|
||||||
|
Proceeds from equity offering, net
|
454,343
|
|
|
—
|
|
|
215,725
|
|
|||
|
Proceeds from employee stock plans
|
3,661
|
|
|
3,445
|
|
|
4,970
|
|
|||
|
Payments for retirement of common stock
|
(7,968
|
)
|
|
(15,508
|
)
|
|
(8,766
|
)
|
|||
|
Payments under credit facilities
|
(324,500
|
)
|
|
(15,000
|
)
|
|
(200,000
|
)
|
|||
|
Borrowings under credit facilities
|
129,500
|
|
|
210,000
|
|
|
—
|
|
|||
|
Termination of interest rate swap
|
(5,420
|
)
|
|
—
|
|
|
—
|
|
|||
|
Payments of deferred financing and offering costs
|
(1,851
|
)
|
|
—
|
|
|
(591
|
)
|
|||
|
Net cash provided by financing activities
|
247,765
|
|
|
182,937
|
|
|
11,338
|
|
|||
|
Effect of exchange rate changes on cash and cash equivalents
|
(97
|
)
|
|
(497
|
)
|
|
549
|
|
|||
|
Net increase (decrease) in cash and cash equivalents
|
191,411
|
|
|
24,884
|
|
|
(40,054
|
)
|
|||
|
Cash and cash equivalents at beginning of year
|
66,521
|
|
|
41,637
|
|
|
81,691
|
|
|||
|
Cash and cash equivalents at end of year
|
$
|
257,932
|
|
|
$
|
66,521
|
|
|
$
|
41,637
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
||||||
|
Interest
|
$
|
10,368
|
|
|
$
|
1,607
|
|
|
$
|
5,758
|
|
|
Income taxes
|
$
|
7,351
|
|
|
$
|
17,004
|
|
|
$
|
2,834
|
|
|
Supplemental disclosures—non-cash activities:
|
|
|
|
|
|
||||||
|
Non-cash financing activity - accrued and unpaid equity offering costs
|
$
|
770
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
•
|
estimated step-ups for fixed assets and inventory;
|
|
•
|
estimated fair values of intangible assets; and
|
|
•
|
estimated income tax assets and liabilities assumed from the acquiree.
|
|
|
Fiscal
2019 |
|
Fiscal
2018 |
|
Fiscal
2017 |
||||||
|
Beginning balance at July 1,
|
$
|
1,336
|
|
|
$
|
1,691
|
|
|
$
|
1,523
|
|
|
Warranty assumed from Germane
|
169
|
|
|
—
|
|
|
—
|
|
|||
|
Warranty assumed from Themis
|
—
|
|
|
117
|
|
|
—
|
|
|||
|
Warranty assumed from CES
|
—
|
|
|
—
|
|
|
176
|
|
|||
|
Warranty assumed from Delta
|
—
|
|
|
—
|
|
|
30
|
|
|||
|
Accruals for warranties issued during the period
|
2,274
|
|
|
1,318
|
|
|
1,328
|
|
|||
|
Settlements made during the period
|
(1,909
|
)
|
|
(1,790
|
)
|
|
(1,366
|
)
|
|||
|
Ending balance at June 30,
|
$
|
1,870
|
|
|
$
|
1,336
|
|
|
$
|
1,691
|
|
|
|
Years Ended June 30,
|
|||||||
|
|
2019
|
|
2018
|
|
2017
|
|||
|
Basic weighted-average shares outstanding
|
47,831
|
|
|
46,719
|
|
|
41,986
|
|
|
Effect of dilutive equity instruments
|
669
|
|
|
752
|
|
|
1,032
|
|
|
Diluted weighted-average shares outstanding
|
48,500
|
|
|
47,471
|
|
|
43,018
|
|
|
|
Amounts
|
||
|
Consideration transferred
|
|
|
|
|
Cash paid at closing
|
$
|
34,049
|
|
|
Working capital and net debt adjustment
|
(446
|
)
|
|
|
Less cash acquired
|
(49
|
)
|
|
|
Net purchase price
|
$
|
33,554
|
|
|
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
|
|
Cash
|
$
|
49
|
|
|
Accounts receivable
|
726
|
|
|
|
Fixed assets
|
74
|
|
|
|
Other current and non-current assets
|
260
|
|
|
|
Accounts payable
|
(48
|
)
|
|
|
Accrued expenses
|
(143
|
)
|
|
|
Other current and non-current liabilities
|
(600
|
)
|
|
|
Deferred tax liability
|
(6,414
|
)
|
|
|
Estimated fair value of net tangible liabilities acquired
|
(6,096
|
)
|
|
|
Estimated fair value of identifiable intangible assets
|
23,700
|
|
|
|
Estimated goodwill
|
15,999
|
|
|
|
Estimated fair value of net assets acquired
|
33,603
|
|
|
|
Less cash acquired
|
(49
|
)
|
|
|
Net purchase price
|
$
|
33,554
|
|
|
|
Amounts
|
||
|
Consideration transferred
|
|
|
|
|
Cash paid at closing
|
$
|
13,118
|
|
|
Less cash acquired
|
(1,118
|
)
|
|
|
Net purchase price
|
$
|
12,000
|
|
|
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
|
|
Cash
|
$
|
1,118
|
|
|
Accounts receivable
|
281
|
|
|
|
Inventory
|
482
|
|
|
|
Fixed assets
