Mercury Computer Systems Reports Fourth Quarter and Fiscal Year 2008 Results

Mercury will host a conference call on Wednesday, July 30, 2008 at 5:00 p.m. EDT to discuss the fourth quarter and fiscal 2008 results, and to review the financial and business outlook going forward.

To listen to the conference call, dial (888) 609-5666 in the USA and Canada, and (913) 312-1240 for all other countries. The conference code number is 7236243. Please call five to ten minutes prior to the scheduled start time. This call will also be broadcast live over the web at www.mc.com/investor under Financial Events.

A replay of the call by telephone will be available from approximately 8:00 p.m. EDT on Wednesday, July 30 through 12:00 a.m. EDT on Friday, August 8. To access the replay, dial (888) 203-1112 in the USA and Canada, and (719) 457-0820 for all other countries. Enter access code 7236243. A replay of the webcast of the call will be available for an extended period of time on the Financial Events page of the Company's website at www.mc.com/investor.

Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides non-GAAP financial measures adjusted to exclude certain non-cash and other specified charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. However, the presentation of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management believes these non-GAAP financial measures assist in providing a more complete understanding of the Company's underlying operational results and trends, and management uses these measures along with their corresponding GAAP financial measures to manage the Company's business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. A reconciliation of GAAP to non-GAAP financial results discussed in this press release is contained in the attached exhibits.

Forward-Looking Safe Harbor Statement

This press release contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company's strategic plans, rationalization of its business portfolio, its business outlook, and its fiscal 2009 business performance and beyond. You can identify these statements by our use of the words "may," "will," "should," "plans," "expects," "anticipates," "continue," "estimate," "project," "intend," and similar expressions. These forward- looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, general economic and business conditions, including unforeseen weakness in the Company's markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, continued funding of defense programs and the timing of such funding, changes in the U.S. Government's interpretation of federal procurement rules and regulations, market acceptance of the Company's products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, inability to identify opportunities to rationalize the Company's business portfolio in a timely manner or at all, and difficulties in retaining key customers. These risks and uncertainties also include such additional risk factors as are discussed in the Company's recent filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended June 30, 2007. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Mercury Computer Systems, Inc. - Where Challenges Drive Innovation

Mercury Computer Systems ( www.mc.com) provides specialized, high- performance computing systems and software designed for complex HPC and embedded applications in a range of industries that include aerospace and defense, telecommunications, medical imaging, semiconductor, EDA, and more.

Our products blend unmatched expertise in algorithm optimization and silicon design with software application knowledge and industry-standard technologies. Mercury's comprehensive, purpose-built solutions capture, process, and present data for the world's largest medical imaging companies, 8 of the 10 top defense prime contractors, and other leading Fortune 500 and mid-market companies in semiconductor, energy, telecommunications, and other industries. Our dedication to performance excellence and collaborative innovation continues a 25-year history in enabling customers to gain the competitive advantage they need to stay at the forefront of the markets they serve.

Mercury is based in Chelmsford, Massachusetts, and serves customers worldwide through a broad network of direct sales offices, subsidiaries, and distributors. We are listed on the Nasdaq Global Select Market (NASDAQ: MRCY).

    Contacts:
    Mark Aslett, President and Chief Executive Officer
    978-967-1776 / maslett@mc.com

    Robert Hult, SVP, Chief Financial Officer
    978-967-1990 / rhult@mc.com

PowerBlock is a trademark, and Visage and Visage Imaging are registered trademarks of Mercury Computer Systems, Inc. Other product and company names mentioned may be trademarks and/or registered trademarks of their respective holders.



    MERCURY COMPUTER SYSTEMS, INC.
    UNAUDITED CONSOLIDATED BALANCE SHEETS
    (in thousands)                                 June 30,          June 30,
                                                     2008              2007

    Assets
    Current assets:
       Cash and cash equivalents                   $59,045           $51,293
       Marketable securities                        60,205            72,482
       Accounts receivable, net                     33,109            35,688
       Inventory                                    24,694            22,151
       Deferred tax assets, net                        -               1,637
       Prepaid expenses and other current assets     8,790             9,714
       Current assets of discontinued operations       -                 786
              Total current assets                 185,843           193,751

