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Aug 4, 2009 at 12:00 AM EDT
Mercury Computer Systems Reports Fourth Quarter and Fiscal Year 2009 Results
Mercury Computer Systems Reports Fourth Quarter and Fiscal Year 2009 Results
Fourth Quarter Fiscal 2009 Results
Fourth quarter revenues were
GAAP net income for the fourth quarter was
Fourth quarter GAAP income from continuing operations was
Fourth quarter GAAP results include approximately
Cash flows from operating activities were a net inflow of
Full Year Fiscal 2009 Results
For fiscal 2009, revenues were
GAAP net income from continuing operations was
"The fourth quarter of fiscal 2009 was a solid conclusion to a successful turnaround year for Mercury," said
"Mercury is off to a strong start as the new fiscal year begins," Aslett said. "We continue to build upon Mercury's strengths in the defense intelligence, surveillance, and reconnaissance (ISR) market. With the turnaround phase largely behind us we are shifting our focus to growth. In fiscal 2009, we substantially increased the probable value of our defense design wins. We delivered strong bookings in our core ACS defense business, in ISR-related services and systems integration within ACS, as well as in our new Mercury Federal Systems business. Although we currently expect that our commercial markets could remain challenged for some time to come, the progress we have made in strengthening and expanding Mercury's defense business positions us well as we return to growth in fiscal 2010 and beyond."
Backlog
The Company's total backlog at the end of the fourth quarter was
Revenues by Operating Unit
Advanced Computing Solutions (ACS) -- Revenues for the fourth quarter from ACS were
Emerging Businesses -- The results for this segment consist of Mercury's wholly-owned subsidiary
The revenues by operating unit do not include adjustments to eliminate any inter-segment revenues.
Business Outlook
This section presents our current expectations and estimates, given current visibility, on our business outlook for the upcoming fiscal quarter. It is possible that actual performance will differ materially from the estimates given -- either on the upside or on the downside. Investors should consider all of the risks, including those listed in the Safe Harbor Statement below, with respect to these estimates, and make themselves aware of the risk factors that may impact the Company's actual performance.
For the first quarter of fiscal 2010, revenues are currently expected to be in the range of approximately
Commencing with the first quarter of fiscal 2010, Mercury will be changing its non-GAAP measure of reporting financial performance by using Adjusted EBITDA (earnings from continuing operations before interest income and expense, income taxes, depreciation, amortization of acquired intangible assets and stock-based compensation costs). Adjusted EBITDA for the first quarter of fiscal 2010 is expected to be in the range of
Recent Highlights
April -- Mercury announced availability of the Ensemble™ 5000 Series VXS HCD5220 Dual 8641D Dual-Core Processing Module. The HCD5220 is the first of several new products from the Ensemble 5000 Series product family designed to extend embedded, high-performance computing to a sensor-networked environment, enabling rapid access to critical information from distributed sensors via the Converged Sensor Network™ (CSN™) Architecture.
May -- Mercury announced availability of two new Echotek Series products, both using three powerful Xilinx Virtex™-5 FPGA (field-programmable gate array) processors, two high-speed fiber transceivers, and two FPGA Mezzanine Card (FMC) sites for high-bandwidth I/O. As integrated components, they extend the functional range of Mercury's VXS and RACE++ Series systems with digitization and FPGA processing of sensor-based data streams.
June -- Mercury announced that it signed a definitive agreement and closed on the sale of its
June -- Mercury announced that it delivered on an initial order and received a follow-on order from
June -- Mercury announced availability of four new modules for the Ensemble 1000 Series family of computing systems at the UAS Payloads East Conference in the
June -- Mercury announced the availability of two new software offerings for multicore application development: the MultiCore Plus (MCP) Pro Edition software environment, and the MultiCore MathPack library bundle. Based on open standards, the MCP Pro Edition features a scalable, modular architecture that supports a broad range of commercial and rugged multicore and multicomputer systems to meet a variety of size, weight, and power (SWaP) requirements. The innovative MultiCore MathPack package includes the MC SAL (
Conference Call Information
Mercury will host a conference call on
To listen to the conference call, dial (888) 228-5287 in the USA and
A replay of the call by telephone will be available from approximately
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.