|
31
|
|
|
|
Other current and non-current assets
|
6
|
|
|
|
Accounts payable
|
(71
|
)
|
|
|
Accrued expenses
|
(61
|
)
|
|
|
Estimated fair value of net tangible assets acquired
|
1,786
|
|
|
|
Estimated fair value of identifiable intangible assets
|
7,100
|
|
|
|
Estimated goodwill
|
4,232
|
|
|
|
Estimated fair value of net assets acquired
|
13,118
|
|
|
|
Less cash acquired
|
(1,118
|
)
|
|
|
Net purchase price
|
$
|
12,000
|
|
|
|
Amounts
|
||
|
Consideration transferred
|
|
|
|
|
Cash paid at closing
|
$
|
36,500
|
|
|
Net purchase price
|
$
|
36,500
|
|
|
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
|
|
Accounts receivable
|
$
|
1,320
|
|
|
Inventory
|
1,454
|
|
|
|
Fixed assets
|
459
|
|
|
|
Accounts payable
|
(217
|
)
|
|
|
Accrued expenses
|
(239
|
)
|
|
|
Estimated fair value of net tangible assets acquired
|
2,777
|
|
|
|
Estimated fair value of identifiable intangible assets
|
12,500
|
|
|
|
Estimated goodwill
|
21,223
|
|
|
|
Estimated fair value of net assets acquired
|
36,500
|
|
|
|
Net purchase price
|
$
|
36,500
|
|
|
|
Amounts
|
||
|
Consideration transferred
|
|
|
|
|
Cash paid at closing
|
$
|
47,166
|
|
|
Working capital and net debt adjustment
|
(1,244
|
)
|
|
|
Less cash acquired
|
(193
|
)
|
|
|
Net purchase price
|
$
|
45,729
|
|
|
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
|
|
Cash
|
$
|
193
|
|
|
Accounts receivable
|
4,277
|
|
|
|
Inventory
|
8,575
|
|
|
|
Fixed assets
|
867
|
|
|
|
Other current and non-current assets
|
596
|
|
|
|
Accounts payable
|
(3,146
|
)
|
|
|
Accrued expenses
|
(1,229
|
)
|
|
|
Other current and non-current liabilities
|
(232
|
)
|
|
|
Estimated fair value of net tangible assets acquired
|
9,901
|
|
|
|
Estimated fair value of identifiable intangible assets
|
12,910
|
|
|
|
Estimated goodwill
|
23,111
|
|
|
|
Estimated fair value of net assets acquired
|
45,922
|
|
|
|
Less cash acquired
|
(193
|
)
|
|
|
Net purchase price
|
$
|
45,729
|
|
|
|
|
Amounts
|
||
|
Consideration transferred
|
|
|
|
|
|
Cash paid at closing
|
|
$
|
187,089
|
|
|
Working capital and net debt adjustment
|
|
(1,274
|
)
|
|
|
Less cash acquired
|
|
(6,810
|
)
|
|
|
Net purchase price
|
|
$
|
179,005
|
|
|
|
|
|
|
|
|
Fair value of tangible assets acquired and liabilities assumed
|
|
|
|
|
|
Cash
|
|
$
|
6,810
|
|
|
Accounts receivable
|
|
7,713
|
|
|
|
Inventory
|
|
7,333
|
|
|
|
Fixed assets
|
|
479
|
|
|
|
Other current and non-current assets
|
|
2,896
|
|
|
|
Accounts payable
|
|
(3,287
|
)
|
|
|
Accrued expenses
|
|
(5,319
|
)
|
|
|
Other current and non-current liabilities
|
|
(1,210
|
)
|
|
|
Deferred tax liability
|
|
(14,307
|
)
|
|
|
Fair value of net tangible assets acquired
|
|
1,108
|
|
|
|
Fair value of identifiable intangible assets
|
|
71,720
|
|
|
|
Goodwill
|
|
112,987
|
|
|
|
Fair value of net assets acquired
|
|
185,815
|
|
|
|
Less cash acquired
|
|
(6,810
|
)
|
|
|
Net purchase price
|
|
$
|
179,005
|
|
|
D.
|
Fair Value of Financial Instruments
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
June 30, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Assets:
|
|
|
|
|
|
|
|
||||||||
|
Certificates of deposit
|
$
|
31,522
|
|
|
$
|
—
|
|
|
$
|
31,522
|
|
|
$
|
—
|
|
|
Total
|
$
|
31,522
|
|
|
$
|
—
|
|
|
$
|
31,522
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
June 30, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Assets:
|
|
|
|
|
|
|
|
||||||||
|
Certificates of deposit
|
$
|
1,056
|
|
|
$
|
—
|
|
|
$
|
1,056
|
|
|
$
|
—
|
|
|
Total
|
$
|
1,056
|
|
|
$
|
—
|
|
|
$
|
1,056
|
|
|
$
|
—
|
|
|
|
June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Raw materials
|
$
|
84,561
|
|
|
$
|
61,748
|
|
|
Work in process
|
38,525
|
|
|
30,841
|
|
||
|
Finished goods
|
14,026
|
|
|
15,996
|
|
||
|
Total
|
$
|
137,112
|
|
|
$
|
108,585
|
|
|
F.
