N
ET
E
ARNINGS
P
ER
S
HARE
Basic net earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net earnings per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options and the vesting of restricted stock, reduced by the number of shares which are assumed to be purchased by the Company under the treasury stock method. For all periods presented, income from continuing operations is the control number for determining whether securities are dilutive or not.
Basic and diluted weighted average shares outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
Basic weighted-average shares outstanding
|
41,986
|
|
|
34,241
|
|
|
32,114
|
|
Effect of dilutive equity instruments
|
1,032
|
|
|
856
|
|
|
825
|
|
Diluted weighted-average shares outstanding
|
43,018
|
|
|
35,097
|
|
|
32,939
|
|
Equity instruments to purchase
16
,
7
and
453
shares of common stock were not included in the calculation of diluted net earnings per share for the fiscal years ended June 30,
2017
,
2016
and
2015
, respectively, because the equity instruments were anti-dilutive.
A
CCUMULATED
O
THER
C
OMPREHENSIVE
I
NCOME
Accumulated other comprehensive income includes foreign currency translation adjustments and pension benefit plan adjustments. The components of accumulated other comprehensive income included
$(93)
and
$171
of accumulated foreign currency translation adjustments for the years ended June 30,
2017
and
2016
. In addition, pension benefit plan adjustments totaled
$220
for the year ended June 30, 2017. There were
no
material accumulated net unrealized gains on investments at June 30,
2017
and
2016
.
F
OREIGN
C
URRENCY
Local currencies are the functional currency for the Company’s subsidiaries in Switzerland, United Kingdom and Japan. The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at
average exchange rates during the period for results of operations. The related translation adjustments are reported in accumulated other comprehensive income in shareholders’ equity. Gains (losses) resulting from non-U.S. currency transactions are included in other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income and were immaterial for all periods presented.
R
ECENTLY
I
SSUED
A
CCOUNTING
P
RONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for the Company on July 1, 2018, and it does not plan to early adopt this ASU. The standard permits the use of either the retrospective or cumulative effect transition method. The Company currently intends to use the retrospective transition method upon adoption of the standard. During fiscal 2017, the Company has made significant investments in its data reporting infrastructure in order to support the reporting requirements of the standard. Throughout fiscal 2018, the Company will continue enhancing its infrastructure to capture each of the specific disclosure requirements detailed in the standard. The Company is continuing to evaluate the future impact that the adoption of the standard will have on its consolidated financial statements. However, the Company does anticipate that the additional disclosure requirements will represent a significant change from current practices.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, an amendment of the FASB Accounting Standards Codification. This ASU requires lessees to recognize a right-of-use asset and lease liability for most lease arrangements. The new standard is effective for the Company on July 1, 2019. The standard mandates a modified retrospective transition method for all entities and early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments
, an amendment of the FASB Accounting Standards Codification. This ASU will reduce diversity in practice for classifying cash payments and receipts in the statement of cash flows for a number of common transactions. It will also clarify when identifiable cash flows should be separated versus classified based on their predominant source or use. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is evaluating the effect that ASU 2016-15 will have on its consolidated financial statements and related disclosures.
In October 2016, the FASB issued ASU No. 2016-16,
Intra-Entity Transfers of Assets Other Than Inventory,
an amendment of the FASB Accounting Standards Codification. This ASU requires the seller and buyer to recognize at the transaction date the current and deferred income tax consequences of intercompany asset transfers (except transfers of inventory). Under current GAAP, the seller and buyer defer the consolidated tax consequences of an intercompany asset transfer from the period of the transfer to a future period when the asset is transferred out of the consolidated group, or otherwise affects consolidated earnings. This standard will cause volatility in companies’ effective tax rates, particularly for those that transfer intangible assets to foreign subsidiaries. For public entities, the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2017. An entity may early adopt the standard but only at the beginning of an annual period for which it has not issued or made available for issuance financial statements (interim or annual). The Company is evaluating the effect that ASU 2016-16 will have on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
, an amendment of the FASB Accounting Standards Codification. This ASU eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (“the Step 2 test”) from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit. For public business entities, the new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The ASU requires prospective adoption and permits early adoption for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect this guidance to have a material impact to its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07,
Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, an amendment of the FASB Accounting Standards Codification. This ASU requires employers that sponsor defined benefit pension and/or other post-retirement benefit plans to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Employers are required to present the other components of net benefit costs in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component of net periodic pension cost will be eligible for asset capitalization. For public
entities, the new standard is effective for annual periods beginning after December 15, 2017, including interim periods within that annual period. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. This ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.The Company is evaluating the effect that ASU 2017-07 will have on its consolidated financial statements and related disclosures.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2016, the Company adopted FASB ASU No. 2015-01,
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,
an amendment of the FASB Accounting Standards Codification.
This ASU eliminates the separate presentation of extraordinary items, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. The ASU aligns GAAP more closely with International Financial Reporting Standards. The Company will continue to evaluate whether items are unusual in nature or infrequent in their occurrence for disclosure purposes and when estimating the annual effective tax rate for interim reporting purposes. Such adoption did not have any impact to the Company's consolidated financial statements.
Effective June 30, 2017, the Company adopted FASB ASU No. 2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,
an amendment of the FASB Accounting Standards Codification. The ASU has added additional disclosure requirements to the codification. It requires management to assess, at each interim and annual reporting period, whether substantial doubt exists about an entity’s ability to continue as a going concern. Substantial doubt exists if it is probable (the “probable” threshold under GAAP has generally been interpreted to be between 75 and 80 percent) that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued or available to be issued (assessment date). There was not a going concern uncertainty in the current year or in the foreseeable future, and therefore this guidance did not have an impact to the Company's consolidated financial statements.
Effective July 1, 2017, the Company adopted FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
, an amendment of the FASB Accounting Standards Codification. This ASU changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value for entities that do not measure inventory using the last-in, first-out or retail inventory method. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. Such adoption did not have any impact to the Company's consolidated financial statements.
D
ELTA
A
CQUISITION
On April 3, 2017, the Company entered into a membership interest purchase agreement with Delta, pursuant to which, the Company acquired Delta on a cash-free, debt-free basis for a total purchase price of
$40,500
, subject to net working capital and net debt adjustments. Delta is a designer and manufacturer of high-value RF, microwave and millimeter wave sub-assemblies and components for the military, aerospace and space markets. The acquisition and transaction related expenses were funded with cash on hand.
The following table presents the net purchase price and the preliminary fair values of the assets and liabilities of Delta:
|
|
|
|
|
|
Amounts
|
Consideration transferred
|
|
|
Cash paid at closing
|
$
|
40,500
|
|
Net purchase price
|
$
|
40,500
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
Accounts receivable and cost in excess of billings
|
$
|
957
|
|
Inventory
|
4,452
|
|
Fixed assets
|
1,918
|
|
Other current and non-current assets
|
67
|
|
Current liabilities
|
(1,854
|
)
|
Estimated fair value of net tangible assets acquired
|
5,540
|
|
Estimated fair value of identifiable intangible assets
|
17,000
|
|
Estimated goodwill
|
17,960
|
|
Estimated fair value of net assets acquired
|
40,500
|
|
Net purchase price
|
$
|
40,500
|
|
The amounts above represent the preliminary fair value estimates as of
June 30, 2017
and are subject to subsequent adjustment as the Company obtains additional information during the measurement period. The preliminary identifiable intangible asset estimates include customer relationships of
$8,000
with a useful life of
9
years, developed technology of
$5,900
with a useful life of
7
years and backlog of
$3,100
with a useful life of
2
years. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.
The goodwill of
$17,960
largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. The Delta acquisition expands scale and breadth of the Company’s RF, microwave and millimeter wave capabilities, provides highly complementary program portfolio in missiles and munitions, deepens market penetration in core radar, electronic warfare ("EW"), and precision-guided munitions markets, and opens new growth opportunities in space launch, GPS, satellite communications and datalinks. The goodwill from this acquisition was initially reported under the MCE reporting unit.
The Company and the shareholders of Delta have agreed to treat the acquisition of Delta as an asset purchase for tax purposes by filing the required election forms under IRC Section 338(h)(10). The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over
15 years
for tax purposes. As of
June 30, 2017
, the Company had
$18,029
of goodwill deductible for tax purposes.
