View:
Mail Stop 0306
March 1, 2005
Via Facsimile and U.S. Mail
Robert E. Hult
Senior Vice President and Chief Financial Officer
Mercury Computer Systems, Inc.
199 Riverneck Road
Chelmsford, MA 01824
Re: Mercury Computer Systems, Inc.
Form 10-K for the fiscal year ended June 30, 2004
Filed September 10, 2004
Form 10-Q for the quarter ended December 31, 2004
File No. 0-23599
Dear Mr. Hult:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comment or on any other
aspects
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K as of June 30, 2004
Note G - Acquisitions - Page 53
1. We note your disclosure that you believe the acquisition of TGS
"will expand the breadth of the Company`s product offerings in the
Image and Visualization Solutions Group markets." We also note
your
disclosure on page 55 that the pro forma results of operations
assuming TGS had been acquired July 1, 2003 would not differ
materially from your operating results as reported. We note you
have
similar disclosures relating to your acquisition of Advanced Radio
Corporation in this Form 10-K and relating to your acquisition of
Momentum Computer Group in your December 31, 2004 Form 10-Q.
Given
these statements, it is unclear why these purchases resulted in
relatively minor amounts being allocated to intangible assets,
with
relatively large amounts recorded to goodwill. Based on your
disclosures, it appears that the value of these acquisitions rest
with the product offerings of the acquired companies and therefore
you should have allocated a greater amount allocated to intangible
assets in accordance with paragraphs 37(e) and 39 of SFAS 141.
Please supplementally tell us why you did not allocate a greater
amount to any intangible assets, including those listed in
Appendix
A14 of SFAS 14. Tell us why the purchase resulted in such a
significant amount being recorded to goodwill.
Supplementary Information (Unaudited) - Page 67
2. Please supplementally describe the factors responsible for the
30%
increase in revenues in the fourth quarter of 2004.
Item 9A. Controls and Procedures - Page 68
3. We note management`s conclusion that as of June 30, 2004, the
disclosure controls and procedures are effective "to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to [the CEO and CFO] by
others within the Company and its consolidated subsidiaries."
This
conclusion contains an inappropriate qualification as to the
effectiveness of your disclosure controls and procedures. Please
revise your filing to limit your conclusion to state simply
whether
the disclosure controls and procedures were effective. However,
if
you elect to retain qualifying language in your disclosure, revise
so
that the language is fully consistent with the definition of
disclosure controls and procedures contained in Rule 13a-15(e).
Form 10-Q as of December 31, 2004
Item 2. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations - Page 14
4. We note that revenues declined from $59.1 million in the fourth
quarter of 2004 to $55.0 million in the first quarter of 2005.
More
specifically, we note revenues in your Defense Electronics Group
declined from $42.8 million in the fourth quarter of 2004 to $31.0
million in the first quarter of 2005, while revenues in your OEM
Solutions group increased from $7.4 million in the fourth quarter
of
2004 to $13.5 million in the first quarter of 2005. Given the
significance of these changes, we believe they should be addressed
in
Management`s Discussion and Analysis. Specifically, you should
discuss any material trends that may exist in the business. For
example, is the decline in revenues for DEG indicative of a trend
that may also impact your future results? Please respond
supplementally and revise future filings to include discussion of
such changes as appropriate.
Item 4. Controls and Procedures - Page 29
Changes in Internal Control over Financial Reporting - Page 29
5. We note your disclosure that "there was no change in [your]
internal control over financial reporting during [your] first
fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, [your] internal control over financial
reporting."
You do not indicate if there were any changes to your internal
controls over financial reporting that occurred with your
evaluation
during your most recent fiscal quarter. Please revise to
disclose
if you had any changes occur in your internal controls over
financial
reporting that occurred during your second fiscal quarter of 2005.
Refer to Item 308(c) of Regulation S-K.
6. We note your statement that a "control system, no matter how
well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the internal control system are
met." Please revise to state clearly, if true, that your
disclosure
controls and procedures are designed to provide reasonable
assurance
of achieving their objectives and that your principal executive
officer and principal financial officer concluded that your
disclosure controls and procedures are effective at that
reasonable
assurance level. In the alternative, remove the reference to the
level of assurance of your disclosure controls and procedures.
Please refer to Section II.F.4 of Management`s Reports on Internal
Control Over Financial Reporting and Certification of Disclosure
in
Exchange Act Periodic Reports, SEC Release No. 33-8238, available
on
our website at .
* * * * * * * *
As appropriate, please amend your June 30, 2004 Form 10-K
and
your December 31, 2004 Form 10-Q and respond to these comments
within
10 business days or tell us when you will provide us with a
response.
You may wish to provide us with marked copies of the amendment to
expedite our review. Please furnish a cover letter with your
amendment that keys your responses to our comments and provides
any
requested supplemental information. Detailed cover letters
greatly
facilitate our review. Please file your cover letter on EDGAR.
Please understand that we may have additional comments after
reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* The company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* Staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Kevin Vaughn, Staff Accountant, at (202)
824-
5387 or me at (202) 942-2813 if you have questions regarding these
comments. In this regard, do not hesitate to contact Martin
James,
the Senior Assistant Chief Accountant, at (202) 942-1984.
Sincerely,
Daniel Gordon
Branch Chief
??
??
??
??
Mr. Robert E. Hult
Mercury Computer Systems, Inc.
March 1, 2005
Page 1
1