Mercury Computer Systems (ticker: MRCY, exchange: NASDAQ Global Select Market (.O))
News Release -
14-Oct-2004
Mercury Computer Systems Reports Record First Quarter Revenues of $55 Million
First Quarter Earnings Per Share of $0.23
Cash Flow from Operations of $11.2 Million
CHELMSFORD, Mass., Oct. 14 /PRNewswire-FirstCall/ -- Mercury Computer
Systems, Inc. (NASDAQ: MRCY) today reported results for its first quarter
ended September 30, 2004. The Company posted its 55th consecutive quarter of
profitable performance.
* First quarter revenues were $55.0 million, an increase of 35.7% over the
prior year's first quarter, and a record for first quarter revenues.
* First quarter operating income was $8.0 million, representing 14.5% of
revenues.
* First quarter net income was $5.1 million, or 9.3% of revenues. Diluted
earnings per share (EPS) were $0.23 for the first quarter, exceeding
guidance by $0.01.
* Cash flows from operating activities were $11.2 million in the first
quarter.
"We are proud to announce record first quarter revenues of $55 million,
which is also the second highest revenue quarter in the Company's history,"
said Jay Bertelli, president and chief executive officer of Mercury Computer
Systems. "This quarter marks our 55th consecutive quarter of profitability,
and a strong start to our fiscal year. We are well-positioned to execute on
our growth initiatives for fiscal 2005 and beyond, with the objective to
sustain a 25% or better long-term revenue growth rate."
Backlog
The Company's total backlog at the end of the quarter was $83.0 million, a
$19.6 million increase over the same quarter last year. Of the current total
backlog, $73.3 million represents shipments scheduled over the next 12 months.
Defense Electronics
Defense electronics revenues grew to $31.0 million, representing 56% of
total revenues for the quarter and an increase of 8% over last year. Revenues
were particularly strong in signals intelligence and defense technology
segments.
Imaging and Visualization Solutions
Imaging and visualization solutions revenues grew to $10.5 million,
representing 19% of total revenues for the quarter and an increase of 46% over
last year. Revenues were particularly strong in the area of digital X-ray.
OEM Solutions
OEM solutions revenues grew to $13.5 million, representing 25% of total
revenues for the quarter and an increase of $9.0 million from last year.
Revenues were driven by design wins in semiconductor inspection applications
that moved into production.
Business Outlook
This section presents our current expectations and estimates, given
current visibility, on our business outlook. It is possible that actual
performance will differ materially from the ranges and 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.
On October 11, the Financial Accounting Standards Board (FASB) ratified
the Emerging Issues Task Force (EITF), Item 04-08, "Accounting Issues Related
to Certain Features of Contingently Convertible Debt and the Effect on Diluted
Earnings Per Share."
Our guidance anticipates this FASB-proposed change in accounting treatment
relative to our contingent convertible debt offering completed earlier in the
year. This change in accounting treatment will become effective with the next
quarter reporting cycle, ending December 31, 2004. The impact of this
accounting change is included within the guidance provided below.
The impact of this new accounting treatment for contingent convertibles
would be to first adjust net income by adding back interest expense and
amortization of debt issuance costs, net of tax; and then to increase the
total shares outstanding by converting the debt to equivalent shares at the
conversion price.
The new FASB regulation would impact the Company's second quarter reported
earnings per share in the following manner. Net income would be increased by
approximately $0.6 million, and shares outstanding would be increased by
approximately 4.1 million shares.
In the second quarter of fiscal year 2005, revenues are expected to be in
the range of $56 to $58 million. At these revenue levels, and under this new
FASB accounting, the Company projects a range of $0.25 to $0.28 for earnings
per share for the second quarter ending December 31, 2004.
For the full year, the Company continues to project revenues to be in the
range of $225 to $230 million. At these revenue levels, the Company had
projected a range of $1.20 to $1.25 for full-year earnings per share. Due
entirely to the pending FASB accounting change related to contingent
convertibles, the Company now projects a range of $1.10 to $1.15.
Recent Highlights
* September - Mercury was featured on the cover of the September issue of
Advanced Imaging magazine and in the feature article "High-Performance
Systems for Multi-dimensional Medical Imaging."