The revenues and income before income taxes from Delta included in the Company's consolidated results for the fiscal year ended
June 30, 2017
were
$5,435
and
$805
, respectively. The Company has not furnished pro forma financial information relating to Delta because such information is not material to the Company's financial results.
C
ES
A
CQUISITION
On November 4, 2016, the Company and the shareholders of CES entered into a Stock Purchase Agreement, pursuant to which, Mercury acquired CES for a total purchase price of
$39,123
, subject to net working capital and net debt adjustments. The acquisition and associated transaction expenses were funded with cash on hand. Based in Geneva, Switzerland, CES is a provider of embedded solutions for military and aerospace mission-critical computing applications. CES specializes in the design, development and manufacture of safety-certifiable product and subsystems solutions including: primary flight control units, flight test computers, mission computers, command and control processors, graphics and video processing and avionics-certified Ethernet and IO. CES products and solutions are used on platforms such as aerial refueling tankers and multi-mission aircraft, as well as the several types of unmanned platforms.
The following table presents the net purchase price and the preliminary fair values of the assets and liabilities of CES:
|
|
|
|
|
|
Amounts
|
Consideration transferred
|
|
|
Cash paid at closing
|
$
|
39,123
|
|
Working capital adjustment
|
(330
|
)
|
Net purchase price
|
$
|
38,793
|
|
|
|
|
Estimated fair value of tangible assets acquired and liabilities assumed
|
|
|
Accounts receivable and cost in excess of billings
|
$
|
2,698
|
|
Inventory
|
8,950
|
|
Fixed assets
|
1,480
|
|
Other current and non-current assets
|
748
|
|
Current liabilities
|
(3,154
|
)
|
Non-current liabilities
|
(6,140
|
)
|
Deferred tax liabilities
|
(857
|
)
|
Estimated fair value of net tangible assets acquired
|
3,725
|
|
Estimated fair value of identifiable intangible assets
|
14,722
|
|
Estimated goodwill
|
20,346
|
|
Estimated fair value of net assets acquired
|
38,793
|
|
Net purchase price
|
$
|
38,793
|
|
The amounts above represent the preliminary fair value estimates as of
June 30, 2017
and are subject to subsequent adjustment as the Company obtains additional information during the measurement period. The preliminary identifiable intangible asset estimates include customer relationships of
$9,060
with a useful life of
9
years and developed technology of
$5,662
with a useful life of
7
years. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.
The goodwill of
$20,346
largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. CES provides the Company with capabilities in mission computing, safety-critical avionics and platform management that are in demand from its customers. These new capabilities will also substantially expand Mercury’s addressable market into commercial aerospace, defense platform management, command, control, communications, computers, and intelligence ("C4I") and mission computing markets that are aligned to Mercury’s existing market focus. The acquisition is directly aligned with the Company's strategy of expanding its capabilities, services and offerings along the sensor processing chain. The goodwill from this acquisition was initially reported under the MCE reporting unit.
The revenues and income before income taxes from CES included in the Company's consolidated results for the fiscal year ended
June 30, 2017
were
$17,008
and
$1,196
, respectively. The Company has not furnished pro forma financial information relating to CES because such information is not material to the Company's financial results.
C
ARVE-
O
UT
B
USINESS
A
CQUISITION
On March 23, 2016, the Company and Microsemi entered into a Stock Purchase Agreement, pursuant to which, Microsemi agreed to sell all the membership interests in the Carve-Out Business to the Company for
$300,000
in cash on a cash-free, debt-free basis, subject to a working capital adjustment. On May 2, 2016, the transaction closed and the Company acquired the Carve-Out Business. Pursuant to the terms of the Stock Purchase Agreement, all outstanding Carve-Out Business employee stock awards that were unvested at the closing were replaced by Mercury. The replacement stock awards granted were determined based on a conversion ratio provided in the Stock Purchase Agreement. Mercury funded the acquisition with a combination of a new
$200,000
bank term loan facility (see Note L) and cash on hand, which included net proceeds of approximately
$92,788
raised from an underwritten common stock public offering (see Note N).
The following table presents the net purchase price and the fair values of the assets and liabilities of the Carve-Out Business:
|
|
|
|
|
|
Amounts
|
Consideration transferred
|
|
|
Cash paid at closing
|
$
|
300,000
|
|
Value allocated to replacement awards
|
407
|
|
Working capital adjustment
|
(1,838
|
)
|
Net purchase price
|
$
|
298,569
|
|
|
|
|
Fair value of tangible assets acquired and liabilities assumed
|
|
|
Accounts receivable and cost in excess of billings
|
$
|
17,157
|
|
Inventory
|
25,477
|
|
Fixed assets
|
13,996
|
|
Other current and non-current assets
|
524
|
|
Current liabilities
|
(4,692
|
)
|
Non-current deferred tax liabilities
|
(25,449
|
)
|
Fair value of net tangible assets acquired
|
27,013
|
|
Fair value of identifiable intangible assets
|
102,800
|
|
Goodwill
|
168,756
|
|
Fair value of assets acquired
|
298,569
|
|
Net purchase price
|
$
|
298,569
|
|
On May 2, 2017, the measurement period for the Carve-Out Business expired. The identifiable intangible assets include customer relationships of
$70,900
, completed technology of
$29,700
and backlog of
$2,200
.
The goodwill of $
168,756
largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. The Carve-Out Business provides the Company with additional capability and expertise related to embedded security custom microelectronics, and microwave and radio frequency technology. The acquisition is directly aligned with the Company's strategy of expanding its capabilities, services and offerings along the sensor processing chain. The goodwill from this acquisition is reported under the AMS and MDS reporting units. As of June 30, 2016, the Company had
$26,494
of goodwill deductible for tax purposes.
|
|
D.
|
Fair Value of Financial Instruments
|
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
June 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
1,043
|
|
|
$
|
—
|
|
|
$
|
1,043
|
|
|
$
|
—
|
|
Total
|
$
|
1,043
|
|
|
$
|
—
|
|
|
$
|
1,043
|
|
|
$
|
—
|
|
The carrying values of cash and cash equivalents, including money market funds, restricted cash, accounts receivable and payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The fair value of the Company’s certificates of deposit are determined through quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. The cost-method investment, which is presented within other non-current assets in the accompanying consolidated balance sheets, does not have a readily determinable fair value, as such the Company recorded the investment at cost and will continue to evaluate the asset for impairment on a quarterly basis.
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
June 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
30,075
|
|
|
$
|
—
|
|
|
$
|
30,075
|
|
|
$
|
—
|
|
Total
|
$
|
30,075
|
|
|
$
|
—
|
|
|
$
|
30,075
|
|
|
$
|
—
|
|
The Company determined the face value of its long-term debt approximated fair value at June 30, 2016 due to the recent issuance and stability of interest rates during that period.
E.
Inventory
Inventory was comprised of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
2017
|
|
2016
|
Raw materials
|
$
|
48,645
|
|
|
$
|
31,205
|
|
Work in process
|
22,567
|
|
|
15,967
|
|
Finished goods
|
9,859
|
|
|
11,112
|
|
Total
|
$
|
81,071
|
|
|
$
|
58,284
|
|
The
$22,787
increase in inventory was primarily due to the inclusion of inventory from CES and Delta. There are
no
amounts in inventory relating to contracts having production cycles longer than one year.
|
|
F.
|
Property and Equipment
|
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives
(Years)
|
|
June 30,
|
2017
|
|
2016
|
Computer equipment and software
|
3-4
|
|
$
|
64,374
|
|
|
$
|
62,409
|
|
Furniture and fixtures
|
5
|
|
4,810
|
|
|
8,547
|
|
Leasehold improvements
|
lesser of estimated useful life or lease term
|
|
19,092
|
|
|
8,515
|
|
Machinery and equipment
|
5-10
|
|
42,193
|
|
|
29,078
|
|
|
|
|
130,469
|
|
|
108,549
|
|
Less: accumulated depreciation
|
|
|
(78,826
|
)
|
|
(80,212
|
)
|
|
|
|
$
|
51,643
|
|
|
$
|
28,337
|
|
The
$23,306
increase in property and equipment was primarily due to the build-out of the Company's new corporate headquarters, integration activities associated with the Carve-Out Business, and the acquisition of CES and Delta. In fiscal
2017
and
2016
, the Company retired
$14,310
and
$32
, respectively, of computer equipment and software, furniture, and fixtures, leasehold improvements, and machinery and equipment that were no longer in use by the Company.
