2013
Proxy Statement
& Annual Report
Aviat Networks, Inc.
Letter to Stockholders
September 25, 2013
To Our Stockholders:
Aviat Networks’ fiscal 2013 results demonstrated momentum in achieving top-line growth and
operational efficiency. In a market that presents long-term potential but short-term challenges, Aviat
continued to deploy solutions to mobile operators and solidify its leadership in non-mobile segments
such as public safety, public utilities and low latency.
During the year, we introduced several new products and product enhancements while improving our
services offering. We are proud to be recognized as the number one microwave specialist by network
operators according to an Infonetics survey, a clear indication that Aviat’s comprehensive product and
services offering shines when compared to other microwave providers.
Aviat’s top-line momentum was supported by our diligent cost-control efforts. Substantial year-over-year
reductions in general and administrative expenses enabled continued investment in R&D and selling
activities. As we prepare for the launch of our innovative converged transport router (“CTR”) family of
products in fiscal 2014, we are extremely confident in our ability to grow existing customer relationships,
expand our addressable market, and continue to optimize both our business processes and balance
sheet. We believe this will culminate in increased shareholder value and a strong fiscal 2014.
Our Fiscal Year 2013 Financial Results
For fiscal year 2013, we reported revenue of $471.3 million, compared with revenue of $444.0 million in
the prior year which is a 6% year-over-year increase. GAAP net loss, including discontinued operations,
for fiscal year 2013 was $(15.0) million, or $(0.25) per share, compared with a net loss of $(24.1) million,
or $(0.41) per share, for fiscal year 2012.
Further optimization of our business led to a reduction in non-GAAP operating expenses to $127.6
million from $129.6 million in the prior year. On a non-GAAP basis we generated income from continuing
operations of $11.0 million, or $0.18 per share, compared with income from continuing operations of $3.8
million, or $0.06 per share, in the prior year.
Our concentration on cash generation and working capital management yielded positive cash flow from
operations of $8.4 million, consistent with cash flow from operations of $8.4 million in the prior year.
1
Our Market Opportunity
Mobile networks continue to represent Aviat’s largest addressable market opportunity. In mature markets
such as North America, Europe and Asia, the leading mobile brands compete to provide the fastest data
services, the broadest national coverage and the best user experience. Subscribers are generating and
consuming increasing amounts of data. This in turn, drives demand for new and improved transmission
solutions. As these networks continue to evolve, large numbers of small cell installations will be crucial to
address these capacity requirements. Microwave and millimeter wave technologies will be important
enablers in cost effective, small cell deployment.
In many other parts of the world mobile operators are the primary communications service providers. As
they expand their range of services to include mobile video and data and enterprise and business
communications solutions, the role for microwave transmission will continue to be significant.
We continue to see attractive opportunities in several other market segments:
Utility networks are increasingly using sophisticated control and automation in remote
locations to more efficiently handle energy generation and distribution.
Public safety and national security agencies are increasing the capabilities of their wireless
networks to provide remote video surveillance, rapid access to central databases from the
field and more secure communications.
Fixed data communications service providers in developing countries are looking to cost-
effectively enhance business enterprises’ access to the global internet.
We are confident that Aviat’s technology roadmap is well aligned with all of these evolving market
requirements.
Operational Focus for Fiscal Year 2014
We will continue to improve our business processes to drive innovation, maximize our competitiveness
and increase efficiency.
In fiscal year 2013 we achieved our objectives of:
improving operational costs and efficiencies;
acquiring new customers;
accelerating product innovation; and
investing in our go-to-market activities and service capabilities.
Our achievements in these areas provide a solid foundation on which to successfully launch our CTR
8000 family of products in fiscal 2014. CTR is a transformational product which we believe will be the
future of microwave networking. Aviat is on track to start shipping the CTR platform in the fiscal third
quarter of 2014 with volume expected to ramp into the subsequent quarter.
Additional success factors in our fiscal 2014 plans include increasing market share by acquiring new
mobile operator customers and developing new streams of professional service revenues such as
software maintenance. We will also continue to optimize costs and further simplify our business
operations. Management remains focused on steadily increasing the Company’s gross margins in order
to achieve strong profitability and to invest in future growth. In addition we remain committed to
maintaining our strong financial liquidity.
2
In Closing
Reflecting on fiscal 2013, I am very proud of the accomplishments that Aviat employees have achieved
during the year. There is no doubt that their focus and hard work position the Company well for fiscal
2014.
I want to thank our stockholders, our customers and our employees for their support as we transform our
business and capitalize on the increasing consumer demand for mobile connectivity and data worldwide.
Overall, we are excited for the future of the Company and look forward to providing you with an update
on our progress.
Michael Pangia
President and Chief Executive Officer
Aviat Networks, Inc.
This letter to Stockholders contains statements that qualify as “forward-looking statements” under the Private
Securities Litigation Reform Act of 1995, including, but not limited to our plans, strategies and objectives for future
operations; new products, services or developments; future economic conditions; outlook; projected cost efficiencies
and; our growth potential; and the potential known and unknown risks, uncertainties and other factors that the
industry and markets we serve are subject to may cause our actual results to be materially different from those
expressed or implied by each forward-looking statement. These risks, uncertainties and other factors are discussed
in our fiscal year 2013 Form 10-K.
3
This page intentionally left blank.
AVIAT NETWORKS, INC.
Fiscal Year Ended June 28, 2013 Summaries
SCHEDULE A
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE
To supplement the consolidated financial statements presented in accordance with accounting principles generally
accepted in the United States (“GAAP”), we provide additional measures of gross margin, research and development expenses,
selling and administrative expenses, operating income or loss, income tax provision or benefit, income or loss from continuing
operations, basic and diluted income or loss per share from continuing operations, and adjusted earnings before interest, tax,
depreciation and amortization ("Adjusted EBITDA"), adjusted to exclude certain costs, charges, gains and losses, as set forth
below. We believe that these non-GAAP financial measures, when considered together with the GAAP financial measures
provide information that is useful to investors in understanding period-over-period operating results separate and apart from
items that may, or could, have a disproportionate positive or negative impact on results in any particular period. We also believe
these non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our
performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term
planning process and to measure operating performance for some management compensation purposes. Any analysis of non-
GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in
accordance with GAAP follow.
AVIAT NETWORKS, INC.
Fiscal Year 2013 Summary
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)
Condensed Consolidated Statements of Operations
(Unaudited)
Fiscal Year Ended
June 28, 2013
% of
Revenue
June 29, 2012
% of
Revenue
(In millions, except percentages and per share amounts)
GAAP gross margin ............................................................................... $
Share-based compensation .......................................................................
E&O Inventory write down .....................................................................
Amortization of purchased technology ....................................................
Non-GAAP gross margin ......................................................................
GAAP research and development expenses ......................................... $
Share-based compensation .......................................................................
Non-GAAP research and development expenses ................................
GAAP selling and administrative expenses ......................................... $
Share-based compensation .......................................................................
Transactional taxes assessments ..............................................................
Other nonrecurring charges .....................................................................
Non-GAAP selling and administrative expenses .................................
GAAP operating income (loss) .............................................................. $
Share-based compensation .......................................................................
E&O Inventory write down .....................................................................
Amortization of purchased technology ....................................................
29.7%
$
30.0%
8.4%
$
8.1%
20.3%
$
18.9%
0.4%
$
140.1
0.5
—
0.6
141.2
39.4
(1.0)
38.4
95.5
(4.9)
(1.4)
—
89.2
1.7
6.4
—
0.6
131.7
0.7
1.0
0.7
134.1
36.0
(0.9)
35.1
99.5
(3.6)
(0.6)
(0.8)
94.5
(13.3)
5.2
1.0
0.7
29.7%
30.2%
8.1%
7.9%
22.4%
21.3%
(3.0)%
Fiscal Year Ended
June 28, 2013
% of
Revenue
June 29, 2012
% of
Revenue
(In millions, except percentages and per share amounts)
Transactional taxes assessments ..............................................................
Other nonrecurring charges .....................................................................
Amortization of intangible assets ............................................................
Goodwill impairment charges ..................................................................
Restructuring charges ..............................................................................
Non-GAAP operating income ...............................................................
GAAP interest and other income (expense), net ................................. $
Other nonrecurring income ......................................................................
Non-GAAP interest and other income (expense), net .........................
GAAP income tax provision .................................................................. $
Adjustment to reflect pro forma tax rate ..................................................
Non-GAAP income tax provision .........................................................
GAAP loss from continuing operations ............................................... $
Share-based compensation .......................................................................
E&O Inventory write down .....................................................................
Amortization of purchased technology ....................................................
Transactional taxes assessments ..............................................................
Other nonrecurring charges .....................................................................
Amortization of intangible assets ............................................................
Goodwill impairment charges ..................................................................
Restructuring charges ..............................................................................
Other nonrecurring income ......................................................................
Adjustment to reflect pro forma tax rate ..................................................
Non-GAAP income from continuing operations ................................. $
Income (loss) per share from continuing operations
Basic:
GAAP .............................................................................................. $
Non-GAAP ...................................................................................... $
Diluted:
GAAP .............................................................................................. $
Non-GAAP ...................................................................................... $
1.4
—
0.4
—
3.1
13.6
0.7
(0.7)
—
13.3
(10.7)
2.6
(10.9)
6.4
—
0.6
1.4
—
0.4
—
3.1
(0.7)
10.7
11.0
(0.18)
0.18
(0.18)
0.18
2.9%
0.1%
$
—%
2.8%
$
0.6%
(2.3)% $
2.3%
$
$
$
$
$
Shares used in computing income (loss) per share from continuing operations
Basic:
GAAP ..............................................................................................
Non-GAAP ......................................................................................
Diluted:
GAAP ..............................................................................................
Non-GAAP ......................................................................................
60.0
60.0
60.0
61.9
0.6
0.8
1.6
5.6
2.3
4.5
(0.7)
—
(0.7)
1.5
(1.5)
—
(15.5)
5.2
1.0
0.7
0.6
0.8
1.6
5.6
2.3
—
1.5
3.8
(0.26)
0.06
(0.26)
0.06
59.0
59.0
59.0
61.0
1.0%
(0.2)%
(0.2)%
0.3%
—%
(3.5)%
0.9%
Fiscal Year Ended
June 28, 2013
% of
Revenue
June 29, 2012
% of
Revenue
(In millions, except percentages and per share amounts)
ADJUSTED EBITDA:
GAAP loss from continuing operations ............................................... $
Depreciation and amortization of property, plant and equipment ............
Interest expense .......................................................................................
Share-based compensation .......................................................................
E&O Inventory write down .....................................................................
Amortization of purchased technology ....................................................
Transactional taxes assessments ..............................................................
Other nonrecurring charges .....................................................................
Amortization of intangible assets ............................................................
Goodwill impairment charges ..................................................................
Restructuring charges ..............................................................................
Other nonrecurring income ......................................................................
Provision for income taxes ......................................................................
Adjusted EBITDA ................................................................................. $
(10.9)
5.6
0.8
6.4
—
0.6
1.4
—
0.4
—
3.1
(0.7)
13.3
20.0
(2.3)% $
4.2%
$
(15.5)
4.9
1.3
5.2
1.0
0.7
0.6
0.8
1.6
5.6
2.3
—
1.5
10.0
(3.5)%
2.3%
_____________________________________________________
(1) The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-
GAAP income or loss from continuing operations excluded share-based compensation, E&O inventory write down,
amortization of purchased technology, transactional taxes assessments, amortization of intangible assets, goodwill
impairment charges, restructuring charges, other nonrecurring income, and adjustment to reflect pro forma tax rate.
Adjusted EBITDA was determined by excluding depreciation and amortization on property, plant and equipment,
interest expense, provision for income taxes, and non-GAAP pre-tax adjustments, as set forth above, from the GAAP
income from continuing operations. We believe that the presentation of these non-GAAP items provides meaningful
supplemental information to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However,
the non-GAAP financial measures have not been prepared under a comprehensive set of accounting rules or principles.
Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in
accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP financial
measures.
.
This page intentionally left blank.
AVIAT NETWORKS, INC.
5200 Great America Parkway
Santa Clara CA 95054
Notice of 2013 Annual Meeting of Stockholders
To Be Held on Wednesday, November 13, 2013
TO THE HOLDERS OF COMMON STOCK OF AVIAT NETWORKS, INC.
NOTICE IS HEREBY GIVEN that the 2013 Annual Meeting of Stockholders (the “Annual Meeting”) of Aviat
Networks, Inc. (the “Company”) will be held at our facilities, located at 5200 Great America Parkway, Santa Clara, California,
on Wednesday, November 13, 2013 at 2:00 p.m., local time, for the following purposes:
1. To elect eight directors to serve until the next annual meeting of stockholders or until their successors have been
elected and qualified.
2. To vote on the ratification of the appointment by our Audit Committee of KPMG LLP as the Company’s independent
registered public accounting firm for fiscal year 2014.
3. To hold an advisory vote on named executive officer compensation.
4. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement
or other delay thereof.
Only holders of common stock at the close of business on September 19, 2013 are entitled to notice of and to vote at
the Annual Meeting.
Whether or not you expect to attend the Annual Meeting in person, we urge you to submit a proxy to vote your shares .
This will help ensure the presence of a quorum at the Annual Meeting.
By Order of the Board of Directors
/s/ Meena Elliott
Senior Vice President, General Counsel and Secretary
September 25, 2013
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on November 13, 2013
The proxy statement and annual report to stockholders are available at
http://www.proxyonline.com
Your vote is important regardless of the number of shares you own. The Board of Directors urges you to sign, date and
return the enclosed proxy card by mail (using the enclosed postage-paid envelope) as promptly as possible, or vote
electronically or by telephone as described in the attached proxy statement. If you have any questions or need assistance
in voting your shares, please contact the Company’s proxy solicitor, AST Phoenix Advisors, toll-free at (800) 622-1573.
TABLE OF CONTENTS
Page
ABOUT THE MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the purpose of the meeting?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the record date, and who is entitled to vote at the meeting? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are the voting rights of the holders of Aviat common stock at the meeting? . . . . . . . . . . . . . . . . . . . . . . .
Who can attend the Annual Meeting?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How do I vote? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy
materials this year instead of a full set of proxy materials? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How can I access the proxy materials and annual report on the Internet? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why is Aviat soliciting proxies?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How do I revoke my proxy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What vote is required to approve each item? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How is the majority voting standard applied to the election of directors? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What constitutes a quorum, abstention, and broker “non-votes”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who pays for the cost of solicitation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the deadline for submitting proposals and director nominations for the 2014 Annual
Meeting?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who will count the votes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board and Committee Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Member Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principles of Corporate overnance, Bylaws and other Governance Documents . . . . . . . . . . . . . . . . . . . . . . . .
Board of Directors Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlock and Insider Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governance and Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G
TRANSACTIONS WITH RELATED PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTOR COMPENSATION AND BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . .
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
1
1
1
2
2
2
2
3
3
3
3
4
4
5
5
5
5
6
8
9
9
10
11
12
12
12
12
13
13
14
15
16
18
19
i
TABLE OF CONTENTS
(continued)
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Considerations in our Compensation Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Award in Fiscal 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Fiscal Year-End 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested in Fiscal 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 1: ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
20
20
27
28
29
31
32
35
35
36
39
39
40
40
41
41
41
41
ii
This page intentionally left blank.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
AVIAT NETWORKS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, NOVEMBER 13, 2013
This proxy statement (this “Proxy Statement”) applies to the solicitation of proxies by the Board of Directors (the
“Board”) of Aviat Networks, Inc. (which we refer to as “Aviat,” the “Company,” “we,” “our,” and “ours”) for use at the 2013
Annual Meeting of Stockholders and any adjournment, postponement or other delay thereof (the “Annual Meeting”), to be held
at 2:00 p.m., local time, on Wednesday, November 13, 2013. The Annual Meeting will be held at our facilities located at 5200
Great America Parkway, Santa Clara, California 95054. The telephone number at that location is (408) 567-7000. These proxy
materials are being made available on or about October 1, 2013 to our stockholders entitled to notice of and to vote at the
Annual Meeting.
What is the purpose of the Annual Meeting?
ABOUT THE ANNUAL MEETING
The purpose of the Annual Meeting is to obtain stockholder action on the matters outlined in the notice of meeting
included with this Proxy Statement. All holders of shares of common stock at the close of business on September 19, 2013 are
entitled to notice of and to vote at the Annual Meeting. At the Annual Meeting, our stockholders will vote (i) to elect eight
directors, (ii) on the ratification of the appointment by our Audit Committee of KPMG LLP as our independent registered
public accounting firm for fiscal year 2014, and (iii) vote on an advisory, non-binding resolution to approve the Company’s
named executive officer compensation.
What is the record date, and who is entitled to vote at the Annual Meeting?
The record date for the stockholders entitled to vote at the annual meeting is September 19, 2013 (the “Record Date”).
The Record Date was established by the Board as required by the Delaware General Corporation Law and our Bylaws. Owners
of shares of our common stock at the close of business on the Record Date are entitled to receive notice of the Annual Meeting
and to vote at the Annual Meeting. You may vote all shares that you owned as of the Record Date.
What are the voting rights of the holders of common stock at the Annual Meeting?
Each outstanding share of our common stock is entitled to one vote on each matter considered at the annual meeting.
As of the Record Date, there were 62,379,639 shares of our common stock outstanding.
Who can attend the Annual Meeting?
Subject to space availability, all stockholders as of the Record Date, or their duly appointed proxies, may attend the
Annual Meeting. Since seating is limited, admission to the Annual Meeting will be on a first-come, first-served basis.
If your shares are held in “street name” (that is, through a bank, broker or other holder of record) and you wish to
attend the Annual Meeting, you must bring a copy of a bank or brokerage statement reflecting your stock ownership as of the
Record Date to the Annual Meeting.
Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport. Cameras,
recording devices and other electronic devices will not be permitted at the Annual Meeting. You may contact us by calling (408)
567-7000 for directions to the Annual Meeting.
How do I vote?
Stockholders of record can vote by proxy as follows:
1
• Via the Internet: Stockholders may submit voting instructions to the proxy holders through the Internet by
following the instructions included with the proxy card.
• By Telephone: Stockholders may submit voting instructions to the proxy holders by telephone by following the
instructions included with the proxy card.
• By Mail: Stockholders may sign, date and return proxy cards in the pre-addressed, postage-paid envelope that will
be provided if a printed proxy statement is requested.
• At the Annual Meeting: If you attend the Annual Meeting, you may vote in person by ballot, even if you have
previously returned a proxy card.
t
n
e
m
e
t
a
t
S
y
x
o
r
P
If you hold your shares in “street name,” the bank, broker or other holder of record holding your shares will send you
separate instructions describing the procedure for voting your shares. If you hold your shares in “street name,” you will not be
able to vote in person at the Annual Meeting unless you have previously requested and obtained a “legal proxy” from your
broker, bank or other holder of record and present it at the Annual Meeting.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials this year instead of
a full set of proxy materials?
Pursuant to Securities and Exchange Commission (“SEC”) rules, we have provided access to our proxy materials over
the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders
of record and beneficial owners of shares held in “street name.” All stockholders will have the ability to access the proxy
materials on a website referred to in the Notice or request a printed set of the proxy materials. Instructions on how to access the
proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, the Notice contains
information on how stockholders may request delivery of proxy materials in printed form by mail or electronically by email on
an ongoing basis.
How can I access the proxy materials and annual report on the Internet?
This Proxy Statement, the form of proxy card, the Notice and our annual report on Form 10-K for the fiscal year ended
June 28, 2013 are available at www.proxyonline.com.
Why is Aviat soliciting proxies?
In lieu of personally attending and voting at the Annual Meeting, you can appoint a proxy to vote on your behalf. The
Board has designated proxy holders to whom you may submit your voting instructions. The proxy holders for the Annual
Meeting are Charles Kissner, Chairman of the Board, Michael Pangia, President and CEO, and Meena Elliott, Senior Vice
President, General Counsel and Secretary.
How do I revoke my proxy?
If you are a stockholder of record, you may revoke your proxy at any time before your shares are voted at the Annual
Meeting by:
•
•
•
•
delivering a written notice of revocation to the Company’s Secretary, Meena Elliott, at 5200 Great America
Parkway, Santa Clara, CA 95054;
signing, dating and returning a proxy card bearing a later date;
submitting another proxy by internet or telephone (the latest dated proxy will control); or
attending the Annual Meeting and voting in person by ballot.
If you hold your shares in “street name,” you should follow the directions provided by the bank, broker or other holder
of record holding your shares to revoke your proxy. Regardless of how you hold your shares, your attendance at the Annual
Meeting after having executed and delivered a valid proxy card will not in and of itself constitute a revocation of your proxy.
2
What vote is required to approve each item?
•
•
•
Proposal No. 1 (election of directors): the director nominees will be elected by a plurality. However, Aviat’s
Corporate Governance Guidelines provide for certain procedures if a director nominee fails to receive more “for”
votes than “withhold” votes. See “How is the majority voting policy applied to the election of directors?” below.
Stockholders may not cumulate votes in the election of directors. The Board recommends a vote “FOR” all
nominees.
Proposal No. 2 (ratification of KPMG LLP as the Company’s independent registered public accounting firm): the
affirmative vote by the holders of common stock entitled to cast a majority of the voting power of all of the
common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the
proposal is necessary for approval of Proposal No. 2. The Board recommends a vote “FOR” Proposal No. 2.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Proposal No. 3 (advisory, non-binding vote on named executive officer compensation): the affirmative vote by the
holders of common stock entitled to cast a majority of the voting power of all of the common stock present in
person or represented by proxy at the Annual Meeting and entitled to vote on the proposal is necessary for
approval of Proposal No. 3. The Board recommends a vote “FOR” Proposal No. 3.
How is the majority voting policy applied to the election of directors?
Aviat’s Corporate Governance Guidelines provide for a majority voting policy in uncontested elections of directors. An
uncontested election is one in which the number of nominees for director does not exceed the number of directors to be elected.
The director election taking place at this Annual Meeting is uncontested, and therefore the majority voting policy applies.
Under the majority voting policy, in order for a nominee to remain on the Board, the votes cast “for” such nominee’s election
must exceed the votes “withheld” from such nominee’s election.
Aviat’s majority voting policy requires an incumbent director nominee who receives a greater number of votes
“withheld” from his election than votes “for” his election to promptly offer his resignation from the Board for consideration by
the Governance and Nominating Committee . The Governance and Nominating Committee will then recommend to the Board
the action to be taken with respect to such offer of resignation, and the Board will determine whether to accept the nominee’s
resignation. See “Majority Vote Policy in Director Elections” on page 9 for additional information.
What constitutes a quorum, abstention and broker “non-vote”?
The presence at the Annual Meeting either in person or by proxy of the holders of common stock entitled to cast a
majority of the voting power of all of the common stock issued and outstanding and entitled to vote at the Annual Meeting
constitutes a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker “non-votes” are counted as present and are, therefore, included for purposes of determining
whether a quorum is present at the Annual Meeting. An abstention occurs when a stockholder does not vote for or against a
proposal but specifically abstains from voting. A broker “non-vote” occurs when a bank, broker or other holder of record
holding shares in street name for a beneficial owner signs and submits a proxy or votes with respect to shares of common stock
held in a fiduciary capacity, but does not vote on a particular matter because the bank, broker or other holder of record does not
have discretionary voting power with respect to that matter and has not received instructions from the beneficial owner or
because the bank, broker or other holder of record elects not to vote on a matter as to which it does have discretionary voting
power. Under the rules governing banks, brokers and other holders of record who are voting with respect to shares held in street
name, such entities have the discretion to vote such shares on routine matters but not on non-routine matters. Only Proposal No.
2 (ratification of KPMG LLP as the Company’s independent registered public accounting firm) is a routine matter.
For Proposal No. 1, abstentions and broker “non-votes” will be disregarded and have no effect on the outcome of the
vote. For Proposals No. 2 and No. 3, abstentions will have the same effect as voting against such proposals, and broker non-
votes, if any, will be disregarded and have no effect on the outcome of the vote.
Who pays for the cost of solicitation?
We will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this Proxy
Statement, the proxy card, the Notice and any additional solicitation materials that may be furnished to our stockholders and the
3
maintenance and operation of the website providing Internet access to these proxy materials. We will reimburse banks, brokers
and other holders of record for reasonable expenses incurred in sending proxy materials to beneficial owners of our common
stock and maintaining Internet access for such materials and the submission of proxies. We may supplement the original
solicitation of proxies by mail through solicitation by telephone, email, over the Internet or by other means by our directors,
officers and other employees. No additional compensation will be paid to these individuals for any such services.
In addition, the Company has retained AST Phoenix Advisors to assist in the solicitation of proxies. The Company has
agreed to pay AST Phoenix Advisors a fee of $8,500, plus reimbursement for their reasonable out-of-pocket expenses. The
Company has also agreed to indemnify AST Phoenix Advisors against certain liabilities and expenses, including certain
liabilities and expenses under the federal securities laws.
t
n
e
m
e
t
a
t
S
y
x
o
r
P
What is the deadline for submitting proposals and director nominations for the 2014 Annual Meeting?
In order for any stockholder to submit nominations of directors or propose business to be considered before our 2014
Annual Meeting, a stockholder of record must submit a written notice thereof, which notice must be received by our Corporate
Secretary at our principal executive offices not less than 60 days nor more than 90 days prior to the date of the 2014 Annual
Meeting. In accordance with our Bylaws, we will announce the date of the 2014 Annual Meeting at least 70 days in advance.
The full requirements for the submission of nominations of directors and proposals of business to be considered are contained
in Article II, Sections 13 and 14, respectively, of our Bylaws, which are available for review at our website,
www.aviatnetworks.com.
Stockholder proposals intended for inclusion in next year’s proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the “Exchange Act”) must be directed to the Corporate Secretary, Aviat Networks, Inc., at our
principal executive offices, and must be received by June 3, 2014.
In accordance with the rules of the SEC, the proxies to be solicited by the Board for the 2014 Annual Meeting will
confer discretionary authority on the proxy holders to vote on any director nomination or stockholder proposal presented at the
Annual Meeting if the Company fails to receive notice of such matter in accordance with the periods specified above.
Who will count the votes?
AST Phoenix Advisors will tabulate the votes cast by proxy. The Company has retained an independent inspector of
elections in connection with Aviat’s solicitation of proxies for the Annual Meeting. Aviat intends to notify stockholders of the
results of the Annual Meeting by filing a Form 8-K with the SEC.
4
CORPORATE GOVERNANCE
We believe in and are committed to sound corporate governance principles. Consistent with our commitment to and
continuing evolution of corporate governance principles, we adopted a Code of Business Ethics, Governance and Nominating
Committee, Audit Committee and Compensation Committee charters and corporate governance guidelines. Each of our Board
committees is required to conduct an annual review of its charter and applicable guidelines.
Board Members
The authorized size of the Board is currently eight. Directors are nominated by the Governance and Nominating
Committee of the Board. Except for Mr. Rau, who was elected to the Board on November 9, 2010, and Mr. Pangia, who was
elected to the Board on July 18, 2011, all current directors have held office as directors since January 26, 2007, the date of the
merger of the Microwave Communications Division (“MCD”) of Harris Corporation (“Harris”) with Stratex Networks, Inc.
(“Stratex”), The Board is chaired by Mr. Kissner.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Name
Charles D. Kissner
William A. Hasler
Clifford H. Higgerson
Michael A. Pangia
Raghavendra Rau
Dr. Mohsen Sohi
Dr. James C. Stoffel
Edward F. Thompson
Title and Positions
Director, Chairman of the Board
Director
Director
Director, President and CEO
Director
Director
Lead Independent Director
Director
The Board has determined that as of the date of this Proxy Statement, each of our current directors and director
nominees except Mr. Kissner and Mr. Pangia has no relationship that would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director and is otherwise independent in accordance with listing rules of the NASDAQ
Stock Market (the “NASDAQ Listing Rules”).
All directors are requested to attend the Annual Meeting. The majority of our directors attended the 2012 Annual
Meeting.
Board and Committee Meetings and Attendance
During fiscal year 2013, the Board held eight meetings. Each of the board members attended at least 75% of the total
number of Board meetings and at least 85% of the total number of meetings of the committee or committees on which the
member served during the fiscal year.
Board Member Qualifications
Our Board believes that its members should encompass a range of talents, skills and expertise, which enables the
Board to provide sound guidance with respect to the Company’s operations and interest. Our Board prefers a variety of
professional experiences and backgrounds among its members. In addition to considering a candidate’s experiences and
background, candidates are reviewed in the context of the current composition of the Board and evolving needs of our
businesses. In particular, the Board has sought to include members that have experience in establishing, growing and leading
communications companies in senior management positions and serving on the board of directors of other companies. In
determining that each of the members of the Board is qualified to be a director, the Board has relied on the attributes listed
below and, where applicable, on the direct personal knowledge of each of the members’ prior service on the Board.
5
Directors’ Biographies
t
n
e
m
e
t
a
t
S
y
x
o
r
P
The following is a brief description of the business experience and background of each nominee for director, including
the capacities in which each has served during at least the past five years:
Mr. Charles D. Kissner, age 66, currently serves as our Chairman of the Board with additional oversight
responsibilities for strategic activities and investor relations. Mr. Kissner served as CEO and Chairman of the Board of Aviat
from July 2010 to July 2011. He was CEO of Stratex from July 1995 through May 2000, and again from October 2001 to May
2006. He was elected a director of Stratex in July 1995 and Chairman in August 1996. Mr. Kissner also served as Vice President
and General Manager of M/A-COM, Inc., a manufacturer of radio and microwave communications products, from July 1993 to
July 1995. Prior to that, he was President and CEO of Aristacom International Inc., a communications software company, and
Executive Vice President and a Director of Fujitsu Network Switching, Inc. He also held a number of executive positions at
AT&T (now Alcatel-Lucent). Mr. Kissner currently serves as Chairman of the board of directors of ShoreTel, Inc., an IP
business telephony systems company. He also serves on the board of directors of Meru Networks Inc., a provider of advanced
enterprise wireless networking systems, Rambus, Inc., a technology licensing company focusing on the development of
technologies that enrich the end-user experience of electronic systems, and KQED Public Media, a non-profit organization.
Mr. Kissner brings extensive knowledge of our business, having served on our Board as non-executive Chairman for
over three years. He also brings nearly fifteen years of relevant CEO experience having served in that capacity at technology
driven companies such as Stratex and Aristacom. Mr. Kissner also brings extensive public company directorship and committee
experience to the Board which has been an invaluable resource as our company regularly assesses its corporate governance,
corporate compliance and risk management obligations. Mr. Kissner has also directly supervised nearly thirty merger and
acquisition activities, which experience has been vital to the assessment and integration of acquisition opportunities.
Mr. William A. Hasler, age 71, has served as a member of the Board since January 2007. He also serves on the board
of directors of Globalstar, Inc., a supplier of satellite communication services and is a trustee of the Schwab Funds. Mr. Hasler
served as a member of the Stratex board of directors from August 2001 through January 2007, and was Chairman of the
Nominating and Corporate Governance Committee and a member of the Audit Committee. Mr. Hasler served as Chairman of
the board of directors of Solectron Corporation from 2003 to 2007 and was a member of that board from 1998 to 2007. He was
co-CEO and a Director of Aphton Corp., a biopharmaceutical company, from 1998 to 2003. From 1991 to 1998, Mr. Hasler was
Dean of both the Graduate and Undergraduate Schools of Business at the University of California, Berkeley. Prior to his
deanship at UC Berkeley, Mr. Hasler was Vice Chairman of KPMG Peat Marwick.
Mr. Hasler’s current and prior service on the boards of several technology-driven companies, including Ditech and
Globalstar, and his prior service as Chairman of a large publicly traded company provide him with an extensive knowledge base
of complex management, financial, operational and governance issues faced by public companies with international operations.
He is a member of the audit committee of various public and private companies. Mr. Hasler has extensive experience in Silicon
Valley companies and this experience brings our Board important knowledge and expertise related to corporate finance and
accounting, strategic planning, manufacturing and operations. He brings valuable financial expertise, including extensive
knowledge of accounting, auditing and investments in both public and private companies. Additionally, through his service on
public company boards, Mr. Hasler has gained an understanding and expertise in public company governance.
Mr. Clifford H. Higgerson, age 73, has served as a member of the Board since January 2007. He has more than 40
years of experience in research, consulting, planning and venture investing primarily in the telecommunications industry, with
an emphasis on carrier systems and equipment. In 2006, he became a partner with Walden International, a global venture capital
firm focused on four key industry sectors: communications, electronics/digital consumer software and IT services, and
semiconductors. Mr. Higgerson was a founding partner of ComVentures from 1986 to 2005, and has been a general partner with
Vanguard Venture Partners since 1991. He currently serves as a member of the board of directors of Kotura Inc., Xtera
Communications Inc., Ygnition Networks, Inc., Ormet Circuits, Inc., Thrupoint, Inc. and Geronimo Windpower. He served as a
member of the Stratex board of directors from March 2006 to January 2007 and served on the Compensation and Strategic
Business Development Committees. He previously served as a member of the board of directors of Hatteras Networks Inc. and
World of Good.
Mr. Higgerson has more than 35 years of experience in research, consulting, planning and venture investing. He has
served on the boards of other public companies and served as a chair of the audit committee for publicly listed companies. His
prior Board experience and his experience in research, strategic planning and corporate finance in technology driven companies
provide him with extensive knowledge of complex issues involved in new product development, strategic planning, and
6
financial and governance issues faced by public companies. His extensive experience with private equity firms and investing
provides him with critical experience related to capital raising, economic analysis and mergers and acquisitions.
Mr. Michael A Pangia, age 52, has been our President and CEO and a member of the Board since July 18, 2011. From
March 2009 to July 2011, he served as our Chief Sales Officer where he was responsible for company-wide operations of the
Global Sales and Services organization. Prior to joining Aviat, Mr. Pangia served as senior vice president, Global Sales
Operations and Strategy, at Nortel, where he was responsible for all operational aspects of the Global Sales function. Prior to
that, he was president of Nortel’s Asia region, where his key responsibilities included sales and overall business management
for all countries in the region where Nortel did business.
Mr. Pangia’s current and prior service as a senior executive officer with large technology driven companies with
international operations provide him with an extensive knowledge base of complex management, financial, operational and
governance issues faced by public companies with global operations. He also brings a high level of financial literacy to the
Board through both formal education and over 15 years’ experience in multiple finance functional areas, including cost
accounting, financial planning and analysis, and mergers and acquisitions.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Mr. Raghavendra Rau, age 64, has served as a member of the Board since November 2010. Mr. Rau currently serves
as CEO and a member on the board of directors of SeaChange International Inc., a manufacturer of digital video systems and
provider of related services to cable, telecommunications and broadcast television companies worldwide. In addition, he is a
strategic advisor to iProf, an e-learning company. Previously, Mr. Rau served as a member of the board of directors of
Microtune, Inc., prior to its acquisition by Zoran, Inc., from May 2010 to December 2010. Mr. Rau served as Senior Vice
President of the Mobile TV Solutions Business of Motorola, Inc. (“Motorola”), from May 2007 until January 2008, and as
Senior Vice President of Strategy and Business Development, Networks & Enterprise of Motorola from March 2006 to May
2007. Mr. Rau served as Corporate Vice President of Global Marketing and Strategy for Motorola from 2005 to 2006, and as
Corporate Vice President, Marketing and Professional Services, from 2001 to 2005. From October 1992 to 2001, Mr. Rau
served in various positions within Motorola, including as Vice President of Strategic Business Planning and Vice President of
Sales and Operations and held positions in Asia and Europe. Mr. Rau is a former Chairman of the QuEST Forum, a
collaboration of service providers and suppliers dedicated to telecom supply chain quality and performance, and was a Director
of the Center for Telecom Management at the University of Southern California. Mr. Rau also served on the Motorola
Partnership Board of France Telecom.
Mr. Rau’s financial and business expertise, including his diversified background in global marketing, business strategy,
venture capital and market development for communications and high-technology companies, provides him with the
qualifications and skills to serve as a director.
Dr. Mohsen Sohi, age 54, has served as a member of the Board since 2007. He currently serves as the Speaker of the
Management Board of Freudenberg & Co. KG, a German technology and manufacturing company. From 2003 through May
2010, Dr. Sohi served as President and CEO of Freudenberg-NOK, a privately-held joint venture partnership between
Freudenberg and NOK Corp. of Japan, the world’s largest producer of elastomeric seals and custom molded products for
automotive and other applications. From 2001 through 2003 he served as President, Retail Store Automation Division, NCR
Corporation. From 1986 through 2001 he served in various key positions at Honeywell/Allied Signal Inc., including President,
Honeywell Electronic Materials and President, Honeywell Commercial Vehicle Systems. Dr. Sohi currently serves on the board
of directors of Steris Corporation, a provider of infection prevention and contamination control products and services, and is
also a member of its Compliance Committee as well as its Nominating Committee. He previously served on the board of
directors of Hayes Lemmerz International, Inc., a leading worldwide producer of aluminum and steel wheels for cars and
trucks.
Dr. Sohi’s current and prior service as a senior executive officer with large technology driven companies with
international operations provide him with an extensive knowledge base of complex management, financial, operational and
governance issues faced by public companies with global operations. His engineering, technical and business education has also
provided him with knowledge and experience related to research and development, new product introductions, strategic
planning, manufacturing, operations, and corporate finance. Dr. Sohi also has gained an understanding of public company
governance and executive compensation through his service on public company boards.
Dr. James C. Stoffel, age 67, currently serves as our lead independent director and has served as a member of the
Board since January 2007. Presently, Dr. Stoffel is on the board of directors of Harris Corporation, of which he has been a
member since August 2003, and is also a member of its Finance Committee and Management Development and Compensation
Committee. Additionally, he serves as General Partner of Trillium International, LLC, a private equity company, and is a senior
7
t
n
e
m
e
t
a
t
S
y
x
o
r
P
advisor to other private equity companies. He also serves on the boards of the following privately held companies: ZBD
Solutions, Ltd., Omni-ID Ltd., Quintel Ltd. and Intrinsiq Ltd. Prior to his retirement, Dr. Stoffel was Senior Vice President,
Chief Technical Officer and Director of Research and Development of Eastman Kodak Company (“Kodak”). He held this
position from 2000 to April 2005. He joined Kodak in 1997 as Vice President and Director, Electronic Imaging Products
Research and Development, and became Director of Research and Engineering in 1998. Prior to joining Kodak, he was with
Xerox Corporation (“Xerox”), where he began his career in 1972. His most recent position with Xerox was Vice President,
Corporate Research and Technology. Dr. Stoffel serves on the Advisory Board for Research and Graduate Studies at the
University of Notre Dame and is a member of the advisory board of the Applied Science and Technology Research Institute,
Hong Kong.
Dr. Stoffel’s prior service as a senior executive of large, publicly traded, technology driven companies, and his more
than 30 years’ experience focused on technology development, provide him with an extensive knowledge of the complex
technical research and development, management, financial and governance issues faced by a public company with
international operations. This experience brings our Board important knowledge and expertise related to research and
development, new product introductions, strategic planning, manufacturing, operations and corporate finance. His experience as
an advisor to private equity firms also provides him with additional knowledge related to strategic planning, capital raising,
mergers and acquisitions and economic analysis. Dr. Stoffel also has gained an understanding of public company governance
and executive compensation through his service on public company boards, including as a lead independent director.
Mr. Edward F. Thompson, age 75, has served as a member of the Board since January 2007. He is currently a member
of the board of directors of ShoreTel, Inc., an IP business telephony systems company, InnoPath Software, Inc., and XBridge
Systems, Inc. a mainframe data discovery company. He is on the Advisory Board of Santa Clara University’s Leavey School of
Business. Mr. Thompson served as a member of the Stratex board of directors from November 2002 through January 2007,
where he was Chairman of the Audit Committee, and served on the Nominating and Corporate Governance Committee. Mr.
Thompson was a consultant to Fujitsu Labs of America from 1995 to 2011. From 1976 to 1994, he held various positions at
Amdahl Corporation, a multinational manufacturer of large scale computer systems, including CFO and Corporate Secretary, as
well as Chairman and CEO of Amdahl Capital Corporation. Mr. Thompson also held positions at U.S. Leasing International,
Inc., Computer Sciences Corporation, International Business Machines and Lockheed Missiles and Space Company. Mr.
Thompson has contributed as a director or advisor to a number of companies, including Fujitsu, Ltd. and several of its
subsidiaries, and SonicWALL Inc., a provider of Internet security solutions.
Mr. Thompson brings a high level of financial literacy to the Board and substantial public company directorship and
committee experience. He is currently designated as an audit committee financial expert and is the audit committee chair on
both public company boards on which he is a member, as well as privately held InnoPath Software. Mr. Thompson’s experience
with accounting principles, financial reporting rules and regulations, evaluation of financial results and oversight of the
financial reporting process of publicly traded companies makes him a valuable asset to the Board. Mr. Thompson also brings to
the Board significant experience in international operations based upon his past experience as a senior advisor to Fujitsu, as a
director of several Fujitsu subsidiaries and portfolio companies and as CFO of Amdahl.
Board Leadership
The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board as the
Board believes that it is in the best interests of the Company for the Board to make that determination based on the position and
direction of the Company and the membership of the Board. The members of the Board possess considerable experience and
unique knowledge of the challenges and opportunities that the Company faces, and are in the best position to evaluate the needs
of the Company and how to best organize the capabilities of the directors and management to meet those needs.
When the CEO also serves as Chairman of the Board, our Corporate Governance Guidelines provide for the
appointment of a lead independent director. Accordingly, when our Chairman Charles Kissner was appointed CEO in June
2010, the Board appointed James Stoffel, an independent director, as lead independent director. Mr. Kissner became the non-
executive Chairman of the Board as of July 19, 2012. Although, currently, the roles of the CEO and the Chairman remain
separate, upon the recommendation of the Governance and Nominating Committee, the Board has determined to continue the
role of the lead independent director for the present time.
The lead independent director is responsible for coordinating the activities of the other independent directors and has
the authority to preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the
independent directors. The lead independent director may also recommend the retention of outside advisors and consultants
who report directly to the Board. The Board believes that appointing a lead independent director to serve along with a CEO and
8
a non-executive Chairman of the Board has enhanced the Board’s oversight of, and independence from, Company management,
the ability of the Board to carry out its roles and responsibilities on behalf of our stockholders and our overall corporate
governance.
The Board has determined that having Mr. Kissner serve as Chairman is in the best interest of the Company’s at this
time. This structure ensures a greater role for the independent directors in the oversight of the Company and active participation
of the independent directors in setting agendas and establishing Board priorities and procedures, and is useful in establishing a
system of corporate checks and balances. Separating the Chairman position from the CEO position allows the CEO to focus on
setting the strategic direction of the Company and the day-to-day leadership and performance of the Company, while the
Chairman leads the Board in its role of, among other things, providing advice to, and overseeing the performance of, the CEO.
In addition, managing the Board can be a time-intensive responsibility, and this structure permits Mr. Pangia, our CEO, to focus
on the management of the Company’s day-to-day operations.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
The Board’s Role in Risk Oversight
Assessing and managing risk is the responsibility of the management of the Company. The Board, through the
Governance and Nominating Committee, oversees and reviews certain aspects of the Company’s risk management efforts,
focusing on the adequacy of the Company’s risk management and risk mitigation processes. At the Board’s request,
management proposed a process for identifying, evaluating and monitoring material risks and such process has been approved
by the Board and is currently in effect. This risk management program is overseen by senior management who, in connection
with their regular review of the overall business, identify and prioritize a broad range of material risks (e.g., financial, strategic,
compliance and operational). Senior management also discusses mitigation plans to address such material risks. Prioritized risks
and management’s plans for mitigating such risks are regularly presented to the full Board for discussion and in order to ensure
monitoring. In addition to the risk management program, the Board encourages management to promote a corporate culture that
incorporates risk management into the Company’s corporate strategy and day-to-day business operations.
A discussion of risk factors in the Company’s compensation design can be found below under the heading “Risk
Considerations in Our Compensation Program”.
Principles of Corporate Governance, Bylaws and Other Governance Documents
The Board has adopted Corporate Governance Guidelines and other corporate governance documents that supplement
certain provisions of our Bylaws and relate to, among other things, the composition, structure, interaction and operation of the
Board. Some of the key governance features of our Corporate Governance Guidelines, Bylaws and other governance documents
are summarized below.
Majority Vote Policy in Director Elections. Aviat’s Corporate Governance Guidelines provide that any nominee for
director in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to
be elected) who receives a greater number of votes “withheld” from his election than votes “for” such election shall, promptly
following certification of the stockholder vote, offer his resignation to the Board for consideration in accordance with the
following procedures. All of these procedures shall be completed within 90 days following certification of the stockholder vote.
The Board, through its Qualified Independent Directors (as defined below), shall evaluate the best interest of the
Company and its stockholders and shall decide the action to be taken with respect to such offered resignation, which can
include, without limitation: (i) accepting the resignation; (ii) accepting the resignation effective as of a future date not later than
180 days following certification of the stockholder vote; (iii) rejecting the resignation but addressing what the Qualified
Independent Directors believe to be the underlying cause of the withhold votes; (iv) rejecting the resignation but resolving that
the director will not be re-nominated in the future for election; or (v) rejecting the resignation.
In reaching their decision, the Qualified Independent Directors shall consider all factors they deem relevant, including
but not limited to: (i) any stated reasons why stockholders withheld votes from such director; (ii) the extent to which the
“withhold” votes exceed the votes “for” the election of the director and whether the “withhold” votes represent a majority of the
outstanding shares of common stock; (iii) any alternatives for curing the underlying cause of the withheld votes; (iv) the
director’s tenure; (v) the director’s qualifications; (vi) the director’s past and expected future contributions to the Company;
(vii) the overall composition of the Board, including whether accepting the resignation would cause the Company to fail or
potentially fail to comply with any applicable law, rule or regulation of the SEC or the NASDAQ Listing Rules; and
(viii) whether such director’s continued service on the Board for a specified period of time is appropriate in light of current or
anticipated events involving the Company.