Mercury is based in
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 fiscal 2009 business performance and beyond and the Company's plans for growth and improvement in profitability and cash flow. You can identify these statements by the 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, 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 and divestitures or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, timing and costs associated with disposing of businesses, and difficulties in retaining key customers. These risks and uncertainties also include such additional risk factors as are discussed in the Company's filings with the
Contact:
Robert Hult , CFO, Mercury Computer Systems, Inc.
978-967-1990
Challenges Drive Innovation, Converged Sensor Network, CSN, and Ensemble are trademarks; and Echotek, MultiCore Plus, PowerBlock, PowerStream, and RACE++ are registered trademarks of
MERCURY COMPUTER SYSTEMS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, June 30,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $46,950 $59,045
Marketable securities 44,977 60,205
Accounts receivable, net 28,595 29,995
Inventory 16,805 24,202
Option to sell auction rate securities at par 5,030 -
Prepaid expenses and other current assets 3,748 7,862
Current assets of discontinued operations - 4,534
--- -----
Total current assets 146,105 185,843
Marketable securities - 47,231
Property and equipment, net 7,960 10,053
Goodwill 57,653 57,653
Acquired intangible assets, net 2,911 4,718
Other non-current assets 4,743 5,520
Non-current assets of discontinued operations - 27,532
--- ------
Total assets $219,372 $338,550
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $3,770 $13,647
Accrued expenses 7,449 8,674
Accrued compensation 9,372 8,249
Notes payable - 125,000
Borrowings under line of credit and current
capital lease obligations 33,408 277
Income taxes payable 2,316 580
Deferred revenues and customer advances 7,840 10,521
Current liabilities of discontinued operations 1,234 12,810
----- ------
Total current liabilities 65,389 179,758
Notes payable and non-current capital lease
obligations 2 18
Accrued compensation - 1,709
Deferred gain on sale-leaseback 7,870 9,027
Other non-current liabilities 1,074 1,204
Non-current liabilities of discontinued operations - 322
--- ---
Total liabilities 74,335 192,038
Shareholders' equity:
Common stock 224 220
Additional paid-in capital 104,843 100,268
Retained earnings 39,313 40,575
Accumulated other comprehensive income 657 5,449
--- -----
Total shareholders' equity 145,037 146,512
------- -------
Total liabilities and shareholders' equity $219,372 $338,550
======== ========
MERCURY COMPUTER SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended Twelve months ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net revenues $48,442 $49,636 $188,939 $190,208
Cost of revenues (1) 22,526 22,660 83,509 80,271
------ ------ ------ ------
Gross profit 25,916 26,976 105,430 109,937
Operating expenses:
Selling, general and
administrative (1) 12,587 13,987 51,185 63,084
Research and development (1) 9,371 10,686 42,372 45,234
Impairment of long-lived
assets - 561 - 561
Gain on sale of long-lived
assets - (3,151) - (3,151)
Amortization of acquired
intangible assets 460 1,275 2,414 5,146
Restructuring 999 3,201 1,712 4,454
--- ----- ----- -----
Total operating expenses 23,417 26,559 97,683 115,328
----- --- ----- ------
Income (loss) from operations 2,499 417 7,747 (5,391)
Interest income 139 736 2,059 6,489
Interest expense (272) (838) (2,551) (3,360)
Other income, net 713 540 763 1,535
--- --- --- -----
Income (loss) from continuing
operations before income taxes 3,079 855 8,018 (727)
Income tax expense 8 1,794 109 3,710
--- ----- --- -----
Income (loss) from continuing
operations 3,071 (939) 7,909 (4,437)
Loss from discontinued
operations, net of tax (632) (18,435) (20,328) (29,971)
Gain (loss) on disposal of
discontinued operations, net
of tax 6,517 (1,005) 11,157 (1,005)
----- ------ ------ ------
Net income (loss) $8,956 $(20,379) $(1,262) $(35,413)
====== ======== ======= ========
Basic earnings (loss) per share:
Income (loss) from continuing
operations $0.14 $(0.04) $0.36 $(0.21)