Depreciation expense related to property and equipment for the fiscal years ended June 30,
2017
,
2016
and
2015
was
$12,589
,
$6,900
and
$6,332
, respectively.
On April 20, 2007, the Company entered into a sales agreement and a lease agreement in connection with a sale-leaseback of the Company’s former headquarters in Chelmsford, Massachusetts. Pursuant to the agreements, the Company sold all land, land improvements, buildings and building improvements related to the facilities and leased back those assets. The term of the lease was
ten
years and included
two
five
year options to renew, which the Company did not exercise. Under the provisions of sale-leaseback accounting, the transaction was considered a normal leaseback; thus the realized gain of
$11,569
was deferred and was amortized to other income on a straight-line basis over the initial lease term.
The unamortized deferred gain of
$929
at June 30, 2016 was included in accrued expenses and in the accompanying consolidated balance sheets and has been fully amortized as of June 30, 2017.
G.
Goodwill
Throughout fiscal 2017, the Company undertook a series of integration activities related to the Carve-Out Business. These integration activities included system conversions, the build-out of our U.S. Manufacturing Organization in Phoenix, insourcing of embedded sensor products manufacturing previously outsourced, retirement of legacy internal controls related to the Carve-Out Business, and integration of the acquired sites into the legacy control environment. Significant work was done through the fourth quarter of fiscal 2017 to complete these integration activities. The conclusion of these integration efforts resulted in a reorganization of the Company's reporting unit structure from MCE, MDS and the Carve-Out Business to: Sensor and Mission Processing (“SMP”), Advanced Microelectronic Solutions (“AMS”) and Mercury Defense Systems (“MDS”). This change had no effect on the Company’s operating segment, as the Chief Operating Decision Maker (“CODM”) continues to evaluate and manage the Company on the basis of
one
reportable segment.
The following table summarizes the changes in goodwill at the Company's
three
reporting units for the year ended June 30, 2016, prior to the reorganization of the Company's reporting unit structure in fiscal 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCE
|
|
MDS
|
|
Carve-Out Business
|
|
Total
|
Balance at June 30, 2015
|
$
|
134,378
|
|
|
$
|
33,768
|
|
|
$
|
—
|
|
|
$
|
168,146
|
|
Goodwill arising from the LIT acquisition
|
—
|
|
|
5,638
|
|
|
—
|
|
|
5,638
|
|
Goodwill arising from the Carve-Out Business Acquisition
|
—
|
|
|
—
|
|
|
170,243
|
|
|
170,243
|
|
Balance at June 30, 2016
|
$
|
134,378
|
|
|
$
|
39,406
|
|
|
$
|
170,243
|
|
|
$
|
344,027
|
|
The following table summarizes the changes in goodwill at the Company's
three
reporting units from June 30, 2016 through May 31, 2017, immediately before the reorganization of the Company's reporting unit structure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCE
|
|
MDS
|
|
Carve-Out Business
|
|
Total
|
Balance at June 30, 2016
|
$
|
134,378
|
|
|
$
|
39,406
|
|
|
$
|
170,243
|
|
|
$
|
344,027
|
|
Goodwill adjustment for the Carve-Out Business acquisition
|
—
|
|
|
—
|
|
|
(1,487
|
)
|
|
(1,487
|
)
|
Goodwill arising from the CES acquisition
|
20,346
|
|
|
—
|
|
|
—
|
|
|
20,346
|
|
Goodwill arising from the Delta acquisition
|
17,960
|
|
|
—
|
|
|
—
|
|
|
17,960
|
|
Balance at May 31, 2017
|
$
|
172,684
|
|
|
$
|
39,406
|
|
|
$
|
168,756
|
|
|
$
|
380,846
|
|
In accordance with FASB ASC 350,
Intangibles-Goodwill and Other
(“ASC 350”), the Company determines its reporting units based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit. A reporting unit is considered to be an operating segment or one level below an operating segment also known as a component.
The Company reviewed its analysis of its internally reorganized business in order to determine its reporting units in accordance with ASC 350. Component level financial information is now reviewed by management at SMP, AMS and MDS. Accordingly, these were determined to be the Company’s new reporting units.
In fiscal 2017, after its reorganization, the Company reassigned goodwill to the businesses in the affected reporting units based on their relative fair values in accordance with ASC 350. There were
no
changes in the total carrying amount of goodwill for the one month ended June 30, 2017 after reallocation. The carrying amounts of goodwill by reporting unit at June 30, 2017 are
$116,003
,
$217,956
, and
$46,887
for SMP, AMS and MDS, respectively.
The change in reporting units qualified as a triggering event and required goodwill to be tested for impairment. As required by ASC 350, the Company analyzed goodwill for impairment immediately prior to and immediately subsequent to the reorganization. As a result of these analyses, it was determined that goodwill was not impaired either prior to or subsequent to the reorganization.
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
June 30, 2017
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
117,630
|
|
|
$
|
(31,533
|
)
|
|
$
|
86,097
|
|
|
10.0 years
|
Licensing agreements and patents
|
1,131
|
|
|
(277
|
)
|
|
854
|
|
|
3.7 years
|
Completed technologies
|
44,503
|
|
|
(6,079
|
)
|
|
38,424
|
|
|
7.9 years
|
Backlog
|
5,430
|
|
|
(1,768
|
)
|
|
3,662
|
|
|
2.0 years
|
|
$
|
168,694
|
|
|
$
|
(39,657
|
)
|
|
$
|
129,037
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
105,370
|
|
|
$
|
(23,824
|
)
|
|
$
|
81,546
|
|
|
9.9 years
|
Licensing agreements and patents
|
756
|
|
|
(38
|
)
|
|
718
|
|
|
4.0 years
|
Completed technologies
|
35,840
|
|
|
(3,545
|
)
|
|
32,295
|
|
|
7.6 years
|
Backlog
|
2,330
|
|
|
(216
|
)
|
|
2,114
|
|
|
2.0 years
|
|
$
|
144,296
|
|
|
$
|
(27,623
|
)
|
|
$
|
116,673
|
|
|
|
Estimated future amortization expense for intangible assets remaining at
June 30, 2017
is as follows:
|
|
|
|
|
|
Year Ending
June 30,
|
2018
|
$
|
21,722
|
|
2019
|
17,542
|
|
2020
|
14,767
|
|
2021
|
14,165
|
|
2022
|
14,165
|
|
Thereafter
|
46,676
|
|
Total future amortization expense
|
$
|
129,037
|
|
The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the Delta acquisition. These assets are included in the Company's gross and net carrying amounts as of June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
Customer relationships
|
$
|
8,000
|
|
|
$
|
(225
|
)
|
|
$
|
7,775
|
|
|
9.1 years
|
Completed technologies
|
5,900
|
|
|
(148
|
)
|
|
5,752
|
|
|
10.0 years
|
Backlog
|
3,100
|
|
|
(388
|
)
|
|
2,712
|
|
|
2.0 years
|
|
$
|
17,000
|
|
|
$
|
(761
|
)
|
|
$
|
16,239
|
|
|
|
The following table summarizes the preliminary estimated fair value of acquired intangible assets arising as a result of the CES acquisition. These assets are included in the Company's gross and net carrying amounts as of June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
Customer relationships
|
$
|
9,060
|
|
|
$
|
(681
|
)
|
|
$
|
8,379
|
|
|
9.0 years
|
Completed technologies
|
5,662
|
|
|
(547
|
)
|
|
5,115
|
|
|
7.0 years
|
|
$
|
14,722
|
|
|
$
|
(1,228
|
)
|
|
$
|
13,494
|
|
|
|
The following table summarizes the fair value of acquired intangible assets arising as a result of the Carve-Out Business acquisition. These assets are included in the Company's gross and net carrying amounts as of June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted
Average
Useful
Life
|
Customer relationships
|
$
|
70,900
|
|
|
$
|
(7,856
|
)
|
|
$
|
63,044
|
|
|
11.5 years
|
Completed technologies
|
29,700
|
|
|
(4,690
|
)
|
|
25,010
|
|
|
7.8 years
|
Backlog
|
2,200
|
|
|
(1,283
|
)
|
|
917
|
|
|
2.0 years
|
|
$
|
102,800
|
|
|
$
|
(13,829
|
)
|
|
$
|
88,971
|
|
|
|
I.
