2021
Proxy Statement
& Annual Report
Aviat Networks, Inc.
September 27, 2021
To Our Stockholders:
Fiscal Year 2021 was marked with a substantial improvement to the business despite the ongoing COVID-19
pandemic. In the last annual letter, the opportunity for growth and improved profitability was highlighted.
We delivered 15.2% revenue growth and record profitability with Adjusted EBITDA margin at 11.9%. Our
Fiscal Year 2021 goals were centered around growth-enablement and our foundation. Some of our key
accomplishments against our goal set included:
Implementation of a customer-focused, market-back approach for our commercial and innovation
teams;
Orientation of our technology portfolio towards differentiated offerings and improvements in total
cost of ownership;
Increase in our software and value-added services sales;
Increase in sales in the Aviat store (ecommerce);
Growth of our North American private network business;
Development of a strong pipeline of International Tier 2 customers; and
Delivery on our COGS and Opex cost reduction initiatives.
These
to our gross margin and overall profitability.
Implementation of our Corporate Strategy
As we progress on executing our corporate strategy, we were able to launch several key offerings that are
derived from our foundational voice of the customer process and emphasis on total cost of ownership (TCO).
These products included:
Hosted FAS (Frequency Assurance Software) software as a service (SaaS) offering for interference
management on microwave links;
Adaptive Dual Carrier Software doubled radio link capacity without additional hardware, lowering
TCO;
upgraded SaaS-based suite of software solutions that simplify the
AviatCloud Enhancements
design, purchase, management, and optimization of backhaul networks, substantially lowering TCO;
and
11GHz and 13GHz Multi-band - the only single box, single antenna multi-band radios in the industry
now support combining 11 and 13 GHz microwave bands with 80 GHz E-Band. The new WTM 4811
and WTM 4813 allow longer links with higher availability and give operators more powerful tools to
expand their networks, avoid expensive fiber builds to deliver the highest capacity, and lower
backhaul network TCO.
Our strategy, execution and process improvements translated into new customer and commercial wins
including:
Addition of Dish as a Customer. This win validates our claim that Aviat has the best microwave
solutions on the market today. This selection of Aviat by a technology innovator like DISH supports
our position as a leader in wireless backhaul solutions for 5G networks and establishes Aviat as the
best-in-class backhaul vendor for OpenRAN deployments which are expected to increase globally in
the coming years.
Rural Broadband. In Fiscal Year 2021, Aviat added 150 new rural broadband accounts, growing our
business significantly, and Aviat is now the leading wireless backhaul provider to this segment in the
USA. With a large amount of rural broadband funding yet to be allocated and invested, we believe
Aviat has a bright future in this segment.
Private Networks. We had three large state network wins in the US and we won a significant
international emergency services network with Airwave
-to-end solution spanning
network planning, design, manufacturing, install, service and support were key to our progress. In
these state networks, our Extra High Power IRU600 indoor radio lowered the TCO and delivered value
to our customers.
We continued to execute our operational expense reduction program. We realized cost savings in Fiscal Year
2021, which we reinvested in growth-related initiatives. We believe we have some small opportunities to
improve but consider this work to be largely complete.
We believe we are well-positioned in Fiscal Year 2022 as we continue to execute our corporate strategy. We
have the recipe to grow as demonstrated by our performance in North America, where revenue grew 15.2%
in Fiscal Year 2021. North America business performance is highlighted by new wins, realizing our
differentiated product offerings and capturing the strong demand drivers: 5G mobile, mission critical
networks and rural broadband.
Our strategic plan addresses the need to improve growth internationally. Over the previous years, our
international business was declining. Our strategy and renewed international leadership focused the sales
effort. We achieved 5.6% growth in Fiscal Year 2021 by emphasizi
Fiscal Year 2021 Financial Results
In Fiscal Year 2021, we reported total revenue of $274.9 million, compared to revenue of $238.6 million in
Fiscal Year 2020. Revenue in North America increased by $31.4 million year-over-year or 20.7% while
international revenue returned to growth and increased $4.9 million or 5.6%. We exited Fiscal Year 2021
with a book to bill above 1, due to our strong performance in North America and return to growth for the
international segment.
In Fiscal Year 2021, we reported GAAP gross margin of 37.3% and non-GAAP gross margins of 37.5%,
compared to GAAP and non-GAAP margin in Fiscal Year 2020 of 35.5% and 35.6%, representing an increase
of 180 basis points and 190 basis points, respectively.
In Fiscal Year 2021, we reported GAAP total operating expenses of $80.4 million, compared to $81.3 million
in Fiscal Year 2020, a decrease of $0.9 million or 1.1%. On a non-GAAP basis, excluding the impact of
restructuring charges and share-based compensation, total operating expenses for Fiscal Year 2021 were
$75.6 million, compared to $75.8 million in Fiscal Year 2020. We have reinvested cost savings into growth-
related initiatives.
We reported Adjusted Earnings before interest, taxes, depreciation, amortization and other non-GAAP items
32.8 million in Fiscal Year 2021, as compared to $13.5 million in Fiscal Year 2020, a
year-over-year increase of $19.3 million.
We ended Fiscal Year 2021 with $47.9 million in net cash and cash equivalents on our balance sheet,
compared to $32.6 million at the end of Fiscal Year 2020, an increase of $15.3 million. We have no loans
outstanding. During Fiscal Year 2021, we also invested $0.8 million to repurchase shares from our stock
repurchase program, and $2.6 million remains available under the program.
We continued to generate positive cash flow from operations and our working capital metrics remain among
the best in our history, with further improvements anticipated.
Fiscal Year 2022 Outlook
We anticipate modest growth in both revenue and Adjusted EBITDA in Fiscal Year 2022. We have a strong
backlog entering Fiscal Year 2022. Our principal challenge is supply chain and component availability. The
Aviat supply chain team and Aviat suppliers have done a tremendous job throughout Fiscal Year 2021. The
environment is challenging. The better that our supply chain team performs and the better that our suppliers
deliver, the better off our customers and investors will be. Our company and our products are well-
positioned to benefit from key market drivers:
The rollout of 5G;
The increased importance of mission-critical networks; and
The expansion of rural broadband networks.
We anticipate continuing our strong momentum across these verticals. We have great relationships and
history with global and domestic 5G players. We will continue to focus on share gains in our mission-critical
network business. Lastly, we will leverage increased funding for rural broadband and the Aviat Store to
participate in the expansion of these developing networks.
Litigation Reform Act of 1995, including, but not limited to our plans, strategies and objectives for future operations,
expectations regarding future performance and opportunities to improve business processes. All statements, trend analyses
and other information contained herein regarding the foregoing beliefs and expectations, as well as about the markets for the
services and products of Aviat and trends in revenue, and other statements identified by the use of forward-looking
terminology, including "anticipate," "believe," "plan," "estimate," "expect," "goal," "will," "see," "continue," "delivering,"
"view," and "intend," or the negative of these terms or other similar expressions, constitute forward-looking statements.
Certain risks, uncertainties and other factors may cause our actual results to be materially different from those expressed or
implied by each forward-looking statement. These other risks, uncertainties and other factors are discussed in our Fiscal Year
2021 Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. You should not rely
on any forward-looking statements. We undertake no obligation to update publicly any forward-looking statement, whether
written or oral, for any reason, except as required by law, even as new information becomes available or other events occur
in the future.
AVIAT NETWORKS, INC.
Fiscal Year 2021 Summary
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, provision for or benefit from income taxes, net income, net income per share, and adjusted income 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.
Table 3
AVIAT NETWORKS, INC.
Fiscal Year 2021 Summary
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)
Condensed Consolidated Statements of Operations
(Unaudited)
Year Ended
GAAP gross margin
Share-based compensation
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
Non-GAAP selling and administrative expenses
GAAP operating income
Share-based compensation
Restructuring charges
Non-GAAP operating income
GAAP income tax provision (benefit)
Adjustment to reflect pro forma tax rate
Non-GAAP income tax provision
GAAP net income
Share-based compensation
Restructuring charges
Adjustment to reflect pro forma tax rate
% of
Revenue
July 3, 2020
% of
Revenue
July 2, 2021
(In thousands, except percentages and per share amounts)
$ 102,615
372
102,987
37.3 % $ 84,696
182
84,878
37.5 %
35.6 %
35.5 %
$ 21,810
(250)
21,560
$ 56,324
(2,299)
54,025
$ 22,210
2,921
2,271
27,402
$ (87,699)
88,899
1,200
$ 110,139
2,921
2,271
(88,899)
7.9 % $ 19,284
(112)
19,172
7.8 %
20.5 % $ 57,985
(1,392)
56,593
19.7 %
8.1 % $
10.0 %
(31.9)% $
0.4 %
40.1 % $
3,378
1,686
4,049
9,113
3,452
(2,252)
1,200
257
1,686
4,049
2,252
8.1 %
8.0 %
24.3 %
23.7 %
1.4 %
3.8 %
1.4 %
0.5 %
0.1 %
Non-GAAP net income
Net income per share:
GAAP
Non-GAAP
Shares used in computing net income per share
GAAP
Non-GAAP
Adjusted EBITDA:
GAAP net income
Depreciation and amortization of property, plant and
equipment
Interest income, net
Share-based compensation
Restructuring charges
Provision for (benefit from) income taxes
Adjusted EBITDA
Year Ended
% of
Revenue
% of
Revenue
July 2, 2021
(In thousands, except percentages and per share amounts)
9.6 % $
$ 26,432
July 3, 2020
8,244
3.5 %
$
$
9.42
2.26
$
$
0.02
0.75
11,688
11,688
$ 110,139
5,383
(230)
2,921
2,271
(87,699)
$ 32,785
10,936
10,936
40.1 % $
257
4,387
(331)
1,686
4,049
3,452
11.9 % $ 13,500
0.1 %
5.7 %
_____________________________________________________
(1) The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP
net income excluded share-based compensation, and other non-recurring charges (recovery). Adjusted EBITDA was determined
by excluding depreciation and amortization on property, plant and equipment, interest, provision for or benefit from income taxes,
and non-GAAP pre-tax adjustments, as set forth above, from the GAAP net income. Aviat monitors the non-GAAP financial
measures included above, and our management believes they are helpful to investors because they provide an additional tool to
use in evaluating Aviat’s financial and business trends and operating results. In addition, Aviat’s management uses these non-
GAAP measures to compare Aviat’s performance to that of prior periods for trend analysis and for budgeting and planning
purposes. 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.
The Company’s forward-looking Adjusted EBITDA excludes estimates for depreciation and amortization, share-based
compensation expense, restructuring charges and provision for income taxes. The Company has not reconciled its expectations
as to Adjusted EBITDA to its most directly comparable GAAP measure due to the high variability and difficulty in making
accurate forecasts and projections, particularly with respect to share-based compensation expense and restructuring charges. The
actual amount of the excluded stock-based compensation expense and restructuring charges will have a significant impact on the
Company’s Adjusted EBITDA. Accordingly, a reconciliation of our forward-looking Adjusted EBITDA is not available without
unreasonable effort.
AVIAT NETWORKS, INC.
200C Parker Dr. Suite 100A
Austin, Texas 78728
Notice of Annual Meeting of Stockholders for Fiscal Year 2021
To Be Held on November 10, 2021
TO THE HOLDERS OF COMMON STOCK OF AVIAT NETWORKS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders for fiscal year 2021 (the “Annual Meeting”)
of Aviat Networks, Inc. (the “Company”) will be held online only, on November 10, 2021, at 12:30 p.m. Central time. You
may attend the Annual Meeting online via webcast by visiting www.virtualshareholdermeeting.com/AVNW2021 and
entering your 16-digit control number included with the Notice of Internet Availability of Proxy Materials or proxy card. You
will be able to vote your shares and submit questions while attending the Annual Meeting online for the following purposes:
1. To elect six directors to serve until the Company’s 2022 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 BDO USA, LLP (“BDO”) as the
Company’s independent registered public accounting firm for fiscal year 2022.
3. To hold an advisory, non-binding vote to approve the Company’s named executive officer compensation (“Say-on-
Pay”).
4. To approve the Amended and Restated 2018 Incentive Plan.
5. 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 13, 2021, are entitled to notice of and to vote at
the Annual Meeting or any adjournment, postponement or other delay thereof.
Whether or not you expect to attend the Annual Meeting online, we urge you to submit a proxy to vote your shares.
This will help ensure the presence of a quorum at the Annual Meeting.
September 27, 2021
By Order of the Board of Directors
/s/ Peter A. Smith
President and Chief Executive Officer
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on November 10, 2021
This Proxy Statement for the 2021 Annual Meeting of Stockholders and
our Annual Report to Stockholders for the Fiscal Year Ended July 2, 2021 are available at
www.proxyvote.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 Broadridge, toll-free at 1-800-690-6903.
TABLE OF CONTENTS
Page
ABOUT THE ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the purpose of the Annual Meeting? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the record date, and who is entitled to vote at the Annual Meeting? . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are the voting rights of the holders of common stock at the Annual Meeting? . . . . . . . . . . . . . . . . . . . .
Who may 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? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What happens if a director does not receive a sufficient number of votes? . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What constitutes a quorum, abstention, and broker “non-vote”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who pays for the cost of solicitation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is the deadline for submitting proposals and director nominations for the 2022 Annual
Meeting? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who will count the votes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Selection Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recently Appointed Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board and Committee Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Member Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principles of Corporate Governance, Bylaws and other Governance Documents . . . . . . . . . . . . . . . . . . . . . .
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlock and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governance and Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRANSACTIONS WITH RELATED PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTOR COMPENSATION AND BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year 2021 Compensation of Non-Employee Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . .
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TABLE OF CONTENTS
(continued)
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Considerations in Our Compensation Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 1: ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 3: ADVISORY, NON-BINDING VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 4: APPROVAL OF THE AMENDED AND RESTATED 2018 INCENTIVE PLAN . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annex 1 Amended and Restated 2018 Incentive Plan
Notice to shareholders
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AVIAT NETWORKS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 10, 2021
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
Annual Meeting of Stockholders for fiscal year 2021 and any adjournment, postponement or other delay thereof (the “Annual
Meeting”), to be held at 12:30 p.m., Central Time, on November 10, 2021. The Annual Meeting will be held online via
webcast, at www.virtualshareholdermeeting.com/AVNW2021 (“Meeting Website”). Stockholders attending the meeting
online via webcast will be able to submit questions and vote their shares electronically at the meeting. These proxy materials
are being made available on or about September 27, 2021, to our stockholders entitled to notice of and to vote at the Annual
Meeting.
To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card, voting
instruction form or notice of internet availability. The Annual Meeting will begin promptly at 12:30 p.m., Central Time.
Online access and check-in will begin at 12:15 p.m., Central Time. We encourage you to access the Meeting Website prior to
the start time to allow ample time for login procedures and so you may address any technical difficulties before the Annual
Meeting begins. If you encounter any difficulties accessing the webcast Annual Meeting during login or in the course of the
meeting, please contact the phone number found on the login page at www.virtualshareholdermeeting.com/AVNW2021.
You may vote and ask questions during the Annual Meeting by following the instructions available on the Meeting
Website at the time of the Annual Meeting. Stockholders may submit questions electronically, in real-time during the
meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for ten days prior to the Annual
Meeting for examination by any stockholder for any purpose germane to the Annual Meeting by emailing our Investor
Relations team at investorinfo@aviatnet.com. This list will also be available for such purposes during the Annual Meeting at
the link to be provided upon your registration for the Annual Meeting.
ABOUT THE ANNUAL MEETING
What is the purpose of 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 13, 2021,
are entitled to notice of and to vote at the Annual Meeting. At the Annual Meeting, our stockholders will vote (i) to elect six
directors, (ii) on the ratification of the appointment by our Audit Committee of BDO USA, LLP (“BDO”) as the Company’s
independent registered public accounting firm for fiscal year 2022, (iii) on an advisory, non-binding resolution to approve the
Company’s named executive officer compensation (“Say-on-Pay”), (iv) to approve the Amended and Restated 2018
Incentive Plan of the Company (the “Amended and Restated Plan”), and (v) to transact such other business as may properly
come before the Annual Meeting or any adjournment or postponement or other delay thereof.
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 13, 2021 (the “Record Date”). The
Record Date was established by the Board as required by the Delaware General Corporation Law and the Amended and
Restated Bylaws of the Company (the “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.
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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 11,187,111 shares of our common stock outstanding.
Who may attend the Annual Meeting?
All stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting.
Stockholders will be
the Annual Meeting online via webcast by visiting
www.virtualshareholdermeeting.com/AVNW2021 and entering the 16-digit control number included in your Notice of
Internet Availability of Proxy Materials, or on your proxy card or in the instructions that accompanied your proxy materials.
to participate
able
in
The Annual Meeting will begin promptly at 12:30 p.m. Central time. Online check-in will be available beginning at
12:15 p.m. Central time. Please allow ample time for online check-in procedures. If you encounter any difficulties accessing
the webcast Annual Meeting during login or in the course of the meeting, please contact the phone number found on the login
page at www.virtualshareholdermeeting.com/AVNW2021.
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 but did not receive a 16-digit control number from your bank or brokerage firm, please follow the
instructions from your bank or brokerage firm, including any requirement to obtain a legal proxy. Most banks or brokerage
firms allow a shareholder to obtain a legal proxy either online or by mail.
You may contact us by calling (512) 265-3680 for more information or directions on how to attend the Annual
Meeting online.
How do I vote?
Stockholders of record can vote by proxy as follows:
•
•
•
•
Via the Internet: Stockholders may submit voting instructions through the Internet by following the instructions
included with the proxy card.
By Telephone: Stockholders may submit voting instructions by telephone by following the instructions included
with the proxy card.
By Mail: Stockholders may sign, date and return their proxy card in the pre-addressed, postage-paid envelope
provided.
At the Annual Meeting: You may attend the Annual Meeting online via webcast, vote, and submit a question during
the Annual Meeting online by visiting www.virtualshareholdermeeting.com/AVNW2021 and using your 16-digit
control number to enter the meeting even if you have previously returned a proxy card.
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 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 entitled to vote at the Annual Meeting 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 of record may request delivery of proxy materials in printed form by mail or
electronically by email on an ongoing basis. Please note that, while our proxy materials are available at the website
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referenced in the Notice and on our website, no other information contained on either website is incorporated by reference
into or considered to be a part of this document.
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 July 2, 2021 are available at www.Proxyvote.com.
Why is Aviat soliciting proxies?
In lieu of personally attending and voting at the Annual Meeting, you may 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 John Mutch, Chairman of the Board, and Peter Smith, Director, President and Chief Executive Officer (“CEO”).
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, at 200 Parker Drive, Suite C100A, Austin,
TX 78728;
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 online 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 to revoke your proxy. Regardless of how you hold your shares, your online 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.
What vote is required to approve each item?
•
•
•
•
Proposal No. 1 (election of directors): the director nominees will be elected by a majority of the votes cast.
Stockholders may not cumulate votes in the election of directors. The Board recommends a vote “FOR” all
nominees.
Proposal No. 2 (ratification of appointment of independent registered public accounting firm): the affirmative
vote by the holders of a majority of the voting power of the common stock present online 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.
Proposal No. 3 (advisory, non-binding vote on named executive officer compensation): the affirmative vote by
the holders of a majority of the voting power of the common stock present online 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.
Proposal No. 4 (approval of the Amended and Restated 2018 Incentive Plan of Aviat Networks, Inc.): the
affirmative vote by the holders of a majority of the voting power of the common stock present online or
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represented by proxy at the Annual Meeting and entitled to vote on the proposal is necessary for approval of
Proposal No. 4. The Board recommends a vote “FOR” Proposal No. 4.
What happens if a director does not receive a sufficient number of votes?
Aviat’s Corporate Governance Guidelines provide that a director nominee who receives a greater number of votes
“AGAINST” his or her election than votes “FOR” his or her election must promptly offer his or her resignation to the Board.
The Board will determine whether to accept the nominee’s resignation. See “Majority Vote Policy in Director Elections” for
additional information.
What constitutes a quorum, abstention and broker “non-vote”?
The presence at the Annual Meeting virtually through the webcast, 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 is a routine matter.
For Proposal No. 1, abstentions and broker “non-votes”, if any, will be disregarded and have no effect on the
outcome of the vote. For Proposals No. 2, No. 3, and No. 4, abstentions will have the same effect as voting against the
proposal, 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 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 D.F. King & Co. to assist it in the solicitation of proxies. The Company has
agreed to pay D.F. King & Co. a fee of $10,500, plus reimbursement for their reasonable out-of-pocket expenses. The
Company has also agreed to indemnify D.F. King & Co. against certain liabilities and expenses, including certain liabilities
and expenses under the federal securities laws.
What is the deadline for submitting proposals and director nominations for the 2022 Annual Meeting?
For stockholder proposals that are not intended to be included in next year’s proxy statement and for director
nominations that are intended to be included in next year’s proxy statement, a stockholder of record must submit a written
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notice thereof, which notice must be received by our Corporate Secretary at our principal executive offices not earlier than
August 12, 2022, or later than September 11, 2022. The full requirements for the submission of proposals of business not
intended to be included in the Company’s proxy and of nominations of directors 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 May 27, 2022.
In accordance with the rules of the SEC, the proxies solicited by the Board for the 2022 Annual Meeting will confer
discretionary authority on the proxy holders to vote on any director nomination or stockholder proposal properly presented at
the 2022 Annual Meeting if the Company fails to receive notice of such matter in accordance with the periods specified
above.
Who will count the votes?
Broadridge 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.
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 Conduct, Corporate Governance Guidelines
and written charters for the Governance and Nominating Committee, Audit Committee and Compensation Committee which
are available in the Governance subsection of the Investors page of our website at https://aviatnetworks.com. 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 up to seven. Our Bylaws require that the Board have a minimum of
three directors. Directors are nominated by the Governance and Nominating Committee of the Board. To further continue our
commitment to Board diversity, the Board elected Michele Klein on May 13, 2021. To further accelerate the next phase of
the Company’s growth, two new director nominees will be voted on during the Annual Meeting as part of the Board
Refreshment Program for fiscal year 2022 (the “Board Refreshment Program”). The Board recognizes the importance of
Board refreshment to ensure that it benefits from fresh ideas and perspectives. In support of the Board Refreshment Program
and the Board’s transition, directors Dahlia Loeb, Kenneth Kong and John Quicke are not standing for re-election.
The following are the members of the Board as of the date of this Proxy Statement. See Proposal No. 1 for
additional information regarding the new nominees for director.
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Name
Title and Positions
John Mutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director, Chairman of the Board
Michele Klein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
Kenneth Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
Dahlia Loeb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
John J. Quicke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
Peter Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director, President and Chief Executive Officer
Dr. James C. Stoffel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
The Board has determined that each of our current directors other than Mr. Smith 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”). Our
independent directors regularly meet in executive session without members of management present.
All of our directors are requested to attend our annual meetings of stockholders. Six of our seven directors,
representing all of our current directors who were directors at the time of the 2020 Annual Meeting, attended our 2020
Annual Meeting either in-person or via telephone.
Director Selection Process
The Governance and Nominating Committee is responsible for leading the search for qualified individuals for
election as directors to ensure the Board has an optimal mix of skills, expertise and diversity of background. The Governance
and Nominating Committee recommends candidates to the full Board for election. Any formal invitation to a director
candidate is authorized by the full Board. The Governance and Nominating Committee identifies candidates through a variety
of means, including recommendations from members of the Board, suggestions from Company management and, from time
to time, a third-party search firm. The Governance and Nominating Committee also considers candidates recommended by
stockholders. Stockholders wishing to recommend director candidates for consideration by the Governance and Nominating
Committee may do so by writing to the Secretary of the Company, giving the recommended candidate’s name, biographical
data and qualifications.
Recently Appointed Directors
Michele Klein was recommended to the Governance and Nominating Committee by a current Board member. An
experienced director of public and private companies, Ms. Klein brings over two decades of operations, investment and
capital markets experience in a wide range of industries, including semiconductor, optical hardware, energy storage and tech-
enabled services.
Director Nominees
Our Board selected two new director nominees based upon their diverse mix of skills, backgrounds, and
perspectives, including their functional areas of experience, educational background, and employment experience. The new
nominees are also thoughtful and responsible leaders who have consistently demonstrated their integrity, judgement, and
intelligence. Based upon these qualifications and the recommendation of the Governance and Nominating Committee, our
Board proposes that Bryan Ingram and Somesh Singh, who have not previously served on the Company’s Board, be elected
as Directors alongside existing Directors Mr. Mutch, Ms. Klein, Mr. Smith and Mr. Stoffel. The Board has determined that
each of Mr. Ingram and Mr. Singh 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 NASDAQ Listing Rules.
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We expect each nominee standing for election as a director to be able to serve if elected. If any nominee is not able
to serve, proxies will be voted in favor of the remainder of those nominated. There are no family relationships between or
among any of our executive officers, directors, or director nominees.
There are no material legal proceedings in which any director, director nominee, officer, or affiliate of the Company
or any owner of record or beneficial owner of more than 5 percent of any class of voting securities of the Company or any,
associate of such director, officer, affiliate of the Company or security holder, is a party adverse to us or has a material
interest adverse to us.
Board and Committee Meetings and Attendance
In fiscal year 2021, the Board held five regularly scheduled meetings and five special meetings. Each of the Board
members attended 100% of the Board meetings and 100% of the total number of meetings of the committee or committees on
which the member served, in each case, with respect to Board and committee meetings that took place while such director
was a member of the Board.
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. Each director shall have the ability
to apply good business judgement and must be able to exercise his or her duties of loyalty and care. Candidates for the
position of director should exhibit proven leadership capabilities, high integrity, exercise high level responsibilities within
their chosen careers, and have an ability to quickly grasp complex principles of business, finance, international transactions,
and communication technologies. 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.
Our Bylaws provide that a director may not be older than 75 years of age on the date of his or her election or
appointment to the Board unless otherwise specifically approved by a resolution passed by the Board. On August 25, 2021,
the Board unanimously approved one additional year of tenure for Dr. James Stoffel due to his years of industry experience
and the current Board Refreshment Program.
Directors’ Biographies
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. John Mutch, age 65, currently serves as Chairman of the Board and has served on the Board since January 2015.
He served on the Board of Directors of Steel Excel Inc., a provider of drilling and production services to the oil and gas
industry and a provider of event-based sports services and other health-related services, from 2007 to 2016. From December
2008 to January 2014, he served as Chairman of the board of directors and Chief Executive Officer of Beyondtrust Software,
a privately-held security software company. Mr. Mutch has been the founder and managing partner of MV Advisors LLC, a
strategic block investment firm that provides focused investment and strategic guidance to small and mid-cap technology
companies, since December 2005. Prior to founding MV Advisors LLC, in March 2003, Mr. Mutch was appointed by the
U.S. Bankruptcy court to the board of directors of Peregrine Systems, Inc., a provider of enterprise asset and service
management solutions. He assisted that company in a bankruptcy work-out proceeding and was named President and Chief
Executive Officer in July 2003. Previous to running Peregrine Systems, Inc., Mr. Mutch served as President, Chief Executive
Officer and a director of HNC Software, an enterprise analytics software provider. Before HNC Software, Mr. Mutch spent
seven years at Microsoft Corporation in a variety of executive sales and marketing positions. Mr. Mutch previously served on
the boards of directors of Phoenix Technologies Ltd., a leader in core systems software products, services and embedded
7
technologies, Edgar Online, Inc., a provider of financial data, analytics and disclosure management solutions, Aspyra, Inc., a
provider of clinical and diagnostic information systems for the healthcare industry, Overland Storage, Inc., a provider of
unified data management and data protection solutions, and Brio Software, Inc., a provider of business intelligence software.
He has served as a director at Agilysys, Inc., a provider of information technology solutions, since March 2009. From April
2017 to May 2019, Mr. Mutch served as a director at Maxwell Technologies, Inc., a manufacturer of energy storage and
power delivery solutions for automotive, heavy transportation, renewable energy, backup power, wireless communications
and industrial and consumer electronics applications. From July 2017 to March 2018, he served as a director at YuMe, Inc., a
provider of digital video brand advertising solutions, at which time YuMe was acquired by RhythmOne plc, a technology-
enabled digital media company, and Mr. Mutch continued serving as a director on the RhythmOne board until January 2019.
Mr. Mutch holds a Bachelor of Science in Economics from Cornell University and a Master of Business Administration from
the University of Chicago.
Mr. Mutch brings to the Board extensive experience as an executive in the technology sector. He also has experience
as a director at several public companies in the technology sector. He is or has been a member of the audit committee of
various public and private companies and brings valuable financial expertise to the Board. For these reasons, we believe Mr.
Mutch is qualified to continue serving on the Board.
Mr. Bryan Ingram, age 57, is a senior corporate executive and advisor whose technology career spans 35 years in
executive management roles with industry leaders Broadcom, Avago, Agilent, HP, and Westinghouse. He has a proven
record in the global semiconductor industry for delivering highly differentiated product performance, cost improvements,
resilient supply chains, and driving growth through the wireless ecosystem. Mr. Ingram presently serves as a director for
Smart Global Holdings, where he was elected in October 2018 and serves on the nominating and governance committee as
well as the compensation committee. Mr. Ingram has also been a director for Anokiwave since June 2020. Most recently,
from November 2019 to March 2020, Mr. Ingram served as a consultant for Broadcom, and he previously served as senior
vice president and general manager of Broadcom’s Wireless Semiconductor Division, from November 2015 to October 2019,
where he oversaw the development, production, and marketing of RF components for handsets and other wireless devices.
Prior to Broadcom, Mr. Ingram served as the Chief Operating Officer for Avago Technologies from April 2013 to October
2015. From October of 2015 until May 2016, Mr. Ingram served as the Senior Vice President and General Manager of the
Wireless Semiconductor Division of Avago Technologies. Mr. Ingram holds a Bachelor of Science in Electrical Engineering
from the University of Illinois and a Master of Science in Electrical Engineering from Johns Hopkins University. We believe
Mr. Ingram’s experience and success in the semiconductor industry, as well as supply chain expertise, qualify him to serve as
a member of the Board.
Ms. Michele Klein, age 72, was appointed to the Board in May 2021. Ms. Klein is an experienced public company
director, venture capital investor and Chief Executive Officer. In August 2021 Michele Klein was elected a director of
Rockley (NYSE: RKLY), photonics chipset developer and module supplier for sensor and communication products, where
she chairs the Nominating and Governance Committee. In 2019 Michele Klein was elected a director of Intevac (NASDAQ:
IVAC), maker of night vision devices for defense and deposition systems for industry, where she serves on the Compensation
and the Nominating and Governance Committees. In 2017 she was elected a director of Photon Control (TSX: PHO), a
provider of optical sensors and systems to the semiconductor industry, where she chaired the M&A Committee and served on
the Audit Committee until the Company’s acquisition in July 2021. Ms. Klein has been the Chief Executive Officer of Jasper
Ridge Inc., a private company developing technology to improve vision, since 2012. She is also a director of Gridtential
Energy, a private energy storage company. From 2005 until 2010 Ms. Klein served as Senior Director of Applied Ventures
LLC, the venture capital arm of Applied Materials, where she recommended and managed investments in energy storage and
solar energy, and represented Applied Materials on the boards of seven technology companies. Ms. Klein co-founded Boxer
Cross, a semiconductor equipment manufacturer, and served as Chief Executive Officer and Director from 1997 until its
acquisition by Applied Materials in 2003. She previously co-founded and led High Yield Technology, a semiconductor
metrology company, from 1986 until its acquisition by public Pacific Scientific in 1996. Ms. Klein earned a BS degree from
the University of Illinois and an MBA from the Stanford Graduate School of Business. We believe Ms. Klein’s decades of
investment and capital markets experience, and knowledge of both public and private companies in a range of industries,
including semiconductor, communications infrastructure, wireless and tech-enabled services, qualifies her to continue to
serve as a director of the Company.
Mr. Somesh Singh, age 65, is a veteran software industry executive with over 30 years of experience in corporate
leadership roles for global leaders including IBM, BMC Software, Attachmate, Vignette/OpenText, Paradigm Geophysical,
and Emerson Electric. During the course of his decades-long career in software, Mr. Singh helped shape the technological
8
shift of the software industry and its application in telecommunications, enterprise, and government markets. Mr. Singh
currently serves as a director for TiE (The Indus Entrepreneurs), where he has served since 2019. He also served as a
director for Pratham USA, Houston from 2010 to 2017. Most recently, from October 2017 to December 2020, he served as
chief product officer of Exploration & Production Software at Emerson Electric and, immediately prior, chief product officer
at Paradigm Geophysical from February 2014 to October 2017. He also served as senior vice president of product
management and engineering at NetIQ from November 2010 to December 2013, and led research and development, customer
care, professional services, training and IT as senior vice president for R&D and technical operations at Vignette from
January 2007 to January 2010. Prior to joining Vignette, Mr. Singh was vice president and general manager, Identity
Management Business Unit, for BMC Software, Inc. Mr. Singh also served as president and chief operating officer of iVita
Corporation, a Houston-based asset management software startup he founded and spent more than 12 years at IBM in several
professional and management positions in manufacturing, research and development, and finance. Mr. Singh holds a
Bachelor of Technology degree in Chemical Engineering from the Indian Institute of Technology, a Master’s degree in
Chemical Engineering from Columbia University, and an MBA from the Wharton School of Business, University of
Pennsylvania. We believe Mr. Singh’s extensive leadership and product development experience qualify him to serve as a
director of the Company.
Mr. Peter Smith, age 55, has been our President and CEO since January 2020 and a member of the Board since
February 2020. Mr. Smith has more than 25 years of leadership experience in business management and a proven track
record of creating value for companies. He most recently served as Senior Vice President, US Windows and Canada for Jeld-
Wen from March 2017 to December 2019, where he had full profit and loss responsibility for Jeld-Wen’s $1B+ windows
business, implementing lean manufacturing principles and strategic development programs to deliver growth and improved
profitability. Prior to Jeld-Wen, from October 2013 to March 2017, he served as President of Polypore International’s
Transportation and Industrial segment and oversaw transformative initiatives that helped prepare the former public company
for sale to the Asahi Kasei Group. Previously, he served as Chief Executive Officer and a director of Voltaix Inc., until its
sale to Air Liquide.
Earlier in his career, Mr. Smith held various executive leadership positions at Fortune 100 and Fortune 500
companies, including Cooper Industries, Dover Knowles Electronics and Honeywell Specialty Materials. In these roles, his
responsibilities ran the gamut of operations, sales and marketing, business development, and mergers and acquisitions. Mr.
Smith also served on the boards of Adaptive 3D from 2020 to 2021 and Soleras Advanced Coatings from 2015 to 2018. He
has both a Bachelor of Science degree in Material (Ceramics) Engineering and PhD in Material Science and Engineering
from Rutgers University, and holds a Master of Business Administration degree from Arizona State University. We believe
Mr. Smith’s executive leadership experience and position as the Company’s CEO qualify him to continue serving on the
Board.
Dr. James C. Stoffel, age 75, has served as a member of the Board since January 2007 and was the lead independent
director for Aviat from July 2010 to February 2015. In addition, Dr. Stoffel currently serves on the board of directors of PAR
Technology Corporation, a NYSE listed company which provides software as a service (SaaS) and related solutions to the
hospitality industry. He has been on the PAR board of directors since November 2017 and is currently the Lead Independent
Director of PAR and chairman of the Compensation Committee. Since June 1, 2020, Dr. Stoffel has served as a director on
the board of EZAccess MD. Dr. Stoffel retired from the board of directors of Harris Corporation in October 2018, having
served since August 2003. He also retired in December 2018 from Trillium International, LLC, a private equity company,
where he served as co-founding General Partner since 2006. He continues to be an advisor to multiple private equity firms.
Prior to his private equity work, 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, where he began his career in
1972. His most recent position with Xerox Corporation was Vice President, Corporate Research and Technology. Dr. Stoffel
holds a Bachelor of Science in Electrical Engineering from the University of Notre Dame and received his Master of Science
and PhD from Syracuse University.
Dr. Stoffel’s prior service as a senior executive of large, publicly traded, technology driven companies and his more
than 30 years of 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
9
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.
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.
The Board has determined that having Mr. Mutch serve as Chairman is in the best interest of the Company 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
our CEO to focus on the management of the Company’s day-to-day operations.
The Board’s Role in Risk Oversight
Assessing and managing risk is the responsibility of the management of the Company. The Board’s oversight of
major risks occurs at both the full Board level and at the Board committee level. The Board 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. Management is responsible for establishing the Company’s business strategy, identifying and assessing
the related risks and implementing appropriate risk management practices. 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.
In addition, each of our Board committees also oversees the management of risks that fall within the committee’s
areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to
engage advisors. The Audit Committee oversees the Company’s compliance with legal and regulatory requirements. The
Governance and Nominating Committee assists the Board in shaping the corporate governance of the Company. The
Compensation Committee oversees the management of risks relating to the Company’s executive compensation plans and
incentive structure.
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
10
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 Voting in Director Elections. In an uncontested election of directors, to be elected to the Board, each
nominee must receive the affirmative vote of shares representing a majority of the votes cast, meaning that the number of
votes “FOR” a director nominee must exceed the number of votes “AGAINST” that director nominee.
Aviat’s Corporate Governance Guidelines provide that any director nominee in an uncontested election who does
not receive a greater number of votes “FOR” his or her election than votes “AGAINST” such election must, promptly
following certification of the stockholder vote, offer his or resignation to the Board for consideration in accordance with the
following procedures. All of these procedures will be completed within 90 days following certification of the stockholder
vote.
The Board, through its Qualified Independent Directors (as defined below), will evaluate the best interests of the
Company and its stockholders and 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 will consider all factors they deem relevant,
including but not limited to: (i) any stated reasons why stockholders did not vote for such director; (ii) the extent to which the
“AGAINST” votes exceed the votes “FOR” the election of the director and whether the “AGAINST” votes represent a
majority of the outstanding shares of common stock; (iii) any alternatives for curing the underlying cause of the “AGAINST”
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.
Following the Board’s determination, the Company will, 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 will
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 may 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 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 policy, then the Qualified Independent Directors
means all of the independent directors, and each independent director who is required to offer his resignation in accordance
with this policy must 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 are deemed to have agreed to abide by this policy
and will offer to resign and will resign if requested to do so in accordance with this policy (and will 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 Insider
Trading Policy, directors and executive officers are prohibited from short sales of Aviat securities, entering into puts, calls or
other derivative securities, 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
11
investment purposes or otherwise using Aviat securities as collateral for a loan. An exception to this prohibition may be
granted where a person wishes to pledge Company securities as collateral for a loan (not including margin debt) and clearly
demonstrates the financial capacity to repay the loan without resort to the pledged securities. Insiders 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.
12
Board Committees
The Board maintains an Audit Committee, a Compensation Committee and a Governance and Nominating
Committee as its regular committees. Copies of the charters for the Audit Committee, the Compensation Committee and the
Governance and Nominating Committee are available on our website at https://investors.aviatnetworks.com/corporate-
governance/documents-charters.
The following table shows, at the conclusion of fiscal year 2021, the Chairman and members of each committee, the
number of committee meetings held, and the principal functions performed by each committee as described in such
committee’s charter:
Committee
Audit . . . . . . . . .
Number of
Meetings in
Fiscal 2021
4
Members
John Mutch*
John J. Quicke
Dr. James C. Stoffel
Compensation . .
5
Dr. James C. Stoffel*
John J. Quicke
Kenneth Kong
Dahlia Loeb
Principal Functions
• 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 independent registered public accounting firm’s and
management’s assessment of the adequacy of financial reporting and
operating controls
• Monitors corporate compliance program
• Reviews the process by which management identifies and mitigates
key areas of risk
• Reviews the Company’s audited and unaudited financial results in the
Company’s annual and quarterly reports on Form 10-K, Form 10-Q
and earnings releases
• Reviews the scope and responsibilities of the internal audit program
and on the appointment of the individual or firm serving in such
capacity
• Reviews and approves all related party transactions
• Reviews our executive compensation policies and strategies
• Oversees and evaluates our overall compensation structure and
programs
• Ensures that an executive performance evaluation is in place
• Reviews and overseas management’s continuity planning processes
• Annually reviews incentive compensation arrangements and their
contribution to the desired risk management policy and practices
Governance and
Nominating . .
6
John J. Quicke*
• Develops and implements policies and practices relating to corporate
Dr. James C. Stoffel
John Mutch
Michele Klein
governance
• Reviews and monitors implementation of our governance policies and
procedures
• Establish, implement, and monitor the processes for (a) effective
communication with stockholders and (b) consideration of
stockholder proposals
• Reviews and oversees management’s continuity planning processes
• 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
• Develops, recommends, and oversees an annual self-evaluation
process of the Board and its committees
_____________________
* Chairman of Committee
13
difference in the manner in which the committee members evaluate nominees for director based on whether the nominee is
recommended by a stockholder. We utilized an executive search firm to identify and assist in identifying or evaluating
potential nominees in fiscal year 2021.
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.
Following the Annual Meeting, it is expected that Dr. James Stoffel, Michele Klein, and John Mutch will serve on
the Governance and Nominating Committee for fiscal year 2022 with Ms. Klein serving as chair. All the expected members
of the Governance and Nominating Committee for fiscal year 2022 are independent under the NASDAQ Listing Rules.
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 https://investors.aviatnetworks.com/investor-resources/contact-us or by sending a letter addressed to:
Aviat Networks, Inc., c/o Corporate Secretary, 200 Parker Drive, Suite C100A, Austin, TX 78728. 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 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 effective January 26, 2007 and as amended February 10, 2021. All of our
employees, including the CEO and CFO, 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 Company 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.
TRANSACTIONS WITH RELATED PERSONS
During fiscal year 2021, 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, director nominees, 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
15
will have a direct or indirect material interest, other than compensation described in the sections titled “Director
Compensation and Benefits” and “Executive Compensation.”
The Company does not have a formal written policy with respect to the review, approval, or ratification of
transactions with related persons, other than the Audit Committee’s responsibility to review such transactions as described in
its charter, but has established procedures to identify these transactions, if any, and bring them to the attention of the Audit
Committee of the Board for consideration. These procedures include a quarterly assessment in connection with our quarterly
financial risk assessments. The Audit Committee of the Board considers the following regulatory guidance: (i) Item 404(a) of
Regulation S-K of the Securities Act of 1933, as amended (Transactions with Related Persons); (ii) Accounting Standards
Codification Topic 850 (Related Party Disclosures); (iii) Public Company Accounting Oversight Board Auditing Standard
No. 18 (Related Parties); and (iv) the NASDAQ’s governance standards related to independence determinations.
