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Mercury Computer Systems Reports Operating Results (10-Q)

November 04, 2010 | About:
10qk

10qk

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Mercury Computer Systems (MRCY) filed Quarterly Report for the period ended 2010-09-30.

Mercury Computer Systems has a market cap of $379.2 million; its shares were traded at around $16 with a P/E ratio of 18 and P/S ratio of 1.9. MRCY is in the portfolios of George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, James Barrow of Barrow, Hanley, Mewhinney & Strauss.

Highlight of Business Operations:

Selling, general and administrative expenses increased $2.9 million, or 25%, to $14.2 million during the three months ended September 30, 2010, compared to $11.3 million during the comparable period in fiscal 2010. The increase was primarily due to a $1.8 million increase in employee compensation expense, including stock-based compensation and bonus expense, driven by an eight person increase in headcount and company-wide pay increases. Additionally, there was a $0.4 million increase in consultant expense, a $0.3 million increase in business meeting and recruiting expense, and a $0.3 million increase in distributor commission costs. Sales, general and administrative expenses increased as a percentage of revenues to 27.2% during the three months ended September 30, 2010 from 23.9% during the same period in fiscal 2010, as increased investments in our corporate infrastructure were necessary to grow the Company organically and inorganically.

Research and development expenses increased $0.7 million, or 7%, to $10.9 million during the three months ended September 30, 2010 compared to $10.2 million during the comparable period in fiscal 2010. The increase was primarily due to a $0.4 million increase in employee compensation expense, including stock-based compensation, driven by a four person increase in headcount and company-wide pay increases. Additionally, there was a $0.3 million increase in contractor expenses, a $0.2 million increase in efforts spent on technology developments, and a $0.2 million increase in IT support expense. These increases were partially offset by a $0.4 million increase in the time spent by our engineers on billable projects. Research and development continues to be a focus of our business with approximately 20.9% of our revenues dedicated to research and development activities during the three months ended September 30, 2010 and approximately 21.5% of our revenues dedicated to such activities during the same period in fiscal 2010. We continue to focus on improving the leverage of our research and development investments in order to realize a more near-term return.

Other net income increased $0.2 million, or 85%, to $0.5 million during the three months ended September 30, 2010, as compared to the same period in fiscal 2010. Other income (expense) primarily consists of $0.3 million in amortization of the gain on the sale leaseback of our corporate headquarters located in Chelmsford, Massachusetts and foreign currency exchange gains and losses. The $0.2 million increase is primarily associated with a $0.2 million foreign currency exchange gain during the three months ended September 30, 2010 as compared to a $0.1 million foreign currency exchange loss for the same period in fiscal 2010.

During the three months ended September 30, 2010, we generated $9.4 million in cash from operations compared to $2.6 million generated from operating activities during the same period in fiscal 2010. The $6.8 million increase in cash generated from operations was largely driven by a $11.0 million increase in cash generated from accounts receivable, a $0.8 million increase in stock-based compensation, and $1.7 million of increases in other non-cash items, offset by lower comparative net income of $0.7 million, a $3.3 million increase in cash used for inventory, a $2.3 million increase in cash used for accounts payable and accrued expenses and a $0.4 million increased in cash used for other assets and liabilities. Our ability to generate cash from operations in future periods will depend in large part on profitability, the rate of collection of accounts receivable, our inventory turns and our ability to manage other areas of working capital.

During the three months ended September 30, 2010, we generated $15.9 million in cash from investing activities compared to $0.3 million used in investing activities during the same period in fiscal 2010. The $16.2 million increase in cash generated from investing activities was primarily driven by $17.6 million of cash received on the redemption of our ARS by UBS, partially offset by a $0.8 million increase in cash used for purchases of capital assets and a $0.5 million increase in cash used for purchases of intangible assets.

During the three months ended September 30, 2010, we generated $0.8 million in cash from financing activities compared to $0.1 million used in financing activities during the same period in fiscal 2010. The $0.9 million increase in cash generated from financing activities was primarily due to a $0.7 million increase in proceeds from stock related activities and a $0.3 million reduction in payments under our ARS line of credit. We satisfied our obligation for the UBS line of credit from both cash on hand and the proceeds from the redemption of certain of our ARS held by UBS. We originally drew down $33.4 million on the UBS line of credit in fiscal 2009.

Read the The complete Report

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