Restructuring
During the fourth quarter of fiscal 2017, the Company initiated a plan to close its Manteca, California facility as a result of the acquisition of Delta. The Company incurred
$910
of severance and related expenses in conjunction with the elimination of
33
positions primarily in operations related to the planned closure of the facility. Additionally, the Company incurred
$1,042
in restructuring expenses related to other various restructuring events during fiscal 2017.
During fiscal 2016, the Company incurred restructuring and other charges of
$1,240
, primarily related to executive severance and facility consolidation.
During fiscal 2015, the Company incurred restructuring and other charges of
$3,175
as the Company completed its acquisition integration plan primarily associated with the Micronetics, Inc. acquisition. Additionally, during the fourth quarter of fiscal 2015, the Company eliminated
16
positions, primarily in operations.
All of the restructuring and other charges are classified as operating expenses in the consolidated statements of operations and any remaining severance obligations are expected to be paid within the next twelve months. The remaining restructuring liability is classified as accrued expenses in the consolidated balance sheets.
The following table presents the detail of expenses for the Company’s restructuring plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance & Related
|
|
Facilities & Other
|
|
Total
|
Restructuring liability at June 30, 2015
|
$
|
657
|
|
|
$
|
1,335
|
|
|
$
|
1,992
|
|
Restructuring charges
|
752
|
|
|
589
|
|
|
1,341
|
|
Cash paid
|
(1,118
|
)
|
|
(1,188
|
)
|
|
(2,306
|
)
|
Reversals (*)
|
(101
|
)
|
|
—
|
|
|
(101
|
)
|
Restructuring liability at June 30, 2016
|
190
|
|
|
736
|
|
|
926
|
|
Restructuring charges
|
1,706
|
|
|
253
|
|
|
1,959
|
|
Cash paid
|
(524
|
)
|
|
(989
|
)
|
|
(1,513
|
)
|
Reversals (*)
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
Restructuring liability at June 30, 2017
|
$
|
1,365
|
|
|
$
|
—
|
|
|
$
|
1,365
|
|
(*) Reversals result from the unused outplacement services and operating costs.
J.
Income Taxes
The components of income from continuing operations before income taxes and income tax expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
Income from continuing operations before income taxes:
|
|
|
|
|
|
United States
|
$
|
30,499
|
|
|
$
|
25,194
|
|
|
$
|
18,443
|
|
Foreign
|
569
|
|
|
92
|
|
|
352
|
|
|
$
|
31,068
|
|
|
$
|
25,286
|
|
|
$
|
18,795
|
|
Tax provision (benefit):
|
|
|
|
|
|
Federal:
|
|
|
|
|
|
Current
|
$
|
11,476
|
|
|
$
|
6,707
|
|
|
$
|
4,267
|
|
Deferred
|
(7,645
|
)
|
|
(2,627
|
)
|
|
(458
|
)
|
|
$
|
3,831
|
|
|
$
|
4,080
|
|
|
$
|
3,809
|
|
State:
|
|
|
|
|
|
Current
|
$
|
3,650
|
|
|
$
|
1,839
|
|
|
$
|
1,372
|
|
Deferred
|
(1,684
|
)
|
|
(424
|
)
|
|
(921
|
)
|
|
$
|
1,966
|
|
|
$
|
1,415
|
|
|
$
|
451
|
|
Foreign:
|
|
|
|
|
|
Current
|
$
|
240
|
|
|
$
|
59
|
|
|
$
|
58
|
|
Deferred
|
156
|
|
|
(10
|
)
|
|
48
|
|
|
396
|
|
|
49
|
|
|
106
|
|
|
$
|
6,193
|
|
|
$
|
5,544
|
|
|
$
|
4,366
|
|
The following is the reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate for continuing operations:
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
Tax provision at federal statutory rates
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income tax, net of federal tax benefit
|
4.9
|
|
|
5.0
|
|
|
4.9
|
|
Research and development credits
|
(6.1
|
)
|
|
(8.4
|
)
|
|
(4.8
|
)
|
Excess tax benefits on stock compensation
|
(13.1
|
)
|
|
(4.4
|
)
|
|
—
|
|
Domestic manufacturing deduction
|
(3.9
|
)
|
|
(3.5
|
)
|
|
(3.2
|
)
|
Income from legal settlement excluded from taxable income
|
—
|
|
|
(2.8
|
)
|
|
—
|
|
Deemed repatriation of foreign earnings
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.4
|
)
|
Foreign income tax rate differential
|
0.2
|
|
|
—
|
|
|
—
|
|
Equity compensation
|
0.6
|
|
|
0.3
|
|
|
(0.1
|
)
|
Officers' compensation
|
1.2
|
|
|
2.3
|
|
|
2.8
|
|
Deferred tax asset and liability adjustments
|
—
|
|
|
—
|
|
|
(4.2
|
)
|
Change in state tax rates
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
Acquisition costs
|
0.9
|
|
|
—
|
|
|
—
|
|
Reserves for tax contingencies
|
(0.6
|
)
|
|
(3.2
|
)
|
|
(5.0
|
)
|
Other
|
0.9
|
|
|
1.8
|
|
|
1.3
|
|
|
19.9
|
%
|
|
21.9
|
%
|
|
23.2
|
%
|
The components of the Company’s net deferred tax liabilities for continuing operations were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
2017
|
|
2016
|
Deferred tax assets:
|
|
|
|
Inventory valuation and receivable allowances
|
$
|
13,845
|
|
|
$
|
12,768
|
|
Accrued compensation
|
4,555
|
|
|
3,267
|
|
Equity compensation
|
4,858
|
|
|
3,201
|
|
Federal and state research and development tax credit carryforwards
|
13,415
|
|
|
15,870
|
|
Gain on sale-leaseback
|
—
|
|
|
371
|
|
Other accruals
|
2,125
|
|
|
1,570
|
|
Deferred compensation
|
1,606
|
|
|
—
|
|
Capital loss carryforwards
|
3,562
|
|
|
3,562
|
|
Other temporary differences
|
1,500
|
|
|
4,011
|
|
|
45,466
|
|
|
44,620
|
|
Valuation allowance
|
(16,570
|
)
|
|
(18,472
|
)
|
Total deferred tax assets
|
28,896
|
|
|
26,148
|
|
Deferred tax liabilities:
|
|
|
|
Prepaid expenses
|
(481
|
)
|
|
(773
|
)
|
Property and equipment
|
(3,749
|
)
|
|
(2,451
|
)
|
Intangible assets
|
(28,163
|
)
|
|
(33,826
|
)
|
Tax method of accounting change
|
(285
|
)
|
|
(570
|
)
|
Other temporary differences
|
(441
|
)
|
|
(370
|
)
|
Total deferred tax liabilities
|
(33,119
|
)
|
|
(37,990
|
)
|
Net deferred tax (liabilities) assets
|
$
|
(4,223
|
)
|
|
$
|
(11,842
|
)
|
|
|
|
|
As reported:
|
|
|
|
Deferred tax assets
|
$
|
633
|
|
|
$
|
—
|
|
Deferred tax liabilities
|
(4,856
|
)
|
|
(11,842
|
)
|
|
$
|
(4,223
|
)
|
|
$
|
(11,842
|
)
|
At
June 30, 2017
, the Company evaluated the need for a valuation allowance on deferred tax assets. In assessing whether the deferred tax assets are realizable, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the Company's past operating results, its forecast of future earnings, future taxable income, and tax planning strategies. The Company continues to conclude that it is more likely than not that most domestic deferred tax assets would be realizable based on recent financial performance, projected future taxable income and the reversal of existing deferred tax liabilities.
