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): November 6, 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 November 6 and 7, 2006 at the American Electronics Association (AeA) Classic Financial 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 November 6-7, 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: November 6, 2006 | By: | /s/ Alex N. Braverman | ||||||
| Alex N. Braverman | ||||||||
| Vice President, Controller and Chief Accounting Officer | ||||||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Presentation materials dated November 6-7, 2006. |
 © 2005 Mercury Computer Systems, Inc. The AeA Classic Financial Conference November 6-7, 2006 Jay Bertelli, President, Chief Executive Officer & Chairman Bob Hult, SVP, Chief Financial Officer Mark Skalabrin, VP & GM, Advanced Solutions Business Exhibit 99.1 |
 © 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 2007 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, the 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 Annual Report on Form 10-K for the quarter ended June 30, 2006. 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 First Quarter Fiscal Year 2007 earnings release, which
can be found on our website at www.mc.com/mediacenter/pr/.
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 © 2005 Mercury Computer Systems, Inc. 3 Mercury at a Glance • HQ in Chelmsford, MA Sales, support, and R&D centers in U.S., Europe, and Japan 823 employees worldwide • Founded in 1983 Seven acquisitions since 2004 • FY06 revenues: $236M 56/44% defense/commercial • Four segments: Defense Business Unit (DBU) Commercial Imaging & Visualization (CIV) Advanced Solutions Business Unit (ASBU) Modular Products & Services (MPS) • Nasdaq: MRCY |
 © 2005 Mercury Computer Systems, Inc. 4 What We Do For diverse customers in: Aerospace & Defense Communications Geosciences Life Sciences Semiconductor Leading provider of: Computing solutions for specialized, compute- and data- intensive applications |
 © 2005 Mercury Computer Systems, Inc. 5 Mercury’s Strategy • Focus on relatively small ($200-400M) niche markets that are not well served by mainstream suppliers • Leverage technology investments across multiple markets • Focus on solving problems that are challenging and can command high margins • Focus on core competencies Multicomputer architectures Signal and image processing Visualization • Market specific domain expertise |
 © 2005 Mercury Computer Systems, Inc. 6 Diverse Base of Customers and Targets Commercial Defense |
 © 2005 Mercury Computer Systems, Inc. What is Driving Growth? |
 © 2005 Mercury Computer Systems, Inc. 8 Revenue Follows Technology Cycles Echotek – A/D-D/A Revenue ($M) $186 $250 $150 $181 $141 $107 $86 $180 $235-245* $236 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E June Fiscal Year End *Per Company guidance, October 26, 2006 earnings conference call PowerPC RACE++ MP-510 Cell BE Processor DSP/GPU / FPGA Processors Northstar Ensemble PowerStream 7000 TGS – 3D Momentum - SBC SoHard – PACS ARC - RF Rapid IO |
 © 2005 Mercury Computer Systems, Inc. 9 Identifying New Markets to Drive Growth • Recently expanded market opportunities Aerospace & Defense - Synthetic vision Communications - Wideband data links satellite communications Geosciences – Data-intensive computation (oil & gas) Life Sciences - 3D medical imaging applications Semiconductor - Design for manufacturing • Future market opportunities Biotechnology - Drug discovery Video Processing – Intelligence to compensate for bandwidth limitations Defense - Homeland security History of finding challenging computing problems that can be solved with Mercury technology |
 © 2005 Mercury Computer Systems, Inc. 10 Market-specific Innovation Leveraged Innovation Leverage as a Competitive Advantage Multi-market leverage of technology and core competencies results in strong competitive advantage and significant barriers to entry Defense, National Labs, Life Sciences, Semi- Equipment, Oil & Gas, Biotech System Solutions Cell BE, FPGA, GPU, Multicore, A/D-D/A, Video Technology & Core Competencies Market Investments |