9
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Following the Board’s determination, the Company shall, within four business days, disclose publicly in a document
furnished or filed with the SEC the Board’s decision as to whether or not to accept the resignation offer. The disclosure shall
also include a description of the process by which the decision was reached, including, if applicable, the reason or reasons for
rejecting the offered resignation.
A director who is required to offer his or her resignation in accordance with this policy shall not be present during the
deliberations or voting whether to accept his or her resignation or, except as otherwise provided below, a resignation offered by
any other director in accordance with this policy. Prior to voting, the Qualified Independent Directors may afford the affected
director an opportunity to provide any information or statement that he or she deems relevant.
For purposes of this policy, “Qualified Independent Directors” means all directors who (i) are independent directors
(as defined in accordance with the NASDAQ Listing Rules) and (ii) are not required to offer their resignation in connection
with an election in accordance with this majority voting policy. If there are fewer than three independent directors then serving
on the Board who are not required to offer their resignations in accordance with this majority voting policy, then the Qualified
Independent Directors shall mean all of the independent directors, and each independent director who is required to offer his
resignation in accordance with this majority voting policy shall recuse himself from the deliberations and voting only with
respect to his individual offer to resign.
All nominees for election as a director in an uncontested election shall be deemed to have agreed to abide by this
majority voting policy and shall offer to resign and shall resign if requested to do so in accordance with this majority voting
policy (and shall if requested submit an irrevocable resignation letter, subject to this majority voting policy, as a condition to
being nominated for election).
Prohibition Against Pledging Aviat Securities and Hedging Transactions. In accordance with Aviat’s Code of Conduct,
directors and executive officers are prohibited from pledging Aviat securities and engaging in hedging transactions with respect
to Aviat securities. Aviat specifically prohibits directors and executive officers from holding Aviat securities in any margin
account for investment purposes or otherwise using Aviat securities as collateral for a loan. Such persons are also prohibited
from purchasing certain instruments (including prepaid variable forward contracts, equity swaps, and collars) and engaging in
transactions designed to hedge or offset any decrease in the value of Aviat securities.
Board of Directors Committees
The Board maintains an Audit Committee, a Compensation Committee and a Governance and Nominating Committee.
Copies of the charters for the Audit Committee, the Compensation Committee and the Governance and Nominating Committee
are available on our website www.investors.aviatnetworks.com/documents.cfm.
10
The following table shows, for fiscal year 2013, the Chairman and members of each committee, the number of
committee meetings held and the principal functions performed by each committee.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Members
Principal Functions
Edward F. Thompson*
William A. Hasler
Raghavendra Rau
• Selects our independent registered public accounting
firm
• Reviews reports of our independent registered public
accounting firm
• Reviews and pre-approves the scope and cost of all
services, including all non-audit services, provided by
the firm selected to conduct the audit
• Monitors the effectiveness of the audit process
• Reviews management’s assessment of the adequacy of
financial reporting and operating controls
• Monitors corporate compliance program
Dr. James C. Stoffel*
Clifford H. Higgerson
Dr. Mohsen Sohi
• Reviews our executive compensation policies and
strategies
• Oversees and evaluates our overall compensation
structure and programs
William A. Hasler*
James C. Stoffel
Clifford H. Higgerson
• Develops and implements policies and practices relating
to corporate governance
• Reviews and monitors implementation of our policies
and procedures
• Reviews the process by which management identifies
and mitigates key areas of risk and reviews critical risk
areas with the Board
• Assists in developing criteria for open positions on the
Board
• Reviews and recommends nominees for election of
directors to the Board
• Reviews and recommends policies, if needed for
selection of candidates for directors
Committee
Audit
Number of
Meetings in
Fiscal 2013
14
Compensation
Governance and
Nominating
5
4
________________
* Chairman of Committee
Audit Committee
The Audit Committee is primarily responsible for selecting, and approving the services performed by, our independent
registered public accounting firm, as well as reviewing our accounting practices, corporate financial reporting and system of
internal controls over financial reporting. The Audit Committee currently consists of Messrs. Thompson (Chairman), Hasler and
Rau. No material amendments to the Audit Committee Charter were made during fiscal year 2013. The Audit Committee is
comprised of independent, non-employee members of our Board who are “financially sophisticated” under the NASDAQ
Listing Rules.
The Board has determined that each of Messrs. Thompson and Hasler qualifies as an “audit committee financial
expert,” as defined under Item 407(d)(5)(i) of Regulation S-K under the Securities Act of 1933 and the Exchange Act, but that
status does not impose on either of them duties, liabilities or obligations that are greater than the duties, liabilities or obligations
otherwise imposed on them as members of our Audit Committee and the Board.
11
Compensation Committee
t
n
e
m
e
t
a
t
S
y
x
o
r
P
The Compensation Committee has the authority and responsibility to approve our overall executive compensation
strategy, to administer our annual and long-term compensation plans and to review and make recommendations to the Board
regarding executive compensation. The Compensation Committee is comprised of independent, non-employee members of the
Board in accordance with NASDAQ Listing Rules. During fiscal year 2013, the Compensation Committee utilized Pearl Meyer
& Partners as an independent, third-party consulting firm.
Compensation Committee Interlock and Insider Participation
The Compensation Committee currently consists of Messrs. Stoffel (Chairman), Higgerson and Sohi. None of these
individuals is an officer or employee or former officer of the Company. None of our executive officers currently serves or in the
past year has served as a member of the board of directors or compensation committee of any entity that has one or more
executive officers serving on our Board or Compensation Committee.
Governance and Nominating Committee
The Governance and Nominating Committee currently consists of Messrs. Hasler (Chairman), Higgerson, and Stoffel.
Each member of the committee meets the independence requirements of the NASDAQ Listing Rules.
The Governance and Nominating Committee develops and implements policies and practices related to corporate
governance consistent with sound corporate governance principles. The Governance and Nominating Committee also reviews
the process by which management identifies and mitigates key areas of risk and reviews critical risk areas with the Board.
The Governance and Nominating Committee also recommends candidates to the Board and periodically reviews
whether a more formal selection policy should be adopted. There is no difference in the manner in which the committee
members evaluate nominees for director based on whether the nominee is recommended by a stockholder. We currently do not
pay a third party to identify or assist in identifying or evaluating potential nominees, although we may in the future utilize the
services of such third parties.
In reviewing potential candidates for the Board, the Governance and Nominating Committee considers the individual’s
experience and background. Candidates for the position of director should exhibit proven leadership capabilities, high integrity,
exercise high level responsibilities within their chosen career, and possess an ability to quickly grasp complex principles of
business, finance, international transactions and communications technologies. In general, candidates who have held an
established executive level position in business, finance, law, education, research, government or civic activity will be
preferred.
Although the Governance and Nominating Committee has not adopted a formal diversity policy with regard to the
selection of director nominees, diversity is one of the factors that the committee considers in identifying director nominees.
When identifying and recommending director nominees, the Governance and Nominating Committee views diversity
expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional
experience, education, skill and other qualities or attributes that contribute to board diversity. As part of this process, the
Governance and Nominating Committee evaluates how a particular candidate would strengthen and increase the diversity of the
Board in terms of how that candidate may contribute to the Board’s overall balance of perspectives, backgrounds, knowledge,
experience, skill sets and expertise in substantive matters pertaining to the Company’s business.
In making its recommendations, the Governance and Nominating Committee bears in mind that the foremost
responsibility of a director of a corporation is to represent the interests of the stockholders as a whole. The Governance and
Nominating Committee intends to continue to evaluate candidates for election to the Board on the basis of the foregoing
criteria.
Stockholder Communications with the Board
Stockholders who wish to communicate directly with the Board may do so by submitting a comment via the
Company’s website at www.investors.aviatnetworks.com/contactBoard.cfm or by sending a letter addressed to: Aviat Networks,
Inc., c/o Corporate Secretary, 5200 Great America Parkway, Santa Clara, CA 95054. The Corporate Secretary monitors these
communications and provides a summary of all received messages to the Board at its regularly scheduled meetings. When
warranted by the nature of communications, the Corporate Secretary will request prompt attention by the appropriate committee
12
or independent director of the Board, independent advisors or management. The Corporate Secretary may decide in her
judgment whether a response to any stockholder communication is appropriate.
Code of Conduct
We implemented our Code of Conduct effectively on January 26, 2007. All of our employees, including the CEO, CFO
and Principal Accounting Officer, are required to abide by the Code of Conduct to help ensure that our business is conducted in
a consistently ethical and legal manner. The Audit Committee has adopted a written policy, and management has implemented a
reporting system, intended to encourage our employees to bring to the attention of management and the Audit Committee any
complaints regarding the integrity of our internal system of controls over financial reporting, or the accuracy or completeness of
financial or other information related to our financial statements.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
TRANSACTIONS WITH RELATED PERSONS
During fiscal 2013, we believe there were no transactions, or series of similar transactions, to which we were or are to
be a party in which the amount exceeded $120,000, and in which any of our directors or executive officers, any holders of more
than 5% of our common stock or any members of any such person’s immediate family, had or will have a direct or indirect
material interest, other than compensation described in the sections titled “Director Compensation and Benefits” and
“Executive Compensation”.
It is the policy and practice of our Board to review and assess information concerning transactions involving related
persons. Related persons include our directors and executive officers and their immediate family members. If the determination
is made that a related person has a material interest in a transaction involving us, then the disinterested members of our Board
would review and approve or ratify it, and we would disclose the transaction in accordance with SEC rules and regulations. If
the related person is a member of our Board, or a family member of a director, then that director would not participate in any
discussion involving the transaction at issue.
Our Code of Conduct prohibits all employees, including our executive officers, from benefiting personally from any
transactions with us other than approved compensation benefits.
13
t
n
e
m
e
t
a
t
S
y
x
o
r
P
DIRECTOR COMPENSATION AND BENEFITS
The form and amount of director compensation is reviewed and assessed from time to time by the Compensation
Committee with changes, if any, recommended to the Board for action. Director compensation may take the form of cash,
equity, and other benefits ordinarily available to directors.
Directors who are not employees of ours received the following fees, as applicable, for their services on our Board
during fiscal year 2013:
•
•
•
•
$60,000 basic annual cash retainer, payable on a quarterly basis, which a director may elect to receive in the form
of shares of common stock;
$10,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Audit Committee;
$5,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Governance and
Nominating Committee;
$8,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Compensation
Committee;
• Annual grant of restricted shares of common stock valued (based on market prices on the date of grant) at
$30,000, with 100% vesting in one year, subject to continuing service as a director;
• Annual grant of options to purchase common stock valued (based on U.S. GAAP (as defined below) values of the
options on the date of grant) at $30,000, with an exercise price per share equal to the market price on the date of
grant and with 100% vesting in one year, subject to continuing service as a director; and
•
$18,000 annual cash retainer, payable on a quarterly basis, for service as the lead independent director of our
Board.
Directors are eligible to defer payment of all or a portion of the retainer fees and restricted stock awards that are
payable to them. Directors may choose either a lump sum or installment distribution of such fees and awards. Installment
distributions are payable in annual installments over a period no longer than 10 years.
We reimburse each non-employee director for reasonable travel expenses incurred and in connection with attendance
at Board and committee meetings on our behalf, and for expenses such as supplies and continuing director education costs,
including travel for one course per year. Employee directors are not compensated for service as a director.
Fiscal 2013 Compensation of Non-Employee Directors
Our non-employee directors received the following aggregate amounts of compensation in respect of the fiscal year
ended June 28, 2013.
Name
William A. Hasler
Clifford H. Higgerson
Charles D. Kissner
Raghavendra Rau
Dr. Mohsen Sohi
Dr. James C. Stoffel
Edward F. Thompson
Fees Earned
or Paid in
Cash (1)
Stock
Awards (2)
Option
Awards (2)
Non-Equity
Incentive Plan
Compensation
Changes in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
All Other
Compensation
($)
65,000
60,000
180,000
60,000
60,000
86,000
70,000
($)
29,999
29,999
29,999
29,999
29,999
29,999
29,999
($)
30,043
30,043
30,043
30,043
30,043
30,043
30,043
14
($)
($)
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
($)
125,042
120,042
240,042
120,042
120,042
146,042
130,042
___________________
(1)
(2)
In lieu of his customary cash retainer, Mr. Kissner received $180,000 for services provided concerning strategic
transactions and investor relations.
The amounts shown in this column reflect the aggregate grant date fair value of the stock awards and option awards
granted to our non-employee directors computed in accordance with FASB ASC Topic 718. The assumptions made in
determining the fair values of our stock awards and option awards are set forth in Notes 1 and 11 to our fiscal 2013
Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K filed with the SEC on
September 23, 2013.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
As of June 28, 2013, our non-employee directors held the following numbers of unvested restricted shares of common
stock and stock options granted under the 2007 Stock Equity Plan, as Amended and Restated Effective November 17, 2011:
Name
William A. Hasler
Clifford H. Higgerson
Charles D. Kissner (1)
Raghavendra Rau
Dr. Mohsen Sohi
Dr. James C. Stoffel
Edward F. Thompson
___________________
Unvested Stock
Awards
Unvested Option
Awards
8,287
8,287
135,887
8,287
8,287
8,287
8,287
19,166
19,166
65,541
19,166
19,166
19,166
19,166
(1)
127,600 shares of unvested stock awards and 46,375 shares of unvested option awards are related to services
concerning strategic transactions and investor relations provided by Mr. Kissner.
Indemnification
Our Bylaws require us to indemnify each of our directors and officers with respect to their activities as a director,
officer, or employee of ours, or when serving at our request as a director, officer, or trustee of another corporation, trust, or
other enterprise, against losses and expenses (including attorney fees, judgments, fines, and amounts paid in settlement)
incurred by them in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, to which they are, or are threatened to be made, a party(ies) as a result of their service to us. In addition, we carry
directors’ and officers’ liability insurance, which includes similar coverage for our directors and executive officers. We will
indemnify each such director or officer for any one or a combination of the following, whichever is most advantageous to such
director or officer:
• The benefits provided by our Bylaws in effect on the date of the indemnification agreement or at the time
expenses are incurred by the director or officer;
• The benefits allowable under Delaware law in effect on the date the indemnification bylaw was adopted, or as
such law may be amended;
• The benefits available under liability insurance obtained by us; and
•
Such benefits as may otherwise be available to the director or officer under our existing practices.
Under our Bylaws, each director or officer will continue to be indemnified even after ceasing to occupy a position as
an officer, director, employee or agent of ours with respect to suits or proceedings arising from his or her service with us.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock as of
September 4, 2013 by each person or entity known by us to beneficially own more than 5 percent of our common stock, by our
directors, by our named executive officers and by all our directors and executive officers as a group. Except as indicated in the
footnotes to this table, and subject to applicable community property laws, the persons listed in the table below have sole voting
and investment power with respect to all shares of our common stock shown as beneficially owned by them. Unless otherwise
indicated, the address of each of the beneficial owners identified is c/o Aviat Networks, Inc., 5200 Great America Parkway,
Santa Clara, CA 95054. As of September 4, 2013, there were 62,377,639 shares of our common stock outstanding.
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Name and Address of Beneficial Owner
BlackRock Inc.
40 East 52th Street
New York, NY 10022
PENN Capital Management
Navy Yard Corporate Center
Three Crescent Drive, Suite 400
Philadelphia, PA 19112
BlueMountain Capital Management, LLC
280 Park Ave., 5th Floor East
New York, NY 10017
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
Dimensional Fund Advisors LP
Palisades West, Building One
6300 Bee Cave Road, Building One
Austin, TX 78746
Named Executive Officers and Directors
William A. Hasler
Clifford H. Higgerson
Edward J. Hayes, Jr.
Paul A. Kennard
Charles D. Kissner
Shaun McFall
Michael Pangia
Raghavendra Rau
Dr. Mohsen Sohi
Dr. James C. Stoffel
Heinz H. Stumpe
Edward F. Thompson
Shares Beneficially Owned as of September 4, 2013(1)
Number of Shares of
Common Stock(2)
Percentage of Voting
Power of Common Stock
6,512,252 (3)
10.44%
3,665,502 (4)
5.88%
3,602,810 (5)
3,475,528 (6)
3,244,947 (7)
113,705 (8)
237,312 (9)
607,979 (10)
406,003 (11)
524,237 (12)
351,787 (13)
893,229 (14)
76,012 (15)
105,166 (8)
105,017 (8)
381,500 (16)
107,517 (8)
5.78%
5.57%
5.20%
*
*
*
*
*
*
1.43%
*
*
*
*
*
All directors and executive officers as a group (12 persons)
3,909,464 (17)
6.27%
__________________________
* Less than one percent
(1)
(2)
Beneficial ownership is determined under the rules and regulations of the SEC, and generally includes voting or
dispositive power with respect to such shares.
Shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and
beneficially owned by that person for the purpose of computing the total number of shares beneficially owned by that
person and the percentage ownership of that person, but are not deemed to be outstanding for the purpose of
16
P
r
o
x
y
S
t
a
t
e
m
e
n
t
computing the percentage ownership of any other person or group. Accordingly, the amounts in the table include
shares of common stock that such person has the right to acquire within 60 days of September 4, 2013 by the exercise
of stock options.
Based solely on a review of Amendment No. 4 to the Schedule 13G filed with the SEC on June 7, 2013 by BlackRock
Inc., on behalf of itself and its wholly owned subsidiaries. BlackRock Inc. and its wholly owned subsidiaries reported
sole voting and dispositive power with respect to all such shares.
Based solely on a review of the Schedule 13G filed with the SEC on February 15, 2013 by PENN Capital
Management. PENN Capital Management reported sole voting and dispositive power with respect to all such shares.
Based solely on a review of Amendment No. 1 to the Schedule 13G filed with the SEC on February 13, 2013 by
BlueMountain Capital Management, LLC (“BCM”) and BlueMountain GP Holdings, LLC (“BGH”). BCM reported
shared voting and dispositive power with respect to all such shares and BGH reported shared voting and dispositive
power with respect to 3,208,263 of such shares.
Based solely on a review of the Schedule 13G filed with the SEC on February 13, 2013 by The Vanguard Group. The
Vanguard Group reported sole voting power with respect to 80,194 of such shares, sole dispositive power with respect
to 3,395,334 of such shares and shared dispositive power with respect to 80,194 of such shares.
Based solely on a review of the Schedule 13G filed with the SEC on February 11, 2013 by Dimensional Fund Advisors
LP. Dimensional Fund Advisors LP reported sole voting power with respect to 3,183,023 of such shares and sole
dispositive power with respect to all such shares.
Includes options to purchase 48,251 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 48,251 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013. Includes 107,895 shares held by, or in trusts for, members of Mr. Higgerson’s
family. Also includes 24,400 shares held by Higgerson Investments. Mr. Higgerson disclaims beneficial ownership of
the shares held in trust and held by Higgerson Investments.
Includes options to purchase 357,884 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 227,736 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 189,495 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013. Includes 103,499 shares held by, or in trusts for, members of Mr. Kissner’s
family. Mr. Kissner disclaims beneficial ownership of the shares held in trust.
Includes options to purchase 187,608 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 461,853 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 45,414 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 210,249 shares of common stock that are currently exercisable or will become exercisable
within 60 days of September 4, 2013.
Includes options to purchase 1,921,494 shares of common stock that are currently exercisable or will become
exercisable within 60 days of September 4, 2013.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
17
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
t
n
e
m
e
t
a
t
S
y
x
o
r
P
The Audit Committee currently consists of three members of the Board, each of whom is independent of the Company
and its management, as defined in the NASDAQ Listing Rules. The Board has adopted, and periodically reviews, the Audit
Committee charter. The charter specifies the scope of the Audit Committee’s responsibilities and how it carries out those
responsibilities.
The Audit Committee reviews management’s procedures for the design, implementation, and maintenance of a
comprehensive system of internal controls over financial reporting and disclosure controls and procedures focused on the
accuracy of our financial statements and the integrity of our financial reporting systems. The Audit Committee provides the
Board with the results of its examinations and recommendations and reports to the Board as it may deem necessary to make the
Board aware of significant financial matters requiring the attention of the Board.
The Audit Committee does not conduct auditing reviews or procedures. The Audit Committee monitors management’s
activities and discusses with management the appropriateness and sufficiency of our financial statements and system of internal
control over financial reporting. Management has primary responsibility for the Company’s financial statements, the overall
reporting process and our system of internal control over financial reporting. Our independent registered public accounting firm
audits the financial statements prepared by management, expresses an opinion as to whether those financial statements fairly
present our financial position, results of operations and cash flows in conformity with accounting principles generally accepted
in the United States ("U.S. GAAP) and discusses with the Audit Committee any issues they believe should be raised with us.
The Audit Committee reviews reports from our independent registered public accounting firm with respect to their
annual audit and approves in advance all audit and non-audit services provided by our independent auditors in accordance with
applicable regulatory requirements. The Audit Committee also considers, in advance of the provision of any non-audit services
by our independent registered public accounting firm, whether the provision of such services is compatible with maintaining
their independence.
In accordance with its responsibilities, the Audit Committee has reviewed and discussed with management the audited
financial statements for the year ended June 28, 2013 and the process designed to achieve compliance with Section 404 of the
Sarbanes-Oxley Act of 2002. The Audit Committee has also discussed with our independent registered public accounting firm,
KPMG LLP, the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”)
in Rule 3200T. The Audit Committee has received the written disclosures and letter from KPMG LLP required by applicable
requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence, and
has discussed with KPMG LLP its independence, including whether KPMG LLP’s provision of non-audit services is
compatible with its independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited
financial statements for the year ended June 28, 2013 be included in Company’s Annual Report on Form 10-K.
Audit Committee of the Board of Directors
Edward F. Thompson, Chairman
William A. Hasler
Raghavendra Rau
18
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
KPMG LLP has been approved by our Audit Committee to act as our independent registered public accounting firm
for the fiscal year ending June 27, 2014. Representatives of KPMG LLP will be present at the Annual Meeting , will have
opportunity to make a statement should they so desire and will be available to respond to appropriate questions.
Audit and other fees billed to us for the fiscal year ended June 28, 2013 and June, 29, 2012 are as follows:
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Audit Fees(4)
Audit-Related Fees(5)
Tax Fees(6)
All Other Fees(7)
Total Fees for Services Provided
________________________
Fiscal 2013 (1)(3)
1,428,917
$
Fiscal 2012 (2)
$
1,935,258
7,500
64,185
—
—
73,065
16,120
$
1,500,602
$
2,024,443
(1)
(2)
(3)
(4)
(5)
(6)
(7)
On September 6, 2012, the Audit Committee approved the engagement of KPMG LLP as its new independent
registered public accounting firm for the year ending June 28, 2013. The appointment of KPMG LLP was ratified by
our stockholders at our 2012 Annual Meeting held on November 13, 2012.
On September 6, 2012, the Company dismissed Ernst & Young LLP as its independent registered public accounting
firm.
Includes the following fees billed to us by Ernst & Young LLP for the period June 29, 2012 through September 6,
2012: audit fees totaling $92,549 and tax fees totaling $64,185.
Audit fees include fees associated with the annual audit, as well as reviews of our quarterly reports on Form 10-Q,
SEC registration statements, accounting and reporting consultations and statutory audits required internationally for
our subsidiaries.
Audit-related fees include fees for completion of certain statutory registration requirements.
Tax fees were for services related to tax compliance and tax planning services.
Other fees include fees billed for other services rendered not included within Audit Fees, Audit Related Fees or Tax
Fees.
KPMG LLP and Ernst & Young LLP did not perform any professional services related to financial information
systems design and implementation for us in fiscal 2013 or fiscal 2012.
The Audit Committee has determined in its business judgment that the provision of non-audit services described above
is compatible with maintaining KPMG LLP and Ernst & Young LLP’s independence.
19
t
n
e
m
e
t
a
t
S
y
x
o
r
P
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview and Summary
This Compensation Discussion and Analysis, which has been prepared by management, is intended to help our
stockholders understand our executive compensation philosophy, objectives, elements, policies, practices, and decisions. It is
also intended to provide context for the compensation information for our CEO, CFO and the three other most highly
compensated executive officers (our “named executive officers”) detailed in the Summary Compensation Table below and in
the other tables and narrative discussion that follow.
To understand our approach to executive compensation, you should read the entire Compensation Discussion and
Analysis that follows. The following brief summary introduces the major topics covered:
•
•
•
•
•
•
the cornerstone of our executive compensation program is pay for performance. Accordingly, while we pay
competitive base salaries and other benefits, the majority of our named executive officers’ compensation
opportunity is based on variable pay.
the objectives of our executive compensation program are to reward superior performance, motivate our
executives to achieve our goals and attract and retain a world-class management team.
the Compensation Committee oversees our compensation program. The Compensation Committee makes most
executive compensation decisions, but also makes recommendations on certain aspects of the program to the full
Board. The Compensation Committee is composed solely of independent directors. In its work, the Compensation
Committee is assisted by independent compensation consultants engaged by the Compensation Committee.
in reviewing the elements of our executive compensation program — base salary, annual incentives, long-term
incentives and post-termination compensation — our Compensation Committee reviews market data from similar
companies.
our competitive positioning philosophy is to set compensation at the 50th percentile of compensation at peer
group companies with allowances for internal factors such as tenure, individual performances and the specific
importance of the job to the Company.
our annual incentive program is based on specific Company financial performance goals for the fiscal year, and
includes provisions to “claw back” any excess amounts paid in the event of a later correction or restatement of our
financial statements.
The Company believes the compensation program for the named executive officers was instrumental in helping the
Company achieve its financial performance in fiscal year 2013. Moreover, we believe that in emphasizing long term
stockholder value creation over short term operating results the structure of our executive compensation program has benefited
our Company.
Compensation Governance Best Practices
The Compensation Committee believes that a demonstrative commitment to best practices in compensation
governance is itself an essential component of our approach to executive compensation. The following practices are some
examples of this commitment:
• Pay for Performance: A substantial portion of our executives’ compensation opportunity is tied to achieving specified
corporate objectives; in 2013, for example, 100% of the equity awards made to our executive officers under the Annual
Incentive Plan (AIP) were performance based and at-risk. Failure to achieve these objectives results in significantly
lower compensation, and in some instances outright forfeiture of equity grants. Under the Long Term Incentive Plan
(LTIP) , an additional two years of service is required before any earned performance-based equity grants vest,
reinforcing the long-term focus of our executive compensation programs;
20
• Mix of short term and long-term compensation: Short term compensation for our executive officers is comprised of
base salaries and at-risk compensation, which includes a mix of performance based cash and equity that may be
awarded if the Company meets its financial targets. Long term compensation is composed of stock options which vest
over a 3 year period.
•
Independent Compensation Consultant: The Compensation Committee directly retains the services of Pearl Meyer,
an independent compensation consultant, to advise it in determining reasonable and market-based compensation
policies;
• Prohibition on hedging: Our executive officers, together with all other employees, are prohibited from engaging in
hedging or similar transactions with respect to our securities.
• No perquisites: Our executive officers are not provided with club memberships, personal use of corporate aircraft or
any other perquisite or special benefits other than our occasional provision of relocation expense reimbursement;
P
r
o
x
y
S
t
a
t
e
m
e
n
t
• No single trigger change of control acceleration: All change of control arrangements with our executive officers
provide for acceleration of vesting for outstanding equity awards only in the event that we are both subject to a change
in control and the executive officer’s employment terminates thereafter for specified reasons; and
•
Strong compensation risk management: The Compensation Committee reviews and analyzes the risk profile of our
compensation programs and practices at least annually.
Compensation Philosophy and Objectives
The primary objectives of our total executive compensation program are to recruit, retain, and develop exceptional
executives, incentivize those individuals to achieve strategic, operational, and financial goals, rewarding superior performance
and aligning the long term interests of our executives with our stockholders. The following principles guide our overall
compensation program:
•
reward superior performance;
• motivate our executives to achieve strategic, operational, and financial goals;
•
•
enable us to attract and retain a world-class management team; and
align outcomes and rewards with stockholder expectations.
The Compensation Committee annually reviews the executive compensation program to ensure our executive
compensation policies and programs remain appropriately aligned with evolving business needs and to consider best
compensation practices. Our executive compensation programs are reviewed to ensure that they achieve a balance between
providing strong retention and performance incentives to our executives while accommodating a meaningful and continuing
effort to manage both the Company’s share burn rate and the dilutive effects of the Company equity awards to the Company’s
stockholders.
Executive Compensation Process
The Compensation Committee is responsible for establishing and implementing executive compensation policies and
programs in a manner consistent with our compensation objectives and principles. The Compensation Committee, which is
comprised solely of independent directors, reviews and approves the features and design of our executive compensation
program, and approves the compensation levels, individual bonus objectives and total compensation targets for our executive
officers other than our CEO. The Board approves the compensation level, individual bonus objectives, and financial targets for
our CEO. The Compensation Committee also monitors executive succession planning and monitors our performance as it
relates to overall compensation policies for employees, including benefit and savings plans.
In discharging its responsibilities, the Compensation Committee may engage outside consultants and consult with our
Human Resources Department as well as internal and external legal or accounting advisors, as the Compensation Committee
determines to be appropriate. The Compensation Committee considers recommendations from our CEO and senior
management when making decisions regarding our executive compensation program and compensation of our executive
21
t
n
e
m
e
t
a
t
S
y
x
o
r
P
officers. Following each fiscal year end, our CEO, assisted by our Human Resources Department, assesses the performance of
all named executive officers and other officers. Following this annual performance review process, our CEO recommends base
salary and incentive and equity awards for our named executive officers and other officers to the Compensation Committee.
Based on input from our CEO and management, as well as from independent consultants, if any are used, and, in the case of the
CEO’s compensation, the Compensation Committee’s evaluation of the CEO’s performance, the Compensation Committee
determines what changes, if any, should be made to the executive compensation program and either sets or recommends to the
full Board the level of each compensation element for all of our officers.
Independent Compensation Consultant for Compensation Committee
The Compensation Committee has the authority under its charter to engage the services of outside advisors, experts
and others to assist it. Accordingly, the Compensation Committee has hired Pearl Meyer & Partners (“Pearl Meyer”) as an
independent consultant to advise the Committee on matters related to the compensation of the Company’s executive officers.
All services that Pearl Meyer provided Aviat in fiscal year 2013 were approved by the Committee and related to executive or
Board compensation. Pearl Meyer provides an annual review of the Company’s compensation practices, reviews and makes
recommendations regarding the compensation peer groups, and provides independent input to the Compensation Committee on
programs and practices.
Compensation Committee Advisor Independence
The Compensation Committee has considered the independence of Pearl Meyer pursuant to the NASDAQ Listing
Rules and related SEC rules finalized in 2012, and has found no conflict of interest in Pearl Meyer continuing to provide advice
to the Compensation Committee. The Compensation Committee is also regularly advised by the Company’s primary outside
counsel, Wilson Sonsini Goodrich & Rosati, Professional Corporation (“WSGR”). Pursuant to the NASDAQ Listing Rules and
related SEC rules finalized in 2012, the Compensation Committee has found no conflict of interest in WSGR continuing to
provide advice to the Compensation Committee. The Compensation Committee intends to reassess the independence of its
advisors at least annually.
Consideration of Say on Pay Results
We conducted our advisory vote on executive compensation last year at our annual meeting. Although this vote was
not binding on the Board or us, we believe that it is important for our stockholders to have an opportunity to express their views
regarding our executive compensation philosophy, program and practices as disclosed in our proxy statement on an annual
basis. The Board and our Compensation Committee value stockholders’ opinions and, to the extent there is any significant vote
against the compensation of our named executive officers, the Compensation Committee will evaluate whether any actions are
warranted or appropriate.
At our 2012 Annual Meeting, 98% of the votes cast on the advisory vote on executive compensation supported our
named executive officers’ compensation as disclosed in the proxy statement. Our Compensation Committee reviewed the
favorable results of this advisory vote, noting the widespread support from our stockholders. Although none of our
Compensation Committee’s subsequent actions or decisions with respect to the compensation of our executive officers were
directly attributable to the results of the vote, our Compensation Committee took the vote outcome into consideration in the
course of its deliberations. Our Compensation Committee believes that stockholder feedback and concerns on executive
compensation matters should be considered as part of its deliberations and intends to consider the results of future advisory
votes in its compensation review process.
Competitive Benchmarking
Our compensation program for all of our officers is addressed in the context of competitive compensation practices.
Our management and Compensation Committee consider external data to assist in benchmarking total target compensation. For
fiscal 2013, targets for total cash and cash based compensation (base salary and short-term incentive), long-term incentives and
total direct compensation (base salary and short-term and long-term incentives) for all officers were set based on data collected
from our peer group companies and from two published survey sources, the Radford Global Technology Survey and the Pearl
Meyer & Partners Executive and Senior Management Total Compensation Survey. In considering data from the two published
survey sources, we focused on results for technology companies with revenues between approximately half and approximately
twice our revenue. The peer group companies selected for benchmarking are reflective of our market for executive talent and
business line competitors. Also, the overall composition of the peer group reflects companies of similar complexity and size to
us.
22
For fiscal 2013, these peer group companies included:
ADTRAN Inc.
Black Box Corp.
Comtech Telecommunications Corp.
Finisar Corp.
Ixia
NETGEAR, Inc.
Plantronics Inc.
Riverbed Technology, Inc.
Symmetricom, Inc.
Aruba Networks, Inc.
Calix, Inc.
Extreme Networks, Inc.
Harmonic Inc.
Loral Space & Communications Inc.
Opnext Inc.
Powerwave Technologies, Inc.
Sonus Networks, Inc.
ViaSat, Inc.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
The Compensation Committee annually reviews the appropriateness of the comparison group used for assessing the
compensation of our CEO and other named executive officers. Modifications to the peer group since fiscal 2012 included
removal of CIENA Group, F5 Networks Inc. and Polycom Inc. in recognition that each of these companies was much larger in
revenue size than we are. EMS Technologies and Hughes Communications were also removed in recognition of their
acquisitions by Honeywell and EchoStar, respectively. Tekelec was also removed after it was taken private by a group of
investors led by Siris Capital Group. Aruba Networks Inc. and Extreme Networks Inc. were added to our fiscal 2013 peer
group to replace these removals and also to better align the overall revenue size of peer group companies with our own.
Data for our peer group companies was collected directly from these companies’ proxy statements. Data from the
published survey source was combined with the peer group data to develop a “market composite” perspective.
Total Compensation Elements
Our executive compensation program includes four major elements:
•
•
•
•
base salary
annual cash incentive
long-term compensation — equity incentives
post-termination compensation
Each named executive officer’s performance is measured against factors such as long and short-term strategic goals
and financial measures of our performance, including factors such as revenue, operating income, cash flow from operations and
earnings per share.
Our compensation policy and practice is to target total compensation levels for all officers, including our named
executive officers, nominally at the 50th percentile for similar positions as derived from the market composite data, assuming
experience in the position and competent performance. The Compensation Committee may decide to target total compensation
above or below the 50th percentile for similar positions in unique circumstances based on an individual’s background,
experience, or position. Though compensation levels may differ among our named executive officers based upon competitive
factors and the role, responsibilities and performance of each named executive officer, there are no material differences in our
compensation policies or in the manner in which total direct compensation opportunity is determined for any of our named
executive officers. Because our CEO has significantly greater duties, responsibilities and accountabilities than our other named
executive officers, the total compensation opportunity for the CEO is higher than for our other named executive officers. In
determining CEO and other named executive officer compensation, the Board also considers the ratio between our CEO’s
compensation and the average compensation of our other named executive officers as compared with similar ratios for peer
group companies. For fiscal 2013, that ratio was 2.00, compared to a median ratio of 2.81 in the peer group companies.
Base Salary
Base salaries are provided as compensation for day-to-day responsibilities and services to us. Executive salaries are
reviewed annually. To determine compensation for fiscal year 2013, our CEO made recommendations to the Compensation
23
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Committee in August 2012 regarding the base pay of each named executive officer (other than himself). The Compensation
Committee considered each executive officer’s responsibilities, as well as the Company’s performance and recommended
increases in base salary for select named executive officers and other officers. The base salary for the Chief Sales Officer was
increased by 6.1% from $325,000 to $345,000 and the base salary for the Chief Marketing Officer was increased by 6.7% from
$300,000 to $320,000 in recognition of their additional responsibilities. However, the base salary for our CEO did not increase.
Additional details concerning the compensation for our named executive officers for fiscal 2013 are set forth in the Summary
Compensation Table
Annual Incentive
The short-term incentive element of our executive compensation program is currently comprised of a cash and equity-
based Annual Incentive Plan, or AIP. The CEO reviews his recommendations for each named executive officer with the
Compensation Committee, taking into account benchmarked market data obtained from Pearl Meyer, the Compensation
Committee’s independent consultant. Based on recommendations by the CEO, and as specified in any applicable employment
agreement, the Compensation Committee recommends to the Board an annual incentive compensation target, expressed as a
percentage of base salary, for each executive officer in August. Each named executive officer’s target annual incentive
percentage is benchmarked against the 50th percentile within the market composite for his or her specific role. The
Compensation Committee also recommends to the Board specific Company financial performance measures and targets
including the relative weighting and payout thresholds. The financial targets are aligned with our Board-approved annual
operating plan, and during the year periodic reports are made to the Board about our performance compared with the targets.
Under the AIP, a significant portion of the executive’s annual compensation is tied directly to our financial performance. The
target amount of annual incentive compensation under our AIP, expressed as a percentage of base salary, generally increases
with an executive’s level of management responsibility. AIP target incentive can represent up to 100% of the base cash
compensation for our named executive officers and may be paid in the form of cash, stock or a combination of the two. If
performance results meet target levels, our executives can earn up to a maximum of 100% of their target incentive. No incentive
can be earned for performance below the minimum threshold. Equity awards under the AIP are granted under the 2007 Stock
Equity Plan, as amended and restated.
For fiscal year 2013, given the Company’s desire to conserve cash, the AIP provided for stock incentives and
contained minimum thresholds and payout ratios for performance measures consisting of earnings per share (EPS) performance
metrics. The target amounts were established in August 2012, and the plan provided for zero payout unless Company
performance was met. The EPS target for fiscal year 2013 was based on a non-GAAP measure which excluded share-based
compensation, amortization of purchased technology, transactional tax assessments, amortization of intangible assets,
restructuring charges, adjustments to the proforma tax rate and non-recurring income.
Table 1
Metric
Earnings Per Share
Fiscal 2013 Annual Incentive Plan
Tiers
Minimum Threshold
Target
Results-Driven Entitlement
Performance
Payout
(As % of
Financial Target)
100%
100%
(As % of
Award Target)
100%
100%
The 2013 AIP did not guarantee payout of the target amounts, and the Compensation Committee considered the EPS
target to be challenging. During the 2013 fiscal year, we achieved the target for AIP awards and upon approval by the
Compensation Committee; all named executive officers received 100% of the payout under the AIP. The Company achieved
106% of its target objective. Payouts to named executive officers were 100% in the form of performance based restricted stock
issued subject to vesting based on achievement of the AIP target.
Long-Term Compensation — Equity Incentives
The Compensation Committee uses the Long Term Incentive Plan (“LTIP”) as a means for determining awards of
stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, and other stock-based
awards to our officers and other executives based on multi-year performance. All of the awards are granted under the 2007
Stock Equity Plan, as amended and restated (the “Plan”).
24
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Our LTIP is designed to motivate our executives to focus on achievement of our long-term financial goals. Equity
awards motivate our executives to achieve our long-term goals and to the extent our results affect our stock price, link such
results with the performance of our stock over a three to four -year period. Using equity awards helps us to retain executives,
encourage share ownership and maintain a direct link between our executive compensation program and the value and
appreciation in the value of our stock.
Initially, in fiscal 2013 LTIP awards were granted at a reduced level, in relation to base salary, in light of the
challenging business environment facing the Company. Prior LTIP awards had been composed of 50% stock options, 25%
service-based restricted stock awards and 25% performance-based restricted stock awards. (These proportions were measured
by the estimated GAAP expense associated with the awards). Initially, management and the Board agreed to reduce the total
target incentive amount for each named executive officer for fiscal year 2013 by eliminating the performance based stock
awards, with no increase in the other components. Pearl Meyer presented a report (the “Report”) to the Compensation
Committee benchmarking LTIP compensation for executive officers. In January 2013, after consideration of the Company’s
financial performance, retention objectives and the Report, the Compensation Committee recommended to the Board that
additional LTIP awards be made to the executive officers. Given the Board’s desire to retain its executive officers, the Board
approved the reinstatement of Performance Restricted Stock to the LTIP. This component of the LTIP was comprised of
performance vesting restricted shares which vest based on both the achievement of the Company’s EPS target and continuous
service. The Committee believes that each type of equity component addresses different compensation objectives. Stock options
provide a leverage opportunity and alignment with shareholder interests. Service-based restricted stock encourages retention of
key executives. Performance-based restricted stock aligns pay with performance.
Performance Shares. In past fiscal years, the Compensation Committee recommended performance share awards that
are earned, if the performance criteria are met, at the end of a 3-year plan cycle. The maximum possible entitlement to
performance shares will occur if 100% of the target is achieved. In addition, irrespective of Company performance versus
target, there is no entitlement to performance shares unless the award recipient continues to be employed throughout the multi-
year period. Performance shares are subject to repurchase by the Company at $0.01 per share if eligible employment ends
during the performance measurement period and to the extent the maximum performance is not achieved during the
performance measurement period. For fiscal year 2010, upon the recommendation of the Compensation Committee, the
performance shares under the 2010-2012 LTIP, were repurchased by the Company since the Committee determined that the
threshold targets had not been met. For fiscal year 2013, upon recommendation of the Compensation Committee, all of the
performance based restricted shares under the fiscal year 2012 LTIP, were repurchased by the Company since the Compensation
Committee determined that the threshold targets had not been met. For compensation planning purposes, awards of
performance-based restricted stock are valued at the fair market value of the shares on the date of award, which is the closing
price on the NASDAQ Global Select Market on that date, without reduction to reflect vesting or other conditions.
Stock Options. The Compensation Committee believes that stock options directly align the interests of executives and
stockholders as the options only result in gain to the recipient if our stock price increases above the exercise price of the
options. In addition, options are intended to help retain key employees because they vest over a period of time, and to assist in
the hiring of new executives by replacing the value of stock options that may have been forfeited as a result of leaving a former
employer. Generally, options are granted with an exercise price equal to the fair market value of the common stock on the grant
date, which is the closing price on the NASDAQ Global Select Market on that date. Typically, the Compensation Committee
awards stock options that vest and become exercisable solely on the basis of continued employment, or other service, over three
or four years, with 50 or 25 % vesting on the first anniversary of the date of the grant and an additional 25 % vesting on the
remaining anniversaries of the date of the grant. Duration of stock options (subject to the terms of the Plan) is seven years from
grant date. For compensation planning purposes, awards of stock options are valued using the Black-Scholes valuation method,
without reduction to reflect vesting or other conditions. In fiscal 2013, the Black-Scholes valuations were approximately 50%
of the grant-date value of the shares subject to the option.
Service-Based Restricted Stock. Service-based restricted stock awards are awards of stock at the start of a vesting
period which is subject to repurchase for nominal consideration if the specified vesting conditions are not satisfied. In addition
to their use as a component of the LTIP, awards of service-based restricted stock may be made on a selective basis to individual
executives primarily to facilitate retention and succession planning or to replace the value of equity awards that may have been
forfeited as a result of the executive’s leaving a former employer. For compensation planning purposes, awards of service-based
restricted stock are valued at the fair market value of the shares on the date of award, which is the closing price on the
NASDAQ Global Select Market on that date, without reduction to reflect vesting or other conditions. Typically, the
Compensation Committee awards restricted stock that vests and becomes exercisable solely on the basis of continued
employment, or other service, usually over three years, with 33 1/3 % vesting on the first anniversary of the date of the grant
25
t
n
e
m
e
t
a
t
S
y
x
o
r
P
and an additional 33 1/3 % vesting on the second and third anniversaries of the date of the grant. Unvested shares are subject to
repurchase by the Company at $0.01 per share if employment ends before the third anniversary of the grant date.
The LTIP continues to be an important element of our executive compensation program. For fiscal 2014, the
Compensation Committee recommended, and the Board authorized, long-term incentive awards structured 100% as stock
options vesting 50% on the first, and 25% on the second and third anniversaries of the grant.
Recovery of Executive Compensation
Our executive compensation program permits us to recover or “clawback” all or a portion of any performance-based
compensation if our financial statements are restated as a result of errors, omissions, or fraud. The amount which may be
recovered will be the amount by which the affected compensation exceeded the amount that would have been payable had the
financial statements been initially filed as restated, or any greater or lesser amount that the Compensation Committee or our
Board shall determine. In no case will the amount to be recovered by us be less than the amount required to be repaid or
recovered as a matter of law. Recovery of such amounts by us would be in addition to any actions imposed by law, enforcement
agencies, regulators, or other authorities.
Hedging Prohibition
Our executive officers, as well as other employees, are prohibited from engaging in hedging or similar transactions
with respect to our securities where the transaction is designed or intended to decrease the risks associated with holding our
securities. This prohibition includes transactions involving puts, call, collars or other derivative securities.
Perquisites
Our executive officers participate in the same group insurance and employee benefit plans as our other full-time U.S.
employees. We do not provide special benefits or other perquisites to our executive officers.