The Company continues to record a full valuation allowance on capital loss carryforwards and certain state research and development credits as of
June 30, 2017
as management continues to believe that it is not more likely than not that these deferred tax assets would be realized. Any future reversals of the valuation allowance will impact income tax expense.
The Company had federal research and development credit carryforwards of
$406
, which will expire in
2033
. The Company had state research and development credit carryforwards of
$13,008
, which will expire from 2017 through 2032.
Upon consideration of changing business conditions and cash position in its foreign subsidiaries, management has determined that it does not need to indefinitely reinvest the earnings of certain foreign subsidiaries. Therefore, the Company has accrued deferred taxes in association with
$794
in undistributed foreign earnings and profits.
The Company files income tax returns in all jurisdictions in which it operates. The Company has established reserves to provide for additional income taxes that management believes will more likely than not be due in future years as these previously filed tax returns are audited. These reserves have been established based upon management’s assessment as to the potential exposures. All tax reserves are analyzed quarterly and adjustments are made as events occur and warrant modification.
The changes in the Company’s reserves for unrecognized income tax benefits are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
Unrecognized tax benefits, beginning of period
|
$
|
1,566
|
|
|
$
|
2,190
|
|
Increases for previously recognized positions
|
46
|
|
|
79
|
|
Settlements of previously recognized positions
|
(793
|
)
|
|
—
|
|
Reductions as a result of a lapse of the applicable statute of limitations
|
(273
|
)
|
|
—
|
|
Increases for currently recognized positions
|
384
|
|
|
302
|
|
Reductions for previously recognized positions deemed effectively settled
|
—
|
|
|
(681
|
)
|
Reductions for previously recognized positions
|
(126
|
)
|
|
(324
|
)
|
Unrecognized tax benefits, end of period
|
$
|
804
|
|
|
$
|
1,566
|
|
The
$804
of unrecognized tax benefits as of
June 30, 2017
, if released, would reduce income tax expense.
The Company’s major tax jurisdiction is the U.S. and the open tax years are fiscal 2014 through 2017.
The Internal Revenue Service (the “IRS”) accepted the final examination report during the fourth quarter of fiscal year 2017 in connection with the IRS’s examination of the Company’s consolidated federal income tax returns for the fiscal year 2013, which resolved various tax matters for the Company. As a result of the acceptance, the Company recorded a
$273
income tax benefit attributable to the reversal of tax reserves and
$793
for amounts previously reserved that were settled through the examination process. The Company received a refund of
$1,598
during July 2017 in connection with the conclusion of the IRS examination.
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of June 30, 2017 and 2016, the total amount of gross interest and penalties accrued was
$54
and
$258
, respectively. In connection with tax matters, the Company recognized interest and penalty expense in fiscal 2017, 2016 and 2015 of
$30
,
$204
and
$26
, respectively.
K.
Commitments and Contingencies
L
EGAL
C
LAIMS
The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company's cash flows, results of operations, or financial position.
I
NDEMNIFICATION
O
BLIGATIONS
The Company's standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to the Company's products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments the Company could be required to make under these indemnification provisions is, in some instances, unlimited.
P
URCHASE
C
OMMITMENTS
As of
June 30, 2017
, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations. The purchase commitments covered by these agreements are for less than one year and aggregate to
$59,173
.
L
EASE
C
OMMITMENTS
The Company leases certain facilities, machinery and equipment under various cancelable and non-cancelable operating leases that expire at various dates through fiscal 2029. The leases contain various renewal options. Rental charges are subject to escalation for increases in certain operating costs of the lessor. For tenant improvement allowances and rent holidays, the Company records a deferred rent liability on the consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the consolidated statements of operations. Rental expense during the fiscal years ended June 30,
2017
,
2016
, and
2015
was
$7,774
,
$4,015
and
$3,777
, respectively. Minimum lease payments under the Company’s non-cancelable operating leases are as follows:
|
|
|
|
|
|
Year Ending
June 30,
|
2018
|
$
|
6,139
|
|
2019
|
5,595
|
|
2020
|
5,208
|
|
2021
|
4,291
|
|
2022
|
3,387
|
|
Thereafter
|
18,897
|
|
Total minimum lease payments
|
$
|
43,517
|
|
O
THER
As part of the Company's strategy for growth, the Company continues to explore acquisitions or strategic alliances. The associated acquisition costs incurred in the form of professional fees and services may be material to the future periods in which they occur, regardless of whether the acquisition is ultimately completed.
The Company may elect from time to time to purchase and subsequently retire shares of common stock in order to settle an individual employees’ tax liability associated with vesting of a restricted stock award or exercise of stock options. These transactions would be treated as a use of cash in financing activities in the Company's statement of cash flows.
L.
Debt
Revolving Credit Facilities
On May 2, 2016, the Company and certain of its subsidiaries, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent. The Credit Agreement provided for a
$200,000
term loan facility (“the Term Loan”) and a
$100,000
revolving credit facility (“Revolver”). In connection with the issuance of Term Loan, the Company incurred
$8,026
of debt issuance costs, which were recorded as a direct reduction to long-term debt on the face of the consolidated balance sheets. The debt issuance costs were amortized to non-cash interest expense using the effective interest method over the term of the Term Loan.
On June 27, 2017, the Company amended the Credit Agreement to increase and extend the borrowing capacity of the Revolver to
$400,000
expiring in June 2022 (“the Amended Credit Agreement”). In connection with the amendment, the Company also repaid the remaining principal and accrued and unpaid interest outstanding on the Term Loan using cash on hand. The Company evaluated the amended Credit Agreement under FASB ASC 470,
Debt
, and determined that the amendment represented a modification of the Credit Agreement. Accordingly, the remaining
$6,522
in unamortized debt issuance costs at June 27, 2017, in addition to
$591
in new fees paid to the syndicate of lenders in connection with the amendment, will be amortized to non-cash interest expense on a straight line basis over the new term of the Revolver. The Revolver remained undrawn at June 30, 2017, other than
$5,897
of outstanding letters of credit.
Maturity
The Revolver has a
five
year maturity.
Interest Rates and Fees
Borrowings under the Revolver bear interest, at the Company’s option, at floating rates tied to LIBOR or the prime rate plus an applicable percentage. The applicable percentage has initially been set at LIBOR plus
1.375%
and in future fiscal quarters will be established pursuant to a pricing grid based on the Company's total net leverage ratio.
In addition to interest on the aggregate outstanding principal amounts of any borrowings, the Company will also pay a quarterly commitment fee on the unutilized commitments under the Revolver, which fee has initially been set at
0.25%
per annum
and in future fiscal quarters will be established pursuant to a pricing grid based on the Company's total net leverage ratio. The Company will also pay customary letter of credit and agency fees.
Covenants and Events of Default
The Amended Credit Agreement provides for customary negative covenants. The Amended Credit Agreement also requires the Company to comply with certain financial covenants, including a quarterly minimum consolidated cash interest charge ratio test and a quarterly maximum consolidated total net leverage ratio test.
The Amended Credit Agreement also provides for customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders under the Amended Credit Agreement will be entitled to take various actions, including the termination of unutilized commitments, the acceleration of amounts outstanding under the Amended Credit Agreement and all actions permitted to be taken by a secured creditor. As of June 30, 2017, the Company was in compliance with all covenants and conditions under the Amended Credit Agreement.
Guarantees and Security
The Company's obligations under the Amended Credit Agreement are guaranteed by certain of its material domestic wholly-owned restricted subsidiaries (the “Guarantors”). The obligations of both the Company and the Guarantors are secured by a perfected security interest in substantially all of the assets of the Company and the Guarantors, in each case, now owned or later acquired, including a pledge of all of the capital stock of substantially all of its domestic wholly-owned restricted subsidiaries and
65%
of the capital stock of certain of its foreign restricted subsidiaries, subject in each case to the exclusion of certain assets and additional exceptions.
M.