 © 2005 Mercury Computer Systems, Inc. 11 Leverage Example: Cell BE Processor • 5-100x faster than conventional microprocessors • Designed to solve the same types of problems Mercury has been solving for many years Medical/ Biotech Radar Video Gaming Semi Creation Oil & Gas Intelligence National Labs • Established relationship with IBM Cell BE |
 © 2005 Mercury Computer Systems, Inc. 12 Unique Strengths in Life Sciences • Medical Imaging 19 years of experience Unique skill set for emerging 3D market • Successful introduction of software applications and full systems for end users • Expanding product portfolio PACS 3D visualization server MRI data acquisition • End-to-end medical image management |
 © 2005 Mercury Computer Systems, Inc. 13 Growth Opportunity: 3D Medical Imaging • Multi-slice CT scanners, PET/CT, multi-channel MRI and new clinical applications are flooding the diagnostic workflow with data • The market requires a more productive means of visualization Revolutionary 3D transformation throughout the medical imaging workflow is occurring Acquisition Reconstruction Visualization Distribution Advanced Research Professional Services & Support |
 © 2005 Mercury Computer Systems, Inc. 14 Growth Opportunity: Oil & Gas • Competitive advantages in computing and visualization Performance/watt/cubic Inch Extremely large data sets • Computing platforms Seismic acquisition and processing • Visualization Seismic QC and interpretation Horizons, faults, well bores, etc. Core analysis Drilling planning Reservoir models |
 © 2005 Mercury Computer Systems, Inc. 15 Unique Strengths in Defense • Leader in airborne surveillance 14 years of experience • Investing and innovating to maintain leadership position • Strong business partnership relationship with defense primes Representative |
 © 2005 Mercury Computer Systems, Inc. 16 Defense Embedded Computing Market Potential A $14.2 Billion Available Market 95% Primes 5-10% COTS Opportunity for Collaborative COTS ® Source: The Embedded Computing Market 2006, Electronic Trend Publications Inc & Internal
Estimates. Defense Weapons & C3 Boards and Systems
|
 © 2005 Mercury Computer Systems, Inc. 17 Growth Opportunity: Radar • Airborne surveillance: MP-RTIP Global Hawk (15 platforms) JSTARS and AWACS upgrade potential • Tactical fighters: F-35, F-22, F-16 • Shipboard missile defense: Aegis • UAV: Predator LYNX SAR • Land-based/mobile radar Aegis (BMD) JSF (F-35) |
 © 2005 Mercury Computer Systems, Inc. 18 Growth Opportunity: Battlefield Communication Projected widespread deployment of battlefield visualization and decision aids Multi-sensor visualization for warfighters on the move Comprehensive battlefield pictures for warfighters Super-smart compression for limited capacity Detection and identification of targets in an urban/civilian environment |
 © 2005 Mercury Computer Systems, Inc. 19 Growth Opportunity: Wide-Band Data Links • Ground, shipboard, and airborne communications via satellite • Deployment of broadband closer to the war fighter driving need for new compute solutions • Mercury well positioned with COTS software- defined radio (SDR) and scalable FPGA and DSP solutions • Technology demonstrated at MILCOM (Oct. 2006) |
 © 2005 Mercury Computer Systems, Inc. 20 Growth Opportunity: Unmanned Systems & Avionics • Forest fire detection and monitoring • Precision agriculture • Border surveillance • Oil and gas pipeline monitoring • Power line monitoring • Surveillance and reconnaissance • Commercial and military avionics Synthetic Vision and Sensor Data Fusion |
 © 2005 Mercury Computer Systems, Inc. 21 Aeronautical Applications & Systems Knowledge Mercury’s Combined Capabilities 3D Visualization Embedded Design Sensor Processing Ruggedization RF Airborne Devices Display Sub-systems |
 © 2005 Mercury Computer Systems, Inc. 22 Nav-Sim Potential FY07 FY08 FY09 FY10 FY11 FY12 Commercial & Military avionics 550 1,750 4,000 9,500 24,500 42,000 Consumer Avionics 1,300 2,500 4,000 6,500 8,000 10,000 Unmanned Systems 450 1,750 7,850 19,000 39,000 72,500 TOTAL AVIONICS 2,300 6,000 15,850 35,000 71,500 124,500 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 FY07 FY08 FY09 FY10 FY11 FY12 NAV-SIM POTENTIAL Unmanned Systems Consumer Avionics Commercial & Military avionics |