* September - Mercury's Ensemble development system was highlighted at
SNDF 2004 Europe, the premier event for developers in the networking
industry. Mercury participated in joint announcements with Xilinx, Inc.
and Enea Embedded Systems on Ensemble's interoperability and technology
and standards support, that includes serial RapidIO(R), the OSE real-
time operating system, and the Advanced Telecom Computing Architecture
(AdvancedTCA).
* September - Mercury introduced the MCP3 FCN, the first of a new family
of rugged, 3U CompactPCI signal processing modules. The MCP3 FCN
integrates a PowerPC 7447 processor, a Virtex-II Pro FPGA, and a PMC
site, and is designed for deployment in harsh environments.
* August - Mercury introduced the first multi-chassis, serial RapidIO
systems. The Mercury ImpactRT(TM) 3200 and PowerStream(R) 7000 systems
provide high-bandwidth serial RapidIO over fiber connections in a
single, cohesive system, and enable twice the system performance to
address the increasingly larger computational challenges in commercial
and defense applications.
* August - Mercury is the technology feature story "New infrastructure for
deployed military environments" in the August issue of VMEbus Systems
magazine.
* July - Mercury announced a follow-on order for RACE++(R) systems for the
development and implementation of the SOSTAR-X (Stand-Off Surveillance
and Target Acquisition Radar) system from the Research Establishment
for Applied Science. SOSTAR-X is a European radar development system
comprising ground surveillance and target identification, synthetic
aperture radar (SAR), classification and data exploitation
technologies.
* July - Mercury shipped RACE++ systems to Telephonics Corporation for the
Canadian Air Force's CP-140 Aurora Incremental Modernization Program.
The Aurora aircraft is used for search and rescue, sovereignty, and
counter-drug patrols. Mercury's multicomputers will be installed in the
advanced APS-143B(V)3-MPA OceanEye Surveillance Radar on the CP-140
Aurora and will enable the Canadian Air Force to detect, classify and
track targets or objects at sea; detect and image land targets; and
provide ground mapping.
Conference Call Information
Management will host a conference call today at 11:00 a.m. ET to review
the first quarter results, and discuss the outlook for fiscal 2005. To listen
to the conference call, dial (800) 289-0494 in the USA and Canada, and for
international, dial (913) 981-5520. The conference code number is 905044.
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 Investor
Events.
A replay of the call by telephone will be available from approximately
2:00 p.m. ET on Thursday, October 14 through midnight ET on Thursday, October
28. To access the replay, dial (888) 203-1112 in the USA and Canada, and for
international, dial (719) 457-0820. Enter access code 905044. A replay of the
webcast of the call will be available for an extended period of time on the
Investor Events page of the Company's website at www.mc.com/investor.
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 anticipated fiscal 2005 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 economic weakness in the Company's markets, effects of
continued geo-political unrest and regional conflicts, competition, changes in
technology and methods of marketing, delays in completing various engineering
and manufacturing programs, changes in customer order patterns, changes in
product mix, continued success in technological advances and delivering
technological innovations, the failure to locate favorable acquisition and
partnership opportunities, continued funding of defense programs, timing of
such fundings, market acceptance of the Company's products, shortages in
components, production delays due to performance quality issues with
outsourced components, and various other factors beyond the Company's control.
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, 2004. 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. The Company may, in its discretion, provide information in
future public announcements regarding its outlook that may be of interest to
the investment community. The format and extent of future outlooks may be
different from the format and extent of the information contained in this
release.
About Mercury Computer Systems, Inc.
Mercury Computer Systems, Inc. (NASDAQ: MRCY) is the leading provider of
commercial off-the-shelf (COTS) embedded digital signal and image processing
computer systems. Mercury's products play a critical role in a wide range of
applications, transforming sensor data to information for analysis and
interpretation. In military reconnaissance and surveillance platforms the
Company's systems process real-time radar, sonar, and signals intelligence
data. Mercury's systems are also used in state-of-the-art medical diagnostic
imaging devices including MRI, CT, PET, and digital X-ray, and in
semiconductor imaging applications including photomask generation and wafer
inspection. Mercury provides advanced 3D image processing and visualization
software and optimized systems to diverse end markets including life sciences,
geosciences, and simulation. The Company also develops radio frequency (RF)
products for enhanced communications capabilities in military and commercial
applications.