Our Code of Conduct prohibits all employees, including our executive officers, from benefiting personally from any
transactions with us other than approved compensation benefits.
DIRECTOR COMPENSATION AND BENEFITS
The Board has delegated responsibility to the Compensation Committee to determine the form and amount of
director compensation, which 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 2021:
•
•
•
•
•
•
$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;
$25,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Board; in May 2021,
the Board approved an increase in the annual cash retainer for services as Chairman of the Board to $40,000
effective at the beginning of fiscal year 2022.
$20,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Audit Committee;
$10,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Governance and
Nominating Committee;
$15,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Compensation
Committee; and
Annual grant of restricted stock units (“RSUs”) under our 2018 Incentive Plan (the “2018 Plan”) valued at
$75,000, with 100% vesting at the earlier of (1) the day before the date of the Annual Meeting, or (2) the first
anniversary of the 2020 annual stockholders’ meeting, subject to continuing service as a director through such
earlier date. The value of the annual grant of RSUs for fiscal year 2022 was increased to $100,000 by the Board
in May 2021.
We reimburse each non-employee director for reasonable travel expenses incurred and in connection with
attendance at Board and committee meetings on our behalf, and for expenses such as supplies and continuing director
education costs, including travel for one course per year. Employee directors are not compensated for service as a director.
As adopted by the Company’s Board of Directors in November 2019, members of the Board shall achieve
ownership of three times (3x) such director’s annual cash retainer (exclusive of chairperson or committee fees). A director is
required to achieve compliance with the foregoing ownership requirement by the later of (a) five years from the date of
adoption of the guidelines, or (b) five years from the start of such director’s directorship with the Company. All vested RSUs
or Company shares purchased by a director in the open market shall be counted toward a director’s ownership requirement.
16
Fiscal Year 2021 Compensation of Non-Employee Directors
Our non-employee directors received the following aggregate amounts of compensation in respect of fiscal year
2021:
Name
Michele Klein (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dahlia Loeb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Mutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John J. Quicke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dr. James C. Stoffel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
__________________
Fees Earned in Cash
($)
Stock Awards (2)
($)
Total
($)
15,000
71,250
72,062
125,783
84,056
90,063
37,863
71,842
71,842
71,842
71,842
71,842
52,863
143,092
143,904
197,625
155,898
161,905
(1) Ms. Klein was appointed by the Board as a non-employee director, effective May 17, 2021. Ms. Klein was
appointed to the Governance and Nominating Committee on June 29, 2021. She received a pro-rated annual cash
retainer and equity award for her service on the Board during the fourth quarter of fiscal year 2021.
(2) The amounts shown in this column reflect the aggregate grant date fair value of RSUs granted to our non-employee
directors computed in accordance with FASB ASC Topic 718, determined without regard to estimated forfeitures.
The assumptions made in determining the fair values of our stock awards and option awards are set forth in Notes 1
and 9 to our fiscal year 2021 Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-
K for the fiscal year ended July 2, 2021, as filed with the SEC on August 25, 2021.
As of July 2, 2021, our non-employee directors held the following numbers of unvested RSUs, all of which were
granted under the 2018 Plan:
Name
Michele Klein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dahlia Loeb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Mutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John J. Quicke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dr. James C. Stoffel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested Stock
Awards
1,329
6,078
6,078
6,078
6,078
6,078
17
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.
In addition, the Company has entered into indemnification agreement with each director and officer.
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, the following table sets forth information with respect to the beneficial ownership of our
common stock as of September 13, 2021, by each person or entity known by us to beneficially own more than 5 percent of
our common stock, by our directors, by our nominees for director, by our named executive officers and by all our directors,
nominees for director 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., 200 Parker Drive. Suite C100A. Austin, TX 78728. As of
September 13, 2021, there were 11,187,111 shares of our common stock outstanding.
Named Executive Officers and Directors
Common
Shares
Currently
Held(1)
Common Shares That May
Be Acquired Within 60
Days of the Record Date(2)
Total
Beneficial
Ownership
Percentage
Beneficially
Owned
John J. Quicke . . . . . . . . . . . . . . . . . . . . . . . .
Dr. James C. Stoffel . . . . . . . . . . . . . . . . . . . .
John Mutch . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth Kong . . . . . . . . . . . . . . . . . . . . . . . .
Dahlia Loeb . . . . . . . . . . . . . . . . . . . . . . . . . .
Michele Klein . . . . . . . . . . . . . . . . . . . . . . . . .
Bryan Ingram . . . . . . . . . . . . . . . . . . . . . . . . .
Somesh Singh . . . . . . . . . . . . . . . . . . . . . . . . .
Peter Smith . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric Chang . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bryan Tucker . . . . . . . . . . . . . . . . . . . . . . . . .
All directors, nominees for director and
executive officers as a group (11 persons) . . .
__________________________
* Less than one percent
81,046
70,480
64,378
34,836
4,920
—
—
—
57,868
19,356
3,263
6,078
6,078
6,078
6,078
6,078
1,329
—
—
8,796
24,100
24,590
87,124
76,558
70,456
40,914
10,998
1,329
—
—
66,664
43,456
27,853
*
*
*
*
*
*
—
—
*
*
*
336,147
89,205
425,352
3.8 %
(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
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 13, 2021 by the
exercise of stock options or vesting of restricted stock units.
19
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
For fiscal year 2021, the Audit Committee consisted of three members of the Board, each of whom was 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 and the effectiveness of our
internal control over financial reporting, 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 (“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 the effectiveness of our internal control over financial reporting 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 July 2, 2021 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, BDO, the matters required to be discussed by the applicable requirements of the Public Company
Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has received the written disclosures and letter
from BDO required by applicable requirements of the PCAOB regarding the communications of BDO with the Audit
Committee concerning independence, and has discussed with BDO its independence, including whether the provision by
BDO of non-audit services, as applicable, 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 July 2, 2021 be included in Company’s Annual Report on Form 10-K.
Audit Committee of the Board of Directors
John Mutch, Chairman
John J. Quicke
Dr. James C. Stoffel
20
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
BDO was our independent registered public accounting firm for the fiscal years ended July 2, 2021 and July 3, 2020.
Representatives of BDO will be present at the Annual Meeting, will have an opportunity to make a statement should they so
desire and will be available to respond to appropriate questions.
The following table sets forth the fees billed for services rendered by our auditors, BDO, for each of our last two
fiscal years:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Audit Fees (2)
Audit Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,387,000 $
1,071,000
—
248,000
—
—
5,000
—
Total Fees for Services Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,635,000 $
1,076,000
Fiscal Year 2021(1)
Fiscal Year 2020(1)
________________________
(1)
(2)
(3)
Includes fees to be billed to us by BDO and BDO’s international affiliates for fiscal 2021 and 2020 financial statement audits,
internal control over financial reporting, quarterly reviews and statutory audits.
Audit fees include fees associated with the annual audit of our consolidated financial statements, internal control
over financial reporting, 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.
Tax fees were for services related to tax compliance, tax advice, tax planning services and transfer pricing. Tax
compliance was $160,000 for fiscal 2021, compared to zero for fiscal 2020.
BDO did not perform any professional services related to financial information systems design and implementation
for us in fiscal year 2021 or fiscal year 2020.
The Audit Committee has determined in its business judgment that the provision of non-audit services described
above is compatible with maintaining BDO’s independence.
Audit Committee Pre-Approval Policy
Section 10A(i)(1) of the Exchange Act and related SEC rules require that all auditing and permissible non-audit
services to be performed by a company’s principal accountants be approved in advance by the Audit Committee of the Board,
subject to a “de minimis” exception set forth in the SEC rules (the “De Minimis Exception”). Pursuant to Section 10A(i)(3)
of the Exchange Act and related SEC rules, the Audit Committee has established procedures by which the Chairperson of the
Audit Committee may pre-approve such services provided the pre-approval is detailed as to the particular service or category
of services to be rendered and the Chairperson reports the details of the services to the full Audit Committee at its next
regularly scheduled meeting. All audit-related and non-audit services in fiscal years 2021 and 2020, if any, were pre-
approved by the Audit Committee at regularly scheduled meetings of the Audit Committee, or through the process described
in this paragraph, and none of such services was performed pursuant to the De Minimis Exception.
21
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, policies, practices, and decisions. It is also
intended to provide context for the compensation awarded to, earned by, or paid to each of our named executive officers (our
“named executive officers”) during fiscal 2021 (defined as July 4, 2020 – July 2, 2021) as detailed in the Summary
Compensation Table below and in the other tables and narrative discussion that follow.
Named Executive Officer
Position
Peter A. Smith
Eric Chang
Bryan Tucker
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Senior Vice President, Americas Sales and Services
The executive team successfully led the Company to achieve 15.2% revenue growth and record profitability with
adjusted EBITDA margin at 11.9%. The executive team’s accomplishments during fiscal year 2021 led to the first year of
meaningful topline growth in six years and improvements to our gross margin and overall profitability. The executive team
also continued to operationalize an expense reduction program with cost savings reinvested in growth-related initiatives.
On April 7, 2021 the Company effected a two-for-one stock split in the form of a stock dividend to shareholders of
record as of April 1, 2021. The equity award amounts for all periods presented have been retrospectively reclassified to
reflect the two-for-one stock split in the form of a stock dividend.
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 compensation and other benefits, our named executive officers’ compensation opportunity is
weighted toward 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 strong management team. We believe that our emphasis
on long term stockholder value creation results in an executive compensation program structure that is
beneficial to our Company and our stockholders.
The Compensation Committee is made up of independent, non-employee members of the Board and oversees
the executive compensation program for our named executive officers. The Compensation Committee works
closely with its independent compensation consultant and management to evaluate the effectiveness of the
Company’s executive compensation program throughout the year. The Compensation Committee’s specific
responsibilities are set forth in its charter, which can be found on the Company’s website at http://
investors.aviatnetworks.com/committee-details/compensation-committee. In reviewing the elements of our
executive compensation program - base salary, annual cash 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 fairly, as compared to the compensation of our
peer group companies, with allowances for internal factors such as tenure, individual performance and the
nature of the relative scope and complexity of the role.
22
•
•
Our annual incentive program is based on specific Company financial performance goals for the fiscal year and
includes provisions to “clawback” any excess amounts paid in the event of a later correction or restatement of
our financial statements.
As a result of the novel coronavirus disease (“COVID-19”) we did not conduct our annual pay review of
executive compensation in August 2020, but instead elected to generally maintain named executive officer
compensation levels set in fiscal year 2020 for fiscal year 2021. That being said, our CFO received a salary
increase effective July 4, 2020 in connection with his promotion to CFO on April 3, 2020 and our CEO received
a performance-related increase to his base salary on January 20, 2021 and on July 1, 2021.
• We believe the compensation program for the named executive officers supported our strategic priorities and
aligned compensation earned with the Company’s financial performance in fiscal year 2021.
Compensation Governance Best Practices
The Compensation Committee believes that a demonstrated 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 fiscal year 2021, 100% of the annual cash bonuses granted pursuant to the
Annual Incentive Plan (the “AIP”) was performance-based and at-risk, subject to the Company’s achievement
of certain financial objectives. Under our 2018 Long Term Incentive Plan (the “2018 Plan”), one-third of the
equity awards value granted to the name executive officers during the fiscal year 2021 were performance-based
restricted stock units (which, if based on the Company’s stock price are referred to herein as “MSUs” and if
based on other performance criteria as described herein are referred to as “PSUs”), the vesting of which is
subject to achievement of a targeted financial measure. All equity grants are subject to the 2018 Plan.
• Mix of short-term and long-term compensation: Short-term compensation for our named executive officers
is comprised of base salaries and bonuses payable pursuant to the AIP, which pays out only to the extent that the
Company achieves its financial targets. Long-term compensation, granted under the 2018 Plan is comprised of
PSUs and MSUs, stock options and time-based restricted stock units (“RSUs”) for fiscal year 2021. PSUs and
MSUs are earned, if the performance or market-based criteria, as applicable, are met, at the end of a three-year
plan cycle, while stock options vest annually 1/3 at the end of each successive anniversary of the date of grant
and RSUs cliff vest after three years.
•
•
•
•
•
Independent compensation consultant: The Compensation Committee directly retains the services of
Compensia, an independent compensation consultant, to advise it in determining reasonable and market-based
compensation policies and practices.
Prohibition on hedging and pledging: Our named executive officers, together with all other employees, are
prohibited from engaging in hedging, pledging or similar transactions with respect to our securities.
No perquisites: Our named executive officers are not provided any perquisites other than our occasional
provision of relocation expense reimbursement.
No single trigger change of control acceleration: Change of control arrangements in the employment
agreements with our named executive officers include “double trigger” vesting provisions providing for
acceleration of vesting of outstanding unvested equity awards only in the event that both a change of control
occurs, and the named executive officer’s employment terminates thereafter for reasons specified in the
employment agreements.
No tax gross-ups: We do not provide gross-up payments to cover our named executive officers’ personal
income taxes that may pertain to any of the compensation or benefits paid or provided by the Company.
23
•
•
Clawback: We have a clawback policy that entitles us to recover all or a portion of any performance-based
compensation, including cash and equity components, if our financial statements are restated as a result of
errors, omissions or fraud.
Compensation risk management: The Compensation Committee reviews and analyzes the risk profile of our
compensation programs and practices on an annual basis.
Compensation Philosophy and Objectives
The primary objectives of our total executive compensation program are to use compensation as a tool to recruit and
retain outstanding executives and incentivize them to create longer-term value for 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.
Each year, the Compensation Committee reviews the executive compensation program to ensure its design and
policies remain appropriately aligned with our evolving business needs and to consider best compensation practices. Our
executive compensation program is also reviewed to ensure that it achieves a balance between providing meaningful retention
and performance incentives to our executives while managing both the Company’s share burn rate and the dilutive effects of
equity awards to the Company’s stockholders.
Executive Compensation Process
The Compensation Committee is responsible for establishing and implementing executive compensation policies in
a manner consistent with our compensation objectives and principles. The Compensation Committee reviews and approves
the features and design of our executive compensation program, and approves the compensation levels, individual AIP
objectives and total compensation targets for our named executive officers other than our CEO. The independent members of
the full Board approve the compensation level, individual AIP objectives, and financial targets for our CEO, based on
recommendations from the Compensation Committee. 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 named
executive officers. Following each fiscal year end, our CEO, assisted by our Human Resources Department, assesses the
performance of all executives other than the CEO. Following this annual performance review process, our CEO recommends
base salary and incentive awards for executives (other than himself) to the Compensation Committee. The CEO, with the help
of management and the independent consultant, makes recommendations to the Compensation Committee regarding the plan
design of the overall executive compensation program for review, discussion and approval. The Compensation Committee is
also responsible for developing pay recommendations for the CEO and in securing the full Board’s approval of these
recommendations annually.
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 for assistance. Accordingly, the Compensation Committee hired Compensia in May of 2021 as an independent
consultant to advise the Compensation Committee on matters related to the compensation of the Company’s executive
officers. Prior to the transition to Compensia, Pearl Meyer served as our outside advisor. All services that Compensia and
Pearl Meyer provided to Aviat in fiscal year 2021 were approved by the Compensation Committee and were related to
executive or Board compensation. Compensia provides an annual review of the Company’s compensation practices, reviews
24
and makes recommendations regarding Aviat’s 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 Compensia and Pearl Meyer pursuant to
NASDAQ Listing Rules and related SEC rules and found no conflict of interest in Pearl Meyer nor Compensia providing
advice to the Compensation Committee during fiscal year 2021. The Compensation Committee is also regularly advised by
the Company’s primary outside counsel, Vinson & Elkins LLP (“V&E”). Pursuant to the NASDAQ Listing Rules and
related SEC rules, the Compensation Committee has found no conflict of interest in V&E continuing to provide advice to the
Compensation Committee. The Compensation Committee reassesses the independence of its advisors annually.
Consideration of Say-on-Pay Results
Each year at our annual meeting, we conduct an advisory vote of our stockholders on our executive compensation
program. Although this vote is 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 evaluates whether any actions are warranted or appropriate.
At our 2020 Annual Meeting, 94.6% 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 evaluated these
results and took into account many other factors in evaluating our executive compensation programs as discussed in the
Compensation Discussion and Analysis. Although none of our Compensation Committee’s subsequent actions or decisions
with respect to the compensation of our named 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 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 Positioning
Our management and Compensation Committee consider external data to assist in evaluating and setting target total
direct compensation. Our compensation policy and practice is to target total compensation levels for all executive officers,
including our named executive officers, at competitive levels 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
direct compensation above or below the 50th percentile of the market data for similar positions in unique circumstances based
on an individual’s background, experience, and relative complexity and scope of the applicable role. 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 way
target total direct compensation opportunity is determined for any of our executive officers.
For fiscal year 2021, targets for total cash and cash-based compensation (base salary and short-term incentive
compensation pursuant to the AIP), long-term incentives and total direct compensation (base salary, and short- and long-term
incentive compensation) for our named executive officers were set based on data collected by Pearl Meyer from our proxy
peer group companies and from a proprietary survey source, using results for technology companies with median annual
revenues of $394 million. The peer group companies selected and used for compensation comparisons 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.
For fiscal year 2021, these peer group companies included:
25
ADTRAN, Inc.
Bel Fuse, Inc.
Casa Systems, Inc.
Applied Optoelectronics, Inc.
Calix, Inc.
Clearfield, Inc.
Comtech Telecommunications Corp.
DASAN Zhone Solutions, Inc.
Digi International, Inc.
Harmonic, Inc.
Park Aerospace Corp.
EMCORE Corp.
Inseego Corp.
PCTEL, Inc.
Ribbon Communications, Inc.
Richardson Electronics, Ltd.
Each year, the Compensation Committee with the compensation consultant reviews the appropriateness of the
comparison group used for assessing the compensation of our CEO and other named executive officers. For fiscal year 2021,
we removed Aerohive Networks as they were acquired by Extreme Networks and their compensation information is no
longer available. The fiscal year 2021 peer group consists of 16 companies located throughout the U.S, with Aviat positioned
at or near the median for revenue and other financial metrics.
Data for our peer group companies was collected directly from these companies’ proxy statements.
Total Compensation Elements
Our executive compensation program includes four primary elements:
•
•
•
•
base salary
annual incentive compensation pursuant to the AIP
long-term compensation (equity incentives)
post-termination compensation
Each named executive officer’s performance is measured against factors such as short- and long-term strategic goals
and financial measures of our performance, including revenue, return on invested capital (“ROIC”), and adjusted earnings
before interest, taxes, depreciation and amortization, AIP expenses and other non-GAAP items (“Gross Adjusted EBITDA”).
Details regarding the applicable financial targets for incentive awards are described below.
Base Salary
Base salaries are provided as compensation for day-to-day responsibilities and services. Executive salaries are
reviewed annually. Our CEO generally makes recommendations to the Compensation Committee in August of each year
regarding the base salary of each named executive officer, other than himself. The Compensation Committee considers each
named 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. For the beginning of fiscal year 2021, the CEO recommended, and the
Compensation Committee approved, that the base salaries for named executive officers be held flat at fiscal 2020 levels due
to the COVID-19 pandemic. Mr. Smith’s base salary was increased from $400,000 to $500,000 on January 20, 2021 and to
$650,000 on July 1, 2021 in recognition of performance and Mr. Chang’s base salary was increased from $280,000 to
$300,000 on July 4, 2020 in connection to his appointment as Chief Financial Officer on April 3, 2020. Additional details
concerning the compensation for our named executive officers for fiscal year 2021 are set forth in the Summary
Compensation Table below.
Annual Incentive Plan (AIP)
Our AIP is designed to motivate our executives to focus on achievement of our short-term financial goals. The CEO
reviews his recommendations for each named executive officer with the Compensation Committee, taking into account
market data obtained from its independent compensation 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 named executive officer.
26
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 and is paid in the form of cash. For fiscal year
2021, individual AIP target incentives were set at 70% of base salary for Mr. Smith and 50% for Messrs. Chang and Tucker,
in each case prorated for the number of days employed by the Company and salary adjustments during fiscal year 2021.
Executives can earn more or less than target if minimum or maximum performance levels are achieved. No incentive can be
earned if the Company does not achieve the minimum performance thresholds.
For fiscal year 2021, the AIP provided for an all-cash payout. The performance metric was 85% based on Gross
Adjusted EBITDA and 15% based on revenue. The following table outlines the minimum, target and maximum performance
and payout levels approved by the Compensation Committee for fiscal year 2021.
Fiscal Year 2021 Annual Incentive Plan - Minimum, Target and Maximum Thresholds
Fiscal Year 2021 AIP (85%)
Gross Adjusted EBITDA
Fiscal Year 2021 AIP (15%)
Revenue
Minimum
Earn 50%
Target
Earn 100%
Maximum
Earn 150%
$12,000,000
$16,800,000
$21,500,000
Earn 80%
Earn 100%
Earn 120%
$220,800,000
$245,300,000
$269,800,000
In fiscal year 2021, the AIP met both the Gross Adjusted EBITDA target at 150% and the Revenue target at 120%.
During fiscal year 2021, the Company experienced significant events that could have impacted achievement of the targeted
Gross Adjusted EBITDA metric and revenue metric, including the COVID-19 pandemic which significantly impacted
worldwide economic conditions and ongoing supply chain shortages. No adjustments were made to the performance
objectives, the target performance or the actual results for these significant events. During the 2021 fiscal year, partially as a
result of management’s swift actions to counter the aforementioned events, we achieved maximum target performance for the
Gross Adjusted EBITDA metric and the revenue metric. All named executive officers earned a payout as shown in the
Summary Compensation Table below.
Long-Term Incentive Compensation
Our equity awards under our 2018 Plan are 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 longer period. Using equity awards helps us
to retain executives, encourage share ownership and maintain a direct link between our executive compensation program and
stockholder value creation. The Company utilizes stock options as a component of executive compensation because they
have value only if the Company’s share price increases and, therefore, motivate our executives to drive sustained, long-term
stockholder value creation. Time-vesting RSUs are a component of executive compensation to further align our executives’
interests with those of stockholders. Because these awards typically vest after a specified period following the date of grant,
they also incentivize our executives to remain in our employ. PSUs and MSUs are a component of executive compensation
to ensure our executives’ incentives are tied directly to key drivers of stockholder value growth. PSUs and MSUs also play a
role in executive retention, as a named executive officer is required to remain employed through the applicable vesting date in
order to receive the shares underlying the PSUs or MSUs as applicable.
For fiscal year 2021, the named executive officers were eligible to receive equity incentive awards. As has
historically been the Company’s practice, these equity incentive awards were granted in September 2020 following the filing
of the Annual Report on Form 10-K using a combination of PSUs or MSUs as applicable, stock options, and RSUs.
Performance metrics and payout levels for the three-year performance period applicable to the PSUs and MSUs granted
during fiscal year 2021 were established at the beginning of fiscal year 2021.
27
Equity Vehicle
PSUs
Weighting
1/3
Stock options
1/3
Purpose/Description
The PSUs are subject to three-year cliff vesting from the issuance date assuming
achievement of ROIC and revenue growth target over a three-year performance period
starting fiscal year 2021 and continued employment through the vesting date in
September 2023.
Strike price: Determined based on the closing stock price on the date of grant
Vesting: One-third annually for a three year period from the issuance date assuming
continued employment through the vesting date
Expiration: Seven years from date of grant if not exercised
RSUs
MSUs
1/3
—
Three-year cliff vesting from the issuance date assuming continued employment
through the vesting date
The MSUs are subject to two and three years vesting from the issuance date (as
outlined in the grant) subject to achievement of certain stock-price achievements over
two- or three-year performance periods and continued employment through the
applicable vesting dates.
The table below shows the equity incentive award values granted for fiscal 2021 for each of the named executive officers.
The total value amounts in the table were determined by reviewing Peer Group data and the Company’s historical
performance. The total value amounts were calculated based on similar cash compensation percentages available to the
named executive officers and the performance of the Company’s share price for Mr. Smith. Included below for Mr. Smith
were 72,000 MSUs issued on January 20, 2021 (adjusted for 2-for-1 stock split effected on April 7, 2021), that will vest
based upon the Company achievement of certain stock price hurdles and Mr. Smith’s continued employment.
PSUs (at target)
and MSUs (at
target)(1)
Stock Options(2)
RSUs(3)
Total Value
$
$
$
1,107,450 $
50,732 $
70,180 $
94,715 $
50,742 $
70,191
94,710 $
50,732 $
70,180 $
1,296,875
152,206
210,551
Named Executive Officer
Peter Smith(4)
Eric Chang
Bryan Tucker
_____________
(1)
(2)
(3)
(4)
The grant date fair value of the PSUs and MSUs were determined under FASB ASC Topic 718 excluding the effect of
estimated forfeitures.
Individual award amounts were calculated based on Black-Scholes values.
The grant date fair value of the RSUs was determined under FASB ASC Topic 718 and was calculated using the
closing market price of our common stock on the respective grant dates.
In addition to a grant of 8.610 target PSUs on September 1, 2020, Mr. Smith received 72,000 target MSUs on January 20, 2021 that
will vest based on the Company’s achievement of certain stock price hurdles and Mr. Smith’s continued employment. Of the 72,000
target MSUs, 30,000 target MSUs has a target closing price of the Company’s common stock greater than or equal to $25.00 per
share for three consecutive days on or prior to December 31, 2022 in order for the MSUs to vest. If the performance measure is
reached prior to December 31, 2022, then the MSUs will convert to RSUs that will vest on December 31, 2022. The remaining
42,000 target MSUs have a target closing price of the Company’s common stock greater than or equal to $30.00 per share for three
consecutive days on or prior to December 31, 2023 in order for the MSUs to vest. If the performance measure is reached prior to
December 31, 2023, then the MSUs will convert to RSUs that will vest on December 31, 2023.
28
Perquisites
Our named 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 other than occasional
relocation expense reimbursement.
Generally Available Benefit Programs
In fiscal year 2021, 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 insurance, employee counseling assistance, flexible spending accounts and accidental death and dismemberment
insurance.
The named executive officers and all other eligible U.S.-based employees participate in our tax-qualified 401(k)
Plan. Under the 401(k) Plan, all eligible employees can receive matching contributions from the Company of 2.5% of eligible
compensation contributed. Each employee under the age of 50 can contribute a maximum of $19,500 during each calendar
year, and each employee over the age of 50 can contribute a maximum of $26,000.
The 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 under our employee stock
purchase plan. 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 48 shares of common stock annually under the
employee stock purchase plan.
The 401(k) Plan, employee stock purchase plan and the other benefits generally available to all other U.S.-based
employees 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 is terminated. We have determined that
such payments and benefits are an integral part of a competitive compensation package for our named executive officers.
Effective May 13, 2021, the Company entered into an amendment to Mr. Smith’s employment agreement that removed the
$750,000 cap on the cash severance amounts payable to Mr. Smith in connection with his termination of employment
following a “Change in Control” (as defined in his employment agreement and described below under “Potential Payments
Upon Termination or Change in Control” below). For additional information regarding our employment agreements with our
named executive officers, see the discussion under “Potential Payments Upon Termination or Change of Control.”
The employment agreements do not provide any tax-related gross-up payments to our named executive officers in
connection with a termination or a “Change in Control” transaction.
Actions Taken Following 2021 Fiscal Year End
In connection with exemplary performance during the 2021 fiscal year, on July 3, 2021, the Company entered into a
second amendment to Mr. Smith’s employment agreement (the “Smith Amendment”). The Smith Amendment provided for
(i) an increase to Mr. Smith’s base salary from $500,000 to $650,000, effective July 1, 2021, (ii) an increase to Mr. Smith’s
target bonus under the AIP for the 2022 fiscal year to $925,000 (zero to 200% of which may be paid out based on
performance achieved), and (iii) an increase to the target value of the long term incentive compensation to be granted to Mr.
Smith during the 2022 fiscal year such that the cumulative target value of equity awards granted to Mr. Smith during the 2022
fiscal year shall be $2,300,000. In connection with the Smith Amendment, on July 3, 2021, Mr. Smith was provided 24,240
PSUs, 59,422 stock options and 24,049 RSUs under the 2018 Plan, all of which will vest in full upon Mr. Smith’s termination
of employment for any reason other than for “Cause” or due to his “Voluntary Termination” (each as defined in Mr. Smith’s
employment agreement, as described below under “Potential Payments Upon Termination or Change in Control”). The
Smith Amendment also provides that if Mr. Smith is terminated by the Company other than for Cause within one year
following a Change in Control, or voluntarily terminates his employment for “Good Reason” (as defined in Mr. Smith’s
29
employment agreement, as described below under “Potential Payments Upon Termination or Change in Control”) within
such period, then he will receive (i) cash severance equal to two times the sum of his annual base salary and the target bonus
amount in effect on the date of termination under the AIP prorated for the period worked, (ii) payment of all premiums for
continued healthcare pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for
up to 18 months, and (iii) vesting of all unvested stock options granted to Mr. Smith and all other then-unvested equity
related awards held by Mr. Smith that vest based solely on continued employment by the Company (unless otherwise
restricted by such equity-related awards).
Recovery of Executive Compensation
Our executive compensation program permits us to recover or “clawback” all or a portion of any performance-based
compensation, including equity awards, 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.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), as amended, generally imposes a $1 million
limit on the amount of compensation paid to “covered employees” (as defined in Section 162(m)) that a public corporation
may deduct for federal income tax purposes in any year. Compensation paid to certain of our named executive officers will
be subject to the $1 million per year deduction limitation imposed by Section 162(m). While we will continue to monitor our
compensation programs in light of the deduction limitation imposed by Section 162(m), our Compensation Committee
considers it important to retain the flexibility to design compensation programs that are in the best long-term interests of the
Company and our stockholders. As a result, we have not adopted a policy requiring that all compensation be fully deductible.
The Compensation Committee has concluded that paying compensation at levels in excess of the limits under Section 162(m)
is in the best interests of the Company and our stockholders in certain circumstances.
Hedging and Pledging Prohibition
Our named executive officers, as well as all other employees, directors and their designees are prohibited from
engaging in hedging, pledging 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,
calls, collars or other derivative securities, whether granted pursuant to the 2018 Plan, or held directly or indirectly by the
covered individual.
Stock Ownership Guidelines
While we do not have a minimum stock ownership requirement for our named executive officers, the corporate
governance guidelines adopted by the Board encourage the ownership of our common stock.
Risk Considerations in Our Compensation Program
The Compensation Committee, pursuant to its charter, is responsible for reviewing and overseeing the compensation
and benefits structure applicable to our employees, generally. We do not believe that our compensation policies and practices
for our employees encourage excessive risk-taking or create risks that are reasonably likely to have a material adverse effect
on our company. In reaching this conclusion, we considered the following factors:
(a) Our compensation program is designed to provide a mix of both fixed and “at risk” incentive compensation.
(b) Our Compensation Committee and management team have responsibility for managing the administration,
determination and approval of total and, in the case of the named executive officers, the Compensation Committee
is responsible for individual approval of payouts under the incentive plans.
(c) The incentive elements of our compensation program (annual incentives and multi-year equity awards) are
designed to reward both annual performance (under the AIP) and longer-term performance (under the 2018 Plan).
30
We believe this design mitigates any incentive for short-term risk-taking that could be detrimental to our
company’s long-term best interests.
(d) The performance periods for our PSUs overlap, and our time-vested RSUs generally cliff vest after three years.
This mitigates the motivation to maximize performance in any one period at the expense of others.
(e) Maximum payouts under our AIP are currently capped at 150% of the target award opportunity set by the
Compensation Committee. We believe these limits mitigate excessive risk-taking, since the maximum amount that
can be earned is limited.
(f) Finally, our AIP and our 2018 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.
(g) The Compensation Committee retains an independent compensation consultant.
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.
Compensation Committee of the Board of Directors
Dr. James C. Stoffel, Chairman
Kenneth Kong
Dahlia Loeb
John J. Quicke
31
Summary Compensation Table
The following table summarizes the total compensation for each of our fiscal years ended July 2, 2021, July 3, 2020,
June 28, 2019, of our named executive officers for the applicable years, consisting of our CEO, CFO and Senior Vice
President Americas Sales and Services. With respect to fiscal year 2021, due to changes in the executive team, we only had
one additional executive officer in addition to our CEO and CFO, therefore there are only three named executive officers for
the most recent fiscal year.
Name/Principal Position
Peter A. Smith,
Director, President and Chief Executive Officer . . .
Eric Chang,
Senior Vice President and Chief Financial Officer .
Bryan Tucker,
Senior Vice President Americas Sales and Services
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
_______________________
Fiscal
Year
Salary(2)
($)
Stock
Awards(3)
($)
Option
Awards(4)
($)
2021
2020
2021
2020
2019
444,231
1,202,160
94,715
187,692
664,485
299,616
101,464
270,231
260,000
88,752
65,344
—
50,742
87,748
65,591
Non-Equity
Incentive Plan
Compensation
(5)
All Other
Compensation
(6)
($)
($)
Total
($)
458,325
138,113
268,250
137,736
—
16,761
2,216,192
3,996
994,286
10,862
730,934
5,929
590,396
8,148
399,083
2021
315,000
140,360
70,191
229,163
19,328
774,042
(1) Mr. Tucker was appointed as an executive officer in fiscal year 2021.
(2)
The annual base salary for Mr. Smith was increased from $400,000 to $500,000 on January 4, 2021 and was
increased to $650,000 on July 1, 2021 due to performance.
The annual base salary for Mr. Chang was $300,000.
The annual base salary for Mr. Tucker was $315,000.
(3)
The “Stock Awards” column shows the full grant date fair value of the market-based shares, performance shares,
and restricted stock granted in fiscal 2021, 2020 and 2019.
The grant date fair value of the PSUs, MSUs, and RSUs was determined under FASB ASC Topic 718 and
represents the amount we would expense in our financial statements over the entire vesting schedule for the awards.
The grant date fair value of MSUs was estimated using a Monte-Carlo simulation model. The grant date fair value
for PSUs and RSUs was based on the closing market price of our common stock on the respective grant dates. The
assumptions used for determining values are set forth in Notes 1 and 9 to our audited consolidated financial
statements in Part II, Item 8 of our Annual Report on Form 10-K for fiscal year 2021. These amounts reflect our
accounting for these grants and do not correspond to the actual values that may be recognized by the named
executive officers.
(4)
The “Option Awards” column shows the aggregate grant date fair value of the stock options granted in fiscal 2021,
determined using Black-Scholes values. The assumptions used for determining values are set forth in Notes 1 and 9
to our audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for fiscal
year 2021.
(5)
(6)
The “Non-Equity Incentive Plan Compensation” column shows the cash bonus earned under the fiscal year 2021
and fiscal year 2020 annual incentive plan. No cash bonus was earned for fiscal 2019.
The following table describes the components of the “All Other Compensation” column.
32
Life Insurance(a)
($)
Company Matching Contributions
Under 401(k) Plan(b)
($)
Vacation payout(c)
($)
Total All Other
Compensation
($)
3,463
1,419
776
654
612
1,302
5,606
2,577
4,317
5,275
7,536
11,968
7,692
—
5,769
—
—
6,058
16,761
3,996
10,862
5,929
8,148
19,328
Name
Peter A. Smith
Eric Chang
Bryan Tucker
Year
2021
2020
2021
2020
2019
2021
_____________________
(a) Represents premiums paid for life insurance that represent taxable income for the named executive officer.
(b) Represents matching contributions made by us to the 401(k) account of the respective named executive.
(c) Represents vacation payout for unused vacation days.
Fiscal Year 2021 Grants of Plan-Based Awards
The following table lists our grants and incentives made to the named executive officers during our fiscal year ended
July 2, 2021, of plan-based awards, both equity and non-equity based under our AIP and 2018 Plan. There is no assurance
that the grant date fair value of stock and option awards will ever be realized.
Estimated Possible Payouts Under
Non-Equity Incentive Plan
Awards(1)
Target
Maximum
Threshold
Estimated Future Payments
Under Equity Incentive Plan
Awards(2)
Target
Maximum
Threshold
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3)
($)
($)
($)
(#)
(#)
(#)
(#)
Name
Peter A. Smith . . .
Type of
Award
Options
RSU
PSU
MSU
AIP
Eric Chang . . . . . .
Options
Bryan Tucker . . . .
RSU
PSU
AIP
Options
RSU
PSU
AIP
Grant Date
9/1/2020
9/1/2020
9/1/2020
1/20/2021
—
—
—
—
—
—
—
—
—
—
—
—
—
171,675
315,000
458,325
9/1/2020
9/1/2020
9/1/2020
—
—
—
—
—
—
—
—
—
—
81,750
150,000
268,250
9/1/2020
9/1/2020
9/1/2020
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,305
8,610
17,220
—
—
—
—
72,000
—
—
—
—
—
—
—
2,306
4,612
9,224
—
—
—
—
—
—
—
—
—
3,190
6,380
12,760
—
85,838
157,500
229,163
—
—
—
All Other
Option
Awards:
Number of
Securities
Underlying
Options(4)
(#)
26,386
—
—
—
—
14,136
—
—
—
19,554
—
—
—
Grant Date,
Fair Value of
Stock and
Option
Awards(5)
($)
94,715
94,710
94,710
1,012,740
—
50,742
50,732
50,732
—
70,191
70,180
70,180
—
—
8,610
—
—
—
—
4,612
—
—
—
6,380
—
—
______________________
(1)
(2)
(3)
(4)
The amounts shown under Estimated Possible Payouts Under Short-Term Non-Equity Incentive Plan Awards reflect
possible payouts under our fiscal 2021 AIP. For Mr. Smith these columns represent the pro-rata portion of his AIP
award following his salary increases in January 2021.
PSUs vest 100% on the third anniversary of the grant date based on the achievement of performance criteria. The
market-based conditions applicable to the MSUs granted to Mr. Smith in January 2021 were achieved in fiscal 2021
and will vest on December 31, 2022 and December 31, 2023, subject to the named executive officer’s continued
employment through each such vesting date.
These amounts represent the number of RSUs granted to the named executive officers during fiscal year 2021,
which vest in full on the third anniversary of the date of grant, subject to the named executive officer’s continued
employment through such vesting date.
These amounts represent the number of stock options granted to the named executive officers during fiscal year
2021, which vest annually over three years from the date of grant, subject to the named executive officer’s continued
employment through such vesting date.
33
(5)
The “Fair Value of Stock and Option Awards” column shows the full grant date fair value of the stock options
granted in fiscal year 2021. The grant date fair value of the 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 assumptions used for determining values are set forth in Notes 1 and 9 to our audited consolidated financial
statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal 2021. 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.
Fiscal 2021 Outstanding Equity Awards
The following table provides information regarding outstanding unexercised stock options and unvested stock
awards held by each of our named executive officers as of July 2, 2021. Each grant of options or unvested stock awards is
shown separately for each named executive officer. The vesting schedule for each award of options and unvested stock
awards 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 the 2007 Plan and 2018 Plan.
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Number
of Shares
or Units
of Stock
that have
not
Vested
(#)
Market
Value of
Shares or
Units of
Stock that
have not
Vested(7)
($)
Option
Expiration
Date
—
—
30,000 (1)
956,400
42,000 (1)
1,338,960
Option
Exercise
Price
($)
—
—
26,386 (2)
11.00
9/1/2027
8,610 (4)
274,487
14,136 (2)
11.00
9/1/2027
4,612 (4)
147,031
9,410 (2)
14,982 (3)
4,894 (2)
6.42
7.23
8.90
19,554 (2)
11.00
5/19/2027
—
—
9/20/2026
6,142 (4)
195,807
9/7/2025
9/1/2027
—
—
6,380 (4)
203,394
16,710 (3)
7.23
9/20/2026
—
—
6,852 (4)
218,442
—
—
—
—
Name
Peter A. Smith .
Eric Chang . . . .
Bryan Tucker . .
Grant Date
1/20/2021
1/20/2021
9/1/2020
9/1/2020
5/19/2020
9/20/2019
9/7/2018
9/1/2020
9/20/2019
9/20/2019
9/20/2019
9/7/2018
9/7/2018
2/2/2015
—
—
—
—
4,706
—
9,788
—
—
—
—
11,510
5,754 (2)
—
808
—
—
—
—
—
—
—
—
—
—
6,852 (5)
218,442
—
—
4,315 (6)
137,562
—
—
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares Units or
Other Rights
that have not
Vested
(#)
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights that
have not
Vested(8)
($)
—
—
8,610 (7)
4,612 (7)
—
6,142 (5)
3,670 (6)
6,380 (7)
—
—
—
—
274,487
147,031
—
195,807
117,000
203,394
—
—
—
—
8.90
—
7.80
—
—
9/7/2025
—
2/2/2022
34
______________________
(1) Market-based conditions applicable to the MSUs granted to Mr. Smith in January 2021 were achieved in fiscal 2021
and will vest in December 31, 2022 and December 31, 2023, subject to the named executive officer’s continued
employment through such vesting date. In accordance with SEC rules, because such market-based conditions have
been achieved and the MSUs only remain subject to time-based vesting conditions, the number of MSUs earned are
reported in the “Number of Shares or Units of Stock that have not Vested” column.
(2)
(3)
(4)
(5)
(6)
(7)
Stock options that vest annually over three years from date of grant.
Stock options that cliff vest three years from date of grant.
RSUs that cliff vest three years from date of grant.
PSUs eligible to vest based on the Company’s non-GAAP net income. From 50% to 150% of the target PSUs will
vest in September 2022 following the end of the fiscal year July 1, 2022, that the Compensation Committee certifies
achievement of the performance measure. Vesting of these PSUs is dependent on continuous employment with us
through the vesting date. The number of PSUs reported in the table above reflects 100% of the target number of
granted PSUs based on the Company’s annual non-GAAP net income for the performance periods.
PSUs eligible to vest based on the Company’s non-GAAP net income. From 50% to 100% of the target PSUs will
vest after the Compensation Committee certifies the achievement of the performance measure.
PSUs eligible to vest based on the Company’s annual average ROIC from fiscal 2021 to fiscal 2023 and revenue
growth for fiscal 2023. From 50% to 200% of the target PSUs will vest after the Compensation Committee certifies
the achievement of the performance measure. Vesting of these PSUs is dependent on continuous employment with
us through the vesting date in September 2023.