Employee Benefit Plans
Pension Plan
With the acquisition of CES on November 4, 2016, the Company assumed a pension plan (the "Plan") for its Swiss employees, which is administered by an independent pension fund. The Plan is mandated by Swiss law and meets the criteria for a defined benefit plan under ASC 715,
Compensation—Retirement Benefits
(“ASC 715”), since participants of the Plan are entitled to a defined rate of return on contributions made. The independent pension fund is a multi-employer plan with unrestricted joint liability for all participating companies for which the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan.
The Company recognizes a net asset or liability for the Plan equal to the difference between the projected benefit obligation of the Plan and the fair value of the Plan’s assets as required by ASC 715. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan.
On January 1, 2017, the Company changed pension providers. The Company's results contain the effects of the change in pension provider as prior service costs. These prior service costs will be amortized from other comprehensive income to net periodic benefit costs over approximately
10 years
. At
June 30, 2017
, the accumulated benefit obligation of the Plan equals the fair value of the Plan's assets. The Plan's funded status at
June 30, 2017
was a net liability of
$6,601
, which is recorded in other non-current liabilities on the consolidated balance sheets. The Company recorded a net gain of
$220
in accumulated other comprehensive income during the year ended
June 30, 2017
. The Company's total expected employer contributions to the Plan during fiscal 2018 are
$539
.
The following table reflects the total pension benefits expected to be paid from the Plan, which is funded from contributions by participants and the Company.
|
|
|
|
|
|
Year Ended
June 30,
|
2018
|
$
|
526
|
|
2019
|
678
|
|
2020
|
800
|
|
2021
|
497
|
|
2022
|
622
|
|
Thereafter (next 5 years)
|
3,928
|
|
Total
|
$
|
7,051
|
|
The following table outlines the components of net periodic benefit cost of the Plan for the year ended
June 30, 2017
:
|
|
|
|
|
|
Year Ended
June 30, 2017
|
Service cost
|
$
|
557
|
|
Interest cost
|
73
|
|
Expected return on assets
|
(105
|
)
|
Amortization of prior service cost
|
20
|
|
Net periodic benefit cost
|
$
|
545
|
|
The following table reflects the related actuarial assumptions used to determine net periodic benefit cost of the Plan for the year ended June 30, 2017:
|
|
|
|
|
Year Ended
June 30, 2017
|
Discount rate
|
0.70
|
%
|
Expected rate of return on Plan assets
|
1.50
|
%
|
Expected inflation
|
1.00
|
%
|
Rate of compensation increases
|
1.00
|
%
|
The calculation of the projected benefit obligation ("PBO") utilized BVG 2015 Generational data for assumptions related to the mortality rates, disability rates, turnover rates, and early retirement ages. Assumptions used to determine the year-end pension benefit obligation is the discount rate of
0.70%
and rate of compensation increases of
1.00%
.
The PBO represents the present value of Plan benefits earned through the end of the year, with an allowance for future salary and pension increases as well as turnover rates. The following table presents the change in projected benefit obligation for the period presented:
|
|
|
|
|
|
Year Ending
June 30, 2017
|
Projected benefit obligation at November 4, 2016
|
$
|
17,086
|
|
Service cost
|
557
|
|
Interest cost
|
73
|
|
Employee contributions
|
581
|
|
Actuarial gain
|
(598
|
)
|
Benefits paid
|
(563
|
)
|
Plan amendment
|
390
|
|
Projected benefit obligation at end of year
|
$
|
17,526
|
|
The following table presents the change in Plan assets for the period presented:
|
|
|
|
|
|
Year Ending
June 30, 2017
|
Fair value of plan assets at November 4, 2016
|
$
|
10,459
|
|
Actual return on Plan assets
|
100
|
|
Company contributions
|
348
|
|
Employee contributions
|
581
|
|
Benefits paid
|
(563
|
)
|
Fair value of plan assets at end of year
|
$
|
10,925
|
|
The following table presents the Company's reconciliation of funded status for the period presented:
|
|
|
|
|
|
Year Ended
June 30, 2017
|
Projected benefit obligation at end of year
|
$
|
17,526
|
|
Fair value of plan assets at end of year
|
10,925
|
|
Funded status
|
$
|
(6,601
|
)
|
The Company did
no
t recognize any (gain) loss from other comprehensive income ("OCI") in its consolidated results of operations during the year ended
June 30, 2017
. The Company does
no
t expect to recognize any (gain) loss from OCI for the year ended June 30, 2018.
The fair value of Plan assets were
$10,925
at
June 30, 2017
. The Plan is denominated in a foreign currency, the Swiss Franc, which can have an impact on the fair value of Plan assets. The Plan was not subject to material fluctuations during year ended
June 30, 2017
. The Plan’s assets are administered by an independent pension fund foundation (the “foundation”). As of June 30, 2017, the foundation has invested the assets of the Plan in various investments vehicles, including cash, real estate, equity securities, and bonds. The investments are measured at fair value using a mix of Level 1, Level 2 and Level 3 inputs.
401(k) Plan
The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S. employees. During fiscal
2017
,
2016
and
2015
, the Company matched employee contributions up to
3%
of eligible compensation. The Company may also make optional contributions to the plan for any plan year at its discretion. Expense recognized by the Company for matching contributions related to the 401(k) plan was
$3,206
,
$1,874
and
$1,934
during the fiscal years ended June 30,
2017
,
2016
, and
2015
, respectively.
N. Shareholders’ Equity
P
REFERRED
S
TOCK
The Company is authorized to issue
1,000
shares of preferred stock with a par value of
$0.01
per share.
F
OLLOW-ON
E
QUITY
O
FFERINGS
On January 26, 2017, the Company announced the commencement of an underwritten public offering of its common stock, par value
$0.01
per share. On February 1, 2017, the Company closed the offering, including the full over-allotment allocation, selling an aggregate of
6,900
shares of common stock at a price to the public of
$33.00
for total net proceeds of
$215,725
.
On April 4, 2016, the Company announced the commencement of an underwritten public offering of its common stock, par value
$0.01
per share. On April 13, 2016, the Company closed the offering, including the full over-allotment allocation, selling an aggregate of
5,175
shares of common stock at a price to the public of
$19.25
for total net proceeds of
$92,788
.
O. Stock-Based Compensation
S
TOCK
O
PTION
P
LANS
The number of shares authorized for issuance under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”), is
15,252
shares at
June 30, 2017
. As reflected in the Company's registration statement on Form S-8 filed on February 4, 2016, the Company's number of shares authorized for issuance under the 2005 Plan increased by
2
shares as a result of forfeitures, cancellations and/or terminations from the Company's 1997 Stock Option Plan. The 2005 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees. All stock options are granted with an exercise price of not less than
100%
of the fair value of the Company’s common stock at the date of grant and the options generally have a term of
seven years
. There were
2,559
shares available for future grant under the 2005 Plan at
June 30, 2017
.
As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives pursuant to the 2005 Plan. Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly. The performance targets include: (i) the achievement of internal performance targets only, and (ii) the achievement of internal performance targets in relation to a peer group of companies.
E
MPLOYEE
S
TOCK
P
URCHASE
P
LAN
The number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is
1,800
shares. Under the ESPP, rights are granted to purchase shares of common stock at
85%
of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed
10%
of an employee’s compensation as defined in the ESPP. The number of shares issued under the ESPP during fiscal years
2017
,
2016
, and
2015
was
96
,
88
and
79
, respectively. Shares available for future purchase under the ESPP totaled
302
at
June 30, 2017
.
S
TOCK
O
PTION
AND
A
WARD
A
CTIVITY
The following table summarizes activity of the Company’s stock option plans since June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Number of
Shares
|
|
Weighted Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value as
of 6/30/2017
|
Outstanding at June 30, 2015
|
830
|
|
|
$
|
13.43
|
|
|
1.66
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
(524
|
)
|
|
13.12
|
|
|
|
|
|
Cancelled
|
(48
|
)
|
|
17.25
|
|
|
|
|
|
Outstanding at June 30, 2016
|
258
|
|
|
$
|
13.34
|
|
|
1.06
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
(207
|
)
|
|
13.29
|
|
|
|
|
|
Cancelled
|
—
|
|
|
—
|
|
|
|
|
|
Outstanding at June 30, 2017
|
51
|
|
|
$
|
13.53
|
|
|
0.60
|
|
$
|
1,442
|
|
Vested and expected to vest at June 30, 2017
|
51
|
|
|
$
|
13.53
|
|
|
0.60
|
|
$
|
1,442
|
|
Exercisable at June 30, 2017
|
51
|
|
|
$
|
13.53
|
|
|
0.60
|
|
$
|
1,442
|
|
The intrinsic value of the options exercised during fiscal years
2017
,
2016
, and
2015
was
$3,762
,
$1,976
and
$3,373
, respectively. Non-vested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions. As of
June 30, 2017
and 2016, there was
$0
of total unrecognized compensation cost related to non-vested options granted under the Company’s stock plans. There were
no
stock options granted during fiscal years 2017, 2016 or 2015.