Loss from discontinued
operations (0.03) (0.85) (0.92) (1.38)
Gain (loss) on disposal of
discontinued operations 0.29 (0.05) 0.50 (0.05)
---- ----- ---- -----
Net income (loss) per share $0.40 $(0.94) $(0.06) $(1.64)
===== ====== ====== ======
Diluted earnings (loss) per share:
Income (loss) from continuing
operations $0.14 $(0.04) $0.35 $(0.21)
Loss from discontinued
operations (0.03) (0.85) (0.91) (1.38)
Gain (loss) on disposal of
discontinued operations 0.29 (0.05) 0.50 (0.05)
---- ----- ---- -----
Net income (loss) per share $0.40 $(0.94) $(0.06) $(1.64)
===== ====== ====== ======
Weighted average shares outstanding:
Basic 22,263 21,785 22,150 21,639
====== ====== ====== ======
Diluted 22,542 21,785 22,416 21,639
====== ====== ====== ======
(1) Includes stock-based
compensation expense,
which was allocated
as follows:
Cost of revenues $(27) $(64) $251 $411
Selling, general and
administrative $(168) $606 $3,223 $6,605
Research and development $107 $175 $1,108 $1,830
MERCURY COMPUTER SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended Twelve months ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from operating
activities:
Net income (loss) $8,956 $(20,379) $(1,262) $(35,413)
Depreciation and amortization 1,871 3,856 9,364 15,988
Impairment of goodwill and
long-lived assets - 17,983 14,555 17,983
Other non-cash items, net (8,470) (602) (9,345) 11,370
Changes in operating assets
and liabilities 986 1,607 (2,113) 3,798
--- ----- ------ -----
Net cash provided by operating
activities 3,343 2,465 11,199 13,726
----- ----- ------ ------
Cash flows from investing activities:
Sales (purchases) of marketable
securities, net 221 (60,094) 60,516 (4,545)
Purchases of property and
equipment, net (938) (1,609) (4,126) (4,625)
Proceeds from liquidation of
insurance policies - - 831 324
Proceeds from sale of AUSG long-
lived and other assets - 3,631 - 3,631
Proceeds from sale of
discontinued operations, net 9,140 367 9,959 367
Acquisition of business, net
of cash acquired, and
acquisition of intangible
assets (234) - (234) (2,400)
---- --- ---- ------
Net cash provided by (used
in) investing activities 8,189 (57,705) 66,946 (7,248)
----- ------- ------ ------
Cash flows from financing activities:
Proceeds from employee stock
option and purchase plans 283 444 696 1,590
Repurchases of common stock (280) (494) (684) (1,010)
Borrowings under line of credit 48 - 33,364 -
Payments of principal under notes
payable (5,312) - (125,000) -
Payments under capital leases (71) (29) (249) (120)
Gross tax windfall from stock-
based compensation 375 17 976 243
--- -- --- ---
Net cash (used in) provided
by financing activities (4,957) (62) (90,897) 703
------ --- ------- ---
Effect of exchange rate changes on
cash and cash equivalents (209) 353 657 571
---- --- --- ---
Net increase (decrease) in cash
and cash equivalents 6,366 (54,949) (12,095) 7,752
Cash and cash equivalents at
beginning of period 40,584 113,994 59,045 51,293
------ ------- ------ ------
Cash and cash equivalents
at end of period $46,950 $59,045 $46,950 $59,045
======= ======= ======= =======
UNAUDITED SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP
MEASURES
The Company provides non-GAAP operating income (losses), non-GAAP income
(losses) from continuing operations, and non-GAAP basic and diluted
earnings (losses) from continuing operations per share as supplemental
measures to GAAP regarding the Company's operational performance. These
financial measures exclude the impact of certain items and, therefore,
have not been calculated in accordance with GAAP. The adjustments to
these non-GAAP financial measures, and the basis for such adjustments,
are outlined below:
Stock-based compensation expense
The Company incurs expense related to stock-based compensation included
in its GAAP presentation of cost of revenues, selling, general and
administrative expense and research and development expense. Although
stock-based compensation is an expense of the Company and viewed as a
form of compensation, these expenses vary in amount from period to period,
and are affected by market forces that are difficult to predict and are
not within the control of management, such as the market price and