Stock Ownership Guidelines
While we do not have a minimum stock ownership requirement for members of the Board and our named executive
officers, the corporate governance guidelines adopted by the Board encourage the ownership of our common stock. The
Compensation Committee is satisfied that the stock and other equity holdings among our executive officers are sufficient at this
time to provide appropriate motivation to align this group’s long-term interests with those of our stockholders.
Tax and Accounting Considerations
Tax Considerations. The Compensation Committee generally considers the federal income tax and financial
accounting consequences of the various components of the executive compensation program in making decisions about
executive compensation. The Compensation Committee believes that achieving the compensation objectives discussed above is
more important than the benefit of tax deductibility and the executive compensation programs may, from time to time, limit the
tax deductibility of compensation. Nevertheless, when not inconsistent with these objectives, the Compensation Committee
endeavors to award compensation that will be deductible for income tax purposes. Internal Revenue Code Section 162(m) may
limit the tax deductions that a public company can claim for compensation to some of its named executive officers. The
Company does not guarantee that any compensation intended to qualify as deductible performance-based compensation under
Section 162(m) so qualifies. Section 409A of the Internal Revenue Code requires that “nonqualified deferred compensation” be
deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of the
deferral elections, timing of payments and certain other matters. As a general matter, it is our intention to design and administer
our compensation and benefits plans and arrangements for all of our employees so that they are either exempt from, or satisfy
the requirements of, Section 409A. We believe that currently we are operating such plans in compliance with Section 409A.
Accounting Considerations. The Compensation Committee also considers the accounting implications of various
forms of executive compensation. In its financial statements, the Company records salaries and performance-based
compensation such as bonuses as expenses in the amount paid or to be paid to the named executive officers. Accounting rules
also require the Company to record an expense in its financial statements for equity awards, even though equity awards are not
paid as cash to employees. The accounting expense of equity awards to employees is calculated in accordance with GAAP. The
Compensation Committee believes that the many advantages of equity compensation, as discussed above, more than
compensate for the non-cash accounting expense associated with them.
26
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Benefits under the 401(k) Plan and Generally Available Benefit Programs
In fiscal year 2013, our named executive officers were eligible to participate in the health and welfare programs that
are generally available to all full-time U.S.-based employees, including medical, dental, vision, life, short-term and long-term
disability, employee assistance, flexible spending and accidental death and dismemberment.
In addition, the named executive officers and all other eligible U.S.-based employees can participate in our tax-
qualified 401(k) Plan. Under the 401(k) Plan, all eligible employees can receive matching contributions from the Company. Our
company-matching contribution for the 401(k) Plan during fiscal year 2013 was 100% of the first 5% of contributions by the
employee to the 401(k) Plan. Employees under the age of 50 can contribute a maximum per participating employee of $17,500
and $23,000 if over the age of 50 during each calendar year, as allowed by the IRS. We do not provide defined benefit pension
plans or defined contribution retirement plans to the named executive officers or other employees other than the 401(k) Plan, or
as required in certain countries other than the United States, for legal or competitive reasons.
We adopted an employee stock purchase plan effective November 19, 2009 and commencing on July 3, 2010, under
which named executive officers and all other eligible U.S.-based employees can elect, on a quarterly basis, to apply a portion of
their cash compensation to purchase shares of our common stock at a 5% discount. An employee’s total purchases in any year
cannot exceed $25,000 in value or 15% of his or her salary, whichever is less. Furthermore, an employee may not purchase
more than 608 shares of common stock annually under the employee stock purchase plan.
The 401(k) Plan, employee stock purchase plan and the other benefit programs allow us to remain competitive and
enhance employee loyalty and productivity. These benefit programs are primarily intended to provide all eligible employees
with competitive and quality healthcare, financial contributions for retirement and to enhance hiring and retention.
Post-Termination Compensation
Employment agreements have been established with each of our named executive officers. These agreements provide
for certain payments and benefits to the employee if his or her employment with us is terminated. These arrangements are
discussed in more detail on page 36. We have determined that such payments and benefits are an integral part of a competitive
compensation package for our named executive officers. For additional information regarding our employment agreements with
our named executive officers, see the discussion under “Potential Payments Upon Termination or Change of Control.”
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and
Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended to
the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference
into our Annual Report on Form 10-K for the fiscal year ended June 28, 2013.
Compensation Committee of the Board of Directors
Dr. James C. Stoffel, Chairman
Clifford H. Higgerson
Dr. Mohsen Sohi
27
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Risk Considerations in Our Compensation Program
The Compensation Committee, pursuant to its charter, is responsible for reviewing and overseeing the compensation
benefits structure applicable to our employees, generally. We do not believe that our compensation policies and practices for our
employees give rise to risks that are reasonably likely to have a material adverse effect on our company. In reaching this
conclusion, we considered the following factors:
• Our compensation program is designed to provide a mix of both fixed and “at risk” incentive compensation.
• The incentive elements of our compensation program (annual incentives and multi-year equity LTIP awards) are
designed to reward both annual performance (under the annual incentive plan) and longer-term performance
(under the LTIP). We believe this design mitigates any incentive for short-term risk-taking that could be
detrimental to our company’s long-term best interests.
• Maximum payouts under our annual incentive plan are currently capped at 100% of target payouts. We believe
these limits mitigate excessive risk-taking, since the maximum amount that can be earned is limited.
•
Finally, our annual incentive plan and our long-term incentive plan both contain provisions under which awards
may be recouped or forfeited if the recipient has not complied with our policies. In addition, our performance-
based plans (cash incentive and performance shares) both contain provisions under which awards may be
recouped or forfeited if the financial results for a period affecting the calculation of an award are later restated.
28
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Summary Compensation Table
The following table summarizes the total compensation for each of our fiscal years ended June 28, 2013, June 29, 2012 and
July 1, 2011 of our named executive officers, who consisted of our CEO, CFO and the next three other most highly
compensated executive officers.
Name/Principal Position
Michael Pangia, Chief
Executive Officer (2)
Edward Hayes Jr., Senior Vice
President and Chief Financial
Officer (2)
Paul A. Kennard, Senior Vice
President and Chief
Technology Officer
(2)
Heinz H. Stumpe, Senior Vice
President and Chief Sales
Officer (formerly Chief
Operating Officer) (2)
Shaun McFall, Senior Vice
President and Chief Marketing
Officer
Fiscal
Year
(1)
2013
2012
2011
2013
2012
2013
2012
2011
2013
2012
2011
2013
2012
2011
Salary
(3)
($)
550,000
542,500
420,000
360,000
—
—
—
—
235,385
75,000
324,804
324,804
324,804
340,385
325,000
325,000
315,385
300,000
300,000
—
—
—
—
—
—
—
—
—
Bonus
(4)
($)
Stock
Awards
(5)
($)
Option
Awards
(6)
($)
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
(8)
Non-Equity
Incentive Plan
Compensation
(7)
All Other
Compensation
(9)
($)
($)
($)
Total
($)
539,809
405,533
109,000
264,997
355,937
191,273
92,411
119,900
237,026
92,430
119,900
204,146
85,320
160,999
366,576
110,255
79,036
458,068
57,047
97,476
121,281
70,693
97,476
121,281
60,887
89,977
119,900
121,281
—
275,000
—
—
96,250
—
97,500
—
—
97,500
—
—
90,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
92,778
1,343,586
234,689
1,824,298
1,324
14,996
54,426
15,344
21,413
16,514
2,379
2,260
8,260
14,170
9,181
14,507
640,579
719,029
1,275,066
588,468
633,604
582,499
650,483
614,666
574,441
594,588
574,478
555,688
(1)
(2)
(3)
(4)
(5)
Our fiscal year 2013 ended June 28, 2013, fiscal year 2012 ended June 29, 2012 and our fiscal year 2011 ended July 1,
2011. The amounts in this table represent total compensation paid or earned for our fiscal year as included in our
annual financial statements.
Effective July 18, 2011, Mr. Pangia was appointed President and CEO. Effective October 31, 2011, Mr. Hayes was
appointed Senior Vice President and CFO. Effective June 24, 2012, Mr. Stumpe was appointed Senior Vice President
and Chief Sales Officer. Effective July 8, 2013, Mr. Kennard’s employment with the Company was terminated.
The annual base salary for Mr. Pangia as our CEO is $550,000. The amount in the Summary Compensation table for
the fiscal year ended June 29, 2012 of $542,500 reflects Mr. Pangia’s salary as our Chief Sales Officer for the period
July 2, 2011 through July 17, 2011 and as our CEO for the period July 18, 2011 through June 29, 2012.
The annual base salary for Mr. Hayes is $360,000. The amount in the Summary Compensation table for fiscal 2012 of
$235,385 reflects Mr. Hayes’ salary for the period October 31, 2011 through June 29, 2012. The annual base salary for
Mr. Stumpe is $345,000 effective July 1, 2012. The annual base salary for Mr. McFall is $320,000 effective August 15,
2012.
Represents a one-time bonus earned by Mr. Hayes in respect of fiscal 2012 performance for the achievement of certain
management objectives.
The “Stock Awards” column shows the full grant date fair value of the performance shares (at target) and restricted
stock granted in fiscal 2013 and 2012. For fiscal 2011, the grant date fair value of the performance shares was reduced
to zero or no value since subsequent to the grant date we estimated that the minimum threshold performance will not
be achieved. If we had estimated that the fiscal 2011 performance shares would be earned by exceeding the target
metrics (the maximum pay-out under the Plan), the following amounts would have been included in the amount under
this column and as part of the named executive officers total compensation:
29
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Mr. Pangia
Mr. Kennard
Mr. Stumpe
Mr. McFall
Mr. Kissner
$ 109,000
$ 119,900
$ 119,900
$ 119,900
$ 466,602
The grant date fair value of the performance shares and restricted stock was determined under FASB ASC Topic 718
and represents the amount we would expense in our financial statements over the entire vesting schedule for the
awards. The grant date fair value for performance awards and restricted stock was based on the closing market price of
our common stock on the respective award dates, except for the performance shares granted during fiscal 2011 as
discussed above. The assumptions used for determining values are set forth in Notes 1 and 10 to our audited
consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended
June 28, 2013. These amounts reflect our accounting for these grants and do not correspond to the actual values that
may be recognized by the named executive officers.
The “Option Awards” column shows the full grant date fair value of the stock options granted in fiscal 2013, 2012 and
2011. The grant date fair value of the stock option awards was determined under FASB ASC Topic 718 and represents
the amount we would expense in our financial statements over the entire vesting schedule for the awards. The
assumptions used for determining values are set forth in Notes 1 and 11 to our audited consolidated financial
statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended June 28, 2013. These
amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized by
the named executive officers.
There was no non-equity incentive compensation under the AIP for fiscal 2013. For fiscal 2012, represents amounts
earned in respect of fiscal 2012 performance under the fiscal year 2012 AIP as though 100% of revenue and operating
income (non-GAAP) targets had been achieved with actual achievement of 100% of both targets. For fiscal 2011, no
amounts were paid to named executive officers in respect of fiscal 2011 performance under the respective fiscal year’s
AIP.
We do not currently have our own pension plan or deferred compensation plan.
The following table describes the components of the “All Other Compensation” column.
(6)
(7)
(8)
(9)
Life
Insurance
(a)
Housing
and Auto
Allowance
(b)
Vacation
Payout
in Cash
Severance
& Related
Benefits
Other
Patent
Income
(c)
Other
Bonus
(d)
Relocation
Benefits
(e)
Company
Matching
Contributions
Under 401(k)
Plan (f)
($)
($)
($)
($)
($)
($)
($)
($)
2,142
2,100
1,324
2,534
1,657
3,469
3,469
2,864
2,379
2,260
2,260
1,170
1,104
1104
—
—
—
—
—
—
—
—
—
—
6,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 50,000
—
—
5,694
1,015
—
—
—
—
—
—
—
—
—
—
—
—
—
—
90,636
232,589
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,462
2,769
11,875
12,250
12,635
—
—
—
13,000
8,077
13,403
Total All
Other
Compensation
($)
92,778
234,689
1,324
14,996
54,426
15,344
21,413
16,514
2,379
2,260
8,260
14,170
9,181
14,507
Name
Michael Pangia
Edward J. Hayes
Paul A. Kennard
Heinz H. Stumpe
Shaun McFall
Year
2013
2012
2011
2013
2012
2013
2012
2011
2013
2012
2011
2013
2012
2011
_____________________
(a)
Represents premiums paid for life insurance that represent taxable income for the named executive officer.
30
(b)
(c)
(d)
(e)
Represents taxable amounts to Mr. Stumpe paid under former Stratex compensation policies that carried forward after
the merger on January 26, 2007.
Represents taxable amounts paid to Mr. Kennard for the acquisition of patents previously owned by him.
Represents a sign-on bonus paid to Mr. Hayes.
Represents taxable benefits paid in connection with the relocation of Mr. Pangia’s household to Santa Clara, California
from Georgia.
(f)
Represents matching contributions made by us to the account of the respective named executive’s 401(k) Plan.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Grants of Plan-Based Awards in Fiscal 2013
The following table lists our grants and incentives during our fiscal year ended June 28, 2013 of plan-based awards,
both equity and non-equity based and including our Annual Incentive Plan and Long-Term Incentive Plan, to the named
executive officers listed in the Summary Compensation Table. There is no assurance that the grant date fair value of stock and
option awards will ever be realized.
Estimated Possible Payouts Under
Short-Term Non-Equity Incentive Plan
Awards in Fiscal 2013 (2)
Estimated Future Payments Under
Equity Incentive Plan Awards in
Fiscal 2013
Grant Date
Threshold
Target
Maximum
Threshold
Target
Maximum
Name
(1)
($)
($)
($)
(#)
(#)
(#)
All Other Stock Awards in Fiscal 2013
Number
of
Shares
of Stock
or Units
(#)
Number of
Securities
Underlying
Options
Exercise or
Base Price
of Option
Awards
Fair Value
of Stock
and Option
Awards (6)
(#)
($/Share)
($)
Michael Pangia
10/03/2012
11/29/2012
10/03/2012
Edward Hayes Jr.
10/3/2012
11/29/2012
10/3/2012
Paul A. Kennard
10/03/2012
11/29/2012
10/03/2012
Heinz H. Stumpe
10/03/2012
Shaun McFall
11/29/2012
10/03/2012
10/03/2012
11/29/2012
10/03/2012
______________________
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
160,769
160,769
160,769 (3)
66,894
66,894
66,894 (4)
—
78,923
32,839
—
56,966
23,703
—
70,592
29,373
—
60,800
25,298
—
—
78,923
32,839
—
56,966
23,703
—
70,592
29,373
—
60,800
25,298
—
—
78,923 (3)
32,839 (4)
—
56,966 (3)
23,703 (4)
—
70,592 (3)
29,373 (4)
—
60,800 (3)
25,298 (4)
—
—
—
—
—
—
—
—
—
—
—
—
—
137,500 (5)
—
—
67,500 (5)
—
—
48,721 (5)
—
—
60,375 (5)
—
—
52,000 (5)
—
—
2.28
—
—
2.28
—
—
2.28
—
—
2.28
—
—
2.28
366,553
173,256
160,999
179,944
85,053
79,036
129,882
61,391
57,047
160,950
76,076
70,693
138,624
65,522
60,887
(1)
(2)
(3)
(4)
Grant Date of Common Stock under our 2007 Stock Equity Plan, as amended and restated effective November 17,
2011.
There were no Non-Equity Incentive Plan Awards granted under our fiscal 2013 Annual Incentive Plan.
Performance shares were granted under the fiscal 2013 AIP, and vest 100% when performance target is met. The target
is $0.17 of Non-GAAP EPS for fiscal 2013. The shares may vest following the end of our fiscal year 2013, or June 28,
2013, based on continuous employment and achievement of performance results as stated above. Performance shares
vested in full on August 28, 2013.
Performance shares were granted under the fiscal 2013 LTIP, and vest if performance target is met: 1/3 upon
performance target is met, 1/3 at the end of fiscal 2014 and 1/3 at the end of fiscal 2015. The target is $0.17 of Non-
GAAP EPS for fiscal 2013. The shares may vest following the end of our fiscal year 2013, 2014 and 2015, based on
continuous employment and achievement of performance results as stated above. The first one-third of the
performance shares vested on August 28, 2013.
(5) Stock options vest in installments of 50% one year from the grant date, 25% two years from the grant date, and 25%
three years from the grant date.
(6)
The “Grant Date Fair Value of Stock and Option Awards” column shows the full grant date fair value of the
performance shares (at target) and stock options granted in fiscal 2013. The grant date fair value of the performance
31
t
n
e
m
e
t
a
t
S
y
x
o
r
P
shares and stock options was determined under FASB ASC Topic 718 and represents the amount we would expense in
our financial statements over the entire vesting schedule for the awards in the event the vesting provisions are
achieved. The grant date fair value for performance awards was based on a grant price ranging between $2.28 and
$2.59, the closing market price of our common stock on the dates which the awards were granted.
The assumptions used for determining values are set forth in Notes 1 and 11 to our audited consolidated financial
statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended June 28, 2013. These
amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized by
the named executive officers.
Outstanding Equity Awards at Fiscal Year-End 2013
The following table provides information regarding outstanding unexercised stock options and unvested stock awards
held by each of our named executive officers as of June 28, 2013. Each grant of options or unvested stock awards is shown
separately for each named executive officer. The vesting schedule for each award of options is shown in the footnotes following
this table based on the option grant date. The material terms of the option awards, other than exercise price and vesting are
generally described in our 2007 Stock Equity Plan, as amended and restated effective November 17, 2011.
32
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Name
Michael Pangia
Edward Hayes Jr.
Paul A. Kennard
Heinz H. Stumpe
Shaun McFall
Option Awards
[Awards Listed
in
Chronological
Order] Award
Grant Date
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(1)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(#)
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Stock Awards
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares Units
or Other
Rights that
have not
Vested
Number of
Shares or
Units of
Stock that
have not
Vested (2)
Market
Value of
Shares or
Units of
Stock that
have not
Vested (3)
Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned Shares,
Units or Other
Rights that have
not Vested (3)
(#)
($)
(#)
($)
11/29/2012
10/03/2012
10/03/2012
09/08/2011
09/08/2011
11/11/2010
11/11/2010
11/11/2010
11/12/2009
03/30/2009
11/29/2012
10/03/2012
10/03/2012
10/31/2011
10/31/2011
10/31/2011
10/31/2011
11/29/2012
10/03/2012
10/03/2012
09/08/2011
09/08/2011
11/11/2010
11/11/2010
11/11/2010
11/12/2009
11/05/2008
02/28/2007
11/29/2012
10/03/2012
10/03/2012
09/08/2011
09/08/2011
11/11/2010
11/11/2010
11/11/2010
11/12/2009
11/05/2008
02/28/2007
11/29/2012
10/03/2012
10/03/2012
09/08/2011
09/08/2011
11/11/2010
11/11/2010
11/11/2010
11/12/2009
11/05/2008
02/28/2007
—
—
—
150,643
—
37,500
—
—
49,052
80,586
—
—
—
148,117
67,973
—
—
—
—
—
40,057
—
41,250
—
—
36,789
50,251
15,000
—
—
—
40,057
—
41,250
—
—
30,100
37,326
11,300
—
—
—
36,976
—
55,000
—
—
26,198
29,796
8,900
—
137,500
—
150,644
—
12,500
—
—
—
—
—
67,500
—
148,117
67,973
—
—
—
48,721
—
40,058
—
13,750
—
—
—
—
—
—
60,375
—
40,058
—
13,750
—
—
—
—
—
—
52,000
—
36,976
—
13,750
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2.28
—
2.37
—
4.36
—
—
6.00
4.05
—
2.28
—
2.05
2.05
—
—
—
2.28
—
2.37
—
4.36
—
—
6.00
5.97
20.4
—
2.28
—
2.37
—
4.36
—
—
6.00
5.97
20.4
—
2.28
—
2.37
—
4.36
—
—
6.00
5.97
20.4
—
10/3/2019
—
9/8/2018
—
—
—
—
—
—
—
—
—
65,185
170,785
11/11/2017
—
—
11/12/2016
3/30/2016
—
10/3/2019
—
10/31/2018
10/31/2018
—
—
—
10/3/2019
—
9/8/2018
—
11/11/2017
—
—
11/12/2016
11/5/2015
2/28/2014
—
10/3/2019
—
9/8/2018
—
11/11/2017
—
—
11/12/2016
11/5/2015
2/28/2014
—
10/3/2019
—
9/8/2018
—
11/11/2017
—
—
11/12/2016
11/5/2015
2/28/2014
—
8,333
—
21,832
—
—
—
—
—
—
—
—
—
—
—
—
—
—
__
—
60,975
23,476
159,755
61,507
—
—
—
—
8,661
—
9,166
—
—
—
—
—
—
—
—
8,666
—
9,166
—
—
—
—
—
—
—
—
8,000
—
9,166
—
—
—
—
—
—
—
—
22,692
—
24,015
—
—
—
—
—
—
—
—
22,705
—
24,015
—
—
—
—
—
—
—
—
20,960
—
24,015
—
—
—
—
66,894 (4)
—
160,769 (4)
—
—
—
—
175,262
—
421,215
—
—
—
—
25,000 (5)
65,500
—
—
32,839 (4)
—
78,923 (4)
—
—
—
—
23,703 (4)
—
56,966 (4)
—
—
—
—
—
—
86,038
—
206,778
—
—
—
—
62,102
—
149,251
—
—
—
—
27,500 (5)
72,050
—
—
—
29,373 (4)
—
70,592 (4)
—
—
—
—
—
—
—
76,957
—
184,951
—
—
—
—
27,500 (5)
72,050
—
—
—
25,298 (4)
—
60,800 (4)
—
—
—
—
—
—
—
66,281
—
159,296
—
—
—
—
27,500 (5)
72,050
—
—
—
—
—
—
__________________________
(1)
Stock options vest in installments of 50% one year from the grant date, 25% two years from the grant date and 25%
three years from the grant date.
33
t
n
e
m
e
t
a
t
S
y
x
o
r
P
(2)
(3)
(4)
(5)
Restricted stock that vests in installments of 33 1/3% one year from the grant date, 33 1/3% two years from the grant
date and 33 1/3% three years from the grant date based on continuous employment through those dates.
Market value is based on the $2.62 closing price of a share of our common stock on June 28, 2013, as reported on the
NASDAQ Global Select Market.
Performance shares were granted under the fiscal 2013 LTIP, and vest if performance target is met: 1/3 upon
performance target is met, 1/3 at the end of fiscal 2014 and 1/3 at the end of fiscal 2015. The performance target is
$0.17 of Non-GAAP EPS for fiscal 2013. The shares may vest following the end of our fiscal year 2013, 2014 and
2015, based on continuous employment and achievement of performance results as stated above. The first one-third of
the performance shares vested on August 28, 2013.
Performance shares were granted under the Fiscal 2011 LTIP, vesting may begin at 80% of the target level of cash flow
from operations, as adjusted, and reaches maximum payout at financial performance at or above 120% of this target.
The target (at which 100% vesting occurs) is $10.0 million of cash flow from operations, as adjusted, cumulatively for
the three fiscal years in the period ending June 28, 2013. The shares may vest following the end of our 2013 fiscal year
or June 28, 2013, based on continuous employment and achievement of performance results for the cumulative period
from July 3, 2010 through the end of fiscal year 2013. Currently, performance shares have not vested for any officer.
34
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Option Exercised and Stock Vested in Fiscal 2013
The following table provides information for each of our named executive officers regarding the number of shares of
our common stock acquired upon the vesting of stock awards during fiscal 2013. No options to purchase common stock were
exercised during fiscal 2013. Stock awards vesting during fiscal 2013 consisted of restricted stock with service-based and
performance-based vesting provisions.
Name
Michael Pangia
Edward Hayes Jr.
Paul A. Kennard
Heinz H. Stumpe
Shaun McFall
Option Awards
Stock Awards
Number of
Shares Acquired
on Exercise (#)
Value Realized
on Exercise ($)
Number of
Shares Acquired
on Vesting (#)
Value Received
on Vesting
($) (3)
—
—
—
—
—
—
—
—
—
—
49,074 (1)
73,333 (2)
42,226 (1)
46,951 (2)
19,609 (1)
26,000 (2)
18,501 (1)
26,000 (2)
17,519 (1)
24,000 (2)
113,390
166,466
96,275
106,579
47,395
59,020
44,657
59,020
42,312
54,480
_________________________
(1)
(2)
(3)
Vested number of shares of service-based restricted common stock.
Vested number of shares of performance-based restricted common stock.
Amount shown is the aggregate market value of the vested shares of restricted common stock based on the closing
price of our stock on the vesting date.
Equity Compensation Plan Summary
The following table provides information as of June 28, 2013, relating to our equity compensation plan pursuant to which
grants of options, restricted stock and performance shares may be granted from time to time and the option plans and agreements
assumed by us in connection with the Stratex acquisition:
Number of
Securities to be
Issued Upon
Exercise of Options
and Vesting of
Restricted Stock
Units and
Performance Share
Units (1)
Weighted-Average
Exercise Price of
Outstanding
Options(2)
Number of
Securities
Remaining
Available for
Further Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in the First
Column)
7,540,012
44,875
7,584,887
$
$
$
3.80
23.73
3.95
4,610,632
—
4,610,632
Plan Category
Equity Compensation plan approved by security holders(3)
Equity Compensation plans not approved by security holders(4)
Total
____________
(1)
Under the 2007 Stock Equity Plan, in addition to options, we have granted share-based compensation awards in the form
of performance shares, restricted stock, performance share units and restricted stock units. As of June 28, 2013, there
were 2,188,407 such awards outstanding under that plan. The outstanding awards consisted of (i) performance share
awards at target and restricted stock awards, for which all 794,084 shares were issued and outstanding; and (ii) 1,394,323
performance share unit awards at target and restricted stock unit awards, for which all 1,394,323 were payable in shares
but for which no shares were yet issued and outstanding. The 7,540,012 shares to be issued upon exercise of outstanding
35
options and vesting of restricted stock units and performance share units as listed in the first column consisted of shares
to be issued in respect of the exercise of 6,145,689 outstanding options and in respect of the 1,394,323 performance share
unit awards and restricted stock units awards payable in shares.
(2)
(3)
(4)
t
n
e
m
e
t
a
t
S
y
x
o
r
P
Excludes weighted average fair value of restricted stock units and performance share units at issuance date.
Consists solely of our 2007 Stock Equity Plan, as amended and restated effective November 17, 2011.
Consists of common stock that may be issued pursuant to option plans and agreements assumed pursuant to the Stratex
acquisition. The Stratex plans were duly approved by the stockholders of Stratex prior to the merger with us. No shares
are available for further issuance.
Potential Payments Upon Termination or Change of Control
Employment agreements have been established with each of the continuing named executive officers, which provide
for such executives to receive certain payments and benefits if their employment with us is terminated. These arrangements are
set forth in detail below assuming a termination event on June 28, 2013 based on our stock price on that date. The Board has
determined that such payments and benefits are an integral part of a competitive compensation package for our executive
officers.
The table below reflects the compensation and benefits due to each of the named executive officers in the event of
termination of employment by us without cause or termination by the executive for good reason (other than within 18 months
after a Change of Control, as defined below) and in the event of disability and in the event of termination of employment by us
without cause or termination by the executive for good reason within 18 months after a Change of Control. The amounts shown
in the table are estimates of the amounts that would be paid upon termination of employment. There are no compensation and
benefits due to any named executive officer in the event of death, or of termination of employment by us for cause or voluntary
termination. The actual amounts would be determined only at the time of the termination of employment.
36
P
r
o
x
y
S
t
a
t
e
m
e
n
t
Name
Michael Pangia
Edward J. Hayes, Jr.
Paul A. Kennard
Heinz H. Stumpe
Shaun McFall
Conditions for
Payouts
Termination
without cause
or for good
reason, or due
to disability
Within 18
months after
Change of
Control
Termination
without cause
or for good
reason, or due
to disability
Within 18
months after
Change of
Control
Termination
without cause
or for good
reason, or due
to disability
Within 18
months after
Change of
Control
Termination
without cause
or for good
reason, or due
to disability
Within 18
months after
Change of
Control
Termination
without cause
or for good
reason, or due
to disability
Within 18
months after
Change of
Control
Number
of
Months
(#)
12
Base per
Month (1)
($)
Months
Times
Base
($)
Total
Severance
Payments
($)
Accelerated
Equity
Vesting (3)
($)
Continuation
of Insurance
Benefit (4)
($)
Out-
Placement
Services
(5)
($)
Total
($)
45,833
550,000
550,000
—
19,367
30,000
599,367
24
12
24
12
24
12
24
12
45,833
1,100,000
1,100,000
873,505
38,733
30,000
2,042,238
30,000
360,000
360,000
—
20,624
30,000
410,624
30,000
720,000
720,000
660,199
41,248
30,000
1,451,447
27,067
324,804
324,804
—
8,266
30,000
363,070
27,067
649,608
649,608
284,639
16,532
30,000
980,779
28,750
345,000
345,000
—
8,363
30,000
383,363
28,750
690,000
690,000
339,170
16,727
30,000
1,075,897
26,667
320,000
320,000
—
19,367
30,000
369,367
24
26,667
640,000
640,000
297,476
38,733
30,000
1,006,209
______________________
(1)
(2)
(3)
(4)
The monthly base salary represents the total gross monthly payments to each named executive officer at the current
salary.
Reflects acceleration of outstanding equity awards as of June 28, 2013.
The insurance benefit provided is paid directly to the insurer benefit provider and includes amounts for COBRA.
The estimated dollar amounts for Outplacement Services would be paid directly to an outplacement provider selected
by us.
37
t
n
e
m
e
t
a
t
S
y
x
o
r
P
The employment agreements with our named executive officers define a “Change of Control” as follows:
•
•
•
•
•
•
any merger, consolidation, share exchange or acquisition, unless immediately following such merger,
consolidation, share exchange or acquisition of at least 50% of the total voting power (in respect of the election of
directors, or similar officials in the case of an entity other than a corporation) of the entity resulting from such
merger, consolidation or share exchange, or the entity which has acquired all or substantially all of our assets (in
the case of an asset sale that satisfies the criteria of an acquisition) (in either case, the “Surviving Entity”), or
if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the total voting power (in respect of the
election of directors, or similar officials in the case of an entity other than a corporation) of the Surviving Entity is
represented by our securities that were outstanding immediately prior to such merger, consolidation, share
exchange or acquisition (or, if applicable, is represented by shares into which such Company securities were
converted pursuant to such merger, consolidation, share exchange or acquisition), or
any person or group of persons (within the meaning of Section 13(d)(3) of the Exchange Act) directly or indirectly
acquires beneficial ownership (determined pursuant to SEC Rule 13d-3 promulgated under the Exchange Act) of
securities possessing more than 30% of the total combined voting power of our outstanding securities pursuant to
a tender or exchange offer made directly to the our stockholders that the Board does not recommend such
stockholders accept, other than: (i) an employee benefit plan of ours or any of our Affiliates; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of our or any of our Affiliates; or (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities; or
over a period of 36 consecutive months or less, there is a change in the composition of the Board such that a
majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or
more proxy contests for the election of Board members, to be composed of individuals each of whom meet one of
the following criteria: (i) have been a Board member continuously since the adoption of this Plan or the beginning
of such 36-month period; (ii) have been appointed by Harris; or (iii) have been elected or nominated during such
36-month period by at least a majority of the Board members that belong to the same Class of director as such
Board member; and (iv) satisfied one of the above criteria when they were elected or nominated; or
a majority of the Board determines that a Change of Control has occurred; or
the complete liquidation or dissolution of the Company.
Employment agreements are in effect for the other current named executive officers, which provide that if they are
terminated without cause or should they resign for good reason or become disabled and they sign a general release they will be
entitled to receive the following severance benefits:
•
•
•
•
severance payments at their final base salary for a period of 12 months following termination;
payment of premiums necessary to continue their group health insurance under COBRA (or to purchase other
comparable health coverage on an individual basis if the employee is no longer eligible for COBRA coverage)
until the earlier of (i) 12 months; or (ii) the date on which they first became eligible to participate in another
employer’s group health insurance plan;
the prorated portion of any incentive bonus they would have earned during the incentive bonus period in which
their employment was terminated;
any equity compensation subject to service-based vesting granted to the executive officer will stop vesting as of
their termination date; however, they will be entitled to purchase any vested share(s) of stock that are subject to
the outstanding options until the earlier of: (i) 12 months; or (ii) the date on which the applicable option(s) expire;
and
•
outplacement assistance selected and paid for by us.
In addition, these agreements provide that if there is a Change of Control, and employment with us is terminated by us
without cause or by the employee for good reason within 18 months after the Change of Control and they sign a general release
of known and unknown claims in a form satisfactory to us, (i) the severance benefits described shall be increased by an
additional 12 months; (ii) they will receive a payment equal to the greater of (a) the average of the annual incentive bonus
payments received by them, if any, for the previous three years; or (b) their target incentive bonus for the year in which their
38
employment terminates; and (iii) the vesting of all unvested stock option(s) and unvested equity-compensation awards subject
to service-based vesting will accelerate, such that all of such stock option(s) and equity-compensation awards will be fully
vested as of the date of their termination/resignation.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of a
registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in
ownership of our common stock and other equity securities. Directors, executive officers and greater than 10% holders are
required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of Forms
3 and 4 received during fiscal 2013, and Forms 5 (or any written representations) received with respect to fiscal year 2013, we
believe that all directors, officers, executive officers and 10% stockholders complied with all applicable Section 16(a) filing
requirements during fiscal 2013.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
PROPOSAL NO. 1: ELECTION OF DIRECTORS
At the Annual Meeting, directors are being nominated for election to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. In a Board meeting on August 21, 2013, following the
recommendation of our Governance and Nominating Committee, the Board nominated Messrs. Kissner, Hasler, Higgerson,
Pangia, Rau, Sohi, Stoffel and Thompson as director nominees for election to serve on the Board.
In the unanticipated event that a nominee is unable or declines to serve as a director at the time of the Annual Meeting,
all proxies received by the proxy holders will be voted for any subsequent nominee named by the Board to fill the vacancy
created by the earlier nominee’s withdrawal from the election. As of the date of this Proxy Statement, the Board is not aware of
any director nominee who is unable or will decline to serve as a director. Each of the nominees has consented to being named in
this Proxy Statement and to serve as a director if elected.
DIRECTOR NOMINEES
Name
Charles D. Kissner
William A. Hasler
Clifford H. Higgerson
Michael A. Pangia
Raghavendra Rau
Dr. Mohsen Sohi
Dr. James C. Stoffel
Edward F. Thompson
Title
Age
Chairman of the Board
Director
Director
Director, President and CEO
Director
Director
Lead Independent Director
Director
66
71
73
52
64
54
67
75
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES AND UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR
NOMINEES.
39
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
t
n
e
m
e
t
a
t
S
y
x
o
r
P
The Audit Committee has appointed KPMG LLP as our independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending June 27, 2014 and our Board has ratified such appointment. During
fiscal year 2013, KPMG LLP served as our independent registered public accounting firm and provided certain tax and other
audit related services. See “Independent Registered Public Accounting Firm Fees” on page 19 of this Proxy Statement.
Notwithstanding its selection, the Audit Committee, in its discretion, may appoint another independent registered
public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best
interests of the Company and its stockholders. If the appointment is not ratified by our stockholders, the Audit Committee may
reconsider whether it should appoint another independent registered public accounting firm.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION
OF THE AUDIT COMMITTEE’S APPOINTMENT OF KPMG LLP AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR FISCAL YEAR 2014.
PROPOSAL NO. 3: ADVISORY, NON-BINDING VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
A “say on pay” advisory vote is required for all U.S. public companies under Section 14A of the Exchange Act . We
are asking stockholders to approve, on an advisory, non-binding basis, the compensation of the Company’s named executive
officers disclosed in the Compensation Discussion and Analysis section, and the related compensation tables, notes and
narrative, in this Proxy Statement.
The Board recommends that you vote “FOR” approval of the advisory, non-binding vote on executive compensation
because it believes that the policies and practices described in the Compensation Discussion and Analysis section are effective
in achieving the Company’s goals of rewarding sustained financial and operating performance and leadership excellence,
aligning the executives’ long-term interests with those of the stockholders and motivating the executives to remain with the
Company for long and productive careers. Named executive officer compensation of the past three years reflects amounts of
cash and long-term equity awards consistent with periods of economic stress and lower earnings, and equity incentives aligning
with our actions to stabilize the Company and to position it for a continued recovery.
We urge stockholders to read the Compensation Discussion and Analysis section beginning on page 20 of this Proxy
Statement, as well as the Summary Compensation Table and related compensation tables, notes and narrative, appearing on
pages 29 through 31, which provide detailed information on the Company’s compensation policies and practices and the
compensation of our named executive officers.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE
ADVISORY, NON-BINDING VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION.
40
2013 Annual Report
OTHER MATTERS
Our annual report for the fiscal year ended June 28, 2013 will be available over the Internet and is mailed along with
the other proxy materials to all stockholders who request printed copies in the manner specified in the Notice.
Form 10-K
We filed an annual report on Form 10-K for the fiscal year ended June 28, 2013 with the SEC on September 23, 2013.
Stockholders may obtain a copy of the annual report on Form 10-K, without charge, by writing to our Corporate Secretary, at
the address of our offices located at 5200 Great America Parkway, Santa Clara, California 95054, or through our website at
www.aviatnetworks.com.
Other Business
The Board is not aware of any other matter that may be presented for consideration at the Annual Meeting. Should any
other matter properly come before the Annual Meeting, your shares of common stock will be voted in accordance with the
discretion of the proxy holders.
P
r
o
x
y
S
t
a
t
e
m
e
n
t
41
This page intentionally left blank.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
(Mark One)
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33278
______________________________
AVIAT NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
5200 Great America Parkway
Santa Clara, California
(Address of principal executive offices)
20-5961564
(I.R.S. Employer
Identification No.)
95054
(Zip Code)
Registrant’s telephone number, including area code: (408) 567-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Name of Each Exchange on Which Registered
NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
_____________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
No
Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of December 28, 2012 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market
value of the registrant’s common stock held by non-affiliates was approximately $134,617,046 based upon the closing price per share on the
NASDAQ Global Select Market. For purposes of this calculation, the registrant has assumed that its directors and executive officers as of
December 28, 2012 are affiliates.
No
The number of shares outstanding of the registrant’s common stock as of August 30, 2013 was 62,377,639 shares.
_________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission within 120 days after the end of the registrant’s fiscal year ended June 28, 2013, are incorporated by reference into
Part III of this Annual Report on Form 10-K.
A
n
n
u
a
l
R
e
p
o
r
t
AVIAT NETWORKS, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended June 28, 2013
Table of Contents
Page
4
4
12
22
22
23
23
24
24
26
28
41
42
79
79
79
80
80
80
80
81
81
82
82
87
88
Item 1.
Item 1A.
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B.
Item 4.
Item 2.
Item 3.
t
r
o
p
e
R
l
a
u
n
n
A
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . .
Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . .
Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if
they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such
forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-
looking statements, including statements of, about, concerning or regarding: our plans, strategies and objectives for future
operations; our research and development efforts and new product releases and services; trends in revenue; drivers of our
business and the markets in which we operate; future economic conditions; performance or outlook and changes in our industry
and the markets we serve; the outcome of contingencies; the value of our contract awards; beliefs or expectations; the
sufficiency of our cash and our capital needs and expenditures; our intellectual property protection; our compliance with
regulatory requirements and the associated expenses; expectations regarding litigation; our intention not to pay cash dividends;
the seasonality of our business; the impact of foreign exchange and inflation; taxes; our ongoing business restructuring efforts;
and assumptions underlying any of the foregoing. Forward-looking statements may be identified by the use of forward-looking
terminology, such as “anticipates,” “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,”
“strategy,” “projects,” “targets,” “goals,” “seeing,” “delivering,” “continues,” “forecasts,” “future,” “predict,” “might,” “could,”
“potential,” or the negative of these terms, and similar words or expressions.
These forward-looking statements are based on estimates reflecting the current beliefs of the senior management of Aviat
Networks. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered
in light of various important factors, including those set forth in this Annual Report on Form 10-K. Important factors that could
cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the
following:
•
continued price erosion as a result of increased competition in the microwave transmission industry;
A
n
n
u
a
l
R
e
p
o
r
t
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the volume, timing and customer, product and geographic mix of our product orders;
our ability to meet projected new product development dates or anticipated cost reductions of new products;
our suppliers’ inability to perform and deliver on time as a result of their financial condition, component shortages
or other supply chain constraints;
customer acceptance of new products;
the ability of our subcontractors to timely perform;
continued weakness in the global economy affecting customer spending;
retention of our key personnel;
our ability to manage and maintain key customer relationships;
uncertain economic conditions in the telecommunications sector combined with operator and supplier
consolidation;
the timing of our receipt of payment for products or services from our customers;
our failure to protect our intellectual property rights or defend against intellectual property infringement claims by
others;
the effects of currency and interest rate risks;
the impact of political turmoil in countries where we have significant business; and
the timing and size of future restructuring plans and write-offs.
Other factors besides those listed here also could adversely affect us. See “Item 1A. Risk Factors” in this Annual Report
on Form 10-K for more information regarding factors that may cause our results to differ materially from those expressed or
implied by the forward-looking statements contained in this Annual Report on Form 10-K.
You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only
as of the date of the filing of this Annual Report on Form 10-K. Forward-looking statements are made in reliance upon the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, along with provisions of the Private Securities Litigation Reform Act of 1995, and we undertake no
obligation, other than as imposed by law, to update any forward-looking statements to reflect further developments or
information obtained after the date of filing of this Annual Report on Form 10-K or, in the case of any document incorporated
by reference, the date of that document.
3
PART I
Item 1. Business
Aviat Networks, Inc., together with its subsidiaries, is a global supplier of microwave networking solutions, backed by an
extensive suite of professional services and support. Aviat Networks, Inc. may be referred to as “the Company,” “AVNW,”
“Aviat Networks,” “we,” “us” and “our” in this Annual Report on Form 10-K.
We were incorporated in Delaware in 2006 to combine the businesses of Harris Corporation’s Microwave
Communications Division (“MCD”) and Stratex Networks, Inc. (“Stratex”). On January 28, 2010, we changed our corporate
name from Harris Stratex Networks, Inc. to Aviat Networks, Inc.
Our principal executive offices are located at 5200 Great America Parkway, Santa Clara, California 95054, and our
telephone number is (408) 567-7000. Our common stock is listed on the NASDAQ Global Select Market under the symbol
AVNW. As of June 28, 2013, we employed approximately 1,000 people, compared with approximately 980 people as of
June 29, 2012.
Overview and Description of the Business
t
r
o
p
e
R
l
a
u
n
n
A
We design, manufacture and sell a range of wireless networking products, solutions and services to mobile and
fixed operators, private network operators, government agencies, transportation and utility companies, public safety agencies
and broadcast network operators around the world. We sell products and services directly to our customers and also use agents
and distributors.
Our products include point-to-point (“PTP”) digital microwave transmission systems designed for first/last mile access,
middle mile/backhaul and long distance trunking applications. We also provide network management solutions to enable our
customers to deploy, monitor and manage our systems; third party equipment such as antennas, routers, multiplexers, etc,
necessary to build and deploy a complete wireless network; and a full suite of turnkey support services.
Our wireless systems deliver regional and country-wide backbone in developing nations, where microwave radio
installations provide 21st-century communications rapidly and economically. Rural communities, areas with rugged terrain and
regions with extreme temperatures benefit from the ability to build an advanced, affordable communications infrastructure
despite these challenges. A significant part of our international business consists of supplying wireless segments in small-
pocket, remote, rural and metropolitan areas. High-capacity backhaul is one of the fastest growing wireless market segments
and is a major opportunity for us. We see the increase in subscriber density and the forecasted growth and introduction of new
bandwidth-hungry High Speed Packet Access (“HSPA”)/Long Term Evolution (“LTE”) mobile broadband services as major
drivers for growth in this market.
Revenue from our North America and international regions represented approximately 38% and 62%, respectively, of our
revenue in fiscal 2013, 37% and 63%, respectively, of our revenue in fiscal 2012, and 35% and 65%, respectively, of our
revenue in fiscal 2011. Information about our revenue attributable to our geographic regions is set forth in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 12 of the accompanying
consolidated financial statements in this Annual Report on Form 10-K.
Market Overview
Wireless transmission networks currently are constructed using microwave radios and other equipment to interconnect
cell sites, switching systems, wireline transmission systems and other fixed access facilities. Wireless transmission networks
range in size from a single transmission link connecting two buildings to complex networks consisting of thousands of wireless
links. The architecture of a network is influenced by several factors, including the available radio frequency spectrum,
coordination of frequencies with existing infrastructure, application requirements, environmental factors and local geography.
In recent years, there has been an increase in capital spending in the wireless telecommunications industry. In addition,
the overall demand for high-speed wireless transmission products has been growing at a higher rate than the wireless industry
as a whole. We believe that this growth in capital spending and demand is directly related to a growing global subscriber base
for mobile wireless communications services, emergence of new high capacity mobile devices and data-intensive applications
and need for new services delivered from next-generation networks capable of delivering broadband services. We see a variety
of factors that drive demand for infrastructure investment and especially in microwave backhaul:
4
• Expanding mobile coverage. Mobile operators around the world are continually being challenged to meet the
needs of a growing mobile subscriber base flooded by the tremendous growth of broadband applications and
devices. They are installing more cell sites to expand geographic coverage and to fill in spots where user coverage
is insufficient.
• Upgrading mobile backhaul. Many mobile operators are modernizing their mobile radio access networks
(“RANs”) with either 3G (HSPA) or 4G (HSPA+ and LTE) technologies. Mobile backhaul networks will also be
upgraded with the RAN moving from T1/E1 copper to fiber or microwave to deliver higher user bandwidth.