The following table summarizes the status of the Company’s non-vested restricted stock awards since June 30,
2015
:
|
|
|
|
|
|
|
|
|
Non-Vested Restricted Stock Awards
|
|
Number of
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Outstanding at June 30, 2015
|
1,866
|
|
|
$
|
10.72
|
|
Granted
|
667
|
|
|
16.26
|
|
Vested
|
(743
|
)
|
|
10.93
|
|
Forfeited
|
(124
|
)
|
|
11.70
|
|
Outstanding at June 30, 2016
|
1,666
|
|
|
$
|
13.09
|
|
Granted
|
718
|
|
|
24.72
|
|
Vested
|
(769
|
)
|
|
11.94
|
|
Forfeited
|
(51
|
)
|
|
15.02
|
|
Outstanding at June 30, 2017
|
1,564
|
|
|
$
|
18.93
|
|
The total fair value of restricted stock awards vested during fiscal year
2017
,
2016
, and
2015
was
$19,402
,
$12,185
and
$9,078
, respectively.
Non-vested restricted stock awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of
June 30, 2017
, there was
$12,160
of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of
1.5
years from
June 30, 2017
. As of
June 30, 2016
, there was
$10,938
of total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock plans that is expected to be recognized over a weighted-average period of
1.6
years from
June 30, 2016
.
S
TOCK
-
BASED
C
OMPENSATION
E
XPENSE
The Company recognizes expense for its share-based payment plans in the consolidated statements of operations for the fiscal years
2017
,
2016
, and
2015
in accordance with FASB ASC 718. The Company had
$194
and
$93
of capitalized stock-based compensation expense on the Consolidated Balance Sheet as of
June 30, 2017
and 2016. In the prior years, the Company did not capitalize any such costs on the consolidated balance sheets, as such costs that qualified for capitalization were not material. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period. The following table presents share-based compensation expenses from continuing operations included in the Company’s consolidated statement of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
Cost of revenues
|
$
|
531
|
|
|
$
|
441
|
|
|
$
|
493
|
|
Selling, general and administrative
|
13,212
|
|
|
7,864
|
|
|
6,751
|
|
Research and development
|
1,598
|
|
|
1,269
|
|
|
1,396
|
|
Share-based compensation expense before tax
|
15,341
|
|
|
9,574
|
|
|
8,640
|
|
Income taxes
|
(5,874
|
)
|
|
(3,727
|
)
|
|
(3,332
|
)
|
Share-based compensation expense, net of income taxes
|
$
|
9,467
|
|
|
$
|
5,847
|
|
|
$
|
5,308
|
|
P. Operating Segment, Geographic Information and Significant Customers
Operating segments are defined as components of an enterprise evaluated regularly by the Company's chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company is comprised of
one
operating and reportable segment. The Company utilized the management approach for determining its operating segment in accordance with FASB ASC 280,
Segment Reporting
.
The geographic distribution of the Company’s revenues as determined by order origination based on the country in which the Company's legal subsidiary is domiciled is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
Europe
|
|
Asia Pacific
|
|
Eliminations
|
|
Total
|
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, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues to unaffiliated customers
|
$
|
259,781
|
|
|
$
|
5,464
|
|
|
$
|
4,909
|
|
|
$
|
—
|
|
|
$
|
270,154
|
|
Inter-geographic revenues
|
7,911
|
|
|
447
|
|
|
—
|
|
|
(8,358
|
)
|
|
—
|
|
Net revenues
|
$
|
267,692
|
|
|
$
|
5,911
|
|
|
$
|
4,909
|
|
|
$
|
(8,358
|
)
|
|
$
|
270,154
|
|
Identifiable long-lived assets (1)
|
$
|
28,187
|
|
|
$
|
127
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
28,337
|
|
YEAR ENDED JUNE 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues to unaffiliated customers
|
$
|
229,849
|
|
|
$
|
2,076
|
|
|
$
|
2,922
|
|
|
$
|
—
|
|
|
$
|
234,847
|
|
Inter-geographic revenues
|
2,806
|
|
|
475
|
|
|
—
|
|
|
(3,281
|
)
|
|
—
|
|
Net revenues
|
$
|
232,655
|
|
|
$
|
2,551
|
|
|
$
|
2,922
|
|
|
$
|
(3,281
|
)
|
|
$
|
234,847
|
|
Identifiable long-lived assets (1)
|
$
|
13,127
|
|
|
$
|
68
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
13,226
|
|
(1) Identifiable long-lived assets exclude goodwill and intangible assets.
In recent years, the Company completed a series of acquisitions that changed its technological capabilities, applications and end markets. As these acquisitions and changes occurred, the Company increased the proportion of its revenue derived from the sale of components in different technological areas, and also increased the amount of revenue associated with combining technologies into more complex and diverse products including modules, sub-assemblies and integrated subsystems. The following tables present revenue consistent with the Company's strategy of expanding its technological capabilities and program content.
The following table presents the Company's net revenue by end market for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
|
2017
|
|
2016
|
|
2015
|
Domestic (1)
|
|
$
|
341,699
|
|
|
$
|
220,253
|
|
|
$
|
189,596
|
|
International/Foreign Military Sales (2)
|
|
66,889
|
|
|
49,901
|
|
|
45,251
|
|
Total Net Revenue
|
|
$
|
408,588
|
|
|
$
|
270,154
|
|
|
$
|
234,847
|
|
(1) Domestic revenues consist of sales where the end user is within the U.S., as well as sales to prime defense contractor customers where the ultimate end user location is not defined.
(2) International/Foreign Military Sales consist of sales to U.S. prime defense contractor customers where the end user is outside the U.S., foreign military sales through the U.S. government, and direct sales to non-U.S. based customers intended for end use outside of the U.S.
The following table presents the Company's net revenue by end application for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
|
2017
|
|
2016
|
|
2015
|
Radar (1)
|
|
$
|
150,441
|
|
|
$
|
140,289
|
|
|
$
|
143,475
|
|
Electronic Warfare (2)
|
|
106,446
|
|
|
72,118
|
|
|
51,419
|
|
Other (3)
|
|
151,701
|
|
|
57,747
|
|
|
39,953
|
|
Total Net Revenue
|
|
$
|
408,588
|
|
|
$
|
270,154
|
|
|
$
|
234,847
|
|
(1) Radar includes end-use applications where radio frequency signals are utilized to detect, track, and identify objects.
(2) Electronic Warfare includes end-use applications comprising the offensive and defensive use of the electromagnetic spectrum.
(3) Other products include all end markets other than Radar and Electronic Warfare. Examples include but are not limited to various commercial and other end-use applications and technologies, as well as various component and other sales where the end use is not specified.
The following table below the Company's net revenue by product grouping for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
|
2017
|
|
2016
|
|
2015
|
Components (1)
|
|
$
|
105,669
|
|
|
$
|
31,252
|
|
|
$
|
15,543
|
|
Modules and Sub-assemblies (2)
|
|
161,973
|
|
|
126,777
|
|
|
107,922
|
|
Integrated Subsystems (3)
|
|
140,946
|
|
|
112,125
|
|
|
111,382
|
|
Total Net Revenue
|
|
$
|
408,588
|
|
|
$
|
270,154
|
|
|
$
|
234,847
|
|
(1)
Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or sub-assembly. Examples include but are not limited to power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.