|
Property and Equipment
|
|
|
Estimated Useful Lives
(Years)
|
|
June 30,
|
||||||
|
2019
|
|
2018
|
|||||||
|
Computer equipment and software
|
3-4
|
|
$
|
78,195
|
|
|
$
|
71,799
|
|
|
Furniture and fixtures
|
5
|
|
5,330
|
|
|
4,927
|
|
||
|
Leasehold improvements
|
lesser of estimated useful life or lease term
|
|
25,646
|
|
|
21,552
|
|
||
|
Machinery and equipment
|
5-10
|
|
63,792
|
|
|
47,419
|
|
||
|
|
|
|
172,963
|
|
|
145,697
|
|
||
|
Less: accumulated depreciation
|
|
|
(112,962
|
)
|
|
(94,717
|
)
|
||
|
|
|
|
$
|
60,001
|
|
|
$
|
50,980
|
|
|
|
|
SMP
|
|
AMS
|
|
MDS
|
|
Total
|
||||||||
|
Balance at June 30, 2018
|
|
$
|
119,560
|
|
|
$
|
218,147
|
|
|
$
|
159,735
|
|
|
$
|
497,442
|
|
|
Goodwill adjustment for the Themis acquisition
|
|
|
|
|
|
139
|
|
|
139
|
|
||||||
|
Goodwill arising from the Germane acquisition
|
|
|
|
|
|
23,111
|
|
|
23,111
|
|
||||||
|
Goodwill arising from the GECO acquisition
|
|
21,223
|
|
|
|
|
|
|
21,223
|
|
||||||
|
Goodwill arising from the Syntonic acquisition
|
|
|
|
4,232
|
|
|
|
|
4,232
|
|
||||||
|
Goodwill arising from the Athena acquisition
|
|
|
|
|
|
15,999
|
|
|
15,999
|
|
||||||
|
Balance at June 30, 2019
|
|
$
|
140,783
|
|
|
$
|
222,379
|
|
|
$
|
198,984
|
|
|
$
|
562,146
|
|
|
H.
|
Intangible Assets
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
||||||
|
June 30, 2019
|
|
|
|
|
|
|
|
||||||
|
Customer relationships
|
$
|
167,460
|
|
|
$
|
(38,308
|
)
|
|
$
|
129,152
|
|
|
11.4 years
|
|
Licensing agreements and patents
|
1,505
|
|
|
(1,022
|
)
|
|
483
|
|
|
3.5 years
|
|||
|
Completed technologies
|
97,592
|
|
|
(22,246
|
)
|
|
75,346
|
|
|
9.0 years
|
|||
|
Backlog
|
1,610
|
|
|
(467
|
)
|
|
1,143
|
|
|
1.6 years
|
|||
|
|
$
|
268,167
|
|
|
$
|
(62,043
|
)
|
|
$
|
206,124
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
||||||
|
Customer relationships
|
$
|
171,940
|
|
|
$
|
(46,505
|
)
|
|
$
|
125,435
|
|
|
10.7 years
|
|
Licensing agreements and patents
|
1,506
|
|
|
(640
|
)
|
|
866
|
|
|
3.5 years
|
|||
|
Completed technologies
|
62,392
|
|
|
(13,101
|
)
|
|
49,291
|
|
|
8.1 years
|
|||
|
Backlog
|
7,650
|
|
|
(5,338
|
)
|
|
2,312
|
|
|
1.6 years
|
|||
|
|
$
|
243,488
|
|
|
$
|
(65,584
|
)
|
|
$
|
177,904
|
|
|
|
|
Fiscal Year
|
|
Totals
|
||
|
2020
|
|
$
|
27,606
|
|
|
2021
|
|
26,390
|
|
|
|
2022
|
|
26,002
|
|
|
|
2023
|
|
24,020
|
|
|
|
2024
|
|
20,869
|
|
|
|
Thereafter
|
|
81,237
|
|
|
|
Total future amortization expense
|
|
$
|
206,124
|
|
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
|
Weighted
Average Useful Life |
||||||
|
Completed technologies
|
$
|
23,700
|
|
|
$
|
(358
|
)
|
|
$
|
23,342
|
|
|
11.0 years
|
|
|
$
|
23,700
|
|
|
$
|
(358
|
)
|
|
$
|
23,342
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
||||||
|
Customer relationships
|
$
|
4,200
|
|
|
$
|
(70
|
)
|
|
$
|
4,130
|
|
|
10.0 years
|
|
Completed technologies
|
2,500
|
|
|
(46
|
)
|
|
2,454
|
|
|
9.0 years
|
|||
|
Backlog
|
400
|
|
|
(67
|
)
|
|
333
|
|
|
1.0 year
|
|||
|
|
$
|
7,100
|
|
|
$
|
(183
|
)
|
|
$
|
6,917
|
|
|
|
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
|
Weighted
Average Useful Life |
||||||
|
Customer relationships
|
$
|
6,700
|
|
|
$
|
(254
|
)
|
|
$
|
6,446
|
|
|
11.0 years
|
|
Completed technologies
|
4,800
|
|
|
(200
|
)
|
|
4,600
|
|
|
10.0 years
|
|||
|
Backlog
|
1,000
|
|
|
(208
|
)
|
|
792
|
|
|
2.0 years
|
|||
|
|
$
|
12,500
|
|
|
$
|
(662
|
)
|
|
$
|
11,838
|
|
|
|
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
|
Weighted
Average Useful Life |
||||||
|
Customer relationships
|
$
|
8,500
|
|
|
$
|
(708
|
)
|
|
$
|
7,792
|
|
|
11.0 years
|
|
Completed technologies
|
4,200
|
|
|
(482
|
)
|
|
3,718
|
|
|
8.0 years
|
|||
|
Backlog
|
210
|
|
|
(193
|
)
|
|
17
|
|
|
1.0 year
|
|||
|
|
$
|
12,910
|
|
|
$
|
(1,383
|
)
|
|
$
|
11,527
|
|
|
|
|
|
Severance & Related
|
|
Facilities & Other
|
|
Total
|
||||||
|
Restructuring liability at June 30, 2017
|
$
|
1,365
|
|
|
$
|
—
|
|
|
$
|
1,365
|
|
|
Restructuring charges
|
3,181
|
|
|
230
|
|
|
3,411
|
|
|||
|
Cash paid
|
(2,546
|
)
|
|
(177
|
)
|
|
(2,723
|
)
|
|||
|
Reversals (*)
|
(199
|
)
|
|
(53
|
)
|
|
(252
|
)
|
|||
|
Restructuring liability at June 30, 2018