(8) Market value is based on the $31.88 closing price of a share of our common stock on July 2, 2021, as reported on the
NASDAQ Global Select Market.
Fiscal 2021 Option Exercised and Stock Vested Table
The following table provides information for each of our named executive officers regarding the number of shares of
our common stock acquired upon exercising vested options or release of stock awards during fiscal year 2021.
Options Awards
Stock Awards
Number of shares
acquired on
exercise(#)
Value realized on
Exercise ($)
Number of Shares
Acquired on Vesting
(#) (1)
Value Received on
Vesting ($) (2)
—
—
8,000 $
—
—
156,160
93,000 $
—
—
1,260,735
—
—
Name
Peter A. Smith . . . . . . . . . . . . . . . . . . . .
Eric Chang . . . . . . . . . . . . . . . . . . . . . . .
Bryan Tucker . . . . . . . . . . . . . . . . . . . . .
_________________________
(1)
(2)
Vested number of shares of PSUs.
Amount shown is the aggregate market value of the vested shares of PSUs based on the closing price of our stock on
the vesting date.
35
Equity Compensation Plan Summary
The following table provides information as of July 2, 2021, relating to our equity compensation plan:
Plan Category
Equity Compensation plan approved by security holders(1)
Equity Compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
998,362
(2)
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
998,362
_____________________
Weighted-
Average
Exercise Price
of
Outstanding
Options
$
$
$
(3)
9.55
—
9.55
Number of Securities
Remaining Available
for Further Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in the First
Column)
897,245
(4)
—
897,245
(1)
(2)
(3)
(4)
Consists of the 2007 Plan, the 2018 Plan and our employee stock purchase plan.
The number includes 540,790 shares to be issued upon exercise of options, 189,244 shares to be issued upon vesting of
RSUs, 165,000 shares to issued upon vesting of MSUs (based on achievement of target market-based metrics) and
103,328 shares to be issued upon vesting of PSUs (based on achievement of target performance metrics).
Excludes weighted average fair value of RSUs, MSUs and PSUs.
Includes 112,452 shares reserved for future issuances under the employee stock purchase plan.
Potential Payments Upon Termination or Change of Control
We have employment agreements 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 and assume a termination event (and Change of Control event, where applicable) on July 2, 2021 and
refer to 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 12 or 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 12 or 18 months after a Change of
Control (depending on individual employment agreements). 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
Name
Conditions for Payouts
Peter Smith . . . . . Termination without cause or
for good reason, or due to
disability
Within 12 months after
Change of Control
Eric Chang . . . . . . Termination without cause or
for good reason, or due to
disability
Within 18 months after
Change of Control
Bryan Tucker . . . . Termination without cause or
for good reason, or due to
disability
Within 18 months after
Change of Control
______________________
Base Salary
Component(1)
$
650,000 $
Cash
Incentive
Component(2)
Accelerated
Equity
Vesting(3)
Insurance
Benefit(4)
Out-
Placement
Services(5)
458,325 $ 2,386,856 $
33,060 $
30,000 $
Total
3,558,241
$
$
$
$
1,300,000 $
925,000 $ 2,937,945 $
49,500 $
30,000 $
5,242,445
300,000 $
268,250 $ 1,035,971 $
— $
30,000 $
1,634,221
300,000 $
150,000 $ 1,443,594 $
— $
30,000 $
1,923,594
315,000 $
229,163 $
908,517 $
26,604 $
30,000 $
1,509,284
$
630,000 $
157,500 $ 1,449,032 $
26,604 $
30,000 $
2,293,136
(1) The base salary component represents the total gross monthly payments to each named executive officer at the base
salary in effect as of the last day of fiscal 2021.
(2) The cash incentive component represents the cash bonus due under the fiscal year 2021 AIP.
(3) Reflects acceleration of outstanding equity awards, including pro-rata vesting of the equity awards granted during
fiscal year 2021, 2020 and 2019 and outstanding as of July 2, 2021.
(4) The insurance benefit provided is paid directly to the insurer benefit provider and includes amounts for COBRA.
(5) The estimated dollar amounts for outplacement services would be paid directly to an outplacement provider selected
by us.
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, 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 (i) 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 (ii) 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 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; or (ii) have been elected or nominated during such 36-month period by at
least a majority of the Board members and satisfied the criteria of this bullet when they were elected or
nominated; or
37
•
•
a majority of the Board determines that a Change of Control has occurred; or
the complete liquidation or dissolution of the Company.
The employment agreements with our named executive officers define a “Cause” as follows:
•
•
•
•
theft, dishonesty, misconduct or falsification of any employment or Company records; or
improper disclosure of the Company’s confidential or proprietary information; or
any action which as material detrimental effect on the Company’s reputation or business; or
refusal or inability to perform any assigned duties (other than as a result of disability) after written notice and a
30-day opportunity to cure such refusal or inability; or
• material breach of an employment agreement or of the proprietary information, confidentiality, assignment of
inventions agreement, after written notice and a 30-day opportunity to cure such breach; or
•
•
violation of the Company’s Code of Conduct; or
conviction (including any plea of guilty or no contest) for any criminal act that impairs the ability to perform
duties under an employment agreement.
The employment agreements with our named executive officers define a “Good Reason” as follows:
•
•
a reduction in base salary below the base salary in effect at the start date of the employment agreement, other
than a reduction that is similarly applicable to all members of the Company’s executive staff; or
a material diminution in your authority, duties and responsibilities.
Employment agreements are in effect for the named executive officers and 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 or 24 months following termination depending
on individual employment agreements;
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 or 18 months (depending on individual employment agreements); 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 exercise any vested stock options until the earlier of: (i)
12 months; or (ii) the date on which the applicable option(s) expire; and
outplacement assistance up to $30,000.
In addition, these agreements provide that if there is a Change of Control, and employment is terminated by us without cause
or by the employee for good reason within 12 or 18 months (depending on the respective named executive officer
employment agreement) after the Change of Control and they sign a general release of known and unknown claims in a form
satisfactory to us (i) they will receive a payment equal to the greater of (a) the average of the annual actual 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
employment terminates; and (ii) accelerated vesting of all unvested stock option(s), RSUs, PSUs and MSUs (assuming
38
performance criteria previously met or pro rata vesting at target for the period of time worked during the performance period
based on individual guidelines under the 2018 Plan.
CEO Pay Ratio
Pursuant to Item 402(u) of Regulation S-K, the Company is required to provide the following information with
respect to the year ended July 2, 2021:
•
The median of the annual total compensation of all employees of the Company (other than Mr. Smith’s the
Company’s Chief Executive Officer) was $ 69,362.
• The annualized total compensation of Mr. Smith, the Company’s Chief Executive Officer, was $2,220,038
• Based on this information, the ratio of the annual total compensation of the Company’s Chief Executive Officer
to the median of the annual total compensation of all employees was 32.01 to 1.
To identify the median paid employee and determine such employee’s annual total compensation in the last fiscal
year, the Company assessed its employee population as of July 2, 2021 and determined employee compensation using the 12-
month period ending July 2, 2021. On this date, the Company’s employee population consisted of 657 individuals. The
Company does not feel that there have been any material changes to the employee population or compensation arrangements
to necessitate needing to recalculate this number.
The Company determined its median employee by: (i) calculating total target cash compensation as the sum of
salary and target variable compensation, including target sales bonus, for each of the Company’s employees, (ii) ranking the
total target cash compensation of all employees except for the Chief Executive Officer from lowest to highest, and (iii)
picking the employee who was in the middle of the list.
39
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, directors are being nominated for election to serve until the 2022 Annual Meeting or until
their successors are elected and qualified.
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. Ages are as of the date of this Proxy Statement.
Director Nominees
Name
John Mutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Board
Bryan Ingram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Nominee
Title
Michele Klein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
Somesh Singh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Nominee
Peter Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director, President and Chief Executive Officer
Dr. James C. Stoffel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director
Age
65
57
72
65
55
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.
40
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed BDO as our independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending July 1, 2022, and our Board has ratified such appointment. See
“Independent Registered Public Accounting Firm Fees.”
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 BDO AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2022.
41
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
which we request annually during our Annual Meeting of Stockholders. 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 of this Proxy Statement, as well as
the Summary Compensation Table and related compensation tables, notes and narrative, which provide detailed information
on the Company’s compensation policies and practices and the compensation of our named executive officers.
As this vote is advisory, it will not be binding on our Board or our Compensation Committee, and neither our Board
nor our Compensation Committee will be required to take any action as a result of the outcome of the vote. However, our
Compensation Committee will carefully consider the outcome of this vote when considering future executive compensation
policies and decisions.
Based on the voting results at the Company’s 2018 Annual Meeting of Stockholders with respect to the frequency
(the “Frequency Vote”) of future stockholder advisory votes to approve the compensation of the Company’s named executive
officers, the Company includes an advisory, non-binding vote to approve the compensation of its named executive officers in
its proxy materials on an annual basis. The next required Frequency Vote is scheduled for the Company’s 2024 Annual
Meeting of Shareholders.
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.
PROPOSAL NO. 4
Approval of the Amended and Restated 2018 Incentive Plan of Aviat Networks, Inc.
Background and Purpose of the Proposal
The 2018 Plan was adopted by the Board and approved by the stockholders on March 20, 2018. At this year’s Annual
Meeting, stockholders will be asked to approve the increase in the number of shares available for issuance under the 2018
Plan (the “Amended and Restated Plan”) by 1,250,000 shares. The Amended and Restated Plan is attached hereto as Annex
1. If the Amended and Restated Plan becomes effective, the Company will register the additional shares on a Registration
Statement on Form S-8 as soon as practicable following the effective date.
The Board believes that stock ownership promotes the alignment of interests of our employees and directors, with those of
our stockholders. A total of only 784,793 shares remain available for issuance under the 2018 Plan as of July 2, 2021. The
proposed adoption of the Amended and Restated Plan will allow us to continue to utilize equity incentive compensation as a
means of aligning the interests of participants with those of our stockholders, will provide participants with further incentives
for outstanding performance and will assist in the retention of key talent. As a result, we believe that the adoption of the
42
Amended and Restated Plan is important to our ability to recruit and retain executive officers, directors and key employees
with outstanding ability and experience, and to our long-term growth and financial success.
The use of stock-based awards under the 2018 Plan continues to be a key element of the Company’s compensation program.
The purpose of the Amended and Restated Plan is to increase the number of shares of common stock that the Company may
issue under the Amended and Restated Plan by 1,250,000 shares. As of July 2, 2021, there were 457,572 shares associated
with outstanding RSUs, MSUs and PSUs, and there were 540,790 options, vested and unvested, outstanding and unexercised.
No other equity awards were outstanding under any of the Company’s equity compensation plans, including the 2018 Plan as
of such date. As of July 2, 2021, there remain only 784,793 shares available for grant.
The Amended and Restated Plan is a broad-based plan under which the Company grants awards to its current and prospective
employees, including officers, directors, and consultants. The Company continues to believe that its long-term interests are
best advanced by aligning the interests of its nonemployee directors and key employees with the interests of its stockholders.
Therefore, to attract, retain and motivate nonemployee directors, officers and key employees of exceptional abilities and, in
recognition of the significant contributions to the long-term performance and growth of the Company and its subsidiaries
made by these individuals, the Board recommends adoption of the Amended and Restated Plan. Approval of the Amended
and Restated Plan will permit the Company to continue to use stock-based compensation to align stockholder and employee
interests and to motivate employees and others providing services to the Company or any subsidiary. While the Board is
cognizant of the potential dilutive effect of compensatory stock awards, it also recognizes the significant motivational and
performance benefits that are achieved from making such awards. The Board determined that an increase of 1,250,000 shares
was appropriate based on a number of factors, including: the current number of shares available under the 2018 Plan, the
number of shares that remain subject to outstanding options and restricted stock units, the potential dilutive effects on the
Company’s stockholders, the Company’s historical annual burn rates, and the anticipated future needs for equity to be able to
attract and retain key employees and members of our leadership team.
Consequence of Failing to Approve the Proposal
If this Proposal No. 4 and the Amended and Restated Plan is not approved by the Company’s stockholders, the 2018 Plan will
continue to be effective, and there will be no impact on the rights of existing award holders under the 2018 Plan. However, if
this Proposal No. 4 and the Amended and Restated Plan is not approved by the Company’s stockholders, the Company would
be required to reevaluate its current use of equity-based awards pursuant to the 2018 Plan to eligible employees and directors
in the future and our compensation programs in general. If this Proposal No. 4 is not approved, we do not expect to be able to
issue any meaningful equity-based compensation awards pursuant to the 2018 Plan to eligible employees and directors in the
future, requiring the Company to reevaluate our compensation programs in general with a much higher percentage of
compensation paid in cash.
Why We Believe You Should Vote for Proposal 4
In evaluating our request to approve Proposal 4 and the Amended and Restated Plan, we ask that you consider the following:
•
Incentive to Attract and Retain Talent. We believe that our future success depends in part on our ability to attract,
hire, motivate and retain high quality employees, including executive officers, and directors and that the ability to
provide equity awards under the Amended and Restated Plan is critical to achieving this success. We would be at a
severe disadvantage if we could not use equity-based awards covering a meaningful number of shares of our
common stock to recruit and secure or retain key talent in the current competitive market for highly skilled and
qualified employees.
• Alignment of Interests. We believe that our future success depends on our ability to align the interests of our
employees, including our executive officers, and directors with those of our stockholders, and that equity
compensation is a key means to foster this alignment.
•
Significant Focus on Performance-Based Equity Awards. Approximately two-thirds of the annual equity awards
granted to our executive officers, including our named executive officers, in fiscal 2021 are either options to
purchase shares of our common stock or full-value awards subject to performance-based vesting requirements, with
the shares subject to such performance-based awards to be earned the vesting of the based on the achievement of
43
return on invested capital and revenue growth targets over a three-year performance period. The foregoing
percentages are based on the grant date fair value of the awards granted in fiscal 2021.
Limiting Cash Compensation Expense. Equity compensation limits the cash cost of our compensation programs and
can preserve cash for other uses in growing our business or returning value to our stockholders. If Proposal 4 and the
Amended and Restated Plan are not approved, we may need to replace the lost compensation value with larger cash
awards, which would increase our cash compensation expense. That cash might be better utilized if reinvested in our
business or returned to our stockholders.
Responsible Share Request Size. We believe that we are asking for enough shares to be able to continue to grant
equity awards under the Amended and Restated Plan for approximately three years (as discussed in more detail
below). We want our stockholders to have the ability to regularly validate their support of our approach to equity
awards
Responsible Plan Features. The Amended and Restated Plan includes several responsible plan features as described
in more detail below.
•
•
•
Summary of the Amended and Restated Plan
The following is a summary of the Amended and Restated Plan and does not purport to be a complete description of all
provisions of the Amended and Restated Plan. The Amended and Restated Plan should be read in conjunction with, and is
qualified in its entirety by reference to, the complete text of the proposed Amended and Restated Plan, which is attached to
this Proxy Statement as Annex 1. The Amended and Restated Plan gives the Compensation Committee the ability to award
stock options, stock appreciation rights (“SARs”), performance awards, restricted stock, RSUs, stock awards, other stock-
based awards, cash awards, and substitute awards.
Administration. The Amended and Restated Plan is administered by the Compensation Committee of Board (the
“Committee”), or such other committee of two or more directors designated by the Board except to the extent the Board
elects to administer the Amended and Restated Plan (in which case references to the “Committee” are references to the
Board). The Committee has broad discretion to administer the Amended and Restated Plan, including the power to determine
the eligible individuals to whom awards will be granted, the number and type of awards to be granted and the terms and
conditions of awards. The Committee may also accelerate the vesting or exercise of any award and make all other
determinations and take all other actions necessary or advisable for the administration of the Amended and Restated Plan.
Notwithstanding anything within the Amended and Restated Plan to the contrary, to comply with applicable laws in countries
other than the United States in which the Company or our affiliates operates or has employees, directors or other service
providers, to ensure that we comply with any applicable requirements of foreign securities exchanges, to achieve specific tax
treatment for an award in any country, or to facilitate the administration of the Amended and Restated Plan, the Committee,
in its sole discretion, has the power and authority to determine who is eligible to participate in the Amended and Restated
Plan, modify the terms and conditions of awards, establish sub-plans with applicable foreign jurisdiction provisions, or take
other actions deemed advisable to comply with foreign laws or securities exchange rules. The description of the Amended
and Restated Plan set forth within this summary addresses the terms and conditions of the Amended and Restated Plan
largely with respect to United States-based award recipients, therefore an award granted to an employee that is subject to
foreign laws or regulations may differ from the descriptions set forth below or contained within the Amended and Restated
Plan document.
Eligibility. Any individual who is an officer or employee of the Company or any of our affiliates, and any other person who
provides services to us or our affiliates, including members of the Board, are eligible to receive awards under the Amended
and Restated Plan at the discretion of the Committee. As of July 2, 2021, we have 657 employees and six members of the
Board who will be eligible to participate in the Amended and Restated Plan. Consultants are eligible to receive awards
pursuant to the Amended and Restated Plan, but as the Committee has sole discretion to determine whether such consultants
could receive an award, the number of consultants that could receive Amended and Restated Plan awards is not determinable
at this time.
Shares Subject to the Amended and Restated Plan. Subject to stockholder approval of the Amended and Restated Plan and
the adjustments described below, the total aggregate number of shares of stock which may be granted, issued or delivered
44
pursuant to Awards under the Amended and Restated 2018 Plan (including pursuant to the exercise of Incentive Options)
shall be the sum of: (i) 1,250,000 Shares, plus (ii) the number of shares of common stock of the Company which remain
available for grants of options or other awards under 2018 Plan prior to its amendment and restatement and the number of
shares of common stock of the Company which remain available for grants of options or other awards under the Company’s
2007 Incentive Plan, as amended and restated (, the “Prior Plan”) as of the Effective Date, plus (iii) the number of shares that,
after the Effective Date, would again become available for issuance pursuant to the reserved share replenishment provisions
of the Prior Plans as a result of, stock options issued thereunder expiring or becoming unexercisable for any reason before
being exercised in full, or, as a result of restricted stock being forfeited to the Company or repurchased by the Company
pursuant to the terms of the agreements governing such shares. The share replenishment provision of the immediately
preceding clause (iii) shall be effective regardless of whether the Prior Plans have terminated or remain in effect. As of July
2, 2021 (the last trading day of fiscal year 2021), the price per share of the Company’s common stock was $31.88 per share.
The shares issued pursuant to awards under the Amended and Restated Plan may be authorized and unissued shares or shares
that the Company reacquired, including shares purchased in the open market.
To the extent that a share of common stock is subject to an outstanding award other than a stock option or SAR (a “Full-
Value Award”), that award will reduce the aggregate share limit by 1.76 shares of common stock. To the extent that a share
of common stock is subject to an outstanding award other than a Full-Value Award, the award reduces the aggregate share
limit by one share of common stock. Shares of common stock subject to an award that expire, are cancelled, exchanged,
settled in cash or otherwise terminated without actual delivery of shares will again be available for awards pursuant to the
2018 Plan. Notwithstanding the foregoing, (i) the number of shares tendered or withheld in payment of any exercise or
purchase price of an award or taxes relating to an award, (ii) shares that were subject to a stock option or a SAR but were not
issued or delivered as a result of the net settlement or net exercise of such stock option or SAR and (iii) shares repurchased on
the open market with the proceeds of a stock option’s exercise price, will not, in each case, be available again for awards
pursuant to the 2018 Plan. Awards that may only be settled in cash will not count against the share limit for the 2018 Plan.
Limitations on Awards. In any one calendar year, the aggregate grant to any plan participant, including awards granted
pursuant to the Amended and Restated Plan shall not exceed 150,000 shares. To calculate the 150,000 annual maximum,
awards granted pursuant to the Amended and Restated Plan shall be valued on the grant date pursuant to FASB ASC Topic
718, and all other cash compensation may include, but is not limited to, quarterly retainer fees, committee fees, meeting fees,
or lead independent director fees.
Awards under the 2018 Plan
Stock Options. The Committee may grant incentive stock options and options that do not qualify as incentive stock options,
except that incentive stock options may only be granted to persons who are our employees or employees of one of our
subsidiaries, in accordance with Section 422 of the Code. The exercise price of a stock option cannot be less than 100% of the
fair market value of a share of our common stock on the date on which the option is granted and the option must not be
exercisable for longer than seven years following the date of grant. In the case of an incentive stock option granted to an
individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock,
the exercise price of the stock option must be at least 110% of the fair market value of a share of our common stock on the
date of grant and the option must not be exercisable more than five years from the date of grant. Any share of common stock
that is available for grant pursuant to the Amended and Restated Plan shall be available for the issuance of shares pursuant to
any award type under the plan, including the exercise of incentive stock options.
Stock Appreciation Rights. A SAR is the right to receive an amount equal to the excess of the fair market value of one share
of our common stock on the date of exercise over the grant price of the SAR. The grant price of a SAR cannot be less than
100% of the fair market value of a share of our common stock on the date on which the SAR is granted. The term of a SAR
may not exceed seven years. SARs may be granted in connection with, or independent of, a stock option. SARs may be paid
in cash, common stock or a combination of cash and common stock, as determined by the Committee.
Restricted Stock. Restricted stock is a grant of shares of common stock subject to the restrictions on transferability and risk
of forfeiture imposed by the Committee. If dividends are paid with respect to common stock underlying an award of unvested
restricted stock, the dividend will either be reinvested in additional shares of restricted stock containing the same terms and
conditions as the original award, or will be subject to the same vesting and forfeiture provisions as the underlying award and
such dividend shall not become payable unless the underlying award is settled.
45
Restricted Stock Units. A restricted stock unit is a right to receive cash, common stock or a combination of cash and
common stock at the end of a specified period equal to the fair market value of one share of our common stock on the date of
vesting. Restricted stock units may be subject to the restrictions, including a risk of forfeiture, imposed by the Committee.
Other Stock-Based Awards. Subject to limitations under applicable law and the terms of the Amended and Restated Plan,
the Committee may grant other awards related to our common stock. Such awards may include, without limitation, awards
that are convertible or exchangeable debt securities, other rights convertible or exchangeable into our common stock,
purchase rights for common stock, awards with value and payment contingent upon our performance or any other factors
designated by the Committee, and awards valued by reference to the book value of our common stock or the value of
securities of, or the performance of, our affiliates.
Performance Awards. Performance awards represent awards with respect to which a participant’s right to receive cash,
shares of our common stock, or a combination of both, is contingent upon the attainment of one or more specified
performance measures during a specified period. The Committee will determine the applicable performance period, the
performance goals and such other conditions that apply to each performance award.
Recapitalization. In the event of any change in our capital structure or business or other corporate transaction or event that
would be considered an equity restructuring, the Committee shall or may (as required by applicable accounting rules)
equitably adjust the (i) aggregate number or kind of shares that may be delivered under the Amended and Restated Plan, (ii)
the maximum number of shares that may be granted to a covered employee each year, (iii) the number or kind of shares or
amount of cash subject to an award, (iv) the terms and conditions of awards, including the purchase price or exercise price of
awards and performance goals, and (v) the applicable share-based limitations with respect to awards provided in the
Amended and Restated Plan, in each case to equitably reflect such event.
Change in Control. Except to the extent otherwise provided in any applicable award agreement, in the event of a change in
control or other changes to us or our common stock, the Committee may, either in advance of a change of control or at the
time or when the Committee may deem appropriate, (i) accelerate the time of vesting and exercisability of an award, (ii) if
the performance cycle has been completed for performance awards, payment shall be made not later than 90 days following
the effective date of termination, or if the performance cycle has not been completed for performance awards, target level of
performance shall be deemed to have been achieved and payment shall be made not later than 90 days following the effective
date of termination, or (iii) make any other adjustments to awards (including no adjustments) that the Committee deems
appropriate to reflect the applicable transaction or event.
Amendment and Termination. The Amended and Restated Plan automatically expires on the seventh anniversary of its
original effective date, or February 12, 2025. The Committee may amend or terminate the Amended and Restated Plan at any
time, subject to stockholder approval if required by applicable law, rule or regulation, including the rules of the stock
exchange on which our shares of common stock are listed. The Committee may amend the terms of any outstanding award
granted under Amended and Restated Plan at any time so long as the amendment would not materially and adversely affect
the rights of a participant under a previously granted award without the participant’s consent.
Clawback. The Amended and Restated Plan and all awards granted thereunder are subject to any clawback or recoupment
policy adopted by the Company.
Certain U.S. Federal Income Tax Consequences
The following discussion is for general information only and is intended to briefly summarize the United States federal
income tax consequences to participants arising from participation in the Amended and Restated Plan. This description is
based on current law, which is subject to change (possibly retroactively). The tax treatment of participants in the Amended
and Restated Plan may vary depending on their particular situations and may, therefore, be subject to special rules not
discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition,
nonqualified stock options and SARs with an exercise price less than the fair market value of shares of common stock on the
date of grant, SARs, restricted stock units, and certain other awards that may be granted pursuant to the Amended and
Restated Plan, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in
Section 409A of the Code and guidance promulgated thereunder. Potential tax consequences to the Company or participants
associated with the Amended and Restated Plan and its awards granted to eligible individuals subject to the laws of
jurisdictions outside of the United States are not addressed herein.
Tax Consequences to Participants
46
Options and SARs. Participants will not realize taxable income upon the grant of an option or a SAR. Upon the exercise of a
nonqualified stock option or a SAR, a participant will recognize ordinary compensation income (subject to withholding if an
employee) in an amount equal to the excess of (i) the amount of cash and the fair market value of the shares of common stock
received, over (ii) the exercise price of the award. A participant will generally have a tax basis in any shares of common stock
received pursuant to the exercise of a nonqualified stock option or SAR that equals the fair market value of such shares of
common stock on the date of exercise. Subject to the discussion under “Tax Consequences to the Company” below, the
Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the
compensation income recognized by a participant under the foregoing rules. When a participant sells the shares of common
stock acquired as a result of the exercise of a nonqualified stock option or SAR, any appreciation (or depreciation) in the
value of the shares of common stock after the exercise date is treated as long- or short-term capital gain (or loss) for federal
income tax purposes, depending on the holding period. The shares of common stock must be held for more than 12 months to
qualify for long-term capital gain treatment.
Participants eligible to receive an option intended to qualify as an incentive option (i.e., under Section 422 of the Code) will
not recognize taxable income on the grant of an incentive option. Upon the exercise of an incentive option, a participant will
not recognize taxable income, although the excess of the fair market value of the shares of common stock received upon
exercise of the incentive option (“ISO Shares”) over the exercise price will increase the alternative minimum taxable income
of the participant, which may cause such participant to incur alternative minimum tax. The payment of any alternative
minimum tax attributable to the exercise of an incentive option would be allowed as a credit against the participant’s regular
tax liability in a later year to the extent the participant’s regular tax liability is in excess of the alternative minimum tax for
that year.
Upon the disposition of ISO Shares that have been held for the required holding period (generally, at least two years from the
date of grant and one year from the date of exercise of the incentive option), a participant will generally recognize capital
gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the
participant for the ISO Shares. However, if a participant disposes of ISO Shares that have not been held for the requisite
holding period (a “Disqualifying Disposition”), the participant will recognize ordinary compensation income in the year of
the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Shares at the time
of exercise of the incentive option (or, if less, the amount realized in the case of an arm’s length disposition to an unrelated
party) exceeds the exercise price paid by the participant for such ISO Shares. A participant would also recognize capital gain
to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Shares on the
exercise date. If the exercise price paid for the ISO Shares exceeds the amount realized (in the case of an arm’s-length
disposition to an unrelated party), such excess would ordinarily constitute a capital loss.
The Company will generally not be entitled to any federal income tax deduction upon the grant or exercise of an incentive
option, unless a participant makes a Disqualifying Disposition of the ISO Shares. If a participant makes a Disqualifying
Disposition, the Company will then, subject to the discussion below under “Tax Consequences to the Company,” be entitled
to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a participant under
the rules described in the preceding paragraph.
Under current rulings, if a participant transfers previously held shares of common stock (other than ISO Shares that have not
been held for the requisite holding period) in satisfaction of part or all of the exercise price of an option, whether a
nonqualified stock option or an incentive option, no additional gain will be recognized on the transfer of such previously held
shares of common stock in satisfaction of the nonqualified stock option or incentive option exercise price (although a
participant would still recognize ordinary compensation income upon exercise of a nonqualified stock option in the manner
described above). Moreover, that number of shares of common stock received upon exercise which equals the number of
previously held shares of common stock surrendered in satisfaction of the nonqualified stock option or incentive option
exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains
holding period of the previously held shares of common stock surrendered in satisfaction of the nonqualified stock option or
incentive option exercise price. Any additional shares of common stock received upon exercise will have a tax basis that
equals the amount of cash (if any) paid by the participant, plus the amount of compensation income recognized by the
participant under the rules described above.
The Amended and Restated Plan generally prohibits the transfer of awards other than by will or according to the laws of
descent and distribution or pursuant to a qualified domestic relations order, but the Amended and Restated Plan allows the
Committee to permit the transfer of awards (other than incentive options), in its discretion. For income and gift tax purposes,
certain transfers of nonqualified stock options should generally be treated as completed gifts, subject to gift taxation.
47
The Internal Revenue Service has not provided formal guidance on the income tax consequences of a transfer of nonqualified
stock options (other than in the context of divorce) or SARs. However, the Internal Revenue Service has informally indicated
that after a transfer of options (other than in the context of divorce pursuant to a domestic relations order), the transferor will
recognize income, which will be subject to withholding, and FICA/FUTA taxes will be collectible at the time the transferee
exercises the options. If a nonqualified stock option is transferred pursuant to a domestic relations order, the transferee will
recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and FICA/FUTA taxes
(attributable to and reported with respect to the transferor) will be collectible from the transferee at such time.
In addition, if a participant transfers a vested nonqualified stock option to another person and retains no interest in or power
over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the
gift is to a grandchild or later generation) equals the value of the nonqualified stock option at the time of the gift. The value of
the nonqualified stock option may be affected by several factors, including the difference between the exercise price and the
fair market value of the shares of common stock, the potential for future appreciation or depreciation of the shares of
common stock, the time period of the nonqualified stock option and the illiquidity of the nonqualified stock option. The
transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of $15,000 per donee (for
2021, subject to adjustment in future years), (ii) the transferor’s lifetime unified credit, or (iii) the marital or charitable
deductions. The gifted nonqualified stock option will not be included in the participant’s gross estate for purposes of the
federal estate tax or the generation-skipping transfer tax.
This favorable tax treatment for vested nonqualified stock options has not been extended to unvested nonqualified stock
options. Whether such consequences apply to unvested nonqualified stock options or to SARs is uncertain and the gift tax
implications of such a transfer is a risk the transferor will bear upon such a disposition.
Other Awards: Restricted Stock, Stock Awards, Restricted Stock Units, Other Stock-Based Awards and Performance
Awards. A participant will recognize ordinary compensation income upon receipt of cash pursuant to an incentive award or
performance award or, if earlier, at the time the cash is otherwise made available for the participant to draw upon. Individuals
will not have taxable income at the time of grant of a restricted stock unit award, but rather, will generally recognize ordinary
compensation income at the time he or she receives cash or shares of common stock in settlement of the restricted stock unit
award, as applicable, in an amount equal to the cash or the fair market value of the shares of common stock received.
A recipient of a stock award or other equity-based award or the receipt of shares pursuant to an incentive award or
performance award generally will be subject to tax at ordinary income tax rates on the fair market value of the shares of
common stock when received, reduced by any amount paid by the recipient; however, if the shares of common stock are not
transferable and are subject to a substantial risk of forfeiture when received, a participant will recognize ordinary
compensation income in an amount equal to the fair market value of the shares of common stock (i) when the shares of
common stock first become transferable and are no longer subject to a substantial risk of forfeiture, in cases where a
participant does not make a valid election under Section 83(b) of the Code, or (ii) when the award is received, in cases where
a participant makes a valid election under Section 83(b) of the Code. If a Section 83(b) election is made and the shares of
common stock are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited
shares of common stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted
stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation
that is taxable as ordinary income to the recipient; otherwise the dividends will be treated as dividends.
A participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at
the time he recognizes income under the rules described above. The tax basis in the shares of common stock received by a
participant will equal the amount recognized by the participant as compensation income under the rules described in the
preceding paragraph, and the participant’s capital gains holding period in those shares of common stock will commence on
the later of the date the shares of common stock are received or the restrictions lapse. Subject to the discussion below under
“Tax Consequences to the Company,” the Company will be entitled to a deduction for federal income tax purposes that
corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules.
Tax Consequences to the Company
Reasonable Compensation. In order for the amounts described above to be deductible by the Company (or a subsidiary),
such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and
necessary business expenses.
Golden Parachute Payments. The ability of the Company (or the ability of one of its subsidiaries) to obtain a deduction for
future payments under the Amended and Restated Plan could also be limited by the golden parachute rules of Section 280G
48
of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change in
control of an employer-corporation.
Deduction Limitations. The ability of the Company (or the ability of one of its subsidiaries) to obtain a deduction for
amounts paid under the Amended and Restated Plan could be limited by Section 162(m) of the Code. Section 162(m) of the
Code limits the Company’s ability to deduct compensation, for federal income tax purposes, paid during any year to a
“covered employee” (within the meaning of Section 162(m) of the Code) in excess of $1,000,000. Despite this limitation, the
Company may determine that it is in the Company’s best interests to grant awards pursuant to the Amended and Restated
Plan that are not tax deductible to the Company in certain situations.
New Plan Benefits
A summary of the material features of the Amended and Restated Plan, including the class of persons eligible to participate
therein and the number of persons in such class, is included above under the title “Summary of Amended and Restated Plan.”
Because awards granted under the Amended and Restated Plan are at the discretion of the Committee, it is not possible to
determine the benefits or amounts that will be received by or allocated to eligible individuals. Therefore, we have not
included a New Plan Benefits Table nor information regarding stock option awards that could be granted pursuant to the
Amended and Restated Plan in the future.
The Company made its annual equity awards under the 2018 Plan for fiscal year 2021 to the named executive officers,
nonemployee directors, and to its other eligible employees. The grants to the named executive officers are reflected in the
“Long-Term Incentive Compensation” table that can be found in the Executive Compensation section of this proxy statement.
The fiscal year 2021 grant to the nonemployee directors is reflected in the “Fiscal Year 2021 Compensation of Non-
Employee Directors” in the Corporate Governance section of this proxy statement.
Equity Previously Awarded
Our stock-based compensation model, including the historical broad-based participation of our employees and directors, and
the portion of equity compensation paid to our senior executives, resulted in a “burn rate,” or share utilization rate, presented
in the table below. The following table summarizes the number of awards granted and/or vested the burn rate for each of the
last four fiscal years:
(in thousands)
FY 2018
FY 2019
FY2020
FY2021
(a) Stock options granted
(b) Restricted stock units granted (1)
(c) Performance-based restricted stock units
vested(1)
(d) Market-based stock units vested (1)
(e) Potential increase in diluted shares due to equity
awards (a + b + c + d)
(f) Weighted average common shares outstanding -
basic
Burn rate (e/f)(2)
____________________
-
84
-
-
84
313
55
94
338
800
285
305
174
-
764
244
211
175
-
630
10,672
10,754
10,782
11,036
0.8%
7.4%
7.1%
5.7%
Four Year Avg
Burn Rate (FY
2018-FY 2021)
210
164
110
85
569
10,811
5.3%
(1) RSUs granted and PSUs and MSUs vested reflected a factor of 1.76 adjustment to shares available for issuance.
(2) The burn rate is not adjusted for forfeitures and expirations, which would reduce the burn rate if taken into account.
The Board urges our stockholders to vote “FOR” Proposal No. 4. This Proposal requires the affirmative vote of the
holders of a majority of the total number of shares of common stock present in person or by proxy and entitled to vote on the
49
matter. The Board believes strongly that the approval of the Amended and Restated Plan is essential to the Company’s
continued success. All duly submitted proxies that are signed, but which do not provide instructions for how to vote, will be
voted FOR the approval of the Amended and Restated Plan by the management proxy holders. All members of the Board and
our executive officers and other senior employees are eligible for awards under the Amended and Restated Plan and thus
have a personal interest in the approval of the Amended and Restated Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE
AMENDED AND RESTATED 2018 INCENTIVE PLAN OF AVIAT NETWORKS, INC.
50
2021 Annual Report
OTHER MATTERS
Our annual report for the fiscal year ended July 2, 2021, including audited financial statements, will be available
over the Internet through our website at www.aviatnetworks.com and is being mailed with this Proxy Statement.
Form 10-K
We filed an annual report on Form 10-K for the fiscal year ended July 2, 2021 with the SEC on August 25,
2021. 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 200 Parker Drive, Suite C100A, Austin, TX 78728, 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 or any
adjournment thereof. 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.
51
Householding of Proxy Materials
To reduce costs and the environmental impact of the Annual Meeting, a single proxy statement and annual report,
along with individual proxy cards, will be delivered in one envelope to certain stockholders having the same last name and
address, and to individuals with more than one account registered with our transfer agent with the same address, unless
contrary instructions have been received from an affected stockholder. Stockholders participating in householding will
continue to receive separate proxy cards. If you are a registered stockholder and would like to enroll in this service or receive
individual copies of this year's and/or future proxy materials, please contact Broadridge Financial Solutions, Inc. 51 Mercedes
Way, Edgewood, New York 11717; or contact our Corporate Secretary at 512-265-3680 or at our headquarters at 200 Parker
Drive, Suite C100A, Austin, TX 78728. If you are a beneficial stockholder, you may contact the broker or bank where you
hold the account.
ANNEX 1
AVIAT NETWORKS, INC.
AMENDED AND RESTATED 2018 INCENTIVE PLAN
1.
Establishment and Purpose
In March 2018, the Board and the Company’s stockholders originally approved the Aviat Networks, Inc.
2018 Incentive Plan to be effective March 20, 2018 (the “Original Effective Date”), and subject to stockholder
approval at the Annual Meeting in November 2021, the Aviat Networks, Inc. Amended and Restated 2018 Incentive
Plan shall go into effect. The Amended and Restated Incentive 2018 Plan was adopted to advance the interests of the
Company by providing eligible individuals of the Company and its affiliates with an opportunity to acquire or
increase a proprietary interest in the Company, and to receive performance-based cash and equity incentive
compensation, in order to create a stronger incentive to expend maximum effort for the growth and success of the
Company and its subsidiaries, and to encourage such eligible individuals to remain in the employ of the Company or
one or more of its affiliates.
1.1
Establishment of the Plan. Aviat Networks, Inc., a Delaware corporation (together with any
successor thereto as provided in Section 16, hereinafter referred to as the “Company”), hereby establishes an
amended and restated stock equity plan to be known as the Amended and Restated 2018 Incentive Plan (hereinafter
referred to as the “Plan”), as set forth in this document. The Plan permits the grant of Nonstatutory Options,
Incentive Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and
Other Stock-Based Awards (each as defined below).
The Plan is adopted and , subject to the approval of the Company’s shareholders, shall become effective as
of November 10, 2021 (the “Effective Date”) and shall remain in effect as provided in Section 1.3; provided,
however, no Option (as defined below) may be exercised and no other Award (as defined below) may be exercised
or otherwise paid until the Plan has been approved by the Company’s stockholders at a meeting at which approval of
the Plan is considered.
1.2
Purpose of the Plan. The purpose of the Plan is to promote the interests of the Company and its
stockholders by aligning the interests of the Participants (as defined below), through the ownership of Shares (as
defined below) and through other incentives, with the interests of the Company’s stockholders, and by providing
flexibility to the Company to attract, motivate, and retain Employees (as defined below), Directors (as defined
below), consultants and advisors upon whose judgment, initiative, and efforts the financial success and growth of the
business of the Company largely depend. This Plan amends and restates the original 2018 Incentive Plan, effective
February 12, 2018 which replaced the Amended and Restated 2007 Stock Equity Plan (the “Prior Plan”), which
Prior Plan was automatically terminated, replaced and superseded by this Plan as of the Original Effective Date,
except that any awards granted under the Prior Plan shall continue to be subject to the terms of the Prior Plan and
applicable Award Agreements (as defined below) (including any such terms that are intended to survive the
termination of the Prior Plan or the settlement of such Award (as defined below)) and shall remain in effect pursuant
to their terms. Similarly, any Award that was granted pursuant to the original 2018 Incentive Plan prior to the new
Effective Date shall continue to be subject to the terms of the 2018 Incentive Plan prior to this amendment and
restatement, and applicable Award Agreements as in effect as of the date of the grant of that Award.
2.
Definitions
As used in this Plan, the following terms shall have the following meanings:
2.1
Affiliate has the meaning ascribed to such term in Rule 12b-2 promulgated under the General
Rules and Regulations of the Exchange Act.
2.2
Award means, individually or collectively, any grant or sale pursuant to the Plan of Options, Stock
Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, in
each case subject to the terms of the Plan.
2.3
Award Agreement means an agreement, certificate, resolution or other type or form of writing or
other evidence approved by the Committee which sets forth the terms and conditions of an Award. An Award
Agreement may be in any electronic medium, may be limited to a notation on the books and records of the Company
and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant.
2.4
Beneficial Owner or Beneficial Ownership has the meaning ascribed to such term in Rule 13d-3
promulgated under the General Rules and Regulations under the Exchange Act.
2.5
2.6
2.7
2.8
Board means the Company’s Board of Directors.
Business Combination has the meaning set forth in Section 9.1.
Change Of Control has the meaning set forth in Section 9.1.
Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor
statute thereto, and any regulations issued from time to time thereunder.
2.9
Committee means the Compensation Committee of the Board, or such other committee designated
by the Board to administer the Plan. The members of the Committee shall be appointed from time to time by and
shall serve at the discretion of the Board. The Committee shall consist solely of two or more directors who are
“nonemployee directors” under Rule 16b-3 promulgated under the Exchange Act, “outside directors” as defined
under Section 162(m) of the Code, and “independent directors” under the listing requirements of the NASDAQ
Global Market, or any similar rule or listing requirement that may be applicable to the Company from time to time.
For any period during which no such committee is in existence “Committee” shall mean the Board and all authority
and responsibility assigned to the Committee under the Plan shall be exercised, if at all, by the Board.