(2) Modules and Sub-assemblies include combinations of multiple functional technology elements and/or components that work together to perform multiple functions but are typically resident on or within a single board or housing. Modules and sub-assemblies may in turn be combined to form an integrated subsystem. Examples of modules and sub-assemblies include but are not limited to embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and IO boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers.
(3) Integrated Subsystems include multiple modules and/or sub-assemblies combined with a backplane or similar functional element and software to enable a solution. These are typically but not always integrated within a chassis and with cooling, power and other elements to address various requirements and are also often combined with additional technologies for interaction with other parts of a complete system or platform. Integrated subsystems also include spare and replacement modules and sub-assemblies sold as part of the same program for use in or with integrated subsystems sold by the Company.
Customers comprising 10% or more of the Company’s revenues for the periods shown below are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
Lockheed Martin Corporation
|
20
|
%
|
|
23
|
%
|
|
20
|
%
|
Raytheon Company
|
16
|
|
|
20
|
|
|
37
|
|
|
36
|
%
|
|
43
|
%
|
|
57
|
%
|
While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms. Programs comprising 10% or more of the Company’s revenues for the periods shown below are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
|
2015
|
SEWIP
|
*
|
|
|
12
|
%
|
|
*
|
|
Aegis
|
*
|
|
|
10
|
%
|
|
12
|
%
|
Patriot
|
*
|
|
|
*
|
|
|
18
|
%
|
F-35
|
*
|
|
|
*
|
|
|
16
|
%
|
|
—
|
%
|
|
22
|
%
|
|
46
|
%
|
* Indicates that the amount is less than 10% of the Company's revenues for the respective period. No programs were in excess of 10% of the Company's revenues for fiscal 2017.
Q. Discontinued Operations
In fiscal 2014, the Company's MIS business met the "held for sale" criteria in accordance with FASB ASC 205. As the Company did not anticipate continuing involvement in the operations of MIS after its divestiture, the MIS operating results have been reported as a discontinued operation for all periods presented. On January 23, 2015, the Company completed the sale of MIS for approximately
$1,600
. The sale resulted in net proceeds of
$885
and a loss on disposal of
$892
, which is reflected within discontinued operations of the Company's accompanying consolidated financial statements. The Company does not have continuing involvement in the operations of MIS after its divestiture.
The amounts reported in loss from discontinued operations, net of income taxes were as follows:
|
|
|
|
|
|
For the Year Ended June 30,
|
|
2015
|
Net revenues of discontinued operations
|
$
|
3,493
|
|
Costs of discontinued operations:
|
|
Cost of revenues
|
2,385
|
|
Selling, general and administrative
|
1,958
|
|
Research and development
|
305
|
|
Amortization of intangible assets
|
279
|
|
Restructuring and other charges
|
—
|
|
Impairment of goodwill
|
2,283
|
|
Loss from discontinued operations before income taxes
|
(3,717
|
)
|
Loss on disposal of discontinued operations before income taxes
|
(892
|
)
|
Tax benefit
|
(549
|
)
|
Loss from discontinued operations, net of income taxes
|
$
|
(4,060
|
)
|
There were no balances for the assets and liabilities of the discontinued operations at
June 30, 2017
and 2016.
The depreciation, amortization, capital expenditures and significant operating and investing non-cash items of the discontinued operations were as follows:
|
|
|
|
|
|
For the Year Ended June 30, 2015
|
|
Depreciation
|
$
|
100
|
|
Amortization of intangible assets
|
$
|
279
|
|
Capital expenditures
|
$
|
—
|
|
Impairment of goodwill
|
$
|
2,283
|
|
Stock-based compensation expense
|
$
|
88
|
|
R. Subsequent Events
The Company has evaluated subsequent events from the date of the consolidated balance sheet through the date the consolidated financial statements were issued.
SUPPLEMENTARY INFORMATION (UNAUDITED)
The following sets forth certain unaudited consolidated quarterly statements of operations data for each of the Company’s last eight quarters. In management’s opinion, this quarterly information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation for the periods presented. Such quarterly results are not necessarily indicative of future results of operations and should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 (In thousands, except per share data)
|
1ST QUARTER
|
|
2ND QUARTER
|
|
3RD QUARTER
|
|
4TH QUARTER
|
Net revenues
|
$
|
87,649
|
|
|
$
|
98,014
|
|
|
$
|
107,317
|
|
|
$
|
115,608
|
|
Gross margin
|
$
|
39,444
|
|
|
$
|
47,389
|
|
|
$
|
50,783
|
|
|
$
|
53,927
|
|
Income from operations
|
$
|
3,742
|
|
|
$
|
8,958
|
|
|
$
|
11,695
|
|
|
$
|
13,008
|
|
Income from continuing operations before income taxes
|
$
|
2,560
|
|
|
$
|
6,983
|
|
|
$
|
10,218
|
|
|
$
|
11,307
|
|
Income tax (benefit) provision
|
$
|
(1,259
|
)
|
|
$
|
1,779
|
|
|
$
|
3,170
|
|
|
$
|
2,503
|
|
Income from continuing operations
|
$
|
3,819
|
|
|
$
|
5,204
|
|
|
$
|
7,048
|
|
|
$
|
8,804
|
|
Net income
|
$
|
3,819
|
|
|
$
|
5,204
|
|
|
$
|
7,048
|
|
|
$
|
8,804
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic net income per share:
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
$
|
0.16
|
|
|
$
|
0.19
|
|
Diluted net income per share:
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
$
|
0.16
|
|
|
$
|
0.19
|
|
2016 (In thousands, except per share data)
|
1ST QUARTER
|
|
2ND QUARTER
|
|
3RD QUARTER
|
|
4TH QUARTER
|
Net revenues
|
$
|
58,409
|
|
|
$
|
60,417
|
|
|
$
|
65,898
|
|
|
$
|
85,430
|
|
Gross margin (1)
|
$
|
28,302
|
|
|
$
|
29,739
|
|
|
$
|
31,402
|
|
|
$
|
38,176
|
|
Income from operations
|
$
|
3,131
|
|
|
$
|
6,369
|
|
|
$
|
6,819
|
|
|
$
|
7,654
|
|
Income from continuing operations before income taxes
|
$
|
3,224
|
|
|
$
|
6,473
|
|
|
$
|
6,999
|
|
|
$
|
8,590
|
|
Income tax provision (2)
|
$
|
368
|
|
|
$
|
1,433
|
|
|
$
|
2,642
|
|
|
$
|
1,101
|
|
Income from continuing operations
|
$
|
2,856
|
|
|
$
|
5,040
|
|
|
$
|
4,357
|
|
|
$
|
7,489
|
|
Net income
|
$
|
2,856
|
|
|
$
|
5,040
|
|
|
$
|
4,357
|
|
|
$
|
7,489
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic net income per share
|
$
|
0.09
|
|
|
$
|
0.15
|
|
|
$
|
0.13
|
|
|
$
|
0.20
|
|
Diluted net income per share
|
$
|
0.08
|
|
|
$
|
0.15
|
|
|
$
|
0.13
|
|
|
$
|
0.19
|
|
(1) During 2017, the Company included costs related to the sustainment of its product portfolio as research and development expense, which was previously included as costs of revenues on the Consolidated Statements of Operations and Comprehensive Income. For comparative purposes, for the fiscal year ended June 30, 2016, the Company has reclassified
$2,845
, from costs of revenues to research and development expense. The quarterly amounts reclassified were
$773
,
$1,161
and
$911
for the 1
st
quarter, 2
nd
quarter and 3
rd
quarter, respectively.
(2) Upon adoption of FASB ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, the Company recognized
$1,100
of excess tax benefits in the fourth quarter as a benefit to income taxes in its consolidated statements of operations and comprehensive income (loss) for the year ended June 30, 2016. The tax benefit (provision) impacts were restated above to show the effect of this adoption as if it had occurred at the beginning of fiscal 2016. The tax benefit (provision) impacts were
$896
,
$247
,
$(169)
, and
$126
for the 1
st
quarter, 2
nd
quarter, 3
rd
quarter and 4
th
quarter, respectively. Income from continuing operations, net income, and net income amounts per share were also updated as a result of the adjustment to the income tax provision.
Due to the effects of rounding, the sum of the four quarters does not equal the annual total.