|
1,801
|
|
|
—
|
|
|
1,801
|
|
|||
|
Restructuring charges
|
549
|
|
|
80
|
|
|
629
|
|
|||
|
Cash paid
|
(2,333
|
)
|
|
(24
|
)
|
|
(2,357
|
)
|
|||
|
Reversals (*)
|
(13
|
)
|
|
(56
|
)
|
|
(69
|
)
|
|||
|
Restructuring liability at June 30, 2019
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
|
Year Ended June 30,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Income before income taxes:
|
|
|
|
|
|
||||||
|
United States
|
$
|
57,281
|
|
|
$
|
43,368
|
|
|
$
|
30,499
|
|
|
Foreign
|
2,246
|
|
|
(795
|
)
|
|
569
|
|
|||
|
|
$
|
59,527
|
|
|
$
|
42,573
|
|
|
$
|
31,068
|
|
|
Tax provision (benefit):
|
|
|
|
|
|
||||||
|
Federal:
|
|
|
|
|
|
||||||
|
Current
|
$
|
11,454
|
|
|
$
|
4,470
|
|
|
$
|
11,476
|
|
|
Deferred
|
(3,008
|
)
|
|
(4,527
|
)
|
|
(7,645
|
)
|
|||
|
|
8,446
|
|
|
(57
|
)
|
|
3,831
|
|
|||
|
State:
|
|
|
|
|
|
||||||
|
Current
|
5,194
|
|
|
2,370
|
|
|
3,650
|
|
|||
|
Deferred
|
(1,421
|
)
|
|
(537
|
)
|
|
(1,684
|
)
|
|||
|
|
3,773
|
|
|
1,833
|
|
|
1,966
|
|
|||
|
Foreign:
|
|
|
|
|
|
||||||
|
Current
|
546
|
|
|
186
|
|
|
240
|
|
|||
|
Deferred
|
(13
|
)
|
|
(272
|
)
|
|
156
|
|
|||
|
|
533
|
|
|
(86
|
)
|
|
396
|
|
|||
|
|
$
|
12,752
|
|
|
$
|
1,690
|
|
|
$
|
6,193
|
|
|
|
Year Ended June 30,
|
|||||||
|
|
2019
|
|
2018
|
|
2017
|
|||
|
Tax provision at federal statutory rates
|
21.0
|
%
|
|
28.0
|
%
|
|
35.0
|
%
|
|
State income tax, net of federal tax benefit
|
5.9
|
|
|
5.6
|
|
|
4.9
|
|
|
Research and development credits
|
(4.5
|
)
|
|
(5.1
|
)
|
|
(6.1
|
)
|
|
Excess tax benefits on stock compensation
|
(4.5
|
)
|
|
(18.5
|
)
|
|
(13.1
|
)
|
|
Domestic manufacturing deduction
|
—
|
|
|
(2.0
|
)
|
|
(3.9
|
)
|
|
Deemed repatriation of foreign earnings
|
—
|
|
|
1.9
|
|
|
(0.1
|
)
|
|
Foreign income tax rate differential
|
0.1
|
|
|
0.3
|
|
|
0.2
|
|
|
Officer and equity compensation
|
2.0
|
|
|
1.7
|
|
|
1.8
|
|
|
Acquisition costs
|
0.1
|
|
|
1.4
|
|
|
0.9
|
|
|
Reserves for tax contingencies
|
0.3
|
|
|
0.3
|
|
|
(0.6
|
)
|
|
Benefit from tax rate changes
|
—
|
|
|
(2.3
|
)
|
|
—
|
|
|
Impacts related to acquired tax attributes
|
—
|
|
|
(8.7
|
)
|
|
—
|
|
|
Other
|
1.0
|
|
|
1.4
|
|
|
0.9
|
|
|
|
21.4
|
%
|
|
4.0
|
%
|
|
19.9
|
%
|
|
|
June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Deferred tax assets:
|
|
|
|
||||
|
Inventory valuation and receivable allowances
|
$
|
10,313
|
|
|
$
|
8,476
|
|
|
Accrued compensation
|
4,644
|
|
|
3,803
|
|
||
|
Equity compensation
|
4,595
|
|
|
3,944
|
|
||
|
Federal and state research and development tax credit carryforwards
|
15,510
|
|
|
18,784
|
|
||
|
Other accruals
|
1,128
|
|
|
1,085
|
|
||
|
Deferred compensation
|
1,561
|
|
|
1,561
|
|
||
|
Acquired net operating loss carryforward
|
721
|
|
|
1,634
|
|
||
|
Capital loss carryforwards
|
2,354
|
|
|
2,413
|
|
||
|
Other temporary differences
|
2,258
|
|
|
1,565
|
|
||
|
|
43,084
|
|
|
43,265
|
|
||
|
Valuation allowance
|
(16,666
|
)
|
|
(16,992
|
)
|
||
|
Total deferred tax assets
|
26,418
|
|
|
26,273
|
|
||
|
Deferred tax liabilities:
|
|
|
|
||||
|
Prepaid expenses
|
(848
|
)
|
|
(696
|
)
|
||
|
Property and equipment
|
(4,927
|
)
|
|
(4,436
|
)
|
||
|
Intangible assets
|
(38,399
|
)
|
|
(34,546
|
)
|
||
|
Other temporary differences
|
(58
|
)
|
|
(230
|
)
|
||
|
Total deferred tax liabilities
|
(44,232
|
)
|
|
(39,908
|
)
|
||
|
Net deferred tax liabilities
|
$
|
(17,814
|
)
|
|
$
|
(13,635
|
)
|
|
|
|
|
|
||||
|
As reported:
|
|
|
|
||||
|
Deferred tax liabilities
|
$
|
(17,814
|
)
|
|
$
|
(13,635
|
)
|
|
|
$
|
(17,814
|
)
|
|
$
|
(13,635
|
)
|
|
|
Year Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Unrecognized tax benefits, beginning of period
|
$
|
998
|
|
|
$
|
804
|
|
|
Increases for previously recognized positions
|
—
|
|
|
—
|
|
||
|
Settlements of previously recognized positions
|
—
|
|
|
—
|
|
||
|
Reductions as a result of a lapse of the applicable statute of limitations
|
—
|
|
|
(81
|
)
|
||
|
Increases for currently recognized positions
|
275
|
|
|
315
|
|
||
|
Reductions for previously recognized positions
|
—
|
|
|
(40
|
)
|
||
|
Unrecognized tax benefits, end of period
|
$
|
1,273
|
|
|
$
|
998
|
|
|
Fiscal Year
|
|
Totals