•
Increasing backhaul capacity: With RAN upgrades, operators are increasing cell site backhaul capacity from a
typical 8 Mbps (4 E1/T1) at an edge site to over 40 Mbps. At hubs or aggregation sites, where traffic from
multiple edge sites is combined, backhaul capacity may need to be as high as 2 Gbps.
• Deploying small cells backhaul. More and more mobile operators are experiencing a capacity crunch. Outdoor
small cells are gaining momentum as one of the best ways to remedy this issue. Industry analysts forecast the
main deployment of small cells will start in 2014-2015, and that microwave will be one of the preferred solutions
for small cells backhaul to be widely used by mobile operators.
• Meeting government requirements. In some countries, governments require that service providers deploy 4G in
underserved, rural areas as a condition of obtaining an LTE spectrum license.
• Using microwave in other vertical markets. In addition to mobile backhaul, we see increasing demand for
microwave technology in other vertical markets, including utility, public safety, financial institution and broadcast.
Many utility companies around the world are actively investing in Smart Grid solutions and energy demand
management, which drive the need for network modernization and increased capacity of networks.
In the public safety vertical market, whether it is for improving border patrol or emergency services for local
or state police, access to timely information or enhanced communications is critical. Mobile video and access
to centralized data servers at the scene of an incident requires a high bandwidth network. Such demands drive
the need for new generation microwave radios with high reliability, high performance, maximum system
redundancy and strong security.
New opportunities have emerged in some other niche markets in non-mobile sectors as well, such as the low
latency application for high frequency trading in financial industry, for which demand has been growing at a
higher rate than the wireless industry, as a whole. With lower latency and shorter line of sight distance
between transmission sites than fiber, microwave technology has been selected over fiber by more and more
financial institutions for such applications. There is also the broadcast market, where terrestrial TV
broadcasting is progressively going digital on a global basis and has presented new opportunities for
microwave vendors.
A
n
n
u
a
l
R
e
p
o
r
t
These factors are combining to create a range of opportunities for continued investment in backhaul and transport
networks favoring microwave technology. As we focus on our execution of the future generations of our technology, our goal is
to make wireless a viable choice for an ever broadening range of network types.
Strategy
Over the past year, we have made significant strides in transitioning our company to focus on our cost effective core
microwave transmission business. We offer and will continue to improve upon our microwave transmission solutions that
deliver the network performance needed to support next generation services and enable a smooth transition from legacy
networks to all IP.
Newer generation 4G technologies require high-speed packet infrastructures. To address this requirement, we have
enhanced our core product offering by building on our market leading Eclipse Packet Node platform by adding new features
and capacity enhancements and leveraging technology in third party products to provide a complete IP network solution. We
have also introduced a new line of all-outdoor, all-IP microwave radio solutions under the Aviat WTM 3000 product family that
addresses the need for “zero-footprint” wireless transport solutions for mobile and private network applications, in areas where
customers do not have space to install equipment indoors.
We look to retain our position as a wireless transmission technology leader with the introduction of our new CTR 8000
family of products in 2014. The CTR is a transformational microwave product line since it has a router integrated in the hardware and
software. This new architecture will enable our customers to create a fully evolved IP transport network. The CTR builds upon our
5
Eclipse Packet Node platform, enabling re-use of already deployed assets, to provide a smooth migration path for our existing
customers, for the lowest risk, lowest cost, and most flexible solution available. Built from the ground up as an IP/MPLS
microwave networking platform, Aviat's CTR 8000 delivers higher microwave capacity and new networking capabilities, which
will enable Aviat to improve its cost structure, and stay well ahead of our competition in existing mobile operator accounts.
Our strategy includes partnering with companies with technical expertise in areas outside of our core competencies to
meet our customers' demand for an end-to-end solution. Our partner product strategy enables us to go beyond wireless
transmission to combat the vendor consolidation trend whereby customers are “buying more from fewer vendors” and in doing
so providing expanding market share opportunity. A comprehensive solutions portfolio comprised of our wireless product and
intelligent partner products can allow us to compete with vendors that offer turnkey solution portfolios and serve to focus our
research and development (“R&D”) efforts on core competency wireless innovations. Having a broader portfolio will enable us
to further differentiate our offerings from other independent microwave equipment suppliers.
We expect to continue to serve and expand upon our existing customer base and develop business with new customers.
We have sold more than 1,000,000 microwave radios in over 140 countries and are present in more than 350 mobile networks
worldwide. We intend to leverage our customer base, our longstanding presence in many countries, our distribution channels,
our comprehensive product line, our superior customer service and our turnkey solution capability to continue to sell existing
and new products and services to current and future customers.
t
r
o
p
e
R
l
a
u
n
n
A
Products and Solutions
We offer a comprehensive product and solutions portfolio that meets the needs of service providers and network operators
in every region of the world and addresses a broad range of applications, frequencies, capacities and network topologies. Our
product categories include point-to-point microwave radios that are licensed (subject to local frequency regulatory
requirements), lightly-licensed and license-exempt (operating in license-exempt frequencies), and element and network
management software. In addition, we provide end-to-end turnkey broadband telecommunications systems, including complete
design, deployment, maintenance, and managed network services, while being an attentive and adaptable partner for our
customers — a key competitive differentiator for us.
• Broad product and solution portfolio. We offer a comprehensive suite of wireless transmission networking
systems for microwave and millimeter-wave networking applications. Our solution consists of tailored offerings
of our own wireless products and our own integrated ancillary equipment or that of other manufacturers and
providers of element and network management systems and professional services. These solutions address a wide
range of transmission frequencies, ranging from 2.4 MHz to 90 GHz, and a wide range of transmission capacities,
ranging up to 4 Gbps and beyond. The major product families included in these solutions are CTR Aviat CTR
8000, Aviat Eclipse, Aviat WTM 3000, Aviat WTM 6000 and Aviat ProVision, our network management software.
•
Low total cost of ownership. Our wireless-based solutions offer a relatively low total cost of ownership, including
savings on the combined costs of initial acquisition, installation and ongoing operation and maintenance. Our
latest generation system designs reduce rack space requirements, require less power, are software-configurable to
reduce spare parts requirements, and are simple to install, operate, upgrade and maintain. Our advanced wireless
features can also enable operators to save on related costs, including spectrum fees and tower rental fees.
• Futureproof network. Our solutions are designed to protect the network operator’s investment by incorporating
software-configurable capacity upgrades and plug-in modules that provide a smooth migration path to Carrier
Ethernet and IP/MPLS-based networking, without the need for costly equipment substitutions and additions. Our
products include key technologies we believe will be needed by operators for their network evolution to support
new broadband services.
• Flexible, easily configurable products. We use flexible architectures with a high level of software configurable
features. This design approach produces high-performance products with reusable components while at the same
time allowing for a manufacturing strategy with a high degree of flexibility, improved cost and reduced time-to-
market. The software features of our products offer our customers a greater degree of flexibility in installing,
operating and maintaining their networks.
• Comprehensive network management. We offer a range of flexible network management solutions, from element
management to enterprise-wide network management and service assurance that we can optimize to work with our
wireless systems.
• Complete professional services. In addition to our product offerings, we provide network planning and design, site
surveys and builds, systems integration, installation, maintenance, network monitoring, training, customer service
6
and many other professional services. Our services cover the entire evaluation, purchase, deployment and
operational cycle and enable us to be one of the few complete turnkey solution providers in the industry.
Business Operations
Sales and Service
We believe that a direct and continuing relationship with service providers is a competitive advantage in attracting new
customers and satisfying existing ones. As a result, we offer our products and services through our own direct sales, service and
support organization, which allows us to closely monitor the needs of our customers. We have offices in Canada and the United
States in North America; Brazil, Argentina and Mexico in Central and South America; Slovenia, Poland, France, Austria,
Amsterdam and the United Kingdom in Europe; Nigeria, Kenya, Ivory Coast, Algeria and South Africa in Africa; the United
Arab Emirates, Saudi Arabia and Lebanon in the Middle East; and Australia, Bangladesh, India, New Zealand, Indonesia,
China, Malaysia, the Philippines, Singapore and Thailand in the Asia Pacific region. Our local offices provide us with a better
understanding of our customers’ needs and enable us to respond to local issues and unique local requirements.
We also have informal, and in some cases formal, relationships with original equipment manufacturers (“OEMs”) and
system integrators. Such relationships increase our ability to pursue a limited number of major contract awards each year. In
addition, such relationships provide our customers with easier access to financing and integrated system providers with a
variety of equipment and service capabilities. In selected countries, we also market our products through independent agents
and distributors, as well as through system integrators.
We use indirect sales channels, including dealers, distributors and sales representatives, in the marketing and sale of some
lines of products and equipment on a global basis. These independent representatives may buy for resale or, in some cases,
solicit orders from commercial or governmental customers for direct sales by us. Prices to the ultimate customer in many
instances may be recommended or established by the independent representative and may be above or below our list prices.
These independent representatives generally receive a discount from our list prices and are free to set the final sales prices paid
by the customer.
We have repair and service centers in India, Nigeria, Ghana, Brazil, Mexico, the Philippines, the United Kingdom and the
United States. We have customer service and support personnel who provide customers with training, installation, technical
support, maintenance and other services on systems under contract. We install and maintain customer equipment directly in
some cases and contract with third-party service providers in other cases, depending on the equipment being installed and
customer requirements.
The specific terms and conditions of our product warranties vary depending upon the product sold and country in which
we do business. On direct sales, warranty periods generally start on the delivery date and continue for one to two years.
Manufacturing
Our global manufacturing strategy is an entirely outsourced manufacturing model using multiple contract manufacturers
in both the United States and Asia locations. Our strategy is to use a select number of contract manufacturers for all products.
We continue to perform our system integration and customer acceptance and testing in an Aviat Networks facility co-located
with one of our contract manufacturers in the United States.
In accordance with our global logistics requirements and customer geographic distribution, we are engaged with contract
manufacturing partners in Asia and the United States. All manufacturing operations have been certified to International
Standards Organization 9001, a recognized international quality standard. We have also been certified to the TL 9000 standard,
a telecommunication industry-specific quality system standard.
Backlog
Our backlog by geographic region is as follows:
June 28, 2013
June 29, 2012
A
n
n
u
a
l
R
e
p
o
r
t
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total backlog. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7
$
(In millions)
89.8
89.2
179.0
$
93.9
114.6
208.5
Backlog for our products generally consists of contracts or purchase orders for both product deliveries scheduled within
the next 12 months and extended service warranty. We regularly review our backlog to ensure that our customers continue to
honor their purchase commitments and have the financial means to purchase and deploy our products and services in
accordance with the terms of their purchase contracts.
We expect to substantially fill the entire backlog as of June 28, 2013 during fiscal 2014, but we cannot be assured that this
will occur. Product orders in our current backlog are subject to changes in delivery schedules or to cancellation at the option of
the purchaser without significant penalty. Accordingly, although useful for scheduling production, backlog as of any particular
date may not be a reliable measure of sales for any future period because of the timing of orders, delivery intervals, customer
and product mix and the possibility of changes in delivery schedules and additions or cancellations of orders. The backlog
figures exclude advance payments and unearned income amounts. As of June 28, 2013, the Mobile Telephone Networks Group
(“MTN Group”) in Africa accounted for 17% of our total backlog and no other customers accounted for 10% or more of our
total backlog.
Customers
Principal customers for our products and services include domestic and international wireless/mobile service providers,
OEMs, and private network users such as public safety agencies, government institutions, and utility, pipeline, railroad and
other industrial enterprises that operate wireless networks.
During fiscal 2013, the MTN Group in Africa accounted for 25% of our total revenue compared with 17% in fiscal 2012
and 14% in fiscal 2011. We have entered into separate and distinct contracts with MTN Group as well as separate arrangements
with MTN Group subsidiaries. During fiscal 2013, revenue from Verizon Wireless accounted for 11% of our total revenue. The
loss of all or a substantial portion of MTN Group's business or of Verizon Wireless' business could adversely affect our results
of operations, cash flows and financial position.
t
r
o
p
e
R
l
a
u
n
n
A
Although we have a large customer base, during any given fiscal year or quarter a small number of customers may
account for a significant portion of our revenue. In certain circumstances, we sell our products to service providers through
OEMs, which provide the service providers with access to financing and in some instances, protection from fluctuations in
international currency exchange rates.
Competition
The wireless access, backhaul and interconnection business is a specialized segment of the wireless telecommunications
industry that is sensitive to technological advancements and is extremely competitive. Some of our competitors have more
extensive engineering, manufacturing and marketing capabilities and greater financial, technical and personnel resources than
us. Many of our competitors may have greater name recognition, broader product lines (some including non-wireless
telecommunications equipment and managed services), a larger installed base of products and longer-standing customer
relationships. In addition, some competitors offer seller financing, which is a competitive advantage in the current economic
environment.
Although successful product and systems development is not necessarily dependent on substantial financial resources,
many of our competitors are significantly larger than us and can maintain higher levels of expenditures for research and
development. In addition, a portion of our overall market is addressed by large mobile infrastructure providers who bundle
microwave radios with other mobile network equipment, such as cellular base stations or switching systems, and offer a full
range of services. This part of the market is generally not open to independent microwave suppliers like us.
We also compete with a number of smaller independent private and public specialist companies, who typically leverage
new technologies and low-cost models, but usually are not able to offer a complete solution including turnkey services in all
regions of the world.
Our principal microwave competitors include large mobile infrastructure manufacturers such as Alcatel-Lucent, Ericsson,
NEC, Huawei and ZTE, as well as a number of other smaller public and private microwave specialists companies such as
Ceragon, DragonWave, SIAE and Exalt. Some of our competitors are OEMs or systems integrators through which we
sometimes distribute and sell products and services to end users.
We concentrate on market opportunities that we believe are compatible with our resources, overall technological
capabilities and objectives. Principal competitive factors are cost-effectiveness, product quality and reliability, technological
capabilities, service, ability to meet delivery schedules and the effectiveness of dealers in international areas. We believe that
the combination of our network and systems engineering support and service, global reach, technological innovation, agility
8
A
n
n
u
a
l
R
e
p
o
r
t
and close collaborative relationships with our customers, are the key competitive strengths for us. However, customers may still
make decisions based primarily on factors such as price, financing terms and/or past or existing relationships, where it may be
difficult for us to compete effectively or profitably.
Research and Development
We believe that our ability to enhance our current products, develop and introduce new products on a timely basis,
maintain technological competitiveness and meet customer requirements is essential to our success. Accordingly, we allocate,
and intend to continue to allocate, a significant portion of our resources to research and development efforts in two major
product areas: backhaul solutions and network management systems. In addition, we are investing in key innovation that will
help separate these products from the competition. The majority of such research and development resources will be used for
point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications.
Our research and development expenditures totaled $39.4 million, or 8.4% of revenue in fiscal 2013, $36.0 million, or
8.1% of revenue in fiscal 2012, and $40.5 million, or 9.0% of revenue in fiscal 2011.
Research and development are primarily directed to the development of new products and to building technological
capability. We are an industry innovator and intend to continue to focus significant resources on product development in an
effort to maintain our competitiveness and support our entry into new markets. We maintain development programs intended to
result in new products, such as additions to our WTM3000, Eclipse and new CTR product platforms.
Our product development teams numbered 235 employees as of June 28, 2013, and were located in Santa Clara,
California; Wellington, New Zealand; Singapore and Ljubljana, Slovenia.
Raw Materials and Supplies
Because of the range of our products and services, as well as the wide geographic dispersion of our facilities, we use
numerous sources for the wide array of raw materials needed for our operations and for our products, such as electronic
components, printed circuit boards, metals and plastics. We are dependent upon suppliers and subcontractors for a large number
of components and subsystems and upon the ability of our suppliers and subcontractors to adhere to customer or regulatory
materials restrictions and meet performance and quality specifications and delivery schedules.
Our strategy for procuring raw material and supplies includes dual sourcing on strategic assemblies and components. In
general, we believe this reduces our risk with regard to the potential financial difficulties in our supply base. In some instances,
we are dependent upon one or a few sources, either because of the specialized nature of a particular item or because of local
content preference requirements pursuant to which we operate on a given project. Examples of sole or limited source categories
include metal fabrications and castings, for which we own the tooling and therefore limit our supplier relationships, and
MMICs (a type of integrated circuit used in manufacturing microwave radios), which we procure at volume discount from a
single source. Our supply chain plan includes mitigation plans for alternative manufacturing sources and identified alternate
suppliers.
Although we have been affected by performance issues of some of our suppliers and subcontractors, we have not been
materially adversely affected by the inability to obtain raw materials or products. In general, any performance issues causing
short-term material shortages are within the normal frequency and impact range experienced by high-tech manufacturing
companies. They are due primarily to the highly technical nature of many of our purchased components.
Looking ahead, we anticipate standard lead times for our raw materials and supplies.
Patents and Other Intellectual Property
We consider our patents and other intellectual property rights, in the aggregate, to constitute an important asset. We own a
portfolio of patents, trade secrets, know-how, confidential information, trademarks, copyrights and other intellectual property.
We also license intellectual property to and from third parties. As of August 15, 2013, we held 124 U.S. patents and 122
international patents and had 62 U.S. patent applications pending and 91 international patent applications pending. We do not
consider our business to be materially dependent upon any single patent, license or other intellectual property right, or any
group of related patents, licenses or other intellectual property rights. From time to time, we might engage in litigation to
enforce our patents and other intellectual property or defend against claims of alleged infringement. Any of our patents, trade
secrets, trademarks, copyrights and other proprietary rights could be challenged, invalidated or circumvented, or may not
provide competitive advantages. Numerous trademarks used on or in connection with our products are also considered to be
valuable assets.
9
t
r
o
p
e
R
l
a
u
n
n
A
In addition, to protect confidential information, including our trade secrets, we require our employees and contractors to
sign confidentiality and invention assignment agreements. We also enter into non-disclosure agreements with our suppliers and
appropriate customers to limit access to and disclosure of our proprietary information.
Although our ability to compete may be affected by our ability to protect our intellectual property, we believe that,
because of the rapid pace of technological change in the wireless telecommunications industry, our innovative skills, technical
expertise and ability to introduce new products on a timely basis will be more important in maintaining our competitive position
than protection of our intellectual property. Trade secret, trademark, copyright and patent protections are important but must be
supported by other factors such as the expanding knowledge, ability and experience of our personnel, new product introductions
and product enhancements. Although we continue to implement protective measures and intend to vigorously defend our
intellectual property rights, there can be no assurance that these measures will be successful.
Environmental and Other Regulations
Our facilities and operations, in common with those of our industry in general, are subject to numerous domestic and
international laws and regulations designed to protect the environment, particularly with regard to wastes and emissions. We
believe that we have complied with these requirements and that such compliance has not had a material adverse effect on our
results of operations, financial condition or cash flows. Based upon currently available information, we do not expect
expenditures to protect the environment and to comply with current environmental laws and regulations over the next several
years to have a material impact on our competitive or financial position, but can give no assurance that such expenditures will
not exceed current expectations. From time to time, we receive notices from the U.S. Environmental Protection Agency or
equivalent state or international environmental agencies that we are a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act, which is commonly known as the Superfund Act and equivalent
laws. Such notices may assert potential liability for cleanup costs at various sites, which include sites owned by us, sites we
previously owned and treatment or disposal sites not owned by us, allegedly containing hazardous substances attributable to us
from past operations. We are not presently aware of any such liability that could be material to our business, financial condition
or operating results, but due to the nature of our business and environmental risks, we cannot provide assurance that any such
material liability will not arise in the future.
Electronic products are subject to environmental regulation in a number of jurisdictions. Equipment produced by us is
subject to domestic and international requirements requiring end-of-life management and/or restricting materials in products
delivered to customers. We believe that we have complied with such rules and regulations, where applicable, with respect to our
existing products sold into such jurisdictions.
Radio communications are also subject to governmental regulation. Equipment produced by us is subject to domestic and
international requirements to avoid interference among users of radio frequencies and to permit interconnection of
telecommunications equipment. We believe that we have complied with such rules and regulations with respect to our existing
products, and we intend to comply with such rules and regulations with respect to our future products. Reallocation of the
frequency spectrum also could impact our business, financial condition and results of operations.
We are in the process of developing comprehensive policies and procedures concerning conflict minerals compliance.
Employees
As of June 28, 2013 we employed approximately 1,000 people, compared with approximately 980 as of the end of fiscal
2012 and approximately 1,000 as of the end of fiscal 2011. Approximately 460 of our employees are located in the U.S. We also
utilized approximately 65 independent contractors as of June 28, 2013. None of our employees in the U.S. are represented by a
labor union. In certain international subsidiaries, our employees are represented by workers’ councils or statutory labor unions.
In general, we believe that our relations with our employees are good.
Executive Officers of the Registrant
The name, age, position held with us, and principal occupation and employment during at least the past 5 years for each
of our executive officers as of September 20, 2013, are as follows:
10
A
n
n
u
a
l
R
e
p
o
r
t
Name and Age
Position Currently Held and Past Business Experience
Michael A. Pangia, 52 . . . . . . Mr. Pangia has been our President and Chief Executive Officer and a member of the Board
since July 18, 2011. From March 2009 to July 2011, he served as our Chief Sales Officer
responsible for company-wide operations of the global sales and services organization. Prior
to joining Aviat Networks, from 2008 to 2009, Mr. Pangia served as Senior Vice President,
global sales operations and strategy at Nortel, where he was responsible for all operational
aspects of the global sales function. From 2006 to 2008, he was President of Nortel’s Asia
region where his key responsibilities included sales and overall business management for all
countries where Nortel did business in the region.
Edward J. (“Ned”) Hayes, 58. Mr. Hayes joined Aviat Networks in October 2011 and serves as our Senior Vice President
and Chief Financial Officer responsible for the finance and IT organizations. Prior to joining
Aviat Networks, from 2006 through October 2011, Mr. Hayes was the Chief Financial
Officer at Pillar Data Systems, Inc., an enterprise data storage company, which was acquired
by Oracle Corporation. Before joining Pillar Data, he served as Executive Vice President and
Chief Financial Officer of Quantum Corporation, a data storage company. Mr. Hayes
currently serves as a senior advisor to the CEO of Super Micro Computer, Inc., where he
previously served as an independent director and Chair of the Audit Committee. He also
currently serves as an independent director and non-executive Chairman of the Board of
Alaska Communications Systems, a provider of high-speed wireless, mobile broadband,
internet, local, long-distance and advanced broadband solutions for businesses and
consumers in Alaska.
Meena Elliott, 50 . . . . . . . . . . Ms. Elliott was appointed Senior Vice President, General Counsel and Secretary on
September 1, 2011. From July 2009 to August 2011, she served as Vice President, General
Counsel and Secretary and in August 2011, was appointed Senior Vice President, General
Counsel and Secretary. She joined our company as Associate General Counsel and Assistant
Secretary in January 2007 when Harris Corporation's MCD and Stratex Networks merged.
Ms. Elliott joined MCD as Division Counsel in March 2006. Prior to joining MCD, she was
Chief Counsel at the Department of Commerce from 2002 to 2006.
Heinz H. Stumpe, 58 . . . . . . . Mr. Stumpe was appointed Chief Sales Officer on June 25, 2012. Before his appointment as
Chief Sales Officer, Mr. Stumpe was our Senior Vice President and Chief Operation Officer
since June 30, 2008. Previously, he was Vice President, Global Operations for Aviat
Networks and Stratex Networks. He joined Stratex Networks as Director of Marketing in
1996. He was promoted to Vice President, Global Accounts in 1999, Vice President,
Strategic Accounts in 2002 and Vice President, Global Operations in April 2006.
Shaun McFall, 53 . . . . . . . . . . Mr. McFall has been our Chief Marketing Officer since July 2008. Previously, from 2000 to
2008, he served as Vice President, Marketing for Aviat Networks and Stratex Networks. He
has been with us since 1989.
There is no family relationship between any of our executive officers or directors, and there are no arrangements or
understandings between any of our executive officers or directors and any other person pursuant to which any of them was
appointed or elected as an officer or director, other than arrangements or understandings with our directors.
Web site Access to Aviat Networks’ Reports; Available Information
We maintain an Internet Web site at http://www.aviatnetworks.com. Our annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available free of charge on our Web site
as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the Securities and Exchange
Commission (“SEC”). Our website and the information posted thereon are not incorporated into this Annual Report on
Form 10-K or any current or other periodic report that we file or furnish to the SEC.
We will also provide the reports in electronic or paper form, free of charge upon request. All reports we file with or
furnish to the SEC are also available free of charge via EDGAR through the SEC’s website at http://www.sec.gov. The public
may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room, 100 F. Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330.
Additional information relating to our business and operations is set forth in “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
11
t
r
o
p
e
R
l
a
u
n
n
A
Item 1A. Risk Factors
In addition to the risks described elsewhere in this Annual Report on Form 10-K and in certain of our other filings with
the SEC, the following risks and uncertainties, among others, could cause our actual results to differ materially from those
contemplated by us or by any forward-looking statement contained herein. Prospective and existing investors are strongly
urged to carefully consider the various cautionary statements and risks set forth in this Annual Report on Form 10-K and our
other public filings.
We have many business risks including those related to our financial performance, investments in our common stock,
operating our business and legal matters. The risks and uncertainties described below are not the only ones facing us.
Additional risks and uncertainties that we are not aware of or focused on may also impair our business operations. If any of
these risks actually occur, our financial condition and results of operations could be materially and adversely affected.
Our success will depend on new products introduced to the marketplace in a timely manner, successfully completing
product transitioning and achieving customer acceptance.
The market for our products is characterized by rapid technological change, evolving industry standards and frequent
new product introductions. Our future success will depend, in part, on continuous, timely development and introduction of
new products and enhancements that address evolving market requirements and are attractive to customers. If we fail to
develop or introduce on a timely basis new products or product enhancements or features that achieve market acceptance, our
business may suffer. Additionally, we work closely with a variety of third party partners to develop new product features and
new platforms. Should our partners face delays in the development process, then the timing of the rollout of our new products
may be significantly impacted which may negatively impact our revenue and gross margin. Another factor impacting our
future success is the growth in the customer demand of our new products. Rapidly changing technology, frequent new
products introductions and enhancements, short product life cycles and changes in customer requirements characterize the
markets for our products. We believe that successful new product introductions provide a significant competitive advantage
because of the significant resources committed by customers in adopting new products and their reluctance to change products
after these resources have been expended. We have spent, and expect to continue to spend, significant resources on internal
research and development to support our effort to develop and introduce new products and enhancements.
As we transition to new product platforms, we face significant risk that the development of our new products may not be
accepted by our current customers or by new customers. To the extent that we fail to introduce new and innovative products
that are adopted by customers, we could fail to obtain an adequate return on these investments and could lose market share to
our competitors, which could be difficult or impossible to regain. Similarly we may face decreased revenue, gross margins and
profitability due to a rapid decline in sales of current products as customers hold spending to focus purchases on new product
platforms. We could incur significant costs in completing the transition, including costs of inventory writedowns of the current
product as customers transition to new product platforms. In addition, products or technologies developed by others may
render our products noncompetitive or obsolete and result in significant reduction in orders from our customers and the loss of
existing and prospective customers.
Our average sales prices may decline in the future.
We are experiencing, and are likely to continue to experience, declining sales prices. This price pressure is likely to
result in downward pricing pressure on our products and services. As a result, we are likely to experience declining average
sales prices for our products. Our future profitability will depend upon our ability to improve manufacturing efficiencies,
reduce costs of materials used in our products and to continue to introduce new lower-cost products and product
enhancements. If we are unable to respond to increased price competition, our business, financial condition and results of
operations will be harmed. Because customers frequently negotiate supply arrangements far in advance of delivery dates, we
may be required to commit to price reductions for our products before we are aware of how, or if, cost reductions can be
obtained. As a result, current or future price reduction commitments and any inability on our part to respond to increased price
competition could harm our business, financial condition and results of operations.
Our sales cycle may be lengthy, and the timing of sales, along with additional services such as warehousing,
inventory management, installation and implementation of our products within our customers' networks, may extend over
more than one period, which can make our operating results difficult to predict.
We anticipate difficulty in accurately predicting the timing of the sale of products and amounts of revenue generated
from sales of our products, primarily in developing countries. The establishment of a business relationship with a potential
customer is a lengthy process, generally taking several months and sometimes longer. Following the establishment of the
relationship, the negotiation of purchase terms can be time-consuming, and a potential customer may require an extended
12
A
n
n
u
a
l
R
e
p
o
r
t
evaluation and testing period. We expect that our product sales cycle, which results in our products being designed into our
customers' networks, could take 12 to 24 months. A number of factors can contribute to the length of the sales cycle, including
technical evaluations of our products and the design process required to integrate our products into our customers' networks
and warehousing and/or inventory management services that may be requested by certain large customers. In anticipation of
product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer
payments. Specifically, should a customer require warehousing and/or inventory management services, such services may
impact our operating results in any period due to the costs associated with providing such services and the fact that the timing
of the revenue recognition may be delayed. As a result, in the event that a sale is not completed or is canceled or delayed, we
may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively
impacting our financial results. Furthermore, because of our lengthy sales cycle, our recognition of revenue from our selling
efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may
fluctuate significantly from quarter to quarter.
Once a purchase agreement has been executed, the timing and amount of revenue, if applicable, may remain difficult to
predict. The completion of services such as warehousing and inventory management, installation and testing of the customer’s
networks and the completion of all other suppliers network elements are subject to the customer’s timing and efforts, and other
factors outside our control which may prevent us from making predictions of revenue with any certainty and could cause us to
experience substantial period-to-period fluctuations in our operating results.
We have not been profitable and must increase our revenues and reduce costs if we hope to achieve profitability.
As measured under U.S. generally accepted accounting principles (“U.S. GAAP”), we have incurred a net loss in each of
the last 6 fiscal years. We incurred net losses of $15.0 million in fiscal 2013, $24.1 million in fiscal 2012 and $90.5 million in
fiscal 2011 and have been unprofitable since we became a public company in January 2007. We also have consistently
reported losses from operations, although we have generated cash from operations in fiscal 2013, 2012, 2010 and 2009.
Throughout fiscal 2013 we experienced strong price competition for new business in all regions while major customer
consolidations also put pressure on revenue and gross margin. We saw pricing pressures in all markets, with increased pressure
in international markets where we compete for the business of large carrier customers. In all markets, telecommunication
operating companies consolidated through mergers or acquisitions, leading to fewer, but larger customers. This consolidation
may have a negative impact on our revenue if Aviat is not selected as a vendor. In order to counter pricing pressures, we
invested heavily in product improvements to reduce unit costs and enhance product features, exited manufacturing facilities
and shifted production to contract manufacturers, and worked with our vendors to attain more favorable pricing. If we are
unable to reduce product unit costs associated with enhanced product features, including payments to contract manufacturers
and other suppliers, we may not achieve profitability.
We cannot be certain that these actions or others that we may take in the future will result in operating profitability or
net income as determined under U.S. GAAP.
We may undertake further restructuring activities, which may adversely impact our operations, and we may not
realize all of the anticipated benefits of these activities or any potential future restructurings; in addition, these
restructuring activities may harm our business.
We continue to evaluate our business to determine the potential need to realign our resources as we continue to transform
our business in order to achieve desired cost savings in an increasingly competitive market. In prior years and again in fiscal
2013, we have undertaken a series of restructuring of our operations involving, among other things and depending on the year,
reductions of our workforce, the relocation of our corporate headquarters and the reduction and outsourcing of manufacturing
activities. We incurred restructuring charges of $3.1 million, $2.3 million and $15.4 million in fiscal 2013, 2012 and 2011,
respectively.
We have based our restructuring efforts on assumptions and plans regarding the appropriate cost structure of our
business based on our product mix and projected sales among other factors. Some of our assumptions include that the
relocation of personnel and the outsourcing of certain functions would reduce our operating expenses and the transition risk is
low. These assumptions may not be correct and we may not be able to operate in accordance with our plans. Should this occur
we may determine that we must incur additional restructuring charges in the future. Moreover, we cannot assure you that we
will realize all of the anticipated benefits of our restructuring actions or that we will not further reduce or otherwise adjust our
workforce or exit, or dispose of, certain businesses and product lines. Any decision to further limit investment, exit, or dispose
of businesses or product lines may result in the recording of additional restructuring charges. As a result, the costs actually
incurred in connection with the restructuring efforts may be higher than originally planned and may not lead to the anticipated
cost savings and/or improved results. For example, if we consolidate additional facilities in the future, we may incur additional
13
t
r
o
p
e
R
l
a
u
n
n
A
restructuring and related expenses, which could have a material adverse effect on our business, financial condition or results of
operations.
Our restructuring actions could harm our relationships with our employees and impact our ability to recruit new
employees.
Employees, whether or not directly affected by any restructuring actions that we undertake, may seek employment with
our business partners, customers or competitors. We cannot assure you that the confidential nature of our proprietary
information will not be compromised by any such employees who terminate their employment with us. Further, we believe
that our future success will depend in large part upon our ability to attract, motivate and retain highly skilled personnel. We
may have difficulty attracting and retaining such personnel as a result of a perceived risk of future workforce reductions, and
we may terminate the employment of employees as part of a restructuring and later determine that such employees were
important to the success of the ongoing business.
Our business could be adversely affected if we are unable to attract and retain key personnel.
Our success and ability to invest and grow depend largely on our ability to attract and retain highly skilled technical,
professional, managerial, sales and marketing personnel. Historically, competition for these key personnel has been intense.
The loss of services of any of our key personnel (including key personnel joining our company through acquisitions), the
inability to retain and attract qualified personnel in the future, delays in hiring required personnel, particularly engineering and
sales personnel, or the loss of key personnel to competitors could make it difficult to meet key objectives, such as timely and
effective product introductions and financial goals.
We face strong competition for maintaining and improving our position in the market, which can adversely affect our
revenue growth and operating results.
The wireless access, interconnection and backhaul business is a specialized segment of the wireless telecommunications
industry and is extremely competitive. We expect competition in this segment to increase. Some of our competitors have more
extensive engineering, manufacturing and marketing capabilities and significantly greater financial, technical and personnel
resources than we have. In addition, some of our competitors have greater name recognition, broader product lines, a larger
installed base of products and longer-standing customer relationships. Our competitors include established companies, such as
Alcatel-Lucent, Eltek ASA, Ericsson, NEC, Huawei and ZTE, as well as a number of other public and private companies such
as Ceragon, DragonWave, SIAE and Exalt. Some of our competitors are OEMs or systems integrators through whom we
market and sell our products, which means our business success may depend on these competitors to some extent. One or
more of our largest customers could internally develop the capability to manufacture products similar to those manufactured or
outsourced by us and, as a result, the demand for our products and services may decrease.
In addition, we compete for acquisition and expansion opportunities with many entities that have substantially greater
resources than we have. Our competitors may enter into business combinations in order to accelerate product development or
to compete more aggressively and we may lack the resources to meet such enhanced competition.
Our ability to compete successfully will depend on a number of factors, including price, quality, availability, customer
service and support, breadth of product lines, product performance and features, rapid time-to-market delivery capabilities,
reliability, timing of new product introductions by us, our customers and competitors, the ability of our customers to obtain
financing and the stability of regional sociopolitical and geopolitical circumstances, and the ability of large competitors to
obtain business by providing more seller financing especially for large transactions. We can give no assurances that we will
have the financial resources, technical expertise, or marketing, sales, distribution, customer service and support capabilities to
compete successfully, or that regional sociopolitical and geographic circumstances will be favorable for our successful
operation.
The effects of the prolonged global financial and economic downturn has had, and may continue to have, significant
effects on our customers and suppliers that would result in material adverse effects on our business, operating results,
financial condition and stock price.
The effects of the global financial and economic downturn include, among other things, significant reductions in
available capital and liquidity from banks and other providers of credit, substantial reductions and/or fluctuations in equity and
currency values worldwide, and concerns that the worldwide economy has entered into or may enter into a further prolonged
recessionary period.
This financial downturn has adversely affected and may continue to adversely affect our customers’ access to capital
and/or willingness to spend capital on our products, and/or their levels of cash liquidity and/or their ability and/or willingness
14
A
n
n
u
a
l
R
e
p
o
r
t
to pay for products that they will order or have already ordered from us, or result in their ceasing operations. Further, we have
experienced an increasing number of our customers, principally in emerging markets, requesting longer payment terms, lease
or vendor financing arrangements, longer terms for the letters of credit securing purchases of our products and services, which
could potentially negatively impact our orders, revenue conversion cycle, and cash flows.
In seeking to reduce their expenses, we have also seen significant pressure from our customers to lower prices for our
products as they try to improve their operating performance and procure additional capital equipment within their reduced
budget levels. To the extent that we lower prices on our products and services, our orders, revenues, and gross margins may be
negatively impacted. Additionally, certain emerging markets are particularly sensitive to pricing as a key differentiator. Where
price is a primary decision driver, we may not be able to effectively compete or we may choose not to compete due to
unacceptable margins.
In addition, the financial downturn may materially adversely affect our suppliers’ access to capital and liquidity with
which to maintain their inventories, production levels, and/or product quality, could cause them to raise prices or lower
production levels, or result in their ceasing operations. Further, with respect to our credit facility discussed under “Liquidity,
Capital Resources and Financial Strategies” in Item 7 of this Annual Report on Form 10-K, if the global financial crisis
adversely affects Silicon Valley Bank, our ability to access the funds available under our credit facility could be materially
adversely affected.
The potential effects of these economic factors are difficult to forecast and mitigate. As a consequence, our operating
results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be
expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of
operations, and financial condition and could adversely affect our stock price.
If we fail to accurately forecast our manufacturing requirements or customer demand, we could incur additional
costs, which would adversely affect our business and results of operations.
If we fail to accurately predict our manufacturing requirements or forecast customer demand, we may incur additional
costs of manufacturing and our gross margins and financial results could be adversely affected. If we overestimate our
requirements, our contract manufacturers may experience an oversupply of components and assess us charges for excess or
obsolete components that could adversely affect our gross margins. If we underestimate our requirements, our contract
manufacturers may have inadequate inventory or components, which could interrupt manufacturing and result in higher
manufacturing costs, shipment delays, damage to customer relationships and/or our payment of penalties to our customers.
Our contract manufacturers also have other customers and may not have sufficient capacity to meet all of their customer's
needs, including ours, during periods of excess demand.
Part of our inventory may be written off, which would increase our cost of revenues. In addition, we may be exposed
to inventory-related losses on inventories purchased by our contract manufacturers.
During fiscal 2013, 2012 and 2011, we recorded charges to reduce the carrying value of our inventory to the lower of
cost or market totaling $7.7 million, $3.4 million and $20.2 million, respectively. Such charges equaled 1.6%, 0.8% and 4.5%
of our revenue in fiscal 2013, 2012 and 2011, respectively. These charges were primarily due to excess and obsolete inventory,
including deferred cost of sales, resulting from product transitioning and discontinuance.
Inventory of raw materials, work in-process or finished products may accumulate in the future, and we may encounter
losses due to a variety of factors, including:
•
•
rapid technological change in the wireless telecommunications industry resulting in frequent product changes;
the need of our contract manufacturers to order raw materials that have long lead times and our inability to
estimate exact amounts and types of items thus needed, especially with regard to the frequencies in which the
final products ordered will operate; and
•
cost reduction initiatives resulting in component changes within the products.
Further, our inventory of finished products may accumulate as the result of cancellation of customer orders or our
customers’ refusal to confirm the acceptance of our products. Our contract manufacturers are required to purchase inventory
based on manufacturing projections we provide to them. If actual orders from our customers are lower than these
manufacturing projections, our contract manufacturers will have excess inventory of raw materials or finished products which
we would be required to purchase. In addition, we require our contract manufacturers from time to time to purchase more
inventory than is immediately required, and to partially assemble components, in order to shorten our delivery time in case of
an increase in demand for our products. In the absence of such increase in demand, we may need to compensate our contract
manufacturers. If we are required to purchase excess inventory from our contract manufacturers or otherwise compensate our
15
contract manufacturers for purchasing excess inventory, our business, financial condition and results of operations could be
materially adversely affected. We also may purchase components or raw materials from time to time for use by our contract
manufacturers in the manufacturing of our products. These purchases are based on our own manufacturing projections. If our
actual orders are lower than these manufacturing projections, we may accumulate excess inventory, which we may be required
to write-off. If we are forced to write-off this inventory other than in the normal course of business, our business, financial
condition, results of operations could be materially adversely affected.
Our effective tax rate could be highly volatile and could adversely affect our operating results.
Our future effective tax rate may be adversely affected by a number of factors, many of which are outside of our control,
including:
•
•
•
•
•
•
•
•
•
•
the jurisdictions in which profits are determined to be earned and taxed;
adjustments to estimated taxes upon finalization of various tax returns;
increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and
development and impairment of goodwill in connection with acquisitions;
changes in available tax credits;
changes in share-based compensation expense;
changes in the valuation of our deferred tax assets and liabilities;
changes in domestic or international tax laws or the interpretation of such tax laws;
the resolution of issues arising from tax audits with various tax authorities;
the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations
between reporting periods; and
taxes that may be incurred upon a repatriation of cash from foreign operations.
t
r
o
p
e
R
l
a
u
n
n
A
Any significant increase in our future effective tax rates could impact our results of operations for future periods
adversely.
If we fail to effectively manage our contract manufacturer relationships, we could incur additional costs or be unable
to timely fulfill our customer commitments, which would adversely affect our business and results of operations and, in the
event of an inability to fulfill commitments, would harm our customer relationships.
We outsource all of our manufacturing and a substantial portion of our repair service operations to independent contract
manufacturers and other third parties. Our contract manufacturers typically manufacture our products based on rolling
forecasts of our product needs that we provide to them on a regular basis. The contract manufacturers are responsible for
procuring components necessary to build our products based on our rolling forecasts, building and assembling the products,
testing the products in accordance with our specifications and then shipping the products to us. We configure the products to
our customer requirements, conduct final testing and then ship the products to our customers. Although we currently partner
with multiple major contract manufacturers, there can be no assurance that we will not encounter problems as we are
dependent on contract manufacturers to provide these manufacturing services or that we will be able to replace a contract
manufacturer that is not able to meet our demand.
In addition, if we fail to effectively manage our relationships with our contract manufacturers or other service providers,
or if one or more of them should not fully comply with their contractual obligations or should experience delays, disruptions,
component procurement problems or quality control problems, then our ability to ship products to our customers or otherwise
fulfill our contractual obligations to our customers could be delayed or impaired which would adversely affect our business,
financial results and customer relationships.
We depend on sole or limited sources for some key components and failure to receive timely delivery of any of these
components could result in deferred or lost sales.
In some instances, we are dependent upon one or a few sources, either because of the specialized nature of a particular
item or because of local content preference requirements pursuant to which we operate on a given project. Examples of sole or
limited sourcing categories include metal fabrications and castings, for which we own the tooling and therefore limit our
supplier relationships, and MMICs (a type of integrated circuit used in manufacturing microwave radios), which we procure at
a volume discount from a single source. Our supply chain plan includes mitigation plans for alternative manufacturing sources
and identified alternate suppliers. However, if these alternatives cannot address our requirements when our existing sources of
these components fail to deliver them on time, we could suffer delayed shipments, canceled orders and lost or deferred
16
A
n
n
u
a
l
R
e
p
o
r
t
revenues, as well as material damage to our customer relationships. Should this occur, our operating results, cash flows and
financial condition could be materially adversely affected.
Credit and commercial risks and exposures could increase if the financial condition of our customers declines.
A substantial portion of our sales are to customers in the telecommunications industry. These customers may require
their suppliers to provide extended payment terms, direct loans or other forms of financial support as a condition to obtaining
commercial contracts. We expect that we may provide or commit to financing where appropriate for our business. Our ability
to arrange or provide financing for our customers will depend on a number of factors, including our credit rating, our level of
available credit and our ability to sell off commitments on acceptable terms. In addition, if local currencies cannot be hedged,
we have an inherent exposure in our ability to convert monies at favorable rates or to U.S. dollars. More generally, we expect
to routinely enter into long-term contracts involving significant amounts to be paid by our customers over time. Pursuant to
these contracts, we may deliver products and services representing an important portion of the contract price before receiving
any significant payment from the customer. As a result of the financing that may be provided to customers and our commercial
risk exposure under long-term contracts, our business could be adversely affected if the financial condition of our customers
erodes. Over the past few years, certain of our customers have filed with the courts seeking protection under the bankruptcy or
reorganization laws of the applicable jurisdiction, or have experienced financial difficulties. The financial healthiness may be
exacerbated in many emerging markets, where our customers are being affected not only by recession, but by deteriorating
local currencies and a lack of credit. Upon the financial failure of a customer, we may experience losses on credit extended
and loans made to such customer, losses relating to our commercial risk exposure and the loss of the customer’s ongoing
business. If customers fail to meet their obligations to us, we may experience reduced cash flows and losses in excess of
reserves, which could materially adversely impact our results of operations and financial position.
Our customers may not pay for products and services in a timely manner, or at all, which would decrease our cash
flows and adversely affect our working capital.
Our business requires extensive credit risk management that may not be adequate to protect against customer
nonpayment. A risk of non-payment by customers is a significant focus of our business. We expect a significant amount of
future revenue to come from international customers, many of whom will be startup telecommunications operators in
developing countries. We do not generally expect to obtain collateral for sales, although we require letters of credit or credit
insurance as appropriate for international customers. For information regarding the percentage of revenue attributable to
certain key customers, see the risks discussed in the factor below titled “Because a significant amount of our revenue may
come from a limited number of customers, the termination of any of these customer relationships may adversely affect our
business.” Our historical accounts receivable balances have been concentrated in a small number of significant customers.
