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 5, 2009
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
Not Applicable
(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 February 5, 2009 at the Cowen and Company 30th Annual Aerospace/Defense 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 5, 2009. | |
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 thereunto duly authorized.
| Dated: February 5, 2009 | MERCURY COMPUTER SYSTEMS, INC. | |||||
| By: | /s/ Alex A. Van Adzin | |||||
| Alex A. Van Adzin | ||||||
| Vice President, General Counsel, | ||||||
| and Corporation Secretary | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Presentation materials dated February 5, 2009. | |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Cowen 30 th Annual Aerospace/Defence Conference February 5, 2009 Mark Aslett – President & CEO Bob Hult – SVP, CFO www.mc.com Exhibit 99.1 |
 © 2009 Mercury Computer Systems, Inc. www.mc.com 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 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, 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 year ended June 30, 2008. 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 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 measures discussed in this presentation is contained in the Company’s Second Quarter of Fiscal Year 2009 earnings release, which can be found on our website at www.mc.com/mediacenter/pressreleaseslist.aspx. 1 |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Introduction • New strategy and management team well established • Improved FY08 financial performance • Strong core defense business – stabilizing commercial • Defense provides long-term profitable growth potential • Need to evolve COTS board business – Converged Sensor Network™ architecture • Mercury Federal Systems a means to evolve Mercury's business model and expand our total addressable market 2 Become the government’s trusted partner for next-generation ISR signal processing and computing solutions |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Significant company dynamics (#’s
GAAP FY08) • Revenue and profitability strength in ACS business • Non-core businesses eroding operating profits 3 Notes: 1) FY08 Operating Profit Total excludes stock-based compensation expense Includes $7.3M amortization expense, $5.2M restructuring, $18M goodwill impairment, $3.2M gain for sale of long-lived asset, and $0.8M inventory write-down |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Major ACS business dynamics • Focus on strengthening and growing the defense business 4 FY07 FY08 Commercial Defense |
 © 2009 Mercury Computer Systems, Inc. www.mc.com ACS commercial segment dynamics • Commercial bookings slower rate of decline in FY08 • Current market conditions challenging • Significant volatility has added unpredictability to ACS • Focused on commercial and defense leverage 5 |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Refocusing ACS commercial opportunities • Focus on existing customer accounts and industry segments • Selective tactical new pursuits leveraging existing products or planned roadmap • Maximize R&D synergies across product lines and defense • Converged Sensor Network™ architecture applicable to commercial markets 6 |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Strength in ACS defense markets • 17% revenue growth and 33% bookings growth in FY08 • Strong revenue growth in Radar, C4I and EW • Focused on the C4ISR market going forward 7 “C4ISR” |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Growing and evolving our COTS defense core • Highly penetrated across many programs and platforms presents good upgrade opportunities and lower risk • Design win-led – refresh product portfolio • Tactically penetrate more programs on new and existing platforms on land, air, and sea • Expand presence in additional defense application segments, such as Electronic Warfare (EW) and C4I • Revolutionize embedded sensor processing with Converged Sensor Network™ 8 |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com Converged Sensor Network™ vision • Target real need – money flows • Next-generation platform- independent ISR architecture • Beyond COTS – expand addressable market 10x • Leverages technology strengths, installed base, and recent acquisitions • Provides catalyst for growth 9 Become the government’s trusted partner for next-generation ISR platform signal processing and computing |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com Military electronics is a market sweet spot • Retrofit and upgrades remain strong for legacy programs • Increased need for EW – Intelligence, Surveillance, Reconnaissance assets • Networked nodal platforms, virtualized sensors • Next-gen onboard processing, exploitation and dissemination architecture critical 10 Sources : The Military Electronics Briefing, 2008 Ed. , The TEAL Group, Frost & Sullivan, U.S C4ISR Market 2007 |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com Commentary on the election and DoD budget • History shows defense budget is more related to what is happening, not who is in charge – Democrats presided over two largest increases in defense spending • Military leadership citing budget and funding deemed to be at a bare minimum – Military needs to recapitalize, replace damaged and worn equipment, fund GWOT and invest in new systems – Funding priorities may shift – upgrades increasingly important • Base defense budget likely to remain intact with lower supplementals – $511b 2009 budget already signed into law + $70b supplemental? – $587b 2010 budget proposal submitted to Congress in February 11 Source : The Spade Index Sep/Oct 2008, Jan 2009 Base defense budget likely to remain intact over next several years but with reduced supplemental spending over time |
  © 2009 Mercury Computer Systems, Inc. www.mc.com Transitioning Mercury's business model Today’s Model • Government frustrated with current prime model • Platform-centric approach • Proprietary stovepipe processing architectures • Pay multiple times for similar capabilities • Slow time to deployment • Maybe not best in class Emerging Model • Platform-independent • Best of breed model proven on sensor side • Likely to occur for signal processing and computing • Pay once – common architecture across multiple platforms • Fast time to deployment 12 Become the government’s trusted, platform-independent signal processing and compute partner |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com ACS Defense and MFS – a hybrid business model ACS COTS Defense • Total addressable market COTS defense electronics ($3B annually) • Be told what board to develop by a prime • Board-level design wins • Develop everything on our own nickel • Long payback period – high risk with Mercury Federal • Total addressable market military electronics market ($30B annually) • Consult on overall signal processing architecture with the government • Platform design wins • Paid to develop elements that do not exist • Lower risk, faster returns 13 |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com Summary • Rationalize portfolio of non-core businesses by end FY09 • Strengthen ACS defense business – stabilize commercial • Grow ACS defense business by targeting upgrades, new platforms and applications • Evolve beyond COTS board business due to industry size constraints and dynamics – Converged Sensor Network™ • Mercury Federal a means to evolve Mercury's business model and expand our total addressable market 14 Become the government’s trusted partner for next-generation ISR signal processing and computing solutions |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Financial Overview |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 16 FY07 vs FY08: Improved Performance 16 Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded
Systems & Professional Services and SolMap. 2) All numbers are non-GAAP.