|
||
|
2020
|
|
$
|
10,205
|
|
|
2021
|
|
8,949
|
|
|
|
2022
|
|
8,280
|
|
|
|
2023
|
|
7,414
|
|
|
|
2024
|
|
6,496
|
|
|
|
Thereafter
|
|
28,286
|
|
|
|
Total minimum lease payments
|
|
$
|
69,630
|
|
|
Fiscal Year
|
|
Total
|
||
|
2020
|
|
$
|
761
|
|
|
2021
|
|
733
|
|
|
|
2022
|
|
883
|
|
|
|
2023
|
|
1,197
|
|
|
|
2024
|
|
1,040
|
|
|
|
Thereafter (next 5 years)
|
|
5,529
|
|
|
|
Total
|
|
$
|
10,143
|
|
|
|
Year Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Service cost
|
$
|
903
|
|
|
$
|
835
|
|
|
Interest cost
|
156
|
|
|
121
|
|
||
|
Expected return on assets
|
(183
|
)
|
|
(162
|
)
|
||
|
Amortization of prior service cost
|
(61
|
)
|
|
39
|
|
||
|
Net periodic benefit cost
|
$
|
815
|
|
|
$
|
833
|
|
|
|
Year Ended June 30,
|
||||
|
|
2019
|
|
2018
|
||
|
Discount rate
|
0.50
|
%
|
|
0.85
|
%
|
|
Expected rate of return on Plan assets
|
1.50
|
%
|
|
1.50
|
%
|
|
Expected inflation
|
1.20
|
%
|
|
1.20
|
%
|
|
Rate of compensation increases
|
1.50
|
%
|
|
1.20
|
%
|
|
|
Year Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Projected benefit obligation, beginning
|
$
|
18,127
|
|
|
$
|
17,526
|
|
|
Service cost
|
903
|
|
|
835
|
|
||
|
Interest cost
|
156
|
|
|
121
|
|
||
|
Employee contributions
|
3,577
|
|
|
1,931
|
|
||
|
Actuarial gain
|
2,859
|
|
|
466
|
|
||
|
Benefits paid
|
(1,607
|
)
|
|
(1,215
|
)
|
||
|
Plan amendment
|
—
|
|
|
(941
|
)
|
||
|
Foreign exchange loss (gain)
|
259
|
|
|
(596
|
)
|
||
|
Projected benefit obligation at end of year
|
$
|
24,274
|
|
|
$
|
18,127
|
|
|
|
Year Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Fair value of Plan assets, beginning
|
$
|
12,029
|
|
|
$
|
10,925
|
|
|
Actual return on Plan assets
|
167
|
|
|
167
|
|
||
|
Company contributions
|
741
|
|
|
608
|
|
||
|
Employee contributions
|
3,577
|
|
|
1,931
|
|
||
|
Benefits paid
|
(1,607
|
)
|
|
(1,215
|
)
|
||
|
Foreign exchange gain (loss)
|
181
|
|
|
(387
|
)
|
||
|
Fair value of Plan assets at end of year
|
$
|
15,088
|
|
|
$
|
12,029
|
|
|
|
June 30, 2019 |
|
June 30, 2018 |
||||
|
Projected benefit obligation at end of year
|
$
|
24,274
|
|
|
$
|
18,127
|
|
|
Fair value of plan assets at end of year
|
15,088
|
|
|
12,029
|
|
||
|
Funded status
|
$
|
(9,186
|
)
|
|
$
|
(6,098
|
)
|
|
|
Options Outstanding
|
|||||||||||
|
|
Number of
Shares |
|
Weighted Average
Exercise Price |
|
Weighted Average
Remaining Contractual Term (Years) |
|
Aggregate
Intrinsic Value as of 6/30/2019 |
|||||
|
Outstanding at June 30, 2017
|
51
|
|
|
$
|
13.53
|
|
|
0.60
|
|
|
||
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Exercised
|
(47
|
)
|
|
14.12
|
|
|
|
|
|
|||
|
Cancelled
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Outstanding at June 30, 2018
|
4
|
|
|
$
|
5.52
|
|
|
3.13
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Cancelled
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Outstanding at June 30, 2019
|
4
|
|
|
$
|
5.52
|
|
|
2.13
|
|
$
|
227
|
|
|
Vested and expected to vest at June 30, 2019
|
4
|
|
|
$
|
5.52
|
|
|
2.13
|
|
$
|
227
|
|
|
Exercisable at June 30, 2019
|
4
|
|
|
$
|
5.52
|
|
|
2.13
|
|
$
|
227
|
|
|
|
Non-Vested Restricted Stock Awards
|
|||||
|
|
Number of
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
|||
|
Outstanding at June 30, 2017
|
1,564
|
|
|
$
|
18.93
|
|
|
Granted
|
521
|
|
|
47.28
|
|
|
|
Vested
|
(821
|
)
|
|
46.71
|
|
|
|
Forfeited
|
(129
|
)
|
|
31.41
|
|
|
|
Outstanding at June 30, 2018
|
1,135
|
|
|
$
|
27.26
|
|
|
Granted
|
468
|
|
|
52.50
|
|
|
|
Vested
|
(478
|
)
|
|
51.50
|
|
|
|
Forfeited
|
(79
|
)
|
|
36.97
|
|
|
|
Outstanding at June 30, 2019
|
1,046
|
|
|
$
|
39.62
|
|
|
|
Year Ended June 30,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Cost of revenues
|
$
|
820
|
|
|
$
|
502
|
|
|
$
|
531
|
|
|
Selling, general and administrative
|
16,188
|
|
|
14,828
|
|
|
13,212
|
|
|||
|
Research and development
|
2,414
|
|
|
1,984
|
|
|
1,598
|
|
|||
|
Stock-based compensation expense before tax
|
19,422
|
|
|
17,314
|
|
|
15,341
|
|
|||
|
Income taxes
|
(5,263
|
)
|
|
(5,713
|
)
|
|
(5,874
|
)
|
|||
|
Stock-based compensation expense, net of income taxes
|
$
|
14,159
|
|
|
$
|
11,601
|
|
|
$
|
9,467
|
|
|
|
U.S.