2.10
Company has the meaning set forth in Section 1.1.
2.11
Subsidiaries.
Director means a member of the Board of Directors of the Company, its Affiliates and/or
2.12
Effective Date has the meaning set forth in Section 1.1.
2.13
Employee means any employee of the Company, its Affiliates and/or Subsidiaries.
2.14
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
2.15
successor act thereto.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, or any
2.16
Fair Market Value or FMV means the value of a share of Stock on a particular date determined by
such methods or procedures as may be established by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Stock as of any date is the closing price for the Stock as reported on the
NASDAQ Global Market (or on any other national securities exchange on which the Stock is then listed) for that
date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing
price was reported. In addition, for purposes of determining the Fair Market Value of Stock for any reason other
than the determination of the Option Price or Stock Appreciation Rights, fair market value will be determined by the
Committee in a manner compliant with applicable laws and applied consistently for such purpose. Note that the
determination of Fair Market Value for purposes of tax withholding may be made in the Committee’s sole discretion
subject to applicable laws and is not required to be consistent with the determination of Fair Market Value for other
purposes.
2.17
Incentive Option means an Option that is intended to qualify as an “incentive stock option” within
the meaning of Section 422 of the Code
2.18
Nonstatutory Option means any Option that is not intended to meet the requirements of
Section 422 of the Code, or that otherwise does not meet such requirements.
2.19
Option means the right to purchase Stock granted to a Participant in accordance with Section 7.1.
Options granted under the Plan may be Nonstatutory Options, Incentive Options or a combination thereof.
2.20
pursuant to an Option..
Option Price means the price at which a share of Stock may be purchased by a Participant
2.21
Original Effective Date has the meaning set forth in Section 1.
2.22
Other Stock-Based Award means an equity-based or equity-related Award not otherwise
described by the terms of the Plan, granted pursuant to Section 7.5.
2.23
Participant means an eligible person as set forth in Section 6.1 to whom an Award is granted
under the Plan.
2.24
Performance Criteria means the criteria that the Committee selects for purposes of establishing
the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria
used to establish Performance Goals are limited to: (i) cash flow (before or after dividends), (ii) earnings per share
(including, without limitation, earnings before interest, taxes, depreciation and amortization), (iii) stock price,
(iv) return on equity, (v) stockholder return or total stockholder return, (vi) return on capital (including, without
limitation, return on total capital or return on invested capital), (vii) return on investment, (viii) return on assets or
net assets, (ix) market capitalization, (x) economic value added, (xi) debt leverage (debt to capital), (xii) revenue,
(xiii) sales or net sales, (xiv) backlog, (xv) income, pre-tax income or net income, (xvi) operating income or pre-tax
profit, (xvii) operating profit, net operating profit or economic profit, (xviii) gross margin, operating margin or profit
margin, (xix) return on operating revenue or return on operating assets, (xx) cash from operations, (xxi) operating
ratio, (xxii) operating revenue, (xxiii) market share improvement, (xxiv) general and administrative expenses or
(xxv) customer service.
2.25
Performance Goals means, for a Performance Period, the written goal or goals established by the
Committee for the Performance Period based upon the Performance Criteria. The Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit, subsidiary, or
an individual, either individually, alternatively or in any combination, applied to either the Company as a whole or
to a business unit or Affiliate, either individually, alternatively or in any combination, and measured either quarterly,
annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to
previous years’ results or to a designated comparison group, in each case as specified by the Committee. The
Committee will objectively define the manner of calculating the Performance Goal or Goals it selects to use for such
Performance Period for such Participant. The Committee may appropriately adjust any evaluation of performance
against a Performance Goal to exclude any of the following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary, unusual, non-recurring or non- comparable items (A) as described
in Accounting Standard Codification 225-20, (B) as described in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s Annual Report to stockholders for the applicable
year, or (C) publicly announced by the Company in a press release or conference call relating to the Company’s
results of operations or financial condition for a completed quarterly or annual fiscal period.
2.26
Performance Period means the one or more periods of time, which may be of varying and
overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals will
be measured for purposes of determining a Participant’s right to, and the payment of, a Performance Unit.
2.27
Performance Unit means a right granted to a Participant under Section 7.5, to receive cash, Stock
or other Awards, the payment of which is contingent on achieving Performance Goals established by the Committee.
2.28
Person has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
2.29
Plan has the meaning set forth in Section 1.1.
2.30
Prior Plan has the meaning set forth in Section 1.2.
2.31
Restricted Stock means Shares granted or sold to a Participant pursuant to Section 7.3 as to which
the Restriction Period has not lapsed.
2.32
Restricted Stock Unit means a unit granted or sold to a Participant pursuant to Section 7.3 as to
which Restriction Period has not lapsed.
2.33
Restriction Period means the period when Restricted Stock or Restricted Stock Units are subject
to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code (based on the passage of time, the
achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its
discretion), as provided in Section 7.3.
2.34
Share means a share of common stock of the Company, par value $0.01 per Share.
2.35
Stock means common stock, par value $0.01 per share, of the Company, and such other securities
as may be substituted for Stock pursuant to Section 8.
2.36
Stock Appreciation Right or SAR means a right to receive any excess in the Fair Market Value of
shares of Stock (except as otherwise provided in Section 7.2(c)) over a specified exercise price.
2.37
Subsidiary means a corporation, company or other entity (i) more than 50% of whose outstanding
shares or securities (representing the right to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership interest representing the right generally to
make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the
Company, except that for purposes of determining whether any person may be a Participant for purposes of any
grant of Incentive Options, “Subsidiary” means any corporation in which at the time the Company owns or controls,
directly or indirectly, more than 50% of the total combined voting power represented by all classes of stock issued
by such corporation.
2.38
Ten Percent Owner means a person who owns, or is deemed within the meaning of
Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (or any parent or subsidiary corporations of the Company, as defined in
Sections 424(e) and (f), respectively, of the Code). Whether a person is a Ten Percent Owner shall be determined
with respect to an Option based on the facts existing immediately prior to the grant date of the Option.
3.
Term of the Plan
Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any
time in the period commencing on the date of approval of the original 2018 Incentive Plan by the Board and ending
immediately prior to the 7th anniversary of the earlier of the adoption of the original 2018 Incentive Plan by the
Board or approval of the Plan by the Company’s stockholders. Awards of Incentive Options granted prior to
stockholder approval of the Plan are expressly conditioned upon such approval, but in the event of the failure of the
stockholders to approve the Plan shall thereafter and for all purposes be deemed to constitute Nonstatutory Options.
After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the Plan’s terms and conditions.
4.
Stock Subject to the Plan
The original share reserve for the 2018 Plan was 500,000 shares (adjusted to 1,000,000 in connection with a 2 for
1 stock split in April 2021). Of those shares, a total of 784,793 shares remain available for issuance under the 2018
Plan as of July 2, 2021. Subject to adjustment as provided in this Section 4 and Section 8, the aggregate number of
Shares of Stock which may be granted, issued or delivered pursuant to Awards under the Plan (including pursuant to
the exercise of Incentive Options) shall be the sum of: (i) 2,250,000 Shares, plus (ii) the number of shares of
common stock of the Company which remained available for grants of options or other awards under the Prior Plan
as of the Original Effective Date, plus (iii) the number of Shares that, after the Original Effective Date, would again
become available for issuance pursuant to the reserved share replenishment provisions of the Prior Plan as a result
of, stock options issued thereunder expiring or becoming unexercisable for any reason before being exercised in full,
or, as a result of restricted stock being forfeited to the Company or repurchased by the Company pursuant to the
terms of the agreements governing such shares. The share replenishment provision of the immediately preceding
clause (iii) shall be effective regardless of whether the Prior Plan has terminated or remains in effect.
For purposes of applying the foregoing limitation,
(a)
if any Option or Stock Appreciation Right expires, terminates, or is cancelled for any reason
without having been exercised in full, or if any other Award is forfeited by the recipient or repurchased at less than
its then Fair Market Value as a means of effecting its forfeiture, the shares not purchased by the Participant or which
are forfeited by the recipient or repurchased shall again be available for Awards to be granted under the Plan;
(b)
the full number of Options and Stock Appreciation Rights granted that are to be settled by the
issuance of Shares shall be counted against the number of Shares available for award under the Plan, regardless of
the number of Shares actually issued upon settlement of any such Award;
(c)
any Shares withheld to satisfy tax withholding obligations on an Award issued under the Plan with
respect to an Option, Stock Appreciation Right or full-value awards, Shares tendered to pay the exercise price of an
Award under the Plan, and Shares repurchased on the open market with the proceeds of an Option exercise will not
be eligible to be again available for grant under the Plan;
(d)
each Share of Stock issued pursuant to or subject to outstanding Awards granted after the Effective
Date, other than pursuant to or subject to any Option or Stock Appreciation Right, shall count as 1.76 Shares of
Stock (but if forfeited, or repurchased at less than its then Fair Market Value as a means of effecting forfeiture, shall
again be available for grant under the Plan as 1.76 Shares of Stock available under the limitation); and
(e)
settlement of any Award shall not count against the foregoing limitation except to the extent
settled in the form of Stock.
Shares of Stock issued pursuant to the Plan may be either authorized but unissued Shares or Shares held by the
Company in its treasury.
5.
Administration
5.1
General. The Committee shall be responsible for administering the Plan, subject to this Section 5
and the other provisions of the Plan. The act or determination of a majority of the Committee shall be the act or
determination of the Committee and any decision reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority at a meeting duly held. The Committee may
employ attorneys, consultants, accountants, agents, and other persons, any of whom may be an Employee, and the
Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or
valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee
shall be final and binding upon the Participants, the Company, and all other interested persons.
5.2
Authority of the Committee. The Committee shall have full and exclusive discretionary power to
interpret the terms and the intent of the Plan and any Award Agreement or other agreement or document ancillary to
or in connection with the Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms,
instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper. Such
authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and
conditions, including the terms and conditions set forth in an Award Agreement, and, subject to Section 17, adopting
modifications and amendments to the Plan or any Award Agreement, including without limitation, any that are
necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/
or its Subsidiaries operate. If the Committee does not exist or is unable to act for any reason, then the Plan shall be
administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be
deemed to be references to the Board.
Notwithstanding anything in the Plan to the contrary, equity-based Awards granted under the Plan may not
become exercisable, vest or be settled, in whole or in part, prior to the one-year anniversary of the date of grant,
except that: (A) the Board may provide that Awards become exercisable, vest or settle prior to such date in the event
of the Participant’s death or disability or in the event of a Change Of Control (as defined below); and (B) annual
equity grants to non- employee Directors that occur in connection with the Company’s annual meeting of
shareholders may vest on the date of the Company’s next annual meeting. The Committee’s determinations made in
good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons having or claiming
any interest under the Plan or an Award made pursuant hereto.
6.
Eligibility and Participation
6.1
Eligibility. Individuals eligible to participate in the Plan include all Employees and nonemployee
Directors, and all consultants and advisors to the Company, its Affiliates and/or Subsidiaries.
6.2
Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time,
select from all eligible individuals, those to whom Awards shall be granted and shall determine, in its sole
discretion, the nature of, any and all terms permissible by law, and the amount of each Award. In making this
determination, the Committee may consider any factors it deems relevant, including without limitation, the office or
position held by a Participant or the Participant’s relationship to the Company, the Participant’s degree of
responsibility for and contribution to the growth and success of the Company or any Subsidiary or Affiliate, the
Participant’s length of service, promotions and potential. Further, in no event shall the number of Shares of Stock
covered by Options or other Awards granted to any one person in any one calendar year exceed 150,000, as adjusted
from time to time under Section 8.
6.3
General Terms of Awards. Each grant of an Award shall be subject to all applicable terms and
conditions of the Plan (including but not limited to any specific terms and conditions applicable to that type of
Award set out in the following Section), and such other terms and conditions, not inconsistent with the terms of the
Plan, as the Committee may prescribe. No prospective Participant shall have any rights with respect to an Award
unless and until such Participant shall have complied with the applicable terms and conditions of such Award
(including, if applicable, delivering a fully executed copy of any agreement evidencing an Award to the Company).
6.4
Effect of Termination of Employment, Etc.
(a)
To the extent consistent with Sections 409A and 162(m) of the Code, each Award
Agreement shall set forth the extent to which the Participant shall have the right to retain or accelerate the
vesting or exercisability of an Award following termination of the Participant’s employment with or
provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such
provisions shall be determined in the sole discretion of the Committee, need not be uniform among all
Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination;
provided, however, any outstanding Option or SAR of the Participant shall cease to be exercisable in any
respect not later than 3 months following termination and, for the period it remains exercisable following
termination, shall be exercisable only to the extent exercisable at the date of termination. Military or sick
leave or other bona fide leave shall not be deemed a termination of employment or other association,
provided that it does not exceed the longer of three (3) months or the period during which the absent
Participant’s reemployment rights, if any, are guaranteed by statute or by contract.
(b)
If the employment of a Participant with the Company and its Affiliates should
subsequently terminate during the one year period following a Change Of Control, then as to any one or
more outstanding Awards which are not otherwise accelerated in full in accordance with Section 9.2, the
Committee may, either in advance of a Change Of Control or at the time thereof and upon such terms as it
may deem appropriate, provide for the acceleration of such outstanding Awards in accordance with the
following provisions:
(i)
All outstanding Awards held by such Participant shall become vested and/or
exercisable as of the effective date of such termination, whether or not the Awards were otherwise
vested and/or exercisable, and all conditions shall be waived with respect to outstanding Awards,
and
(ii)
For all outstanding Awards that are Performance Awards, (A) if the performance
cycle has been completed, payment of amounts determined in accordance with the terms of the
Performance Award shall be made in a lump sum not later than 90 days following the effective
date of such termination, and (B) otherwise, the target level of performance shall be deemed to
have been achieved with respect to such Performance Award and payment of amounts determined
in accordance with the terms of the Performance Award, pro-rated to reflect the portion of the full
performance cycle for such Performance Award that elapsed prior to such effective date shall be
made in a lump sum not later than 90 days following such effective date.
6.5
Non-Transferability of Awards. Except as otherwise provided in this Section 6.5, Awards shall not
be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law. All of
a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the
Participant’s legal representative. However, the Committee may, at or after the grant of an Award of a Nonstatutory
Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient to a family
member; provided, however, that any such transfer is without payment of any consideration whatsoever and that no
transfer shall be valid unless first approved by the Committee, acting in its sole discretion. For this purpose, “family
member” has the meaning set forth in the instruction to Form S-8 under the Securities Act of 1933.
6.6
Awards to Participants Outside the United States. The Committee may modify the terms of any
Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident
or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or
appropriate in order that the Award shall conform to laws, regulations, and customs of the country in which the
Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the
Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence
or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or
primarily employed in the United States. The Committee may establish supplements to, or amendments,
restatements, or alternative versions of the Plan for the purpose of granting and administrating any such modified
Award. No such modification, supplement, amendment, restatement or alternative version may increase the Share
limit of Section 4.
7.
Specific Terms of Awards
7.1
Options.
(a)
Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted
to Participants in such number, and upon such terms, and at any time and from time to time as shall be
determined by the Committee, in its sole discretion; provided that Incentive Options may be granted only to
eligible Employees of the Company or of any parent or subsidiary corporation (as permitted under
Sections 422 and 424 of the Code).
(b)
Award Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the
Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other
provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The
Award Agreement also shall specify whether the Option is intended to be an Incentive Option or a
Nonstatutory Option. Only if expressly so provided in the applicable Award Agreement shall the grant date
be the date on which the Award Agreement shall have been duly executed and delivered by the Company
and the Optionee.
(c)
Option Price. The Option Price for each grant of an Option under the Plan shall not be
less than 100% of the Fair Market Value of Stock on its grant date. With respect to a Participant who is a
Ten Percent Owner, the Option Price of Stock subject to an Incentive Option shall not be less than 110% of
the Fair Market Value of Stock on its grant date.
(d)
Option Period. Except as otherwise provided in Section 422 of the Code with respect to
any Incentive Option, each Option granted to a Participant shall expire at such time as the Committee shall
determine at the time of grant and specify in the Award Agreement; provided, however, that no Incentive
Option may be exercisable on or after the 7th anniversary of its grant date or on or after the 5th anniversary
of its grant date if the Participant is a Ten Percent Owner. No Nonstatutory Option may be exercisable on
or after the 7th anniversary of its grant date. If the Fair Market Value exceeds the Option Price on the last
day that an Option may be exercised under an Award Agreement, as long as an exercise would be permitted
under applicable laws, the affected Participant will be deemed to have exercised the vested portion of such
Option in a net exercise under Section 7.1(e) below without the requirement of any further action.
(e)
Exercisability. An Option may be immediately exercisable or become exercisable in such
installments, cumulative or non-cumulative, as the Committee may determine. In the case of an Option not
otherwise immediately exercisable in full, the Committee may, subject to Section 6.4 and Section 9,
accelerate such Option in whole or in part; provided, however, that in the case of an Incentive Option, any
such acceleration of the Option would not cause the Option to fail to comply with the provisions of
Section 422 of the Code.
(f)
Method of Exercise and Payment. An Option may be exercised by the Participant giving
written notice, in the manner provided in Section 18, specifying the number of Shares with respect to which
the Option is then being exercised. The notice shall be accompanied by payment in the form of cash or
check payable to the order of the Company in an amount equal to the Option Price of the shares to be
purchased or, subject in each instance to the Committee’s approval, acting in its sole discretion, and to such
conditions, if any, as the Committee may deem necessary to avoid adverse accounting effects to the
Company, by delivery to the Company Shares of Stock having a Fair Market Value equal to the Option
Price of the Shares to be purchased. An Option may also be exercised via a net exercise method whereby
the Company withholds from the delivery of Stock for which the Option was exercised that number of
Shares of Stock having a Fair Market Value equal to the aggregate Option Price of the Shares of Stock for
which the Option was exercised.
If the Stock is traded on an established market, payment of any Option Price may also be made through and
under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the
sale of the Stock subject to an Option in a brokered transaction (other than to the Company). Receipt by the
Company of such notice and payment in any authorized or combination of authorized means shall constitute the
exercise of the Option. Within thirty (30) days thereafter but subject to the remaining provisions of the Plan, the
Company shall deliver or cause to be delivered to the
Participant or his agent the number of Shares then being purchased. Such Shares of Stock shall be fully paid
and nonassessable.
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be
paid in United States dollars.
(g)
Limit on Incentive Option Characterization. An Incentive Option shall be considered to
be an Incentive Option only to the extent that the number of Shares of Stock for which the Option first
becomes exercisable in a calendar year does not have an aggregate Fair Market Value (as of the date of the
grant of the Option) in excess of the “current limit”. The current limit for any Participant for any calendar
year shall be $100,000 minus the aggregate Fair Market Value at the date of grant of the number of Shares
of Stock available for purchase for the first time in the same year under each other Incentive Option
previously granted to the Participant under the Plan, and under each other incentive option previously
granted to the Participant under any other incentive option plan of the Company and its Affiliates after
December 31, 1986, including under the Prior Plan. Any Shares of Stock which would cause the foregoing
limit to be violated shall be deemed to have been granted under a separate Nonstatutory Option, otherwise
identical in its terms to those of the Incentive Option.
(h)
Notification of Disposition. Each person exercising any Incentive Option granted under
the Plan shall be deemed to have covenanted with the Company to report to the Company any disposition
of such Shares prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code and,
if and to the extent that the realization of income in such a disposition imposes upon the Company federal,
state, local or other withholding tax requirements, or any such withholding is required to secure for the
Company an otherwise available tax deduction, to remit to the Company an amount in cash sufficient to
satisfy those requirements.
7.2
Stock Appreciation Rights.
(a)
Grant of SARs. Stock Appreciation Rights may be granted in tandem with an Option (at
or, in the case of a Nonstatutory Option, after, the award of the Option), or alone and unrelated to an
Option. Stock Appreciation Rights in tandem with an Option shall terminate to the extent that the related
Option is exercised, and the related Option shall terminate to the extent that the tandem Stock Appreciation
Rights are exercised.
(b)
Award Agreement. Each SAR shall be evidenced by an Award Agreement that shall
specify the exercise price, the term of the SAR, and such other provisions as the Committee shall
determine.
(c)
Exercise Price. Stock Appreciation Rights shall have an exercise price of not less than
one hundred percent (100%) of the Fair Market Value of the Stock on the date of award, or in the case of
Stock Appreciation Rights in tandem with Options, the exercise price of the related Option.
(d)
Period. No Stock Appreciation Right may be exercised on or after the 7th anniversary of
the grant date.
(e)
Other Terms. Except as the Committee may deem inappropriate or inapplicable in the
circumstances, Stock Appreciation Rights shall be subject to terms and conditions substantially similar to
those applicable to a Nonstatutory Option.
7.3
Restricted Stock and Restricted Stock Units.
(a)
Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions
of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and
Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock
Units shall represent the right of a Participant to receive Shares of Stock upon the lapse of the Period of
Restriction.
(b)
Award Agreement. Each Share of Restricted Stock and/or Restricted Stock Unit grant
shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of
Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as
the Committee shall determine.
(c)
Other Restrictions. The Committee shall impose such other conditions and/or restrictions
on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem
advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of
specific performance goals, time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any
stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale
restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock
Units. Subject to Section 6.4 and Section 9, any such Restriction Period may be shortened by the
Committee on such basis as it deems appropriate.
In the event that the vesting date occurs on a date which is not a trading day on the principal securities exchange
on which the Shares are then traded, the Fair Market Value on the last prior trading date will be utilized for cost
basis.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing
Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions
applicable to such Shares have been satisfied or lapse.
(d)
Issuance of Shares. Shares of Restricted Stock awarded pursuant to a Restricted Stock
Award shall be issued as certificates or recorded in book-entry form, subject to subsection (e) below. Such
shares shall be registered in the name of the Participant. Any certificates so issued shall be printed with an
appropriate legend referring to the terms, conditions, and restrictions applicable to such Award as
determined or authorized in the sole discretion of the Committee. Shares recorded in book-entry form shall
be recorded with a notation referring to the terms, conditions, and restrictions applicable to such Award as
determined or authorized in the sole discretion of the Committee.
(e)
Escrow of Shares. The Committee may require that the stock certificates or book-entry
registrations evidencing Shares of Restricted Stock be held in custody by a designated escrow agent (which
may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Participant
deliver a stock power, endorsed in blank, relating to the Stock covered by such Award.
(f)
Voting and Other Rights. Except as otherwise provided in the Plan or the applicable
Award Agreement, to the extent permitted or required by law, a Participant holding Shares of Restricted
Stock granted hereunder shall have all of the rights of a stockholder of the Company, including the right to
vote. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
At the discretion of the Committee, a Participant may be entitled to receive payments equivalent to any
dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following
the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned.
Unless the Committee shall provide otherwise, any such dividend equivalents shall be paid, if at all,
without interest or other earnings.
(g)
Form and Timing of Payment. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock, any certificates for such shares shall be delivered to the Participant
promptly if not theretofore so delivered, and the restrictive legends shall be promptly removed from any
book- entry registrations for such shares. Settlement of vested Restricted Stock Units shall be made
promptly following the close of the applicable Restriction Period.
(h)
Section 83(b) Election. The Board may provide in an Award Agreement that the Award
of Restricted Stock is conditioned upon the Participant making or refraining from making an election with
respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to
Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file
promptly a copy of such election with the Company.
7.4
Performance Units.
(a)
Grant of Performance Units. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may grant Performance Units to Participants in such
amounts and upon such terms as the Committee shall determine.
(b)
Value and Character. Each Performance Unit shall entitle the recipient to the value of a
specified number of Shares of Stock, over the initial value for such number of Shares, if any, established by
the Committee at the time of grant, at the close of a specified Performance Period to the extent specified
Performance Goals shall have been achieved.
(c)
Earning of Performance Units. The Committee shall set Performance Goals in its
discretion which, depending on the extent to which they are met within the applicable Performance Period,
will determine the number and value of Performance Units that will be paid out to the Participant. After the
applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive
payout on the number and value of Performance Units earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding Performance Goals have
been achieved.
(d)
Form and Timing of Payment. Payment of earned Performance Units shall be as
determined by the Committee and as evidenced in the Award Agreement. Payment shall be made in a
single lump sum equal to the value of the earned Performance Units at the close of the applicable
Performance Period, or as soon as practicable after the end of the Performance Period, but not later than the
expiration of the deferral period for such Award under Section 409A of the Code. At the discretion of the
Committee, Participants may be entitled to receive any dividends declared with respect to Stock which have
been earned in connection with grants of Performance Units which have been earned but not yet distributed
to Participants. The Committee may permit or, if it so provides at grant require, a Participant to defer such
Participant’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such
Participant by virtue of the satisfaction of any requirements or goals with respect to Performance Units. If
any such deferral election is required or permitted, the Committee shall establish rules and procedures for
such payment deferrals in accordance with Section 409A of the Code.
7.5
Other Stock-Based Awards.
(a)
Other Stock-Based Awards. The Committee may grant other types of equity-based or
equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale
of unrestricted Shares) in such amounts and subject to such terms and conditions as the Committee shall
determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or
otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed
to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
(b)
Value Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in
terms of Shares or units based on Shares, as determined by the Committee.
(c)
Payment of Other Stock-Based Awards. Payment, if any, with respect to an Other Stock-
Based Award shall be made in accordance with the terms of the Award, in cash, Shares or a combination
thereof, as the Committee determines.
8.
Adjustment Provisions
8.1
Adjustment for Corporate Actions. All of the share numbers set forth in the Plan reflect the capital
structure of the Company as of the Effective Date. Subject to Section 9.2, if subsequent to the Effective Date the
outstanding Shares of Stock (or any other securities covered by the Plan by reason of the prior application of this
Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if
additional Shares or new or different shares or other securities are distributed with respect to Shares of Stock,
through merger, consolidation, sale of all or substantially all the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with
respect to such Shares of Stock, an appropriate and proportionate adjustment will be made in (i) the maximum
numbers and kinds of Shares provided in Section 4, (ii) the numbers and kinds of Shares or other securities subject
to the then outstanding Awards, (iii) the exercise price for each Share or other unit of any other securities subject to
then outstanding Options and Stock Appreciation Rights (without change in the aggregate purchase price as to which
such Options or Rights remain exercisable), and (iv) the repurchase price of each Share of Restricted Stock then
subject to a risk of forfeiture in the form of a Company repurchase right.
8.2
Cancellation and Termination of Awards. The Committee may, in connection with any merger,
consolidation, share exchange or other transaction entered into by the Company in good faith, determine that any
outstanding Awards granted under the Plan, whether or not vested, will be canceled and terminated and that in
connection with such cancellation and termination the holder of such Award may receive for each Share of Common
Stock subject to such Award a cash payment (or the delivery of shares of stock, other securities or a combination of
cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the amount
determined by the Committee to be the Fair Market Value of the Common Stock and the purchase price per Share (if
any) under the Award multiplied by the number of Shares subject to such Award; provided that if such product is
zero or less or to the extent that the Award is not then exercisable, the Award will be canceled and terminated
without payment therefor.
8.3
Dissolution or Liquidation. Upon dissolution or liquidation of the Company, other than as part of a
Change Of Control, each outstanding Option and SAR shall terminate, but the Participant (if, at the time, an
Employee of the Company or an Affiliate) shall have the right, immediately prior to the dissolution or liquidation, to
exercise the Option or SAR to the extent exercisable on the date of dissolution or liquidation.
8.4
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In the
event of any corporate action not specifically covered by the preceding Sections, including but not limited to an
extraordinary cash distribution on Stock, a corporate separation or other reorganization or liquidation, the
Committee may make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion,
may deem equitable and appropriate in the circumstances. The Committee may make adjustments in the terms and
conditions of, and the criteria included in Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in this Section) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Adjustments under this Section 8.4 shall be
consistent with Section 409A and 162(m) of the Code and adjustments pursuant to determination of the Committee
shall be conclusive and binding on all Participants under the Plan.
8.5
Related Matters. Any adjustment in Awards made pursuant to this Section 8 shall be determined
and made, if at all, by the Committee and shall include any correlative modification of terms, including of Option
exercise prices, rates of vesting or exercisability, risks of forfeiture, applicable repurchase prices for Restricted
Stock, Performance Goals and other financial objectives which the Committee may deem necessary or appropriate
so as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged
as a result of the adjustment and corporate action other than as expressly contemplated in this Section 8. No fraction
of a Share shall be purchasable or deliverable upon exercise, but in the event any adjustment hereunder of the
number of Shares covered by an Award shall cause such number to include a fraction of a Share, such number of
Shares shall be adjusted to the nearest smaller whole number of Shares. No adjustment of an Option exercise price
per Share pursuant to this Section 8 shall result in an exercise price which is less than the par value of a Share.
9.
Change Of Control
9.1
Change Of Control. For purposes of the Plan, a “Change Of Control” shall mean the occurrence
during the term of any of the following events.
(a)
the consummation of:
(i)
any consolidation, merger or similar transaction of the Company (a “Business
Combination”) (other than a consolidation, merger or similar transaction of the Company into or
with a direct or indirect wholly-owned Subsidiary) as a result of which (1) the stockholders of the
Company immediately prior to the Business Combination own (directly or indirectly),
immediately after the Business Combination, less than 50% of the then outstanding shares of
common stock that are entitled to vote generally for the election of directors of the corporation
resulting from such Business Combination (including as a result of shares being converted into
cash, securities or other property) or (2) the holders of the shares immediately prior to the Business
Combination do not have substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the Business Combination; or
(ii)
any sale, lease, exchange or transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company, provided, however, that no sale,
lease, exchange or other transfer of all or substantially all the assets of the Company shall be
deemed to occur unless assets constituting at least 80% of the total assets of the Company are
transferred pursuant to such sale, lease, exchange or other transfer;
(b)
the stockholders of the Company shall approve any plan or proposal for the liquidation or
dissolution of the Company;
(c)
any Person shall become the Beneficial Owner of securities of the Company representing
50% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and
apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a
result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise,
without the approval of the Board; or
(d)
at any time during a consecutive period of 36 months, individuals who at the beginning of
such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company’s stockholders of each new director during such
36-month period was approved by a vote of at least a majority of the directors then still in office who were
directors at the beginning of such 36-month period (or were approved by a majority of directors then in
office).
Notwithstanding the foregoing, if a Change Of Control constitutes a payment event with respect to any Award
(or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A of the
Code, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the
transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall
only constitute a Change Of Control for purposes of the payment timing of such Award if such transaction also
constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Committee shall have full and final authority, which shall be exercised in its sole discretion, to determine
conclusively whether a Change Of Control has occurred pursuant to the above definition, the date of the occurrence
of such Change Of Control and any incidental matters relating thereto; provided that any exercise of authority in
conjunction with a determination of whether a Change Of Control is a “change in control event” as defined in
Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
9.2
Limited Acceleration Upon Change Of Control. For the avoidance of doubt, the Committee may
not accelerate the vesting and exercisability (as applicable) of any outstanding Awards, in whole or in part, solely
upon the occurrence of a Change Of Control except as provided in this Section 9.2. In the event of termination of
employment at or following a Change Of Control, acceleration of vesting and exercisability of any outstanding
Awards, if any, shall occur subject to Section 6.4(b).
In the event of a Change of Control after the date of the adoption of the Plan, then:
(a)
to the extent an outstanding Award subject solely to time-based vesting is not assumed or
replaced by a comparable Award referencing shares of the capital stock of the successor corporation or its
“parent corporation” (as defined in Section 424(e) of the Code) or “subsidiary corporation” (as defined in
Section 424(f) of the Code) which is publicly traded on a national stock exchange or quotation system, as
determined by the Committee in its sole discretion, with appropriate adjustments as to the number and
kinds of shares and the exercise prices, if applicable, then any outstanding Award subject solely to time-
based vesting then held by Participants that is unexercisable, unvested or still subject to restrictions or
forfeiture shall, in each case as specified by the Committee in the applicable Award Agreement or
otherwise, be deemed exercisable or otherwise vested, as the case may be, as of immediately prior to such
Change of Control;
(b)
all Awards that vest subject to the achievement of any performance goal, target
performance level, or similar performance-related requirement shall, in each case as specified by the
Committee in the applicable Award Agreement or otherwise, either (A) be canceled and terminated without
any payment or consideration therefor; or (B) automatically vest based on: (1) actual achievement of any
applicable Performance Goals through the date of the Change Of Control, as determined by the Committee
in its sole discretion; or (2) achievement of target performance levels (or the greater of actual achievement
of any applicable Performance Goals through the date of the Change of Control, as determined by the
Committee in its sole discretion, and target performance levels); provided that in the case of vesting based
on target performance levels such Awards shall also be prorated based on the portion of the Performance
Period elapsed prior to the Change Of Control; and, in the case of this clause (B), shall be paid at the
earliest time permitted under the terms of the applicable agreement, plan or arrangement that will not
trigger a tax or penalty under Section 409A of the Code, as determined by the Committee.
Each outstanding Award that is assumed in connection with a Change Of Control, or is otherwise to continue
in effect subsequent to the Change Of Control, will be appropriately adjusted, immediately after the Change Of
Control, as to the number and class of securities and other relevant terms in accordance with Section 8.
10.
11.
Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the
same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
12.
Deferrals
To the extent permitted by Section 409A and Section 162(m) of the Code, the Committee may permit or
require a Participant to defer the delivery of Shares that would otherwise be due to such Participant by virtue of the
exercise of an Option or the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units.
If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals consistent with Section 409A of the Code.
It is intended that all Awards issued under the Plan be in a form and administered in a manner that will
comply with the requirements of Section 409A of the Code, or the requirements of an exception to Section 409A of
the Code, and the Award Agreement and this Plan will be construed and administered in a manner that is consistent
with and gives effect to such intent. The Committee is authorized to adopt rules or regulations deemed necessary or
appropriate to qualify for an exception from or to comply with the requirements of Section 409A of the Code. With
respect to an Award that constitutes a deferral of compensation subject to Section 409A of the Code: (i) if any
amount is payable under such Award upon a termination of service, a termination of service will be treated as having
occurred only at such time the Participant has experienced a “separation from service” as such term is defined for
purposes of Section 409A of the Code; (ii) if any amount is payable under such Award upon a disability, a disability
will be treated as having occurred only at such time the Participant has experienced a “disability” as such term is
defined for purposes of Section 409A of the Code; (iii) if any amount is payable under such Award on account of the
occurrence of a Change Of Control, a Change Of Control will be treated as having occurred only at such time a
“change in the ownership or effective control of the corporation or in the ownership of a substantial portion of the
assets of the corporation” has occurred as such terms are defined for purposes of Section 409A of the Code, (iv) if
any amount becomes payable under such Award on account of a Participant’s separation from service at such time
as the Participant is a “specified employee” within the meaning of Section 409A of the Code, then no payment shall
be made, except as permitted under Section 409A of the Code, prior to the first business day after the earlier of
(y) the date that is six months after the date of the Participant’s separation from service or (z) the Participant’s death,
(v) any right to receive any installment payments under this Plan shall be treated as a right to receive a series of
separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate
and distinct payment, and (vi) no amendment to or payment under such Award will be made except and only to the
extent permitted under Section 409A of the Code.
Notwithstanding the foregoing, the tax treatment of the benefits provided under the Plan or any Award
Agreement is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any
taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance
with Section 409A of the Code.
13.
Settlement of Awards
13.1
In General. Options and Restricted Stock shall be settled in accordance with their terms. All other
Awards may be settled in cash, Stock, or other Awards, or a combination thereof, as determined by the Committee at
or after grant and subject to any contrary Award Agreement. The Committee may not require settlement of any
Award in Stock pursuant to the immediately preceding sentence to the extent issuance of such Stock would be
prohibited or unreasonably delayed by reason of any other provision of the Plan.
13.2
Violation of Law. Notwithstanding any other provision of the Plan or the relevant Award
Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of Shares of Stock covered by an
Award may constitute a violation of law, then the Company may delay such issuance and the delivery of such Shares
until (i) approval shall have been obtained from such governmental agencies, other than the Securities and Exchange
Commission, as may be required under any applicable law, rule, or regulation and (ii) in the case where such
issuance would constitute a violation of a law administered by or a regulation of the Securities and Exchange
Commission, one of the following conditions shall have been satisfied:
(a)
the Shares are at the time of the issue of such Shares effectively registered under the
Securities Act of 1933; or
(b)
the Company shall have determined, on such basis as it deems appropriate (including an
opinion of counsel in form and substance satisfactory to the Company) that the sale, transfer, assignment,
pledge, encumbrance or other disposition of such Shares or such beneficial interest, as the case may be,
does not require registration under the Securities Act of 1933, as amended or any applicable State securities
laws.
The Company shall make all reasonable efforts to bring about the occurrence of said events.
13.3
Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to Awards granted
under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed
by the charter, certificate or articles, and by-laws, of the Company.
13.4
Investment Representations. The Company shall be under no obligation to issue any shares
covered by any Award unless the shares to be issued pursuant to Awards granted under the Plan have been
effectively registered under the Securities Act of 1933, as amended, or the Participant shall have made such written
representations to the Company (upon which the Company believes it may reasonably rely) as the Company may
deem necessary or appropriate for purposes of confirming that the issuance of such shares will be exempt from the
registration requirements of that Act and any applicable state securities laws and otherwise in compliance with all
applicable laws, rules and regulations, including but not limited to that the Participant is acquiring the shares for his
or her own account for the purpose of investment and not with a view to, or for sale in connection with, the
distribution of any such shares.
13.5
Registration. If the Company shall deem it necessary or desirable to register under the Securities
Act of 1933, as amended or other applicable statutes any Shares of Stock issued or to be issued pursuant to Awards
granted under the Plan, or to qualify any such Shares of Stock for exemption from the Securities Act of 1933, as
amended or other applicable statutes, then the Company shall take such action at its own expense. The Company
may require from each recipient of an Award, or each holder of Shares of Stock acquired pursuant to the Plan, such
information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for that purpose and may require reasonable indemnity to the Company and its officers
and directors from that holder against all losses, claims, damage and liabilities arising from use of the information so
furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements therein not misleading in the light of
the circumstances under which they were made. In addition, the Company may require of any such person that he or
she agree that, without the prior written consent of the Company or the managing underwriter in any public offering
of Shares of Stock, he or she will not sell, make any short sale of, loan, grant any option for the purchase of, pledge
or otherwise encumber, or otherwise dispose of, any shares of Stock during the 180 day period commencing on the
effective date of the registration statement relating to the underwritten public offering of securities. Without limiting
the generality of the foregoing provisions of this Section 12.5, if in connection with any underwritten public offering
of securities of the Company the managing underwriter of such offering requires that the Company’s directors and
officers enter into a lock-up agreement containing provisions that are more restrictive than the provisions set forth in
the preceding sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of whether
such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be
deemed to have agreed to, the same lock-up terms as those to which the Company’s directors and officers are
required to adhere; and (b) at the request of the Company or such managing underwriter, each such person shall
execute and deliver a lock-up agreement in form and substance equivalent to that which is required to be executed
by the Company’s directors and officers.
13.6
Placement of Legends; Stop Orders; etc. Each share of Stock to be issued pursuant to Awards
granted under the Plan may bear a reference to the investment representation made in accordance with Section 12.4
in addition to any other applicable restriction under the Plan, the terms of the Award and to the fact that no
registration statement has been filed with the Securities and Exchange Commission in respect to such shares of
Stock. All shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders
and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of
any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any certificates or recorded in connection with book-entry
accounts representing the shares to make appropriate reference to such restrictions.
13.7
Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect
the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the rules of any stock exchange.
13.8
Tax Withholding. Whenever Shares of Stock are issued or to be issued pursuant to Awards
granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount
sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by
law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the
delivery of any such Shares. The obligations of the Company under the Plan shall be conditional on satisfaction of
all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the recipient of an Award. However, in such case a
Participant may elect, subject to the approval of the Committee, acting in its sole discretion, to satisfy an applicable
withholding requirement, in whole or in part, by having the Company withhold Shares to satisfy its tax obligations.
The Company also may require a Participant to satisfy withholding obligations by engaging in a cashless exercise
transaction (whether through a broker or otherwise) implemented by the Company in connection with the Plan. A
Participant may only elect to have Shares withheld having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall
be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that
the Committee deems appropriate.
14.
Reservation of Stock
The Company shall at all times during the term of the Plan and any outstanding Awards granted hereunder
reserve or otherwise keep available such number of Shares of Stock as will be sufficient to satisfy the requirements
of the Plan (if then in effect) and the Awards and shall pay all fees and expenses necessarily incurred by the
Company in connection therewith.
15.
Rights of Participants
15.1
Limitation of Rights in Stock. A Participant shall not be deemed for any purpose to be a
stockholder of the Company with respect to any of the Shares of Stock subject to an Award, unless and until Shares
shall have been issued therefor and delivered to the Participant or his agent. Any Stock to be issued pursuant to
Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or
hereafter imposed by the Certificate of Incorporation and the By-laws of the Company.
15.2
Employment. Nothing contained in the Plan or in any Award Agreement shall confer upon any
recipient of an Award any right with respect to the continuation of his or her employment or other association with
the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to
the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to
the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or
otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the
Company and its Affiliates.
15.3
Participation. No Participant or other Person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms
and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be
the same with respect to each Participant and may be made selectively among Participants, whether or not such
Participants are similarly situated.
16.
Unfunded Status of Plan
The Plan is intended to constitute an “unfunded” plan for incentive compensation, and the Plan is not
intended to constitute a plan subject to the provisions of ERISA. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than
those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts
or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to
Options, Stock Appreciation Rights and other Awards hereunder, provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of the Plan.
17.
Successors
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding
on any successor to the Company, whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the
Company.
18.
Amendment, Modification, Suspension, and Termination
Subject to Section 8, the Board may, at any time and from time to time, alter, amend, modify, suspend, or
terminate the Plan and any Award Agreement in whole or in part; provided, however, that no amendment of the Plan
shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange
rule. Unless the Board otherwise expressly provides, no amendment of the Plan shall affect the terms of any Award
outstanding on the date of such amendment. The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, provided that the Award as amended is consistent with the terms of the Plan
or if necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future
law relating to plans of this or similar nature (including, without limitation, Section 409A and Section 162(m) of the
Code), and to the administrative regulations and rulings promulgated thereunder.