Based in Chelmsford, Massachusetts, Mercury serves customers in North
America, Europe and Asia through its direct sales force and a network of
subsidiaries and distributors. Visit Mercury on the web at www.mc.com.
Contact:
Diane Basile
Vice President, Investor Relations & Corporate Communications
978-256-1300
ImpactRT is a trademark, and PowerStream and RACE++ are registered
trademarks of Mercury Computer Systems, Inc. Product and company names
mentioned may be trademarks and/or registered trademarks of their respective
holders.
MERCURY COMPUTER SYSTEMS, INC.
Consolidated Balance Sheet
(in thousands) September 30, June 30,
2004 2004
(unaudited)
Assets
Current assets:
Cash and cash equivalents $125,076 $148,995
Marketable securities 61,201 54,898
Accounts receivable, net 30,759 41,609
Inventory 11,793 10,746
Deferred tax assets, net 3,819 3,819
Prepaid expenses and other current
assets 4,091 5,370
Total current assets 236,739 265,437
Marketable securities 54,218 34,391
Property and equipment, net 25,972 25,866
Goodwill 28,963 29,009
Acquired intangible assets, net 5,113 5,529
Deferred tax assets, net 3,612 3,612
Other assets 8,880 5,894
Total assets $363,497 $369,738
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $9,169 $10,884
Accrued expenses 10,148 5,715
Accrued compensation 9,196 13,147
Amounts payable for acquisition 7,512 7,512
Notes payable 990 948
Income taxes payable 3,564 6,922
Deferred revenues and customer
advances 5,847 5,851
Total current liabilities 46,426 50,979
Notes payable 135,643 135,827
Deferred compensation 1,140 1,122
Other long-term liabilities 870 953
Total liabilities 184,079 188,881
Stockholders' equity:
Common stock 210 223
Additional paid-in capital 15,847 53,882
Treasury stock, at cost - (31,336)
Retained earnings 163,006 157,908
Accumulated other comprehensive
income 355 180
Total stockholders' equity 179,418 180,857
Total liabilities and
stockholders' equity $363,497 $369,738
MERCURY COMPUTER SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three months ended
September 30,
2004 2003
Net revenues $54,982 $40,521
Cost of revenues 19,464 14,539
Gross profit 35,518 25,982
Operating expenses:
Selling, general and
administrative 16,023 12,796
Research and development 11,522 8,734
Total operating expenses 27,545 21,530
Income from operations 7,973 4,452
Interest income 994 429
Interest expense (1,054) (223)
Other income (expense), net (189) 116
Income before income taxes 7,724 4,774
Income tax provision 2,626 1,480
Net income $5,098 $3,294
Net income per share:
Basic $0.24 $0.16
Diluted $0.23 $0.15
Weighted average shares outstanding:
Basic 21,178 21,002
Diluted 21,916 21,580
MERCURY COMPUTER SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended
September 30,
2004 2003
Cash flows from operating activities:
Net income $5,098 $3,294
Depreciation and amortization 2,050 1,916
Other and non-cash items, net 274 425
Changes in operating assets and
liabilities 3,751 3,527
Net cash provided by operating
activities 11,173 9,162
Cash flows from investing activities:
Sales (purchases) of marketable
securities, net (26,192) 2,319
Purchases of property and
equipment (1,707) (1,011)
Net cash used in investing
activities (27,899) 1,308
Cash flows from financing activities:
Proceeds from employee stock plans 867 375
Purchases of common stock (7,844) -
Principal payments under notes
payable (178) (174)
Net cash provided by (used in)
financing activities (7,155) 201
Effect of exchange rate changes on
cash and cash equivalents (38) 21
Net increase (decrease) in cash and
cash equivalents (23,919) 10,692
Cash and cash equivalents at
beginning of period 148,995 27,158
Cash and cash equivalents at end of
period $125,076 $37,850
SOURCE Mercury Computer Systems, Inc.
CONTACT: Diane Basile, Vice President, Investor Relations & Corporate
Communications of Mercury Computer Systems, Inc.,
+1-978-256-1300
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Mercury Computer Systems