 © 2005 Mercury Computer Systems, Inc. 23 Communication • Communications market potential System development platforms for wireless infrastructure applications • Growth Opportunity AdvancedTCA DSP and FPGA compute solutions • Example: Satellite ground stations for Ancillary Terrestrial Component (ATC) |
 © 2005 Mercury Computer Systems, Inc. 24 Semiconductor Equipment Market • Semiconductor market applications Wafer and reticle inspection systems • Process streaming data to find defects Mask writing systems • Generate patterns to write to semiconductor and flat-panel masks • Mercury Cell BE-based solutions driving growth in existing and new applications • Emerging applications Stepper/scanner control Electronic Design Automation (EDA) – Mask synthesis |
 © 2005 Mercury Computer Systems, Inc. 25 Growth Opportunity: EDA Mask Synthesis • Compute-intensive processing required to prepare designs for mask creation Resolution Enhancement Technology (RET) Design For Manufacturing (DFM) • Mercury Cell-based solutions to provide over 10 Teraflops to speed application by 10x to 100x • Working with a leading EDA company to deploy a solution by the end of the year |
 © 2005 Mercury Computer Systems, Inc. Financial Overview |
 © 2005 Mercury Computer Systems, Inc. 27 Advancing Towards Our Goals Non-GAAP FY04 FY05 FY06 Guidance FY07* Timeless Business Model Revenue 100% 100% 100% 100% 100% Gross Margin 67% 66% 62% 57% 60+% SG&A 30% 29% 34% R&D 21% 20% 25% Income from Operations 17% 17% 3% 3% 16-18% *Per Company guidance, October 26, 2006 earnings conference call
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 © 2005 Mercury Computer Systems, Inc. 28 Focus on Working Capital Inventory Turns 8.0 4.9 6.9 5.4 4.6 5.5 2003 2004 2005 2006 2007E Model • Supply chain transformation Competitive advantage for Mercury and customers • Customer satisfaction DSO target 45 days Days Sales Outstanding 45 50 59 53 51 43 2003 2004 2005 2006 2007E Model |
 © 2005 Mercury Computer Systems, Inc. 29 EBITDA $M $42 $41 $57 $5 $10 2003 2004 2005 2006 2007E *Per Company guidance, October 26, 2006 earnings conference call
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 © 2005 Mercury Computer Systems, Inc. 30 Strong Balance Sheet Historically strong balance sheet Net cash positive * Adjusted for October 19 mortgage payoff ** Convertible senior notes offering * Quarter ended September 30, 2006 Cash and Equivalents $142 Total Current Assets $172 Total Assets $368 Total Debt $125 Total Liabilities $184 Stockholders’ Equity $184 ** |
 © 2005 Mercury Computer Systems, Inc. 31 Q2 Fiscal Year 2007 Guidance • Impact of equity-based compensation costs related to FAS 123(R) of approximately $2.6M excluded from non- GAAP • Acquisition-related amortization of approximately $1.7 M excluded from Non-GAAP Notes: 1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP 2) Company guidance, October 26, 2006 earnings conference call Quarter Ending December 31, 2006 Revenues ($M) $52-54 GAAP Non-GAAP Gross Margin 55% EPS $(0.48)-(0.43) $(0.23)-(0.19) |
 © 2005 Mercury Computer Systems, Inc. 32 Fiscal Year 2007 Guidance Fiscal Year Ending June 30, 2007 Revenues ($M) $235-245 GAAP Non-GAAP Gross Margin ~57% EPS ~$(0.50) ~$0.29 Notes: 1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP 2) Company guidance, October 26, 2006 earnings conference call • Impact of equity-based compensation costs related to FAS 123(R) of approximately $9.8M excluded from non- GAAP • Acquisition-related amortization of approximately $7M, Q1 in-process R&D charge of $3.1M, and Q1 restructuring impairment charge of $800K excluded from non-GAAP |
 © 2005 Mercury Computer Systems, Inc. 33 Why Invest in Mercury? • Strong competitive position in attractive and growing markets • Large growth opportunities in 3D medical imaging, semiconductor applications, defense communications, and synthetic vision • Leverage technology investments across multiple applications in diverse markets Defense and commercial • Open innovation strategy through partnerships and acquisitions • Strong financial position supports continued investments in technology and new market development |
 © 2005 Mercury Computer Systems, Inc. 34 www.mc.com NASDAQ: MRCY |