Unexpected adverse events impacting the financial condition of our customers, bank failures or other unfavorable regulatory,
economic or political events in the countries in which we do business may impact collections and adversely impact our
business, require increased bad debt expense or receivable write-offs and adversely impact our cash flows, financial condition
and operating results, which could also result in a breach of our bank covenants.
Because a significant amount of our revenue may come from a limited number of customers, the termination of any
of these customer relationships may adversely affect our business.
Sales of our products and services historically have been concentrated in a small number of customers. Principal
customers for our products and services include domestic and international wireless/mobile service providers, OEMs, as well
as private network users such as public safety agencies; government institutions; and utility, pipeline, railroad and other
industrial enterprises that operate broadband wireless networks. We had revenue from two customers that each exceeded 10%
of our total revenue during fiscal 2013, and one customer in each of 2012 and 2011. Although we have a large customer base,
during any given quarter a small number of customers may account for a significant portion of our revenue.
It is possible that a significant portion of our future product sales also could become even more concentrated in a limited
number of customers as currently, two of our customers, MTN and Verizon Wireless, each represented over 10% of our
revenue. In addition, product sales to major customers have varied widely from period to period. The loss of any existing
customer, a significant reduction in the level of sales to any existing customer, or our inability to gain additional customers
could result in declines in our revenue or an inability to grow revenue. In addition, further consolidation of our potential
customer base could result in purchasing decision delays as consolidating customers integrate their operations and could
generally reduce our opportunities to win new customers to the extent that the number of potential customers decreases.
Furthermore, as our customers become larger, they may have more leverage to negotiate better pricing which could adversely
affect our revenues and gross margins.
We continually evaluate strategic opportunities which could involve merger and/or acquisition activities that could
disrupt our operations and harm our operating results.
17
t
r
o
p
e
R
l
a
u
n
n
A
Our growth depends upon market growth, our ability to enhance our existing products and our ability to introduce new
products on a timely basis. We intend to continue to address the need to develop new products and enhance existing products
through acquisitions, or “tuck-ins,” product lines, technologies, and personnel. Acquisitions involve numerous risks, including
the following:
•
•
•
•
•
•
•
difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired
companies, particularly companies with large and widespread operations and/or complex products;
diversion of management's attention from normal daily operations of the business and the challenges of
managing larger and more widespread operations resulting from acquisitions;
potential difficulties in completing projects associated with in-process research and development intangibles;
difficulties in entering markets in which we have no or limited direct prior experience and where competitors in
each market have stronger market positions;
initial dependence on unfamiliar supply chains or relatively small supply partners;
insufficient revenue to offset increased expenses associated with acquisitions; and
the potential loss of key employees, customers, distributors, vendors and other business partners of the
companies we acquire following and continuing after announcement of acquisition plans.
Acquisitions may also cause us to:
•
•
•
•
•
•
•
•
•
issue common stock that would dilute our current stockholders;
use a substantial portion of our cash resources, or incur debt;
significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to
pay for an acquisition;
assume material liabilities;
record goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis
and potential periodic impairment charges;
incur amortization expenses related to certain intangible assets;
incur tax expenses related to the effect of acquisitions on our intercompany R&D cost sharing arrangement and
legal structure;
incur large and immediate write-offs and restructuring and other related expenses; and
become subject to intellectual property or other litigation.
Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our
control. No assurance can be given that our previous or future acquisitions will be successful and will not materially adversely
affect our business, operating results or financial condition. Failure to manage and successfully integrate acquisitions could
materially harm our business and operating results. Even when an acquired company has already developed and marketed
products, there can be no assurance that product enhancements will be made in a timely fashion or that pre-acquisition due
diligence will have identified all possible issues that might arise with respect to such products.
Our quarterly results may be volatile, which can adversely affect the trading price of our common stock.
Our quarterly operating results may vary significantly for a variety of reasons, many of which are outside our control.
These factors could harm our business and include, among others:
•
•
•
seasonality in the purchasing habits of our customers;
the volume and timing of product orders and the timing of completion of our product deliveries and installations;
our ability and the ability of our key suppliers to respond to changes on demand as needed;
• margin variability based on geographic and product mix;
•
•
•
•
•
•
our suppliers’ inability to perform and deliver on time as a result of their financial condition, component
shortages or other supply chain constraints;
retention of key personnel;
our sales cycles can be lengthy;
litigation costs and expenses;
continued timely rollout of new product functionality and features;
increased competition resulting in downward pressure on the price of our products and services;
18
•
•
•
•
•
unexpected delays in the schedule for shipments of existing products and new generations of the existing
platforms;
failure to realize expected cost improvement throughout our supply chain;
order cancellations or postponements in product deliveries resulting in delayed revenue recognition;
seasonality in the purchasing habits of our customers;
restructuring and organization of our operations;
• war and acts of terrorism;
•
•
•
•
•
•
natural disasters;
the ability of our customers to obtain financing to enable their purchase of our products;
fluctuations in international currency exchange rates;
regulatory developments including denial of export and import licenses;
general economic conditions worldwide that affect demand and financing for microwave telecommunications
networks; and
the timing and size of future restructuring plans and write-offs.
Our quarterly results are expected to be difficult to predict and delays in product delivery or closing a sale can cause
revenue, margins and net income or loss to fluctuate significantly from anticipated levels. A substantial portion of our
contracts are completed in the latter part of a quarter and a significant percentage of these are large orders. Because a
significant portion of our cost structure is largely fixed in the short term, revenue shortfalls tend to have a disproportionately
negative impact on our profitability and can increase our inventory. The number of large new transactions also increases the
risk of fluctuations in our quarterly results because a delay in even a small number of these transactions could cause our
quarterly revenues and profitability to fall significantly short of our predictions. In addition, we may increase spending in
response to competition or in pursuit of new market opportunities. Accordingly, we cannot provide assurances that we will be
able to achieve profitability in the future or that if profitability is attained, that we will be able to sustain profitability,
particularly on a quarter-to-quarter basis.
A
n
n
u
a
l
R
e
p
o
r
t
Due to the significant volume of international sales we expect, we may be susceptible to a number of political,
economic and geographic risks that could harm our business.
We are highly dependent on sales to customers outside the U.S. In fiscal 2013, 2012 and 2011, our sales to international
customers accounted for 62%, 64% and 67%, respectively, of total revenue. Significant portions of our international sales are
in less developed countries. Our international sales are likely to continue to account for a large percentage of our products and
services revenue for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic
event could result in a significant decline in revenue. In addition, compliance with complex foreign and U.S. laws and
regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These
numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and
filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt
payments to governmental officials, and anti-competition regulations, among others. Violations of these laws and regulations
could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of
our business and on our ability to offer our products and services in one or more countries, and could also materially affect our
brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.
Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there
can be no assurance that our employees, contractors, or agents will not violate our policies.
Some of the risks and challenges of doing business internationally include:
•
•
•
unexpected changes in regulatory requirements;
fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our
forecast variations for hedgeable currencies;
imposition of tariffs and other barriers and restrictions;
• management and operation of an enterprise spread over various countries;
•
•
the burden of complying with a variety of laws and regulations in various countries;
application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and
relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and
uncertainty;
•
general economic and geopolitical conditions, including inflation and trade relationships;
19
t
r
o
p
e
R
l
a
u
n
n
A
• war and acts of terrorism;
•
•
•
•
kidnapping and high crime rate;
natural disasters;
currency exchange controls; and
changes in export regulations.
While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely
affect our business, financial condition and results of operations in the future.
Consolidation within the telecommunications industry could result in a decrease in our revenue.
The telecommunications industry has experienced significant consolidation among its participants, and we expect this
trend to continue. Some operators in this industry have experienced financial difficulty and have filed, or may file, for
bankruptcy protection. Other operators may merge and one or more of our competitors may supply products to the customers
of the combined company following those mergers. This consolidation could result in purchasing decision delays and
decreased opportunities for us to supply products to companies following any consolidation. This consolidation may also
result in lost opportunities for cost reduction and economies of scale. In addition, see the risks discussed in the factor above
titled “Because a significant amount of our revenue may come from a limited number of customers, the termination of any of
these customer relationships may adversely affect our business.”
If we are unable to adequately protect our intellectual property rights, we may be deprived of legal recourse against
those who misappropriate our intellectual property.
Our ability to compete will depend, in part, on our ability to obtain and enforce intellectual property protection for our
technology in the U.S. and internationally. We rely upon a combination of trade secrets, trademarks, copyrights, patents and
contractual rights to protect our intellectual property. In addition, we enter into confidentiality and invention assignment
agreements with our employees, and enter into non-disclosure agreements with our suppliers and appropriate customers so as
to limit access to and disclosure of our proprietary information. We cannot give assurances that any steps taken by us will be
adequate to deter misappropriation or impede independent third-party development of similar technologies. In the event that
such intellectual property arrangements are insufficient, our business, financial condition and results of operations could be
harmed. We have significant operations in the U.S., United Kingdom, Singapore and New Zealand, and outsourcing
arrangements in Asia and the U.S. We cannot provide assurances that the protection provided to our intellectual property by
the laws and courts of particular nations will be substantially similar to the protection and remedies available under U.S. law.
Furthermore, we cannot provide assurances that third parties will not assert infringement claims against us based on
intellectual property rights and laws in other nations that are different from those established in the U.S.
If we fail to develop and maintain distribution and licensing relationships, our revenue may decrease.
Although a majority of our sales are made through our direct sales force, we also will market our products through
indirect sales channels such as independent agents, distributors, OEMs and systems integrators. These relationships enhance
our ability to pursue major contract awards and, in some cases, are intended to provide our customers with easier access to
financing and a greater variety of equipment and service capabilities, which an integrated system provider should be able to
offer. We may not be able to maintain and develop additional relationships. If additional relationships are developed, they may
not be successful. Furthermore, as we consider increasing licensing revenue based on upgraded technology, we may not be
successful in transitioning customers to the planned software upgrades. Our inability to establish or maintain these distribution
and licensing relationships could restrict our ability to market our products and thereby result in significant reductions in
revenue. If these revenue reductions occur, our business, financial condition and results of operations would be harmed.
If sufficient radio frequency spectrum is not allocated for use by our products, or we fail to obtain regulatory
approval for our products, our ability to market our products may be restricted.
We will be affected by the allocation and auction of the radio frequency spectrum by governmental authorities both in
the U.S. and internationally. These governmental authorities may not allocate sufficient radio frequency spectrum for use by
our products or we may not be successful in obtaining regulatory approval for our products from these authorities.
Historically, in many developed countries, the unavailability of frequency spectrum has inhibited the growth of wireless
telecommunications networks. In addition, to operate in a jurisdiction, we must obtain regulatory approval for our products.
Each jurisdiction in which we market our products has its own regulations governing radio communications. Products that
support emerging wireless telecommunications services can be marketed in a jurisdiction only if permitted by suitable
frequency allocations, auctions and regulations. The process of establishing new regulations is complex and lengthy. If we are
20
A
n
n
u
a
l
R
e
p
o
r
t
unable to obtain sufficient allocation of radio frequency spectrum by the appropriate governmental authority or obtain the
proper regulatory approval for our products, our business, financial condition and results of operations may be harmed.
Radio communications are subject to regulation by U.S. and foreign laws and international treaties. Generally, our
products need to conform to a variety of United States and international requirements established to avoid interference among
users of transmission frequencies and to permit interconnection of telecommunications equipment. Any delays in compliance
with respect to our future products could delay the introduction of such products.
Our business is subject to changing regulation of corporate governance, public disclosure, and anti-bribery measures
that have resulted in increased costs and may continue to result in additional costs in the future and/or potential liabilities.
We are subject to rules and regulations of federal and state regulatory authorities, The NASDAQ Stock Market LLC
(“NASDAQ”) and financial market entities charged with the protection of investors and the oversight of companies whose
securities are publicly traded, and foreign and domestic legislative bodies. During the past few years, these entities, including
the Public Company Accounting Oversight Board, the SEC, NASDAQ and several foreign governments such as the
governments of the United Kingdom and Brazil, have issued requirements, laws and regulations and continue to develop
additional requirements, laws and regulations, such as those in response to laws enacted by Congress, most notably the
Sarbanes-Oxley Act of 2002 (“SOX”), and recent laws and regulations regarding bribery and unfair competition. Our efforts to
comply with these requirements and regulations have resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of substantial management time and attention from revenue-generating activities to
compliance activities.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in
practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty
regarding compliance matters and additional costs potentially necessitated by ongoing revisions to our disclosure and
governance practices. Finally, if we are unable to ensure compliance with such requirements, laws, or regulations, we may be
subject to costly prosecution and liability, and resulting reputational harm, from such noncompliance.
Our products are used in critical communications networks which may subject us to significant liability claims.
Because our products are used in critical communications networks, we may be subject to significant liability claims if
our products do not work properly. We warrant to our current customers that our products will operate in accordance with our
product specifications. If our products fail to conform to these specifications, our customers could require us to remedy the
failure or could assert claims for damages. The provisions in our agreements with customers that are intended to limit our
exposure to liability claims may not preclude all potential claims. In addition, any insurance policies we have may not
adequately limit our exposure with respect to such claims. Liability claims could require us to spend significant time and
money in litigation or to pay significant damages. Any such claims, whether or not successful, would be costly and time-
consuming to defend, and could divert management’s attention and seriously damage our reputation and our business.
We may be subject to litigation regarding intellectual property associated with our wireless business. This litigation
could be costly to defend and resolve, and could prevent us from using or selling the challenged technology.
The wireless telecommunications industry is characterized by vigorous protection and pursuit of intellectual property
rights, which has resulted in often protracted and expensive litigation. Any litigation regarding patents or other intellectual
property could be costly and time-consuming and could divert our management and key personnel from our business
operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these
risks. Such litigation or claims could result in substantial costs and diversion of resources. In the event of an adverse result in
any such litigation, we could be required to pay substantial damages, cease the use and transfer of allegedly infringing
technology or the sale of allegedly infringing products and expend significant resources to develop non-infringing technology
or obtain licenses for the infringing technology. We can give no assurances that we would be successful in developing such
non-infringing technology or that any license for the infringing technology would be available to us on commercially
reasonable terms, if at all. This could have a materially adverse effect on our business, results of operation, financial condition,
competitive position and prospects.
System security risks, data protection breaches, and cyber-attacks could compromise our proprietary information,
disrupt our internal operations and harm public perception of our security products, which could cause our business and
reputation to suffer and adversely affect our stock price.
In the ordinary course of business, we store sensitive data, including intellectual property, our proprietary business
information and that of our customers, suppliers and business partners on our networks. The secure maintenance of this
information is critical to our operations and business strategy. Increasingly, companies, including Aviat Networks are subject
21
to a wide variety of attacks on their networks on an ongoing basis. Despite our security measures, Aviat Networks' information
technology and infrastructure may be vulnerable to penetration or attacks by computer programmers and hackers, or breached
due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks, creating system
disruptions or slowdowns and exploiting security vulnerabilities of our products, and the information stored on our networks
could be accessed, publicly disclosed, lost or stolen, which could subject us to liability to our customers, suppliers, business
partners and others, and cause us reputational and financial harm. In addition, sophisticated hardware and operating system
software and applications that we produce or procure from third parties may contain defects in design or manufacture,
including “bugs” and other problems that could unexpectedly interfere with the operation of our networks.
If an actual or perceived breach of network security occurs in our network or in the network of a customer of our security
products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our
products could be harmed. Because the techniques used by computer programmers and hackers, many of whom are highly
sophisticated and well-funded, to access or sabotage networks change frequently and generally are not recognized until after
they are used, we may be unable to anticipate or immediately detect these techniques. This could impede our sales,
manufacturing, distribution or other critical functions. In addition, the economic costs to us to eliminate or alleviate cyber or
other security problems, bugs, viruses, worms, malicious software systems and security vulnerabilities could be significant and
may be difficult to anticipate or measure because the damage may differ based on the identity and motive of the programmer
or hacker, which are often difficult to identify.
Anti-takeover provisions of Delaware law and provisions in our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws could make a third-party acquisition of us difficult.
Because we are a Delaware corporation, the anti-takeover provisions of Delaware law could make it more difficult for a
third party to acquire control of us, even if the change in control would be supported by our stockholders. We are subject to the
provisions of Section 203 of the General Corporation Law of Delaware, which prohibits us from engaging in certain business
combinations, unless the business combination is approved in a prescribed manner. In addition, our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws also contain certain provisions that may make a third-party
acquisition of us difficult, including the ability of the board of directors to issue preferred stock and the requirement that
nominations for directors and other proposals by stockholders must be made in advance of the meeting at which directors are
elected or the proposals are voted upon.
t
r
o
p
e
R
l
a
u
n
n
A
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of June 28, 2013, we leased approximately 319,000 square feet of facilities worldwide, with approximately 61% in
North America, mostly in California, Texas and North Carolina. Our corporate headquarters are located in Santa Clara,
California, and consist of a building of approximately 129,000 square feet. The lease for our headquarters expires in April 2020
and we plan to sublease a portion of the facility as part of our restructuring plan. We also lease approximately 52,000 square
feet of office and assembly facilities in San Antonio and Austin, Texas. Internationally, we lease approximately 125,000 square
feet of facilities throughout Europe, Central America, South America, Africa and Asia regions, including offices in Singapore,
Slovenia, Philippine Islands, India, Mexico, South Africa, Nigeria, Ivory Coast, France, Kenya, Poland, Australia and
Bangladesh. In addition, we own approximately 110,000 square feet of facilities in Wellington, New Zealand and Lanarkshire,
Scotland.
During fiscal 2011, we announced the closing of our 60,000 square-foot Morrisville, North Carolina office which
formerly served as our headquarters. A sub-tenant for the entire 60,000 square feet of space took occupancy of the premises in
early fiscal 2012. We continue to have an on-going lease commitment for this location ending in fiscal 2015.
We maintain our facilities in good operating condition, and believe that they are suitable and adequate for our current and
projected needs. We continuously review our anticipated requirements for facilities and may, from time to time, acquire
additional facilities, expand existing facilities, or dispose of existing facilities or parts thereof, as we deem necessary.
For more information about our lease obligations, see “Note 15. Commitments and Contingencies” of notes to
consolidated financial statements, which are included in Item 8 in this Annual Report on Form 10-K.
22
Item 3. Legal Proceedings
From time to time, we may be involved in various legal claims and litigation that arise in the normal course of our
operations. While the results of such claims and litigation cannot be predicted with certainty, we currently believe that we are
not a party to any litigation the final outcome of which is likely to have a material adverse effect on our financial position,
results of operations or cash flows. However, should we not prevail in any such litigation; it could have a material adverse
impact on our operating results, cash flows or financial position.
Item 4. Mine Safety Disclosures
Not applicable.
A
n
n
u
a
l
R
e
p
o
r
t
23
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Price Range of Common Stock
Our common stock, with a par value of $0.01 per share, is listed and primarily traded on the NASDAQ Global Select
Market, under the ticker symbol AVNW (prior to January 28, 2010 our ticker symbol was HSTX). There was no established
trading market for shares of our common stock prior to January 29, 2007.
According to the records of our transfer agent, as of August 30, 2013, there were approximately 4,622 holders of record
of our common stock. The following table sets forth the high and low closing prices for a share of our common stock on
NASDAQ Global Select Market for the periods indicated during our fiscal years 2013 and 2012:
First Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.80
$3.32
$3.75
$3.35
$2.11
$2.28
$3.26
$2.57
$4.21
$2.66
$3.06
$2.92
$2.29
$1.62
$1.77
$2.39
Fiscal 2013
Fiscal 2012
High
Low
High
Low
Dividend Policy
We have not paid cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future.
We intend to retain any earnings for use in our business. In addition, the covenants of our credit facility may restrict us from
paying dividends or making other distributions to our stockholders under certain circumstances.
t
r
o
p
e
R
l
a
u
n
n
A
Sales of Unregistered Securities
During the fourth quarter of fiscal 2013, we did not issue or sell any unregistered securities.
Issuer Repurchases of Equity Securities
During the fourth quarter of fiscal 2013, we did not repurchase any equity securities.
24
Performance Graph
The following graph and accompanying data compares the cumulative total return on our common stock with the
cumulative total return of the Total Return Index for The NASDAQ Composite Market (U.S. Companies) and the NASDAQ
Telecommunications Index for the five-year period ended June 28, 2013. The stock price performance shown on the graph
below is not necessarily indicative of future price performance. Note that this graph and accompanying data is “furnished,” not
“filed,” with the SEC.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Aviat Networks, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
6/27/08
7/3/09
7/2/10
7/1/11
6/29/12
6/28/13
Aviat Networks, Inc.
NASDAQ Composite
NASDAQ Telecommunications
Aviat Networks, Inc. . . . . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . . .
NASDAQ Telecommunications. . . . . . .
100.00
100.00
100.00
64.20
78.40
78.78
36.53
92.16
79.53
41.34
125.36
93.58
29.23
132.17
81.84
27.35
155.77
105.27
6/27/2008
7/3/2009
7/2/2010
7/1/2011
6/29/2012
6/28/2013
____________________________
*
Assumes (i) $100 invested on June 27, 2008 in Aviat Networks, Inc. common stock, the Total Return Index for The
NASDAQ Composite Market (U.S. companies) and the NASDAQ Telecommunications Index; and (ii) immediate
reinvestment of all dividends.
A
n
n
u
a
l
R
e
p
o
r
t
25
Item 6. Selected Financial Data
The following table summarizes our selected historical financial information for each of the last five fiscal years that has
been derived from our audited consolidated financial statements. Data presented for fiscal years 2013, 2012 and 2011 are
included elsewhere in this Annual Report on Form 10-K. This table should be read in conjunction with our other financial
information, including “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the consolidated financial statements and notes, included elsewhere in this Annual Report on Form 10-K.
June 28, 2013
June 29, 2012
July 1, 2011
July 2, 2010
July 3, 2009
Fiscal Year Ended
(In millions)
Revenue from product sales and services . . . . . . . . . . $
Cost of product sales and services . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . .
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
471.3
$
444.0
$
452.1
$
465.5
$
677.9
331.2
(10.9)
(15.0)
312.3
(15.5)
(24.1)
324.0
(58.8)
(90.5)
332.7
(108.4)
(130.2)
503.8
(348.8)
(355.0)
Basic and diluted loss per common share:
Loss from continuing operations . . . . . . . . . . . . . $
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.18) $
(0.25)
(0.26) $
(0.41)
(1.00) $
(1.54)
(1.82) $
(2.19)
(5.94)
(6.05)
June 28, 2013
June 29, 2012
July 1, 2011
July 2, 2010
July 3, 2009
(In millions)
As of
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
305.8
$
329.6
$
383.9
$
447.0
$
24.8
149.9
24.7
157.5
15.1
177.7
17.2
263.2
600.2
17.9
387.9
t
r
o
p
e
R
l
a
u
n
n
A
26
The following table summarizes certain charges, expenses and gains included in our net losses for each of the fiscal years
in the five-year period ended June 28, 2013:
June 28, 2013
June 29, 2012
July 1, 2011
July 2, 2010
July 3, 2009
Fiscal Year Ended
6.4
$
(In millions)
$
4.8
$
3.1
$
Share-based compensation expense. . . . . . . . . . . . . . . $
Goodwill impairment charges . . . . . . . . . . . . . . . . . . .
Intangible impairment charges. . . . . . . . . . . . . . . . . . .
Property, plant and equipment impairment charges. . .
Rebranding and transitional costs . . . . . . . . . . . . . . . .
Charges for product transition, product
discontinuances and inventory mark-downs . . . . . .
Amortization of purchased technology and intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges. . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of the fair value adjustments related to
fixed assets and inventory . . . . . . . . . . . . . . . . . . . .
Acquired in-process research and development . . . . .
Gains from sale of building and Telsima acquisition
purchase price settlement. . . . . . . . . . . . . . . . . . . . .
NetBoss bad debt expenses and other . . . . . . . . . . . . .
Loss on sale of NetBoss assets. . . . . . . . . . . . . . . . . . .
Transactional tax assessments . . . . . . . . . . . . . . . . . . .
Liquidation of entities . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5.2
5.6
—
—
—
1.0
2.3
2.3
—
—
—
0.8
—
0.6
—
—
—
—
—
0.9
6.6
3.4
15.4
0.2
—
—
—
4.6
2.8
0.8
(0.9)
38.6
—
57.7
8.7
8.4
16.9
12.3
7.1
0.6
—
(2.2)
—
—
—
—
—
2.9
279.0
32.6
3.2
—
29.8
12.7
8.2
1.7
2.4
—
—
—
—
—
—
A
n
n
u
a
l
R
e
p
o
r
t
$
17.8
$
$
112.6
$
372.5
—
—
—
—
—
1.0
3.1
—
—
—
—
—
1.4
—
(0.7)
11.2
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2013 and 2014 Results
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our results of
operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our
consolidated financial statements and the accompanying notes. In the discussion below, our fiscal year ending June 27, 2014 is
referred to as “fiscal 2014” or “2014”; our fiscal year ended June 28, 2013 is referred to as “fiscal 2013” or “2013”; our fiscal
year ended June 29, 2012 is referred to as “fiscal 2012” or “2012”; and our fiscal year ended July 1, 2011 is referred to as
“fiscal 2011” or “2011.”
We generate revenue by designing, developing, manufacturing and supporting a range of wireless networking products,
solutions and services for mobile and fixed communications service providers, private network operators, government agencies,
transportation and utility companies, public safety agencies and broadcast system operators across the globe. Our products
include point-to-point (PTP) digital microwave transmission systems designed for first/last mile access, middle mile/backhaul,
and long distance trunking applications. We also provide network management software solutions to enable operators to deploy,
monitor and manage our systems, third party equipment such as antennas, routers, and multiplexers, necessary to build and
deploy a wireless transmission network, and a full suite of turnkey support services.
t
r
o
p
e
R
l
a
u
n
n
A
We work continuously to improve our established brands and to create new products that meet our customers’ evolving
needs and preferences. Our fundamental business goal is to generate superior returns for our stockholders over the long term.
We believe that increases in revenue, operating profits and earnings per share are the key measures of financial performance for
our business.
Our strategic focus in fiscal 2014 will be to continue to accelerate innovation and optimize our product portfolio, improve
costs and operational efficiencies, grow our revenue and create a sustainable, profitable business model. To do this, we have
examined our products, markets, facilities, development programs, and operational flows to ensure we are focused on what we
do well and what will differentiate us in the future. We will continue working to streamline management processes to attain the
efficiency levels required by the markets in which we do business.
Although the general trend of increasing demand for bandwidth to support mobile networks applies in all markets, we
expect to see quarter-to-quarter fluctuations within markets and with individual customers based on customers' past purchasing
patterns. Seasonality is also a factor that impacts our business. Our fiscal third quarter revenue and orders have historically been
lower than the revenue and orders in our second fiscal quarter because many of our customers utilize a significant portion of
their capital budgets at the end of their fiscal years, which is typically the calendar year end and coincides with our second
fiscal quarter. The majority of our customers begin a new fiscal year on January 1, and capital expenditures tend to be lower in
an organization’s first quarter than in its fourth quarter. We anticipate that this seasonality will continue. The seasonality
between the second quarter and third quarter may be affected by a variety of additional factors, including changes in the global
economy and other factors.
During fiscal 2014, we expect to provide increased managed services to certain customers in certain geographies. Our
operating results may be impacted by the provision of these services to the extent that we incur upfront and ongoing expenses
associated with the provision of these services that are not offset with additional revenue from product sales associated with
these services until a future period.
Please refer to the section entitled “Risk Factors” in Item 1A in this Annual Report on Form 10-K.
Operations Review
During fiscal 2013, we secured orders and continued to expand our footprint with our customers in the mobile operator
market using our current technology and service capabilities. The market for mobile backhaul continues to be our primary
addressable market segment and the demand for increasing the backhaul capacity in our customers' networks continues to grow
in line with our expectations. In fiscal 2013 we saw sustained demand in North America as we supported the long-term
evolution (“LTE”) deployments of our mobile operator customers. Internationally, our business continued to rely on a
combination of customers increasing their capacity to handle subscriber growth, the ongoing build-out of some large 3G
deployments, and the emergence of early stage LTE deployments. Our objective continues to be to position Aviat Networks to
support our customers for LTE readiness and to ensure that our technology roadmap is well aligned with evolving market
requirements. We continue to find that our strength in turnkey and after-sale support services is a differentiating factor in
serving new business and enabling us to expand our business with existing customers across all markets. During fiscal 2013,
our growth in revenue over fiscal 2012 was predominantly attributable to an increase in service orders in North America and
28
A
n
n
u
a
l
R
e
p
o
r
t
Africa. However, as disclosed above and in the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K, a
number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to
competition and macroeconomic conditions in the geographic markets that we service.
During fiscal 2013, we incurred restructuring expenses that were taken to reduce our operational costs. We intend to
complete a majority of the remaining restructuring activities under the Fiscal 2013-2014 Plan during fiscal 2014. See
“Restructuring Charges” below.
Revenue
We manage our sales activities primarily on a geographic basis in North America and three international geographic
regions: (1) Africa and Middle East, (2) Europe and Russia and (3) Latin America and Asia Pacific. Revenue by region for
fiscal 2013, 2012 and 2011 and the related changes are shown in the table below:
Fiscal Year
$ Change
% Change
(In millions, except percentages)
2013
2012
2011
2013 /2012
2012 /2011
2013 /2012
2012 /2011
North America . . . . . . . . . . . . . . $
Africa and Middle East. . . . . . . .
Europe and Russia . . . . . . . . . . .
Latin America and Asia Pacific .
Total Revenue . . . . . . . . . . . . . . $
180.5
182.2
48.0
60.6
471.3
$
$
164.9
147.7
53.6
77.8
444.0
$
$
160.4
143.6
73.4
74.7
452.1
$
$
15.6
34.5
(5.6)
(17.2)
27.3
$
$
4.5
4.1
(19.8)
3.1
(8.1)
9.5 %
23.4 %
(10.4)%
(22.1)%
6.1 %
2.8 %
2.9 %
(27.0)%
4.1 %
(1.8)%
Our revenue in North America increased $15.6 million, or 9.5%, in fiscal 2013 compared with fiscal 2012. In fiscal 2013,
we saw improved sales to North American mobile operators which were attributable to their ongoing buildout of LTE networks
in the region. At the same time, North America sales to non-mobile customers, such as power utilities and state and local
government private networks, were flat in fiscal 2013 compared with fiscal 2012.
Our revenue in North America increased $4.5 million, or 2.8%, in fiscal 2012 compared with fiscal 2011. We have seen
substantial changes in product mix of our sales in this region from year to year. The bulk of our product revenue in North
America came from our Eclipse product platform, whereas in the first half of fiscal 2011, our legacy products made up a
significant portion of the region's sales. The revenue growth and product mix changes reflect continued success in transitioning
our customer base to the new product platform as well as an increase in our services business from major customers in fiscal
2012.
Our revenue in Africa and Middle East increased $34.5 million, or 23.4%, in fiscal 2013 compared with fiscal 2012. The
majority of the increase came in the first half of fiscal 2013 and was attributable to demand from mobile operator customers in
Africa investing in network transmission capacity in order to accommodate growth in network data traffic and to increase their
service competitiveness. Revenue from mobile operators in Europe and Russia declined $5.6 million, or 10.4%, in fiscal 2013
compared with fiscal 2012. We believe the decrease was related to economic difficulties experienced generally throughout
Europe. Revenue in Latin America and Asia Pacific declined $17.2 million, or 22.1%, in fiscal 2013 compared with fiscal 2012.
The decrease was primarily due to a decline in customer purchases in Asia as some of our larger customers, who are beginning
to roll out LTE service, continue to deploy large orders that we delivered in the past year.
Our international revenue declined $12.6 million, or 4.3%, in fiscal 2012 compared with fiscal 2011. Our business in Asia
and Latin America showed improvement in fiscal 2012 from increased orders from network operators. However, our sales in
Europe and Russia were down from fiscal 2011 primarily due to the reduction of business with a major customer in Russia who
took substantial deliveries in fiscal 2011, partially offset by increased orders and sales to wireless network operators in other
European countries. In fiscal 2012, we experienced substantially increased sales with our long-term customers in Africa,
offsetting the reduced volume in the Middle East. Africa continued to be our strongest international sector, where we continued
to compete successfully for wireless infrastructure business of large network operators, particularly in West Africa.
Our revenue from product sales increased $1.2 million, or 0.4%, in fiscal 2013 compared with fiscal 2012. The increase
came primarily from strong sales in Africa, offset in part by reductions in Asia Pacific, Europe and a small year-to-year
decrease in North America. Our services revenue increased $26.1 million, or 24.1%, in fiscal 2013 compared with fiscal 2012.
The increase in fiscal 2013 came from additional services delivered in North America, Africa and a small increase in Europe,
offset in part by a decrease in Asia Pacific.
29
t
r
o
p
e
R
l
a
u
n
n
A
Our revenue from product sales decreased $22.0 million, or 6.2%, in fiscal 2012 compared with fiscal 2011. Product sales
were lower in Europe and Russia and North America, offset in part by gains in Asia Pacific and Middle East Africa. Our
services revenue increased $13.9 million, or 14.7%, in fiscal 2012 compared with fiscal 2011. The increase in fiscal 2012 came
from additional services delivered in North America, due to a growth in demand for our network services and support in the
region, Africa and Middle East, offset in part by a decrease in Asia Pacific and Latin America.
During fiscal 2013, the MTN Group in Africa accounted for 25% of our total revenue compared with 17% in fiscal 2012
and 14% in fiscal 2011. We have entered into separate and distinct contracts with MTN Group as well as separate arrangements
with MTN Group subsidiaries. For fiscal 2013, revenue from Verizon Wireless accounted for 11% of our total revenue. The loss
of all or a substantial portion of MTN Group's business or of Verizon Wireless' business could adversely affect our results of
operations, cash flows and financial position.
Gross Margin
Fiscal Year
$ Change
% Change
(In millions, except percentages)
Revenue . . . . . . . . . . . . . . . . . . . $
Cost of revenue . . . . . . . . . . . . . .
Gross margin. . . . . . . . . . . . . . . . $
% of revenue . . . . . . . . . . . . . . . .
Product margin % . . . . . . . . . . . .
Service margin % . . . . . . . . . . . .
2013
471.3
331.2
140.1
29.7%
28.8%
31.9%
$
$
2012
444.0
312.3
131.7
29.7%
30.4%
27.4%
2011
$ 452.1
324.0
$ 128.1
2013 /2012
27.3
$
18.9
8.4
2012 /2011
$
(8.1)
(11.7)
3.6
2013 /2012
2012 /2011
6.1%
6.1%
6.4%
(1.8)%
(3.6)%
2.8 %
28.3 %
29.2 %
24.9 %
Gross margin for fiscal 2013 increased $8.4 million, or 6.4%, compared with fiscal 2012, primarily due to higher sales
volume. Gross margin as a percentage of revenue remained approximately the same in fiscal 2013 compared with fiscal 2012.
Product margin as a percentage of product revenue for fiscal 2013 decreased 1.6% compared with fiscal 2012. The slight
reduction resulted from competitive pricing pressures in the international markets, offset in part by a small increase in margin
on product sales in North America. Service margin as a percentage of service revenue for fiscal 2013 increased 4.5% compared
with fiscal 2012. Service revenue volume increased substantially in fiscal 2013, which enabled us to spread our fixed costs
over a larger base of service business in North America as well as in international markets, resulting in improved service margin
rate.
Gross margin for fiscal 2012 increased $3.6 million, or 2.8%, compared with fiscal 2011. Gross margin as a percentage of
revenue increased 1.4% compared with fiscal 2011. The year-over-year gross margin improvement was primarily due to the
absence in fiscal 2012 of a $6.0 million one-time charge related to manufacturing overhead that we recorded in the first quarter
of fiscal 2011 and to the absence of large inventory write-downs, which we incurred in fiscal 2011 as we transitioned out of the
legacy products.
Prior to fiscal 2011, we capitalized most of the costs associated with our internal manufacturing operations as a
component of the overall cost of product inventory. Beginning in the first quarter of fiscal 2011, we shifted the manufacturing
of our products primarily to contract manufacturers and completed the transfer by the end of fiscal 2011. Accordingly, the costs
associated with our internal operations organization are now expensed as incurred. Gross margin in fiscal 2011 was negatively
affected by the immediate expensing of $6.0 million of such previously capitalized costs in the first quarter of fiscal 2011.
Exclusive of the net impact from these charges, the gross margin and gross margin as a percentage of revenue in fiscal
2012 were lower than fiscal 2011 due to competitive pricing pressures and a small shift in the mix of our business toward
services, which caused a small decline in the fiscal 2012 gross margin rate.
The general business trends of strong price competition for new business in all regions and major customer consolidations
continue to put pressure on our gross margin. We expect our gross margin as a percentage of revenue to decline in the first
quarter of fiscal 2014 due to anticipated geographic mix changes in the quarter and timing of long-term project completions. In
the second quarter of fiscal 2014, we expect gross margin as a percentage of revenue to be in line with levels we generally
experienced in fiscal 2013. In the second half of fiscal 2014 and beyond, we anticipate a directional improvement in gross
margin rates as a result of the transition to our next generation products.
30
A
n
n
u
a
l
R
e
p
o
r
t
Research and Development Expenses
Fiscal Year
$ Change
% Change
(In millions, except percentages)
2013
2012
2011
2013 /2012
2012 /2011
2013 /2012
2012 /2011
Research and development
expenses. . . . . . . . . . . . . . . . . $
% of revenue . . . . . . . . . . . . . . . .
39.4
$
36.0
$
40.5
$
3.4
$
(4.5)
9.4%
(11.1)%
8.4%
8.1%
9.0%
Our R&D expenses increased $3.4 million, or 9.4%, in fiscal 2013 compared with fiscal 2012. As a percentage of
revenue, R&D expenses also increased to 8.4% in fiscal 2013 from 8.1% in fiscal 2012. The increase in R&D expenses of $3.4
million consisted primarily of a $2.0 million increase of personnel expenses and a $0.6 million increase in material supplies due
to our investment in new product development. In addition, depreciation expenses increased by $0.4 million due to additions of
new lab equipment. We continue to invest in new product features, new functionality and lower cost platforms that we believe
will enable our product lines to retain their technology leads in a cost effective manner.
Our R&D expenses declined $4.5 million, or 11.1%, in fiscal 2012 compared with fiscal 2011. As a percentage of
revenue, R&D expenses also decreased to 8.1% in fiscal 2012 from 9.0% in fiscal 2011. The decrease in R&D expenses of $4.5
million, consisting mostly of personnel expenses, was primarily due to restructuring of our research and development
workforce in prior years. In addition, share-based compensation expense in fiscal 2011 was higher by $1.0 million due to
vesting of performance shares upon the achievement of new product development milestones in fiscal 2011.
Selling and Administrative Expenses
(In millions, except percentages)
2013
Fiscal Year
2012
2011
2013 /2012
2012 /2011
2013 /2012
2012 /2011
$ Change
% Change
Selling and administrative
expenses . . . . . . . . . . . . . . . . . $
% of revenue . . . . . . . . . . . . . . . .
$
95.5
20.3%
99.5
22.4%
$
107.6
$
(4.0) $
(8.1)
(4.0)%
(7.5)%
23.8%
Our selling and administrative expenses declined $4.0 million, or 4.0%, in fiscal 2013 compared with fiscal 2012. The
decrease was due primarily to a $2.1 million reduction in professional services, a $1.2 million reduction in personnel expenses,
a $1.4 million reduction in telecommunications expense and a $0.7 million reduction in bad debt expenses, partially offset by a
$1.3 million increase in share-based compensation expenses and a $0.8 million increase in transactional taxes assessments
related to certain international entities. We will continue to seek ways to improve our operating efficiency in fiscal 2014.
Our selling and administrative expenses declined $8.1 million, or 7.5%, in fiscal 2012 compared with fiscal 2011. The
decrease was due primarily to a $2.6 million reduction in sales and administrative compensation expenses and a $0.4 million
decrease in facility expenses as a result of the restructuring programs we implemented, a $2.0 million decrease in agent
commission expenses driven by lower fee-based revenues, and a decrease of $1.1 million in expenses for information
technology projects, partially offset by an increase of $1.3 million in share-based compensation.
Restructuring Charges
During the fourth quarter of fiscal 2013, we initiated a restructuring plan (the “Fiscal 2013-2014 Plan”) that was intended
to bring our cost structure in line with the changing business environment of the worldwide microwave radio and
telecommunication markets, primarily in North America, Europe and Asia. Activities under the Fiscal 2013-2014 Plan included
the downsizing of our Santa Clara, California headquarters and certain international field offices, and reductions in force to
reduce our operating expenses.
During the first quarter of fiscal 2011, we initiated the Fiscal 2011 Plan to reduce our operational costs primarily in North
America, Europe and Asia. Activities under the Fiscal 2011 Plan included the reductions in force to reduce our operating
expenses and downsizing or closures of our Morrisville, North Carolina, Santa Clara, California, Montreal, Canada offices and
certain international field offices. The Fiscal 2011 Plan has been completed as of the end of fiscal 2013.
Earlier in fiscal 2009, we commenced a restructuring plan (the “Fiscal 2009 Plan”) to reduce our workforce in the U.S.,
France, Canada and other locations throughout the world and outsource our San Antonio manufacturing operations to a third
party in Austin, Texas. The Fiscal 2009 Plan was completed as of the end of fiscal 2011.
31
t
r
o
p
e
R
l
a
u
n
n
A
Our restructuring charges by plan for fiscal 2013, 2012 and 2011 are summarized in the table below:
(In millions, except percentages)
Restructuring charges: . . . . . . . . $
By Plan:
Fiscal 2013-2014 Plan . . . . . .
Fiscal 2011 Plan . . . . . . . . . . .
Fiscal 2009 Plan . . . . . . . . . . .
2013
Fiscal Year
2012
2011
2013 /2012
2012 /2011
2013 /2012
2012 /2011
$ Change
% Change
3.1
$
2.3
$
15.4
$
0.8
$
(13.1)
34.8 %
(85.1)%
1.8
1.3
—
—
2.3
—
—
12.7
2.7
1.8
(1.0)
—
—
(10.4)
(2.7)
N/A
N/A
(43.5)%
(81.9)%
N/A
(100.0)%
Our restructuring expenses consisted primarily of severance and related benefit charges and, to a lesser extent, facilities
costs related to obligations under non-cancelable leases for facilities that we ceased to use. Restructuring charges increased by
$0.8 million in fiscal 2013 compared with fiscal 2012 primarily due to employee termination benefits related to the initiation of
the Fiscal 2013-2014 Plan, partially offset by the absence of a $1.3 million facilities charge in fiscal 2012 associated with the
sublease and relocation of our Morrisville, North Carolina facility. We intend to complete a majority of the remaining
restructuring activities under the Fiscal 2013-2014 Plan in fiscal 2014.
Restructuring charges declined significantly by $13.1 million in fiscal 2012 compared with fiscal 2011. The changes were
due to the completion of Fiscal 2009 Plan in fiscal 2011 and the fact that major restructuring activities under the Fiscal 2011
Plan, such as the downsizing of our Morrisville, North Carolina office, occurred in fiscal 2011.
Other Income (Loss), Interest Income and Interest Expense
(In millions)
Loss on sale of NetBoss assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
Fiscal Year
2012
2011
— $
0.7
0.8
(0.8)
— $
—
0.6
(1.3)
(4.6)
—
0.3
(2.2)
Other income of $0.7 million for fiscal 2013 reflected a nonrecurring benefit related to a customer contract.
Interest income reflected interest earned on our cash equivalents which were comprised of money market funds and
certificates of deposit.
Interest expense was primarily related to interest associated with borrowings, term loan and letters of credit under our
credit facility and, in fiscal 2012 and fiscal 2011, also included preference dividends on our $8.25 million redeemable
preference shares. The $8.25 million preference shares were redeemed at their carrying value on January 30, 2012, funded by a
two-year term loan of $8.25 million under our credit facility at a fixed interest rate of 5% per annum.
Income Taxes
(In millions, except percentages)
2013
2012
2011
2013 /2012
2012 /2011
Income (loss) from continuing operations before income taxes . . $
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As % of income (loss) from continuing operations
before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4
13.3
$ (14.0)
$ (44.7)
$
1.5
14.1
$
16.4
11.8
30.7
(12.6)
561.1%
(10.8)%
(31.5)%
Fiscal Year
$ Change
The income tax expense from continuing operations for fiscal 2013 was $13.3 million. The variation between our income
tax expense from continuing operations and income tax expense at the statutory rate of 35% on our pre-tax income of $2.4
million was primarily attributable to a $11.7 million increase in our reserves for uncertain tax positions, losses in tax
jurisdictions in which we cannot recognize a tax benefit and increase in foreign withholding taxes. The increase in our
unrecognized tax benefits was the result of additional information obtained during recent tax examinations in certain countries.
32
The income tax expense from continuing operations for fiscal 2012 was $1.5 million. The variation between our income
tax expense from continuing operations and income tax benefit at the statutory rate of 35% on our pre-tax loss of $14.0 million
was primarily attributable to losses in tax jurisdictions in which we cannot recognize a tax benefit. The tax expense for fiscal
2012 of $1.5 million was primarily attributable to profitable foreign entities for which we have accrued income taxes.
The income tax expense from continuing operations for fiscal 2011 was $14.1 million. The variation between our income
tax expense from continuing operations and income tax benefit at the statutory rate of 35% on our pre-tax loss of $44.7 million
was primarily due to an $11.3 million increase in valuation allowance for Singapore deferred tax assets as of the beginning of
fiscal 2011 and a $1.4 million foreign branch withholding tax accrual. The expense was partially offset by a valuation
allowance release of $1.6 million on Mexico deferred tax assets as of the beginning of fiscal 2011.