volatility of the Company's shares, risk-free interest rates and the
expected term and forfeiture rates of the awards. In accordance with SFAS
No. 123R, stock-based compensation expense is calculated as of the grant
date of each stock-based award, and generally cannot be changed or
influenced by management after the grant date. Management believes that
exclusion of these expenses allows comparisons of operating results that
are consistent with periods prior to the Company's adoption of SFAS No.
123R, and allows comparisons of the Company's operating results to those
of other companies, both public, private or foreign, that either are not
required to adopt SFAS No. 123R, or disclose non-GAAP financial measures
that exclude stock-based compensation.
Amortization of acquired intangible assets
The Company incurs amortization of intangibles related to various
acquisitions it has made in recent years. These intangible assets are
valued at the time of acquisition, are then amortized over a period of
several years after the acquisition and generally cannot be changed or
influenced by management after the acquisition. Management believes that
exclusion of these expenses allows comparisons of operating results that
are consistent over time for both our newly-acquired and long-held
businesses.
Restructuring
The Company incurs restructuring charges in connection with management's
decisions to undertake certain actions to realign operating expenses
through workforce reductions and the closure of certain Company
facilities, businesses and product lines. Management believes this item
is outside the normal operations of the Company's business and is not
indicative of ongoing operating results, and that exclusion of this
expense allows comparisons of operating results that are consistent across
past, present and future periods.
Impairment of long-lived assets
The Company incurs impairment charges of long-lived assets based on events
that may or may not be within the control of management. Management
believes these items are outside the normal operations of the Company's
business and are not indicative of ongoing operating results, and that
exclusion of these expenses allows comparisons of operating results that
are consistent across past, present and future periods.
Sale of long-lived assets
The Company recorded a significant gain in the fourth quarter of fiscal
2008 in connection with management's decisions to sell off selected assets
of the Avionics and Unmanned Systems Group (AUSG) reporting unit.
Management believes this item is outside the normal operations of the
Company's business and is not indicative of ongoing operating results, and
that exclusion of this gain allows comparisons of operating results that
are consistent across past, present and future periods.
Inventory Writedown
The Company incurred a significant inventory writedown in the third
quarter of fiscal 2008, resulting from the closure of one of its
businesses. Management believes this item was outside the normal
operations of the Company's business and is not indicative of ongoing
operating results, and that exclusion of this writedown allows comparisons
of operating results that are consistent across past, present and future
periods.
Tax valuation allowance
The Company records a tax valuation allowance as an expense item when it
is "more likely than not" per FAS 109 criteria that the Company will not
reap the benefits of the deferred tax assets (future deductible amounts
derived from temporary differences between book and taxable income).
Management believes these allowances are not indicative of ongoing
operating results, and that exclusion of this expense item allows
comparisons of operating results that are consistent across past, present
and future periods.
Adjustments for related tax impact
Finally, for purposes of calculating non-GAAP net income (losses) from
continuing operations and non-GAAP basic and diluted earnings (losses)
from continuing operations per share, management adjusts the (benefit)
provision for income taxes to tax effect the non-GAAP adjustments
described above as they have a significant impact on the Company's income
tax (benefit) provision.
