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FORM 8-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): February 8, 2006

 

Mercury Computer Systems, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Massachusetts   000-23599   04-2741391

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

 

199 Riverneck Road, Chelmsford, Massachusetts   01824
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (978) 256-1300

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 7.01. Regulation FD Disclosure.

 

The management of Mercury Computer Systems, Inc. (“Mercury”) will present an overview of Mercury’s business on Wednesday, February 8, 2006 at the SG Cowen & Co. 27th Annual Aerospace/Defense Technology Conference. Attached as Exhibit 99.1 to this Current Report on Form 8-K (the “Report”) is a copy of the slide presentation to be made by Mercury at the conference.

 

This information is being furnished pursuant to Item 7.01 of this Report and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and will not be incorporated by reference into any registration statement filed by Mercury under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein by reference. This Report will not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.

 

Please refer to page 2 of Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto, as well as the use of non-GAAP financial measures included therein.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.    
  

Description    

99.1   Presentation materials dated February 8, 2006.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

MERCURY COMPUTER SYSTEMS, INC.

(Registrant)

Date: February 8, 2006       By:   /s/     ROBERT E. HULT         
                Robert E. Hult
               

Senior Vice President, Operations and

Finance, Chief Financial Officer

EXHIBIT INDEX

 

Exhibit No.
  

Description        

99.1   Presentation materials dated February 8, 2006.
PRESENTATION MATERIALS
©
2005  Mercury Computer Systems, Inc.
SG Cowen & Co. 27
th
Annual
Aerospace/Defense Technology 
Conference
February 8, 2006
Jay
Bertelli,
President,
Chief
Executive
Officer
&
Chairman
Barry
Isenstein,
VP
&
GM,
Defense
Business
Unit

©
2005 Mercury Computer Systems, Inc.
2
Forward-Looking Safe Harbor Statement
This
presentation
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
2006
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,
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,
and
inability
to
fully
realize
the
expected
benefits
from
acquisitions
or
delays
in
realizing
such
benefits,
challenges
in
integrating
acquired
businesses,
and
achieving
anticipated
synergies,
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
Quarterly
Report
on
Form
10-Q
for
the
quarter
ended
September
30,
2005.
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.
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
presentation
is
contained
in
the
company’s
Second
Quarter
Fiscal
2006
earnings
release,
which
can
be
found
on
our
website
at
www.mc.com/mediacenter/pr/.

©
2005 Mercury Computer Systems, Inc.
3
Company Overview
•
Leader in high-performance
computing for defense and
commercial applications
•
FY05 revenues of $250
million
•
891 employees
•
HQ in Chelmsford, MA
•
Specialized technology for:
High-data rate computing and I/O
Signal processing
2D and 3D image processing
•
Four business units:
Defense
Commercial Imaging &
Visualization
Advanced Solutions
Modular Products & Services

©
2005 Mercury Computer Systems, Inc.
4
Mercury Growth Story
•
Strong competitive position in attractive and
growing markets
•
Leverage technology investments across multiple
applications in diverse markets
Defense and Commercial
•
Straightforward operating model and financial
structure
•
Strong balance sheet, operating cash flow with
significant financing flexibility
•
Open innovation strategy through partnerships and
acquisitions enhances capability to deliver solutions
across target markets

©
2005 Mercury Computer Systems, Inc.
5
Deep
Algorithm
Expertise
System
Architecture Expertise
Acceleration
Expertise
GPU
Cell
Broadband
Engine
FPGA
Applications
Expertise
…by
combining
extensive
technical
expertise
with
deep
knowledge
of
the
science
behind
our
customers’
applications…
•
Radar
•
Sonar
•
Signals
intelligence
•
Image & data
exploitation
•
Smart weapons
Life Sciences:
•
Medical imaging
•
Biotechnology
Geosciences:
•
Oil and gas
exploration
•
Engineering and
simulation
Semiconductor
equipment:
•
Mask generation
•
Wafer inspection
High-end baggage
scanning
Telecommunications
Solving Challenging Problems…
…and delivering broad, sustained value
to our customers.
Parallel
Processing
New markets and
opportunities
that can benefit
from Mercury
expertise

©
2005 Mercury Computer Systems, Inc.
6
Investment Thesis: Emerging Growth Story
Revenue ($M)
$150
$180
$186
$250
$250-260*
2002A
2003A
2004A
2005A
2006E
*Per Company guidance, January 26, 2006 earnings conference call
**Growth rates calculated at midpoint of FY2006 revenue guidance
June Fiscal Year End
DBU
~(5)%
CIV
~20%
ASB
~(10)%
MPS
~45%
FY2005: Record revenues
FY2006 Projected Growth Rates**
by Business Unit*