Loss from Discontinued Operations
(In millions)
2013
2012
2011
2013 /2012
2012 /2011
Loss from discontinued operations, net of tax . . . . . . . . . . . . $
(4.1) $
(8.6) $
(31.7) $
4.5
$
23.1
Fiscal Year
$ Change
Our discontinued operations consist of our WiMAX business, which was sold to EION Networks, Inc. (“EION”) on
September 2, 2011. We completed the business transition with EION in fiscal 2012. The loss from discontinued operations
decreased $4.5 million in fiscal 2013 compared with fiscal 2012. The loss incurred in fiscal 2013 was primarily due to $4.2
million write-downs of certain WiMAX deferred cost of sales that were not transferred to EION and certain expenses we
incurred to support a remaining customer obligation. The loss was partially offset by a $0.3 million write down of our payable
to EION related to customer receivables and $0.1 million contingent payments we received from EION.
The loss in fiscal 2012 included operating expenses we incurred to transition the business and a $1.9 million loss on
disposition of the WiMAX business. The loss from discontinued operations decreased $23.1 million in fiscal 2012 compared
with fiscal 2011. The decrease resulted primarily from the absence of large charges for provisions for excess and obsolete
inventories and noncancellable purchase commitments which we incurred in fiscal 2011 when we decided to exit the WiMAX
business, partially offset by higher WiMAX revenue in fiscal 2011. The loss in fiscal 2011 also included a $9.5 million loss on
WiMAX assets held for sale.
A
n
n
u
a
l
R
e
p
o
r
t
Liquidity, Capital Resources and Financial Strategies
Sources of Cash
As of June 28, 2013, our total cash and cash equivalents were $90.0 million. Approximately $30.8 million, or 34.2%, was
held by entities domiciled in the United States. The remaining balance of $59.2 million, or 65.8%, was held by entities outside
the United States. Of the amount of cash and cash equivalents held by our foreign subsidiaries at June 28, 2013, $48.2 million
was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and would be subject to U.S. taxes if
repatriated.
As of June 28, 2013, our principal sources of liquidity consisted of the $90.0 million in cash and cash equivalents, $26.0
million of available credit under our $40.0 million credit facility with Silicon Valley Bank (“SVB”), and future collections of
receivables from customers. We regularly require letters of credit from some customers and, from time to time, these letters of
credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to
reduce our credit and sovereign risk. Historically our primary sources of liquidity have been cash flows from operations, credit
facilities and cash proceeds from sale of our equity securities. During fiscal 2013, our total cash and cash equivalents decreased
by $6.0 million primarily due to $10.4 million of cash used for capital expenditures and $4.1 million repayment on our long-
term debt, partially offset by $8.4 million of cash provided by operating activities.
Cash provided by operating activities was $8.4 million in fiscal 2013 primarily due to decreases in inventories of $14.9
million and in receivables of $1.9 million, an increase in reserve for uncertain tax positions and deferred income taxes of $11.5
million, and taking into account our net loss of $15.0 million adjusted by non-cash expense items of $22.7 million, partially
offset by decreases in accounts payable and accrued expenses of $10.3 million, in customer advance payments and unearned
income of $14.1 million, and an increase in unbilled costs of $3.1 million. The decrease in our inventory was due to
improvement of supply chain efficiency and a reduction in deferred cost of sales due to timing of revenue recognition on
several large contracts. Our accounts receivable decreased during fiscal 2013 primarily due to strong collections from
customers. The decrease in accounts payable and accrued expenses was primarily due to the timing of payments to our contract
33
t
r
o
p
e
R
l
a
u
n
n
A
manufacturers and suppliers. The decrease in customer advance payments and unearned income was due to the timing of
revenue recognition on several large contracts. The increase in unbilled costs was due to the timing of billing of projects. We
also used $2.6 million in cash during fiscal 2013 for restructuring liabilities.
For fiscal 2014, we expect to spend approximately $10.0 million for capital expenditures primarily on equipment for
development of new products and improvement of our information technology infrastructure which will enable more automated
supply chain management and financial reporting and lead to process and cost efficiency and ability to scale our business.
During fiscal 2013, we increased our reserve for uncertain tax positions that may require future cash payments from $4.2
million to $15.9 million and recorded a reserve for transactional taxes of $1.4 million. The majority of these tax provisions are
related to audits of past years in several foreign jurisdictions where we have not received final assessments. Although we
continue to defend our positions and will continue with the appeal processes, we could receive demand for cash tax payments
up to $20.0 million from one or more of these jurisdictions during fiscal 2014. We expect tax payments during the first two
quarters of fiscal 2014 to be approximately $3.6 million and we are not able to estimate the timing and amount of the remaining
tax payments.
We believe that our existing cash and cash equivalents, the available line of credit under our credit facility and future cash
collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital
expenditures for the next 12 months and the foreseeable future. There can be no assurance, however, that our business will
generate cash flow, or that anticipated operational improvements will be achieved. If we are unable to maintain cash balances or
generate sufficient cash flow from operations to service our obligations or liability for uncertain tax positions that may arise in
the future, we may be required to sell assets, reduce capital expenditures, or obtain financing. If we need to obtain additional
financing, we cannot be assured that it will be available on favorable terms, or at all. Our ability to make scheduled principal
payments or pay interest on or refinance any future indebtedness depends on our future performance and financial results,
which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to
general economic, political, financial, competitive, legislative and regulatory factors beyond our control.
Available Credit Facility, Borrowings and Repayment of Debt
As of June 28, 2013, we had $26.0 million of credit available under our credit facility with SVB and had $8.8 million in
outstanding borrowings and $5.2 million in outstanding standby letters of credit issued under the credit facility.
In an amendment to the facility effective November 2, 2011, the commitment of $40.0 million under the credit facility
was extended to expire on February 28, 2014 and provides for (1) advance borrowings at the prime rate published in the Wall
Street Journal, (2) fixed term Eurodollar loans for up to six months at LIBOR plus a spread of between 2.00% to 2.75% based
on the Company’s current leverage ratio, (3) a two-year term loan in the amount of $8.3 million at a fixed rate of 5% per annum
expiring on January 31, 2014, and (4) the issuance of standby or commercial letters of credit. As of June 28, 2013, we had $6.0
million advance borrowings under the credit facility and $2.8 million outstanding balance for the term loan. The term loan
drawn on January 30, 2012 is repaid in 24 equal monthly installments of principal plus accrued interest commencing February
29, 2012. The credit facility contains a minimum liquidity ratio covenant and a minimum profitability covenant and is secured
by certain of the Company’s assets, including accounts receivable, inventory and equipment. The credit facility also imposes
certain restrictions on our ability to pay dividends or make distributions to our stockholders under certain circumstances.
Based on financial covenants included as part of the amended credit facility effective September 28, 2012, we must
maintain, as measured at the last day of each fiscal quarter beginning September 28, 2012 through December 27, 2013, (1) no
less than a minimum liquidity ratio of 1.50 to 1 (defined as the ratio of total domestic unrestricted cash and cash equivalents
plus short-term and long-term marketable securities plus the lesser of 25% of eligible accounts receivable or $12.5 million to
total obligations outstanding with the bank) and (2) minimum consolidated EBITDA measured for each fiscal quarter. As of
June 28, 2013, we were in compliance with these financial covenants.
Restructuring Payments
We have a liability for restructuring activities totaling $2.7 million as of June 28, 2013, $2.3 million of which is classified
as current liability and expected to be paid out in cash over the next year. We expect to fund these future payments with
available cash and cash flow provided by operations.
34
A
n
n
u
a
l
R
e
p
o
r
t
Contractual Obligations
As of June 28, 2013, cash payments due under our contractual obligations are estimated as follows:
Obligations Due by Fiscal Year
(In millions)
Total
2014
2015-2016
2017-2018
After 2018
Other
Advance borrowings . . . . . . . . . . . . . . . . . . . . $
Current portion of long-term debt . . . . . . . . . .
Interest on long-term debt(1)(4) . . . . . . . . . . . . .
Purchase obligations(2)(4). . . . . . . . . . . . . . . . . .
Other purchase obligations(4) . . . . . . . . . . . . . .
Operating lease commitments(4) . . . . . . . . . . . .
Capital lease commitments. . . . . . . . . . . . . . . .
Liabilities for uncertain tax positions(3) . . . . . .
Total contractual cash obligations . . . . . . . . $
$
6.0
2.8
0.1
61.5
5.0
24.5
0.3
15.9
6.0
2.8
0.1
54.9
4.3
5.6
0.3
3.6
$
— $
— $
— $
—
—
6.6
0.5
8.0
—
—
—
—
—
0.2
5.8
—
—
—
—
—
—
5.1
—
—
116.1
$
77.6
$
15.1
$
6.0
$
5.1
$
—
—
—
—
—
—
—
12.3
12.3
___________________________
(1)
The interest rate is 5% per annum on the two-year term loan expiring on January 31, 2014.
(2)
From time to time in the normal course of business we may enter into purchasing agreements with our suppliers that
require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products
that we requested be held as safety stock, and work in process started on our behalf in the event we cancel or terminate
the purchasing agreement. It is not our intent, nor is it reasonably likely, that we would cancel a purchase order that we
have executed. Because these agreements do not specify fixed or minimum quantities, do not specify minimum or
variable price provisions, and do not specify the approximate timing of the transaction, we have no basis to estimate
any future liability under these agreements and have therefore excluded them from the table above.
(3)
Liabilities for uncertain tax positions of $15.9 million were included in long-term liabilities in the consolidated balance
sheet. At this time, we are unable to make a reasonably reliable estimate of the timing of payments related to this
amount due to uncertainties in the timing of tax audit outcomes.
(4)
These items are not recorded on our balance sheet.
Commercial Commitments
We have entered into commercial commitments in the normal course of business including surety bonds, standby letters
of credit and other arrangements with financial institutions and insurers primarily relating to the guarantee of future
performance on certain tenders and contracts to provide products and services to customers. As of June 28, 2013, we had
commercial commitments on outstanding surety bonds and standby letters of credit as follows:
(In millions)
Standby letters of credit used for:
Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Payment guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surety bonds used for:
Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and payment guarantees . . . . . . . . . . . . . . . . . . . . . . . . .
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial commitments . . . . . . . . . . . . . . . . . . . . . $
Expiration of Commitments by Fiscal Year
Total
2014
2015
2016
After 2016
0.4
0.3
5.4
6.1
0.5
5.6
41.8
47.9
54.0
$
$
0.4
0.1
4.8
5.3
0.5
5.6
24.6
30.7
36.0
$
$
— $
—
0.5
0.5
—
—
17.2
17.2
17.7
$
— $
—
—
—
—
—
—
—
— $
—
0.2
0.1
0.3
—
—
—
—
0.3
As we have not historically had to pay out on any of our performance guarantees, the outstanding commercial
commitments have not been recorded on our consolidated balance sheet.
35
Off-Balance Sheet Arrangements
In accordance with the definition under SEC rules (Item 303(a) (4) (ii) of Regulation S-K), any of the following qualify
as off-balance sheet arrangements:
•
•
•
•
any obligation under certain guarantee contracts;
a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar
arrangement that serves as credit, liquidity or market risk support to that entity for such assets;
any obligation, including a contingent obligation, under certain derivative instruments; and
any obligation, including a contingent obligation, under a material variable interest held by the registrant in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or
engages in leasing, hedging or research and development services with the registrant.
Currently we are not participating in transactions that generate relationships with unconsolidated entities or financial
partnerships, including variable interest entities, and we do not have any material retained or contingent interest in assets as
defined above. As of June 28, 2013, we did not have material financial guarantees or other contractual commitments that are
reasonably likely to adversely affect liquidity. In addition, we are not currently a party to any related party transactions that
materially affect our results of operations, cash flows or financial condition.
Due to the downsizing of certain of our operations pursuant to divestitures, restructuring plans or otherwise, some
properties leased by us have been sublet to third parties. In the event any of these third parties vacate any of these premises, we
would be legally obligated under master lease arrangements. We believe that the financial risk of default by such sublessors is
not likely to be individually or in the aggregate material to our financial position, results of operations or cash flows.
Financial Risk Management
In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and
changes in interest rates. We employ established policies and procedures governing the use of financial instruments to manage
our exposure to such risks.
t
r
o
p
e
R
l
a
u
n
n
A
Exchange Rate Risk
We conduct business globally in numerous currencies and are therefore exposed to foreign currency risks. We use
derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange
rates. We do not hold nor issue derivatives for trading purposes or make speculative investments in foreign currencies.
We use foreign exchange forward contracts to hedge forecasted foreign currency transactions relating to forecasted sales
and purchase transactions. These derivatives are designated as cash flow hedges and are carried at fair value. The effective
portion of the gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon
occurrence of the forecasted transaction, is subsequently reclassified into the income or expense line item to which the hedged
transaction relates. We also enter into foreign exchange forward contracts to mitigate the change in fair value of specific non-
functional currency assets and liabilities on the balance sheet. All balance sheet hedges are marked to market through earnings
every period. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and
liabilities.
As of June 28, 2013, we had foreign currency forward contracts outstanding with a total net notional amount of $28.6
million consisting of 12 different currencies. The following is a summary of the gross notional amount of our outstanding
contracts grouped by the underlying foreign currency as of June 28, 2013:
36
Currency
Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian rupee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philippine peso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Polish zloty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand baht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Republic of South Africa rand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other currencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of all currency forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notional
Contract
Amount
(Local Currency)
Notional
Contract
Amount
(USD)
$
(In millions)
2.8
0.3
3.2
137.0
132.3
38.5
17.9
24.8
N/A
$
2.6
0.3
4.2
2.3
3.1
11.7
0.6
2.4
1.4
28.6
Net foreign exchange loss recorded in our consolidated statements of operations during fiscal 2013, 2012 and 2011
totaled $1.5 million, $1.5 million and $2.6 million, respectively. A 10% adverse change in currency exchange rates for our
foreign currency derivatives held as of June 28, 2013 would have an impact of approximately $2.0 million on the fair value of
such instruments. This quantification of exposure to the market risk associated with foreign exchange financial instruments
does not take into account the offsetting impact of changes in the fair value of our foreign denominated assets, liabilities and
firm commitments.
A
n
n
u
a
l
R
e
p
o
r
t
Certain of our international business was transacted in non-U.S. dollar currency environments. As discussed above, we
utilize foreign currency hedging instruments to minimize the currency risk of international transactions. The impact of
translating the assets and liabilities of foreign operations to U.S. dollars is included as a component of stockholders’ equity. As
of June 28, 2013 and June 29, 2012, the cumulative translation adjustment decreased our stockholders’ equity by $3.4 million
and $4.0 million, respectively.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our cash equivalents and borrowings under
our credit facility.
Exposure on Cash Equivalents
We had $90.0 million in total cash and cash equivalents as of June 28, 2013. Cash equivalents totaled $$41.6 million as of
June 28, 2013 and were comprised of money market funds and certificates of deposit. Cash equivalents have been recorded at
fair value on our balance sheet.
We do not use derivative financial instruments in our short-term investment portfolio. We invest in high-credit quality
issues and, by policy, limit the amount of credit exposure to any one issuer and country. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio liquidity. The portfolio is also diversified by maturity to
ensure that funds are readily available as needed to meet our liquidity needs. This policy reduces the potential need to sell
securities in order to meet liquidity needs and therefore the potential effect of changing market rates on the value of securities
sold.
The primary objective of our short-term investment activities is to preserve principal while maximizing yields, without
significantly increasing risk. Our cash equivalents earn interest at fixed rates; therefore, changes in interest rates will not
generate a gain or loss on these investments unless they are sold prior to maturity. Actual gains and losses due to the sale of our
investments prior to maturity have been immaterial. The weighted average days to maturity for cash equivalents held as of
June 28, 2013 was two days, and these investments had an average yield of 0.33% per annum. A 10% change in interest rates on
our cash and cash equivalents is not expected to have a material impact on our financial position, results of operations or cash
flows.
Exposure on Borrowings
37
t
r
o
p
e
R
l
a
u
n
n
A
During fiscal 2013, we had $6.0 million of demand borrowings outstanding under our credit facility that incurred interest
at the prime rate. We also recorded interest on our $8.3 million borrowing drawn on January 30, 2012 at the fixed rate of 5%
per annum. During fiscal 2013, our weighted average interest rate was 4% and we recorded total interest expense of $0.4
million on these borrowings.
A 10% change in interest rates on the current borrowings or on future borrowings is not expected to have a material
impact on our financial position, results of operations or cash flows since interest on our borrowings is not material to our
overall financial position.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require
us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon
which we rely are reasonable based upon information available to us.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the
consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the
extent there are material differences between these estimates, judgments or assumptions and actual results, our financial
statements will be affected.
The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are
the most critical to aid in fully understanding and evaluating our reported financial results include the following:
•
•
•
•
revenue recognition;
inventory valuation and provision for excess and obsolete inventory losses;
impairment of long-lived assets; and
income taxes and tax valuation allowances.
In some cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not
require management’s judgment in its application. There are also areas in which management’s judgment in selecting among
available alternatives would not produce a materially different result. Our senior management has reviewed these critical
accounting policies and related disclosures with the Audit Committee of the Board of Directors.
The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our significant
accounting policies are more fully described in “Note 1. The Company and Summary of Significant Accounting Policies” in the
notes to consolidated financial statements. In preparing our financial statements and accounting for the underlying transactions
and balances, we apply those accounting policies. We consider the estimates discussed below as critical to an understanding of
our financial statements because their application places the most significant demands on our judgment, with financial reporting
results relying on estimates about the effect of matters that are inherently uncertain.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in
preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported
amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are
based on experience and other information available prior to the issuance of the financial statements. Materially different results
can occur as circumstances change and additional information becomes known, including for estimates that we do not deem
“critical.”
Revenue Recognition
We generate substantially all of our revenue from the sales or licensing of our microwave radio and wireless access
systems, network management software, and professional services including installation and commissioning and training.
Principal customers for our products and services include domestic and international wireless/mobile service providers, original
equipment manufacturers, distributors, system integrators, as well as private network users such as public safety agencies,
government institutions, and utility, pipeline, railroad and other industrial enterprises that operate broadband wireless networks.
Our customers generally purchase a combination of our products and services as part of a multiple element arrangement. Our
assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve
significant judgment. This assessment has a significant impact on the amount and timing of revenue recognition.
Revenue is recognized when all of the following criteria have been met:
38
•
Persuasive evidence of an arrangement exists. Contracts and customer purchase orders are generally used to
determine the existence of an arrangement.
• Delivery has occurred. Shipping documents and customer acceptance, when applicable, are used to verify
delivery.
• The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms
associated with the transaction and whether the sales price is subject to refund or adjustment.
• Collectability is reasonably assured. We use judgment to assess collectability based primarily on the
creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment
history.
We often enter into multiple contractual agreements with the same customer. Such agreements are reviewed to determine
whether they should be evaluated as one arrangement. If an arrangement, other than a long-term contract, requires the delivery
or performance of multiple deliverables or elements, we determine whether the individual elements represent “separate units of
accounting”. The determination as to whether multiple contractual agreements should be evaluated as one arrangement and the
identification of units of accounting in an arrangement requires significant judgment and impacts the amount of product and
service revenue recognized in a given period.
In accordance with ASC 605-25, Revenue Recognition — Multiple-Element Arrangements, based on the terms and
conditions of the product arrangements, we believe that our products and services can be accounted for separately as our
products and services have value to our customers on a stand-alone basis. Accordingly, amounts related to services not yet
performed at the time of product shipment are deferred based on their relative selling price and recognized as revenue as such
services are performed. The relative selling price of any undelivered products is also deferred at the time of shipment and
recognized as revenue when these products are delivered. There is generally no customer right of return in our sales
agreements. The sequence for typical multiple-element arrangements is as follows: we deliver our products, perform installation
services and then provide post-contract support services.
A
n
n
u
a
l
R
e
p
o
r
t
Vendor-specific objective evidence (“VSOE”) of fair value is based on the price charged when the element is sold
separately. For multiple element arrangements, if VSOE cannot be established, we establish, where available, the selling price
based on third-party evidence (“TPE”). TPE requires judgment and is determined based on evidence of competitor pricing for
similar deliverables when sold separately. When we cannot determine VSOE or TPE, which is typically the case, we use the
estimated selling price (“ESP”) in our allocation of arrangement consideration. The objective of ESP is to determine the price at
which we would typically transact a stand-alone sale of the product or service. In determining ESP, we apply significant
judgment as we weigh a variety of factors including our pricing policies, internal costs and gross margin objectives, method of
distribution, information gathered from experience in customer negotiations, market research and information, recent
technological trends, competitive landscape and geographies. The determination of ESP is approved by our management taking
into consideration our pricing strategy. We regularly review VSOE, TPE and ESP and maintain internal controls over the
establishment and updates of these estimates. We do not expect a material impact in future periods from changes in VSOE, TPE
or ESP.
Revenues related to long-term contracts for customized network solutions are recognized using the percentage-of-
completion method. In using the percentage-of-completion method, we generally apply the cost-to-cost method of accounting
where sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion. Contracts are
combined when specific aggregation criteria are met including when the contracts are in substance an arrangement to perform a
single project with a customer; the contracts are negotiated as a package in the same economic environment with an overall
profit objective; the contracts require interrelated activities with common costs that cannot be separately identified with, or
reasonably allocated to the elements, phases or units of output and the contracts are performed concurrently or in a continuous
sequence under the same project management at the same location or at different locations in the same general vicinity.
Recognition of profit on long-term contracts requires estimates of the total contract value, the total cost at completion and the
measurement of progress towards completion. Significant judgment is required when estimating total contract costs and
progress to completion on the arrangements as well as whether a loss is expected to be incurred on the contract. Amounts
representing contract change orders, claims or other items are included in sales only when they can be reliably estimated and
realization is probable. When adjustments in contract value or estimated costs are determined, any changes from prior estimates
are reflected in earnings in the current period. Anticipated losses on contracts or programs in progress are charged to earnings
when identified.
Inventory Valuation and Provisions for Excess and Obsolete Losses
Our inventories have been valued at the lower of cost or market. We balance the need to maintain prudent inventory
levels to ensure competitive delivery performance with the risk of excess or obsolete inventory due to changing technology and
39
t
r
o
p
e
R
l
a
u
n
n
A
customer requirements, and new product introductions. Beginning in the first quarter of fiscal 2011, the manufacturing of our
products was handled primarily by contract manufacturers. Our contract manufacturers procure components and manufacture
our products based on our forecast of product demand. We regularly review inventory quantities on hand and record a provision
for excess and obsolete inventory based primarily on our estimated forecast of product demand, the stage of the product life
cycle, anticipated end of product life and production requirements. Several factors may influence the sale and use of our
inventories, including decisions to exit a product line, technological change, new product development and competing product
offerings. These factors could result in a change in the amount of obsolete inventory quantities on hand. Additionally, our
estimates of future product demand may prove to be inaccurate, in which case the provision required for excess and obsolete
inventory may be overstated or understated. In the future, if we determine that our inventory is overvalued, we would be
required to recognize such costs in cost of product sales and services in our Statement of Operations at the time of such
determination. In the case of goods which have been written down below cost at the close of a fiscal quarter, such reduced
amount is considered the new lower cost basis for subsequent accounting purposes, and subsequent changes in facts and
circumstances do not result in the restoration or increase in that newly established cost basis. We did not make any material
changes in the valuation methodology during the past three fiscal years.
Our customer service inventories are stated at the lower of cost or market. We carry service parts because we generally
provide product warranty for 12 to 24 months and earn revenue by providing enhanced and extended warranty and repair
service during and beyond this warranty period. Customer service inventories consist of both component parts, which are
primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary
basis while the defective unit is being repaired. We record adjustments to reduce the carrying value of customer service
inventories to their net realizable value. Factors influencing these adjustments include product life cycles, end of service life
plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant
estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.
Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an
undiscounted basis are less than the carrying amount of the assets. If impairment exists, the impairment loss is measured and
recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest
levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups.
Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating
performance, growth rates and other factors. The actual cash flows realized from these assets may vary significantly from our
estimates due to increased competition, changes in technology, fluctuations in demand, consolidation of our customers,
reductions in average selling prices and other factors. Assumptions underlying future cash flow estimates are therefore subject
to significant risks and uncertainties.
Income Taxes and Tax Valuation Allowances
We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities of
amounts reported in our Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. Significant
judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we
believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different
from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing
facts and circumstances, such as the opening and closing of a tax audit or the refinement of an estimate. To the extent that the
final tax outcome of these matters is different than the amounts recorded, such differences may result in an increase or decrease
to our tax provision in a subsequent period in which such determination is made.
We record deferred taxes by applying enacted statutory tax rates to the respective jurisdictions and follow specific and
detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance sheet and
provide necessary valuation allowances as required. Future realization of deferred tax assets ultimately depends on meeting
certain criteria in ASC 740, Income Taxes. One of the major criteria is the existence of sufficient taxable income of the
appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available
under the tax law. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected
future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our
judgments regarding future profitability may change due to many factors, including future market conditions and our ability to
successfully execute our business plans and/or tax planning strategies. Should there be a change in our ability to recover our
deferred tax assets, our tax provision would increase or decrease in the period in which the assessment is changed.
40
The accounting estimates related to the liability for uncertain tax position require us to make judgments regarding the
sustainability of each uncertain tax position based on its technical merits. It is inherently difficult and subjective to estimate our
reserves for the uncertain tax positions. Although we believe our estimates are reasonable, no assurance can be given that the
final tax outcome of these matters will be same as these estimates. These estimates are updated quarterly based on factors such
as change in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues.
Impact of Recently Issued Accounting Pronouncements
See Note 1 of the accompanying consolidated financial statements for a full description of recently issued accounting
pronouncements, including the respective expected dates of adoption and effects on our consolidated financial position and
results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and
changes in interest rates. We employ established policies and procedures governing the use of financial instruments to manage
our exposure to such risks. For a discussion of such policies and procedures and the related risks, see “Financial Risk
Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is
incorporated by reference into this Item 7A.
A
n
n
u
a
l
R
e
p
o
r
t
41
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Report of KPMG LLP, Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for Fiscal Years Ended June 28, 2013, June 29, 2012 and July 1, 2011. . . . . . . . .
Consolidated Statements of Comprehensive Loss for Fiscal Years Ended June 28, 2013, June 29, 2012 and
July 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of June 28, 2013 and June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for Fiscal Years Ended June 28, 2013, June 29, 2012 and July 1, 2011 . . . . . . . .
Consolidated Statements of Stockholders’ Equity for Fiscal Years Ended June 28, 2013, June 29, 2012 and
July 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statement Schedule: Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
43
44
45
45
47
48
49
50
88
t
r
o
p
e
R
l
a
u
n
n
A
42
The Board of Directors and Stockholders of Aviat Networks, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc. and subsidiaries ("the Company")
as of June 28, 2013, and the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash
flows for the year ended June 28, 2013. In connection with our audit of the consolidated financial statements, we also have
audited the financial statement schedule of valuation and qualifying accounts and reserves as listed in the accompanying index.
We have also audited the Company's internal control over financial reporting as of June 28, 2013, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on these consolidated financial statements and schedule and an opinion on the Company's
internal control over financial reporting based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in
all material respects. Our audit of the consolidated financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.
A
n
n
u
a
l
R
e
p
o
r
t
A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Aviat Networks, Inc. and subsidiaries as of June 28, 2013, and the results of their operations and their cash flows for
the year ended June 28, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein. Also in our opinion, Aviat Networks, Inc. maintained,
in all material respects, effective internal control over financial reporting as of June 28, 2013, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Santa Clara, California
September 20, 2013
/s/ KPMG LLP
43
The Board of Directors and Stockholders of Aviat Networks, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheet of Aviat Networks, Inc. as of June 29, 2012, and the
related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the two
years in the period ended June 29, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15
(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Aviat Networks, Inc. at June 29, 2012, and the consolidated results of its operations and its cash flows for each of
the two years in the period ended June 29, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Redwood City, California
September 4, 2012
/s/ Ernst & Young LLP
t
r
o
p
e
R
l
a
u
n
n
A
44
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Revenues:
Revenue from product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue from services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues:
Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of NetBoss assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before income taxes . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Basic and diluted loss per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding, basic and diluted . . . . . . . . . . . . . . . . . . . . . .
June 28,
2013
Fiscal Year Ended
June 29,
2012
July 1,
2011
$
336.7
134.6
471.3
239.6
91.6
331.2
140.1
39.4
95.5
0.4
—
3.1
138.4
1.7
—
0.7
0.8
(0.8)
2.4
13.3
(10.9)
(4.1)
(15.0) $
(0.18) $
(0.07) $
(0.25) $
60.0
$
335.5
108.5
444.0
233.5
78.8
312.3
131.7
36.0
99.5
1.6
5.6
2.3
145.0
(13.3)
—
—
0.6
(1.3)
(14.0)
1.5
(15.5)
(8.6)
(24.1) $
(0.26) $
(0.15) $
(0.41) $
59.0
357.5
94.6
452.1
253.0
71.0
324.0
128.1
40.5
107.6
2.8
—
15.4
166.3
(38.2)
(4.6)
—
0.3
(2.2)
(44.7)
14.1
(58.8)
(31.7)
(90.5)
(1.00)
(0.54)
(1.54)
58.6
A
n
n
u
a
l
R
e
p
o
r
t
See accompanying notes to consolidated financial statements
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
AVIAT NETWORKS, INC.
(In millions)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss):
Transfer from currency translation adjustment to operating expenses resulting
from the liquidation of foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in unrealized gain or loss on hedging activities . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
June 28,
2013
Fiscal Year Ended
June 29,
2012
July 1,
2011
(15.0) $
(24.1) $
(90.5)
—
0.6
0.1
0.7
(14.3) $
—
(1.4)
0.1
(1.3)
(25.4) $
0.6
(0.3)
(0.4)
(0.1)
(90.6)
t
r
o
p
e
R
l
a
u
n
n
A
See accompanying notes to consolidated financial statements
46
A
n
n
u
a
l
R
e
p
o
r
t
AVIAT NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value amounts)
June 28, 2013
June 29, 2012
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer service inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Assets
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments and unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Liabilities
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingencies (Note 15)
Stockholders’ Equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued . . . . . . . . . . . . . . .
Common stock, $0.01 par value; 300,000,000 shares authorized; issued and outstanding
61,252,494 shares as of June 28, 2013 and 61,274,740 shares as of June 29, 2012 . . . . . . . .
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Stockholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Stockholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
See accompanying notes to consolidated financial statements
47
$
$
90.0
86.3
28.9
35.0
16.2
0.9
17.0
274.3
28.8
0.8
1.4
0.5
31.5
305.8
8.8
50.6
12.4
33.7
18.6
3.6
1.1
2.3
131.1
—
8.5
2.3
12.3
1.7
155.9
96.0
90.7
25.9
56.8
18.5
1.0
15.7
304.6
21.7
1.8
0.4
1.1
25.0
329.6
4.1
55.8
11.9
39.5
33.3
—
1.3
1.5
147.4
8.8
8.0
2.8
4.2
0.9
172.1
—
—
0.6
803.5
(650.9)
(3.3)
149.9
305.8
$
0.6
796.8
(635.9)
(4.0)
157.5
329.6
t
r
o
p
e
R
l
a
u
n
n
A
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization of identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization of property, plant and equipment and capitalized software . .
Goodwill impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges for inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges or loss (gain) on disposition related to WiMAX business . . . . . . . . . . . .
Loss on sale of NetBoss assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer service inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments and unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable or receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for uncertain tax positions and deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Cash received from sale of NetBoss assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash disbursed related to sale of WiMAX business, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions of property, plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions of capitalized software related to NetBoss assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities
Payments on short-term debt arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from share-based compensation awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preference shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash investing activities:
Property and equipment acquired under capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal Year Ended
June 28,
2013
June 29,
2012
July 1,
2011
(15.0) $
(24.1) $
(90.5)
1.0
5.6
—
2.5
6.4
7.7
(0.4)
—
(0.1)
1.9
(3.1)
14.9
1.6
(7.1)
(3.2)
(14.1)
(1.6)
11.5
(0.1)
8.4
—
(0.1)
(10.4)
—
(10.5)
—
—
(4.1)
0.3
—
(0.1)
(3.9)
—
(6.0)
96.0
90.0
0.8
3.0
0.4
$
$
$
$
2.3
4.9
5.6
3.9
5.2
3.4
1.9
—
—
38.4
(1.1)
(7.6)
0.7
(18.3)
(6.2)
(4.6)
0.1
(0.5)
4.4
8.4
—
(1.5)
(5.9)
—
(7.4)
—
8.3
(1.4)
0.1
(8.3)
—
(1.3)
(1.9)
(2.2)
98.2
96.0
1.3
1.3
$
$
$
— $
3.4
8.6
—
2.9
4.8
20.2
9.5
4.6
—
(28.7)
5.5
(6.4)
(10.9)
13.0
2.3
8.5
(1.9)
11.0
2.6
(41.5)
3.8
—
(7.2)
(0.8)
(4.2)
(5.0)
6.0
—
0.2
—
—
1.2
1.0
(43.5)
141.7
98.2
2.2
2.7
—
See accompanying notes to consolidated financial statements
48
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
(In millions)
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Balance as of July 2, 2010 . . . . . . . . . . . . . . . . . . . . . .
59.4
$
0.6
$
786.5
$
(521.3) $
(2.6) $
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net. . . . . . . . . . . . . . . . . . .
Issuance of stock related to employee share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation. . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of July 1, 2011 . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net. . . . . . . . . . . . . . . . . . .
Issuance of stock related to employee share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation. . . . . . . . . . . . . . . . . . . . . .
Balance as of June 29, 2012. . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net . . . . . . . . . . . . . . . .
Issuance of stock related to employee share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation. . . . . . . . . . . . . . . . . . . . . .
—
—
1.2
—
—
60.6
—
—
0.7
—
61.3
—
—
—
—
—
—
—
—
—
0.6
—
—
—
—
0.6
—
—
—
—
—
—
0.2
4.8
0.1
791.6
—
—
—
5.2
796.8
—
—
0.3
6.4
(90.5)
—
—
—
—
(611.8)
(24.1)
—
—
—
(635.9)
(15.0)
—
—
—
—
(0.1)
—
—
—
(2.7)
—
(1.3)
—
—
(4.0)
—
0.7
—
—
263.2
(90.5)
(0.1)
0.2
4.8
0.1
177.7
(24.1)
(1.3)
—
5.2
157.5
(15.0)
0.7
0.3
6.4
A
n
n
u
a
l
R
e
p
o
r
t
Balance as of June 28, 2013. . . . . . . . . . . . . . . . . . . .
61.3
$
0.6
$
803.5
$
(650.9) $
(3.3) $
149.9
See accompanying notes to consolidated financial statements
49
AVIAT NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
The Company
We design, manufacture and sell a range of wireless networking solutions and services to mobile and fixed telephone
service providers, private network operators, government agencies, transportation and utility companies, public safety agencies
and broadcast system operators across the globe. Our products include broadband wireless access base stations and customer
premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and
license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.
We were incorporated in Delaware in 2006 to combine the businesses of Harris Corporation’s Microwave
Communications Division (“MCD”) and Stratex Networks, Inc. (“Stratex”). On January 28, 2010, we changed our corporate
name from Harris Stratex Networks, Inc. to Aviat Networks, Inc. (“Aviat Networks”, “we,” “us,” and “our”) to more effectively
reflect our business and communicate our brand identity to customers. Additionally, the change of our corporate name was to
comply with the termination of the Harris Corporation (“Harris”) trademark licensing agreement resulting from the spin-off by
Harris of its interest in our stock to its stockholders in May 2009.
Basis of Presentation
The consolidated financial statements include the accounts of Aviat Networks and its wholly-owned and majority owned
subsidiaries. Significant intercompany transactions and accounts have been eliminated.
Our fiscal year ends on the Friday nearest June 30. This was June 28 for fiscal 2013, June 29 for fiscal 2012 and July 1
for fiscal 2011. All fiscal years presented each included 52 weeks. In these notes to consolidated financial statements, we refer
to our fiscal years as “fiscal 2013”, “fiscal 2012” and “fiscal 2011.”
Reclassifications
Certain amounts in the fiscal 2012 and 2011 financial statements have been reclassified to conform with fiscal 2013
t
r
o
p
e
R
l
a
u
n
n
A
presentation.
Use of Estimates
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”) requires us to make estimates, assumptions and judgments affecting the amounts reported and
related disclosures. Estimates are based upon historical factors, current circumstances and the experience and judgment of our
management. We evaluate our estimates and assumptions on an ongoing basis and may employ outside experts to assist us in
making these evaluations. Changes in such estimates, based on more accurate information, or different assumptions or
conditions, may affect amounts reported in future periods. Such estimates affect significant items, including revenue
recognition, provision for doubtful accounts, inventory valuation, valuation allowances for deferred tax assets, uncertainties in
income taxes, restructuring obligations, product warranty obligations, share-based awards, contingencies and useful lives of
intangible assets, property, plant and equipment.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be
cash equivalents. Cash and cash equivalents are carried at amortized cost, which approximates fair value due to the short-term
nature of these investments. Amortization or accretion of premium or discount is included in interest income on the
consolidated statements of operations. We hold cash and cash equivalents at several major financial institutions, which often
significantly exceed Federal Deposit Insurance Corporation insured limits. However, a substantial portion of the cash
equivalents is invested in prime money market funds which are backed by the securities in the fund. Historically, we have not
experienced any losses due to such concentration of credit risk.
We invest our excess cash in high-quality marketable debt securities to ensure that cash is readily available for use in our
current operations. Investments with original maturities greater than three months but less than one year are accounted for as
50
A
n
n
u
a
l
R
e
p
o
r
t
short-term and are classified as such at the time of purchase. Marketable securities are classified as “available-for-sale” and are
classified as short-term because we view our entire portfolio as available for use in our current operations.
As of June 28, 2013 and June 29, 2012, all of our high-quality marketable debt securities were classified as cash
equivalents.
Accounts Receivable, Major Customers and Other Significant Concentrations
We typically invoice our customers for the sales order (or contract) value of the related products delivered at various
milestones, including order receipt, shipment, installation and acceptance and for services when rendered. Our trade receivables
are derived from sales to customers located in North America, Africa, Europe, the Middle East, Russia, Asia-Pacific and Latin
America.
Accounts receivable are presented net of allowance for estimated uncollectible accounts to reflect any loss anticipated on
the collection of accounts receivable balances. We calculate the allowance based on our history of write-offs, level of past due
accounts and economic status of the customers. The fair value of our accounts receivable approximates their net realizable
value.
We regularly require letters of credit from some customers and we generally discount these letters of credit with various
financial institutions. Under these arrangements, collection risk is fully transferred to the financial institutions. We record the
cost of discounting these letters of credit as interest expense. Total customer letters of credit discounted and related interest
expense are as follows:
(In millions)
Customer letters of credit discounted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2013
2012
2011
36.8
0.2
$
$
59.1
0.3
$
$
57.7
0.4
Fiscal Year
During fiscal 2013, 2012 and 2011, we had one international customer in Africa, Mobile Telephone Networks Group
(“MTN Group”) that accounted for 25%, 17% and 14%, respectively, of our total revenue. In addition, Verizon Wireless
accounted for 11% of our total revenue during fiscal 2013. As of June 28, 2013 and June 29, 2012, MTN Group accounted for
approximately 12% and 7%, respectively, of our accounts receivable. No other customers accounted for more than 10% of our
revenue or accounts receivable for the years presented.
Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash equivalents,
marketable debt securities, trade accounts receivable and financial instruments used in foreign currency hedging activities. We
invest our excess cash primarily in prime money market funds and certificates of deposit. We are exposed to credit risks related
to such instruments in the event of default or decrease in credit-worthiness of the issuers of the investments. We perform
ongoing credit evaluations of our customers and generally do not require collateral on accounts receivable, as the majority of
our customers are large, well-established companies. However, in certain circumstances, we may require letters of credit,
additional guarantees or advance payments. We maintain allowances for collection losses, but historically have not experienced
any significant losses related to any particular geographic area since our business is not concentrated within any particular
geographic region. Our customers are primarily in the telecommunications industry, so our accounts receivable are concentrated
within one industry and exposed to concentrations of credit risk within that industry. Accounts receivable are written off when
attempts to collect outstanding amounts have been exhausted or there are other indicators that the amounts are no longer
collectible.
We rely on sole providers for certain components of our products and rely on a limited number of contract manufacturers
and suppliers to provide manufacturing services for our products. The inability of a contract manufacturer or supplier to fulfill
our supply requirements could materially impact future operating results.
We have entered into agreements relating to our foreign currency contracts with large, multinational financial institutions.
The amounts subject to credit risk arising from the possible inability of any such parties to meet the terms of their contracts are
generally limited to the amounts, if any, by which such party’s obligations exceed our obligations to that party.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined using standard cost, which approximates actual
cost on a weighted-average basis. We regularly review inventory quantities on hand and record adjustments to reduce the cost
51
of inventory for excess and obsolete inventory based primarily on our estimated forecast of product demand and production
requirements. Inventory adjustments are measured as the difference between the cost of the inventory and estimated market
value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of
sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent
improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
Customer Service Inventories
Our customer service inventories are stated at the lower of cost or market. We carry service parts because we generally
provide product warranty for 12 to 24 months and earn revenue by providing enhanced and extended warranty and repair
service during and beyond this warranty period. Customer service inventories consist of both component parts, which are
primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary
basis while the defective unit is being repaired. We record adjustments to reduce the carrying value of customer service
inventories to their net realizable value. Factors influencing these adjustments include product life cycles, end of service life
plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant
estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.
Income Taxes and Related Uncertainties
t
r
o
p
e
R
l
a
u
n
n
A
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based
on the estimated future tax effects of temporary differences between the financial statement and tax bases of assets and
liabilities, as measured by tax rates at which temporary differences are expected to reverse as well as operating loss and tax
credit carry forwards. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. A valuation
allowance is established to offset any deferred tax assets if, based upon the available information, it is more likely than not that
some or all of the deferred tax assets will not be realized.
We are required to compute our income taxes in each federal, state, and international jurisdiction in which we operate.
This process requires that we estimate the current tax exposure as well as assess temporary differences between the accounting
and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax
purposes as well as operating loss and tax credit carry forwards. The income tax effects of the differences we identify are
classified as current or long-term deferred tax assets and liabilities in our Consolidated Balance Sheets. Our judgments,
assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our interpretation
of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities.
Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly
impact the amounts provided for income taxes in our consolidated balance sheets and consolidated statements of operations. We
must also assess the likelihood that deferred tax assets will be realized from future taxable income and, based on this
assessment, establish a valuation allowance, if required. Our determination of our valuation allowance is based upon a number
of assumptions, judgments, and estimates, including forecasted earnings, future taxable income, and the relative proportions of
revenue and income before taxes in the various domestic and international jurisdictions in which we operate. To the extent we
establish a valuation allowance or change the valuation allowance in a period, we reflect the change with a corresponding
increase or decrease to our tax provision in our consolidated statements of operations.
We use a two-step process to determine the amount of tax benefit to be recognized. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step
requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon
ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the
probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is
based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax
benefit or an additional charge to the tax provision in the period.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost less accumulated depreciation and amortization. We
capitalize costs of software, consulting services, hardware and other related costs incurred to purchase or develop internal-use
software. We expense costs incurred during preliminary project assessment, re-engineering, training and application
maintenance. Leasehold improvements made either at the inception of the lease or during the lease term are amortized over the
remaining current lease term, or estimated life, if shorter.
52
Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the
respective assets. Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease
term or the estimated useful life of the improvements. The useful lives of the assets are generally as follows:
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 45 years
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 5 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 5 years
Expenditures for maintenance and repairs are charged to expense as incurred. Cost and accumulated depreciation of assets
sold or retired are removed from the respective property accounts, and any gain or loss is reflected in the consolidated
statements of operations.
Impairment of Goodwill, Identifiable Intangible Assets and Long-Lived Assets
Our acquisition of Telsima Corporation and the merger with Stratex occurred in fiscal 2009 and fiscal 2007, respectively.
We accounted for business combinations using the purchase method of accounting which means we recorded the assets
acquired and liabilities assumed at their respective fair values at the date of acquisition, with any excess purchase price
recorded as goodwill. Goodwill resulting from our past acquisitions has been impaired and written off in prior years. We
therefore no longer have goodwill on our balance sheets as of June 28, 2013 and June 29, 2012.
Valuation of intangible assets and in-process research and development requires significant estimates and assumptions
including, but not limited to, determining the timing and expected costs to complete development projects, estimating future
cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful completion
of development projects, continuation of customer relationships and renewal of customer contracts. Intangible assets
determined to have finite lives are amortized over their estimated useful lives.
A
n
n
u
a
l
R
e
p
o
r
t
Goodwill and intangible assets deemed to have indefinite lives are not amortized but instead are tested for impairment at
the reporting unit level at least annually in the fourth quarter of our fiscal year. In addition, we review the carrying value of our
intangible assets and goodwill for impairment whenever events or circumstances indicate that their carrying amount may not be
recoverable. Significant negative industry or economic trends, including a lack of recovery in the market price of our common
stock, disruptions to our business, unexpected significant changes or planned changes in the use of the intangible assets, and
mergers and acquisitions could result in the need to reassess the fair value of our assets and liabilities which could lead to an
impairment charge for any of our intangible assets or goodwill. The value of our indefinite lived intangible assets and goodwill
could also be impacted by future adverse changes such as any future declines in our operating results, a significant slowdown in
the worldwide economy and the microwave industry or any failure to meet the performance projections included in our
forecasts of future operating results.