|
|
Europe
|
|
Asia Pacific
|
|
Eliminations
|
|
Total
|
||||||||||
|
YEAR ENDED JUNE 30, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net revenues to unaffiliated customers
|
$
|
599,422
|
|
|
$
|
49,332
|
|
|
$
|
5,990
|
|
|
$
|
—
|
|
|
$
|
654,744
|
|
|
Inter-geographic revenues
|
10,570
|
|
|
1,343
|
|
|
—
|
|
|
(11,913
|
)
|
|
—
|
|
|||||
|
Net revenues
|
$
|
609,992
|
|
|
$
|
50,675
|
|
|
$
|
5,990
|
|
|
$
|
(11,913
|
)
|
|
$
|
654,744
|
|
|
Identifiable long-lived assets (1)
|
$
|
54,952
|
|
|
$
|
5,037
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
60,001
|
|
|
YEAR ENDED JUNE 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net revenues to unaffiliated customers
|
$
|
450,218
|
|
|
$
|
35,000
|
|
|
$
|
7,966
|
|
|
$
|
—
|
|
|
$
|
493,184
|
|
|
Inter-geographic revenues
|
10,650
|
|
|
925
|
|
|
—
|
|
|
(11,575
|
)
|
|
—
|
|
|||||
|
Net revenues
|
$
|
460,868
|
|
|
$
|
35,925
|
|
|
$
|
7,966
|
|
|
$
|
(11,575
|
)
|
|
$
|
493,184
|
|
|
Identifiable long-lived assets (1)
|
$
|
47,997
|
|
|
$
|
2,974
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
50,980
|
|
|
YEAR ENDED JUNE 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net revenues to unaffiliated customers
|
$
|
380,538
|
|
|
$
|
22,242
|
|
|
$
|
5,808
|
|
|
$
|
—
|
|
|
$
|
408,588
|
|
|
Inter-geographic revenues
|
7,637
|
|
|
44
|
|
|
—
|
|
|
(7,681
|
)
|
|
—
|
|
|||||
|
Net revenues
|
$
|
388,175
|
|
|
$
|
22,286
|
|
|
$
|
5,808
|
|
|
$
|
(7,681
|
)
|
|
$
|
408,588
|
|
|
Identifiable long-lived assets (1)
|
$
|
50,340
|
|
|
$
|
1,288
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
51,643
|
|
|
|
|
Year Ended June 30,
|
||||||||||
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Domestic (1)
|
|
$
|
580,935
|
|
|
$
|
410,050
|
|
|
$
|
341,699
|
|
|
International/Foreign Military Sales (2)
|
|
73,809
|
|
|
83,134
|
|
|
66,889
|
|
|||
|
Total Net Revenue
|
|
$
|
654,744
|
|
|
$
|
493,184
|
|
|
$
|
408,588
|
|
|
|
|
Year Ended June 30,
|
||||||||||
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Radar (1)
|
|
$
|
164,046
|
|
|
$
|
159,737
|
|
|
$
|
150,441
|
|
|
Electronic Warfare (2)
|
|
128,841
|
|
|
114,801
|
|
|
106,446
|
|
|||
|
Other Sensor and Effector (3)
|
|
90,245
|
|
|
48,088
|
|
|
27,719
|
|
|||
|
Total Sensor and Effector
|
|
383,132
|
|
|
322,626
|
|
|
284,606
|
|
|||
|
C4I (4)
|
|
183,172
|
|
|
87,414
|
|
|
31,679
|
|
|||
|
Other (5)
|
|
88,440
|
|
|
83,144
|
|
|
92,303
|
|
|||
|
Total Net Revenues
|
|
$
|
654,744
|
|
|
$
|
493,184
|
|
|
$
|
408,588
|
|
|
|
|
Year Ended June 30,
|
||||||||||
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
Components (1)
|
|
$
|
184,870
|
|
|
$
|
142,982
|
|
|
$
|
105,669
|
|
|
Modules and Sub-assemblies (2)
|
|
180,873
|
|
|
194,377
|
|
|
161,973
|
|
|||
|
Integrated Subsystems (3)
|
|
289,001
|
|
|
155,825
|
|
|
140,946
|
|
|||
|
Total Net Revenues
|
|
$
|
654,744
|
|
|
$
|
493,184
|
|
|
$
|
408,588
|
|
|
|
Year Ended June 30,
|
|||||||
|
|
2019
|
|
2018
|
|
2017
|
|||
|
Raytheon Company
|
20
|
%
|
|
19
|
%
|
|
16
|
%
|
|
Lockheed Martin Corporation
|
17
|
%
|
|
19
|
%
|
|
20
|
%
|
|
|
37
|
%
|
|
38
|
%
|
|
36
|
%
|
|
Q.
