Mercury Computer Systems Breaks $100 Million Revenue Milestone in Fiscal 1999.CHELMSFORD, Mass.--(BUSINESS WIRE)--July 29, 1999-- Fourth Quarter Revenues Up 26%, Net Income Up 66%, Strong FY99 Delivers Record $106.6 Million in Revenue and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $1.25 Mercury Computer Systems Mercury Computer Systems, Inc. NASDAQ: MRCY provides high-performance embedded, real-time digital signal and image processing solutions. Mercury designs and builds embedded multicomputers, which may be considered to be either loosely coupled , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :MRCY), the leading provider of real-time digital signal and image processing image processing Set of computational techniques for analyzing, enhancing, compressing, and reconstructing images. Its main components are importing, in which an image is captured through scanning or digital photography; analysis and manipulation of the image, accomplished systems, today reported record results for the fourth quarter and fiscal year ended June 30, 1999. For the quarter, net income increased 66% to $4.5 million, or $0.41 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ), from $2.7 million, or $0.25 per share (diluted), the same quarter last year. Fourth quarter 1999 revenues rose 26% to $29.7 million from $23.5 million in the fourth quarter of 1998. For the year ended June 30, 1999, net income rose 54% to $13.5 million or $1.25 per share, from $8.7 million or $0.94 per share, for the year ended June 30, 1998. Fiscal 1999 revenues surpassed the $100 million milestone increasing 25% to $106.6 million from $85.5 million in 1998. "Mercury experienced strong growth in both its core businesses. Combined sales in medical imaging and defense electronics segments increased by 25%, and we have a record backlog entering the new fiscal year," said Jay Bertelli, president & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Mercury Computer Systems. "The company's recent investments in medical imaging applications were rewarded with a substantial revenue increase largely due to the commencement of production of new Computed Tomography Computed tomography (CT scan) X rays are aimed at slices of the body (by rotating equipment) and results are assembled with a computer to give a three-dimensional picture of a structure. (CT) equipment. In the defense electronics sector numerous contracts, including those for systems for Joint STARS, U2, and Predator predator an animal that derives its life support by predation. UAV UAV Unmanned Aerial Vehicle UAV Unmanned Air Vehicle UAV Unmanned Aerospace Vehicle UAV Unmanned Airborne Vehicle UAV Uninhabited Air Vehicle UAV Urban Assault Vehicle UAV Unpiloted Aerial Vehicle (less common) surveillance aircraft and for the U.S. Navy submarine submarine, naval craft capable of operating for an extended period of time underwater. Submarines are almost always warships, although a few are used for scientific or business purposes (see also submersible). upgrade program, made FY99 an exceptional year." "The year was also notable for two business decisions. First, together with Sarnoff Corporation Sarnoff Corporation, with headquarters in Princeton, New Jersey, is the former RCA Laboratories. The headquarters is the site of the development of color television, CMOS technology, electron microscopy, and many other important technologies since the cornerstone was laid just , we are in the final stages of forming a joint venture that will combine technologies from the two companies and will develop products for the high-definition digital television broadcast and cable industry. Secondly, we announced our decision to spin off the Shared Storage Business Unit and are in active discussions with several companies. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile this unit continues to increase its presence in the marketplace and to increase its value to potential acquirers." "Mercury anticipates continued strong growth in the medical and defense electronics businesses in fiscal 2000, making it possible to invest in new, high return applications for our technology." Worldwide Defense Electronics Business The company's fourth quarter worldwide defense electronics revenues increased 27% to $23.9 million from $18.8 million in the quarter ended June 30, 1998. For the entire year, defense revenues increased 23% to $82.6 million from $67.2 million last year. U.S. Defense Electronics Business The year was marked by over 40 design wins, several of them likely to develop into significant deployment programs that will sustain Mercury's future growth. Among the notable orders in 1999 were systems for the radar upgrade program on the fleet of U2 reconnaissance  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. aircraft valued at over $11 million and the multi-purpose processor upgrade program for the Los Angeles Class submarine The Los Angeles class is a class of nuclear-powered fast attack submarines (SSN) that forms the backbone of the United States submarine fleet, and is the most numerous class of nuclear powered submarine in the world. fleet valued at over $9 million. The company was honored hon·or n. 1. High respect, as that shown for special merit; esteem: the honor shown to a Nobel laureate. 2. a. Good name; reputation. b. by Northrop Grumman Northrop Grumman Corporation (NYSE: NOC) is an aerospace and defense conglomerate that is the result of the 1994 purchase of Grumman by Northrop. The company is the third largest defense contractor for the U.S. Corporation's Electronic Sensors