Goodwill is tested for impairment using a two-step process. First, we determine if the carrying amount of any of our
reporting units exceeds its fair value (determined using an analysis of a combination of projected discounted cash flows and
market multiples based on revenue and earnings before interest, taxes, depreciation and amortization), which would indicate a
potential impairment associated with that reporting unit. If we determine that a potential impairment exists, we then compare
the implied fair value associated with the respective reporting unit, to its carrying amount to determine if there is an impairment
loss.
Evaluations of impairment involve management estimates of asset useful lives and future cash flows. Significant
management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible,
however, that the plans and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in
future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur
additional impairment charges in a future period which could result in charges that are material to our results of operations.
We evaluate other long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on
an undiscounted basis are less than the carrying amount of the assets. If impairment exists, the impairment loss is measured and
recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest
levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups.
Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating
performance, growth rates and other factors. The actual cash flows realized from these assets may vary significantly from our
53
estimates due to increased competition, changes in technology, fluctuations in demand, consolidation of our customers,
reductions in average selling prices and other factors. Assumptions underlying future cash flow estimates are therefore subject
to significant risks and uncertainties.
Other Accrued Expenses and Other Assets
No accrued liabilities or expenses within other accrued expenses on our consolidated balance sheets exceeded 5% of our
total current liabilities as of June 28, 2013 or June 29, 2012. Other accrued expenses on our consolidated balance sheets
primarily includes accruals for sales commissions, warranties and severance. No current assets other than those already
disclosed on the consolidated balance sheets exceeded 5% of our total current assets as of June 28, 2013 or June 29, 2012. No
assets within the caption “Other assets” on the consolidated balance sheets exceeded 5% of total assets as of June 28, 2013 or
June 29, 2012.
Warranties
On product sales we provide for future warranty costs upon product delivery. The specific terms and conditions of those
warranties vary depending upon the product sold and country in which we do business. In the case of products sold by us, our
warranties generally start from the delivery date and continue for one to two years, depending on the terms.
Our products are manufactured to customer specifications and their acceptance is based on meeting those specifications.
Factors that affect our warranty liability include the number of installed units, historical experience and management’s
judgment regarding anticipated rates of warranty claims and cost per claim. We assess the adequacy of our recorded warranty
liabilities every quarter and make adjustments to the liability as necessary.
Network management software products generally carry a 30-day to 90-day warranty from the date of acceptance. Our
liability under these warranties is to provide a corrected copy of any portion of the software found not to be in substantial
compliance with the agreed-upon specifications.
t
r
o
p
e
R
l
a
u
n
n
A
Operating Leases
We lease facilities and equipment under various operating leases. These lease agreements generally include rent
escalation clauses, and many include renewal periods at our option. We recognize expense for scheduled rent increases on a
straight-line basis over the lease term beginning with the date we take possession of the leased space. Leasehold improvements
made either at the inception of the lease or during the lease term are amortized over the current lease term, or estimated life, if
shorter.
Foreign Currency Translation
The functional currency of our subsidiaries located in the United Kingdom, Singapore, Mexico, Algeria and New Zealand
is the U.S. dollar. Determination of the functional currency is dependent upon the economic environment in which an entity
operates as well as the customers and suppliers the entity conducts business with. Changes in facts and circumstances may
occur which could lead to a change in the functional currency of that entity. Accordingly, all of the monetary assets and
liabilities of these subsidiaries are re-measured into U.S. dollars at the current exchange rate as of the applicable balance sheet
date, and all non-monetary assets and liabilities are re-measured at historical rates. Income and expenses are re-measured at the
average exchange rate prevailing during the period. Gains and losses resulting from the re-measurement of these subsidiaries’
financial statements are included in the consolidated statements of operations.
Our other international subsidiaries use their respective local currency as their functional currency. Assets and liabilities
of these subsidiaries are translated at the local current exchange rates in effect at the balance sheet date, and income and
expense accounts are translated at the average exchange rates during the period. The resulting translation adjustments are
included in accumulated other comprehensive loss.
Gains and losses resulting from foreign exchange transactions and translation of monetary assets and liabilities in non-
functional currencies are included in cost of product sales and services in the accompanying consolidated statements of
operations. Net foreign exchange losses recorded in our consolidated statements of operations during fiscal 2013, 2012 and
2011 totaled $1.5 million, $1.5 million and $2.6 million, respectively.
54
A
n
n
u
a
l
R
e
p
o
r
t
Retirement Benefits
As of June 28, 2013, we provided retirement benefits to substantially all employees primarily through our defined
contribution retirement plans. These plans have matching and savings elements. Contributions by us to these retirement plans
are based on profits and employees’ savings with no other funding requirements. We may make additional contributions to the
plan at our discretion.
Contributions to retirement plans are expensed as incurred. Retirement plan expense amounted to $2.9 million, $2.8
million and $3.3 million in fiscal 2013, 2012 and 2011, respectively.
Revenue Recognition
We generate substantially all of our revenue from the sales or licensing of our microwave radio and wireless access
systems, network management software, and professional services including installation and commissioning and training.
Principal customers for our products and services include domestic and international wireless/mobile service providers, original
equipment manufacturers, distributors, system integrators, as well as private network users such as public safety agencies,
government institutions, and utility, pipeline, railroad and other industrial enterprises that operate broadband wireless networks.
Our customers generally purchase a combination of our products and services as part of a multiple element arrangement. Our
assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve
significant judgment.
Revenue from product sales is generated predominately from the sales of products manufactured by third party
manufacturers to whom we have outsourced our manufacturing processes. In general, printed circuit assemblies, mechanical
housings, and packaged modules are manufactured by contract manufacturing partners, with periodic business reviews of
material levels and obsolescence. Product assembly, product testing, complete system integration and system testing may either
be performed within our own facilities or at the locations of our third party manufacturers.
Revenue from services includes certain installation, extended warranty, customer support, consulting, training and
education. It also can include certain revenue generated from the resale of equipment purchased on behalf of customers for
installation service contracts we perform for customers. Such equipment may include towers, antennas, and other related
materials. Revenue from warranty services are recognized ratably over the service period.
Under our revenue recognition policy, revenue is recognized when all of the following criteria have been met:
•
Persuasive evidence of an arrangement exists. Contracts and customer purchase orders are generally used to
determine the existence of an arrangement.
• Delivery has occurred. Shipping documents and customer acceptance, when applicable, are used to verify
delivery.
• The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms
associated with the transaction and whether the sales price is subject to refund or adjustment.
• Collectibility is reasonably assured. We assess collectibility based primarily on the creditworthiness of the
customer as determined by credit checks and analysis, as well as the customer’s payment history.
We often enter into multiple contractual agreements with the same customer. Such agreements are reviewed to determine
whether they should be evaluated as one arrangement. If an arrangement, other than a long-term contract, requires the delivery
or performance of multiple deliverables or elements, we determine whether the individual elements represent “separate units of
accounting”. Based on the terms and conditions of our typical product sales arrangement, we believe that our products and
services can be accounted for as separate units because our products and services have value to our customers on a stand-alone
basis.
When a sale involves multiple deliverables, the entire fee from the arrangement is allocated to each unit of accounting
based on the relative selling price of each deliverable. When applying the relative selling price method, we determine the
selling price for each deliverable using vendor-specific objective evidence (“VSOE”) of selling price, if it exists, or third-party
evidence (“TPE”) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, which is typically the case,
we use our best estimate of selling price (“ESP”) for that deliverable. Revenue allocated to each element is then recognized
when the other revenue recognition criteria are met for each element. Accordingly, services not yet performed at the time of
product shipment are deferred based on their relative selling price and recognized as revenue as such services are performed.
The relative selling price of any undelivered products is also deferred at the time of shipment and recognized as revenue when
these products are delivered. There is generally no customer right of return in our sales agreements. The sequence for typical
55
t
r
o
p
e
R
l
a
u
n
n
A
multiple element arrangements: we deliver our products, perform installation services and then provide post-contract support
services.
VSOE of fair value is based on the price charged when the element is sold separately. For multiple element arrangements,
if VSOE cannot be established, we establish, where available, the selling price based on TPE. TPE is determined based on
evidence of competitor pricing for similar deliverables when sold separately. When we cannot determine VSOE or TPE, which
is typically the case, we use ESP in our allocation of arrangement consideration. The objective of ESP is to determine the price
at which we would typically transact a stand-alone sale of the product or service. ESP is determined by considering a number of
factors including our pricing policies, internal costs and gross margin objectives, method of distribution, information gathered
from experience in customer negotiations, market research and information, recent technological trends, competitive landscape
and geographies. The determination of ESP is approved by our management taking into consideration our pricing strategy. We
regularly review VSOE, TPE and ESP and maintain internal controls over the establishment and updating of these estimates.
For our proprietary and OEM products, we determine ESP using a discount off list methodology. Under this approach,
reasonably available data points, including deals bid and won in the past rolling four quarters and competitor pricing data, for
each part number are gathered. Then similar parts are grouped together and the average net price and the discount off the list
price are calculated for each group of products. Since we have determined that pricing varies significantly by geography, the
data is further stratified by geography. Within geographies, the data is stratified based on type of customer, distribution channel
and estimated deal size or customer volume as larger opportunities with multiple deliverables bundled are more likely to receive
preferential pricing. Based on all the available information (pricing practices and trends, competition, market, potential pricing
limitations set by the competitors for the similar or identical product, functionality and expected technological life of the
product, etc.), the final discount off list percentage is determined. Using the discount off list price percentage, the best estimated
selling price for each product is determined.
For services ESP, we also stratify data based on geography, type of customer and estimated deal size. For training and
extended support services, we determine ESP using a discount off list methodology as discussed above. For technical and
installation services, we determine ESP using an estimated margin methodology. Under this methodology, ESP’s are determined
based on estimated margins anticipated. We consider historical margins as well as current pricing trends and market conditions
when determining the estimated margin.
Some of our products have both software and non-software components that function together to deliver the product’s
essential functionality. Accordingly, these products are not within the scope of the software revenue recognition rules,
ASC 985-605, Software Revenue Recognition.
In addition to the software in our core microwave product which is not within the scope of the software revenue
recognition rules, some of our sales arrangements have multiple deliverables containing software and related software support
components. Such sale arrangements are subject to the accounting guidance in ASC 985-605, Software-Revenue Recognition.
Under the software revenue recognition guidance, we use the residual method to recognize revenue when a multiple element
arrangement includes one or more elements to be delivered at a future date and VSOE of all undelivered elements exists. If
VSOE cannot be established for the undelivered elements of an arrangement, we defer revenue until the earlier of delivery, or
fair value of the undelivered element exists, unless the undelivered element is a service, in which the entire arrangement fee is
recognized ratably over the period during which the services are expected to be performed.
Revenues related to long-term contracts for customized network solutions are recognized using the percentage-of-
completion method. In using the percentage-of-completion method, we generally apply the cost-to-cost method of accounting
where sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion. Contracts are
combined when specific aggregation criteria are met including when the contracts are in substance an arrangement to perform a
single project with a customer; the contracts are negotiated as a package in the same economic environment with an overall
profit objective; the contracts require interrelated activities with common costs that cannot be separately identified with, or
reasonably allocated to the elements, phases or units of output and the contracts are performed concurrently or in a continuous
sequence under the same project management at the same location or at different locations in the same general vicinity.
Recognition of profit on long-term contracts requires estimates of the total contract value, the total cost at completion and the
measurement of progress towards completion. Significant judgment is required when estimating total contract costs and
progress to completion on the arrangements as well as whether a loss is expected to be incurred on the contract. Amounts
representing contract change orders, claims or other items are included in sales only when they can be reliably estimated and
realization is probable. When adjustments in contract value or estimated costs are determined, any changes from prior estimates
are reflected in earnings in the current period. Anticipated losses on contracts or programs in progress are charged to earnings
when identified.
Royalty income is recognized on the basis of terms specified in the contractual agreements.
56
A
n
n
u
a
l
R
e
p
o
r
t
Cost of Product Sales and Services
Cost of sales consists primarily of materials, labor and overhead costs incurred internally and paid to contract
manufacturers to produce our products, personnel and other implementation costs incurred to install our products and train
customer personnel, and customer service and third party original equipment manufacturer costs to provide continuing support
to our customers. Also included in cost of sales is the amortization of purchased technology intangible assets.
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements of
operations because we include in revenue the related costs that we bill our customers.
Presentation of Transactional Taxes Collected from Customers and Remitted to Government Authorities
We present transactional taxes such as sales and use tax collected from customers and remitted to governmental
authorities on a net basis.
Share-Based Compensation
We have issued stock options, restricted stock and performance shares under our 2007 Stock Equity Plan and have
assumed stock options from the acquisition of Stratex Networks, Inc. (“Stratex”). We estimate the grant date fair value of our
share-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term.
To estimate the fair value of our stock option awards, we use the Black-Scholes option pricing model. The determination
of the fair value of share-based payment awards on the date of grant using an option pricing model is affected by our stock price
as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock
price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, risk-free
interest rate and expected dividends. Due to the inherent limitations of option valuation models, including consideration of
future events that are unpredictable and the estimation process utilized in determining the valuation of the share-based awards,
the ultimate value realized by our employees may vary significantly from the amounts expensed in our financial statements. For
restricted stock and performance share awards, we measure the grant date fair value based upon the market price of our
common stock on the date of the grant.
For stock options and restricted stock, we recognize compensation cost on a straight-line basis over the awards’ vesting
periods for those awards which contain only a service vesting feature. For awards with a performance condition vesting feature,
when achievement of the performance condition is deemed probable we recognize compensation cost on a straight-line basis
over the awards’ expected vesting periods.
We estimate forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ
significantly from initial estimates. Share-based compensation expense is recorded net of estimated forfeitures such that
expense was recorded only for those share-based awards that are expected to vest.
Cash flows, if any, resulting from the gross benefit of tax deductions related to share-based compensation in excess of the
grant date fair value of the related share-based awards are presented as part of cash flows from financing activities. This amount
is shown as a reduction to cash flows from operating activities and an increase to cash flow from financing activities.
Net Income (Loss) per Share of Common Stock
We compute net income (loss) per share of common stock using the two-class method. Basic net income (loss) per share
is computed using the weighted average number of common shares and participating securities outstanding. Our unvested
restricted shares (including restricted stock awards and performance share awards) contain rights to receive non-forfeitable
dividends and therefore are considered to be participating securities and would be included in the calculations of net income per
basic and diluted common share. However, we incurred a net loss in all periods presented. In accordance with ASC subtopic
260-10, undistributed losses are not allocated to unvested restricted shares due to the fact that the unvested restricted shares are
not contractually obligated to share in the losses of the company.
Restructuring Charges
Our restructuring charges represent expenses incurred in connection with certain cost reduction programs that we have
implemented, and consist of the costs of employee termination benefits, facilities charges and other costs of exiting activities or
geographies. A liability for costs associated with an exit or disposal activity is measured at its fair value when the liability is
incurred. Expenses for one-time termination benefits are recognized at the date we notify the employee, unless the employee
must provide future service, in which case the benefits are expensed ratably over the future service period. We recognize
57
severance benefits provided as part of an ongoing benefit arrangement when the payment is probable and the amounts can be
reasonably estimated. Liabilities related to an operating lease/contract are measured and recognized at fair value when the
contract does not have any future economic benefit to the entity (i.e., the entity ceases to utilize the rights conveyed by the
contract). We expense all other costs related to an exit or disposal activity as incurred. Assumptions to estimate facility exit
costs include the ability to secure sublease income largely based on market conditions, the likelihood and amounts of a
negotiated settlement for contractual lease obligations and other exit costs.
Research and Development Costs
Our sponsored research and development costs, which include costs in connection with new product development,
improvement of existing products, process improvement, and product use technologies, are charged to operations in the period
in which they are incurred.
Recently Issued Accounting Standards
t
r
o
p
e
R
l
a
u
n
n
A
In July 2013, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting guidance on
the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or tax credit
carryforward exists. This new guidance requires entities, if certain criteria are met, to present an unrecognized tax benefit, or
portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward when such items exist in the same taxing jurisdiction. This new
guidance is to be adopted prospectively and is effective for us beginning in our first quarter of fiscal 2015. The adoption of this
standard will have no effect on our consolidated financial position or results of operations.
In February 2013, the FASB issued an accounting standards update on reporting amounts reclassified out of accumulated
other comprehensive income (“AOCI”), which requires companies to present information about reclassifications out of AOCI
in one place. Companies also are required to present reclassifications by component when reporting changes in AOCI balances.
For significant items reclassified out of AOCI to net income in their entirety in the period, companies must report the effect of
the reclassifications on the respective line items in the statement where net income is presented. This information may be
provided either in the notes or parenthetically on the face of that statement as long as all the information is disclosed in a single
location. For items not reclassified to net income in their entirety in the period, companies must cross-reference in a note to
other required disclosures. This new guidance is to be adopted prospectively and is effective for us beginning in our first quarter
of fiscal 2014. The adoption of this new guidance will not impact our consolidated financial position or results of operations, as
the guidance relates only to financial statement presentation.
Note 2. Accumulated Other Comprehensive Income (Loss)
The changes in components of our accumulated other comprehensive income (loss) during fiscal 2013, 2012 and 2011 are
as follows:
Foreign
Currency
Translation
Adjustment
(“CTA”)
Total
Accumulated
Other
Comprehensive
Income (Loss)
Hedging
Derivatives
(In millions)
Balance as of July 2, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Transfer from CTA to operating expenses resulting from the liquidation
of foreign entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized loss on hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of July 1, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2.9) $
0.3
$
0.6
(0.3)
—
(2.6)
(1.4)
—
(4.0)
0.6
—
(3.4) $
—
—
(0.4)
(0.1)
—
0.1
—
—
0.1
0.1
$
(2.6)
0.6
(0.3)
(0.4)
(2.7)
(1.4)
0.1
(4.0)
0.6
0.1
(3.3)
58
A
n
n
u
a
l
R
e
p
o
r
t
Note 3. Net Income (Loss) per Share of Common Stock
As we incurred net loss for all periods in fiscal 2013, 2012 and 2011, all potential dilutive securities from stock options,
restricted stocks and units and performance shares and units have been excluded from the diluted net loss per share calculations,
as their effect would have been anti-dilutive. The following table summarizes the potential weighted average shares of common
stock outstanding that have been excluded from the diluted net loss per share calculations:
Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stocks and units and performance shares and units . . . . . . . . . . . . . .
Total potential shares of common stock excluded . . . . . . . . . . . . . . . . . . . .
2013
Fiscal Year
2012
(In millions)
5.0
2.0
7.0
5.0
1.2
6.2
2011
3.8
1.6
5.4
Note 4. Balance Sheet Components
Receivables
Our net receivables are summarized below:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: allowances for collection losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Inventories
Our inventories are summarized below:
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Deferred cost of sales included within finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
June 28,
2013
June 29,
2012
$
(In millions)
96.5
(10.2)
86.3
$
106.9
(16.2)
90.7
June 28,
2013
June 29,
2012
$
(In millions)
30.9
3.9
0.2
35.0
3.1
$
$
49.2
6.9
0.7
56.8
14.0
During fiscal 2013, 2012 and 2011, we recorded charges to adjust our inventory and customer service inventory to the
lower of cost or market. These charges were primarily due to excess and obsolete inventory resulting from product transitioning
and discontinuance, and deferred costs of revenue that were unlikely to derive revenue from due to disposition of our WiMAX
business or customer insolvency. Such charges incurred during fiscal 2013, 2012 and 2011 were classified in cost of product
sales as follows:
Excess and obsolete inventory and deferred cost of sales charges. . . . . . . . . .
Customer service inventory write-downs. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As % of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
Fiscal Year
2012
$
$
(In millions)
1.7
1.7
3.4
0.8%
$
$
6.9
0.8
7.7
1.6%
$
$
2011
19.4
0.8
20.2
4.5%
59
Property, Plant and Equipment
Our property, plant and equipment are summarized below:
June 28,
2013
June 29,
2012
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(In millions)
0.7
10.6
12.1
48.8
72.2
(43.4)
28.8
$
0.7
10.7
7.2
45.0
63.6
(41.9)
21.7
Depreciation and amortization expense related to property, plant and equipment, including amortization of software
developed for internal use, was $5.6 million, $4.9 million and $8.6 million, respectively, in fiscal 2013, 2012 and 2011.
Accrued Warranties
We have accrued for the estimated cost to repair or replace products under warranty at the time of sale. Changes in our
warranty liability, which is included as a component of other accrued expenses on the consolidated balance sheets, during fiscal
2013 and 2012 are as follows:
Fiscal Year
2013
2012
t
r
o
p
e
R
l
a
u
n
n
A
Balance as of the beginning of the fiscal year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Warranty provision for revenue recorded during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumption during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
(In millions)
3.0
4.1
(3.8)
3.3
$
2.8
3.7
(3.5)
3.0
Note 5. Fair Value Measurements of Assets and Liabilities
We determine fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal
market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction
between market participants as of the measurement date. We try to maximize the use of observable inputs and minimize the use
of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the inputs used to
measure fair value. The three levels of inputs used to measure fair value are as follows:
• Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;
• Level 2 — Observable market-based inputs or observable inputs that are corroborated by market data; and
• Level 3 — Unobservable inputs reflecting our own assumptions.
The carrying amounts, estimated fair values and valuation input levels of our assets and liabilities that are measured at
fair value on a recurring basis as of June 28, 2013 and June 29, 2012 are as follows:
60
June 28, 2013
June 29, 2012
Carrying
Amount
Fair
Value
Carrying
Amount
(In millions)
Fair
Value
Valuation
Inputs
Assets:
Cash equivalents:
Bank certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . $
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets:
Foreign exchange forward contracts. . . . . . . . . . . . . . . . . . $
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts. . . . . . . . . . . . . . . . . . $
2.4
39.2
0.1
$
$
$
2.4
39.2
0.1
$
$
$
0.3
50.8
0.1
$
$
$
0.3
50.8
Level 2
Level 1
0.1
Level 2
0.1
$
0.1
$
0.1
$
0.1
Level 2
We classify investments within Level 1 if quoted prices are available in active markets. Our level 1 investments include
shares in prime money market funds purchased from two major financial institutions. As of June 28, 2013, these money market
shares were valued at $1.00 net asset value per share by these financial institutions.
We classify items in Level 2 if the investments are valued using observable inputs to quoted market prices, benchmark
yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Our
foreign exchange forward contracts are classified within Level 2. Foreign currency forward contracts are valued using an
income approach for the remaining term of the contract based on forward market rates less the contract rate multiplied by the
notional amount.
Our policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the
events or change in circumstances that caused the transfer. During fiscal 2013, 2012 and 2011, we had no transfers between
levels of the fair value hierarchy of our assets or liabilities measured at fair value.
A
n
n
u
a
l
R
e
p
o
r
t
Note 6. Redeemable Preference Shares
During fiscal 2007, our Singapore subsidiary issued 8,250 redeemable preference shares to the U.S. parent company
which, in turn, sold the shares to two unrelated investment companies at par value for total sale proceeds of $8.3 million. Upon
original issuance in fiscal 2007, our former majority stockholder, Harris Corporation, guaranteed redemption of these
preference shares directly with these two unrelated investment companies through the existence of put option arrangements.
During May 2009, one of these unrelated investment companies exercised a put option with Harris and sold its entire interest in
3,250 redeemable preference shares at face value to Harris.
These redeemable preference shares represented less than a 1% interest in our Singapore subsidiary. The redeemable
preference shares had an automatic redemption date of January 2017, which is 10 years from the date of issue. Preference
dividends were cumulative and payable quarterly in cash at the rate of 12% per annum. Preference dividends totaling $0.6
million and $1.0 million, respectively, for fiscal 2012 and 2011, were recorded as interest expense in the accompanying
consolidated statements of operations.
In an agreement dated June 30, 2011 by and among Harris, the Company and our Singapore subsidiary, we agreed to
redeem the shares on the fifth anniversary of the date of issuance, which was January 30, 2012, at the stated redemption amount
of 105% of their face value. In consideration for the early redemption, Harris agreed to waive the 5% premium for the amount
that would otherwise be payable to them and to reimburse us for the 5% premium that is payable to the remaining stockholder.
On January 30, 2012, the preference shares were redeemed in accordance with the provisions of the redemption agreement and
we funded the redemption with proceeds of $8.3 million from a two-year term loan under our credit facility with Silicon Valley
Bank as described in Note 7 below.
Note 7. Credit Facility and Debt
During the quarter ended October 1, 2010, we terminated our previous credit facility with two commercial banks and
entered into a new $40.0 million credit facility with Silicon Valley Bank (“SVB”) for an initial term of one year expiring on
September 30, 2011. We repaid the outstanding debt of $5.0 million under the previous credit facility on October 1, 2010 with
the proceeds of advance borrowings of $6.0 million under the new facility with SVB. On September 23, 2011, the availability
61
of the facility was extended and, on November 2, 2011, the facility was amended to expire on February 28, 2014 and provide
for a two-year term loan for up to $8.3 million to fund the redemption of the preference shares issued by our Singapore
subsidiary. On January 30, 2012, we borrowed $8.3 million to complete that redemption. The term loan matures on January 31,
2014 and must be repaid in 24 equal monthly principal payments commencing on February 29, 2012.
Our credit facility provides for a committed amount of $40.0 million. The facility provides for (1) advance borrowings
(with no stated maturity date other than the February 28, 2014 expiration of the facility); (2) fixed term Eurodollar loans for up
to six months, (3) a two-year term loan of $8.3 million; and (4) the issuance of standby or commercial letters of credit. As of
June 28, 2013, available credit under this credit facility was $26.0 million reflecting borrowings of $8.8 million, as described
below, and outstanding letters of credit of $5.2 million.
As of June 28, 2013, our outstanding debt under the credit facility consisted of the $6.0 million advance borrowings in
fiscal 2011 and a $2.8 million outstanding balance on the original $8.3 million two-year term loan that matures on January 31,
2014. Since the expiration of the credit facility is less than 12 months from June 28, 2013, we classified the $6.0 million
advance borrowings as short-term debt as of June 28, 2013.
The advance borrowings carry an interest rate computed at the daily prime rate as published in the Wall Street Journal.
Interest on Eurodollar loans is offered at LIBOR plus a spread of between 2.00% to 2.75% based on our current leverage ratio.
The interest rate on Eurodollar loans was set initially at a spread of 2.75% for the fiscal quarter ended October 1, 2010 and is
adjustable quarterly thereafter based on the computed actual leverage ratio for the most recently completed fiscal quarter.
During fiscal 2013, the weighted average interest rate on our advance borrowings was 3.25%. The two-year term loan bears a
fixed interest rate of 5% per annum and provides for equal monthly payments of principal. The SVB credit facility, as further
amended on September 28, 2012, contains a minimum liquidity ratio covenant and a minimum profitability covenant. As of
June 28, 2013, we were in compliance with these financial covenants. The facility also imposes certain restrictions on our
ability to pay dividends or make distributions to our stockholders under certain circumstances. Certain of our assets, including
accounts receivable, inventory, and equipment, are pledged as collateral for the credit facility. Pursuant to the loan and security
agreement, if a material adverse event occurs, all obligations in connection with the agreement would be immediately due and
payable.
t
r
o
p
e
R
l
a
u
n
n
A
Note 8. Divestitures
WiMAX Discontinued Operations
In March 2011, our board of directors approved a plan for the sale of our WiMAX business. On September 2, 2011, we
sold to EION Networks, Inc. (“EION”) our WiMAX business and related assets consisting of certain technology, inventory and
equipment. We assigned customer contracts for WiMAX products and maintenance and agreed to license related patents to
EION. We also agreed to indemnification for customary seller representations and warranties, and the provision of transitional
services. As consideration for the sale of assets, EION agreed to pay us $0.4 million in cash and up to $2.8 million in additional
cash payments contingent upon specific factors related to future WiMAX business performance. Currently we are not able to
estimate the amount of consideration that we will receive beyond the $0.4 million or the probability of any such payment.
Accordingly, any future consideration will be recorded as a contingent gain in the period that it is received. As of June 28, 2013,
we had received $0.1 million of such contingent payments. EION is also entitled to receive cash payments up to $2.0 million
upon collections of certain WiMAX accounts receivable, of which $1.6 million has been paid by us to EION and $0.3 million
was reversed resulting from the write-down of the corresponding WiMAX accounts receivable as of June 28, 2013. As of June
28, 2013 and June 29, 2012, our accrued liabilities related to the disposition of WiMAX business were $0.1 million and $0.6
million, respectively.
In the third quarter of fiscal 2011, we began accounting for the WiMAX business as a discontinued operation and,
therefore, the operating results of our WiMAX business are included in discontinued operations in our Consolidated Financial
Statements for all years presented. We recognized a $0.4 million gain or adjustment and a $1.9 million loss on disposition,
which was included in our loss from discontinued operations, in fiscal 2013 and 2012, respectively.
Summary results of operations for the WiMAX business were as follows:
62
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from operations of WiMAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gain/adjustment (loss) on disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal Year
2013
2012
2011
(In millions)
1.6
0.1
$
$
(6.5) $
(4.3) $
(1.9)
0.4
(0.2)
(0.2)
(8.6) $
(4.1) $
20.6
(31.7)
—
—
(31.7)
Sale of NetBoss Assets
In September 2010, we sold our NetBoss assets, consisting of internally-developed intellectual property and certain
equipment, to a third party named NetBoss Technologies, Inc. for $3.8 million of cash. We recognized a $4.6 million loss on the
sale of the NetBoss assets in our Consolidated Statement of Operations during fiscal 2011. NetBoss Technologies, Inc. is a
company formed by its management team, our former development partner for NetBoss, and private investors. As part of the
terms of the sale, we have assigned our customer contracts for NetBoss software and maintenance to NetBoss Technologies,
Inc. We continue to license NetBoss technology to operate our Network Operations Centers.
Note 9. Goodwill and Identifiable Intangible Assets
Goodwill
Our goodwill for fiscal 2012 and 2011 resulted from our acquisition of Telsima Corporation in fiscal 2009, which was
accounted for as a purchase business combination. Goodwill resulting from the Telsima acquisition has been impaired and
written off in prior years. We therefore no longer have goodwill on our balance sheets as of June 28, 2013 and June 29, 2012.
The changes in the carrying amount of goodwill were as follows:
Amount
(In millions)
Balance as of July 2, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill allocated to WiMAX business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of July 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6.2
(0.6)
5.6
(5.6)
—
In the third quarter of fiscal 2011, in conjunction with the reclassification of WiMAX business as a discontinued
operation, $0.6 million of goodwill was allocated to the WiMAX business. Concurrently we performed an impairment review
and recorded a $0.6 million impairment charge for WiMAX business goodwill, which was included in loss from discontinued
operations. We also performed impairment reviews on the remaining $5.6 million goodwill, and determined that there was no
impairment as of July 1, 2011.
In the second quarter of fiscal 2012, we concluded that a goodwill impairment indicator existed due to a significant
decline in our market capitalization. Therefore we performed a goodwill impairment analysis and recorded a $5.6 million
goodwill impairment charge in the quarter. As of June 28, 2013 and June 29, 2012, we did not have any goodwill on our
consolidated balance sheets.
Identifiable Intangible Assets
A summary of our identifiable intangible assets is presented below:
A
n
n
u
a
l
R
e
p
o
r
t
63
t
r
o
p
e
R
l
a
u
n
n
A
Purchased
Technology
Trade
Names
Customer
Relationships
Total
Identifiable
Intangible
Assets
Net identifiable intangible assets as of July 1, 2011 . . . . . . . . . . . . . . $
Less: amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net identifiable intangible assets as of June 29, 2012. . . . . . . . . . . . .
Less: amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net identifiable intangible assets as of June 28, 2013. . . . . . . . . . . . . $
Amortization expenses:
Fiscal 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average estimated useful life (in years). . . . . . . . . . . . . . . .
$
1.3
(0.7)
0.6
(0.6)
— $
$
$
$
0.6
0.7
0.7
3.0
$
(In millions)
1.3
(1.3)
—
—
— $
— $
$
1.3
$
2.3
1.6
$
$
$
$
$
1.5
(0.3)
1.2
(0.4)
0.8
0.4
0.3
0.4
5.0
4.1
(2.3)
1.8
(1.0)
0.8
1.0
2.3
3.4
Our identifiable intangible assets are being amortized over their useful estimated economic lives, which range from one to
five years.
At June 28, 2013, we estimate our future amortization of identifiable intangible assets with definite lives by year as
follows:
Fiscal Year
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(In millions)
0.4
0.4
0.8
$
Note 10. Restructuring Activities
Fiscal 2013-2014 Plan
During the fourth quarter of fiscal 2013, we initiated a restructuring plan (the “Fiscal 2013-2014 Plan”) to bring our cost
structure in line with the changing business environment of the worldwide microwave radio and telecommunication markets,
primarily in North America, Europe and Asia. Activities under the Fiscal 2013-2014 Plan include the downsizing of our Santa
Clara, California headquarters and certain international field offices, and reductions in force to reduce our operating expenses.
The following table summarizes our costs incurred during fiscal 2013, estimated additional costs to be incurred and estimated
total costs expected to be incurred as of June 28, 2013 under the Fiscal 2013-2014 Plan:
Costs Incurred During
Fiscal Year Ended
June 28, 2013
Estimated
Additional
Costs
to be Incurred
(in millions)
Total
Restructuring
Costs Expected
to be Incurred
Severance and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Facilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for Fiscal 2013-2014 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.8
—
1.8
$
$
2.2
5.0
7.2
$
$
4.0
5.0
9.0
During fiscal 2013, our severance and benefits charges under the Fiscal 2013-2014 Plan primarily related to reductions in
force in Santa Clara, California, and several international locations of their finance and engineering functions. We intend to
complete a majority of the remaining restructuring activities in fiscal 2014.
Fiscal 2011 Plan
During the first quarter of fiscal 2011, we initiated a restructuring plan (the “Fiscal 2011 Plan”) to reduce our operational
costs primarily in North America, Europe and Asia. The following table summarizes our costs incurred during fiscal 2013, 2012
and 2011 and total costs incurred through June 28, 2013 under the Fiscal 2011 Plan:
64
Costs Incurred During
Fiscal Year Ended
June 28, 2013
June 29, 2012
July 1, 2011
Cumulative
Costs Incurred
Through
June 28, 2013
Severance and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Facilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for Fiscal 2011 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.2
0.1
1.3
$
$
(in millions)
0.9
1.4
2.3
$
10.5
2.2
12.7
$
$
12.6
3.7
16.3
During fiscal 2011, our severance and benefits charges under the Fiscal 2011 Plan for North America region related to
reductions in force for the downsizing of the Morrisville, North Carolina office, reductions in force in Canada of their finance,
human resources, IT and engineering functions, and the reductions in force resulting from the sale of our NetBoss assets. The
severance and benefits for International region related primarily to reductions in personnel located in our field offices during
fiscal 2011. Facilities and other charges in fiscal 2011 included obligations under non-cancelable leases for facilities that we
ceased to use at the Morrisville, North Carolina office upon the permanent downsizing of that office.
During fiscal 2013 and 2012, we continued executing restructuring activities to reduce our operating costs worldwide
under the Fiscal 2011 Plan. The facilities charges primarily related to the sublease and relocation of our Morrisville, North
Carolina office and Montreal office during the period. As of June 28, 2013, we have completed our initiatives under the Fiscal
2011 Plan.
Fiscal 2009 Plan
During the first quarter of fiscal 2009, we announced a restructuring plan to reduce our worldwide workforce in the U.S.,
France, Canada and other locations throughout the world (the “Fiscal 2009 Plan”). The Fiscal 2009 Plan also included the
restructure and transition of our North America manufacturing operations and global supply chain operations. The Fiscal 2009
Plan has been completed at the end of fiscal 2011 and we do not expect to incur future restructuring costs related to the Fiscal
2009 Plan.
The following table summarizes our costs incurred during fiscal 2011 and total costs incurred under the Fiscal 2009 Plan:
A
n
n
u
a
l
R
e
p
o
r
t
Costs Incurred
During Fiscal
2011
Total
Restructuring
Costs Incurred
(Completed in Q4
Fiscal 2011)
Severance and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Facilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for Fiscal 2009 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.5
0.2
2.7
$
$
15.0
3.0
18.0
During fiscal 2011, the restructuring activities related to the Fiscal 2009 Plan primarily consisted of outsourcing our San
Antonio manufacturing operations to a third party in Austin, Texas. The restructuring charges primarily consisted of the
severance and benefits charges for reductions in force in our San Antonio manufacturing facilities and costs related to facility
lease obligation adjustments.
Restructuring Liabilities
The information in the following table summarizes our restructuring activities during fiscal 2013, 2012 and 2011 and
restructuring liability as of June 28, 2013:
65
t
r
o
p
e
R
l
a
u
n
n
A
Severance and
Benefits
Facilities and
Other
(In millions)
Total
Restructuring liability as of July 2, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Provision related to Fiscal 2011 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision related to Fiscal 2009 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring liability as of July 1, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision related to Fiscal 2011 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring liability as of June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision related to Fiscal 2013-2014 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
$
10.5
2.5
(12.0)
3.2
0.9
(3.1)
1.0
1.8
4.2
2.2
0.2
(4.8)
1.8
1.4
(2.0)
1.2
—
Provision related to Fiscal 2011 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.1
Cash payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.5)
Restructuring liability as of June 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.8
Current portion of restructuring liability as of June 28, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2
(2.1)
1.9
$
Long-term portion of restructuring liability (included in other long-term liabilities) as of June 28, 2013 . . . . . .
$
$
$
$
6.4
12.7
2.7
(16.8)
5.0
2.3
(5.1)
2.2
1.8
1.3
(2.6)
2.7
2.3
0.4
Note 11. Stockholders’ Equity
Stock Incentive Programs
2007 Stock Equity Plan
As of June 28, 2013, we had one stock incentive plan for our employees and outside directors, the 2007 Stock Equity
Plan, as amended and restated effective November 17, 2011 (the “2007 Stock Plan”). The 2007 Stock Plan provides for
accelerated vesting of certain share-based awards if there is a change in control. The 2007 Stock Plan also provides for the
issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and
performance share awards and units. We have various incentive programs under the 2007 Stock Plan, including annual and
long-term incentive programs (“AIP” or “LTIP”), a global equity program (“GEP”) and product development incentive
programs (“PDIP”). Under the 2007 Stock Plan, option exercise prices are equal to the fair market value on the date the options
are granted using our closing stock price. Options may be exercised for a period set at the time of grant, which is generally
seven years after the date of grant. Options generally vest in installments on one of three vesting schedules: (1) 50% one year
from the grant date and 25% each year thereafter over a three-year period from the date of grant; (2) one-third annually over a
three-year period from the date of grant; or (3) one-fourth annually over a four-year period from date of grant. Stock options are
issued to directors annually and generally vest in one year from the grant date.
Restricted stock is not transferable until vested and the restrictions lapse upon the achievement of continued employment
or service over a specified time period. Restricted stock issued to employees generally vests either one-third annually over a
three-year period from the date of grant or in full three years after the grant date. Restricted stock is issued to directors annually
and generally vests in full one year from the grant date.
Vesting of performance shares under our AIP, LTIP or GEP is subject to financial performance criteria including revenue,
operating income, or cash flow targets for the periods as defined in the programs and continued employment through the end of
the applicable period. Performance shares under our PDIPs are issued to employees related to certain new product development
projects and vest upon achievement of the product development milestones as defined in the programs.
Upon the exercise of stock options, vesting of restricted stock awards and units, or vesting of performance share awards
and units, we issue new shares of our common stock to our employees. All awards that are cancelled prior to vesting or expire
unexercised are returned to the approved pool of reserved shares under the 2007 Stock Plan and made available for future
grants. Shares of our common stock remaining available for future issuance under the 2007 Stock Plan totaled 4,610,632 as of
June 28, 2013.
Acquisition Plan
66
We assumed all of the former Stratex outstanding stock options as of January 26, 2007, as part of the Stratex acquisition.
The outstanding former Stratex options became fully vested in fiscal 2011.
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan (“ESPP”), employees are entitled to purchase shares of our common stock at a
5% discount from the fair market value at the end of a three-month purchase period. As of June 28, 2013, 787,750 shares were
reserved for future issuances under the ESPP. We issued 26,016 shares under the ESPP during fiscal 2013.
Share-Based Compensation
Total compensation expense for share-based awards included in our consolidated statements of operations for fiscal 2013,
2012 and 2011 was as follows:
(In millions)
By Expense Category:
Cost of product sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
By Types of Award:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted stock awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal Year
2013
2012
2011
0.5
1.0
4.9
—
6.4
2.5
1.5
2.4
6.4
$
$
$
$
0.7
0.9
3.6
—
5.2
2.6
1.8
0.8
5.2
$
$
$
$
0.4
1.9
2.3
0.2
4.8
2.4
1.2
1.2
4.8
A
n
n
u
a
l
R
e
p
o
r
t
As of June 28, 2013, there was $4.2 million of total unrecognized compensation expense related to nonvested stock
options and restricted stock awards and units granted under our 2007 Stock Equity Plan. This expense is expected to be
recognized over a weighted-average period of 1.5 years.
Stock Options
A summary of the combined stock option activity under our equity plans during fiscal 2013 is as follows:
Options outstanding as of June 29, 2012 . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding as of June 28, 2013 . . . . . . . . . . . . . . . . . . . .
Options exercisable as of June 28, 2013 . . . . . . . . . . . . . . . . . . . . .
Options vested and expected to vest as of June 28, 2013 . . . . . . . .
Shares
5,698,874
1,371,477
(106,306)
(391,235)
(382,246)
6,190,564
3,311,415
5,953,527
Weighted
Average
Exercise Price
$4.95
$2.60
$2.17
$2.91
$12.60
$3.95
$5.07
$4.01
Weighted
Average
Remaining
Contractual
Life
(Years)
5.27
Aggregate
Intrinsic Value
($ in millions)
$1.3
4.85
4.06
4.81
$1.0
$0.4
$1.0
The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing
price of our common stock on June 28, 2013 of $2.62 and the exercise price for in-the-money options that would have been
received by the optionees if all options had been exercised on June 28, 2013. The options expected to vest are the result of
applying the pre-vesting forfeiture rate assumptions to total outstanding options.
67
Additional information related to our stock options is summarized below:
(In millions, except per share amounts)
Weighted average grant date fair value per share granted . . . . . . . . . . . . . . . . . . . . . . . . $
Intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of options vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
2012
2011
1.30
$
— $
$
3.0
1.22
$
— $
$
3.0
2.41
—
2.6
Fiscal Year
The fair value of each option grant under our 2007 Stock Equity Plan was estimated using the Black-Scholes option
pricing model on the date of grant. A summary of the significant weighted average assumptions we used in the Black-Scholes
valuation model is as follows:
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—%
64.9%
0.49%
4.33
—%
65.9%
0.73%
4.46
—%
63.7%
1.32%
4.35
Fiscal Year
2013
2012
2011
Expected volatility is based on implied volatility for the expected term of the options from our stock price. Prior to fiscal
2012, due to lack of sufficient trading history, our stock price volatility assumption was based on a hybrid method of implied
volatility from our stock price and a group of peer companies whose share prices are publicly available. The expected term of
the options is calculated using the simplified method described in the SEC’s Staff Accounting Bulletins Topic 14.D.2. We use
the simplified method because we do not have sufficient stock option exercise data and the types of employees that receive
share option grants have been significantly changed due to the implementation of our 2012 global equity plan, under which we
granted share-based awards to employees who are not eligible for the long-term incentive programs. The risk-free rate for the
expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield
is zero because we have not historically paid dividends on our common stock and have no intention to pay dividends in the
foreseeable future. The following summarizes all of our stock options outstanding and exercisable as of June 28, 2013:
t
r
o
p
e
R
l
a
u
n
n
A
Actual Range of Exercise Prices
$1.72 — $2.11 . . . . . . . . . . . . . . . . . . . . . . . .
$2.28 — $2.37 . . . . . . . . . . . . . . . . . . . . . . . .
$2.45 — $2.71 . . . . . . . . . . . . . . . . . . . . . . . .
$2.92 — $5.18 . . . . . . . . . . . . . . . . . . . . . . . .
$5.92 — $6.44 . . . . . . . . . . . . . . . . . . . . . . . .
$6.50 — $24.60 . . . . . . . . . . . . . . . . . . . . . . .
$1.72 — $24.60 . . . . . . . . . . . . . . . . . . . . . . .
Number
Outstanding
1,171,216
1,097,836
1,417,048
992,387
1,303,124
208,953
6,190,564
Restricted Stock
Options Outstanding
Weighted
Average
Remaining
Contractual
Life
(Years)
Options Exercisable
Weighted
Average
Exercise Price
Number
Exercisable
Weighted
Average
Exercise Price
5.33
5.63
5.91
4.49
3.34
2.03
4.85
$2.08
$2.33
$2.63
$4.28
$6.14
$16.63
$3.95
663,158
328,743
186,732
677,400
1,246,429
208,953
3,311,415
$2.08
$2.37
$2.70
$4.42
$6.15
$16.63
$5.07
A summary of the status of our restricted stock as of June 28, 2013 and changes during fiscal 2013 are as follows:
68
Restricted stock outstanding as of June 29, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and released. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock outstanding as of June 28, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
1,310,712
58,009
(746,288)
(60,388)
562,045
Weighted Average
Grant Date
Fair Value
$3.01
$3.62
$2.87
$2.73
$3.27
The fair value of each restricted stock grant is based on the closing price of our common stock on the date of grant and is
amortized to compensation expense over its vesting period. The total fair value of restricted stock that vested during fiscal
2013, 2012 and 2011 was $1.9 million, $0.6 million and $0.7 million, respectively.