©
2005 Mercury Computer Systems, Inc.
7
Commercial Imaging & Visualization
•
20% of FY05 revenues
50% growth over FY04
•
Delivering Imaging &
Computing Solutions to:
Life Sciences (Medical Imaging &
Biotech)
Geosciences  (Oil and gas
exploration)
Navigation
•
Strong economic trends
•
Growing, $1 billion+ market
•
Increased 3D demand
•
2D + 3D + systems =
competitive advantage
0
500
1000
1500
2000
2500
2006
2008
2010
Navigation & CAD
Geoscience
Biotech (Microscopy
& Drug Disc.)
Medical Imaging and
PACS
OEM Available Markets US$M
Source: IDC , Frost & Sullivan, MCS data

©
2005 Mercury Computer Systems, Inc.
8
Advanced Solutions Business Unit
•
20% of FY05 revenues
81% growth over FY04
•
Market Focus
Semiconductor Capital
Equipment
Wireless Communications
Infrastructure
•
New applications in
semiconductor equipment
•
Expanding business in
communication segments
New business emerging in
Silicon Solutions and Data Links
Available Market
$1.5 B
Served
Market
$170 M
*Fiscal 2005 revenues were $48 M
*
Today
5 years
Telecommunications
Semiconductor

©
2005 Mercury Computer Systems, Inc.
9
FY04
FY05
Guidance
FY06
Timeless
Business Model
Revenue
100%
100%
100%
100%
Gross Margin
67%
66%
61-63%
66-67%
SG&A
29%
29%
29-30%
R&D
21%
20%
20-21%
Income from Operations
17%
17%
6-8%
16-18%
Timeless Business Model
Notes:
FY06 non-GAAP guidance per January 26, 2006 Q2 earnings conference call

©
2005 Mercury Computer Systems, Inc.
10
Fiscal Year 2006 Guidance
Fiscal Year Ending June 30, 2006
Revenues ($M)
$250-260
Gross Margin
61-63%
      GAAP 
Non-GAAP
Operating Income
6-8%
EPS
$(0.16)-0.09
$0.50-0.70
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, January 26, 2006 Q2 earnings press release
•
Impact of equity-based compensation costs related to
FAS 123(R), amortization of purchased intangibles, and
in-process R&D charges excluded from Non-GAAP

©
2005 Mercury Computer Systems, Inc.
11
Q3 Fiscal 2006 Guidance
Quarter Ending March 31, 2006
Revenues ($M)
$55-58
      GAAP 
Non-GAAP
Operating Income
    
   (6)%-(3)%
EPS
$(0.32)-$(0.26)
$(0.10)-$(0.04)
•
Impact of equity-based compensation costs related to FAS
123(R), amortization of purchased intangibles, and in-
process R&D charges excluded from Non-GAAP
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, January 26, 2006 Q2 earnings press release

©
2005 Mercury Computer Systems, Inc.
12
Mercury, IBM & Cell: A Landmark Agreement
•
The Cell Broadband Engine processor is
5-100x faster than conventional
microprocessors
•
Mercury is the 1
st
non-gaming company
to integrate the Cell Broadband Engine
into its products
High-volume gaming market is transforming the
technology industry
•
Targeting applications in existing and
new markets with optimized Cell
Broadband Engine-based products
Medical imaging, inspection, defense,
geosciences, telecommunications, etc.
•
Mercury is uniquely capable
The Cell Broadband Engine is designed to solve
the same types of problems Mercury has been
solving for many years
Cell Broadband Engine is
a trademark of Sony
Computer Entertainment
Inc.

©
2005  Mercury Computer Systems, Inc.
Barry Isenstein, SVP, GM
Defense Business Unit (DBU)

©
2005 Mercury Computer Systems, Inc.
14
Which Markets Drive Technology?
Telecom/
Networking
Desktop/
Server
Graphics/
Gaming
PMC
Linux

©
2005 Mercury Computer Systems, Inc.
15
$ Millions
Mercury R&D Investment
Historically 18-21% of Revenues
Enabled by Solid Financial Performance
$250.2  Rev.
Revenues for Fiscal years ended June 30
Research and Development
$161.5M over 4 years
0
50
100
150
200
250
300
FY2002
FY2003
FY2004
FY2005
Defense
Imaging & Visualization Solutions
OEM Solutions
R&D

©
2005 Mercury Computer Systems, Inc.
16
Mercury Broadly Leverages Embedded Markets
Telecom
Life Sciences
Defense
3-D
Visualization
Image
Processing
Shared Benefit

©
2005 Mercury Computer Systems, Inc.
17
Defense
•
60% of FY05 revenues
18% growth over FY04
•
Market focus
Radar
Signals Intelligence (SIGINT)
Other defense technologies
•
Technology leadership
Strong COTS model
Aboard demanding platforms
in air, on land, under sea
Full life-cycle support
•
Military transformation
•
CISR
Smart weapons
Cell Broadband Engine-based
technology
Representative