ESSS Electronic Sensors and Systems Sector (Northrop Grumman Corporation) ESSS Enhanced Services Sales Support (Sprint) ) award as their "Supplier of the Year." Mercury, which has entered into a strategic alliance with Northrop Grumman, has worked with ESSS on such prestigious programs as TESAR TESAR Tactical Endurance Synthetic Aperture Radar (Army) TESAR Tactical Enhanced Synthetic Aperture Radar , which is the tactical radar on the Predator UAV, and Mountain Top, for which Mercury delivered a 972-processor system to support an advanced radar system utilizing Space-Time Adaptive Processing Space-time Adaptive Processing (STAP) is a signal processing technique most commonly used in radar systems. It involves adaptive array processing algorithms to aid in target detection. Radar signal processing benefits from STAP in areas where interference is a problem (i.e. . International Defense Business Substantial progress was made in Mercury's international defense market during the last year. Two major European defense companies, British Aerospace British Aerospace (BAe) was a UK aircraft and defence systems manufacturer, now part of BAE Systems. History The company was formed as a statutory corporation on April 29, 1977 as a result the Aircraft and Shipbuilding Industries Act. and Alenia Marconi, selected Mercury to be their long-term supplier of signal processing See DSP. systems. The relationship with Alenia Marconi was marked with a development order in support of new radar systems and is anticipated to develop into a multi-million dollar deployed contract over the next eight years. In addition, the relationship with British Aerospace has led to the selection of Mercury for the SAMPSON radar project. Medical Business Group For the quarter, the company's worldwide medical revenues increased 16% to $4.1 million from $3.6 million in the quarter ended June 30, 1998. For the entire year, medical revenues increased 36% to $15.3 million from $11.2 million last year. Growth over the last year resulted from a continuation of MRI 1. (application) MRI - Magnetic Resonance Imaging. 2. MRI - Measurement Requirements and Interface. sales and the initial ramp-up of CT production at GE Medical Systems. Siemens Medical Engineering Group's latest CT machine, the SOMATOM(R) Plus 4 Volume Zoom, has been announced and is entering volume production as early orders are beginning to flow in support of this new advanced system. Picker International is also close to commencing production of its latest CT system where Mercury's computers provide the image processing. Production volume from these three major international manufacturers is expected to result in a significant increase in Mercury's medical imaging business in the coming year. Operations Mercury's gross and net margins both increased over the prior year numbers, with the gross margin increasing from 65% last year to 68% this fiscal year. Income from operations expanded as well, from 15% last year to 18% this fiscal year. The company adjusted its tax rate in the fourth quarter, reducing the rate from 35% to 33%, as a result primarily of increased tax-exempt income Tax-exempt income Dividends and interest not subject to federal and, in some cases, state and local income taxes. in the quarter and a one-time state investment tax credit associated with the acquisition of its Chelmsford, Massachusetts Chelmsford is a town in Middlesex County, Massachusetts in the Greater Boston area. It is located 24 miles from Boston and, bordering on the City of Lowell, it is part of the Greater Lowell metropolitan area. office buildings. Looking Forward Mercury expects its current revenue growth to continue in the 25% to 30% range for the coming year. However, with the high volume of orders received in the last quarter, the company anticipates that revenue growth for the first quarter of FY2000 will be substantially higher than the yearly range. Margins are expected to hold in their current range, producing strong earnings growth from the company's established defense and medical businesses. Looking ahead, the company believes there are substantial new business opportunities for Mercury technology in both high-definition digital television (HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates ) and the digital wireless markets, both of which will require significant investment in the coming year. Investment in the HDTV market will be made through Mercury's joint venture with Sarnoff. The venture will use Mercury technology to design, develop, and deliver products and solutions expected to dramatically reduce the cost of digital TV infrastructure for the broadcast and cable markets. The total potential market size for the venture's products is estimated to exceed $1 billion in aggregate over the transition period as the industry converts to digital TV formats. The many business uncertainties that attend the new venture make revenue projections at this time inappropriate. The joint venture does anticipate it would begin to generate revenues during the coming year. Mercury's share of gains and losses will be reported as a separate line item in its profit and loss statement. Mercury will pursue the wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. opportunity internally, offering its technology and expertise to manufacturers for incorporation within new generations of base stations that require substantially more flexible and powerful signal processing capabilities. Returns on Mercury's investments in fiscal 2000 and 2001 would not begin before 2001. The market opportunity, however, is very large, amounting to several hundred millions of dollars annually, and it represents an OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and business model, which Mercury understands well. In this past year, Mercury has carried out extensive activities creating a business development plan that merges its future technology with the processing requirements of the evolving wireless infrastructure. In addition to the investments in these new business areas Mercury will continue to make significant investments in existing markets. In the defense segment the company will invest in the ground-based radar market and image fusion, manipulation and processing, among other areas. In medical imaging, investments are expected to focus on computers for the expanding digital X-ray market and technology to assist in image processing for interventional surgery. At the same time, the company is continuing to invest significantly in its core engineering programs in order to deliver important new products planned for release in 2000 for its existing customers. Management believes that making these investments now offers the best pathway pathway /path·way/ (path´wa) 1. a course usually followed. 