Performance Share Awards
A summary of the status of our performance shares as of June 28, 2013 and changes during fiscal 2013 are as follows:
Performance shares outstanding as of June 29, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and released. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited due to target thresholds not achieved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited due to terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance shares outstanding as of June 28, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
1,316,175
1,308,213
(380,450)
(513,740)
(103,836)
1,626,362
Weighted Average
Grant Date
Fair Value
$3.63
$2.38
$2.47
$3.68
$3.14
$2.91
A
n
n
u
a
l
R
e
p
o
r
t
The fair value of each performance share is based on the closing price of our common stock on the date of grant and is
amortized to compensation expense over its vesting period if achievement of the performance conditions is considered
probable. Any previously recognized compensation cost would be reversed if the performance condition is not satisfied or if it
is not probable that the performance conditions will be achieved.
The total fair value of performance share awards that vested during fiscal 2013, 2012 and 2011 was $0.9 million, $0.3
million and $1.2 million, respectively.
Note 12. Segment and Geographic Information
We operate in one reportable business segment: the design, manufacturing and sale of a range of wireless networking
products, solutions and services. We conduct business globally and our sales and support activities are managed on a
geographic basis. Our Chief Executive Officer is the Chief Operating Decision Maker (the “CODM”). Our CODM manages our
business primarily by function globally and reviews financial information on a consolidated basis, accompanied by
disaggregated information about revenues by geographic region, for purposes of allocating resources and evaluating financial
performance. The profitability of our geographic region is not a determining factor in allocating resources and the CODM does
not evaluate profitability below the level of the consolidated company.
We report revenue by region and country based on the location where our customers accept delivery of our products and
services. Revenue by region for 2013, 2012 and 2011 are as follows:
(In millions)
North America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Africa and Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Russia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America and Asia Pacific. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
2012
2011
180.5
182.2
48.0
60.6
471.3
$
$
164.9
147.7
53.6
77.8
444.0
$
$
160.4
143.6
73.4
74.7
452.1
Fiscal Year
69
Revenue by country comprising more than 5% of our sales to unaffiliated customers for fiscal 2013, 2012 and 2011 are as
follows:
(In millions, except %)
Fiscal 2013:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nigeria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2012:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nigeria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2011:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nigeria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue
% of
Total Revenue
177.0
92.7
161.6
94.5
27.9
147.2
78.0
37.6%
19.7%
36.4%
21.3%
6.3%
32.6%
17.3%
t
r
o
p
e
R
l
a
u
n
n
A
Our long-lived assets, consisting primarily of property, plant and equipment, by geographic areas based on the physical
location of the assets as of June 28, 2013 and June 29, 2012 are as follows:
(In millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
United Kingdom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
June 28,
2013
June 29,
2012
22.0
3.5
3.8
29.3
$
$
15.5
3.6
3.7
22.8
Note 13. Income Taxes
Income (loss) from continuing operations before provision for income taxes during fiscal year 2013, 2012 and 2011 is as
follows:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(4.8) $
7.2
2.4
$
(5.6) $
(8.4)
(14.0) $
(32.3)
(12.4)
(44.7)
Fiscal Year
2013
2012
2011
(In millions)
70
Provision for income taxes from continuing operations for fiscal year 2013, 2012 and 2011 are summarized as follows:
Current provision:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred provision (benefit):
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal Year
2013
2012
2011
(In millions)
(0.1) $
13.6
—
13.5
—
(0.2)
—
(0.2)
13.3
$
0.1
1.4
—
1.5
—
—
—
—
1.5
$
$
0.1
2.0
—
2.1
—
12.0
—
12.0
14.1
The following table summarizes the significant differences between the U.S. Federal statutory tax rate and our effective
tax rate from continuing operations for fiscal year 2013, 2012 and 2011:
Statutory U.S. federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local taxes, net of U.S. federal tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment not deductible. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income taxed at rates less than the U.S. statutory rate. . . . . . . . . . . . . . . . . . . . .
Dividend from foreign subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign branch income/withholding taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
35.0 %
67.4 %
11.1 %
(1.7)%
— %
(63.9)%
— %
27.5 %
488.9 %
(3.2)%
561.1 %
Fiscal Year
2012
(35.0)%
12.8 %
— %
(1.7)%
6.6 %
4.4 %
12.1 %
7.2 %
— %
4.4 %
10.8 %
2011
(35.0)%
51.9 %
— %
(3.4)%
0.2 %
9.0 %
— %
6.3 %
— %
2.5 %
31.5 %
The income tax expense from continuing operations for fiscal year 2013 was $13.3 million. The variation between our
income tax expense from continuing operations and income tax expense at the statutory rate of 35% on our pre-tax income of
$2.4 million was primarily attributable to a $11.7 million increase in our reserve for uncertain tax positions, losses in tax
jurisdictions in which we cannot recognize a tax benefit and increase in foreign withholding taxes.
The income tax expense from continuing operations for fiscal year 2012 was $1.5 million. The variation between our
income tax expense from continuing operations and income tax benefit at the statutory rate of 35% on our pre-tax loss of $14.0
million was primarily attributable to losses in tax jurisdictions in which we cannot recognize a tax benefit. The tax expense for
fiscal year 2012 of $1.5 million was primarily attributable to profitable foreign entities for which we have accrued income
taxes.
The income tax expense from continuing operations for fiscal year 2011 was $14.1 million. The variation between our
income tax expense from continuing operations of $14.1 million and income tax benefit at the statutory rate of 35% on our pre-
tax loss of $44.7 million was primarily due to an $11.3 million increase in valuation allowance for Singapore deferred tax assets
as of the beginning of fiscal 2011 and a $1.4 million foreign branch withholding tax accrual. The expense was partially offset
by a valuation allowance release of $1.6 million on Mexico deferred tax assets as of the beginning of fiscal year 2011.
A
n
n
u
a
l
R
e
p
o
r
t
71
t
r
o
p
e
R
l
a
u
n
n
A
The components of deferred tax assets and liabilities are as follows:
Deferred tax assets:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals and reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized exchange gain/loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Branch undistributed earnings reserve . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
June 28, 2013
June 29, 2012
Current
Non-Current
Current
Non-Current
(In millions)
$
10.5
5.4
2.5
—
—
—
—
3.6
—
—
—
22.0
(21.1)
0.9
1.1
—
—
1.1
(0.2) $
— $
0.1
—
—
24.5
5.6
0.7
—
4.8
20.3
122.3
178.3
(176.9)
1.4
0.2
0.8
0.7
1.7
(0.3) $
$
9.9
4.2
4.6
—
—
—
—
3.5
—
—
—
22.2
(21.2)
1.0
1.3
—
—
1.3
(0.3) $
—
0.1
—
3.8
12.3
4.6
1.9
—
4.6
14.8
130.1
172.2
(171.8)
0.4
0.1
0.8
—
0.9
(0.5)
Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheet, was $198.0
million as of June 28, 2013 and $193.0 million as of June 29, 2012. The increase in valuation allowance from fiscal 2012 to
fiscal 2013 was primarily due to excess R&D credit that was created in certain foreign jurisdiction.
Tax loss and credit carryforwards as of June 28, 2013 have expiration dates ranging between one year and no expiration
in certain instances. The amount of U.S. federal tax loss carryforwards as of June 28, 2013 and June 29, 2012 were $282.8
million and $271.0 million and begin to expire in fiscal 2023. Credit carryforwards as of June 28, 2013 and June 29, 2012 were
$26.1 million and $20.9 million and certain credits began to expire in fiscal 2012. The amount of foreign tax loss carryforwards
as of June 28, 2013 and June 29, 2012 was $95.2 million and $143.0 million, respectively.
United States income taxes have not been provided on basis differences in foreign subsidiaries of $5.5 million and $6.3
million as of June 28, 2013 and June 29, 2012, because of our intention to reinvest these earnings indefinitely. The residual U.S.
tax liability, if such amounts were remitted, would be nominal.
We entered into a tax sharing agreement with Harris effective on January 26, 2007, the date of the acquisition of Stratex.
The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and
tax attributes that are attributable to the Microwave Communication Division when it was a division of Harris. There was no
settlement payments recorded in fiscal year 2013, 2012 or 2011.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in
determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of
our business, there are many transactions and calculations where the ultimate tax determination is uncertain.
As of June 28, 2013 and June 29, 2012, we had unrecognized tax benefits of $28.7 million and $13.4 million for various
federal, foreign, and state income tax matters. Unrecognized tax benefits increased by $15.3 million. Our total unrecognized tax
benefits that, if recognized, would affect our effective tax rate were $15.9 million and $4.2 million , respectively, as of June 28,
2013 and June 29, 2012. These unrecognized tax benefits are presented on the accompanying consolidated balance sheet net of
the tax effects of net operating loss carryforwards.
72
We account for interest and penalties related to unrecognized tax benefits as part of our provision for income taxes. We
accrued $0.1 million interest as of June 28, 2013 and did not accrue any amount for such interest as of June 29, 2012. No
penalties have been accrued.
The amount of unrecognized tax benefits may change in the next twelve months. We believe that we have adequately
provided for any reasonably foreseeable outcomes related to our tax audits.
Our unrecognized tax benefit activity for fiscal 2013, 2012 and 2011 is as follows:
(In millions)
Unrecognized tax benefit as of July 2, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefit as of July 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefit as of June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefit as of June 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amount
14.9
1.3
(2.2)
14.0
—
(0.6)
13.4
0.7
15.0
(0.4)
28.7
We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax jurisdictions
include the U.S., Singapore and Nigeria. The earliest years still open and subject to potential audits for these jurisdictions are as
follows: U.S. —2003; Singapore — 2005; and Nigeria — 2004.
In fiscal year 2013, we received several assessments from the taxing authorities in various foreign countries challenging
certain tax benefits recognized in those jurisdictions. We continue to protest these assessments and defend the positions that we
have taken with regards to these tax benefits.
A
n
n
u
a
l
R
e
p
o
r
t
Note 14. Derivative Financial Instruments and Hedging Activities
We use derivative instruments to manage our market exposures to foreign currency risk. Our objectives for using
derivatives are to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates.
We do not hold or issue derivatives for trading purposes or make speculative investments in foreign currencies. All derivative
instruments are carried on the balance sheet at fair value.
Our major foreign currency hedging activities are described below:
Cash Flow Hedges. We use currency forward contracts to hedge exposures related to certain forecasted foreign currency
transactions relating to revenue, product costs, operating expenses and intercompany transactions. As of June 28, 2013, hedged
transactions included our customer and intercompany backlog and outstanding purchase commitments denominated primarily
in the Australian dollar, Euro, Polish zloty and South Africa rand. These derivatives are designated as cash flow hedges and
typically have maturities from one to three months with a maximum of six months, which in general closely match the
underlying forecasted transaction in duration.
We measure the effectiveness of the hedges of forecasted transactions on a monthly basis by comparing the fair values of
the designated currency forward contracts with the fair values of the forecasted transactions. The effective portion of the
contract’s gain and loss is initially recognized in other comprehensive income or loss (“OCI”) and, upon occurrence of the
forecasted transaction, is reclassified into the income or expense line item to which the hedged transaction relates. Any
ineffective portion of the derivative hedging gain or loss as well as changes in the fair value of the derivative’s time value
(which are excluded from the assessment of hedge effectiveness) is recorded in current period earnings, specifically, in cost of
product sales as these gains and losses are considered by us to be operational in nature. If the forecasted transaction does not
occur, or it becomes probable that it will not occur, the gain or loss on the related cash flow hedge is recognized immediately in
cost of product sales.
73
t
r
o
p
e
R
l
a
u
n
n
A
As of June 28, 2013, it is expected that $0.1 million of derivative net gain on both outstanding and matured derivatives
recorded in AOCI will be reclassified to net income or loss during the next twelve months as a result of underlying hedged
transactions also being recorded in net income or loss. Actual amounts ultimately to be reclassified to net income or loss depend
on the exchange rates in effect when currently outstanding derivative contracts mature.
Balance Sheet Hedges. We also use foreign exchange forward contracts to mitigate the gains and losses generated from
the re-measurement of certain monetary assets and liabilities denominated in a foreign currency, including primarily cash
balances, third party accounts receivable and accounts payable, and intercompany transactions recorded on the balance sheet.
These derivatives are not designated and do not qualify as hedge instruments and accordingly are carried at fair value with
changes recorded in the cost of product sales in current period. Changes in the fair value of these derivatives are largely offset
by re-measurement of the underlying assets and liabilities. These derivatives have maturities of approximately one month.
The following table presents the gross notional value of all our foreign exchange forward contracts outstanding as of
June 28, 2013 and June 29, 2012:
(In millions)
Cash flow hedges:
June 28, 2013
June 29, 2012
Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Polish zloty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Republic of South Africa rand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Balance sheet hedges:
Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian rupee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philippine peso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Polish zloty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand baht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Republic of South Africa rand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-designated hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.5
2.8
4.8
—
—
8.1
2.1
0.3
1.4
2.3
3.1
6.9
—
0.6
2.4
1.4
20.5
28.6
$
$
1.2
4.2
1.9
4.5
0.4
12.2
2.4
1.5
6.2
0.9
3.8
5.6
0.6
1.1
2.9
1.1
26.1
38.3
The following table presents the fair value of derivative instruments included within our consolidated balance sheet as of
June 28, 2013 and June 29, 2012:
(In millions)
Balance Sheet
Location
June 28,
2013
June 29,
2012
Balance Sheet
Location
June 28,
2013
June 29,
2012
Asset Derivatives
Liability Derivatives
Derivatives designated as hedging instruments:
Foreign exchange forward contracts . Other current
assets
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts . Other current
assets
Total derivatives. . . . . . . . . . . . . . . .
$
$
0.1
$
0.1
Other accrued
expenses
—
0.1
$
—
0.1
Other accrued
expenses
$
$
— $
0.1
0.1
0.1
$
—
0.1
74
The following table summarizes the location and amount of the gains and losses on derivative instruments reported in our
financial statements during fiscal 2013, 2012 and 2011:
Locations of Gains (Losses) on Derivative Instruments
2013
Fiscal Year
2012
(In millions)
2011
Designated as cash flow hedges (foreign exchange forward contracts):
Effective portion of gain (loss) recognized in OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective portion of gain (loss) reclassified from AOCI into:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of Products Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss associated with the derivatives' time value recognized in cost of
product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) due to hedge ineffectiveness recognized in cost of product sales. . . . . . . .
Not designated as cash flow hedges (foreign exchange forward contracts):
Gain (loss) recognized in cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
0.1
$
0.8
$
(0.6)
0.1
$
(0.1) $
(0.2) $
— $
(0.9) $
$
0.1
(0.2) $
— $
0.4
(0.1)
(0.2)
—
0.5
$
1.2
$
(2.3)
Credit Risk
We are exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The
counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this
does not eliminate our exposure to credit risk with these institutions. Should any of these counterparties fail to perform as
contracted, we could incur interest charges and unanticipated gains or losses on the settlement of the derivatives in addition to
the recorded fair value of the derivative due to non-delivery of the currency. To manage this risk, we have established strict
counterparty credit guidelines for financial institutions providing foreign currency exchange services in accordance with
corporate policy. As a result of the above considerations, we consider the risk of counterparty default to be immaterial.
The credit facilities we have with financial institutions under which we transact foreign exchange transactions are
generally restricted to a total notional amount outstanding, a maximum settlement amount in any one day and a maximum term.
There are no formal written agreements supporting these facilities other than the financial institutions’ general terms and
conditions for trading. None of the facilities are collateralized and none require compliance with financial covenants or contain
cross default or other provisions which could affect other credit arrangements we have with the same or other banks. If we fail
to deliver currencies as required upon settlement of a trade, the bank may require early settlement on a net basis of all
derivatives outstanding and if any amounts are still owing to the bank, they may charge any cash account we have with the bank
for that amount.
Note 15. Commitments and Contingencies
Operating Lease Commitments
We lease office and manufacturing facilities under non-cancelable operating leases expiring at various dates through April
2020. We lease approximately 129,000 square feet of office space in Santa Clara, California as our corporate headquarters. As
of June 28, 2013, future minimum lease payments for our headquarters total $17.5 million through April 2020.
As of June 28, 2013, our future minimum lease payments under all non-cancelable operating leases with an initial lease
term in excess of one year are as follows:
A
n
n
u
a
l
R
e
p
o
r
t
75
Fiscal Years Ending in June
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amount
(In millions)
5.6
4.2
3.8
2.9
2.9
5.1
24.5
t
r
o
p
e
R
l
a
u
n
n
A
These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent concessions,
leasehold improvement incentives or unusual provisions or conditions. We sublease a portion of our facilities to third parties
and total minimum rentals to be received in the future under our noncancelable subleases was $0.7 million as of June 28, 2013.
Rental expense for operating leases, including rentals on a month-to-month basis was $8.5 million, $9.3 million and $11.1
million in fiscal 2013, 2012 and 2011, respectively.
Purchase Orders and Other Commitments
From time to time in the normal course of business we may enter into purchasing agreements with our suppliers that
require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products that we
requested be held as safety stock, and work in process started on our behalf in the event we cancel or terminate the purchasing
agreement. Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price
provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or
terminate any of these agreements, we currently do not believe that we have any future liability under these agreements. As of
June 28, 2013, we had outstanding purchase obligations with our suppliers or contract manufacturers of $61.5 million. In
addition, we had contractual obligations of approximately $5.0 million associated with major capital purchase and service
agreements as of June 28, 2013.
Financial Guarantees and Commercial Commitments
Guarantees issued by banks, insurance companies or other financial institutions are contingent commitments issued to
guarantee our performance under borrowing arrangements, such as bank overdraft facilities, tax and customs obligations and
similar transactions or to ensure our performance under customer or vendor contracts. The terms of the guarantees are generally
equal to the remaining term of the related debt or other obligations and are generally limited to two years or less. As of June 28,
2013, we had no guarantees applicable to our debt arrangements.
We have entered into commercial commitments in the normal course of business including surety bonds, standby letters
of credit agreements and other arrangements with financial institutions primarily relating to the guarantee of future performance
on certain contracts to provide products and services to customers. As of June 28, 2013, we had commercial commitments of
$54.0 million outstanding that were not recorded on our consolidated balance sheets. We do not believe, based on historical
experience and information currently available, that it is probable that any amounts will be required to be paid on the
performance guarantees.
Indemnifications
Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment
against our customers arising from claims against such customers that our software products infringe the intellectual property
rights of a third party. As of June 28, 2013, we have not received any notice that any customer is subject to an infringement
claim arising from the use of our software products; we have not received any request to defend any customers from
infringement claims arising from the use of our software products; and we have not paid any final judgment on behalf of any
customer related to an infringement claim arising from the use of our software products. Because the outcome of infringement
disputes is related to the specific facts of each case, and given the lack of previous or current indemnification claims, we cannot
estimate the maximum amount of potential future payments, if any, related to our indemnification provisions. As of June 28,
2013, we had not recorded any liabilities related to these indemnifications.
76
Legal Proceedings
From time to time, we may be involved in various legal claims and litigation that arise in the normal course of our
operations. While the results of such claims and litigation cannot be predicted with certainty, we currently believe that we are
not a party to any litigation the final outcome of which is likely to have a material adverse effect on our financial position,
results of operations or cash flows. However, should we not prevail in any such litigation; it could have a material adverse
impact on our operating results, cash flows or financial position.
Contingent Liabilities
We have unresolved legal and tax matters, as discussed further in “Note 13. Income Taxes” and in this note. We record a
loss contingency as a charge to operations when (i) it is probable that an asset has been impaired or a liability has been incurred
at the date of the financial statements; and (ii) the amount of the loss can be reasonably estimated. Disclosure in the notes to the
financial statements is required for loss contingencies that do not meet both those conditions if there is a reasonable possibility
that a loss may have been incurred. Gain contingencies are not recorded until realized. We expense all legal costs incurred to
resolve regulatory, legal and tax matters as incurred.
Periodically, we review the status of each significant matter to assess the potential financial exposure. If a potential loss is
considered probable and the amount can be reasonably estimated, we reflect the estimated loss in our results of operations.
Significant judgment is required to determine the probability that a liability has been incurred or an asset impaired and whether
such loss is reasonably estimable. Further, estimates of this nature are highly subjective, and the final outcome of these matters
could vary significantly from the amounts that have been included in our consolidated financial statements. As additional
information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise
estimates accordingly. Such revisions in the estimates of the potential liabilities could have a material impact on our results of
operations and financial position.
A
n
n
u
a
l
R
e
p
o
r
t
Note 16. Quarterly Financial Data (Unaudited)
The following financial information reflects all normal recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of the results of the interim periods. Our fiscal quarters end on the Friday nearest the end of the
calendar quarter. Summarized quarterly data for fiscal 2013 and 2012 are as follows:
Q1
Ended
9/28/2012
Q2
Ended
12/28/2012
Q3
Ended
3/29/2013
Q4
Ended
6/28/2013
Fiscal 2013
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Per share data:
(In millions, except per share amounts)
$
118.3
34.1
$
(1.0) $
(1.7) $
$
129.0
$
38.7
4.9
$
(5.3) $
$
115.0
$
33.7
0.7
$
(2.2) $
109.0
33.6
(2.9)
(5.8)
Basic and diluted net loss per common share . . . . . . . . . . . . . . . . . . . $
(0.04) $
(0.09) $
(0.03) $
(0.10)
Q1
Ended
9/30/2011
Q2
Ended
12/30/2011
Q3
Ended
3/30/2012
Q4
Ended
6/29/2012
Fiscal 2012
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Per share data:
(In millions, except per share amounts)
$
111.6
34.3
$
(0.5) $
(3.2) $
$
105.0
31.9
$
(8.9) $
(12.8) $
$
111.4
32.7
$
(2.5) $
(6.8) $
116.0
32.8
(1.4)
(1.3)
Basic and diluted net loss per common share . . . . . . . . . . . . . . . . . . . $
(0.12) $
(0.22) $
(0.05) $
(0.02)
77
The following tables summarize certain charges, expenses and loss from discontinued operations included in our results
of operations for each of the fiscal quarters presented:
Q1
Ended
9/28/2012
Q2
Ended
12/28/2012
Q3
Ended
3/29/2013
Q4
Ended
6/28/2013
Fiscal 2013
Amortization of purchased technology and intangible assets. . . . . . . . . . $
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactional tax assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.3
0.3
0.7
1.5
—
2.8
1.4
Q1
Ended
9/30/2011
t
r
o
p
e
R
l
a
u
n
n
A
Fiscal 2012
Charges for product transition, product discontinuances and
inventory mark-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of purchased technology and intangible assets. . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetBoss bad debt expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactional tax assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.1
0.9
0.9
—
—
—
1.0
2.9
3.1
(In millions)
0.2
0.2
—
1.9
—
2.3
0.3
$
$
$
0.3
0.4
0.7
1.4
—
2.8
0.1
$
$
$
0.2
2.2
—
1.6
(0.7)
3.3
2.3
Q2
Ended
12/30/2011
Q3
Ended
3/30/2012
Q4
Ended
6/29/2012
(In millions)
0.9
0.8
0.1
5.6
0.4
0.3
1.3
9.4
2.8
$
$
$
— $
0.3
0.4
—
0.5
0.3
1.4
2.9
2.4
$
$
—
0.3
0.9
—
(0.1)
—
1.5
2.6
0.3
$
$
$
$
$
$
78
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving
their control objectives.
Management has conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 28, 2013.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer, management has assessed the effectiveness of
the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management
has concluded that our internal control over financial reporting was effective as of June 28, 2013.
KPMG LLP, our independent registered public accounting firm, has issued an attestation report regarding its assessment
of our internal control over financial reporting as of June 28, 2013, as set forth at the beginning of Part II, Item 8 of this Annual
Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There has been no change in our internal controls over financial reporting during the fourth quarter of fiscal 2013 that has
materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
A
n
n
u
a
l
R
e
p
o
r
t
Item 9B. Other Information
None.
79
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a
definitive Proxy Statement with the SEC within 120 days after the end of our fiscal year ended June 28, 2013.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We adopted a Code of Conduct that is available at www.aviatnetworks.com. No amendments to our Code of Business
Ethics or waivers from our Code of Conduct with respect to any of our executive officers or directors have been made. If, in the
future, we amend our Code of Conduct or grant waivers from our Code of Conduct with respect to any of our executive officers
or directors, we will make information regarding such amendments or waivers available on our corporate website
(www.aviatnetworks.com) for a period of at least 12 months.
For information with respect to Executive Officers, see Part I, Item 1 of this Annual Report on Form 10-K, under
“Executive Officers of the Registrant.”
Information regarding our directors and compliance with Section 16(a) of the Exchange Act by our directors and
executive officers will appear in our definitive Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
Information regarding our executive compensation will appear in our definitive Proxy Statement and is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Summary
The following table provides information as of June 28, 2013, relating to our equity compensation plan pursuant to which
grants of options, restricted stock and performance shares may be granted from time to time and the option plans and
agreements assumed by us in connection with the Stratex acquisition:
t
r
o
p
e
R
l
a
u
n
n
A
Plan Category
Equity Compensation plan approved by security holders(3) . .
Equity Compensation plans not approved by security
holders(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
_________________________
Number of Securities to
be Issued Upon Exercise
of Options and Vesting
of restricted Stock Units
and Performance Share
Units(1)
Weighted-
Average
Exercise Price of
Outstanding
Options(2)
Number of Securities
Remaining Available for
Further Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
the First Column)
7,540,012
44,875
7,584,887
$
$
$
3.80
23.73
3.95
4,610,632
—
4,610,632
(1)
(2)
(3)
Under the 2007 Stock Equity Plan, in addition to options, we have granted share-based compensation awards in the
form of performance shares, restricted stock, performance share units and restricted stock units. As of June 28, 2013,
there were 2,188,407 such awards outstanding under that plan. The outstanding awards consisted of (i) performance
share awards at target and restricted stock awards, for which all 794,084 shares were issued and outstanding; and
(ii) 1,394,323 performance share unit awards at target and restricted stock unit awards, for which all 1,394,323 were
payable in shares but for which no shares were yet issued and outstanding. The 7,540,012 shares to be issued upon
exercise of outstanding options and vesting of restricted stock units and performance share units as listed in the first
column consisted of shares to be issued in respect of the exercise of 6,145,689 outstanding options and in respect of
the 1,394,323 performance share unit awards and restricted stock units awards payable in shares.
Excludes weighted average fair value of restricted stock units and performance share units at issuance date.
Consists solely of our 2007 Stock Equity Plan, as amended and restated effective November 17, 2011.
80
(4)
(5)
Consists of common stock that may be issued pursuant to option plans and agreements assumed pursuant to the Stratex
acquisition. The Stratex plans were duly approved by the stockholders of Stratex prior to the merger with us. No shares
are available for further issuance.
For further information on our equity compensation plans see “Note 1. The Company and Summary of Significant
Accounting Policies” and “Note 11. Stockholders’ Equity” in the notes to consolidated financial statements included in
Item 8.
The other information required by this item will appear in our definitive Proxy Statement and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions, and director independence will appear in our
definitive Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information regarding our principal accountant fees and services will appear in our definitive Proxy Statement and is
incorporated herein by reference.
A
n
n
u
a
l
R
e
p
o
r
t
81
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report.
1. Financial Statements.
t
r
o
p
e
R
l
a
u
n
n
A
The financial statements of Aviat Networks, Inc. are set forth in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules.
Schedule II — Valuation and Qualifying Accounts for the three fiscal years ended June 28, 2013
All other schedules have been omitted because the required information is not present or is not present in amounts
sufficient to require submission of the schedules or because the information required is included in the consolidated financial
statements or notes thereto.
(b) Exhibits.
The following exhibits are filed herewith or are incorporated herein by reference to exhibits previously filed with the
SEC:
Ex. #
2.1
2.2
2.3
2.4
3.1
3.2
3.3
Description
Intentionally omitted
Intentionally omitted
Intentionally omitted
Asset Purchase Agreement by and among Aviat U.S., Inc. and EION Networks, Inc., dated as of September 2,
2011 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on
September 9, 2011, File No. 001-33278)
Amended and Restated Certificate of Incorporation of Harris Stratex Networks, Inc. as filed with the Secretary of
State of the State of Delaware on November 19, 2009 (incorporated by reference to Exhibit 3.1 to the Current
Report on Form 8-K filed with the SEC on November 23, 2009, File No. 001-33278)
Amended and Restated Bylaws of Harris Stratex Networks, Inc. (incorporated by reference to Exhibit 3.2 to the
Current Report on Form 8-K filed with the SEC on November 23, 2009, File No. 001-33278)
Certificate of Ownership and Merger Merging Aviat Networks, Inc. into Harris Stratex Networks, Inc., effective
January 27, 2010, as filed with the Secretary of State of the State of Delaware on January 27, 2010 (incorporated
by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 28, 2010, File
No. 001-33278)
82
Ex. #
4.1
4.1.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
Intentionally omitted
Description
Specimen common stock certificate, adopted as of January 29, 2010 (incorporated by reference to Exhibit 4.1.1 to
the Annual Report on Form 10-K for fiscal year end July 2, 2010 filed with the SEC on September 9, 2010, File
No. 001-33278)
Intentionally omitted
Intentionally omitted
Intentionally omitted
Intentionally omitted
Intellectual Property Agreement between Harris Stratex Networks, Inc. and Harris Corporation dated January 26,
2007 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on
February 1, 2007, File No. 001-33278)
Intentionally omitted
Intentionally omitted
Intentionally omitted
10.6.1
Intentionally omitted
10.7
10.8
10.9
10.10
Intentionally omitted
Intentionally omitted
Intentionally omitted
Tax Sharing Agreement between Harris Stratex Networks, Inc. and Harris Corporation dated January 26, 2007
(incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed with the SEC on February 1,
2007, File No. 001-33278)
10.11
Intentionally omitted
10.12*
Intentionally omitted
10.13*
Intentionally omitted
A
n
n
u
a
l
R
e
p
o
r
t
83
Ex. #
Description
10.13.1* Intentionally omitted
10.14*
10.15
Standard Form of Executive Employment Agreement between Harris Stratex Networks, Inc. and certain
executives (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed with the SEC on
February 1, 2007, File No. 001-33278)
Form of Indemnification Agreement between Harris Stratex Networks, Inc. and its directors and certain officers
(incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1 of Stratex Networks, Inc.,
File No. 33-13431)
10.16
Intentionally omitted
10.17*
Harris Stratex Networks, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.17 to the Annual
Report on Form 10-K for the fiscal year ended June 27, 2008 filed with the SEC on September 25, 2008, File
No. 001-33278)
10.18*
Harris Stratex Networks, Inc. 2007 Stock Equity Plan (incorporated by reference to Exhibit 4.9 to the
Registration Statement on Form S-8 filed with the SEC on February 5, 2007, File No. 333-140442)
10.18.1
10.18.2
Harris Stratex Networks, Inc. 2007 Stock Equity Plan (As Amended and Restated Effective November 19, 2009)
(incorporated by reference to Appendix B to the Registrant’s Schedule 14A filed with the Securities and
Exchange Commission on October 7, 2009, File No. 001-33278)
Aviat Networks, Inc. 2007 Stock Equity Plan (as Amended and Restated Effective November 17, 2011)
(incorporated by reference to Appendix A to Schedule 14A filed with the SEC on October 3, 2011, File
No. 001-33278)
10.19
Intentionally omitted
10.19.1
Intentionally omitted
10.20
Intentionally omitted
10.20.1
Intentionally omitted
10.20.2
Loan and Security Agreement between Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte Ltd. and
Silicon Valley Bank, dated September 30, 2010 (incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K filed with the SEC on October 4, 2010, File No. 001-33278)
10.21
Intentionally omitted
t
r
o
p
e
R
l
a
u
n
n
A
84
Ex. #
Description
10.22*
Intentionally omitted
10.22.1*
Employment Agreement, effective as of October 31, 2011, between Aviat Networks, Inc. and Edward J. Hayes,
Jr. (incorporated by reference to the Current Report on Form 8-K filed with the SEC on October 31, 2011, File
No. 001-33278)
10.23*
10.24*
10.24.1*
10.24.2*
Employment Agreement, dated as of April 1, 2006, between Harris Stratex Networks, Inc. and Heinz Stumpe
(incorporated by reference to Exhibit 10.15.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 2007 filed with the SEC on May 8, 2007, File No. 001-33278)
Employment Agreement, dated as of May 14, 2002, between Stratex Networks, Inc. and Paul Kennard
(incorporated by reference to Exhibit 10.1 to the Stratex Networks, Inc. Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2006 filed with the SEC on August 9, 2006, File No. 000-15895)
Amendment A, effective as of April 1, 2006, to Employment Agreement, dated May 14, 2002, between Stratex
Networks, Inc. and Paul Kennard (incorporated by reference to Exhibit 10.2 to the Stratex Networks, Inc.
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 filed with the SEC on August 9, 2006,
File No. 000-15895)
Amendment B, effective as of April 1, 2006, to Employment Agreement, dated May 14, 2002, between Stratex
Networks, Inc. and Paul Kennard (incorporated by reference to Exhibit 10.3 to the Stratex Networks, Inc.
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 filed with the SEC on August 9, 2006,
File No. 000-15895)
10.25*
Employment Agreement, dated as of May 14, 2002, between Stratex Networks, Inc. and Shaun McFall
(incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K for the fiscal year ended July 3,
2009 filed with the SEC on September 4, 2009, File No. 001-33278)
10.25.1*
Amendment, effective April 1, 2006, to Employment Agreement, dated May 14, 2002, between Stratex
Networks, Inc. and Shaun McFall (incorporated by reference to Exhibit 10.25.1 to the Annual Report on Form
10-K for the fiscal year ended July 3, 2009 filed with the SEC on September 4, 2009, File No. 001-33278)
A
n
n
u
a
l
R
e
p
o
r
t
10.26*
Intentionally omitted
10.26.1* Intentionally omitted
10.27*
Intentionally omitted
10.28*
Employment Agreement, dated July 18, 2011, between Aviat Networks, Inc. and Michael Pangia (incorporated by
reference to the Current Report on Form 8-K filed with the SEC on July 20, 2011, File No. 001-33278)
10.29*
Employment Agreement, dated December 30, 2010, between Aviat Networks, Inc. and John Madigan
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 4,
2011, File No. 001-33278)
10.30
Moved to item number 10.20.2
85
Ex. #
10.31
16
21
23.1
23.2
31.1
31.2
32.1
32.2
Intentionally omitted
Description
Letter from Ernst & Young LLP to the Securities and Exchange Commission dated September 12, 2012
(incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 12, 2012, File No.. 001-33278)
List of Subsidiaries of Aviat Networks, Inc.
Consent of KPMG LLP
Consent of Ernst & Young LLP
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer
t
r
o
p
e
R
l
a
u
n
n
A
101.INS**
XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
_____________________________
* Management compensatory contract, arrangement or plan required to be filed as an exhibit pursuant to Item 15(b) of this
report.
** XBRL information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of
sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange
Act of 1934, and otherwise is not subject to liability under these sections.
86
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
AVIAT NETWORKS, INC.
(Registrant)
By:
/s/ Michael A. Pangia
Michael A. Pangia
President and Chief Executive Officer
Date: September 20, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Michael A. Pangia
Michael A. Pangia
/s/ Edward J. Hayes, Jr.
Edward J. Hayes, Jr.
/s/ John J. Madigan
John J. Madigan
/s/ Charles D. Kissner
Charles D. Kissner
/s/ William A. Hasler
William A. Hasler
/s/ Clifford H. Higgerson
Clifford H. Higgerson
/s/ Raghavendra Rau
Raghavendra Rau
/s/ Dr. Mohsen Sohi
Dr. Mohsen Sohi
/s/ James C. Stoffel
James C. Stoffel
/s/ Edward F. Thompson
Edward F. Thompson
President and Chief Executive Officer
(Principal Executive Officer)
September 20, 2013
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
September 20, 2013
Vice President, Corporate Controller and
Principal Accounting Officer
(Principal Accounting Officer)
September 20, 2013
Chairman of the Board
September 20, 2013
A
n
n
u
a
l
R
e
p
o
r
t
Director
September 20, 2013
Director
September 20, 2013
Director
September 20, 2013
Director
September 20, 2013
Lead Independent Director
September 20, 2013
Director
September 20, 2013
87
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AVIAT NETWORKS, INC.
Years Ended June 28, 2013, June 29, 2012 and July 1, 2011
Balance at
Beginning of
Period
Additions
Charged to
Costs and
Expenses
Deductions
Describe
Balance
at End
of Period
(In millions)
Allowances for collection losses:
Year ended June 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year ended June 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year ended July 1, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
____________________________
16.2
14.2
13.3
$
$
$
2.8
3.9
2.9
$
$
$
8.8 (A)
1.9 (B)
2.0 (C)
$
$
$
10.2
16.2
14.2
Note A Consists of changes to allowance for collection losses of $0.1 million for foreign currency translation losses and
$8.9 million for uncollectible accounts charged off, net of recoveries on accounts previously charged off.
Note B
Note C
t
r
o
p
e
R
l
a
u
n
n
A
Consists of changes to allowance for collection losses of $0.7 million for foreign currency translation gains and
$1.2 million for uncollectible accounts charged off, net of recoveries on accounts previously charged off.
Consists of changes to allowance for collection losses of $0.4 million for foreign currency translation losses,
$1.7 million in additions from the sale of NetBoss assets and $4.1 million for uncollectible accounts charged off,
net of recoveries on accounts previously charged off.
88
Exhibit 31.1
I, Michael A. Pangia, certify that:
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended June 28, 2013, of Aviat Networks, 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 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;
A
n
n
u
a
l
R
e
p
o
r
t
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 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.
Date: September 20, 2013
/s/ Michael A. Pangia
Name:
Title:
Michael A. Pangia
President and Chief Executive Officer
t
r
o
p
e
R
l
a
u
n
n
A
I, Edward J. Hayes, Jr., certify that:
CERTIFICATION
Exhibit 31.2
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended June 28, 2013, of Aviat Networks, 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 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 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.
Date: September 20, 2013
/s/ Edward J. Hayes, Jr.
Name:
Title:
Edward J. Hayes, Jr.
Senior Vice President and Chief
Financial Officer, Principal Financial
Officer
Certification
Exhibit 32.1
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report on Form 10-K of Aviat Networks, Inc. (“Aviat Networks”) for the
fiscal year ended June 28, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Michael A. Pangia, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1350,
that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of Aviat Networks as of the dates and for the periods expressed in the Report
Date: September 20, 2013
/s/ Michael A. Pangia
Name:
Title:
Michael A. Pangia
President and Chief Executive Officer
A
n
n
u
a
l
R
e
p
o
r
t
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the filing of the Annual Report on Form 10-K of Aviat Networks, Inc. (“Aviat Networks”) for the
fiscal year ended June 28, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Edward J. Hayes, Jr., hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
§1350, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of Aviat Networks as of the dates and for the periods expressed in the Report
Date: September 20, 2013
t
r
o
p
e
R
l
a
u
n
n
A
/s/ Edward J. Hayes, Jr.
Name:
Title:
Edward J. Hayes, Jr.
Senior Vice President and Chief
Financial Officer, Principal Financial
Officer
Appendix
A-1
Stockholder Information
Executive Offices
Aviat Networks, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
(408) 567-7000
Independent Public Accountants
KPMG LLP
Transfer Agent and Registrar
Computershare
PO Box 43006
Providence, RI 02940-3006
Investor Relations Contact
Investor Relations
408-567-7117
InvestorInfo@aviatnet.com
Overnight Correspondence to:
Computershare
250 Royall Street
Canton, MA 02021
Tel: (800) 522-6645
TDD for hearing Impaired: 800-231-5469
Foreign Shareowners: 201-680-6578
TDD Foreign Shareowners: 201-680-6610
Shareholder website: www.computershare.com/investor
Shareholder online inquiries: https://www-us.computershare.com/investor/contact
Stockholder Inquiries
Questions relating to stockholder records, change of ownership or change of address should be sent to
our transfer agent, Mellon Investor Services, whose address appears above.
Financial Information
Securities analysts, investment managers and stockholders should direct financial information inquiries to
the Investor Relations contact listed above.
SEC Form 10-K
A copy of the Company’s Form 10-K filed with the Securities and Exchange
Commission is available by downloading from our website, Aviatnetworks.com or by writing to:
Aviat Networks, Inc.
Attn: Investor Relations
5200 Great America Parkway
Santa Clara, California 95054
2013 Annual Report
We have published this 2013 Annual Report to Stockholders, including the Consolidated Financial
Statements and Management’s Discussion and Analysis, as an appendix to our Proxy Statement. Further
information regarding various aspects of our business can be found on our Web site
(www.Aviatnetworks.com).
Electronic Delivery
In an effort to reduce paper mailed to your home, we offer stockholders the convenience of viewing the
Proxy Statement, Annual Report to Stockholders and related materials online. With your consent, we can
stop sending future paper copies of these documents to you by mail. To participate, follow the instructions
at www.icsdelivery.com.
A-2
To Ourareholders
Online Voting at www.proxyonline.com
If you are a registered stockholder, you may now use the Internet to transmit your voting instructions
any time before 5:00 p.m. EDT on November 12, 2013. Have your proxy card in hand when you access
the Web site. You will be prompted to enter your Control Number to obtain your records and create an
electronic voting instruction form.
www.Aviatnetworks.com
The Aviat Networks Web site provides access to a wide variety of information, including
products, new releases and financial information. A principal feature of the Web site is the Investor
Relations section, which contains general financial information and access to the current Proxy Statement
and Annual Report to Stockholders. The site also provides archived information (for example, historical
financial releases and stock prices) and access to conference calls and analyst group presentations.
Other interesting features are the press release alerts and SEC filings email alerts, which allow users to
receive automatic updates informing them when new items such as news releases, financial event
announcements and SEC documents are added to the site.
www.computershare.com/investor
The Computershare Web site provides access to an Internet self-service product, Investor
Centre. Through Investor Centre, registered stockholders can view their account profiles, stock
certificate histories, Form 1099 tax information, current stock price quote (20-minute delay) and historical
stock prices. Stockholders may also request the issuance of stock certificates, duplicate Form 1099s,
safekeeping of stock certificates or an address change.
A-3
Corporate Directory
Officers
Michael Pangia
President and Chief Executive Officer
Edward J. Hayes, Jr.
Sr. Vice President and Chief Financial Officer
Shaun McFall
Sr. Vice President and Chief Marketing Officer
Heinz H. Stumpe
Sr. Vice President and Chief Sales Officer
Meena Elliott
Sr. Vice President, General Counsel and
Secretary
John Madigan
Vice President, Corporate Controller, Principal
Accounting Officer
Directors
Charles D. Kissner
Chairman of the Board
Aviat Networks, Inc.
Director
ShoreTel, Inc.
Meru Networks, Inc.
Rambus, Inc.
William A. Hasler
Director
Globalstar, Inc.
Schwab Funds
Clifford H. Higgerson
General Partner
Vangard Venture Partners
Walden International
Raghavendra Rau
CEO & Director
Sea Change International, Inc.
Dr. Mohsen Sohi
Speaker of the Management Board
Freudenberg & Co. KG
Director
Steris Corporation
Dr. James C. Stoffel
Lead Independent Director
Aviat Networks, Inc.
Director
Harris Corporation
Edward F. Thompson
Director
InnoPath Software, Inc.
ShoreTel, Inc.
XBridge Systems, Inc.
Outside Legal Counsel
Wilson Sonsini Goodrich & Rosati, PC
Palo Alto, CA
A-4
Asia & Pacific Rim
Bangkok, Thailand
Colombo, Sri Lanka
Dhaka, Bangladesh
Gurgaon, India
Jakarta, Indonesia
Manila, Philippines
Kuala Lumpur, Malaysia
Shenzhen, China
Singapore
Sydney, Australia
Wellington, New Zealand
South America
Buenos Aires, Argentina
Forward-looking Statements
This Annual Report, including the letter
to shareholders, contains forward-
looking statements that are based on
the views of management regarding
future events at the time of publication
of this report. These forward-looking
statements, which include, but are not
limited to: our plans, strategies and
objectives for future operations; new
products, services or developments;
future economic conditions; outlook;
impact on operating results due to the
volume, timing, customer, product and
geographic mix of our product orders;
our growth potential and the potential of
industries and the markets we serve,
are subject to the known and unknown
Risks, uncertainties and other factors
that may cause our actual results to be
materially different from those
expressed or implied by each forward-
looking statement. These risks,
uncertainties and other factors are
discussed in the 2013 Form 10-K.
Headquarters and Operations
Corporate Headquarters
Aviat Networks, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
United States
International Headquarters, Singapore
Aviat Networks (S) Pte. Ltd.
17, Changi Business Park Central 1
Honeywell Building, #04-01
Singapore 486073
Offices
North America
Alpharetta, GA
Montréal, Canada
Morrisville, NC
San Antonio, TX
Europe
Aix En Provence, France
Bucharest, Romania
Châtenay-Malabry, France
Dublin, Ireland
Glasgow, Scotland
Hilversum, The Netherlands
London, United Kingdom
Madrid, Spain
Moscow, Russia
Nuneaton, United Kingdom
Trin-Ljubljana, Slovenia
Warsaw, Poland
Mexico
Mexico D.F.
Africa
Abidjan, Côte d’Ivoire
Accra, Ghana
Alger, Algeria
Lagos, Nigeria
Midrand, South Africa
Nairobi, Kenya
Middle East
Dubai, United Arab Emirates
Riyadh, Saudi Arabia
A-5
This page intentionally left blank.
WWW.AVIATNETWORKS.COM
5200 Great America Parkway Santa Clara, CA 95054
Tel: 408 567 7000 Fax: 408 567 7001