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Mercury Systems Reports Second Quarter Fiscal 2013 Results

Mercury Systems, Inc., Innovation That Matters, Air Flow-By, and Application-Ready Subsystems are trademarks of Mercury Systems, Inc. Other product and company names mentioned may be trademarks and/or registered trademarks of their respective holders.

   
MERCURY SYSTEMS, INC.    
UNAUDITED CONSOLIDATED BALANCE SHEETS   
(In thousands) December 31, June 30,
  2012 2012
     
Assets    
Current assets:    
 Cash and cash equivalents  $ 33,900  $ 115,964
 Accounts receivable, net   35,275  38,532
 Unbilled receivables and costs in excess of billings  12,567  10,918
 Inventory  40,783  25,845
 Deferred income taxes  13,194  7,653
 Prepaid income taxes  2,617  2,585
 Prepaid expenses and other current assets  5,444  6,206
 Total current assets  143,780  207,703
     
Restricted cash  658  3,281
Property and equipment, net  18,261  15,929
Goodwill   178,429  132,621
Intangible assets, net  39,565  25,083
Other non-current assets  1,446  989
 Total assets  $ 382,139  $ 385,606
     
Liabilities and Shareholders' Equity    
Current liabilities:    
 Accounts payable  $ 8,875  $ 9,002
 Accrued expenses  9,822  9,895
 Accrued compensation  10,558  13,190
 Deferred revenues and customer advances  6,007  4,855
 Total current liabilities  35,262  36,942
     
Deferred gain on sale-leaseback  3,821  4,399
Deferred income taxes  12,768  7,197
Income taxes payable  2,597  2,597
Other non-current liabilities  1,608  1,367
 Total liabilities  56,056  52,502
     
Shareholders' equity:    
 Common stock  302  297
 Additional paid-in capital  227,827  222,769
 Retained earnings  96,748  108,732
 Accumulated other comprehensive income   1,206  1,306
 Total shareholders' equity  326,083  333,104
     
 Total liabilities and shareholders' equity  $ 382,139  $ 385,606
 
MERCURY SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Net revenues  $ 49,804  $ 67,959  $ 99,232  $ 117,081
Cost of revenues (1)   32,232  27,046  61,270  46,252
 Gross margin  17,572  40,913  37,962  70,829
         
Operating expenses:        
 Selling, general and administrative (1)   14,574  14,419  29,107  28,064
 Research and development (1)  7,588  11,724  17,627  23,589
 Amortization of intangible assets  2,230  692  4,018  1,508
 Restructuring and other charges  217  --   5,201  -- 
 Acquisition costs and other related expenses  42  593  272  618
 Total operating expenses  24,651  27,428  56,225  53,779
         
(Loss) income from operations  (7,079)  13,485  (18,263)  17,050
         
Interest income  2  3  4  9
Interest expense  (15)  (9)  (23)  (18)
Other income, net  116  394  455  799
         
(Loss) income from operations before income taxes (benefit)  (6,976)  13,873  (17,827)  17,840
         
Tax (benefit) provision  (2,192)  4,828  (5,843)  6,142
         
Net (loss) income   $ (4,784)  $ 9,045  $ (11,984)  $ 11,698
         
         
Basic net (loss) earnings per share:  $ (0.16)  $ 0.31  $ (0.40)  $ 0.40
         
Diluted net (loss) earnings per share:  $ (0.16)  $ 0.30  $ (0.40)  $ 0.39
         
Weighted-average shares outstanding:        
 Basic 30,107 29,457 29,995 29,367
 Diluted  30,107 29,969 29,995 30,001
         
         
(1) Includes stock-based compensation expense, allocated as follows:        
 Cost of revenues  $ 99  $ 70  $ 230  $ 158
 Selling, general and administrative   $ 1,706  $ 1,573  $ 3,609  $ 3,248
 Research and development   $ 205  $ 169  $ 516  $ 446
 
MERCURY SYSTEMS, INC. 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  Three Months Ended Six Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Cash flows from operating activities:        
 Net (loss) income  $ (4,784)  $ 9,045  $ (11,984)  $ 11,698
 Depreciation and amortization  4,421  2,597  8,420  5,268
 Other non-cash items, net  (626)  348  (1,815)  2,366
 Changes in operating assets and liabilities, net of effect of business acquired  2,548  (962)  (3,011)  (4,088)
         
 Net cash provided by (used in) operating activities  1,559  11,028  (8,390)  15,244
         
Cash flows from investing activities:        
 Acquisition of business, net of cash acquired  --  (70,370)  (67,721)  (70,370)
 Purchases of property and equipment  (746)  (1,925)  (1,726)  (3,571)
 Payments for acquired intangible assets  --  --  --  (20)
 Increase in other investing activities  (112)  (281)  (377)  (281)
         
 Net cash used in investing activities  (858)  (72,576)  (69,824)  (74,242)
         
Cash flows from financing activities:        
 Proceeds from employee stock plans  537  695  670  785
 Payments of deferred financing and offering costs  (774)  --  (774)  (30)
 Payment of acquired debt  --  --  (6,575)  --
 Payments of capital lease obligations  (222)  (43)  (268)  (102)
 Decrease in restricted cash  3,000  --  3,000  --
 Excess tax benefits from stock-based compensation  --  7  9  412
         
 Net cash provided by (used in) financing activities  2,541  659  (3,938)  1,065
         
Effect of exchange rate changes on cash and cash equivalents  90  (18)  88  13
         
Net increase (decrease) in cash and cash equivalents  3,332  (60,907)  (82,064)  (57,920)
         
Cash and cash equivalents at beginning of period  30,568  165,862  115,964  162,875
         
Cash and cash equivalents at end of period  $ 33,900  $ 104,955  $ 33,900  $ 104,955
         

UNAUDITED SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands)

Adjusted EBITDA, a non-GAAP measure for reporting financial performance, excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. Management believes that exclusion of these items assists in providing a more complete understanding of the Company's underlying operational results and trends, and management uses these measures along with the 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. The adjustments to calculate this non-GAAP financial measure, and the basis for such adjustments, are outlined below:

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