Management excludes the above-described items and their related tax
impact from its internal forecasts and models when establishing internal
operating budgets, supplementing the financial results and forecasts
reported to the Company's board of directors, determining the portion of
bonus compensation for executive officers and other key employees based
on operating performance, evaluating short-term and long-term operating
trends in the Company's operations, and allocating resources to various
initiatives and operational requirements. The Company believes that
these non-GAAP financial adjustments are useful to investors because they
allow investors to evaluate the effectiveness of the methodology and
information used by management in its financial and operational decision-
making.
These non-GAAP financial measures have not been prepared in accordance
with GAAP, and should not be considered in isolation or as a substitute
for financial information provided in accordance with GAAP. These non-
GAAP financial measures may not be computed in the same manner as
similarly titled measures used by other companies. The Company expects
to continue to incur expenses similar to the non-GAAP financial
adjustments described above, and investors should not infer from the
Company's presentation of these non-GAAP financial measures that these
costs are unusual, infrequent or non-recurring.
The following tables reconcile the non-GAAP financial measures to their
most directly comparable GAAP financial measures.
(in thousands, except per share data)
Three months ended Twelve months ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Income (loss) from operations $2,499 $417 $7,747 $(5,391)
Stock-based compensation (88) 717 4,582 8,846
Amortization of acquired
intangible assets 460 1,275 2,414 5,146
Restructuring 999 3,201 1,712 4,454
Impairment of long-lived assets - 561 - 561
Gain on sale of long-lived
assets - (3,151) - (3,151)
Inventory writedown - - - 792
--- --- --- ---
Non-GAAP income from operations $3,870 $3,020 $16,455 $11,257
====== ====== ======= =======
Three months ended Twelve months ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Income (loss) from continuing
operations $3,071 $(939) $7,909 $(4,437)
Stock-based compensation (88) 717 4,582 8,846
Amortization of acquired
intangible assets 460 1,275 2,414 5,146
Restructuring 999 3,201 1,712 4,454
Impairment of long-lived assets - 561 - 561
Gain on sale of long-lived
assets - (3,151) - (3,151)
Inventory writedown - - - 792
Tax valuation allowance and tax
impact of excluding the above
items (1,505) 757 (5,578) (1,066)
------- --- ------- -------
Non-GAAP income from continuing
operations $2,937 $2,421 $11,039 $11,145
====== ====== ======= =======
Non-GAAP income from continuing
operations per share:
Basic $0.13 $0.11 $0.50 $0.52
===== ===== ===== =====
Diluted $0.13 $0.11 $0.49 $0.51
===== ===== ===== =====
Non-GAAP weighted average shares
outstanding:
Basic 22,263 21,785 22,150 21,639
====== ====== ====== ======
Diluted 22,542 22,161 22,416 22,002
====== ====== ====== ======
MERCURY COMPUTER SYSTEMS, INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE RANGE
Quarter Ending September 30, 2009
Beginning with the first quarter of fiscal 2010, the Company will be
changing its reported non-GAAP measure of financial performance to
Adjusted EBITDA. The Company defines Adjusted EBITDA as income from
continuing operations before interest, income taxes, depreciation,
amortization of acquired intangible assets and stock-based compensation
costs.
The following table reconciles the non-GAAP financial measure to its most
directly comparable GAAP measure:
(in thousands, except per share data)
RANGE
-----
LOW HIGH
--- ----
GAAP expectation -- Income from continuing operations
per share $0.03 $0.08
===== =====
GAAP expectation -- Income from continuing operations $700 $1,800
Adjust for:
Income tax expense 200 600
Interest (income) expense, net (100) (100)
Depreciation 1,300 1,300
Amortization of acquired intangible assets 400 400
Stock-based compensation expense 1,000 1,000
----- -----
Adjusted EBITDA expectation $3,500 $5,000
====== ======
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