Notwithstanding the foregoing,
(a)
the Board may not amend the Plan to (i) change the description of the persons eligible for Awards
under the Plan (ii) increase the number of shares of Stock available under the Plan except as necessary to carry out
the provisions of Section 8 (concerning certain adjustments attributable to corporate actions and other events), or
(iii) change the basis on which Shares under any Award are taken into account for purposes of the limitation on the
number of Shares of Stock available under the Plan, without shareholder approval;
(b)
no Option or Stock Appreciation Right shall be repriced, replaced, or regranted through
cancellation, or by lowering the Option Price for a previously granted Option or the grant price of a previously
granted SAR, and no Award shall be canceled in exchange for a cash payment from the Company to the Award
owner, except under the limited circumstances described above in Section 8.2 relating to Cancellation and
Termination of Awards; and
(c)
no amendment or modification of the Plan by the Board, or of an outstanding Award by the
Committee, shall impair the rights of the recipient of any Award outstanding on the date of such amendment or
modification or such Award, as the case may be, without the recipient’s consent; provided, however, that no such
consent shall be required if (i) the Board or Committee, as the case may be, determines in its sole discretion and
prior to the date of any Change Of Control that such amendment or alteration either is required or advisable in order
for the Company, the Plan or the Award to satisfy any present or future law or regulation, including without
limitation the provisions of Section 409A of the Code or to meet the requirements of or avoid adverse financial
accounting consequences under any accounting standard, or (ii) the Board or Committee, as the case may be,
determines in its sole discretion that such amendment or alteration is not reasonably likely to significantly diminish
the benefits provided under the Award, or that any such diminution has been adequately compensated.
19.
General Provisions
19.1
Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of
the Plan to the stockholders of the Company shall be construed as creating any limitations on the power of the Board
to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of
stock options and restricted stock other than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
19.2
Notices and Other Communications
(a)
Any notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class
registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular,
certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the recipient of an Award,
at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place
of business, addressed to the attention of its Treasurer, or to such other address or telecopier number, as the
case may be, as the addressee may have designated by notice to the addressor. All such notices, requests,
demands and other communications shall be deemed to have been received: (i) in the case of personal
delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and
(iii) in the case of facsimile transmission, when confirmed by facsimile machine report.
(b)
Electronic Delivery. The Company may deliver by e-mail or other electronic means
(including posting on a website maintained by the Company or by a third party under contract with the
Company all documents relating to the Plan or any Award and all other documents that the Company is
required to deliver to its security holders (including prospectuses, annual reports and proxy statements).
19.3
Severability. If any one or more of the provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or impaired thereby.
19.4
Choice of Law; Choice of Forum. The Plan, all Awards and all determinations made and actions
taken under the Plan, to the extent not otherwise governed by the laws of the United States, will be governed by the
laws of the State of Delaware without giving effect to principles of conflicts of law. For purposes of litigating any
dispute that arises under this Plan, a Participant’s acceptance of an Award is his or her consent to the jurisdiction of
the State of Delaware, and agreement that any such litigation will be conducted in Delaware Court of Chancery, or
the federal courts for the United States for the District of Delaware, and no other courts, regardless of where a
Participant’s services are performed.
19.5
Forfeiture and Clawback. Without limiting in any way the generality of the Committee’s power to
specify any terms and conditions of an Award consistent with law, and for greater clarity, the Committee may
specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award,
including any payment of Shares received upon exercise or in satisfaction of an Award under the Plan shall be
subject to reduction, cancellation, forfeiture or clawback upon the occurrence of certain specified events, in addition
to any otherwise applicable vesting or performance conditions, without limit as to time. Such events shall include,
but not be limited to, failure to accept the terms of the Award Agreement, termination of service under certain or all
circumstances, violation of material Company policies, misstatement of financial or other material information about
the Company, fraud, misconduct, breach of noncompetition, confidentiality, nonsolicitation, noninterference,
corporate property protection, or other agreements that may apply to the Participant, or other conduct by the
Participant that the Committee determines is detrimental to the business or reputation of the Company and its
Subsidiaries, including facts and circumstances discovered after termination of service. Without limiting the
foregoing, the terms of any Award shall be subject to, and shall be deemed automatically to incorporate, any
“clawback”, “recovery,” or similar policy adopted by the Company and in effect before or after the grant of such
Award.
19.6
Tolling. If exercising an Option or Stock Appreciation Right prior to its expiration is not
permitted because of applicable laws, other than the rules of any stock exchange or quotation system on which the
Stock is listed or quoted, the Option or Stock Appreciation Right will remain exercisable until 30 days after the first
date on which exercise would no longer be prevented by such provisions. If this would result in the Option or Stock
Appreciation Right remaining exercisable past the end of its original Option Period, then it will remain exercisable
only until the end of the later of (x) the first day on which its exercise would not be prevented by applicable laws
and (y) the last day of the Option Period.
[This page intentionally left blank]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 2, 2021 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
20-5961564
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
200 Parker Drive, Suite C100A, Austin, Texas
(Address of principal executive offices)
78728
(Zip Code)
Registrant’s telephone number, including area code: (408) 941-7100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Preferred Share Purchase Rights
Trading Symbol(s)
AVNW
Name of Each Exchange on Which Registered
NASDAQ Stock Market LLC
NASDAQ Stock Market LLC
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 ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the 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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
☐
☐
☐
Accelerated filer
Smaller reporting company
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 1, 2021, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately
$165.4 million. For purposes of this calculation, the registrant has assumed that its directors, executive officers and holders of 10% or more of
the outstanding common stock are affiliates.
As of August 20, 2021, there were 11,165,221 shares of the registrant’s common stock outstanding.
_________________________________
Portions of the registrant’s definitive Proxy Statement for its fiscal 2021 Annual Meeting of Stockholders (“Proxy Statement”), which
will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended July 2, 2021, are
incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
AVIAT NETWORKS, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended July 2, 2021
Table of Contents
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B.
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Item 4.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
Item 6.
Item 7.
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 . . . . . . . . .
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . .
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
6
15
32
32
33
33
34
34
38
39
51
52
90
91
91
93
93
93
93
93
93
94
94
95
96
97
3
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, including with respect to growing our business and sustaining profitability; our restructuring
efforts; 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; seasonality of our business; the impact of foreign exchange and inflation; taxes; 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, Inc. 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, but are not limited to, the following:
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the impact of COVID-19 on our business, operations and cash flows;
continued price and margin erosion as a result of increased competition in the microwave transmission industry;
the impact of the volume, timing, and customer, product, and geographic mix of our product orders;
the timing of our receipt of payment for products or services from our customers;
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, the effects of COVID-19 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;
our failure to protect our intellectual property rights or defend against intellectual property infringement claims
by others;
the results of our restructuring efforts;
the ability to preserve and use our net operating loss carryforwards;
the effects of currency and interest rate risks;
the effects of current and future government regulations, including the effects of current restrictions on various
commercial and economic activities in response to the COVID-19 pandemic;
general economic conditions, including uncertainty regarding the timing, pace and extent of an economic
recovery in the United States and other countries where we conduct business;
the conduct of unethical business practices in developing countries;
the impact of political turmoil in countries where we have significant business;
the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States
withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of
border crossings, and other changes in trade regulations or relationships; and
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our ability to implement our stock repurchase program or that it will enhance long-term stockholder value.
our ability to meet financial covenant requirements which could impact, among other things, our liquidity;
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
expressly disclaim any obligation, other than as required 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.
5
Item 1. Business
PART I
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,” “Aviat,” “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 200 Parker Dr., Suite C100A, Austin, Texas 78728, and our
telephone number is (408) 941-7100. Our common stock is listed on the NASDAQ Global Select Market under the
symbol AVNW. As of July 2, 2021, we had 687 employees compared with 674 employees as of July 3, 2020.
Overview and Description of the Business
We design, manufacture and sell a range of wireless networking products, solutions and services to two principal
customer types.
1. Communications Service Providers (“CSPs”): These include mobile and fixed telecommunications
network operators, broadband and internet service providers and network operators which generate
revenues from the communications services that they provide.
2. Private network operators: These are customers which do not resell communications services but build
networks for reasons of economics, autonomy, and/or security to support a wide variety of mission critical
performance applications. Examples include federal, state and local government agencies, transportation
agencies, energy and utility companies, public safety agencies and broadcast network operators around the
world.
We sell products and services directly to our customers, and, to a lesser extent, agents and resellers.
Our products utilize microwave and millimeter wave technologies to create point to point wireless links for short,
medium and long-distance interconnections. Our products incorporate Ethernet switching and IP routing capabilities
optimized for a microwave and millimeter wave environment and for hybrid applications of microwave and optical fiber
transport, to form complete networking solutions. We provide software tools and applications to enable deployment,
monitoring, network management and optimization of our systems as well as to automate network design and
procurement. We also source, qualify, supply and support third party equipment such as antennas, routers, optical
transmission equipment and other equipment necessary to build and deploy a complete telecommunications transmission
network. We provide a full suite of professional services for planning, deployment, operations, optimization and
maintenance of our customers’ networks.
Our wireless systems deliver urban, suburban, regional and country-wide communications links as the primary
alternative to fiber optic connections. In dense urban and suburban areas, short range wireless solutions are faster to
deploy and lower cost per mile than new fiber deployments. In developing nations, fiber infrastructure is scarce and
wireless systems are used for both long and short distance connections. Wireless systems also have advantages over
optical fiber in areas with rugged terrain, and to provide connections over bodies of water such as between islands or to
offshore oil and gas production platforms. Through the air wireless transmission is also inherently lower in latency than
transmission through optical cables and can be leveraged in time sensitive networking applications.
Revenue from our North America and international regions represented approximately 67% and 33% of our
revenue in fiscal 2021, respectively, 64% and 36% of our revenue in fiscal 2020, respectively, and 54% and 46% of our
revenue in fiscal 2019, respectively. 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 10.
Segment and Geographic Information” of the accompanying consolidated financial statements in this Annual Report on
Form 10-K.
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Market Overview
We believe that future demand for microwave and millimeter wave transmission systems will be influenced by a
number of factors across several market segments.
Mobile/5G Networks
As mobile networks expand, add subscribers and increase the number of wirelessly connected devices, sensors
and machines, they require ongoing investment in backhaul infrastructure. Whether mobile network operators choose to
self-build this backhaul infrastructure or lease backhaul services from other network providers, the evolution of the
network drives demand for transmission technologies such as microwave and millimeter wave wireless backhaul. Within
this overall scope there are multiple individual drivers for investment in backhaul infrastructure.
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5G Deployments. Mobile Radio Access Network (“RAN”) technologies are continually evolving. With the evolution
from 4G (HSPA+ and LTE) to 5G, technology is continuously advancing and providing subscribers with higher
speed access to the Internet, social media, and video streaming services. The rapid increases in data to be transported
through the RAN and across the backhaul infrastructure drives requirements for higher data transport links
necessitating upgrades to or replacement of the existing backhaul infrastructure.
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Subscriber Growth. Traffic on the backhaul infrastructure increases as the number of unique subscribers grows.
Connected Devices. The number of devices such as smart phones and tablets connected to the mobile network is far
greater than the number of unique subscribers and is continuing to grow as consumers adopt multiple mobile device
types. There is also rapid growth in the number and type of wireless enabled sensors and machines being connected
to the mobile network creating new revenue streams for network operators in healthcare, agriculture, transportation
and education. As a result, the data traffic crossing the backhaul infrastructure continues to grow rapidly.
IoT. The Internet of Things (“IoT”) brings the potential of massive deployment of wireless end points for sensing
and reporting data and remotely controlling machines and devices. The increase of data volume drives investment in
network infrastructure.
Network Densification. RAN frequency spectrum is a limited resource and shared between all of the devices and
users within the coverage area of each base station. Meeting the combined demand of increasing subscribers and
devices will require the deployment of much higher densities of base stations with smaller and smaller range (small
cells) each requiring interconnection and proportionally driving increased demand for wireless backhaul and or
fronthaul solutions as the primary alternative to optical fiber connectivity.
Geographic Coverage. Expanding the geographic area covered by a mobile network requires the deployment of
additional cellular base station sites. Each additional base station site also needs to be connected to the core of the
mobile network through expansion of the backhaul system.
License Mandates. Mobile Operators are licensed telecommunications service providers. Licenses will typically
mandate a minimum geographic footprint within a specific period of time and/or a minimum proportion of a national
or regional population served. This can pace backhaul infrastructure investment and cause periodic spikes in
demand.
Rural Broadband
• Middle Mile. Aviat transport equipment is used to deliver broadband connectivity to rural and suburban communities
as an alternative to costly fiber. There are significant investments being made to improve rural household and
enterprise connectivity and many of these investments target middle mile infrastructure builds.
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Expansion of Offered Services. Internet service providers, especially those in emerging markets, now own and
operate the most modern communications networks within their respective regions. These network assets can be
further leveraged to provide high speed broadband services to fixed locations such as small, medium and large
business enterprises, airports, hotels, hospitals, and educational institutions. Microwave and millimeter wave
backhaul is ideally suited to providing high speed broadband connections to these end points due to the lack of fiber
infrastructure.
Private Networks
In addition to mobile backhaul, we see demand for microwave technology in other vertical markets, including
utility, public safety, financial institutions and broadcast.
7
• 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.
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The investments in network modernization in the public safety market can significantly enhance the capabilities of
security agencies. Improving border patrol effectiveness, enabling inter-operable emergency communications
services for local or state police, providing access to timely information from centralized databases, or utilizing
video and imaging devices at the scene of an incident requires a high bandwidth and reliable network. The mission
critical nature of public safety and national security networks can require that these networks are built, operated and
maintained independently of other public network infrastructure and microwave is very well suited to this
environment because it is a cost-effective alternative to fiber.
• Microwave technology can be used to engineer long distance and more direct connections than optical cable.
Microwave signals also travel through the air much faster than light through glass and the combined effect of shorter
distance and higher speed reduces latency, which is valued for trading applications in the financial industry. Our
products have already been used to create low latency connections between major centers in the United States
(“U.S.”), Europe and Asia and we see long-term interest in the creation of further low latency routes in various
geographies around the world.
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Evolution to IP. Network Infrastructure capacity, efficiency and flexibility is greatly enhanced by transitioning from
legacy SDH (synchronous digital hierarchy) / SONET (synchronous optical network) / TDM (time division
multiplexing) to IP (internet protocol) infrastructure. Our products offer integrated IP transport and routing
functionality increasing the value they bring in the backhaul network.
The enhancement of border security and surveillance networks to counter terrorism and insurgency is aided by the
use of wireless technologies including microwave backhaul.
These factors are combining to create a range of opportunities for continued investment in backhaul and transport
networks favoring microwave and millimeter wave technologies. As we focus on executing future generations of our
technology, our goal is to make wireless technology a viable choice for an ever-broadening range of network types.
Strategy
As we continue executing our technology roadmap, we are engaging more deeply with customers on the evolution
of use cases and applications as 5G mobile and broadband networks edge closer to implementation and begin to factor
more strongly in the vendor selection process. We are confident in our ability to address current and future 5G market
needs.
We are focused on building a sustainable and profitable business with growth potential. We have invested in our
people and processes to create a platform for operational excellence across sales, services, product development and
supply chain areas while continuing to make investments in strengthening our product and services portfolio and
expanding our reach into targeted market areas.
Our strategy has three main elements aligned to deliver a compelling Total Cost of Ownership (“TCO”) value
proposition. The first is our portfolio of wireless transport products allowing our customers increased capacity and
flexibility with a much better total cost solution. We are expanding the data-carrying capacity of our wireless products to
address the increasing data demand in networks of all types.
Second, in order to address the operational complexity of planning, deploying, owning and operating microwave
networks, we are investing in a combination of software applications, tools and services where simplification, process
automation and our unique expertise in wireless technology can make a significant difference for our customers and
partners.
Finally, Aviat is investing in e-commerce through our Aviat Store platform and supporting supply chain
capabilities. Aviat can better service customers buying through the Aviat Store with lower costs, faster lead times and a
simpler purchasing experience. The Aviat Store, together with our supply chain, enables customers (including Tier 2 and
mobile 5G operators) to purchase products as needed, thus avoiding lengthy and variable lead times that come with other
vendor solutions and allowing those customers to lower warehousing costs, reduce obsolete equipment, and lower the
cost of capital by paying only when equipment is needed.
We continue to develop our professional services portfolio as key to our long-term strategy and differentiation.
We offer a portfolio of hosted expert services and we continue to offer training and accreditation programs for
microwave and IP network design, deployment and maintenance.
8
We expect to continue to serve and expand upon our existing customer base and develop business with new
customers. 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.
Products and Solutions
Our strong product and solutions portfolio is key to building and maintaining our marquee base of customers. 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 that addresses a broad range of applications, frequencies, capacities and network
topologies.
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Broad product and solution portfolio. We offer a comprehensive suite of wireless transmission systems for
microwave and millimeter wave networking applications. These solutions utilize a wide range of transmission
frequencies, ranging from 5 GHz to 90 GHz, and can deliver a wide range of transmission capacities, ranging up to
20 Gigabits per second (Gbps). The major product families included in these solutions are CTR 8000, WTM 4000
and AviatCloud. Our CTR 8000 platform merges the functionality of an indoor microwave modem unit and a cell
site router into a single integrated solution, simplifying IP/MPLS deployments and creating a better performing
network. The newest addition to our product portfolio is the WTM 4000, the highest capacity microwave radio ever
produced, and purpose built for software-defined networks (“SDN.”) SDN technology is an approach to networking
management that enables dynamic, programmatically efficient networking configuration in order to improve
networking performance and monitoring, making it more like cloud computing than traditional networking
management. We have now introduced multiple important variants to the WTM 4000 platform; WTM4100 & 4200
providing single and dual frequency microwave links with advanced XPIC and MIMO capabilities; WTM4500 for
multi-channel aggregation of microwave channels in long distance applications; WTM4800 is the latest addition to
address 5G network requirements and is capable of operating in the 80GHz E Band at up to 20Gbps capacity, with a
unique Multi-Band capability which simultaneously uses microwave and E Band frequencies for maximum
robustness. WTM 4800 is the industry’s only single box multi-band solution for lowest total cost of ownership
deployments. To address the issues of operational complexity in our customers’ networks, AviatCloud is a platform
with secure hosted software and services to automate networks and their operations.
Low total cost of ownership. Our wireless-based solutions are focused on achieving a 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 (multiprotocol label switching) 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
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
9
Our primary route to market is through our own direct sales, service and support organization. This provides us
with the best opportunity to leverage our role as a technology specialist and differentiate ourselves from competitors. Our
focus on key customers and geographies allows us to consistently achieve high customer satisfaction ratings leading to a
high level of customer retention and repeat business. Our highest concentrations of sales and service resources are in the
United States, Western and Southern Africa, the Philippines, and the European Union. We maintain a presence in a
number of other countries, some of which are based in customer locations and include, but not limited to, Canada,
Mexico, Kenya, India, Saudi Arabia, Australia, New Zealand, and Singapore.
In addition to our direct channel to market, we also have informal, and in some cases formal, relationships with
original equipment manufacturers (“OEMs”) and system integrators especially focused towards large and complex
projects in national security and government-related applications. Our role in these relationships ranges from equipment
supply only to being a sub-contractor for a portion of the project scope where we will supply equipment and a variety of
design, deployment and maintenance services.
We also use indirect sales channels, including dealers, resellers 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 introduced a direct online sales option through our online “Aviat Store” for our WTM radio platform,
initially in North America and targeted at wireless internet service providers delivering broadband services in rural and
underserved areas. We provide online design tools for radio link planning and on-line ordering tools, which we fulfill
directly from our Aviat Store with multiple options of product available for next day shipment. Shipments from Aviat
Store commenced late in 2018.
We have repair and service centers in India, Nigeria, Ghana, 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 three
years.
Manufacturing
Our global manufacturing strategy follows an outsourced manufacturing model using contract manufacturing
partners in both the United States and Asia. Our strategy is based on balancing cost and supplier performance as well as
taking into account qualification for localization requirements of certain market segments, such as the Buy American
Act.
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 was approximately $225 million at July 2, 2021 and $210 million at July 3, 2020 consisting primarily
of contracts or purchase orders for both product and service deliveries and extended service warranties. Services include
management’s initial estimate of the value of a customer’s commitment under a services contract. The calculation used
by management involves estimates and judgments to gauge the extent of a customer’s commitment, including the type
and duration of the agreement, and the presence of termination charges or wind down costs. Contract extensions and
increases in scope are treated as backlog only to the extent of the new incremental value. 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. Backlog
10
estimates are subject to change and are affected by several factors, including terminations, changes in the scope of
contracts, periodic revalidation, adjustments for revenue not materialized and adjustments for currency.
We expect to substantially deliver against the backlog as of July 2, 2021 during fiscal 2022, 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 as well as long-term projects that could take more
than a year to complete. 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.
Customers
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.
Mobile Telephone Networks Group (“MTN Group”) in Africa accounted for 11% of fiscal 2019 total revenue. We
have entered into separate and distinct contracts with MTN Group as well as separate arrangements with MTN Group
subsidiaries. No customer was greater than 10% of total revenue for fiscal 2021 or 2020.
Competition
The microwave and millimeter wave wireless networking business is a specialized segment of the
telecommunications industry that is sensitive to technological advancements and is extremely competitive. Our principal
competitors include business units of large mobile and IP network infrastructure manufacturers such as Ericsson,
Huawei, NEC Corporation and Nokia Corporation, as well as a number of smaller microwave specialist companies such
as Ceragon Networks Ltd. and SIAE Microelectronica S.p.A.
Some of our larger 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. They may from time to time leverage their extensive overall portfolios into completely
outsourced and managed network offerings restricting opportunities for specialist suppliers. In addition, some
competitors may offer seller financing, which can be a competitive advantage under certain economic climates.
Some of our larger competitors may also act as systems integrators through which we sometimes distribute and
sell products and services to end users.
The smaller independent private and public specialist competitors typically leverage new technologies and low
product costs but are generally less capable of offering a complete solution including professional services, especially in
the North America and Africa regions which form the majority of our addressed market.
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 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
key technology areas and innovation to differentiate our overall portfolio from our competition. The majority of such
research and development resources will be focused on technologies in microwave and millimeter wave RF, digital
signal processing, networking protocols and software applications.
Our research and development expenditures totaled $21.8 million, or 7.9% of revenue, in fiscal 2021, $19.3
million, or 8.1% of revenue, in fiscal 2020, and $21.1 million, or 8.7% of revenue, in fiscal 2019.
11
Research and development are primarily directed to the development of new products and to build 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.
Our product development teams totaled 154 employees as of July 2, 2021, and were located primarily in New
Zealand and 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 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 customers’
requirements or regulatory restrictions and to 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 ASIC’s and MMICs (types 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 sites which would also mitigate COVID-19 risks.
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 currently experienced by
high-tech manufacturing companies and are due primarily to the highly technical nature of many of our purchased
components.
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 July 2, 2021, we held 434 U.S.
patents and 462 international patents and had 14 U.S. patent applications pending and 19 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.
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
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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 could impact our business, financial condition and results of
operations.
We have a comprehensive policy and procedures in effect concerning conflict minerals compliance.
Employees
As of July 2, 2021, we had 687 employees, compared with 674 employees at the end of fiscal 2020, and 708
employees at the end of fiscal 2019. As of July 2, 2021, of the 687 employees, 661 were full-time employees with 278
located in the U.S. 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 employee relations are good.
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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 August 25, 2021, are as follows:
Position Currently Held and Past Business Experience
Name and Age
Peter A. Smith, 55 . . . . Mr. Smith was appointed President and Chief Executive Officer in January 2020. Prior
to joining Aviat Networks, Mr. Smith served as Senior Vice President, US Windows
and Canada for Jeld-Wen from March 2017 to December 2019. Prior to Jeld-Wen, he
served as President of Polypore International’s Transportation and Industrial segment
from October 2013 to March 2017. Previously, he served as Chief Executive Officer
and a director of Voltaix Inc. from September 2011 to October 2013. Earlier in his
career, Mr. Smith held various executive leadership positions at Fortune 100 and
Fortune 500 companies, including Cooper Industries, Dover Knowles Electronics and
Honeywell Specialty Materials. Mr. Smith also served on the board of Soleras
Advanced Coatings from August 2015 to October 2018. He has both a Bachelor of
Science degree in Material (Ceramics) Engineering and PhD in Material Science and
Engineering from Rutgers University, and holds a Master of Business Administration
degree from Arizona State University.
Eric Chang, 48 . . . . . . . Mr. Chang was appointed Senior Vice President and Chief Financial Officer in April
2020. Mr. Chang joined Aviat Networks in February 2016 as our Vice President,
Corporate Controller and Principal Accounting Officer. Prior to joining Aviat
Networks, from 2013 to 2016, Mr. Chang was the Senior Director, Corporate Controller
at Micrel, Incorporated. From 2007 to 2013, he served as Senior Director, Assistant
Controller and Business Unit Controller at Atmel Corporation. From 2003 to 2007, he
was at Ernst & Young LLP, most recent as Senior Audit Manager. Mr. Chang is a
Certified Public Accountant in California and holds a Bachelor of Science degree in
Accounting and Computer Information Systems from Indiana University Kelley School
of Business.
Bryan C. Tucker, 53 . . . As Senior Vice President Americas, Mr. Tucker is responsible for sales and services in
the Americas. Mr. Tucker joined the Company in 2005, and since, has served in a
number of roles for Aviat Networks and its predecessor companies Harris Stratex
Networks and Harris Microwave Communications Division (“MCD”). For example, as
senior director for North America Operations, Mr. Tucker spearheaded major transitions
in ERP systems, product lines and operational locations. He also led the company’s
post-merger systems unification with Harris MCD in 2007. Before joining Aviat
Networks, Mr. Tucker worked for Sony Corp. as director of Manufacturing Engineering
and Maintenance for two production facilities. Overall, Mr. Tucker has more than 24
years of experience in engineering and manufacturing operations with high-tech
companies. He has a bachelor’s degree in electrical engineering from the University of
Florida, is Six Sigma Certified and has pursued postgraduate studies/research in
semiconductor physics at Georgia Tech.
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.
Website Access to Aviat Networks’ Reports; Available Information
We maintain a website 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 website 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.
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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.
Item 1A. Risk Factors
The nature of the business activities conducted by the Company subjects us to certain hazards and risks. The
following is a summary of some of the material risks relating to the Company’s business activities. Other risks are
described in “Item 1. Business,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” 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 in our other public filings.
We face 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 not currently known to us or that we currently deem immaterial may also impair
our business operations. If any of these risks occur, our financial condition and results of operations could be materially
and adversely affected. In that case, the market price of the Company’s common stock could decline.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations and financial
results.
Business and Operational Risk Factors
•
•
Our sales cycle may be lengthy, and the timing of sales, along with additional services such as network design,
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.
The ongoing global COVID-19 pandemic could adversely affect our business, financial condition and results of
operations.
• 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. Any restructuring
activities may harm our business.
• We must continue to increase our revenues and/or reduce costs if we hope to maintain profitability.
•
•
Our quarterly results may be volatile, which can adversely affect the trading price of our common stock.
Our success will depend on new products introduced to the marketplace in a timely manner, successfully
completing product transitioning and achieving customer acceptance.
• We rely on various third-party service partners to help complement our global operations, and failure to
adequately manage these relationships could adversely impact our financial results and relationships with
customers.
• We must respond to rapid technological change and comply with evolving industry standards and requirements
•
•
•
for our products to be successful.
Our average sales prices may decline in the future.
Credit and commercial risks and exposures could increase if the financial condition of our customers declines.
Our restructuring actions could harm our relationships with our employees and impact our ability to recruit new
employees.
Our business could be adversely affected if we are unable to attract and retain key personnel.
•
• We face strong competition for maintaining and improving our position in the market, which can adversely
•
•
•
affect our revenue growth and operating results.
Our ability to sell our products and compete successfully is highly dependent on the quality of our customer
service and support, and our failure to offer high quality service and support could have a material adverse
effect on our sales and results of operations.
Product performance problems, including undetected errors in our hardware or software, or deployment delays
could harm our business and reputation.
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.
15
•
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 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.
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.
• We continually evaluate strategic transaction opportunities which could involve merger, divestiture, sale and/or
acquisition activities that could disrupt our operations and harm our operating results.
If we fail to develop and maintain distribution and licensing relationships, our revenue may decrease.
•
Financial and Macroeconomic Risk Factors
•
Due to the volume of our international sales, we may be susceptible to a number of political, economic and
geographic risks that could harm our business.
• We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our
•
•
•
stockholders.
The effects of global financial and economic conditions in certain markets has had, and may continue to have,
significant effects on our customers and suppliers, and has in the past, and may in the future have, a material
adverse effect on our business, operating results, financial condition and stock price.
Changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation in any country in which
we operate; the loss of a major tax dispute; a successful challenge to our operating structure, intercompany
pricing policies or the taxable presence of our key subsidiaries in certain countries; or other factors could cause
volatility in our effective tax rate and could adversely affect our operating results.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax
purposes and other tax benefits may be limited.
• We may be adversely affected by fluctuations in currency exchange rates.
Legal and Regulatory Risk Factors
•
•
•
•
Continued tension in U.S.-China trade relations may adversely impact our supply chain operations and business.
Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) could
adversely affect our financial condition and results of operations, and could require a significant expenditure of
time, attention and resources, especially by senior management.
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.
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.
Our business is subject to changing regulation of corporate governance, public disclosure and anti-bribery
measures which have resulted in increased costs and may continue to result in additional costs or potential
liabilities in the future.
There are inherent limitations on the effectiveness of our controls.
•
Our products are used in critical communications networks which may subject us to significant liability claims.
•
• We may be subject to litigation regarding our intellectual property. This litigation could be costly to defend and
•
•
resolve and could prevent us from using or selling the challenged technology.
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.
General Risk Factors
Natural disasters or other catastrophic events could have an adverse effect on our business.
•
• We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-
•
term stockholder value.
Anti-takeover provisions of Delaware law, the Plan, and provisions in our Amended and Restated Certificate of
Incorporation, as amended, and Amended and Restated Bylaws could make a third-party acquisition of us
difficult.
For a more complete discussion of the material risks facing our business, see below.
Business and Operational Risk Factors
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Our sales cycle may be lengthy, and the timing of sales, along with additional services such as network design,
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 experience 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, usually taking several months or more. Following the establishment of the
relationship, the negotiation of purchase terms can be time-consuming, and a potential customer may require an extended
evaluation and testing period. Once a purchase agreement has been executed, the timing and amount of revenue, if
applicable, may remain difficult to predict. Our typical product sales cycle, which results in our products being designed
into our customers’ networks, can take 12 to 24 months. A number of factors 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. The completion of services such as 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, each of 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.
Due to the challenges from 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.
The ongoing global COVID-19 pandemic could adversely affect our business, financial condition and results of
operations.
In March 2020, the World Health Organization characterized the current respiratory illness caused by novel
coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-
place or stay-at-home orders, and business shutdowns. Our global operations expose us to risks associated with public
health crises and epidemics/pandemics, such as the COVID-19 pandemic. The COVID-19 pandemic has, and is expected
to continue to have, an impact on our operations, supply chains and distribution systems. The extent to which the
COVID-19 pandemic continues to affect our business, prospects and results of operations will depend on future
developments, many of which are highly uncertain, including, but not limited to, the duration and spread of the
pandemic, its severity, the actions to contain the virus or treat its impact, including ongoing vaccination efforts, any new
variant strains of the underlying virus and how quickly and to what extent normal economic and operating activities can
resume. Management continues to monitor the impact of COVID-19 on the Company’s financial condition, liquidity,
operations, suppliers, industry, and workforce.
Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be
done off-site have been instructed to work from home. Our sites support essential businesses and remain operational. We
are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal
protective equipment, where appropriate. There is no certainty that such measures will be sufficient to mitigate the risks
posed by COVID-19, and our ability to perform critical functions could be harmed as a result.
Depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well
as our ability to perform field services during shelter in place orders, we could/may continue to experience constraints
and delays in fulfilling customer orders in future periods.
While the ultimate effects of the pandemic on our business are uncertain, the pandemic and related government
actions, including restrictions on travel, temporary closure of businesses and stay at home orders have, and are likely to
continue to have, an adverse impact on global economic conditions and consumer confidence and spending, which could
materially affect demand for our products. Our customers could become more conservative in response to the pandemic
and economic conditions and may seek to reduce their purchases. Our results of operations depend upon, among other
things, our ability to maintain and increase sales volume with existing customers, our ability to attract new customers and
the financial condition of our customers. Decreases in demand for our products without a corresponding decrease in costs
would negatively impact our operating margins and financial results.
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We are monitoring, assessing and adapting to the situation and have prepared for implications to our business,
supply chain and customer demand. We expect these challenges to continue until business and economic activities return
to more normal levels. The financial results for the fiscal year reflect some of the reduced activity experienced during the
period in various locations around the world and are not necessary indicative of the results for the next fiscal period or
fiscal year.
Our business and operating results are affected by the global business environment and economic conditions,
including changes in interest rates, availability of capital from credit providers, consumer confidence, rates of inflation,
geopolitical issues and other macro-economic factors. The United States and global economies continue to experience a
period of economic and financial uncertainty, in part due to COVID-19 and the related public health actions taken by
many governments and businesses. An economic downturn, whether related to COVID-19 or otherwise, could lead to
decreased customer demand, inability to execute installs and/or service, or the inability of our customers to pay for our
products, the inability of suppliers to deliver the components necessary to manufacture our products, and reduced access
to capital from credit providers and through the capital markets, among other things, which could adversely affect our
business, results of operations and financial condition.
To the extent the COVID-19 pandemic adversely affects the global economy moving forward, and/or adversely
affects our business, operations or financial performance, it may also have the effect of increasing the likelihood and/or
magnitude of other risks described in the “Risk Factors” set forth in this Item 1A.
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. Any 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, we
have undertaken a series of steps to restructure 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 $2.3 million, $4.0 million and $0.7 million in fiscal 2021,
2020 and 2019, 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 the
elimination of jobs and the outsourcing of certain functions to reduce our operating expenses. These assumptions may
not be accurate 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 disposal of
businesses or product lines may result in the recording of additional restructuring charges. Consequently, 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 restructuring and related expenses, which could have a material adverse effect on our business,
financial condition or results of operations.
We must continue to increase our revenues and/or reduce costs if we hope to maintain profitability.
As measured under U.S. generally accepted accounting principles (“U.S. GAAP”), we recorded net income of
$110.1 million in fiscal 2021, compared to $0.3 million in fiscal 2020 and $9.7 million in fiscal 2019. We generated cash
from operations of $17.3 million, $17.5 million and $2.9 million in fiscal 2021, 2020 and 2019, respectively.
Throughout fiscal 2021, we experienced strong price competition for new business in all regions while major
customer consolidations from prior years also put pressure on revenue and gross margin. In addition, we saw pricing
pressures in all markets, particularly in international markets. Customer consolidation may have an increasing negative
impact on our revenue if Aviat is not selected as a vendor for the products and/or services we provide. In order to counter
pricing pressures, we invested heavily in product improvements to reduce unit costs and enhance product features,
decreased overall company expenses, 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, or achieve the projected cost reductions, we may not maintain profitability.
18
We cannot be certain that these actions or others that we may take will allow us to maintain operating profitability
or net income as determined under U.S. GAAP in the future.
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;
the length of our sales cycle;
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;
unexpected delays in the schedule for shipments of existing products and new generations of the existing
platforms;
• maintaining appropriate inventory levels and purchase commitments;
•
•
failure to realize expected cost improvement throughout our supply chain;
order cancellations or postponements in product deliveries, including due to the COVID-19 pandemic,
resulting in delayed revenue recognition;
restructuring and streamlining of our operations;
war and acts of terrorism;
natural disasters;
diseases or pandemics, such as the COVID-19 pandemic, and corresponding governmental actions;
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 and millimeter wave
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 competitive actions 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.
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 and services 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-
19
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 product 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 write-downs of the current product as customers transition to new product platforms. In
addition, products or technologies developed by others may render our products non-competitive or obsolete and result in
significant reduction in orders from our customers and the loss of existing and prospective customers.
We rely on various third-party service partners to help complement our global operations, and failure to adequately
manage these relationships could adversely impact our financial results and relationships with customers.
We rely on a number of third-party service partners, both domestic and international, to complement our global
operations. We rely upon these partners for certain installation, maintenance, logistics and support functions. In addition,
as our customers increasingly seek to rely on vendors to perform additional services relating to the design, construction
and operation of their networks, the scope of work performed by our service partners is likely to increase and may
include areas where we have less experience providing or managing such services. We must successfully identify, assess,
train and certify qualified service partners in order to ensure the proper installation, deployment and maintenance of our
products. The vetting and certification of these partners can be costly and time-consuming, and certain partners may not
have the same operational history, financial resources and scale as we have. Moreover, certain service partners may
provide similar services for other companies, including our competitors. We may not be able to manage our relationships
with our service partners effectively, and we cannot be certain that they will be able to deliver services in the manner or
time required, that we will be able to maintain the continuity of their services, or that they will adhere to our approach to
ethical business practices. Our service partners may also experience challenges in providing services to us as a result of
the impact of the COVID-19 pandemic. We may also be exposed to a number of risks or challenges relating to the
performance of our service partners, including:
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delays in recognizing revenue;
liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our
service partners;
our services revenue and gross margin may be adversely affected; and
our relationships with customers could suffer.
If we do not effectively manage our relationships with third-party service partners, or if they fail to perform these
services in the manner or time required, our financial results and relationships with our customers could be adversely
affected.
We must respond to rapid technological change and comply with evolving industry standards and requirements for
our products to be successful.
The optical transport networking equipment market is characterized by rapid technological change, changes in
customer requirements and evolving industry standards. We continually invest in research and development to sustain or
enhance our existing products, but the introduction of new communications technologies and the emergence of new
industry standards or requirements could render our products obsolete. Further, in developing our products, we have
made, and will continue to make, assumptions with respect to which standards or requirements will be adopted by our
customers and competitors. If the standards or requirements adopted by our prospective customers are different from
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those on which we have focused our efforts, market acceptance of our products would be reduced or delayed, and our
business would be harmed.
We are continuing to invest a significant portion of our research and development efforts in the development of
our next-generation products. We expect our competitors will continue to improve the performance of their existing
products and introduce new products and technologies and to influence customers’ buying criteria so as to emphasize
product capabilities that we do not, or may not, possess. To be competitive, we must anticipate future customer
requirements and continue to invest significant resources in research and development, sales and marketing, and
customer support. If we do not anticipate these future customer requirements and invest in the technologies necessary to
enable us to have and to sell the appropriate solutions, it may limit our competitive position and future sales, which
would have an adverse effect on our business and financial condition. We may not have sufficient resources to make
these investments and we may not be able to make the technological advances necessary to be competitive.
Our average sales prices may decline in the future.
We have experienced, and could 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, to reduce the costs of materials used in our products and to continue to introduce new lower-cost products
and product enhancements and if we are unable to do so, we may not be able to respond to pricing pressures. 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.
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, including the Company, to provide extended payment terms, direct loans or other forms of
financial support as a condition to obtaining commercial contracts. In addition, if local currencies cannot be hedged, we
have an inherent exposure in our ability to convert monies at favorable rates from 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. Our customers’ financial conditions face additional challenges in many emerging markets, where
our customers are being affected not only by recession, but by deteriorating local currencies and a lack of credit and,
more broadly, by the COVID-19 pandemic and related economic effects. 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 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 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 “Risk Factors - Business and
Operational Risk Factors - 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.
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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 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, 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 for us 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. Competition in this segment is intense, and we expect it 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 Ericsson, Huawei, NEC and Nokia, as well as a
number of other public and private companies, such as Ceragon and SIAE. 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.
Our ability to sell our products and compete successfully is highly dependent on the quality of our customer service
and support, and our failure to offer high quality service and support could have a material adverse effect on our
sales and results of operations.
Once our products are delivered, our customers depend on our service and support to resolve any issues relating to
our products. Our support personnel includes employees in various geographic locations, who provide general technical
support to our customers. A high level of support is important for the successful marketing and sale of our products. If
we do not effectively help our customers quickly resolve issues or provide effective ongoing support, it could adversely
affect our ability to sell our products to existing customers as well as demand for maintenance and renewal contracts and
could harm our reputation with existing and potential customers.
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Product performance problems, including undetected errors in our hardware or software, or deployment delays could
harm our business and reputation.
The development and production of products with high technology content is complicated and often involves
problems with hardware, software, components and manufacturing methods. Complex hardware and software systems,
such as our products, can often contain undetected errors or bugs when first introduced or as new versions are released.
In addition, errors associated with components we purchase from third parties, including customized components, may
be difficult to resolve. We have experienced issues in the past in connection with our products, including failures due to
the receipt of faulty components from our suppliers and performance issues related to software updates. From time to
time we have had to replace certain components or provide software remedies or other remediation in response to errors
or bugs, and we may have to do so again in the future. In addition, performance issues can be heightened during periods
where we are developing and introducing multiple new products to the market, as any performance issues we encounter
in one technology or product could impact the performance or timing of delivery of other products. Our products may
also suffer degradation of performance and reliability over time.
If reliability, quality, security or network monitoring problems develop, a number of negative effects on our
business could result, including:
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reduced orders from existing customers;
declining interest from potential customers;
delays in our ability to recognize revenue or in collecting accounts receivables;
costs associated with fixing hardware or software defects or replacing products;
high service and warranty expenses;
delays in shipments;
high inventory excess and obsolescence expense;
high levels of product returns;
diversion of our engineering personnel from our product development efforts; and
payment of liquidated damages, performance guarantees or similar penalties.
Because we outsource the manufacturing of certain components of our products, we may also be subject to
product performance problems as a result of the acts or omissions of third parties, and we may not have adequate
compensating remedies against such third parties.
From time to time, we encounter interruptions or delays in the activation of our products at a customer’s site.
These interruptions or delays may result from product performance problems or from issues with installation and
activation, some of which are outside our control. If we experience significant interruptions or delays that we cannot
promptly resolve, the associated revenue for these installations may be delayed or confidence in our products could be
undermined, which could cause us to lose customers, fail to add new customers, and consequently harm our financial
results.