2. the nerve structures through which an impulse passes between groups of nerve cells or between the central nervous system and an organ or muscle. for building the company and increasing shareholder value. This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. including those dealing with business growth and investments. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Factors that could cause or contribute to such risks and uncertainties include, but are not limited to, general economic and business conditions, competition, changes in technology and methods of marketing, and various other factors beyond the company's control. These risks and uncertainties include such factors as are described in the company's recently filed reports with the Securities and Exchange Commission in the USA. The company wishes to caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Conference Call Information Mercury Computer Systems will hold a quarterly conference call with investors and analysts on Friday, July 30 at 9:00AM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . You may listen to a live webcast of the call on the company's worldwide web site, www.mc.com/investors. A replay of the call will be available on the web site beginning in the afternoon on Friday, July 30 through 5PM on Friday, August 6. A replay by telephone will also be available from about noon on Friday, July 30, through 6PM on Monday, August 2. To access the replay, call (719) 457-0820, and enter access code 732005. About Mercury Computer Systems, Inc. Mercury Computer Systems is the leading independent producer of high-performance digital signal and image processing computer systems that transform sensor A device that measures or detects a real-world condition, such as motion, heat or light and converts the condition into an analog or digital representation. An optical sensor detects the intensity or brightness of light, or the intensity of red, green and blue for color systems. data to visual information for analysis and interpretation on a real-time basis. Mercury's products play a major role in a wide range of life-critical defense and medical imaging applications. In air-, sea-, and land-based military platforms, these systems process real-time radar, sonar, and signal intelligence data. Mercury's systems are also used in state-of-the-art medical diagnostic devices, including magnetic resonance imaging magnetic resonance imaging (MRI), noninvasive diagnostic technique that uses nuclear magnetic resonance to produce cross-sectional images of organs and other internal body structures. (MRI), computed tomography (CT), and the rapidly growing field of digital X-ray. Mercury has also developed a range of shared storage software products that allow multiple systems and servers to share files and data using Fibre Channel at data rates up to and exceeding 100 MB/sec. These products are marketed for use in the broadcast, entertainment, and digital prepress industries, and for a variety of enterprise computing Refers to information technology in the larger company. See enterprise data and enterprise networking. applications. Based in Chelmsford, Massachusetts, Mercury has more than 400 employees serving customers in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe and Asia through a network of subsidiaries and distributors. Visit Mercury on the Web: www.mc.com. -0-
Mercury Computer Systems, Inc.
Consolidated Statements of Operations
(In thousands except per share data)
Three months ended Twelve months ended
June 30, June 30,
1999 1998 1999 1998
Net revenue $29,686 $23,517 $106,571 $85,544
Cost of revenue 8,942 8,308 34,237 30,084
Gross profit 20,744 15,209 72,334 55,460
Operating expenses:
Selling, general
and administrative 8,672 7,284 33,002 27,879
Research and development 5,960 3,941 20,709 14,476
Total operating expenses 14,632 11,225 53,711 42,355
Income from operations 6,112 3,984 18,623 13,105
Interest income, net 277 368 1,285 1,084
Other income (expenses), net (97) 22 185 (30)
Income before income taxes 6,292 4,374 20,093 14,159
Provision for income taxes 1,802 1,662 6,631 5,428
Net income $4,490 $2,712 $13,462 $8,731
Diluted earnings per
common share and
common share equivalent $.41 $.25 $1.25 $.94
Weighted average diluted
common share and
common share equivalents 10,904 10,647 10,800 9,270
Mercury Computer Systems, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
June 30, June 30,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 3,676 $ 6,054
Marketable securities 12,762 10,077
Trade accounts receivable, net of allowances
of $376 and $218 at June 30, 1999
and 1998, respectively 28,915 17,143
Inventory 12,431 9,125
Deferred income taxes, net 1,907 1,669
Prepaid expenses and other current assets 1,392 1,255
Total current assets 61,083 45,323
Marketable securities 8,978 18,889
Property and equipment, net 25,325 8,466
Deferred income taxes, net 1,378 429
Other assets 747 462
Total assets $ 97,511 $ 73,569
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,580 $ 3,368
Accrued expenses 3,694 2,804
Accrued compensation 4,292 3,316
Capital lease - S/T 434 --
Billings in excess of revenues
and customer advances 3,169 1,017
Income taxes payable 2,312 2,024
Total current liabilities 19,481 12,529
Capital lease - L/T
590 --
Stockholders' equity:
Common stock, $.01 par value:
25,000,000 shares authorized;
10,310,877 and 9,973,491 shares
issued and outstanding
at June 30, 1999 and 1998, respectively 103 100
Additional paid-in capital 28,515 25,961
Retained earnings 48,945 35,483
Cumulative translation adjustment and unrealized
gain/(loss) on securities (123) (179)
Related parties notes receivable -- (325)
Total stockholders' equity 77,440 61,040
Total liabilities and stockholders' equity $ 97,511 $ 73,569
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