|
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 17 Revenue growth: Driven by Defense 17 Notes: 1)Represents total Company revenues; VI, VSG and Emerging businesses’ revenue treated as Commercial 2)All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap June Fiscal Year End ~ 10% CAGR FY98 – FY08 Revenue ($M) |
     © 2009 Mercury Computer Systems, Inc. www.mc.com 18 Strategic Direction – Sell, fix or grow Government Defense Commercial Mercury Federal Sell or Shutdown Fix Grow 18 VSG AUSG - Sold VI ES/PS - Sold Biotech – Sold VI - Sold |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 19 FY09 Mercury Cash Balance Analysis 19 FY09 Cash Changes Summary (4) (125) 167 32 3 198 73 0 50 100 150 200 250 Q1FY09 ARS Write- down UBS Loan Q2 FCF/Other Q2FY09 Repay Convert Cash & Sec Bal ARS: 42 Cash: 31 |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 20 Focus on Working Capital • Supply chain transformation Operational efficiencies Manufacturing lead times Cost of quality Competitive advantage for Mercury and customers Inventory reduced $7.3M • Customer satisfaction DSO’s below model End-of-quarter shipment skew 20 Inventory Turns 4.9 6.9 5.4 4.6 4.1 3.3 3.9 3.8 7.5 2003 2004 2005 2006 2007 2008 Q109 Q209 Model Days Sales Outstanding 43 51 53 59 61 63 49 46 50 2003 2004 2005 2006 2007 2008 Q109 Q209 Model |
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2009 Mercury Computer Systems, Inc. www.mc.com 21 Gap to Target Business Model (#’s
non-GAAP) 21 Target Business Model Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded
Systems & Professional Services and SolMap. |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 22 Guidance Summary (Non-GAAP) Q108 Q208 Q308 Q408 Q109 Q209 Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0- 55.0 55.2 53.0- 56.0 49.1 47.0- 49.0 50.7 47.0- 49.0 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04 (0.04)- 0.00 0.01 (0.05)- 0.01 0.07 (0.07)- (0.03) 0.03 (0.05)- 0.00 Last 6 quarters’ revenue and EPS exceeded or met the top end of guidance 22 |
  © 2009 Mercury Computer Systems, Inc. www.mc.com 23 Q3 Fiscal Year 2009 Guidance Revenues ($M) GAAP Non-GAAP Gross Margin Approx. 56% - 57% Approx. 56% - 57% EPS $(0.02) - $0.03 $0.05 - $0.09 $48 - $50 Quarter Ending March 31, 2009 • Impact of equity-based compensation costs related to FAS 123R of approximately $1.7M excluded from non-GAAP • Acquisition-related amortization of approximately $0.7M excluded from non-GAAP Notes: 1) Figures in millions, except percent and per share data |
 © 2009 Mercury Computer Systems, Inc. www.mc.com Appendix |
 ©
2009 Mercury Computer Systems, Inc. www.mc.com 25 GAAP to Non-GAAP Reconciliation Q309 Guidance Reconciliation* * Per Company guidance range, January 27, 2009 earnings conference call RANGE Income (Loss) Per Share - Diluted Income (Loss) Per Share - Diluted GAAP expectation (0.02) $
0.03 $
Adjustment to exclude stock-based compensation 0.07 0.07 Adjustment to exclude amortization of acquired intangible assets 0.03 0.03 Adjustment for tax impact (0.03) (0.04) Non-GAAP expectation 0.05 $
0.09 $
|
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2009 Mercury Computer Systems, Inc. www.mc.com 26 GAAP to Non-GAAP Reconciliation 2007 2008 GAAP net loss from continuing operations (35.6) $ (33.2) $ Adjustment to exclude stock-based compensation 10.6 10.2 Adjustment to exclude inventory write-down - 0.8 Adjustment to exclude amortization of acquired intangible
assets 7.2 7.3 Adjustment to exclude impairment of goodwill and
long-lived assets 0.1 18.0 Adjustment to exclude restructuring 5.5 5.2 Adjustment to exclude gain on sale of long-lived
assets - (3.2) Adjsutment for tax impact 5.5 (0.3) Non-GAAP net income from continuing operations (6.7) $
4.8 $
Net income (loss) per share from continuing operations --
diluted: GAAP (0.32) $ 0.22 $
Non-GAAP (0.32) $ 0.22 $
Weighted average shares -- diluted: GAAP 21.2 21.6 Non-GAAP 21.2 22.0 Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded
Systems & Professional Services and SolMap. |