    Marketable securities                                          47,231                        33,350
        Property  and  equipment,  net                                          11,183                        14,733
        Goodwill                                                                                80,956                        93,999
        Acquired  intangible  assets,  net                                    7,501                        14,526
        Deferred  tax  assets,  net                                                      -                              2,085
        Other  non-current  assets                                                  5,836                          7,167
        Non-current  assets  of  discontinued  operations            -                                  654
                            Total  assets                                                $338,550                    $360,265

        Liabilities  and  Shareholders'  Equity
        Current  liabilities:
              Accounts  payable                                                        $15,171                      $14,643
              Accrued  expenses                                                            9,829                        14,097
              Accrued  compensation                                                  11,834                          9,221
              Notes  payable  and  current  capital
                lease  obligation                                                      125,301                              140
              Income  taxes  payable                                                    1,383                          1,273
              Deferred  revenues  and  customer  advances            16,240                        13,333
              Current  liabilities  of
                discontinued  operations                                                -                                  364
                            Total  current  liabilities                        179,758                        53,071

        Notes  payable  and  non-current  capital
          lease  obligation                                                                      18                      125,083
        Accrued  compensation                                                          1,709                          1,918
        Deferred  tax  liabilities                                                      285                              392
        Deferred  gain  on  sale-leaseback                                    9,027                        10,184
        Other  long-term  liabilities                                            1,241                              960
                            Total  liabilities                                        192,038                      191,608

        Shareholders'  equity:
              Common  stock                                                                        220                              214
              Additional  paid-in  capital                                    100,268                        89,332
              Retained  earnings                                                        40,575                        75,988
              Accumulated  other  comprehensive
                income                                                                              5,449                          3,123
                            Total  shareholders'  equity                      146,512                      168,657

                            Total  liabilities  and
                              shareholders'  equity                              $338,550                    $360,265



        MERCURY  COMPUTER  SYSTEMS,  INC.
        UNAUDITED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
        (in  thousands,  except  per  share  data)

                                                                              Three  months  ended            Year  ended
                                                                                        June  30,                        June  30,
                                                                                  2008            2007            2008            2007
        Net  revenues                                                $55,190      $57,832    $209,903    $217,218
        Cost  of  revenues  (1)                                  23,759        25,196        83,833        95,056
              Gross  profit                                            31,431        32,636      126,070      122,162

        Operating  expenses:
              Selling,  general  and
                administrative  (1)                              18,994        22,894        81,870        88,708
              Research  and  development  (1)            13,056        12,932        54,794        58,489
              Amortization  of  acquired
                intangible  assets                                  1,816          1,797          7,289          7,223
              In-process  research  and
                development                                                  -                  -                  -              3,060
              Impairment  of  goodwill  and
                long-lived  assets  (2)                        17,983          1,895        17,983          1,974
              Restructuring                                            3,715          4,463          5,194          5,482
              Sale  of  long-lived  assets                  (3,151)            -            (3,151)            -
                    Total  operating  expenses              52,413        43,981      163,979      164,936

        Loss  from  operations                                (20,982)    (11,345)    (37,909)    (42,774)

        Interest  income                                                  740          1,863          6,509          6,804
        Interest  expense                                              (839)          (847)      (3,363)      (4,241)
        Other  income,  net                                                31              266          1,047          2,652

        Loss  from  continuing  operations
          before  income  taxes                                (21,050)    (10,063)    (33,716)    (37,559)

        Income  (benefit)  tax  provision              (1,521)      10,249          1,683          2,561

        Net  loss  from  continuing
          operations                                                $(19,529)  $(20,312)  $(35,399)  $(40,120)
        Income  from  discontinued
          operations                                                          155              594              991          2,300
        Loss  on  sale  of  discontinued
          operations                                                    (1,005)                -        (1,005)                -
        Net  loss                                                      $(20,379)  $(19,718)  $(35,413)  $(37,820)

        Basic  (loss)  income  per  share:
              Net  loss  from  continuing
                operations                                              $(0.90)      $(0.95)      $(1.64)      $(1.89)
              Income  from  discontinued
                operations                                                  0.01            0.03            0.05            0.11
              Loss  on  sale  of  discontinued
                operations                                                (0.05)            -              (0.05)            -
              Net  loss  per  share                                $(0.94)      $(0.92)      $(1.64)      $(1.78)

