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Mercury Computer Systems Reports Operating Results (10-Q)

November 04, 2011 | About:
10qk

10qk

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Mercury Computer Systems (MRCY) filed Quarterly Report for the period ended 2011-09-30.

Mercury Computer Systems has a market cap of $451 million; its shares were traded at around $14.76 with a P/E ratio of 21.4 and P/S ratio of 1.9.

Highlight of Business Operations:

Total revenues decreased $3.0 million, or 6%, to $49.1 million during the three months ended September 30, 2011 as compared to the comparable period in fiscal 2011. International revenues represented approximately 5% and 4% of total revenues during the three months ended September 30, 2011 and 2010, respectively.

Selling, general and administrative expenses decreased $0.6 million, or 4%, to $13.6 million during the three months ended September 30, 2011, compared to $14.2 million during the comparable period in fiscal 2011. The decrease was primarily due to a $0.6 million decrease in variable compensation expense, a $0.4 million decrease in distributor costs, a $0.2 million decrease in consultant expense and a $0.2 million decrease in recruiting expense. These decreases were partially offset by a $0.5 million increase in stock based compensation and a $0.2 million increase in depreciation expense. Selling, general and administrative expenses increased as a percentage of revenues to 27.8% during the three months ended September 30, 2011 from 27.2% during the same period in fiscal 2011.

Research and development expenses increased $1.0 million, or 9%, to $11.9 million during the three months ended September 30, 2011, compared to $10.9 million during the comparable period in fiscal 2011. The increase was primarily due to a $1.4 million increase in employee compensation expense, including stock-based compensation. The increase was also driven by an increase in headcount as a result of the LNX acquisition in January 2011. The employee compensation expense increases were partially offset by a $0.6 million decrease in costs of prototype and development materials and a $0.2 million decrease in variable compensation expenses. Research and development continues to be a focus of our business with approximately 24.1% and 20.9% of our revenues dedicated to research and development activities during the three months ended September 30, 2011 and 2010, respectively.

Results from operations of the MFS segment increased $1.0 million during the three months ended September 30, 2011 to operating income of $0.5 million. The increase in results from operations was primarily due to a $2.3 million increase in revenues. Additionally MFS received a higher gross margin percentage of 19% during the three months ended September 30, 2011 compared to a 7% gross margin for the same period in fiscal 2011 while lowering its administrative expenses.

During the three months ended September 30, 2011, we generated $4.2 million in cash from operations compared to $9.4 million generated from operating activities during the same period in fiscal 2011. The $5.2 million decrease in cash generated from operations was largely driven by $1.0 million in comparative lower net income, a $4.8 million increase in cash used for inventory, a $2.1 million increase in cash used for accounts payable and accrued expenses, a $1.1 million decrease in cash generated from prepaid income taxes, a $1.0 million increase in cash used for income tax payable, and a $1.8 million increase in cash used for deferred revenue, customer advances and other non-current liabilities. These uses of cash were offset by a $2.2 million increase in cash received from accounts receivable, a $1.5 million increase in cash generated from other non-current assets, a $0.6 million increase in cash generated from prepaid expenses and other current assets, a $0.9 million increase in depreciation and amortization expenses, a $0.8 million increase in stock-based compensation, and a $0.6 million increase in deferred income tax provision and other non-cash items. 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.

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