©
2005 Mercury Computer Systems, Inc.
18
Customer Success
Enabling our customers to win by providing
commercial off-the-shelf technology for new
applications

©
2005 Mercury Computer Systems, Inc.
19
DBU Strategy
•
Target
High-growth CISR applications
Offer COTS “more of the sensor-based computing
system”
Solutions: HW, SW and services
Leadership in performance and functionality per volume
•
Leverage
Leadership in existing radar and SIGINT platforms
Strong customer relationships
Technological expertise

©
2005 Mercury Computer Systems, Inc.
20
Sensor
Defense Value Proposition
•
Sensor streaming
•
Scalable
•
Real time
•
Embedded
Real estate, environmental, cooling constraints
Real-time signal and image processing applications
Acquire
Process
Transmit
Mathematical
transformations
Visualize
Image Display
Complex signal returns

©
2005 Mercury Computer Systems, Inc.
21
Mercury Continues to Evolve
High Density, High Performance
Multiprocessors
Conduction-Cooled
Boards
3U Boards
Cell-Based Products
RapidIO IP
Photo-realistic
effects
Integration,
Ruggedization,
Custom Software

©
2005 Mercury Computer Systems, Inc.
22
DBU Elements of Stability
•
The importance of CISR
Old threats
New threats
•
The role of COTS
Lower life-cycle costs
Faster time to deployment
•
Technology is driven by non-defense markets
Servers/Desktops
Graphics/Gamers
Telecommunications/Networking
DBU is extremely well-positioned to out-maneuver
competition in a changing environment

©
2005 Mercury Computer Systems, Inc.
23
Radar –
Leading through Innovation
•
Radar Processing Leadership
Tactical fighters: JSF
Airborne surveillance: MP-RTIP
•
Global Hawk
•
E10-A, JSTARS, AWACS
Shipboard missile defense: Aegis
UAV SAR: Predator LYNX
•
Expanding Radar Markets
Upgrades to existing radars
Land-based/mobile radar
Propose new technology
•
Passive radars
Cell Broadband Engine for large and
small radars
Aegis (BMD)
JSF (F-35)

©
2005 Mercury Computer Systems, Inc.
24
Signals Intelligence (SIGINT)
•
Communications Intelligence (COMINT) and Electronic
(ELINT) Intelligence
•
Fastest growing DBU segment
Proliferation of signals
Cross-cueing for other sensors
COTS adoption
•
Comprehensive product offering
RF receivers
Analog-to-digital conversion
ASIC and FPGA-based digital receivers
Programmable digital signal processing
Future integrated product
•
Leveraged investments for defense communications

©
2005 Mercury Computer Systems, Inc.
25
Revolutionizing the Industry
Widespread deployment of battlefield visualization and
decision aids previously found only in research
laboratories
Multisensor
visualization
for
ALL
warfighters
on
the
move
Comprehensive battlefield pictures for all warfighters
Super-smart compression for high-demand data links
Detection and acquisition of previously intractable targets
What You Could Only Dream About Before
PowerBlock™
200

©
2005 Mercury Computer Systems, Inc.
26
Challenges of Modern Warfare
Sensor data overwhelming analysts
PEO-IEW&S  Eddie Bair:
“Over 90% of all
data falls on the
floor”

©
2005 Mercury Computer Systems, Inc.
27
Mercury Applications for Modern Warfare
Sensor to Shooter:
Providing real-time sensor-based intelligence to the shooter
on the ground
Airborne
Reconnaissance
Image
Exploitation
System

©
2005 Mercury Computer Systems, Inc.
28
Growth Drivers
•
DoD transformation/ISR
initiative
Persistent ISR
•
Expansion to lower
echelons, smaller platforms
•
Image & data exploitation
•
Software radio/data links
ISR becoming CISR
Network-centric warfare
•
Smart weapons
COTS initiative
Today
5 Years
Available Market
$3 B
Served
Market
$380 M
*
•
Smart
Weapons
•
Image & Data
Exploitation
•
Data links
*Fiscal 2005 revenues were $148 M
231 Active Defense Programs
35 Design Wins in FY05

©
2005 Mercury Computer Systems, Inc.
29
DBU Summary
•
DoD investment priorities consistent with DBU
strengths
Transformation agenda driving increasing need for
CISR and processing
•
COTS will grow in importance
•
DBU well-positioned
Significant barriers to entry
Strong investment strategy
•
Defense
and
Commercial
Driving innovations for the next generation
New designs and legacy upgrades

©
2005 Mercury Computer Systems, Inc.
30
Corporate Summary
•
Strong competitive position in attractive and
growing markets
•
Leveraging technology investments by
entering new markets and applications
Defense and commercial
•
Continuous partnership and acquisition 
activity supplements internal development
•
Strong balance sheet and operating cash
flow support investments

©
2005 Mercury Computer Systems, Inc.
31
www.mc.com
NASDAQ: MRCY