        Diluted  (loss)  income  per  share:
              Net  loss  from  continuing
                operations                                              $(0.90)      $(0.95)      $(1.64)      $(1.89)
              Income  from  discontinued
                operations                                                  0.01            0.03            0.05            0.11
              Loss  on  sale  of  discontinued
                operations                                                (0.05)            -              (0.05)            -
              Net  loss  per  share                                $(0.94)      $(0.92)      $(1.64)      $(1.78)

        Weighted  average  shares
          outstanding:
              Basic                                                          21,785        21,331        21,639        21,221
              Diluted                                                      21,785        21,331        21,639        21,221

        (1)  Includes  stock-based  compensation  expense,  which  was  allocated  as
                follows:
            Cost  of  revenues                                          $(59)          $168            $470            $383
            Selling,  general  and
              administrative                                            $754        $1,830        $7,520        $7,957
            Research  and  development                          $255            $568        $2,372        $2,246

          (2)  Impairment  of  goodwill  and  long-
                  lived  assets  consists  of:
            Impairment  of  goodwill                        $17,983                $-      $17,983                $-
            Impairment  of  licensed  technology            $-        $1,895                $-        $1,895
            Impairment  of  non-compete
              agreement                                                          $-                $-                $-              $79



        MERCURY  COMPUTER  SYSTEMS,  INC.
        UNAUDITED  CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
        (in  thousands)
                                                                              Three  months  ended            Year  ended
                                                                                        June  30,                        June  30,
                                                                                  2008            2007            2008            2007
        Cash  flows  from  operating
          activities:
              Net  loss                                                $(20,379)  $(19,718)  $(35,413)  $(37,820)
              Depreciation  and  amortization            3,856          4,296        15,988        17,963
              In-process  research  and
                development                                                      -                  -                  -          3,060
              Impairment  of  goodwill  and
                long-lived  assets                                17,983          1,895        17,983          1,974
              Other  and  non-cash  items,  net              (602)        8,610        11,370        12,398
              Changes  in  operating  assets  and
                liabilities                                              1,607        11,962          3,798        (7,888)

                    Net  cash  provided  by  (used
                      in)  operating  activities              2,465          7,045        13,726      (10,313)

        Cash  flows  from  investing
          activities:
              (Purchases)  sales  of  marketable
                securities,  net                                  (60,094)      (5,556)      (4,545)      34,014
              Purchases  of  property  and
                equipment,  net                                      (1,609)      (1,812)      (4,625)      (8,109)
              Sale  of  building,  net                                    -        26,365                  -        26,365
              Proceeds  from  sales  of
                businesses  and  long-lived
                assets                                                        3,998                  -          3,998                  -
              Acquisitions,  net  of  cash
                acquired,  and  acquired
                intangible  assets                                          -                (6)      (2,400)      (1,618)
              Redemption  of  life  insurance
                policies                                                            -                  -              324                  -

                    Net  cash  (used  in)  provided
                      by  investing  activities            (57,705)      18,991        (7,248)      50,652

        Cash  flows  from  financing
          activities:
              Proceeds  from  employee  stock
                option  and  purchase  plans                      444              741          1,590          1,824
              Repurchases  of  common  stock                  (494)          (167)      (1,010)          (507)
              Payments  of  principal  under
                notes  payable  and  capital
                leases                                                            (29)            (39)          (120)    (10,517)
              Gross  tax  windfall  from  stock-
                based  compensation                                      17                  1              243                64
              Increase  in  restricted  cash                        -        (3,000)                -        (3,000)

                    Net  cash  provided  by  (used
                      in)  financing  activities                  (62)      (2,464)            703      (12,136)

        Effect  of  exchange  rate  changes  on
          cash  and  cash  equivalents                            353              (31)            571              107

        Net  (decrease)  increase  in  cash
          and  cash  equivalents                              (54,949)      23,541          7,752        28,310

        Cash  and  cash  equivalents  at
          beginning  of  period                                113,994        27,752        51,293        22,983

        Cash  and  cash  equivalents  at  end
          of  period                                                    $59,045      $51,293      $59,045      $51,293



        UNAUDITED  SUPPLEMENTAL  INFORMATION  -  RECONCILIATION  OF  GAAP  TO  NON-GAAP
        MEASURES
 





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