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 customers’ needs, including ours, during periods of excess demand.
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.
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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. There can be no assurance that we will not encounter problems with our contract manufacturer related to
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 they do 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 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.
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. During fiscal 2019 we had one customer in Africa,
MTN Group, that accounted for 11% of our total revenue, respectively. No customer accounted for more than 10% of
our total revenue in fiscal 2021 or 2020. 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.
In addition, 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, 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.
It is possible that a significant portion of our future product sales could become even more concentrated in a
limited number of customers due to the factors described above. 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, the consolidation of existing customers, or our inability to gain additional customers could result in declines in
our revenue or an inability to grow revenue.
We continually evaluate strategic transaction opportunities which could involve merger, divestiture, sale and/or
acquisition activities that could disrupt our operations and harm our operating results.
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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. Strategic transactions involve
numerous risks, including the following:
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difficulties in integrating the operations, systems, technologies, products, and personnel of the combined
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 business combinations, sales, divestitures
and /or restructurings;
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, resellers, vendors and other business partners of our company
or the companies with which we engage in strategic transactions following and continuing after
announcement of an anticipated strategic transaction.
Strategic transactions may also cause us to:
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issue common stock that would dilute our current stockholders or cause a change in control of the combined
company;
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, restructurings, sales and acquisitions of high-technology companies are inherently risky and subject to
many factors outside of our control. No assurance can be given that any future strategic transactions will be successful
and will not materially adversely affect our business, operating results or financial condition. Failure to manage and
successfully complete a strategic transaction could materially harm our business and operating results. Even when an
acquired or acquiring 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.
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 market our products through
indirect sales channels such as independent agents, resellers, 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 our current relationships or develop new ones. 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.
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Financial and Macroeconomic Risk Factors
Due to the volume of our international sales, 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 2021, our sales to international customers
accounted for 34% 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:
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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;
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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;
the conduct of unethical business practices in developing countries;
general economic and geopolitical conditions, including inflation and trade relationships;
restrictions on travel to locations where we conduct business, including those imposed due to COVID-19;
war and acts of terrorism;
kidnapping and high crime rate;
natural disasters;
availability of U.S. dollars especially in countries with economies highly dependent on resource exports,
particularly oil; and
changes in export regulations.
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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.
We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our
stockholders.
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. However, it is possible that we may not
generate sufficient cash flow from operations or otherwise have the capital resources to meet our longer-term capital
needs. If this occurs, we may need to sell assets, reduce capital expenditures, or obtain additional equity or debt
financing. We have no assurance that additional financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms if and when needed, our business, financial condition and
results of operations could be harmed.
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If we raise additional funds through the issuance of equity or convertible debt securities, the ownership of our
existing stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or
privileges senior to those of existing stockholders.
The effects of global financial and economic conditions in certain markets has had, and may continue to have,
significant effects on our customers and suppliers, and has in the past, and may in the future have, a material adverse
effect on our business, operating results, financial condition and stock price.
The effects of global financial and economic conditions in certain markets 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.
Economic conditions in certain markets have 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 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, economic conditions in certain markets could materially adversely affect our suppliers’ access to
capital and liquidity with which to maintain their inventories, production levels, 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,
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 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.
Changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation in any country in which we
operate; the loss of a major tax dispute; a successful challenge to our operating structure, intercompany pricing
policies or the taxable presence of our key subsidiaries in certain countries; or other factors could cause volatility in
our effective tax rate and could adversely affect our operating results.
We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions. Our
future effective tax rate may be adversely affected by a number of factors, many of which are outside of our control,
including:
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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;
our ability to utilize net operating loss;
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, treaties, rulings, regulations or agreements or the interpretation
of such tax laws, treaties, rulings, regulations or agreements, including the impact of the Tax Cuts and Jobs
Act of 2017 and any new administrations;
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the resolution of issues arising from tax audits with various tax authorities, including the loss of a major tax
dispute;
local tax authority challenging our operating structure, intercompany pricing policies or the taxable presence
of our key subsidiaries in certain countries;
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.
Any significant increase in our future effective tax rates could impact our results of operations for future periods
adversely.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax
purposes and other tax benefits may be limited.
Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limitation on the
amount of taxable income that may be offset if a corporation experiences an “ownership change” as defined in Section
382 of the Code. An ownership change occurs when a company’s “five-percent shareholders” (as defined in Section 382
of the Code) collectively increase their ownership in the company by more than 50 percentage points (by value) over a
rolling three-year period. Additionally, various states have similar limitations on the use of state net operating losses
(“NOL”) following an ownership change.
If we experience an ownership change, our ability to use our NOLs, any loss or deduction attributable to a “net
unrealized built-in loss” and other tax attributes (collectively, the “Tax Benefits”) could be substantially limited, and the
timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the
Tax Benefits. There is no assurance that we will be able to fully utilize the Tax Benefits and we could be required to
record an additional valuation allowance related to the amount of the Tax Benefits that may not be realized, which could
adversely impact our results of operations.
We believe that these Tax Benefits are a valuable asset for us. On September 6, 2016, the Board adopted certain
amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”), to
protect our tax benefits. In addition, on March 3, 2020, the Board approved a Tax Benefit Preservation Plan (as
amended and restated on August 27, 2020, the “Plan”) in an effort to protect our Tax Benefits during the effective period
of the Plan. We submitted the Plan to a stockholder vote and our stockholders approved the plan at the 2020 Annual
Meeting of Stockholders. Although the Plan and the Charter Amendments are intended to reduce the likelihood of an
“ownership change” that could adversely affect us, there is no assurance that the restrictions on transferability in the Plan
and the Charter Amendments will prevent all transfers that could result in such an “ownership change.” There also can
be no assurance that the transfer restrictions in the Charter Amendments will be enforceable against all of our
stockholders absent a court determination confirming such enforceability. The transfer restrictions may be subject to
challenge on legal or equitable grounds.
The Plan and the Charter Amendments could make it more difficult for a third party to acquire, or could
discourage a third party from acquiring, us or a large block of our common stock. A third party that acquires 4.9% or
more of our common stock could suffer substantial dilution of its ownership interest under the terms of the Plan through
the issuance of common stock or common stock equivalents to all stockholders other than the acquiring person. The
acquisition may also be void under the Charter Amendments.
The foregoing provisions may adversely affect the marketability of our common stock by discouraging potential
investors from acquiring our stock. In addition, these provisions could delay or frustrate the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to
acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders.
We may be adversely affected by fluctuations in currency exchange rates.
A portion of our sales and expenses stem from countries outside of the United States, and are in currencies other
than U.S. dollars, and therefore subject to foreign currency fluctuation. Accordingly, fluctuations in foreign currency
rates could have a material impact on our financial results in future periods. We currently enter into foreign currency
exchange forward contracts to reduce the impact of foreign currency fluctuations on certain non-functional currency
account balances, and also to reduce the volatility of cash flows primarily related to forecasted foreign currency revenue
28
and expenses. These forward contracts reduce the impact of currency exchange rate movements on certain transactions,
but do not cover all foreign-denominated transactions and therefore do not entirely eliminate the impact of fluctuations in
exchange rates on our results of operations and financial condition.
Legal and Regulatory Risk Factors
Continued tension in U.S.-China trade relations may adversely impact our supply chain operations and business.
The U.S. government has taken certain actions that change U.S. trade policies, including tariffs that affect certain
products manufactured in China. Some components manufactured by our Chinese suppliers are subject to tariffs if
imported into the United States. The Chinese government has taken certain reciprocal actions, including recently
imposed tariffs affecting certain products manufactured in the United States. Certain of our products manufactured in our
U.S. operations have been included in the tariffs imposed on imports into China from the United States. Although some
of the products and components we import are affected by the tariffs, at this time, we do not expect these tariffs to have a
material impact on our business, financial condition or results of operations.
It is unknown whether and to what extent additional new tariffs (or other new laws or regulations) will be adopted
that increase the cost or feasibility of importing and/or exporting products and components from China to the United
States and vice versa. Further, the effect of any such new tariffs or retaliatory actions on our industry and customers is
unknown and difficult to predict. As additional new tariffs, legislation and/or regulations are implemented, or if existing
trade agreements are renegotiated or if China or other affected countries take retaliatory trade actions, such changes
could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) could adversely
affect our financial condition and results of operations, and could require a significant expenditure of time, attention
and resources, especially by senior management.
Our accounting and financial reporting policies conform to U.S. GAAP, which are periodically revised and/or
expanded. The application of accounting principles is also subject to varying interpretations over time. Accordingly, we
are required to adopt new or revised accounting standards or comply with revised interpretations that are issued from
time to time by various parties, including accounting standard setters and those who interpret the standards, such as the
FASB and the SEC and our independent registered public accounting firm. New financial accounting standards which
may be adopted by FASB could result in significant changes to our accounting and/or financial reporting practices that
could adversely affect our financial condition and results of operations.
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 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 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 may be affected by the allocation and auction of the radio frequency spectrum by governmental authorities
both in the U.S. and internationally. The unavailability of sufficient radio frequency spectrum may inhibit the future
growth of wireless communications networks. In addition, to operate in a jurisdiction, we must obtain regulatory
approval for our products and each jurisdiction in which we market our products has its own regulations governing radio
29
communications. If we are 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.
Our business is subject to changing regulation of corporate governance, public disclosure and anti-bribery measures
which have resulted in increased costs and may continue to result in additional costs or potential liabilities in the
future.
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, have issued requirements, laws and regulations and continue to develop additional requirements, laws and
regulations, 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.
There are inherent limitations on the effectiveness of our controls.
We do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect
all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not
absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact
that resource constraints exist, and the benefits of controls must be considered relative to their costs. Further, because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been
detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of
some persons, by collusion of two or more people, or by management’s override of the controls. The design of any
system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of
any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become
inadequate due to changes in conditions or deterioration in the degree of compliance with policies or procedures. If our
controls become inadequate, we could fail to meet our financial reporting obligations, our reputation may be adversely
affected, our business and operating results could be harmed, and the market price of our stock could decline.
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 our intellectual property. This litigation could be costly to defend and
resolve and could prevent us from using or selling the challenged technology.
30
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 proprietary information 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
ours, are subject to a wide variety of attacks on their networks on an ongoing basis. Despite our security measures, our
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. Due to the COVID-19 pandemic, an increased number of our employees are
working from home and connecting to our networks remotely, which we believe may further increase the risk of, and our
vulnerability to, a cyber-attack or breach on our network.
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.
As cyber-attacks become more sophisticated, the need to develop our infrastructure to secure our business can
lead to increased cybersecurity protection costs. Such costs may include making organizational changes, deploying
additional personnel and protection technologies, training employees, and engaging third party experts and consultants.
These efforts come at the potential cost of revenues and human resources that could be utilized to continue to enhance
our product offerings, and such increased costs may adversely affect our operating margins.
Additionally, certain of our suppliers have in the past and may in the future experience cybersecurity attacks that
can constrain their capacity and ability to meet our product demands. If our contract manufacturers and suppliers suffer
future cyberattacks, 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.
General Risk Factors
Natural disasters or other catastrophic events could have an adverse effect on our business.
31
Natural disasters, such as hurricanes, earthquakes, fires, extreme weather conditions and floods, could adversely
affect our operations and financial performance. Such events could result in physical damage to one or more of our
facilities, the temporary closure of one or more of our facilities or those of our suppliers, a temporary lack of an adequate
work force in a market, a temporary or long-term disruption in the supply of products from local or overseas suppliers, a
temporary disruption in the transport of goods from overseas, and delays in the delivery of goods. Public health issues,
whether occurring in the United States or abroad, could disrupt our operations, disrupt the operations of suppliers or
customers, or have an adverse impact on customer demand. As a result of any of these events, we may be required to
suspend operations in some or all of our locations, which could have an adverse effect on our business, financial
condition, results of operations, and cash flows. These events could also reduce demand for our products or make it
difficult or impossible to receive components from suppliers. Although we maintain business interruption insurance and
other insurance intended to cover some or all of these risks, such insurance may be inadequate, whether because of
coverage amount, policy limitations, the financial viability of the insurance companies issuing such policies, or other
reasons.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term
stockholder value.
In May 2018, the board of directors of the Company (the (“Board of Directors” or “Board”)) approved a stock
repurchase program for the repurchase of up to $7.5 million. Our repurchase program even if fully implemented, may not
enhance long-term stockholder value. During fiscal 2021, 2020 and 2019 we repurchased $0.8 million, $1.8 million and
$2.3 million of our common stock in the open market respectively. As of July 2, 2021, $2.6 million remained available
for repurchase under our stock repurchase program.
Anti-takeover provisions of Delaware law, the Plan, and provisions in our Amended and Restated Certificate of
Incorporation, as amended, 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, as amended, 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 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.
In addition, the Plan and the Charter Amendments could make an acquisition of us more difficult, and certain
acquisitions may also be void under the Charter Amendments. The risks associated with the Plan and the Charter
Amendments are described in more detail above under the heading “Our ability to use net operating loss carryforwards to
offset future taxable income for U.S. federal income tax purposes and other tax benefits may be limited.”
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of July 2, 2021, we leased approximately 164,000 square feet of facilities worldwide, with approximately 37%
in the United States, mostly in California and Texas. Our corporate headquarters is located in Austin, Texas, and consists
of approximately 18,000 square feet of office space. We also lease approximately 24,000 square feet of office, assembly
facilities and warehouse in multiple locations in Texas and 19,000 square feet of office space in Milpitas, California.
Internationally, we lease approximately 103,000 square feet of facilities throughout Europe, North America, Africa and
Asia regions, including offices in Singapore, Slovenia, Philippine Islands, India, Mexico, Canada, South Africa, Ghana,
Ivory Coast, Kenya, Nigeria, Algeria, Congo, France, Netherlands, Russia, Australia, Dubai, Saudi Arabia, Lebanon,
China, and Thailand. In addition, we own approximately 108,000 square feet of facilities in Wellington, New Zealand
and Lanarkshire, Scotland.
32
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 leases, see “Note 4. Leases” of the notes to consolidated financial statements,
which are included in Item 8 in this Annual Report on Form 10-K.
Item 3. Legal Proceedings
We are subject from time to time to disputes with customers concerning our products and services. In May 2016,
we received notification of a claim for damages from a customer alleging that certain of our products were defective
which we settled for an immaterial amount during the third quarter of 2021.
In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought
against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of
intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the
time frames dictated by the Indian regulations under the Foreign Exchange Management Act ("FEMA"). In November
2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima
Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of
intercompany receivables and non-payment of intercompany payables which originated from the period prior to our
acquisition of Telsima India in February 2009. In September 2019, our directors of Aviat India appeared before the
Ministry of Finance Enforcement Directorate. No settlement offers were discussed at the meeting and the matter is still
ongoing with no subsequent hearing date currently scheduled. We have accrued an immaterial amount representing the
estimated probable loss for which we would settle the matter. We currently cannot form an estimate of the range of loss
in excess of our amounts already accrued. If the outcome of this matter is greater than the current immaterial amount
accrued, we intend to dispute it vigorously.
From time to time, we may be involved in various other legal claims and litigation that arise in the normal course
of our operations. We are aggressively defending all current litigation matters. Although there can be no assurances and
the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings
are likely to have a material adverse effect on our financial position. We expect to defend each of these disputes
vigorously. There are many uncertainties associated with any litigation and these actions or other third-party claims
against us may cause us to incur costly litigation and/or substantial settlement charges. As a result, our business, financial
condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may
be materially different from our estimates, if any.
We record accruals for our outstanding legal proceedings, investigations or claims when it is probable that a
liability will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least on a quarterly basis,
developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any
developments that would result in a loss contingency to become both probable and reasonably estimable. We have not
recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.
Item 4. Mine Safety Disclosures
Not applicable.
33
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information on 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 20, 2021, there were 2,057 holders of record of our
common stock.
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.
On April 7, 2021, we effected a two-for-one split in the form of a stock dividend to shareholders of record as of
April 1, 2021.
Sales of Unregistered Securities
On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration
process. When we utilize the shelf registration we will be able to, from time to time, offer and sell, either individually or
in combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities
described in the shelf registration statement or a related prospectus supplement. During fiscal 2021, we did not issue or
sell any unregistered securities.
Issuer Repurchases of Equity Securities
In May 2018, our Board of Directors approved a stock repurchase program, which does not have an expiration
date, for the repurchase of up to $7.5 million of our common stock. The stock repurchase program was suspended
temporarily between February 2020 and February 2021. During fiscal 2021, our Board of Directors voted to re-instate
our stock repurchase program and we repurchased 19,587 shares of our common stock in the open market for an
aggregate purchase price, including commissions, of $0.8 million. These shares were recorded as treasury stock and we
do not anticipate retiring them. Treasury stock did not participate in the two-for-one stock split in the form of a stock
34
dividend paid on April 7, 2021. As of July 2, 2021, $2.6 million remained available for repurchases under our stock
repurchase program.
Period
Total Number of Shares
Repurchased
Average Price Paid per
Share
Total Number of Shares
Repurchased as Part of
Publicly Announced
Program
Approximate dollar
Value of Shares that
May Yet be Repurchased
Under the Program (1)
(in thousands)
April 3, 2021 through
April 30, 2021
May 1, 2021 through
May 28, 2021
May 29, 2021 through
July 2, 2021
Total
_______________________
—
11,287 $
—
11,287
—
29.10
—
— $
11,287 $
— $
2,956
2,627
2,627
(1) In May 2018, our Board of Directors approved a stock repurchase program, which does not have an expiration date,
for the repurchase of up to $7.5 million of our common stock.
35
Performance Graph
The following graph and accompanying data compare 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 July 2, 2021. 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.
36
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Aviat Networks, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
Aviat Networks, Inc. . . . . . . . . . . . . . . . . . . $
NASDAQ Composite . . . . . . . . . . . . . . . . . . $
NASDAQ Telecommunications . . . . . . . . . . $
100.00 $
216.15 $
203.35 $
170.19 $
230.93 $
792.05
100.00 $
127.76 $
157.91 $
170.20 $
219.27 $
316.73
100.00 $
116.29 $
140.68 $
169.02 $
176.50 $
235.38
7/1/2016
6/30/2017
6/29/2018
6/28/2019
7/3/2020
7/2/2021
____________________________
*
Assumes (i) $100 invested on July 1, 2016 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.
37
Aviat Networks, Inc.NASDAQ CompositeNASDAQ Telecommunications07/01/1606/30/1706/29/1806/28/1907/30/2007/02/210200400600800 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 consolidated financial statements. Data presented for fiscal years 2021, 2020 and 2019 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.
July 2, 2021
July 3, 2020
Fiscal Year Ended
June 28, 2019
June 29, 2018
July 1, 2017
(In thousands, except per share amounts)
Revenue from product sales and services . . . . . . . $ 274,911 $ 238,642 $ 243,858 $ 242,506 $ 241,874
Cost of product sales and services . . . . . . . . . . . .
166,402
172,296
Income (loss) from continuing operations (1) (2) . .
Net income (loss) (1), (2), (3)
. . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling
110,139
162,003
164,588
153,946
110,139
9,738
2,302
9,738
2,302
257
257
(621)
(621)
interests, net of tax . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Aviat Networks
Basic and diluted net income (loss) per common
share(4):
—
110,139
—
257
—
457
202
9,738
1,845
(823)
Net income (loss) - basic . . . . . . . . . . . . . . . . $
Net income (loss) - diluted . . . . . . . . . . . . . . $
9.98 $
9.42 $
0.02 $
0.02 $
0.91 $
0.87 $
0.17 $
0.16 $
(0.08)
(0.08)
_______________________
(1) Includes share-based compensation expense of $2.9 million, $1.7 million, $1.7 million, $2.4 million, and $2.1
million for fiscal 2021, 2020, 2019, 2018, and 2017, respectively.
(2) Includes restructuring charges of $2.3 million, $4.0 million, $0.7 million, $1.3 million, and $0.6 million for fiscal
2021, 2020, 2019, 2018, and 2017, respectively.
(3) Includes U.S. valuation allowance release of $92.2 million related to U.S. federal and state deferred tax assets for
fiscal 2021.
(4) On April 7, 2021, we effected a stock split in the form of a stock dividend of all of the outstanding shares of our
common stock at a ratio of two-for-one (“Stock Split”). The authorized number of shares of 300 million and par
value per share of our common stock of $0.01 per share remained unchanged after the Stock Split.
July 2, 2021
July 3, 2020
As of
June 28, 2019
June 29, 2018
July 1, 2017
(In thousands)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 297,653 $ 179,801 $ 169,193 $ 156,061 $ 152,576
Long-term liabilities . . . . . . . . . . . . . . . . . . . . .
12,218
15,466
17,949
17,150
12,077
_______________________
38
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2021 and 2020 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
July 1, 2022 is referred to as “fiscal 2022” or “2022”; our fiscal year ended July 2, 2021 is referred to as “fiscal 2021” or
“2021”; our fiscal year ended July 3, 2020 is referred to as “fiscal 2020” or “2020”; and our fiscal year ended June 28,
2019 is referred to as “fiscal 2019” or “2019.” Our fiscal year ends on the Friday nearest to June 30. Fiscal 2021
presented included 52 weeks while fiscal 2020 included 53 weeks and fiscal 2019 included 52 weeks. This one week
difference between fiscal 2021 and fiscal 2020 impacts the comparison of both revenue and expenses.
Overview
We achieved revenue growth of 15.2% in fiscal 2021. We anticipate further revenue growth in fiscal 2022. We
continue to have a strong backlog entering fiscal 2022 and we anticipate continuing our strong momentum across all
verticals. We have made inroads into the U.S. rural broadband and wireless internet service provider areas and there is
now further evidence of investment to support 5G deployments with our U.S. service provider customers. Our
international sales grew in fiscal 2021.
In March 2020, the World Health Organization characterized the current respiratory illness caused by novel
coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-
place or stay-at-home orders, and business shutdowns. Our global operations expose us to risks associated with public
health crises and epidemics/pandemics, such as the COVID-19 pandemic. The COVID-19 pandemic has had and is
likely to continue to have an impact on our operations, supply chains and distribution systems. The COVID-19 pandemic
has led to an increase in our expenses, including as a result of impacts associated with preventive and precautionary
measures that we, other businesses and governments are taking or requiring. The extent to which the COVID-19
pandemic impacts our business, prospects and results of operations will depend on future developments, which are
highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the
pandemic, its severity, the actions to contain the virus or treat its impact, including ongoing vaccination efforts, any new
variant strains of the underlying virus and how quickly and to what extent normal economic and operating activities can
resume. Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity,
operations, suppliers, industry, and workforce.
Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be
done offsite have been instructed to work from home. Our manufacturing sites remain operational, and we are
maintaining social distancing and have enhanced cleaning protocols and usage of personal protective equipment, where
appropriate.
The impact to our supply chain lead times and ability to fulfill orders was minimal for the year ended July 2, 2021.
However, depending on pandemic-related factors such as constraints of supply of certain component parts, uncertain
duration of temporary manufacturing restrictions and our ability to perform field services during shelter in place orders,
we could experience constraints and delays in fulfilling customer orders in future periods. We are monitoring, assessing
and adapting to the situation and preparing for possible implications to our business, supply chain and customer demand.
We expect the potential for these challenges to continue until business and economic activities return to more normal
levels. The financial results for the year ended July 2, 2021 reflect some of the reduced activity experienced during the
period in various locations around the world and are not necessarily indicative of the results for the next fiscal period or
fiscal year.
39
Operations Review
The market for mobile backhaul continued to be our primary addressable market segment globally in fiscal 2021.
In North America, we supported 5G and long-term evolution (“LTE”) deployments of our mobile operator customers,
public safety network deployments for state and local governments, and private network implementations for utilities and
other customers. In international markets, our business continued to rely on a combination of customers increasing their
capacity to handle subscriber growth, the ongoing build-out of 3G deployments, 5G deployments and LTE deployments.
Our position continues to be to support our customers for 5G and LTE readiness and 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 that wins business for us and enables us to expand our business with existing
customers in all markets. However, as disclosed in “Overview” 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.
Revenue
We manage our sales activities primarily on a geographic basis in North America and three international
geographic regions: (1) Africa and the Middle East, (2) Europe and Russia and (3) Latin America and Asia Pacific.
Revenue by region for fiscal 2021, 2020 and 2019 and the related changes are shown in the table below:
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
North America . . . . . . . . . . . . . . $ 183,071 $ 151,709 $ 132,884 $ 31,362 $ 18,825
20.7 %
14.2 %
Africa and the Middle East . . . .
44,023
Europe and Russia . . . . . . . . . . .
8,826
Latin America and Asia Pacific .
38,991
37,595
11,157
38,181
48,305
16,933
45,736
6,428
(10,710)
17.1 % (22.2) %
(2,331)
(5,776)
(20.9) % (34.1) %
810
(7,555)
2.1 % (16.5) %
Total Revenue . . . . . . . . . . . . . $ 274,911 $ 238,642 $ 243,858 $ 36,269 $ (5,216)
15.2 %
(2.1) %
Our revenue from North America increased by $31.4 million, or 20.7%, in fiscal 2021 compared with fiscal 2020.
The increase in North America revenue during fiscal 2021 was due to revenue growth with private network customers, as
well as increased sales to mobile operators. Revenue from North America increased $18.8 million, or 14.2%, in fiscal
2020 compared with fiscal 2019. The increase in North America revenue during fiscal 2020 was due to stronger order
flow from private network customers, as well as increased sales to mobile operators.
Our revenue from Africa and the Middle East increased by $6.4 million, or 17.1%, in fiscal 2021 compared with
fiscal 2020. The increase in revenue was primarily due to increased sales to mobile operators in the region. Revenue
from Africa and the Middle East decreased $10.7 million, or 22.2%, in fiscal 2020 compared with fiscal 2019. The
decrease in revenue was primarily due to decreased sales to our mobile operator customers in the region.
Revenue from Europe and Russia decreased by $2.3 million, or 20.9%, in fiscal 2021 compared with fiscal 2020.
The decrease in revenue was due to lower sales to mobile operator customers. Revenue in Europe and Russia decreased
$5.8 million, or 34.1%, in fiscal 2020 compared with fiscal 2019. The decrease was due to lower sales to mobile operator
customers.
Revenue in Latin America and Asia Pacific increased by $0.8 million, or 2.1%, in fiscal 2021 compared with
fiscal 2020. The increase in revenue was primarily due to higher sales to mobile operator customers in Asia Pacific offset
in part by decreased revenue in Latin America. Revenue from Latin America and Asia-Pacific decreased $7.6 million, or
16.5%, in fiscal 2020 compared with fiscal 2019. The decrease was primarily due to lower sales volume from certain
mobile operator customers in Asia Pacific offset in part by increased revenue in Latin America.
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
Product sales . . . . . . . . . . . . . . . $ 185,787 $ 153,793 $ 156,724 $ 31,994 $ (2,931)
Services . . . . . . . . . . . . . . . . . . .
(2,285)
Total Revenue . . . . . . . . . . . . . . $ 274,911 $ 238,642 $ 243,858 $ 36,269 $ (5,216)
89,124
87,134
84,849
4,275
20.8 %
5.0 %
15.2 %
(1.9) %
(2.6) %
(2.1) %
40
Our revenue from product sales increased by $32.0 million, or 20.8%, in fiscal 2021 compared with fiscal 2020.
Product volume increased with customers in North America and Middle East Africa, offset in part by small declines in
the other international markets. Our services revenue increased by $4.3 million, or 5.0%, in fiscal 2021 compared with
fiscal 2020 from increased sales in North America.
Our revenue from product sales decreased $2.9 million, or 1.9%, in fiscal 2020 compared with fiscal 2019.
Product volume decreased with customers in international markets and was offset in part by increased product sales in
North America. Our services revenue decreased by $2.3 million, or 2.6%, in fiscal 2020 compared with fiscal 2019.
Decreased sales in international markets were offset in part by increased sales in North America.
Gross Margin
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
Revenue . . . . . . . . . . . . . . . $ 274,911
$ 238,642
$ 243,858
$ 36,269 $ (5,216)
Cost of revenue . . . . . . . . . .
172,296
153,946
164,588
18,350
(10,642)
Gross margin . . . . . . . . . . . . $ 102,615
$ 84,696
$ 79,270
$ 17,919 $ 5,426
15.2 %
11.9 %
21.2 %
(2.1) %
(6.5) %
6.8 %
% of revenue . . . . . . . . . . . .
Product margin % . . . . . . . .
Service margin % . . . . . . . .
37.3 %
39.1 %
33.5 %
35.5 %
38.0 %
30.9 %
32.5 %
33.9 %
29.9 %
Gross margin for fiscal 2021 increased by $17.9 million, or 21.2%, compared with fiscal 2020. Gross margin as a
percentage of revenue for fiscal 2021 increased to 37.3%, compared with 35.5% in fiscal 2020, primarily due to higher
volume of Private Network business, increased sales through Aviat Store which serves primarily the Rural Broadband,
and wins with our multiband products and software sales.
Gross margin for fiscal 2020 increased $5.4 million, or 6.8%, compared with fiscal 2019. Gross margin as a
percentage of revenue for fiscal 2020 increased to 35.5%, compared with 32.5% in fiscal 2019, primarily due to higher
margin rates for product sales and implementation of cost savings initiatives. The increased volume of product sales in
North America, which generally has a higher gross margin compared to international, contributed most of the overall
gross margin improvement in fiscal 2020.
Research and Development Expenses
(In thousands, except percentages)
Research and development
Fiscal Year
$ Change
% Change
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
expenses . . . . . . . . . . . . . . . . . $ 21,810
$ 19,284
$ 21,111
$ 2,526 $ (1,827)
13.1 %
(8.7) %
% of revenue . . . . . . . . . . . . . . .
7.9 %
8.1 %
8.7 %
Our research and development (“R&D”) expenses increased by $2.5 million, or 13.1%, in fiscal 2021 compared
with fiscal 2020. The increase was due to additional investments to support new product offerings.
Our R&D expenses decreased $1.8 million, or 8.7%, in fiscal 2020 compared with fiscal 2019. The decrease was
primarily due to consolidation of product development, lower variable compensation and costs reduction initiatives
associated with COVID-19, offset in part by expenses associated with one extra week in our fiscal 2020 calendar.
Selling and Administrative Expenses
(In thousands, except percentages)
Selling and administrative
Fiscal Year
$ Change
% Change
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
expenses . . . . . . . . . . . . . . . . . $ 56,324
$ 57,985
$ 56,055
$ (1,661) $ 1,930
(2.9) %
3.4 %
% of revenue . . . . . . . . . . . . . . .
20.5 %
24.3 %
23.0 %
41
Our selling and administrative expenses decreased by $1.7 million, or 2.9%, in fiscal 2021 compared with fiscal
2020. The decrease was primarily due to lower travel expenses and restructuring savings offset in part by higher sales-
related expenses.
Our selling and administrative expenses increased $1.9 million, or 3.4%, in fiscal 2020 compared with fiscal 2019.
The increase was primarily due to higher variable compensation and expenses associated with one extra week in our
fiscal 2020 calendar, partially offset by cost reductions initiatives associated with COVID-19.
Restructuring Charges
During the third and fourth quarters of fiscal 2021, our Board of Directors approved restructuring plans (the
“Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability. We recorded restructuring
charges of $2.4 million related to the Fiscal 2021 Plan in fiscal 2021. Payments related to the accrued restructuring
balances for this plan are expected to be fully paid in fiscal 2022.
During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020
Plan”) in order to continue to reduce our operating costs and improve profitability to optimize our business model and
increase efficiencies. We recorded restructuring charges of $1.9 million related to the Q4 2020 Plan in fiscal 2020.
Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2022.
During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”)
in order to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.
We recorded restructuring charges of $0.6 million related to the Q3 2020 Plan in fiscal 2020. Payments related to the
accrued restructuring liability balance for this plan were fully paid in fiscal 2021.
During the fourth quarter of fiscal 2019, our Board of Directors approved a restructuring plan (the “Fiscal 2020
Plan”) to primarily consolidate product development, right size our resources to support our International business and
other support functions. Payments related to the accrued restructuring liability balance for this plan were fully paid in
fiscal 2021.
During the fourth quarter of fiscal 2018, our Board of Directors approved a restructuring plan (the “Fiscal
2018-2019 Plan”) to consolidate back-office support functions and align resources by geography to lower our expense
structure. We completed the restructuring activities under the Fiscal 2018-2019 Plan at the end of fiscal 2019. Payments
related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.
Our restructuring charges by plan for fiscal 2021, 2020 and 2019 are summarized in the table below:
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
Fiscal 2021 Plan . . . . . . . . . . . . $
2,414 $
— $
— $ 2,414 $
—
N/A
Q4 2020 Plan . . . . . . . . . . . . . . .
92
1,879
—
(1,787)
1,879
(95.1) %
N/A
N/A
Prior Years' Plan . . . . . . . . . . . .
Restructuring charges . . . . . . . $
(235)
2,271 $
2,170
4,049 $
1,434
(2,405)
736
736 $ (1,778) $ 3,313
(110.8) % 194.8 %
(43.9) % 450.1 %
Restructuring charges for fiscal 2021 included employee severance and benefits of $2.4 million the Fiscal 2021
Plan and a reduction in the previously estimated accrual of $0.2 million in Prior Years' Plan. Restructuring charges for
fiscal 2020 included employee severance and benefits costs of $1.9 million for the Q4 2020 Plan, $2.2 million for the
Prior Years' Plan. Restructuring charges for fiscal 2019 included $0.7 million of employee severance and benefits costs
related to the Prior Years' Plan.
Interest Income, Interest Expense and Other Income (Expense), Net
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
2021/2020
2020/2019
Interest income . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . .
Other income, net . . . . . . . . . . .
230 $
—
—
385 $
(54)
—
267 $
(102)
17
(155) $
54
—
118
48
(17)
(40) %
(100) %
N/A
44 %
(47) %
N/A
42
Interest income reflected interest earned on our cash equivalents which were comprised of money market funds
and bank certificates of deposit.
Interest expense was primarily related to interest associated with borrowings under our Silicon Valley Bank
(“SVB”) credit facility and discounts on customer letters of credit.
Income Taxes
(In thousands, except percentages)
2021
2020
2019
2021/2020
2020/2019
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . $ 22,440
$ 3,709
$ 1,550
$ 18,731 $ 2,159
(Benefit from) provision for income taxes . . . . . . . . . . .
(87,699)
3,452
(8,188)
(91,151) 11,640
As % of income before income taxes . . . . . . . . . . . . . . .
(390.8) %
93.1 % (528.3) %
Fiscal Year
$ Change
Our (benefit from) provision for income taxes was $87.7 million of benefit for fiscal 2021, $3.5 million of
expense for fiscal 2020 and $8.2 million of benefit for fiscal 2019. Our tax benefit for fiscal 2021 was primarily due to
the release of $92.2 million in valuation allowance on our U.S. federal and state deferred tax assets, offset by tax
expenses related to profitable foreign subsidiaries and an increase in our reserve for uncertain tax positions.
Our tax expense for fiscal 2020 was primarily due to tax expense related to profitable foreign subsidiaries and an
increase in our reserve for uncertain tax positions.
Liquidity, Capital Resources and Financial Strategies
As of July 2, 2021, our cash and cash equivalents and short-term investments totaled $47.9 million.
Approximately $27.9 million, or 58.2%, was held in the United States. The remaining balance of $20.0 million, or
41.8%, was held by entities outside the United States. Of the amount of cash and cash equivalents held by our foreign
subsidiaries at July 2, 2021, $18.8 million was held in jurisdictions where our undistributed earnings are indefinitely
reinvested, and if repatriated, would be subject to foreign withholding taxes.
Operating Activities
Cash provided by operating activities is presented as net income adjusted for certain non-cash items and changes
in assets and liabilities. Net cash provided by operating activities was $17.3 million for fiscal 2021, $17.5 million for
fiscal 2020 and $2.9 million for fiscal 2019.
For fiscal 2021 compared to fiscal 2020, cash provided by operating activities decreased by $0.2 million. The net
contribution of non-cash items to cash provided by operating activities decreased by $92.3 million and the net
contribution of changes in operating assets and liabilities to cash provided by operating activities decreased by $17.7
million in fiscal 2021 as compared to fiscal 2020.
The $92.3 million decrease in the net contribution of non-cash items to cash provided by operating activities was
primarily attributable to a $90.4 million net change in deferred tax assets.
Net changes in operating assets and liabilities resulted in a decrease of $17.7 million to cash used by operating
activities for fiscal 2021 compared to fiscal 2020. Accounts receivable and unbilled costs fluctuate from period to period,
depending on the amount and timing of sales and billing activities and cash collections. The fluctuations in accounts
payable and accrued expenses during fiscal 2021 were primarily due to the timing of liabilities incurred and vendor
payments. The change in inventories and in customer service inventories during fiscal 2021 were primarily driven by
forecasted demand and to secure component parts in shortage. The increase in customer advance payments and unearned
revenue during fiscal 2021 was due to the timing of payment from customers and revenue recognition. We used $2.3
million in cash during fiscal 2021 on expenses related to restructuring liabilities.
For fiscal 2020 compared to fiscal 2019, cash provided by operating activities increased by $14.5 million. The net
contribution of non-cash items to cash provided by operating activities increased by $9.3 million and the net changes in
operating assets and liabilities to cash provided by operating activities increased by $10.3 million in fiscal 2020 as
compared to fiscal 2019.
43
The $9.3 million increase in the net contribution of non-cash items to cash provided by operating activities was
primarily attributable to a $8.6 million net change in deferred tax assets.
Investing Activities
Net cash used in investing activities was $2.8 million for fiscal year 2021, $4.6 million for fiscal 2020 and $5.2
million for fiscal 2019, which consisted of capital expenditures.
For fiscal 2022, we expect to spend between $5.0 million to $6.0 million for capital expenditures, primarily on
equipment for development and manufacturing of new products and IT infrastructure.
Financing Activities
Financing cash flows consist primarily of proceeds and repayments of short-term debt, repurchase of stock and
proceeds from the sale of shares of common stock through employee equity plans. Net cash used in financing activities
was $8.0 million for fiscal year 2021, which was attributable to $9.0 million for the repayment of borrowings, $0.8
million for repurchase of common stock, $0.2 million payments for taxes related to net settlement of equity awards,
offset by $1.9 million proceeds from the issuance of common stock from employee stock plans. Net cash used by
financing activities was $2.5 million for fiscal 2020 and $3.0 million for fiscal 2019.
As of July 2, 2021, our principal sources of liquidity consisted of the $47.9 million in cash and cash equivalents,
$22.7 million of available credit under our $25.0 million credit facility with Silicon Valley Bank (“SVB Credit Facility”)
which matures on June 28, 2024, and future collections of receivables from customers. We regularly require letters of
credit from certain 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 and credit facilities.
On May 17, 2021 we entered into Amendment No. 4 to Third Amended and Restated Loan and Security
Agreement, which extended the expiration date to June 28, 2024. While we intend to continue to renew the SVB Credit
Facility in the future, there can be no assurance that the SVB Credit Facility will be renewed. In addition, there can be no
assurance that our business will generate cash flow from operations, that we will be in compliance with the quarterly
financial covenants contained in the SVB Credit Facility, or that we will have a sufficient borrowing base under such
facility. If we are not in compliance with the financial covenants or do not have sufficient eligible accounts receivable to
support our borrowing base, the availability of our credit facility is not certain or may be diminished. Over the longer
term, if we are unable to maintain cash balances or generate sufficient cash flow from operations to service our
obligations 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.
On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration
process. If and when we utilize the shelf registration, we will be able to, from time to time, offer and sell, either
individually or in combination, in one or more offerings, up to a total dollar amount of $200 million of any combination
of the securities described in the shelf registration statement. Each time we offer securities under this shelf registration,
we will provide a prospectus supplement that will contain more specific information about the terms of that offering.
We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility
and future cash collections from customers will be sufficient to provide for our anticipated requirements for working
capital and capital expenditures for at least the next 12 months.
Available Credit Facility, Borrowings and Repayment of Debt
On May 17, 2021, we entered into Amendment No. 4 to Third Amended and Restated Loan and Security
Agreement to extend the maturity date to June 28, 2024. The SVB Credit Facility provides for a $25.0 million accounts
receivable formula-based revolving credit facility that can be borrowed by the U.S. company, with a $25.0 million sub-
limit that can be borrowed by our U.S. and Singapore entities. Loans may be advanced under the SVB Credit Facility
based on a borrowing base equal to a specified percentage of the value of eligible accounts of all borrowers under the
SVB Credit Facility. The borrowing base is subject to certain eligibility criteria. Availability under the accounts
44
receivable formula-based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-
limit. We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.
As of July 2, 2021, available credit under the SVB Credit Facility was $22.7 million reflecting the calculated borrowing
base of $25.0 million less outstanding letters of credit of $2.3 million. We did not borrow against the SVB Credit Facility
during fiscal 2021 and there was no borrowing outstanding as of July 2, 2021.
The SVB Credit Facility carries an interest rate, at our option, computed (i) at the prime rate reported in the Wall
Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio; or (ii) if
we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a
spread of 2.75%. Any outstanding Singapore subsidiary-borrowed loans shall bear interest at an additional 2.00% above
the applicable prime or LIBOR rate.
The SVB Credit Facility contains monthly and quarterly financial covenants for minimum adjusted quick ratio and
minimum profitability (EBITDA) requirements, respectively. In the event our adjusted quick ratio falls below a certain
level, cash received in our accounts with SVB may be directly applied to reduce outstanding obligations under the SVB
Credit Facility. The SVB Credit Facility also imposes certain restrictions on our ability to dispose of assets, enter into a
transaction resulting in a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens,
make investments, make certain restricted payments and enter into transactions with affiliates under certain
circumstances. Certain of our assets, including accounts receivable, inventory, and equipment, are pledged as collateral
for the SVB Credit Facility. Upon an event of default, outstanding obligations would be immediately due and payable.
Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of
default at a per annum rate of interest equal to 5.00% above the applicable interest rate.
As of July 2, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the
SVB Credit Facility.
