4/18/2003 - Mercury Computer Systems, Inc. (NASDAQ: MRCY) reported results for its third quarter fiscal 2003 ended March 31, 2003.
The Company posted its 49th consecutive quarter of profitable performance. In the third quarter:
"We are pleased with the results for the quarter," said Jay Bertelli, president and chief executive officer of Mercury Computer Systems. "It was a very strong performance with revenue increasing 40% over last year, expanding margins, and solid working capital management resulting in another strong quarter of cash generation. The Company generated $6.3 million in cash flow from operating activities in the quarter, bringing the total for the year to approximately $42.9 million."
Order Rates and Backlog
Order rates for the quarter were low within the defense electronics and medical imaging segments resulting in a book-to-bill ratio below 1.0. The Company’s total backlog position at the end of the quarter was $59.8 million, down from $78.4 million at the beginning of the fiscal year. Of the current total backlog, $54.2 million represents shipments scheduled over the next 12 months.
Revenues for the quarter from defense electronics were $34.4 million, representing 71% of total revenues. Defense electronics revenues continued to recover from last year’s nadir, increasing 95% over the prior year’s third quarter performance of $17.6 million. For the first nine months of fiscal 2003, defense electronics revenues were $91.6 million, representing 67% of the Company’s total revenues, compared to $64.1 million for the same period of fiscal 2002, a year-over-year increase of 43%. The year-over-year increase in defense electronics revenues occurred across each of the three primary application markets within the segment, including radar, signals intelligence, and emerging applications markets.
Revenues for the quarter from medical imaging were $8.2 million, representing 17% of total revenues. Medical imaging revenues were down 43% compared to the prior year’s third quarter performance of $14.3 million. For the first nine months of fiscal 2003, medical imaging revenues were $28.4 million, representing 21% of the Company’s total revenues, compared to $34.8 million for the same period of fiscal 2002, a year-over-year decrease of 18%. Medical imaging revenues were down year-over-year due primarily to continued reductions in CT-related revenues as customers introduce CT models that do not contain the Company’s products. The reduction has been partially offset by increasing revenues in other modalities, including MRI, and Digital X-ray. The Company anticipates shipments for the CT modality to be essentially completed by the end of the fourth quarter.
Revenues for the quarter from OEM solutions were $6.1 million, representing 12% of the Company’s total revenues. OEM solutions revenues increased 103% compared to the prior year’s third quarter performance of $3.0 million. For the first nine months of fiscal 2003, OEM solutions revenues were $15.8 million, representing 12% of the Company’s total revenues, compared to $8.3 million for the same period of fiscal 2002, a year-over-year increase of 90%. The year-over-year increase in OEM solutions revenues is due primarily to increased shipments of systems for inclusion in baggage scanning/Explosive Detection Systems ("EDS") applications, and to increased shipments to semiconductor imaging OEMs for developing and testing of new semiconductor imaging systems. Growth in this business segment is constrained by the continued weakness in the overall semiconductor capital equipment industry.
This section presents our current expectations and estimates, given current visibility, on our business outlook. It is possible that actual performance will differ materially from the ranges and estimates given – either on the upside or on the downside. Investors should consider all of the risks identified, including those listed in the Safe Harbor Statement below, with respect to these estimates and make themselves aware of the risk factors that may impact the Company’s actual performance.
For the fourth quarter, the Company expects revenues in the range of $43 million to $46 million. The mid-point of this range would represent 3% growth over the year-ago period. At these revenue levels, operating income should approximate 12% of revenues resulting in an estimated diluted EPS in the range of $0.16 to $0.20 for the quarter. The mid-point of this range would represent a 25% decrease from the year-ago quarter. The year-earlier period included $1.6 million in non-operating income, representing $0.05 in diluted earnings per share, associated with the sale of the SSBU.
Assuming the mid-point of the range for Q4, the Company expects to complete FY03 with revenues of approximately $180 million and diluted earnings per share of approximately $1.00.
There is significant uncertainty in all of our markets due to a combination of the current geo-political environment and the continued weakness in worldwide economies. Faced with this level of uncertainty, the Company is not prepared at this time to provide specific guidance beyond the fourth quarter. Recognizing the current limited visibility to revenue growth, the Company will closely monitor market trends, order rates and expenses as it develops its fiscal 2004 operating plan. At this point in the planning process, the Company is anticipating modest revenue growth in fiscal 2004.
Third Quarter Highlights
About Mercury Computer Systems, Inc
Mercury Computer Systems, Inc. (NASDAQ: MRCY) is the leading producer of high-performance embedded, real-time digital signal and image processing computer systems. Mercury’s products play a critical role in a wide range of applications, transforming sensor data to information for analysis and interpretation. In military reconnaissance and surveillance platforms the company’s systems process real-time radar, sonar, and signals intelligence data. Mercury’s systems are also used in state-of-the-art medical diagnostic imaging devices including MRI, CT, PET, and digital X-ray, and in semiconductor imaging applications including photomask generation and wafer inspection.
Based in Chelmsford, Massachusetts, Mercury serves customers in North America, Europe and Asia through its direct sales force and a network of subsidiaries and distributors.
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