|
Derivatives
|
|
2019 (In thousands, except per share data)
|
1ST QUARTER
|
|
2ND QUARTER
|
|
3RD QUARTER
|
|
4TH QUARTER
|
||||||||
|
Net revenues
|
$
|
144,056
|
|
|
$
|
159,089
|
|
|
$
|
174,636
|
|
|
$
|
176,963
|
|
|
Gross margin
|
$
|
61,583
|
|
|
$
|
70,887
|
|
|
$
|
73,847
|
|
|
$
|
79,839
|
|
|
Income from operations
|
$
|
13,810
|
|
|
$
|
19,861
|
|
|
$
|
22,062
|
|
|
$
|
20,851
|
|
|
Income before income taxes
|
$
|
10,608
|
|
|
$
|
16,866
|
|
|
$
|
19,466
|
|
|
$
|
12,587
|
|
|
Income tax provision (benefit)
|
$
|
3,129
|
|
|
$
|
4,483
|
|
|
$
|
5,357
|
|
|
$
|
(217
|
)
|
|
Net income
|
$
|
7,479
|
|
|
$
|
12,383
|
|
|
$
|
14,109
|
|
|
$
|
12,804
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
||||||||
|
Basic net income per share
|
$
|
0.16
|
|
|
$
|
0.26
|
|
|
$
|
0.30
|
|
|
$
|
0.26
|
|
|
Diluted net income per share
|
$
|
0.16
|
|
|
$
|
0.26
|
|
|
$
|
0.29
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
2018 (In thousands, except per share data)
|
1ST QUARTER
|
|
2ND QUARTER
|
|
3RD QUARTER
|
|
4TH QUARTER
|
||||||||
|
Net revenues
|
$
|
106,069
|
|
|
$
|
117,912
|
|
|
$
|
116,336
|
|
|
$
|
152,867
|
|
|
Gross margin
|
$
|
50,674
|
|
|
$
|
54,160
|
|
|
$
|
52,766
|
|
|
$
|
68,258
|
|
|
Income from operations
|
$
|
10,371
|
|
|
$
|
10,888
|
|
|
$
|
6,838
|
|
|
$
|
18,888
|
|
|
Income before income taxes
|
$
|
9,572
|
|
|
$
|
10,468
|
|
|
$
|
5,905
|
|
|
$
|
16,628
|
|
|
Income tax (benefit) provision
|
$
|
(8,381
|
)
|
|
$
|
1,335
|
|
|
$
|
2,209
|
|
|
$
|
6,527
|
|
|
Net income
|
$
|
17,953
|
|
|
$
|
9,133
|
|
|
$
|
3,696
|
|
|
$
|
10,101
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
||||||||
|
Basic net income per share
|
$
|
0.39
|
|
|
$
|
0.20
|
|
|
$
|
0.08
|
|
|
$
|
0.22
|
|
|
Diluted net income per share
|
$
|
0.38
|
|
|
$
|
0.19
|
|
|
$
|
0.08
|
|
|
$
|
0.21
|
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
|
(a)
|
EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
|
|
(b)
|
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
|
|
(c)
|
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
|
|
(d)
|
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
|
|
ITEM 9B.
|
OTHER INFORMATION
|
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
|
1.
|
Financial statements:
|
|
2.
|
Financial Statement Schedule:
|
|
II.
|
Valuation and Qualifying Accounts
|
|
|
BALANCE
AT BEGINNING OF PERIOD |
|
ADDITIONS
|
|
REVERSALS
|
|
WRITE-
OFFS |
|
BALANCE
AT END OF PERIOD |
||||||||||
|
2019
|
$
|
359
|
|
|
$
|
1,223
|
|
|
$
|
264
|
|
|
$
|
90
|
|
|
$
|
1,228
|
|
|
2018
|
$
|
83
|
|
|
$
|
359
|
|
|
$
|
31
|
|
|
$
|
52
|
|
|
$
|
359
|
|
|
2017
|
$
|
92
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
83
|
|
|
|
BALANCE
AT BEGINNING OF PERIOD |
|
CHARGED
TO COSTS & EXPENSES |
|
CHARGED
TO OTHER ACCOUNTS |
|
DEDUCTIONS
|
|
BALANCE
AT END OF PERIOD |
||||||||||
|
2019
|
$
|
16,992
|
|
|
$
|
(326
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,666
|
|
|
2018
|
$
|
16,570
|
|
|
$
|
422
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,992
|
|
|
2017
|
$
|
18,472
|
|
|
$
|
(1,902
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,570
|
|
|
|
|
|
|
|
MERCURY SYSTEMS, INC.
|
|
|
|
|
|
|
|
By
|
/s/ MICHAEL D. RUPPERT
|
|
|
|
Michael D. Ruppert
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND TREASURER [PRINCIPAL FINANCIAL OFFICER] |
|
Signature
|
|
Title(s)
|
|
Date
|
|
/s/ MARK ASLETT
|
|
President, Chief Executive Officer and Director (principal executive officer)
|
|
August 15, 2019
|
|
Mark Aslett
|
|
|
|
|
|
/S/ MICHAEL D. RUPPERT
|
|
Executive Vice President, Chief Financial Officer, and Treasurer (principal financial officer)
|
|
August 15, 2019
|
|
Michael D. Ruppert
|
|
|
|
|
|
/S/ MICHELLE M. MCCARTHY
|
|
Vice President, Controller, and Chief Accounting Officer (principal accounting officer)
|
|
August 15, 2019
|
|
Michelle M. McCarthy
|
|
|
|
|
|
/S/ VINCENT VITTO
|
|
Chairman of the Board of Directors
|
|
August 15, 2019
|
|
Vincent Vitto
|
|
|
|
|
|
/S/ JAMES K. BASS
|
|
Director
|
|
August 15, 2019
|
|
James K. Bass
|
|
|
|
|
|
/S/ MICHAEL A. DANIELS
|
|
Director
|
|
August 15, 2019
|
|
Michael A. Daniels
|
|
|
|
|
|
/S/ LISA S. DISBROW
|
|
Director
|
|
August 15, 2019
|
|
Lisa S. Disbrow
|
|
|
|
|
|
/S/ MARY LOUISE KRAKAUER
|
|
Director
|
|
August 15, 2019
|
|
Mary Louise Krakauer
|
|
|
|
|
|
/S/ BARRY R. NEARHOS
|
|
Director
|
|
August 15, 2019
|
|
Barry R. Nearhos
|
|
|
|
|
|
/S/ WILLIAM K. O’BRIEN
|
|
Director
|
|
August 15, 2019
|
|
William K. O’Brien
|
|
|
|
|
|
ITEM NO.