Due to the current economic uncertainty stemming from the impact of the COVID-19 pandemic, on April 21,
2020, we entered into a Paycheck Protection Program Note (the “Note”) with Silicon Valley Bank as the lender
(“Lender”) in an aggregate principal amount of $5.9 million pursuant to the Paycheck Protection Program under the
CARES Act (the “PPP Loan”). On April 22, 2020, we received proceeds of $5.9 million from the PPP Loan. At the time
when we applied for the PPP Loan, we had qualified to receive the funds pursuant to the then-published qualification
requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance
regarding qualification requirements for public companies. Based on our assessment of the new guidance, on May 5,
2020, we repaid the principal and interest on the PPP Loan.
We also obtained an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support
the operations of our subsidiary located there in fiscal 2015. This line of credit provides for $0.3 million in short-term
advances at various interest rates, all of which was available as of July 2, 2021. The line of credit also provides for the
issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of July 2, 2021.
This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a
corporate guarantee.
Restructuring Payments
We had liabilities for restructuring activities totaling $2.7 million as of July 2, 2021, which was classified as
current liability and expected to be paid in cash over the next 12 months. We expect to fund these future payments with
available cash and cash provided by operations.
45
Contractual Obligations
The following table summarizes our contractual obligations and commitments as of July 2, 2021:
(In thousands)
Purchase obligations (1)(4) . . . . . . . . . . .
Other purchase obligations (3)(4)
. . . . . . .
Operating lease commitments (5)
Reserve for uncertain tax positions (2)
. . . . . .
. .
Total
< 1 year
1 - 3 years
3 - 5 years
> 5 years
Other
Obligations Due by Fiscal Year
31,411
2,456
5,172
5,164
17,201
1,529
973
—
13,515
927
1,315
—
695
—
1,174
—
—
—
1,710
—
Total contractual cash obligations . . . $ 44,203 $ 19,703 $ 15,757 $
1,869 $
1,710 $
—
—
—
5,164
5,164
___________________________
(1) 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.
(2) Liabilities for uncertain tax positions of $5.2 million were included in long-term liabilities in the consolidated
balance sheets. 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.
(3) Contractual obligation related to software as a service and software maintenance support.
(4) These items are not recorded on our consolidated balance sheets.
(5) Includes operating leases with terms less than 1 year that are not recorded on our consolidated balance sheets.
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 July 2, 2021,
we had commercial commitments on outstanding surety bonds and standby letters of credit as follows:
(In thousands)
Standby letters of credit used for:
Expiration of Commitments by Fiscal Year
Total
2022
2023
2024
After 2024
Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
787 $
787 $
— $
— $
Payment guarantees . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,238
34,697
38,825
2,190
33,584
36,629
—
1,113
1,113
Surety bonds used for:
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
530,497
524,726
5,771
Payment guarantees . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,642
10,315
3,542
6,771
100
—
544,454
535,039
5,871
—
—
35
—
—
3,544
3,544
—
1,048
—
1,048
—
—
—
—
Total commercial commitments . . . . . . . . . . . . . . $ 583,279 $ 571,668 $
6,984 $
3,579 $
1,048
Historically, we have not paid out any significant amount of our performance guarantees. As such, the outstanding
commercial commitments have not been recorded in our consolidated balance sheets.
46
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, arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages
in leasing, hedging or research and development services with us.
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 July 2, 2021, 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.
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.
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 or issue derivatives for trading purposes or make speculative investments in foreign
currencies.
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 consolidated balance sheets. 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 July 2, 2021, we had no foreign currency forward contracts outstanding.
Net foreign exchange gain (loss) recorded in our consolidated statements of operations during fiscal 2021, 2020
and 2019 was as follows:
(In thousands)
Amount included in costs of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total foreign exchange gain (loss), net . . . . . . . . . . . . . . . . . . . . . . $
2021
Fiscal Year
2020
2019
1,015 $
1,015 $
419 $
419 $
(664)
(664)
A 10% adverse change in currency exchange rates for our foreign currency derivatives held as of July 2, 2021
would have an no impact as we held no foreign currency derivatives as of July 2, 2021.
Certain of our international business are transacted in non-U.S. dollar currency. 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 July 2, 2021 and July 3, 2020, the cumulative translation adjustment decreased our stockholders’ equity by
$14.3 million and $15.0 million, respectively.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our cash equivalents, short-term
investments and borrowings under our credit facility.
47
Exposure on Cash Equivalents and Short-term Investments
We had $47.9 million in total cash and cash equivalents and short-term investments as of July 2, 2021. Cash
equivalents and short-term investments totaled $30.1 million as of July 2, 2021 and were comprised of money market
funds and certificates of deposit. Cash equivalents and short-term investments have been recorded at fair value on our
consolidated balance sheets.
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 and short-term investments 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
investments held as of July 2, 2021, had weighted-average days to maturity of 28 days, and an average yield of
3.39% per annum. A 10% change in interest rates on our cash equivalents and short-term investments is not expected to
have a material impact on our financial position, results of operations or cash flows.
Exposure on Borrowings
During fiscal 2021, we had no demand borrowings outstanding under our credit facility. The interest would have
been at the prime rate plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio.
During fiscal 2021, our weighted average interest rate would have been 3.75%.
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 for estimated costs to complete overtime services;
inventory valuation and provision for excess and obsolete inventory losses; and
income taxes valuation.
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.
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
48
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
Effective June 30, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606, using the modified retrospective method applied to those contracts that were not completed as
of June 29, 2018. Results for the reporting periods after June 29, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605.
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, we
recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer; (2)
identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of
the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy
a performance obligation.
Revenue from services
includes certain network planning and design, engineering,
installation and
commissioning, extended warranty, customer support, consulting, training, and education. Maintenance and support
services are generally offered to our customers and recognized over a specified period of time and from sales and
subsequent renewals of maintenance and support contracts. The network planning and design, engineering and
installation related services noted are recognized based on an over-time recognition model using the cost-input method.
Certain judgment is required when estimating total contract costs and progress to completion on the over-time
arrangements, as well as whether a loss is expected to be incurred on the contract. The cost estimation process for these
contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial
professionals. Changes in job performance and job conditions are factors that influence estimates of the total costs to
complete those contracts and the Company’s revenue recognition. If circumstances arise that change the original
estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made in a timely
manner. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are
reflected in income in the period in which the circumstances that gave rise to the revision become known to us. We
perform ongoing profitability analysis of our service contracts accounted for under this method in order to determine
whether the latest estimates of revenues, costs, and profits require updating. In rare circumstances if these estimates
indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded
immediately.
Inventory Valuation and Provisions for Excess and Obsolete Losses
Our inventories have been valued at the lower of cost and net realizable value. Net realizable value is defined as
the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal
and transportation. 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 customer requirements, and new product
introductions. The manufacturing of our products is 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
49
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 consolidated statements 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 and net realizable value. We carry service parts
because we generally provide product warranty for 12 to 36 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 Valuation
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 sheets, as well as operating loss and tax credit carryforwards. Certain
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 consolidated
balance sheets 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.
Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions. At each
reporting date, management considers new evidence, both positive and negative, that could affect its view of the future
realization of deferred tax assets on a more likely than not basis. During fiscal 2021, we recorded a valuation allowance
release of $92.2 million as a discrete item based on management’s reassessment of the amount of its U.S. federal and
state deferred tax assets that are more likely than not to be realized, primarily as a result of increases in U.S. profitability
in the current period and expectations of continued profitability in future periods. In performing our analysis, we used the
most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization
of our deferred tax assets. We continue to maintain a valuation allowance of $1.4 million on certain U.S. federal and
state deferred tax assets that we believe is not more likely than not to be realized in future periods.
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
50
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. The Company and Summary of Significant Accounting Policies” in the notes to 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.
51
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 1. The Company and Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 2. Net Income per Share of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 3. Revenue Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 4. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 5. Balance Sheet Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 6. Fair Value Measurements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 7. Credit Facility and Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 8. Restructuring Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 9. Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 10. Segment and Geographic Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 11. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 12. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 13 Subsequent Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 14. Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
53
56
57
58
59
61
62
62
69
69
64
74
76
76
77
78
82
83
87
89
90
52
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Aviat Networks, Inc.
Austin, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc. (the “Company”) as of July 2,
2021 and July 3, 2020, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash
flows for each of the three fiscal years in the period ended July 2, 2021, the related notes and the financial statement
schedule - Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at July 2, 2021 and July 3, 2020, and the results of its operations and its cash flows for each of the three fiscal
years in the period ended July 2, 2021, in conformity with accounting principles generally accepted in the United States
of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company's internal control over financial reporting as of July 2, 2021, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) and our report dated August 25, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Estimated Costs to Complete
As described in Note 3 to the consolidated financial statements, revenues from network planning and design, engineering
and installation-related services are recognized based on an overtime recognition model using the cost-input method. The
cost estimation process for these contracts is based on the knowledge and experience of the Company’s project
managers, engineers, and financial professionals. Changes in job performance and job conditions are factors that
influence estimates of the total costs to complete those contracts and the Company’s revenue recognition.
53
We identified estimated costs to complete for open and ongoing over-time revenue contracts at year end as a critical
audit matter. The determination of the total estimated cost and progress toward completion requires management to make
significant estimates and assumptions. Changes in these estimates or timing of when the costs occur can have a
significant impact on the revenue recognized each period. Auditing these elements involved especially challenging and
subjective auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the
duration of these contracts.
The primary procedures we performed to address this critical audit matter included:
a. Testing the design and operating effectiveness of certain controls related to estimated costs to complete,
including controls over management’s review of cost estimates.
b. Evaluating the reasonableness of a sample of project budgets for projects completed during the year through a
retrospective review against actual performance at project completion.
c. Assessing the reasonableness of the estimated costs to complete for a sample of open projects through: (i)
evaluating the reasonableness of project budgets and the nature of costs required to complete open projects, (ii)
assessing the status of completion of respective projects through testing of a sample of project costs incurred to
date, (iii) evaluating the reasonableness of project status by performing inquiries of project managers and
assessing the nature of activities required to complete open projects, and (iv) performing retrospective review
on closed projects and investigating budget to actual variances (if any).
d. Assessing the reasonableness of changes in estimated costs to complete and investigating reasons for changes in
expected costs and project margins.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2015.
San Jose, California
August 25, 2021
54
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Aviat Networks, Inc.
Austin, Texas
Opinion on Internal Control over Financial Reporting
We have audited Aviat Networks, Inc.’s (the “Company’s”) internal control over financial reporting as of July 2, 2021,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of August 25, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated balance sheets of the Company as of July 2, 2021 and July 3, 2020, the related
consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three fiscal
years in the period ended July 2, 2021, the related notes and the financial statement schedule - Valuation and Qualifying
Accounts and our report dated August 25, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible 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 Item 9A,
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit 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 opinion.
Definition and Limitations of Internal Control over Financial Reporting
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.
/s/ BDO USA, LLP
San Jose, California
August 25, 2021
55
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Revenues:
Fiscal Year Ended
July 2,
2021
July 3,
2020
June 28,
2019
Revenue from product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185,787 $ 153,793 $ 156,724
Revenue from services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,124
84,849
87,134
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274,911
238,642
243,858
Cost of revenues:
Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
113,055
95,321
103,517
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,241
58,625
61,071
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
172,296
153,946
164,588
102,615
84,696
79,270
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,810
56,324
2,271
80,405
22,210
230
—
—
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,440
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(87,699)
19,284
57,985
4,049
81,318
3,378
385
(54)
—
3,709
3,452
21,111
56,055
736
77,902
1,368
267
(102)
17
1,550
(8,188)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,139 $
257 $
9,738
Net income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.98 $
9.42 $
0.02 $
0.02 $
0.91
0.87
Weighted average shares outstanding: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,036
11,688
10,782
10,936
10,754
11,236
See accompanying Notes to Consolidated Financial Statements
56
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Fiscal Year Ended
July 2,
2021
July 3,
2020
June 28,
2019
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,139 $
Other comprehensive income (loss):
257 $
9,738
Net change in cumulative translation adjustment, net of tax . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
642
642
(2,233)
(2,233)
(131)
(131)
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,781 $
(1,976) $
9,607
See accompanying Notes to Consolidated Financial Statements
57
AVIAT NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
ASSETS
Current Assets:
July 2, 2021
July 3, 2020
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,942 $ 41,618
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer service inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,135
37,521
23,436
1,431
2,218
9,556
44,661
28,085
13,997
1,234
—
10,355
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,239
139,950
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,701
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103,467
Right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,816
8,430
16,911
12,799
3,474
6,667
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 297,653 $ 179,801
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
9,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments and unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,405
28,154
769
32,304
2,737
96,369
8,592
3,223
356
5,164
614
31,995
26,920
1,445
21,872
2,738
93,970
8,142
2,303
401
5,759
545
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114,318
111,120
Commitments and contingencies (Note 12)
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; 11,153,445 and
10,800,974 shares issued and outstanding as of July 2, 2021 and July 3, 2020, respectively
Treasury stock 19,587 and 0 shares as of July 2, 2021 and July 3, 2020, respectively . . . . .
—
112
(787)
—
108
—
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
818,939
814,283
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(620,602) (730,741)
(14,969)
68,681
TOTAL LIABILITIES AND EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 297,653 $ 179,801
183,335
(14,327)
See accompanying Notes to Consolidated Financial Statements
58
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
July 2,
2021
July 3,
2020
June 28,
2019
(In thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,139 $
257 $
9,738
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property, plant and equipment . . . . . . . . . . .
Provision for (recovery from) uncollectible receivables . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,383
171
2,921
4,387
23
1,686
4,468
(359)
1,723
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(90,599)
(172)
(8,760)
Charges for inventory and customer service inventory write-downs . . . . . . . .
1,452
Loss on disposition of property, plant and equipment, net . . . . . . . . . . . . . . . .
6
945
56
Noncash lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(342)
4,416
553
4
—
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,232)
7,043
(6,395)
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,579)
(304)
(4,976)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,987)
(5,651)
1,228
Customer service inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,104)
(1,023)
(357)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
580
1,767
Advance payments and unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,560
Income taxes payable or receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159
4,285
6,304
1,978
(3,122)
5,074
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(997)
(3,615)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . .
17,298
17,493
Investing Activities
(2,585)
4,170
338
(920)
2,944
Payments for acquisition of property, plant and equipment . . . . . . . . . . . . . . .
(2,847)
(4,608)
(5,246)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,847)
(4,608)
(5,246)
Financing Activities
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
41,911
36,000
Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,000)
(41,911)
(36,000)
Payments for repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(1,772)
(2,316)
Payments for repurchase of common stock - treasury shares . . . . . . . . . . . . . .
Payments for taxes related to net settlement of equity awards . . . . . . . . . . . . .
Proceeds from issuance of common stock under employee stock plans and
exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(787)
(167)
—
(802)
—
(671)
1,906
29
35
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,048)
(2,545)
(2,952)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash . .
(77)
(669)
(309)
Net increase (decrease) in cash, cash equivalents, and restricted cash . . . . . .
Cash, cash equivalents, and restricted cash, beginning of year . . . . . . . . . . . .
6,326
41,872
9,671
32,201
(5,563)
37,764
Cash, cash equivalents, and restricted cash, end of year . . . . . . . . . . . . . . . . . $ 48,198 $ 41,872 $ 32,201
59
(In thousands)
Non-cash investing activities:
Fiscal Year Ended
July 2,
2021
July 3,
2020
June 28,
2019
Unpaid property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
228 $
277 $
578
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4 $
60 $
Cash (received) paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2,119) $
1,057 $
70
687
See accompanying Notes to Consolidated Financial Statements
60
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock
Treasury Stock
Shares
$ Amount
Shares
$ Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
10,702,310 $
108
— $ — $ 816,372 $
(746,359) $
(12,605) $
57,516
(In thousands, except share amounts)
Balance as of June 29, 2018 . . . . . . . . . . . . .
Cumulative-effect adjustment for ASC Topic
606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock under employee
stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares withheld for taxes related to vesting
of equity awards . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . .
Balance as of June 28, 2019 . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock under employee
stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares withheld for taxes related to vesting
of equity awards . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock under employee
stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares withheld for taxes related to vesting
of equity awards . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . .
Balance as of July 2, 2021 . . . . . . . . . . . . . .
—
—
—
345,406
(15,788)
(312,538)
—
10,719,390
—
—
450,112
(112,482)
(256,046)
—
—
—
393,724
(13,366)
(27,887)
—
Balance as of July 3, 2020 . . . . . . . . . . . . . .
10,800,974
5,623
9,738
—
—
5,623
9,738
(131)
(131)
815,142
(730,998)
(12,736)
257
—
(2,233)
(2,233)
—
—
—
—
—
—
—
—
—
—
—
—
—
31
(670)
(2,314)
1,723
—
—
25
(800)
(1,770)
1,686
—
—
—
4
(2)
(2)
—
108
—
—
4
(2)
(2)
—
108
—
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19,587
—
(787)
—
814,283
(730,741)
(14,969)
—
—
1,902
(167)
—
2,921
110,139
—
—
—
—
—
—
642
—
—
—
—
—
—
—
—
—
—
—
—
35
(672)
(2,316)
1,723
71,516
257
29
(802)
(1,772)
1,686
68,681
110,139
642
1,906
(167)
(787)
2,921
11,153,445 $
112
19,587 $
(787) $ 818,939 $
(620,602) $
(14,327) $
183,335
See accompanying Notes to Consolidated Financial Statements
61
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. (“the Company”, “Aviat Networks,” “Aviat”,
“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 July 2, for fiscal 2021, July 3, for fiscal 2020 and
June 28, for fiscal 2019. Fiscal 2021 presented 52 weeks while fiscal 2020 included 53 weeks and fiscal 2019 included
52 weeks. In these notes to consolidated financial statements, we refer to our fiscal years as “fiscal 2021”, “fiscal 2020”
and “fiscal 2019.”
Stock Split
On April 7, 2021 we effected a two-for-one stock split in the form of a stock dividend to shareholders of record as
of April 1, 2021. Common stock, Additional paid-in-capital, per share and equity award amounts for all periods
presented have been retrospectively reclassified to reflect the two-for-one stock split in the form of a stock dividend.
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 uncollectible receivables, inventory valuation, valuation allowances
for deferred tax assets and uncertainties in income taxes.
Cash, Cash Equivalents and Restricted Cash
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 equivalents are carried at amortized cost, which approximates fair value due to the short-
term nature of these investments. Investments with an original maturity of greater than three months are accounted for as
short-term investments and are classified as such at the time of purchase.
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.
62
As of July 2, 2021 and July 3, 2020, all of our high-quality marketable debt securities were invested in prime
money market funds.
Cash and cash equivalents that are restricted as to withdrawal or usage under the terms of contractual agreements
are recorded as restricted cash. Our long-term restricted cash included the cash balance in our disability insurance
voluntary plan account that cannot be used by us for any operating purposes other than to pay benefits to the insured
employees and was recorded in other assets on our consolidated balance sheets and the corresponding liabilities were
included in other long-term liabilities on our consolidated balance sheets.
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 is 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 the economic status of the customers. The fair value of our accounts receivable
approximates their net realizable value.
We regularly require letters of credit from certain customers and, from time to time, we discount these letters of
credit issued by customers through various financial institutions. The discounting of letters of credit depends on many
factors, including the willingness of financial institutions to discount the letters of credit and the cost of such
arrangements. Under these arrangements, collection risk is fully transferred to the financial institutions. We record the
financing charges on discounting these letters of credit as interest expense.
During fiscal 2021 and 2020 there were no customers that accounted for more than 10% of our total revenue.
During fiscal 2019, Mobile Telephone Networks Group (“MTN Group”) in Africa accounted for 11% of our total
revenue. As of July 2, 2021 and July 3, 2020, MTN Group accounted for approximately 14% and 21%, respectively, of
our accounts receivable.
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. Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and
investing in, creditworthy institutions.
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. 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 third parties to manufacture our products and we purchase raw materials from third-party vendors. In
addition, we purchase certain strategic component inventory which is consigned to our third-party manufacturers. Other
components included in our products are sourced from various suppliers and are principally industry standard parts and
components that are available from multiple vendors. The inability of a contract manufacturer or supplier to fulfill our
supply requirements or changes in their financial or business condition could disrupt our ability to supply quality
products to our customers, and thereby may have a material adverse effect on our business and operating results.
We have entered into agreements relating to our foreign currency contracts with Silicon Valley Bank, a
multinational financial institution. 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.
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Inventories
Inventories are valued at the lower of cost and net realizable value. Net realizable value is defined as the estimated
selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and
transportation. Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-
first-out basis. We regularly review inventory quantities on hand and record adjustments to reduce the cost 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 net realizable
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 and net realizable value. We carry service parts
because we generally provide product warranty for 12 to 36 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.
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.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 years
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 10 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 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.
64
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 the 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 three years, depending
on the terms.
Many of our products are manufactured to customer specifications and their acceptance is based on meeting those
specifications. Factors that affect our warranty liabilities include the number of product units subject to warranty
protection, 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 liabilities
as necessary.
Leases
On June 29, 2019, the first day of our fiscal 2020, we adopted ASC 842 using the modified retrospective transition
method, which requires a cumulative-effect adjustment, if any, to the opening balance of accumulated deficit to be
recognized on the date of adoption with prior periods not restated.
We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range
from one to 20 years and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition,
some of these leases have renewal options for up to 3 years.
We determine if an arrangement contains a lease at inception. These operating leases are included in Right of use
assets (ROU assets) on our July 2, 2021 consolidated balance sheets and represent our right to use the underlying asset
for the lease term. Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term
lease liabilities" on our July 2, 2021 consolidated balance sheets. We have not entered into any financing leases during
fiscal 2021.
Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum
lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we used
the incremental borrowing rate based on the remaining lease term at commencement date in determining the present
value of future payments. The operating lease ROU assets also include any lease payments made and exclude lease
incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within
the ROU asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line
basis over the lease term. Certain of our lease arrangements include non-lease components and we account for non-lease
components together with lease components for all such lease arrangements.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets. We recognize
lease expense for these leases on a straight-line basis over the lease term.
Foreign Currency Translation
The functional currency of our subsidiaries located in the United Kingdom, Singapore, Mexico, Algeria and New
Zealand is the United States (“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 revaluation of monetary assets and liabilities in
non-functional currencies are included in cost of product sales and services in the accompanying consolidated statements
65
of operations, based on the nature of the transactions. Net foreign exchange gain (loss) recorded in our consolidated
statements of operations during fiscal 2021, 2020 and 2019 was as follows:
(In thousands)
Amount included in costs of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total foreign exchange gain (loss), net . . . . . . . . . . . . . . . . . . . . . . $
2021
Fiscal Year
2020
2019
1,015 $
1,015 $
419 $
419 $
(664)
(664)
Retirement Benefits
As of July 2, 2021, 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. Contributions to retirement plans
are expensed as incurred. Retirement plan expense amounted to $1.8 million, $1.7 million and $2.0 million in fiscal
2021, 2020 and 2019, respectively.
Revenue Recognition
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, we
recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer;
(2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation
of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we
satisfy a performance obligation. See Note 3 for additional discussion on revenue recognition.
Cost of Product Sales and Services
Cost of sales consists primarily of materials, labor and overhead costs incurred internally and amounts incurred for
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.
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements
of operations because they are also included in revenue that we bill our customers.
Advertising Costs
We expense all advertising costs as incurred. Advertising costs were immaterial during fiscal 2021, 2020 and
2019.
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.
Research and Development Costs
Our research and development costs, which include costs in connection with new product development,
improvement of existing products, process improvement, and product use technologies, are generally charged to
operations in the period in which they are incurred. For certain software projects under development, we capitalize the
development costs during the period between determining technological feasibility of the product and commercial
release and are included in Other assets on the consolidated balance sheet. We amortize the capitalized development cost
upon commercial release, generally over three years. To date, the amount of development costs capitalized and amount
amortized have not been material.
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Share-Based Compensation
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 stock option 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 awards and
units and performance share awards and units, we measure the grant date fair value based upon the market price of our
common stock on the date of the grant. The fair value of each market-based stock unit with market conditions was
estimated using the Monte-Carlo simulation model. We elected to account for forfeitures as they occur.
We generally recognize compensation cost for share-based payment awards on a straight-line basis over the
requisite service period. For an award that has a graded vesting schedule, compensation expense is recognized on a
straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was,
in-substance, multiple awards. The amount of compensation cost recognized at any date must at least equal the portion of
the grant-date value of the award that is vested at that date.
For awards with a performance condition vesting feature, we recognize share-based compensation costs for the
performance awards and units when 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. For awards with a market condition vesting feature, we recognize share-
based compensation costs over the period the requisite service is rendered, regardless of when, if ever, the market
condition is satisfied.
Restructuring Charges
Our restructuring charges represent expenses incurred in connection with certain cost reduction programs that we
have implemented, and consisted of the costs of employee termination costs, lease and other contract termination 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 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
termination of an operating lease or contract are measured and recognized at fair value when the contract does not have
any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the
remaining lease obligations, adjusted for the effects of deferred items recognized under the lease, and reduced by
estimated sublease rentals that could be reasonably obtained for the property. The assumptions in determining such
estimates include anticipated timing of sublease rentals and estimates of sublease rental receipts and related costs based
on market conditions. We expense all other costs related to an exit or disposal activity as incurred.
Income Taxes and Related Uncertainties
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
basis 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 taxes take into
account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits
67
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 for uncertain tax positions. 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.
Accounting Standards Adopted
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a
Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or
obtain internal-use software. ASU 2018-15 will be effective for us in our first quarter of fiscal 2021, with early adoption
permitted. The standard can be adopted either using the prospective or retrospective transition approach. We adopted this
amendment on July 4, 2020. We have assessed the amendments of ASU 2018-15 and determined the amendments to
have an immaterial impact on our consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The update eliminates, adds, and
modifies certain disclosure requirements for fair value measurements. ASU 2018-13 will be effective for us in our first
quarter of fiscal 2021 and early adoption is permitted of the entire standard or only the provisions that eliminate or
modify disclosure requirements. We adopted this amendment on July 4, 2020. We have assessed the amendments of
ASU 2018-13 and determined the amendments to have an immaterial impact on our consolidated financial statements
and related disclosures.
Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). This guidance simplifies the
accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as
franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment
of tax laws and rate changes. ASU 2019-12 will be effective for us in our first quarter of fiscal 2022. We are currently
evaluating the potential impact of ASU 2019-12 will have on our consolidated financial statements..
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides
optional guidance related to reference rate reform, which provides practical expedients for contract modifications and
certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This
guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and will be effective through
December 31, 2022. We are currently evaluating the potential impact of ASU 2020-04 will have on our consolidated
financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance:
ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, Topic 326). Topic 326 requires measurement and
recognition of expected credit losses for financial assets held. Topic 326 will be effective for us in our first quarter of
68
fiscal 2024, and earlier adoption is permitted. We are evaluating the impact adopting Topic 326 will have on our
consolidated financial statements.
Note 2. Net Income per Share of Common Stock
Net income per share is computed using the two-class method, by dividing net income attributable to us by the
weighted average number of shares of our outstanding common stock and participating securities outstanding. Our
restricted shares contain rights to receive non-forfeitable dividends and therefore are considered to be participating
securities and included in the calculations of net income per basic and diluted common share. Undistributed losses are
not allocated to unvested restricted shares because the unvested restricted shares are not contractually obligated to share
our losses. The impact on earnings per share of the participating securities under the two-class method was immaterial.
The following table presents the computation of basic and diluted net income per share attributable to our
common stockholders:
(In thousands, except per share amounts)
Numerator: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021
Fiscal Year
2020
2019
110,139 $
257 $
9,738
Denominator: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding, basic . . . . . . . . . . . . . . . . . .
Effect of potentially dilutive equivalent shares . . . . . . . . . . . . . . . .
Weighted average shares outstanding, diluted . . . . . . . . . . . . . . . . .
11,036
652
11,688
10,782
154
10,936
10,754
482
11,236
Net income per share: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.98 $
9.42 $
0.02 $
0.02 $
0.91
0.87
The following table summarizes the weighted-average equity awards that were excluded from the diluted net
income per share calculations since they were antidilutive:
(In thousands)
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
Restricted stock units and performance stock units . . . . . . . . . . . . . . . .
Total shares of common stock excluded . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year
2020
2019
8
4
12
356
2
358
390
32
422
Note 3. Revenue Recognition
We recognize revenue by applying the following five-step approach: (1) identification of the contract with a
customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4)
allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or
as, we satisfy a performance obligation.
Contracts and customer purchase orders are used to determine the existence of an arrangement.
Many of the Company’s arrangements with customers contain multiple performance obligations and therefore
promises to provide multiple goods and services. The Company evaluates each promised good and service in a contract
to determine whether it represents a distinct performance obligation or should be accounted for as a combined
performance obligation. For goods and services determined to be distinct we have concluded that they provide a benefit
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to the customer either on their own or together with other resources that are readily available to the customer, without
having the need for significant integration or customization.
Revenue from product sales, recognized at a point-in-time, is generated predominately from the sales of products
manufactured by third-party manufacturers to whom we have outsourced our manufacturing processes. 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 network planning and design, engineering, installation and commissioning
(“field services”), extended warranty, customer support, consulting, training, and education. Maintenance and support
services are generally offered to our customers and recognized over a specified period of time and from sales and
subsequent renewals of maintenance and support contracts. The network planning and design, engineering and
installation related services noted are recognized based on an over-time recognition model using the cost-input method.
Certain judgment is required when estimating total contract costs and progress to completion on the over-time
arrangements, as well as whether a loss is expected to be incurred on the contract. The cost estimation process for these
contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial
professionals. Changes in job performance and job conditions are factors that influence estimates of the total costs to
complete those contracts and the Company’s revenue recognition. If circumstances arise that change the original
estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made in a timely
manner. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are
reflected in income in the period in which the circumstances that gave rise to the revision become known to us. We
perform ongoing profitability analysis of our service contracts accounted for under this method in order to determine
whether the latest estimates of revenues, costs, and profits require updating. In rare circumstances if these estimates
indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded
immediately. We establish billing terms at the time project deliverables and milestones are agreed. Revenues recognized
in excess of the amounts invoiced to clients are classified as unbilled receivables and if invoicing is ahead of revenue
recognized it is classified as an unearned liability on the consolidated balance sheets.
In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and
transfer of control. We typically satisfy our performance obligations upon shipment or delivery of product depending on
the contractual terms. Payment terms to customers generally range from net 30 to 120 days from invoice, which are
considered to be standard payment terms. Revenue recognition does not necessarily follow payment terms as there are a
number of scenarios where they would be different. Recognition follows contractual terms and those vary depending on
the nature of the performance obligation being satisfied. These timing differences result in contract assets and liabilities
as discussed below. We assess our ability to collect from our customers based primarily on the creditworthiness and past
payment history of the customer.
While our customers do not have the right of return, we reserve for estimated product returns as an offset to
revenue based primarily on historical trends. Actual product returns may be different than what was estimated. These
factors and unanticipated changes in economic and industry condition could make actual results differ from our return
estimates.
We present transactional taxes such as sales and use tax collected from customers and remitted to government
authorities on a net basis.
Bill-and-Hold Sales
Certain customer arrangements consist of bill-and-hold characteristics under which transfer of control has been
met (including the passing of title and significant risk and reward of ownership to the customers). Therefore, the
customers can direct the use of the bill-and-hold inventory while we retain physical possession of the product until it is
installed at a customer site at a point in time in the future.
Termination Rights
The contract term is determined on the basis of the period over which the parties to the contract have present
enforceable rights and obligations. Certain customer contracts include a termination for convenience clause that allows
the customer to terminate services without penalty, upon advance notification. We concluded that the duration of support
contracts does not extend beyond the non-cancellable portion of the contract.
70
Variable Consideration
The consideration associated with customer contracts is generally fixed. Variable consideration includes
discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration that can
vary is not a substantial portion of total consideration.
Variable consideration estimates are re-assessed at each reporting period until a final outcome is determined. The
changes to the original transaction price due to a change in estimated variable consideration are applied on a
retrospective basis, with the adjustment recorded in the period in which the change occurs. Changes to variable
consideration are tracked and material changes disclosed.
Stand-alone Selling Price
Stand-alone selling price is the price at which an entity would sell a good or service on a stand-alone (or separate)
basis at contract inception. Under the model, the observable price of a good or service sold separately provides the best
evidence of stand-alone selling price. However, in certain situations, stand-alone selling prices will not be readily
observable and the entity must estimate the stand-alone selling price.
When allocating on a relative stand-alone selling price basis, any discount provided in the contract is allocated
proportionately to all of the performance obligations in the contract.
The majority of products and services that we offer have readily observable selling prices. For products and
services that do not, we estimate stand-alone selling price using the market assessment approach based on expected
selling price and adjust those prices as necessary to reflect our costs and margins. As part of our stand-alone selling price
policy, we review product pricing on a periodic basis to identify any significant changes and revise our expected selling
price assumptions as appropriate.
Shipping and Handling
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements
of operations because they are also included in revenue that we bill our customers.
Costs to Obtain a Contract
We have assessed the treatment of costs to obtain or fulfill a contract with a customer. Under ASC 606, we
capitalize sales commissions related to multi-year service contracts, and amortize the asset over the period of benefit,
which is the estimated service period. Sales commissions paid on contract renewals, including service contract renewals,
is commensurate with the sales commissions paid on the initial contracts. The capitalized sales commissions are included
in Other Current Assets and Other Assets on the consolidated balance sheets. We have not identified any impairments
during the periods presented.
We elected the practical expedient to expense sales commissions as incurred when the amortization period of the
related asset is one year or less. These costs are recorded as sales and marketing expense and included in our
consolidated balance sheet as accrued expenses until paid. Our amortization expense was not material for the fiscal years
ended July 2, 2021, July 3, 2020 and June 28, 2019.
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Contract Balances, Performance Obligations, and Backlog
The following table provides information about receivables and liabilities from contracts with customers (in
thousands):
Contract Assets
July 2, 2021
July 3, 2020
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capitalized commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
48,135 $
37,521 $
1,720 $
44,661
28,085
1,157
Contract Liabilities
Advance payments and unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unearned revenue, long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32,304 $
8,592 $
21,872
8,142
Significant changes in contract balances may arise as a result of recognition over time for services, transfer of
control for equipment, and periodic payments (both in arrears and in advance).
From time to time, we may experience unforeseen events that could result in a change to the scope or price
associated with an arrangement. We would update the transaction price and measure of progress for the performance
obligation and recognize the change as a cumulative catch-up to revenue. Because of the nature and type of contracts we
engage in, the timeframe to completion and satisfaction of current and future performance obligations can shift; however,
this will have no impact on our future obligation to bill and collect.
As of July 2, 2021, we had $40.9 million in advance payments and unearned revenue and long-term unearned
revenue, of which approximately 80% is expected to be recognized as revenue in fiscal 2022 and the remainder
thereafter. During fiscal years 2021 and 2020, we recognized approximately $21.9 million and $14.0 million
respectively, that was included in advance payments and unearned revenue at the beginning of each reporting period.
Remaining Performance Obligations
We elect the practical consideration to exclude performance obligations that relate to contracts with original
expected durations of one year or less. As our product purchase orders are generally delivered within one year or less and
our maintenance and support service contracts can be terminated without substantive termination penalties resulting in
contracts with less than one year of duration, these performance obligations have been excluded from the remaining
performance obligation amounts. The aggregate amount of transaction price allocated to the remaining unsatisfied
performance obligations (or partially unsatisfied) was approximately $70.4 million at July 2, 2021 relating to our long-
term field service projects. Of this amount, we expect to recognize approximately 60% as revenue during fiscal 2022,
with the remaining amount to be recognized as revenue beyond 12 months.
Note 4. Leases
We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range
from one to 20 years and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition,
some of these leases have renewal options for up to 3 years. We lease approximately 18,000 square feet of office space in
Austin, Texas as our corporate headquarters with an original term of 36 months.
We determine if an arrangement contains a lease at inception. These operating leases are included in "Right of use
assets" (ROU assets) on our July 2, 2021 consolidated balance sheet and represent our right to use the underlying asset
for the lease term. Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term
lease liabilities" on our July 2, 2021 consolidated balance sheet. We have not entered into any financing leases during
fiscal 2021.
Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum
lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we used
the incremental borrowing rate based on the remaining lease term at commencement date in determining the present
value of future payments. The operating lease ROU assets also include any lease payments made and exclude lease
incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within
72
the ROU asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line
basis over the lease term. Certain of our lease arrangements include non-lease components and we account for non-lease
components together with lease components for all such lease arrangements.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets. We recognize
lease expense for these leases on a straight-line basis over the lease term.
As of July 2, 2021, total ROU assets were approximately $3.8 million, and short-term lease liabilities and long-
term lease liabilities were approximately $0.8 million and $3.2 million, respectively. Cash paid for lease liabilities was
$1.3 million for fiscal 2021.
The following summarizes our lease costs, lease term and discount rate for fiscal 2021 and 2020 (in thousands):
Operating lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,213 $
Short-term lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,639
324
Total lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,176 $
5,241
1,541
351
7,133
Fiscal
2021
2020
Other information related to our operating leases for fiscal 2021 and 2020 (in thousands, except for weighted
average):
Fiscal
2021
2020
Weighted average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.8 years
5.7 %
6.8 years
6.8 %
Operating lease assets obtained in exchange for operating lease
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,772
$
—
Rental expense for operating leases, including rentals on a month-to-month basis was $3.3 million for fiscal 2021
and $3.7 million for each of fiscal 2020 and 2019.
As of July 2, 2021, our future minimum lease payments under all non-cancelable operating leases with an initial
term in excess of one year were as follows (in thousands):
Fiscal years
Amount
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
973
717
598
617
557
1,710
5,172
(1,181)
3,991
73
Note 5. Balance Sheet Components
Cash, Cash Equivalents, and Restricted Cash
The following table provides a summary of cash, cash equivalents, and restricted cash reported within the
Consolidated Balance Sheets that reconciles to the corresponding amount in the Consolidated Statements of Cash Flows:
(In thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash included in Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents, and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
July 2,
2021
July 3,
2020
47,942 $
256
48,198 $
41,618
254
41,872
Accounts Receivable, net
Our net accounts receivable are summarized below:
(In thousands)
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Allowances for collection losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
July 2,
2021
July 3,
2020
50,276 $
46,502
(2,141)
(1,841)
48,135 $
44,661
Inventories
Our inventories are summarized below:
(In thousands)
July 2,
2021
July 3,
2020
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,409 $
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,027
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23,436 $
Consigned inventories included within raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,570 $
9,055
4,942
13,997
1,931
During fiscal 2021, 2020 and 2019, we recorded charges to adjust our inventory and customer service inventory
due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. Such
charges incurred during fiscal 2021, 2020 and 2019 were classified in cost of product sales as follows:
(In thousands)
Excess and obsolete inventory charges (recovery) . . . . . . . . . . . . . . . . . $
Customer service inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . .
2021
544 $
908
Total charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,452 $
Fiscal Year
2020
2019
233 $
712
945 $
(352)
905
553
Assets Held for Sale
We consider properties to be Assets held for sale when management approves and commits to a plan to dispose of
a property or group of properties. The property held for sale prior to the sale date is separately presented on the
consolidated balance sheets as Assets held for sale.
During the second quarter of fiscal 2021 management initiated the sale of our facility located in Lanarkshire,
Scotland. We expect to complete the sale within twelve months. The carrying value of this asset held for sale as of April
2, 2021 of $2.2 million which represents the lower of 1) the carrying value or 2) fair value of the assets, less estimated
74
costs to sell the assets. We performed an analysis and determined the estimated fair value of the assets, less estimated
selling costs, is higher than the carrying value of the assets. As a result, no impairment charge was recorded in our
consolidated statements of operations.
Property, Plant and Equipment, net
Our property, plant and equipment, net is summarized below:
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 2,
2021
July 3,
2020
210 $
6,914
21,370
51,244
79,738
710
11,737
17,887
52,293
82,627
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Property, Plant and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(68,037)
(65,716)
11,701 $
16,911
Included in the total plant, property and equipment above were $0.3 million and $3.5 million of assets in progress
which have not been placed in service as of July 2, 2021 and July 3, 2020, respectively. Depreciation and amortization
expense related to property, plant and equipment, including amortization of internal use software was $5.4 million, $4.4
million and $4.5 million in fiscal 2021, 2020 and 2019, respectively.
Accrued Expenses
Our accrued expenses are summarized below:
(In thousands)
July 2,
2021
July 3,
2020
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
13,455 $
11,814
Accrued agent commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,348
3,228
9,123
2,356
3,196
9,554
$
28,154 $
26,920
We accrue for the estimated cost to repair or replace products under warranty. Changes in our warranty liability,
which is included as a component of accrued expenses in the consolidated balance sheets, were as follows:
(In thousands)
Balance as of the beginning of the fiscal year . . . . . . . . . . . . . . . . . . . . $
Warranty provision recorded during the period . . . . . . . . . . . . . . . . . . .
Consumption during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021
Fiscal Year
2020
3,196 $
3,323 $
1,679
1,564
(1,647)
(1,691)
3,228 $
3,196 $
2019
3,196
1,974
(1,847)
3,323
Advance payments and Unearned Income
Our advance payments and unearned income are summarized below:
(In thousands)
Advance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
July 2,
2021
July 3,
2020
2,445 $
29,859
32,304 $
2,529
19,343
21,872
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Note 6. Fair Value Measurements of Assets and Liabilities
Fair value is defined 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 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 that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
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 July 2, 2021 and July 3, 2020 were as follows:
(In thousands)
Assets:
Cash and cash equivalents:
July 2, 2021
July 3, 2020
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Valuation
Inputs
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . $ 26,847 $ 26,847 $ 18,189 $ 18,189
Bank certificates of deposit . . . . . . . . . . . . . . . . . . . $
3,250
3,250 $
3,288 $
3,288 $
Level 1
Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts . . . . . . . . . . . . $
— $
— $
14 $
14
Level 2
We classify items within Level 1 if quoted prices are available in active markets. Our Level 1 items mainly are
money market funds purchased from major financial institutions. As of July 2, 2021, these money market funds were
valued at $1.00 net asset value per share by these financial institutions.
We classify items in Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades,
broker/dealer quotes or alternative pricing sources are available with reasonable levels of price transparency. Our bank
certificates of deposit and foreign exchange forward contracts are classified within Level 2. Foreign currency forward
contracts are measured at fair value using observable foreign currency exchange rates. The assets and liabilities related to
our foreign currency forward contracts were not material as of July 2, 2021 and July 3, 2020. We did not have any
recurring assets or liabilities that were valued using significant unobservable inputs.
