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Mercury Computer Systems Reports Operating Results (10-Q)

February 08, 2012 | About:
10qk

10qk

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Mercury Computer Systems (MRCY) filed Quarterly Report for the period ended 2011-12-31.

Mercury Computer Systems has a market cap of $445.7 million; its shares were traded at around $14.56 with a P/E ratio of 18.2 and P/S ratio of 1.9.

Highlight of Business Operations:

Selling, general and administrative expenses increased $0.4 million, or 3%, to $14.4 million during the three months ended December 31, 2011 compared to $14.0 million during the same period in fiscal 2011. The increase was primarily due to a $0.3 million increase in distributor costs, a $0.2 million increase in equipment and supplies and a $0.3 million increase in depreciation and maintenance expenses. These increases were partially offset by a $0.3 million decrease in IT support expense and a $0.1 million decrease in recruiting expense. However, selling, general and administrative expenses decreased as a percentage of revenues to 21.2% during the three months ended December 31, 2011 from 25.2% during the same period in fiscal 2011 due to higher revenues and slower expense growth.

Research and development expenses increased $1.2 million, or 12%, to $11.7 million during the three months ended December 31, 2011 compared to $10.5 million during the same period in fiscal 2011. The increase was primarily the result of a $1.1 million increase in employee compensation expense, a $0.3 million increase in maintenance and depreciation expenses, and a $0.2 million increase in IT support expense. These increases were mainly driven by an increase in personnel and related expenses as a result of the LNX acquisition in January 2011. These increases were offset by higher design and development costs allocated to cost of sales for long-term production contracts. Research and development continues to be a focus of our business with approximately 17.3% of our revenues dedicated to research and development activities during the three months ended December 31, 2011 and approximately 18.9% of our revenues dedicated to such activities during the same period in fiscal 2011.

Selling, general and administrative expenses decreased $0.1 million, or 1%, to $28.1 million during the six months ended December 31, 2011 compared to $28.2 million during the same period in fiscal 2011. The decrease was primarily due to a $0.4 million decrease in IT support expense, a $0.3 million decrease in employee compensation expense, and $0.3 million decrease in recruiting expense. These decreases were partially offset by a $0.6 million increase in depreciation and maintenance expenses and a $0.4 million increase in distributor costs. Selling, general and administrative expenses decreased as a percentage of revenues to 24.0% during the six months ended December 31, 2011 from 26.2% during the same period in fiscal 2011 due to higher revenues and operating leverage.

Research and development expenses increased $2.2 million, or 10%, to $23.6 million during the six months ended December 31, 2011 compared to $21.4 million during the same period in fiscal 2011. The increase was primarily driven by a $2.3 million increase in employee compensation expense, a $0.4 million increase in maintenance and depreciation expenses, and a $0.3 million increase in IT support expense. These increases were mainly driven by an increase in personnel and related expenses as a result of the LNX acquisition in January 2011. These increases were offset by a $0.5 million decrease in costs of prototype and development materials and a $0.4 million increase in design and development costs allocated to cost of sales for long-term production contracts. Research and development continues to be a focus of our business with approximately 20.1% of our revenues dedicated to research and development activities during the six months ended December 31, 2011 and approximately 19.9% of our revenues dedicated to such activities during the same period in fiscal 2011.

During the six months ended December 31, 2011, we generated $15.2 million in cash from operations compared to $17.5 million generated from operating activities during the same period in fiscal 2011. The $2.2 million decrease in cash generated from operations was largely driven by a $10.0 million decrease in cash received from accounts receivable, a $1.5 million decrease in deferred income tax provision, a $1.2 million increase in cash used for inventory, and a $1.1 million increase in cash used for prepaid income taxes. These uses of cash were offset by $2.9 million in higher net income, a $3.6 million increase in cash generated by deferred revenue and customer advances, a $1.7 million increase in depreciation and amortization expenses, a $1.4 million decrease in cash used for other non-current assets, and a $1.4 million decrease in cash used for income tax payable. 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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