|
|
DESCRIPTION OF EXHIBIT
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
ITEM NO.
|
|
DESCRIPTION OF EXHIBIT
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
ITEM NO.
|
|
DESCRIPTION OF EXHIBIT
|
|
101†
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheet, (ii) Consolidated Statement of Operations, (iii) Consolidated Statement of Shareholders’ Equity, (iv) Consolidated Statement of Cash Flows, and (v) Notes to Consolidated Financial Statements
|
|
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
|
|
*
|
Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates.
|
|
†
|
Filed with this Form 10-K.
|
|
+
|
Furnished herewith. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
|
|
•
|
a market survey of Board compensation to peer companies at the 50th and 75th percentiles;
|
|
•
|
a review of Board and Committee meeting frequency;
|
|
•
|
Board member personal preparation time for Board and Committee meetings; and
|
|
•
|
Board member responsibilities.
|
|
1.
|
Section 5(b)(i) of the Employment Agreement is amended by deleting said section and substituting therefor the following:
|
|
2.
|
Section 5(b)(iv) of the Employment Agreement is amended by deleting said section and substituting therefor the following:
|
|
3.
|
A new Section 5(b)(vi) is added with the following:
|
|
4.
|
All other provisions of the Employment Agreement shall remain in full force and effect according to their respective terms, and nothing contained herein shall be deemed a waiver of any right or abrogation of any obligation otherwise existing under the Employment Agreement except to the extent specifically provided for herein.
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|
5.
|
The validity, interpretation, construction, and performance of this Third Amendment shall be governed by the laws of The Commonwealth of Massachusetts.
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|
6.
|
This Third Amendment may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
|
|
MERCURY SYSTEMS, INC.
|
|
|
|
|
|
|
|
|
By: /s/ Emma Woodthorpe
|
|
|
Name: Emma Woodthorpe
|
|
|
Title: Senior Vice President, Chief Human Resources Officer
|
|
|
|
|
|
|
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
|
/s/ Mark Aslett
|
|
|
Mark Aslett
|
|
|
|
|
Year Ended June 30, 2019
|
|
Year Ended June 30, 2018
|
|
Year Ended June 30, 2017
|
|
Year Ended June 30, 2016
|
|
Year Ended June 30, 2015
|
||||||||||
|
Income (loss) from continuing operations before income taxes
|
|
$
|
59,527
|
|
|
$
|
42,573
|
|
|
$
|
31,068
|
|
|
$
|
25,286
|
|
|
$
|
18,795
|
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Interest expense
|
|
$
|
9,109
|
|
|
$
|
2,850
|
|
|
$
|
7,568
|
|
|
$
|
1,172
|
|
|
$
|
34
|
|
|
Portion of rental expense representative of interest factor (1)
|
|
2,874
|
|
|
2,156
|
|
|
2,565
|
|
|
1,325
|
|
|
1,246
|
|
|||||
|
Total fixed charges
|
|
$
|
11,983
|
|
|
$
|
5,006
|
|
|
$
|
10,133
|
|
|
$
|
2,497
|
|
|
$
|
1,280
|
|
|
Income from continuing operations before income taxes plus fixed charges
|
|
$
|
71,510
|
|
|
$
|
47,579
|
|
|
$
|
41,201
|
|
|
$
|
27,783
|
|
|
$
|
20,075
|
|
|
Ratio of earnings to fixed charges (2)
|
|
6.0
|
|
|
9.5
|
|
|
4.1
|
|
|
11.1
|
|
|
15.7
|
|
|||||
|
Coverage deficiency
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
NAME
|
JURISDICTION OF ORGANIZATION
|
|
Mercury Defense Systems, Inc.
|
California
|
|
Mercury Mission Systems, LLC
|
Delaware
|
|
Arxan Research, Inc.
|
Delaware
|
|
Nihon Mercury Computer Systems K.K.
|
Japan
|
|
Mercury Computer Systems Limited
|
United Kingdom
|
|
Mercury Mission Systems Canada, Inc.
|
Canada
|
|
Mercury Mission Systems International Holding, SA
|
Switzerland
|
|
Mercury Mission Systems International, SA
|
Switzerland
|
|
Mercury Mission Systems Spain, SL
|
Spain
|
|
CES do Brasil Creative Electronic Systems Participacces Ltda.
|
Brazil
|
|
Mercury Systems - Trusted Mission Solutions, Inc.
|
California
|
|
Mercury Systems - Trusted Mission Solutions SARL
|
France
|
|
1.
|
I have reviewed this annual report on Form 10-K of Mercury Systems, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
/s/ MARK ASLETT
|
|
Mark Aslett
|
|
PRESIDENT AND CHIEF EXECUTIVE OFFICER
[PRINCIPAL EXECUTIVE OFFICER]
|
|
1.
|
I have reviewed this annual report on Form 10-K of Mercury Systems, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
/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
|