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 2021, 2020 and 2019, we had no transfers
between levels of the fair value hierarchy of our assets or liabilities measured at fair value.
Note 7. Credit Facility and Debt
On May 17, 2020, we entered into Amendment No. 4 to Third Amended and Restated Loan and Security
Agreement with Silicon Valley Bank (the “SVB Credit Facility”) which extended the expiration date to June 28, 2024.
The SVB Credit Facility provides for a $25.0 million accounts receivable formula based revolving credit facility that can
be borrowed by our U.S. company, with a $25.0 million sublimit that can be borrowed by our U.S. and Singapore
entities. Loans may be advanced under the SVB Credit Facility based on a borrowing base equal to a specified
percentage of the value of eligible accounts of the borrowers under the SVB Credit Facility. The borrowing base is
subject to certain eligibility criteria. Availability under the accounts receivable formula based revolving credit facility
can also be utilized to issue letters of credit with a $12.0 million sub limit. We may prepay loans under the SVB Credit
Facility in whole or in part at any time without premium or penalty. As of July 2, 2021, available credit under the SVB
Credit Facility was $22.7 million reflecting the calculated borrowing base of $25.0 million less outstanding letters of
credit of $2.3 million. We did not borrow against the SVB Credit Facility during fiscal 2021 and there was no borrowing
outstanding as of July 2, 2021.
76
The SVB Credit Facility carries an interest rate, at our option, computed (i) at the prime rate reported in the Wall
Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio; or (ii) if
we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a
spread of 2.75%. Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00% above
the applicable prime or LIBOR rate.
The SVB Credit Facility contains monthly and quarterly financial covenants including minimum adjusted quick
ratio and minimum profitability (EBITDA) requirements. In the event our adjusted quick ratio falls below a certain level,
cash received in our accounts with Silicon Valley Bank may be directly applied to reduce outstanding obligations under
the SVB Credit Facility. The SVB Credit Facility also imposes certain restrictions on our ability to dispose of assets,
permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments,
make certain restricted payments and enter into transactions with affiliates under certain circumstances. Certain of our
assets, including accounts receivable, inventory, and equipment, are pledged as collateral for the SVB Credit Facility.
Upon an event of default, outstanding obligations would be immediately due and payable. Under certain circumstances, a
default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest
equal to 5.00% above the applicable interest rate. As of July 2, 2021, we were in compliance with the quarterly financial
covenants, as amended, contained in the SVB Credit Facility.
Due to the current economic uncertainty stemming from the impact of the COVID-19 pandemic, on April 21,
2020, we entered into a Paycheck Protection Program Note (the “Note”) with Silicon Valley Bank as the lender
(“Lender”) in an aggregate principal amount of $5.9 million pursuant to the Paycheck Protection Program under the
CARES Act (the “PPP Loan”). On April 22, 2020, we received proceeds of $5.9 million from the PPP Loan. At the time
when we applied for the PPP Loan, we had qualified to receive the funds pursuant to the then published qualification
requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance
regarding qualification requirements for public companies. Based on our assessment of the new guidance, on May 5,
2020, we repaid the principal and interest on the PPP Loan.
We also obtained an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support
the operations of our subsidiary located there in fiscal 2015. This line of credit provides for $0.3 million in short-term
advances at various interest rates, all of which was available as of July 2, 2021. The line of credit also provides for the
issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of July 2, 2021.
This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a
corporate guarantee.
Note 8. Restructuring Activities
The following table summarizes our restructuring related activities during fiscal year 2021, 2020 and 2019:
Severance and Benefits
Facilities
and Other
(In thousands)
Restructuring liability June 29, 2018 . . . . . . . . . $
Fiscal 2021
Plan
Q4 2020
Plan
Prior Years'
Plan
Prior Years'
Plans
Total
— $
— $
1,646 $
266 $
1,912
Charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation (gain) loss . . . . . .
Balance as of June 28, 2019
Charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation (gain) loss . . . . . .
—
—
—
—
—
—
—
—
—
—
—
1,879
736
(1,293)
—
1,089
2,170
(322)
—
(2,314)
—
Balance as of July 3, 2020 . . . . . . . . . . . . . . . . .
Charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation (gain) loss . . . . . .
Balance as of July 2, 2021 . . . . . . . . . . . . . . . . . $
—
2,414
(205)
—
2,209 $
1,557
92
(1,440)
7
216 $
945
(235)
(646)
—
64 $
—
(23)
(5)
238
—
—
(2)
236
—
—
12
248 $
736
(1,316)
(5)
1,327
4,049
(2,636)
(2)
2,738
2,271
(2,291)
19
2,737
77
As of July 2, 2021, the sum of the accrual balance of $2.7 million was in short-term restructuring liabilities on the
consolidated balance sheets.
Fiscal 2021 Plan
During the third and fourth quarters of fiscal 2021, our Board of Directors approved restructuring plans (the
“Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability. We recorded restructuring
charges of $2.4 million related to the Fiscal 2021 Plan in fiscal 2021. Payments related to the accrued restructuring
balances for this plan are expected to be fully paid in fiscal 2022.
Q4 2020 Plan
During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020
Plan”) in order to continue to reduce our operating costs and improve profitability to optimize our business model and
increase efficiencies. Payments related to the accrued restructuring liability balance for this plan are expected to be fully
paid in fiscal 2022.
Q3 2020 Plan
During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”)
in order to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.
Payments related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.
Fiscal 2020 Plan
During the fourth quarter of fiscal 2019, our Board of Directors approved a restructuring plan (the “Fiscal 2020
Plan”) to primarily consolidate product development, right size our resources to support our international business and
other support functions. Payments related to the accrued restructuring liability balance for this plan were fully paid in
fiscal 2021.
Fiscal 2018-2019 Plan
During the fourth quarter of fiscal 2018, our Board of Directors approved a restructuring plan (the “Fiscal
2018-2019 Plan”) to consolidate back-office support functions and align resources by geography to lower our expense
structure. We completed the restructuring activities under the Fiscal 2018-2019 Plan at the end of fiscal 2019. Payments
related to the accrued restructuring liability balance for this plan were fully paid in fiscal 2021.
Note 9. Stockholders’ Equity
Stock Repurchase Program
In May 2018, our board of directors approved a repurchase program pursuant to which authorized repurchase of
up to $7.5 million of our common stock.
The following table summarizes the repurchase of our common stock:
(In thousands, except share and per-share amounts)
Shares
Weighted-Average
Price Paid per Share
Aggregate
purchase price
Fiscal 2021 Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,587 $
256,046 $
312,538 $
40.16 $
6.91 $
7.39 $
787
1,769
2,309
78
Starting in February 2021 repurchased shares were recorded as treasury stock and we do not anticipate retiring
them. Treasury stock did not participate in the two-for-one stock split in the form of a stock dividend paid on April 7,
2021. All repurchased shares prior to February 2021 were retired and reflected the two-for-one stock split. As of July 2,
2021, $2.6 million remained available for repurchase under our stock repurchase program.
Stock Incentive Programs
Stock Equity Plan
At July 2, 2021, we had one stock incentive plan for our employees and non-employee directors, the 2018
Incentive Plan (the “2018 Plan”). The 2018 Plan was approved by the stockholders at the fiscal year 2017 Annual
Stockholders’ Meeting and it added 500,000 shares to the equity pool of shares available to grant to employees and non-
employee directors. The 2018 Plan replaced the 2007 Plan as our primary long-term incentive program (“LTIP”). The
2007 Plan was discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2007
Plan will continue to remain in effect in accordance with their terms; provided that, as shares are returned under the 2007
Plan upon cancellation, termination or otherwise of awards outstanding under the 2007 Plan, such shares will be
available for grant under the 2018 Plan. The 2018 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.
Under the 2018 Plan, option exercise prices are equal to the fair market value of our common stock on the date the
options are granted using our closing stock price. After vesting, options generally may be exercised within seven years
after the date of grant.
Restricted stock units are not transferable until vested and the restrictions lapse upon the achievement of continued
employment or service over a specified time period. Restricted stock units issued to employees generally vest three years
from the date of grant (three-year cliff or annually over three years). Restricted stock units issued to non-executive board
members annually generally vest on the day before the annual stockholders’ meeting.
Vesting of performance share awards and units is subject to the achievement of predetermined financial
performance criteria and continued employment through the end of the applicable period. Market-based stock units vest
upon meeting certain predetermined share price performance criteria and continued employment through the end of the
applicable period.
We issue new shares of our common stock to our employees upon the exercise of stock options, vesting of
restricted stock awards and units or vesting of performance share awards and units. All awards that are canceled prior to
vesting or expire unexercised are returned to the approved pool of reserved shares and made available for future grants
under the 2018 Plan. Shares of our common stock remaining available for future issuance under the 2018 Plan totaled
784,793 as of July 2, 2021.
On March 3, 2020, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”)
for each outstanding share of our common stock, par value $0.01 per share, to our stockholders of record as of the close
of business on March 3, 2020, (the “Record Date”). Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share (the
“Preferred Shares”), of the Company at an exercise price of $35.00 per one one-thousandth of a Preferred Share, subject
to adjustment. Until the rights become exercisable, they will not be evidenced by separate certificates and will trade
automatically with shares of the Company’s common stock. The Rights have a de minimis fair value. The complete
terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), dated as of March 3, 2020, and amended
as of August 27, 2020, between the Company and Computershare Inc., as rights agent. By adopting the Plan, we are
helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses
(collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section
382 Code. We submitted the Plan to a stockholder vote and our stockholders voted to approve the Plan at the 2020
Annual Meeting of Stockholders.
Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated
Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve
the Tax Benefits by restricting certain transfers of our common stock.
79
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 July 2, 2021,
112,452 shares were reserved for future issuances under the ESPP. We issued 2,744 shares under the ESPP during fiscal
2021.
Share-Based Compensation
Total following table presents the compensation expense for share-based awards included in our consolidated
statements of operations for fiscal 2021, 2020 and 2019:
(In thousands)
By Expense Category:
2021
Fiscal Year
2020
2019
Cost of product sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
372 $
182 $
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
2,299
112
1,392
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . $
2,921 $
1,686 $
By Types of Award:
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
757 $
588 $
Restricted stock awards and units . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance share awards and units and market-based stock units . . . .
857
1,307
743
355
170
150
1,403
1,723
389
879
455
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . $
2,921 $
1,686 $
1,723
The following table summarizes the unamortized compensation expense and the remaining years over which such
expense would be expected to be recognized, on a weighted-average basis, by type of award:
Unamortized
Expense
(In thousands)
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted stock awards and units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance share awards and units . . . . . . . . . . . . . . . . . . . . . . . . . . . $
976
1,138
2,232
Stock Options
July 2, 2021
Weighted-Average Remaining
Recognition Period
(Years)
1.58
1.45
1.50
A summary of the combined stock option activity under our equity plans during fiscal 2021 is as follows:
Shares
Weighted-
Average
Exercise Price-
Options outstanding as of July 3, 2020 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
643,436 $
243,810 $
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(227,422) $
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding as of July 2, 2021 . . . . . . . . . . . . . .
Options vested and expected to vest as of July 2, 2021 . .
Options exercisable as of July 2, 2021 . . . . . . . . . . . . . . .
(37,998) $
(81,036) $
540,790 $
540,790 $
66,592 $
8.65
12.02
8.12
10.05
13.81
9.55
9.55
8.40
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(Years)
(In thousands)
4.20
5.38 $
5.38 $
3.86 $
12,090
12,090
1,564
80
The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the
closing price of our common stock on July 2, 2021 of $31.88, and the exercise price for in-the-money options that would
have been received by the optionees if all options had been exercised on July 2, 2021.
The fair value of each option grant under our 2018 Stock 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 (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
— %
48.5 %
0.2 %
3.0
Fiscal Year
2020
— %
51.7 %
1.7 %
4.6
2019
— %
59.0 %
2.80 %
4.5
The following summarizes all of our stock options outstanding and exercisable as of July 2, 2021:
Options Outstanding
Options Exercisable
Actual Range of Exercise Prices
Number
Outstanding
Weighted-
Average
Remaining
Contractual
Life
(Years)
Weighted-
Average
Exercise Price
Number
Exercisable
Weighted-
Average
Exercise Price
$6.42
$7.23
$7.44
— $6.42
— $7.23
— $27.01
23,942
182,984
333,864
540,790
5.88
5.22
5.43
5.38
$
$
$
$
6.42
7.23
11.00
9.55
7,982
—
58,610
66,592
$
$
$
$
6.42
—
8.66
8.40
Additional information related to our stock options is summarized below:
(In thousands)
2021
Fiscal Year
2020
2019
Intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,208 $
Fair value of options vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
484 $
3 $
499 $
2
23
Restricted Stock Awards and Units
A summary of the status of our restricted stock as of July 2, 2021 and changes during fiscal 2021 is as follows:
Shares
Weighted-Average
Grant Date
Fair Value
Restricted stock outstanding as of July 3, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock outstanding as of July 2, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161,658 $
120,122 $
(64,372) $
(28,164) $
189,244 $
7.14
12.51
7.25
7.48
10.46
The fair value of each restricted stock grant is based on the closing price of our common stock on the date of
grant. The total fair value of restricted stock that vested during fiscal 2021, 2020 and 2019 was $2.1 million, $1.7 million
and $2.2 million, respectively.
Market-Based Stock Units
A summary of the status of our market-based stock units granted during fiscal 2020 as of July 2, 2021 is as
follows:
81
Shares
Weighted-Average
Grant Date
Fair Value
Restricted stock outstanding as of July 3, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock outstanding as of July 2, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,000 $
72,000
165,000 $
9.53
14.07
11.51
The fair value for each market-based stock units with market condition was estimated using the Monte-Carlo
simulation model. A summary of the significant weighted-average assumptions we used in the Monte-Carlo simulation
model is as follows:
Fiscal Year
2021
2020
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53.2% - 48.9% 36.4% - 47.3%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.13% - .19% 1.57% - 1.58%
Weighted-average grant date fair value per share granted . . . . . . . . . . . . . . . . . . . . $
14.07 $
9.53
Performance Share Awards and Units
A summary of the status of our performance shares awards and units as of July 2, 2021 and changes during fiscal
2021 is as follows:
Performance share awards and units outstanding as of July 3, 2020 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance share awards and units outstanding as of July 2, 2021 . . . . . . . . . . . . . .
Shares
Weighted-Average
Grant Date
Fair Value
151,536 $
76,706 $
(99,186) $
(25,728) $
103,328 $
7.95
11.84
3.82
8.84
14.58
Note 10. 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 regions 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 2021, 2020 and 2019 were as follows:
(In thousands)
2021
Fiscal Year
2020
2019
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
183,071 $
151,709 $
132,884
Africa and Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America and Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44,023
8,826
38,991
274,911 $
37,595
11,157
38,181
238,642 $
48,305
16,933
45,736
243,858
82
Revenue by country comprising more than 5% of our total revenue for fiscal 2021, 2020 and 2019 was as
follows:
(In thousands, except percentages)
Fiscal 2021:
Revenue
% of
Total Revenue
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
181,842
66.1 %
Fiscal 2020:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
147,795
12,550
Fiscal 2019:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
129,929
Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
24,368
61.9 %
5.3 %
53.3 %
10.0 %
Our long-lived assets, consisting primarily of net property, plant and equipment, by geographic areas based on the
physical location of the assets as of July 2, 2021 and July 3, 2020 were as follows:
(In thousands)
New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 2,
2021
July 3,
2020
6,840 $
3,434
115
1,312
8,342
4,829
2,420
1,320
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11,701 $
16,911
During fiscal 2021 management initiated the sale of our facility located in Lanarkshire, Scotland. Therefore, the
carrying value of $2.2 million relating to the real property was reclassified to assets held for sale in the consolidated
balance sheet.
Note 11. Income Taxes
Income before provision for income taxes during fiscal year 2021, 2020 and 2019 consisted of the following:
(In thousands)
2021
Fiscal Year
2020
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,325 $
9,497 $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,885)
(5,788)
Total income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
22,440 $
3,709 $
2019
5,827
(4,277)
1,550
(Benefit from) provision for income taxes for fiscal year 2021, 2020 and 2019 were summarized as follows:
83
(In thousands)
Current provision (benefit):
2021
Fiscal Year
2020
2019
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(60) $
(10) $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,128
221
2,289
3,589
45
3,624
Deferred provision (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(75,587)
(744)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
983
State and local
(15,384)
(89,988)
572
—
(172)
Total (benefit from) provision for income taxes . . . . . . . . . . . . . . . . . $
(87,699) $
3,452 $
—
527
45
572
(7,482)
(1,278)
—
(8,760)
(8,188)
The (benefit from) provision for income taxes differed from the amount computed by applying the federal
statutory rate of 21.0%, to our income before (benefit from) provision for income taxes as follows:
(In thousands)
2021
Fiscal Year
2020
2019
Tax provision at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,713 $
779 $
308
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(95,796)
(6,577)
(13,461)
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(346)
(347)
State and local taxes, net of U.S. federal tax benefit . . . . . . . . . . . . . . .
Foreign income taxed at rates different than the U.S. statutory rate . . .
1,436
209
Stock-based compensation excess tax benefits . . . . . . . . . . . . . . . . . . .
(482)
Tax credit/deductions - generated and expired . . . . . . . . . . . . . . . . . . . .
Foreign withholding taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brazil withholding tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return-to-provision/Deferred true-up adjustments . . . . . . . . . . . . . . . .
108
1,184
72
102
—
542
764
—
99
303
—
2,674
5,634
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,101
(419)
664
2,008
1,488
—
2,167
911
(1,877)
859
(1,371)
116
Total provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . $
(87,699) $
3,452 $
(8,188)
Our (benefit from) provision for income taxes was $87.7 million of benefit for fiscal 2021, $3.5 million of
expense for fiscal 2020 and $8.2 million of benefit for fiscal 2019. Our tax benefit for fiscal 2021 was primarily due to
the release of valuation allowance on our U.S. federal and state deferred tax assets.
Our tax expense for fiscal 2020 was primarily due to tax expense related to profitable foreign subsidiaries and
increase in our reserve for uncertain tax positions.
The components of deferred tax assets and liabilities were as follows:
84
(In thousands)
Deferred tax assets:
July 2, 2021
July 3, 2020
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,279 $
Accruals and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized exchange gain/loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets before valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
3,437
392
1,530
552
1,960
197
3,433
5,447
4,849
2,923
201
1,585
465
2,124
129
4,845
5,498
119,287
141,514
126,550
149,169
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(37,447)
(136,097)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,067
13,072
Deferred tax liabilities:
Branch undistributed earnings reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130
450
634
—
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,214
57
142
556
63
818
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
102,853 $
12,254
As Reported on the Consolidated Balance Sheets
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
103,467 $
12,799
Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
614
545
Total net deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
102,853 $
12,254
Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was
$37.4 million as of July 2, 2021 and $136.1 million as of July 3, 2020. The change in valuation allowance for the fiscal
years ended July 2, 2021 and July 3, 2020 was a decrease of $98.7 million and $6.8 million. The decrease in the
valuation allowance in fiscal 2021 was primarily due to the release of certain U.S. federal, state, and foreign valuation
allowances, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits. During the third
quarter of fiscal 2021, we recorded a valuation allowance release of $92.2 million as a discrete item based on
management’s reassessment of the amount of its U.S. federal and state deferred tax assets that are more likely than not to
be realized, primarily as a result of increases in U.S. profitability in the current period and expectations of continued
profitability in future periods. In performing our analysis, we used the most updated plans and estimates that we
currently use to manage the underlying business and calculated the utilization of our deferred tax assets. We continue to
maintain a valuation allowance of $1.4 million on certain U.S. federal and state deferred tax assets that we believe is not
more likely than not to be realized in future periods.
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, including tax loss carryforwards that are attributable to the Microwave Communication
Division when it was a division of Harris. There have been no settlement payments recorded since the acquisition date.
Tax loss and credit carryforwards as of July 2, 2021 have expiration dates ranging between one year and no
expiration in certain instances. The amounts of U.S. federal tax loss carryforwards as of July 2, 2021 and July 3, 2020
were $382.3 million ($303.8 million and $78.5 million to Harris tax attributes) and $404.1 million ($325.6 million and
$78.5 million related to Harris tax attributes), respectively, and begin to expire in fiscal 2023. The amount of U.S. federal
and state tax credit carryforwards as of July 2, 2021 was $6.3 million, and certain credits will begin to expire in fiscal
85
2022. The amount of foreign tax loss carryforwards as of July 2, 2021 was $182.8 million and certain losses begin to
expire in fiscal 2022. The amount of foreign tax credit carryforwards as of July 2, 2021 was $2.9 million, and certain
credits will begin to expire in fiscal 2026.
United States income taxes have not been provided on basis differences in foreign subsidiaries of $2.8 million and
$1.6 million as of July 2, 2021 and July 3, 2020, respectively, because of our intention to reinvest these earnings
indefinitely. Additionally, no foreign withholding taxes, federal or state taxes have been provided if these unremitted
earnings of the Company’s foreign subsidiaries were distributed, as such amounts are considered permanently reinvested.
It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes, that would be
due upon the repatriation of these earnings.
As of July 2, 2021 and July 3, 2020, we had unrecognized tax benefits of $17.3 million and $18.0 million,
respectively, as revised for correction to unrecognized tax benefits in the table below, for various federal, foreign, and
state income tax matters. Unrecognized tax benefits decreased by $0.8 million. Our total unrecognized tax benefits that,
if recognized, would affect our effective tax rate were $5.2 million and $5.8 million, respectively, as of July 2, 2021 and
July 3, 2020. These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the
tax effects of net operating loss carryforwards.
We account for interest and penalties related to unrecognized tax benefits as part of our provision for income
taxes. The interest accrued was $0.6 million as of July 2, 2021 and $0.7 million as of July 3, 2020. An immaterial
amount of penalties have been accrued.
Our unrecognized tax benefit activity for fiscal 2021, 2020 and 2019 was as follows:
(In thousands)
Amount
Unrecognized tax benefit as of June 29, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,840
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to change of foreign exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefit as of June 28, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to change of foreign exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefit as of July 3, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions in prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to change of foreign exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
287
1,501
(1,674)
33
12,987
7,023
3,094
(4,692)
(365)
18,047
184
869
(1,788)
(57)
Unrecognized tax benefit as of July 2, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,255
Our unrecognized tax benefit decreased for tax positions in prior periods by $0.9 million, $3.8 million and
$0.0 million for fiscal year 2021, 2020 and 2019, respectively, related to settlements with tax authorities in the table
above.
Our unrecognized tax benefit decreased for tax positions in prior periods by $0.6 million, $0.9 million and
$0.2 million for fiscal year 2021, 2020 and 2019, respectively, related to lapses of the applicable statute of limitations in
the table above.
We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax
jurisdictions that are open and subject to potential audits include the U.S., Singapore, Nigeria, Saudi Arabia and the Ivory
Coast. The earliest years for these jurisdictions are as follows: U.S. - 2003; Singapore - 2015; Nigeria - 2006: Saudi
Arabia - 2019, and Ivory Coast - 2017.
86
During the first quarter of 2021, we received a tax refund of $1.2 million from the Federal Revenue of Brazil
related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.
During the second quarter of 2021, we effectively settled a tax audit with the Financial Administration of the
Republic of Slovenia for fiscal years 2016 to 2018 and recorded $0.4 million of tax expense related to the denial of
research and development tax relief as a discrete item. During the second quarter of 2021, we effectively settled a tax
audit with the General Authority of Zakat and Tax in Saudi Arabia for fiscal years 2016 to 2018 and recorded minimal
tax benefit related to the release of previously recorded ASC 740-10 reserve as a discrete item.
During the first and third quarter of 2021, we settled tax litigation cases with the Income Tax Department of
Ministry of Finance for fiscal years 2005 to 2011 and recorded minimal tax benefit related to the release of previously
recorded ASC740-10 reserve as a discrete item.
On March 27, 2020, the US enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act which
provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes
in the deduction of interest, (3) acceleration of alternative minimum tax credit (AMT) refunds, and (4) a technical
correction to allow accelerated deductions for qualified improvement property. The Tax Cuts and Jobs Act repealed the
corporate AMT credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year
2018. The CARES Act allows for acceleration of the refundable AMT credit up to 100% of the AMT credit to be
refunded in tax year 2018. During the third quarter of 2021, we received a tax refund of $3.5 million from the U.S.
Internal Revenue Service primarily related to our refundable AMT credit claim under the CARES Act and recorded
minimal tax benefit related to interest as a discrete item.
On December 27, 2020, the US enacted the Consolidated Appropriations Act of 2021 (CAA) which extended and
expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of
Payroll Protection Program loans, and (2) the Employer Retention Credit for 2021.
On March 11, 2021, the US enacted the American Rescue Plan Act of 2021 (ARPA) which expands Section
162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered
employees” effective for taxable years beginning after December 31, 2026. We continue to examine the elements of
CARES Act, CAA, and ARPA and the impact they may have on our future business.
Note 12. Commitments and Contingencies
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 July 2, 2021, we had outstanding purchase obligations with our suppliers or
contract manufacturers of $31.4 million. In addition, we had contractual obligations of approximately $2.5
million associated with software as a service and software maintenance support as of July 2, 2021.
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 July 2, 2021, 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 July 2, 2021, we had commercial
commitments of $583.3 million outstanding that were not recorded on our consolidated balance sheets. During the
second quarter of fiscal 2017, we recorded a payout in cost of revenues of $0.4 million on the performance guarantees to
a contractor in the Middle East region. We believe the customer improperly drew down on the performance bond and
87
intend to pursue all remedies available to recover the payment. We do not believe, based on historical experience and
information currently available, that it is probable that any significant amounts will be required to be paid on the
performance guarantees in the future.
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 products infringe the intellectual
property rights of a third party. As of July 2, 2021, we have not received any notice that any customer is subject to an
infringement claim arising from the use of our products; we have not received any request to defend any customers from
infringement claims arising from the use of our 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 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 July 2, 2021, we had not recorded any liabilities related to these indemnifications.
Legal Proceedings
We are subject from time to time to disputes with customers concerning our products and services. In May 2016,
we received notification of a claim for damages from a customer alleging that certain of our products were defective
which we settled for an immaterial amount during the third quarter of 2021.
From time to time, we may be involved in various other legal claims and litigation that arise in the normal course
of our operations. We are aggressively defending all current litigation matters. Although there can be no assurances and
the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings
are likely to have a material adverse effect on our financial position. We expect to defend each of these disputes
vigorously. There are many uncertainties associated with any litigation and these actions or other third-party claims
against us may cause us to incur costly litigation and/or substantial settlement charges. As a result, our business, financial
condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may
be materially different from our estimates, if any.
We record accruals for our outstanding legal proceedings, investigations or claims when it is probable that a
liability will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least on a quarterly basis,
developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any
developments that would result in a loss contingency to become both probable and reasonably estimable. We have not
recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.
Contingent Liabilities
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.
In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought
against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of
intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the
time frames dictated by the Indian regulations under the Foreign Exchange Management Act. In November 2017, the
Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications
Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany
receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of
Telsima India in February 2009. In September 2019, our directors of Aviat India appeared before the Ministry of
Finance Enforcement Directorate. No settlement offers were discussed at the meeting and the matter is still ongoing with
no subsequent hearing date currently scheduled. We have accrued an immaterial amount representing the estimated
probable loss for which we would settle the matter. We currently cannot form an estimate of the range of loss in excess
of our amounts already accrued. If the outcome of this matter is greater than the current immaterial amount accrued, we
intend to dispute it vigorously.
88
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.
COVID-19
In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by
novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-
place or stay-at-home orders, and business shutdowns. Our global operations expose us to risks associated with public
health crises and epidemics/pandemics, such as the COVID-19 virus. The COVID-19 virus may have an impact on our
operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated
with preventive and precautionary measures that we, other businesses and governments are taking or requiring. The
extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future
developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its
severity, the actions to contain the virus or treat its impact, including ongoing vaccination efforts, any new variant strains
of the underlying virus and how quickly and to what extent normal economic and operating activities can resume.
Management is actively monitoring the impact of COVID-19 on our financial condition, liquidity, operations, suppliers,
industry, and workforce.
Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be
done off-site have been instructed to work from home. Our manufacturing sites support essential businesses and remain
operational. We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage
of personal protective equipment, where appropriate.
The impact to our supply chain lead times and ability to fulfill orders was minimal for fiscal 2021. However,
depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our
ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling
customer orders in future periods. We continue to monitor, assess and adapt to the situation and prepare for implications
to our business, supply chain and customer demand. We expect these challenges to continue until business and economic
activities return to more normal levels. The financial results for fiscal 2021 reflect some of the reduced activity
experienced during the period in various locations around the world and are not necessary indicative of the results for the
next fiscal period or fiscal year.
Note 13. Subsequent Event
On August 25, 2021, our Board of Directors approved a restructuring plan to further reduce operating costs and
improve profitability. We estimate the restructuring charges, consist of one-time severance charges, will be
approximately $0.8 million to be recorded in the first quarter of fiscal 2022. We anticipate it will generate approximately
$0.6 million in annual net savings, the majority of which will be allocated to support growth-related initiatives to be in a
stronger position to drive both top- and bottom- line performance.
89
Note 14. 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 2021 and 2020 were as follows:
(In thousands, except per share amounts)
Fiscal 2021
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per share data: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q1
Ended
9/28/2020
Q2
Ended
1/1/2021
Q3
Ended
3/29/2021
Q4
Ended
7/2/2021
66,290 $
24,249
6,565
5,936
70,531 $
26,909
7,878
6,641
66,404 $
25,578
4,035
94,731
71,686
25,879
3,732
2,831
Basic net income per common share . . . . . . . . . . . . . . . . . $
Diluted net income per common share . . . . . . . . . . . . . . . . $
0.55 $
0.54 $
0.60 $
0.58 $
8.49 $
8.00 $
0.25
0.24
(In thousands, except per share amounts)
Fiscal 2020
Q1
Ended
9/27/2019
Q2
Ended
12/27/2019
Q3
Ended
4/3/2020
Q4
Ended
7/3/2020
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
58,614 $
55,997 $
61,379 $
62,652
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,556
1,519
54
18,319
(1,497)
(1,671)
21,961
1,236
731
21,860
2,120
1,143
Per share data:
Basic net income (loss) per common share . . . . . . . . . . . . $
0.01 $
Diluted net income (loss) per common share . . . . . . . . . . . $
— $
(0.15) $
(0.15) $
0.07 $
0.07 $
0.11
0.10
The following tables summarize charges included in our results of operations for each of the fiscal quarters
presented:
(In thousands)
Fiscal 2021
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Release of valuation allowance
$
Q1
Ended
9/28/2020
Q2
Ended
1/1/2021
Q3
Ended
3/29/2021
Q4
Ended
7/2/2021
— $
— $
— $
1,162 $
1,109
— $
(92,200) $
—
(In thousands)
Fiscal 2020
Q1
Ended
9/27/2019
Q2
Ended
12/27/2019
Q3
Ended
4/3/2020
Q4
Ended
7/3/2020
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,177 $
381 $
617 $
1,874
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
90
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation, with participation of our Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), as of the end of the period covered by this report, our CEO and CFO have concluded that our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are effective to
provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and is accumulated and communicated to management, including our principal
executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Controls Over Financial Reporting
There were no changes to our internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f)
that occurred during the quarter ended July 2, 2021 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Management 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) to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in
accordance with U.S. GAAP.
Management, including our CEO and CFO, assessed our internal control over financial reporting as of July 2,
2021, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Management’s assessment included evaluation of elements such as the design and operating effectiveness of key
financial reporting controls, process documentation, accounting policies, and our overall control environment.
Based on this assessment, management has concluded that our internal control over financial reporting was
effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.
We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
BDO USA LLP, the independent registered public accounting firm that audited the consolidated financial
statements of the Company included in this Annual Report on Form 10-K, has issued an attestation report on the
effectiveness of the Company’s internal control over financial reporting as of July 2, 2021. The report is included in this
Item under the heading “Report of Independent Registered Public Accounting Firm.”
Inherent Limitations on Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how
well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives
will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of
controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information
Subsequent Event
On August 25, 2021, our Board of Directors approved a restructuring plan to further reduce operating costs and
improve profitability. We estimate the restructuring charges, consist of one-time severance charges, will be
91
approximately $0.8 million to be recorded in the first quarter of fiscal 2022. We anticipate it will generate approximately
$0.6 million in annual net savings, the majority of which will be allocated to support growth-related initiatives to be in a
stronger position to drive both top- and bottom- line performance.
92
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 July 2, 2021.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We adopted a Code of Conduct that is available at www.aviatnetworks.com. We most recently amended and
restated our Code of Conduct on February 10, 2021, and posted it on our website. 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,” which is incorporated herein by reference.
All information required to be disclosed in this Item 10 that is not otherwise contained herein 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
Information regarding security ownership of certain beneficial owners and management and related stockholder
matters 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.
93
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as part of this report.
1. Financial Statements
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
Page
Schedule II — Valuation and Qualifying Accounts for the three fiscal years ended July 2, 2021 . . . . . . . . . . . . . .
96
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 information required by this Item is set forth on the Exhibit Index (following the Signatures section of this
report) and is included, or incorporated by reference, in this Form 10-K.
94
Pursuant to the requirements of Section 13 or 15(d) 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
Date: August 25, 2021
By:
/s/ Eric Chang
AVIAT NETWORKS, INC.
(Registrant)
Eric Chang
Senior Vice President, Chief Financial
Officer
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/ Peter A. Smith
Peter A. Smith
/s/ Eric Chang
Eric Chang
/s/ John Mutch
John Mutch
/s/ Michele Klein
Michele Klein
/s/ Kenneth Kong
Kenneth Kong
/s/ Dahlia M. Loeb
Dahlia M. Loeb
/s/ John Quicke
John Quicke
/s/ James C. Stoffel
James C. Stoffel
President and Chief Executive Officer
(Principal Executive Officer)
August 25, 2021
Senior Vice President, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
August 25, 2021
Chairman of the Board
August 25, 2021
Director
August 25, 2021
Director
August 25, 2021
Director
August 25, 2021
Director
August 25, 2021
Director
August 25, 2021
95
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
AVIAT NETWORKS, INC.
Years Ended July 2, 2021, July 3, 2020 and June 28, 2019
(In thousands)
Allowances for collection losses:
Year ended July 2, 2021 . . . . . . . . . . . . . . . . . . . . $
Year ended July 3, 2020 . . . . . . . . . . . . . . . . . . . . $
Year ended June 28, 2019 . . . . . . . . . . . . . . . . . . . $
Balance at
Beginning of
Period
Charged to
(Credit from)
Costs and
Expenses
Deductions
Balance
at End
of Period
1,841
1,602
1,588
$
$
$
300
248
120
$
$
$
—
$
9 (1) $
106 (2) $
2,141
1,841
1,602
____________________________
(1) - Consisted of changes to allowance for collection losses of $0 for foreign currency translation gain and $9 thousand
for uncollectible accounts charged off, net of recoveries on accounts previously charged off.
(2) - Consisted of changes to allowance for collection losses of $0 for foreign currency translation gain and $107
thousand for uncollectible accounts charged off, net of recoveries on accounts previously charged off.
96
The following exhibits are filed or furnished herewith or are incorporated herein by reference to exhibits
previously filed with the SEC:
EXHIBIT INDEX
Ex. #
3.1
3.2
4.1
4.2
4.3
4.4*
10.1
10.2
10.3+
10.4+
10.5
10.5.1
10.5.2
10.5.3
10.5.4
Description
Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporated
by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed with the SEC on February 10,
2017, File No. 001-33278)
Amended and Restated Bylaws of Aviat Networks, Inc. (incorporated by reference to Exhibit 3.1 to
the Current Report on Form 8-K filed with the SEC on September 24, 2020, File No. 001-33278)
Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred
Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC
on September 7, 2016. File No. 001-33278)
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)
Amended and Restated Tax Benefit Preservation Plan, dated as of August 27, 2020, by and between
Aviat Networks, Inc. and Computershare Inc., as Rights Agent (incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K filed with the SEC on August 31, 2020, File No. 011-33278)
Description of Registered Securities
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)
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)
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)
Aviat Networks, Inc. 2007 Stock Equity Plan (as Amended and Restated Effective November 13,
2015) (incorporated by reference to Appendix A to Schedule 14A filed with the SEC on October 1,
2015, File No. 001-33278)
Third Amended and Restated Loan and Security Agreement, dated as of June 29, 2018, by and among
Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon Valley bank
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
June 29, 2018, File No. 001-33278)
Amendment #1 to Third Amended and Restated Loan and Security Agreement, dated as of September
28, 2018, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and
Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed with the SEC on October 4, 2018, File No. 001-33278)
Amendment #2 to Third Amended and Restated Loan and Security Agreement, dated as of June 10,
2019, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on June 12, 2019, File No. 001-33278)
Third Amendment to Third Amended and Restated Loan and Security Agreement, dated as of May 4,
2020, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on May 5, 2020, File No. 001-33278)
Fourth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of May
17, 2021, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and
Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K
filed with the SEC on May 5, 2020, File No. 001-33278)
97
Ex. #
10.6
10.7+
10.7.1+
10.7.2+
10.8
10.9+
10.9.1+
10.9.2+
10.10+
21*
23.1*
31.1*
31.2*
32.1**
32.2**
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Description
Letter Agreement, dated as of January 11, 2015, among Aviat Networks, Inc., Steel Partners Holdings
L.P., Lone Star Value Management, LLC and certain other parties (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 12, 2015, File No.
001-33278)
Employment Agreement, dated January 20, 2016, between Aviat Networks, Inc. and Eric Chang
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 21, 2016, File No. 001-33278)
Amendment to Employment Agreement, dated June 20, 2018, between Aviat Networks, Inc. and Eric
Chang (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the
SEC on June 25, 2018, File No. 001-33278)
Amendment to Employment Agreement, dated April 3, 2020, between Aviat Networks, Inc. and Eric
Chang (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the
SEC on April 3, 2020, File No. 001-33278)
Lease Agreement, dated June 8, 2016, between Aviat Networks, Inc., through its wholly owned
subsidiary Aviat U.S., Inc., and The Irvine Company LLC (incorporated by reference to Exhibit 10.34
to the Annual Report on Form 10-K for fiscal year end July 1, 2016 filed with the SEC on September
9, 2016, File No. 001-33278)
Employment Agreement, dated January 2, 2020, between Aviat Networks, Inc. and Peter Smith
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 2, 2020, File No. 001-33278)
First Amendment to the Employment Agreement between Aviat Networks, Inc. and Peter Smith,
dated May 17, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed with the SEC on May 18, 2021, File No. 001-33278)
Second Amendment to Employment Agreement, dated July 4, 2021, between the Company and Pete
Smith (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the
SEC on July 7, 2021, File No. 001-33278)
Aviat Networks, Inc. 2018 Incentive Plan (incorporated by reference to Appendix A to the
Registrant’s Proxy Statement on schedule 14A filed with the SEC on February 12, 2018, File No.
001-33278)
List of Subsidiaries of Aviat Networks, Inc.
Consent of BDO USA, 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
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
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.
*
Filed herewith.
** Furnished herewith.
98
APPENDIX
A - 1
Independent Public Accountants
BDO USA LLP
Investor Relations Contact
Investor Relations
InvestorInfo@aviatnet.com
Stockholder Information
Executive Offices
Aviat Networks, Inc.
200 Parker Drive, Suite C100A
Austin, TX 78728
(512) 265-3680
Transfer Agent and Registrar
Computershare
PO Box 505000
Louisville, KY 40233-5002
Overnight Correspondence to:
Computershare
462 South 4th Street
Suite 1600
Louisville, KY 40202
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,
Computershare, 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
200 Parker Drive, Suite C100A
Austin, TX 78728
2021 Annual Report
We have published this 2021 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 website 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.
Online Voting at www.Proxyvote.com
If you are a registered stockholder, you may now use the Internet to transmit your voting instructions any time before 11:59
p.m. ET on November 9, 2021. 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
A - 2
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
Directors
John Mutch
Chairman of the Board
Aviat Networks
Michele Klein
Director
Intevac Inc.
Kenneth Kong
Sr. Vice President
Steel Services, Ltd.
Dahlia Loeb
Managing Director
Arcadia Investment Partners
John J. Quicke
Former Chairman
Steel Energy Services, Ltd.
Dr. James C. Stoffel
Lead Independent Director
PAR Technology Corporation
Peter Smith
President & CEO
Aviat Networks
Management
Peter Smith
President and Chief Executive Officer
Eric Chang
Sr. Vice President & Chief Financial
Officer
Erin Boase
Vice President of Legal Affairs
Bryan C. Tucker
Sr. Vice President Americas Sales and
Services
Gary Croke
Vice President of Marketing and
Product Line Management
Outside Legal Counsel
Vinson & Elkins LLP
Austin, TX
A - 4
Headquarters and Operations
Corporate Headquarters
Aviat Networks, Inc.
200 Parker Drive, Suite C100A
Austin, TX 78728
USA
International Headquarters
Aviat Networks (S) Pte. Ltd.
51 Changi Business Park Central 2
#04-10 The Signature
Singapore 486066
Offices
North America
Milpitas, CA
Quebec, Canada
San Antonio, TX
Latin America
Mexico D.F., Mexico
Europe
Munchen, Germany
Meudon La Foret, France
Glasgow, United Kingdom
Ljubljana, Slovenia
Schiphol, The Netherlands
Africa
Abidjan, Cote d’Ivoire
Accra, Ghana
Nairobi, Kenya
Lagos, Nigeria
Centurion, South Africa
Asia & Pacific Rim
Gurgaon Haryana, India
Taguig, Philippines
Lower Hutt, New Zealand
Shenzhen, China
Clark Freeport Zone, Philippines
Bangkok, Thailand
Middle East
Riyadh, Saudi Arabia
Zahle, Lebanon
Dubai, United Arab Emirates
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 2021 Form 10-K.
A - 5
[This page intentionally left blank]
WWW.AVIATNETWORKS.COM
200 Parker Dr., Suite C 100A, Austin, TX 78728
Tel: 408-941-7100
BR05366Y-0921-COMBO