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Mercury Systems Reports Third 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)  
  March 31, 2013 June 30, 2012
Assets    
Current assets:    
Cash and cash equivalents  $ 35,145  $ 115,964
Accounts receivable, net   29,470  38,532
Unbilled receivables and costs in excess of billings  17,997  10,918
Inventory  38,744  25,845
Deferred income taxes  13,016  7,653
Prepaid income taxes  3,014  2,585
Prepaid expenses and other current assets  4,919  6,206
Total current assets  142,305  207,703
     
Restricted cash  546  3,281
Property and equipment, net  16,631  15,929
Goodwill   178,398  132,621
Intangible assets, net  37,209  25,083
Other non-current assets  1,305  989
Total assets  $ 376,394  $ 385,606
     
Liabilities and Shareholders' Equity    
Current liabilities:    
Accounts payable  $ 5,997  $ 9,002
Accrued expenses  7,779  9,895
Accrued compensation  9,943  13,190
Deferred revenues and customer advances  4,898  4,855
Total current liabilities  28,617  36,942
     
Deferred gain on sale-leaseback  3,531  4,399
Deferred income taxes  12,011  7,197
Income taxes payable  2,597  2,597
Other non-current liabilities  1,216  1,367
Total liabilities  47,972  52,502
     
Shareholders' equity:    
Common stock  303  297
Additional paid-in capital  229,550  222,769
Retained earnings  97,536  108,732
Accumulated other comprehensive income   1,033  1,306
Total shareholders' equity  328,422  333,104
     
Total liabilities and shareholders' equity  $ 376,394  $ 385,606
         
MERCURY SYSTEMS, INC.        
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS        
(In thousands, except per share data)        
     
  Three Months Ended March 31, Nine Months Ended March 31,
  2013 2012 2013 2012
Net revenues  $ 54,123  $ 66,989  $ 153,355  $ 184,070
Cost of revenues (1)   31,549  31,926  92,819  78,178
Gross margin  22,574  35,063  60,536  105,892
         
Operating expenses:        
Selling, general and administrative (1)   13,918  15,217  43,025  43,281
Research and development (1)  7,503  11,452  25,130  35,041
Amortization of intangible assets  2,356  1,143  6,374  2,651
Restructuring and other charges  228  --   5,429  -- 
Acquisition costs and other related expenses  32  145  304  763
Total operating expenses  24,037  27,957  80,262  81,736
         
(Loss) income from operations  (1,463)  7,106  (19,726)  24,156
         
Interest income  2  3  6  12
Interest expense  (7)  (8)  (30)  (26)
Other income, net  24  524  479  1,323
         
(Loss) income from operations before income taxes  (1,444)  7,625  (19,271)  25,465
         
Tax (benefit) provision  (2,232)  2,380  (8,075)  8,522
         
Net income (loss)  $ 788  $ 5,245  $ (11,196)  $ 16,943
         
Basic net earnings (loss) per share:  $ 0.03  $ 0.18  $ (0.37)  $ 0.58
         
Diluted net earnings (loss) per share:  $ 0.03  $ 0.17  $ (0.37)  $ 0.56
         
Weighted-average shares outstanding:        
Basic 30,235 29,562 30,075 29,432
Diluted  30,410 30,168 30,075 30,057
         
         
(1) Includes stock-based compensation expense, allocated as follows:  
 Cost of revenues  $ 105  $ 83  $ 335  $ 241
 Selling, general and administrative   $ 1,486  $ 1,013  $ 5,095  $ 4,261
 Research and development   $ 310  $ 246  $ 826  $ 692
         
MERCURY SYSTEMS, INC.         
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        
(In thousands)    
  Three Months Ended March 31, Nine Months Ended March 31,
  2013 2012 2013 2012
Cash flows from operating activities:        
Net income (loss)  $ 788  $ 5,245  $ (11,196)  $ 16,943
Depreciation and amortization  4,424  3,113  12,844  8,381
Other non-cash items, net  1,123  3,081  (692)  5,447
Changes in operating assets and liabilities, net of effect of business acquired  (4,638)  1,004  (7,649)  (3,084)
         
Net cash provided by (used in) operating activities  1,697  12,443  (6,693)  27,687
         
Cash flows from investing activities:        
Acquisition of business, net of cash acquired  --  --  (67,721)  (70,370)
Purchases of property and equipment  (533)  (2,867)  (2,259)  (6,438)
Decrease (increase) in other investing activities  112  (30)  (265)  (331)
         
Net cash used in investing activities  (421)  (2,897)  (70,245)  (77,139)
         
Cash flows from financing activities:        
Proceeds from employee stock plans  73  246  743  1,031
Payments of deferred financing and offering costs  3  --  (771)  (30)
Payment of acquired debt  --  --  (6,575)  --
Payments of capital lease obligations  (97)  (35)  (365)  (137)
Decrease in restricted cash  --  --  3,000  --
Excess tax benefits from stock-based compensation  9  75  18  487
         
Net cash (used in) provided by financing activities  (12)  286  (3,950)  1,351
         
Effect of exchange rate changes on cash and cash equivalents  (19)  58  69  71
         
Net increase (decrease) in cash and cash equivalents  1,245  9,890  (80,819)  (48,030)
         
Cash and cash equivalents at beginning of period  33,900  104,955  115,964  162,875
         
Cash and cash equivalents at end of period  $ 35,145  $ 114,845  $ 35,145  $ 114,845

MERCURY SYSTEMS, INC. UNAUDITED QUARTERLY SEGMENT INFORMATION (In thousands)

Following a series of acquisitions that expanded the Company's capabilities, the Company initiated a reorganization to logically group its product and service offerings and better reflect the way in which it currently manages its business. As a result, effective January 1, 2013, the Company's new reporting segments are Mercury Commercial Electronics (MCE) and Mercury Defense and Intelligence Systems (MDIS).  

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