Mercury Computer Systems Reports First Quarter Fiscal 2013 Results

Mercury Computer Systems Reports First Quarter Fiscal 2013 Results

                   First quarter operating results include:
                          Revenues of $49.4 million
                   Net loss from operations of $7.2 million
                       GAAP net loss per share of $0.24
                       Adjusted EBITDA of $1.6 million
                    Operating cash outflow of $9.9 million

CHELMSFORD, Mass., October 23, 2012 (GLOBE NEWSWIRE) -- Mercury Computer
Systems, Inc. (Nasdaq:MRCY) (www.mc.com), a best-of-breed provider of
commercially developed, open sensor and Big Data processing systems for
critical commercial, defense and intelligence applications, reported operating
results for its first quarter of fiscal 2013 ended September 30, 2012.

First Quarter Fiscal 2013 Results

First quarter fiscal 2013 revenues were $49.4 million, an increase of $0.3
million from the first quarter of the prior fiscal year. Revenues from
commercial customers increased by $0.8 million, while revenues from defense
customers decreased by $0.5 million, as compared with the prior year's first
quarter.

GAAP net loss from operations for the first quarter of fiscal 2013 was $7.2
million, or $0.24 per share, compared to GAAP net income from operations of
$2.7 million, or $0.09 per diluted share, for the prior year's first quarter.
First quarter fiscal 2013 GAAP net loss per share includes $0.11 for
restructuring charges, $0.04 associated with the amortization of acquired
intangible assets, and $0.01 for acquisition costs related to the Micronetics,
Inc. acquisition. First quarter fiscal 2012 GAAP net earnings per share
include $0.02 associated with the amortization of acquired intangible assets.

First quarter fiscal 2013 GAAP net loss from operations includes approximately
$3.7 million in tax benefits, $2.2 million in depreciation expense, $2.3
million in stock-based compensation costs, $1.8 million in amortization of
acquired intangible assets, $5.0 million in restructuring charges, $0.9
million in fair value adjustments from purchase accounting, and $0.2 million
of acquisition costs and other related expenses. First quarter fiscal 2013
adjusted EBITDA (earnings from continuing operations before interest income
and expense, income taxes, depreciation, amortization of acquired intangible
assets, restructuring, impairment of long-lived assets, acquisition costs and
other related expenses, fair value adjustments from purchase accounting, and
stock-based compensation costs) was $1.6 million, compared to $8.7 million for
the prior year's first quarter.

Cash flow from operating activities was a net outflow of $9.9 million in the
first quarter of fiscal 2013, compared to a net inflow of $4.2 million in the
first quarter of fiscal 2012. Free cash flow, defined as cash flow from
operating activities less capital expenditures, was a net outflow of $10.9
million in the first quarter of fiscal 2013, compared to a net inflow of $2.6
million in the first quarter of fiscal 2012. Cash and cash equivalents as of
September 30, 2012 were $30.6 million, a decrease of $85.4 million from June
30, 2012, largely due to $74.3 million of cash used to purchase Micronetics,
Inc. (net of cash acquired and including the payoff of assumed debt from
Micronetics, Inc.), and cash used in operating activities.

Management Comments

"Mercury's financial results for the first quarter reflected the increasingly
challenging conditions in the defense industry," said Mark Aslett, President
and CEO, Mercury Computer Systems. "Current constraints on U.S. defense
spending and uncertainties surrounding the future defense budget have led the
industry to operate in what appears to be a soft sequestration environment.
The resulting slowdowns in funding and contracting activity had a more
significant impact on our first-quarter business than we initially anticipated
– primarily due to delayed orders associated with the Navy's Surface
Electronic Warfare Improvement Program (SEWIP) Block 2."

"During the first quarter we proactively responded to this difficult industry
environment by implementing aggressive expense reduction actions that included
reducing the size of our workforce by 142 positions," Aslett said. "We expect
this restructuring and other cost control measures completed during the
quarter to result in approximately $20 million of annualized savings beginning
in the current second quarter of fiscal 2013. This is in addition to the $5
million of estimated annualized savings associated with the restructuring that
took place in the fourth quarter of fiscal 2012."

"We have been careful to retain key engineering and middle management talent –
and hence Mercury's unique capabilities and differentiation – during this
process in order to preserve the intrinsic value of the business while also
increasing its operating leverage," Aslett said. "At the same time, we have
ensured that we have sufficient liquidity and financial flexibility, not only
to manage the ongoing needs of the business, but also for future M&A purposes
when end-market conditions become more favorable. As a result, we believe that
Mercury will not only quickly recover when the defense industry returns to a
more normal procurement environment, but also be positioned for accelerated
growth and improved profitability for the long term."

Backlog

Mercury's total backlog at September 30, 2012 was $120.2 million, a $15.6
million sequential increase from June 30, 2012, and an $18.4 million increase
from September 30, 2011. Of the September 30, 2012 total backlog, $102.7
million represents orders scheduled to be shipped over the next 12 months. The
defense backlog at September 30, 2012 was $107.9 million, a $6.5 million
sequential increase from June 30, 2012, and a $10.1 million increase from
September 30, 2011. The total book-to-bill ratio was 0.8 for the first quarter
of fiscal 2013 compared to 1.3 for the first quarter of fiscal 2012 and 1.0
for the fourth quarter of fiscal 2012.

Revenues by Operating Segment

Advanced Computing Solutions (ACS) — Revenues for the first quarter of fiscal
2013 from ACS were $42.7 million, including KOR Electronics and Micronetics,
Inc., representing a decrease of $4.6 million from the first quarter of fiscal
2012, as a result of a decrease of $5.4 million in defense and an increase of
$0.8 million in commercial. Approximately 89% of ACS revenues for the first
quarter of fiscal 2013 related to defense business, as compared to
approximately 91% in the first quarter of fiscal 2012.

Mercury Federal Systems (MFS)— Revenues for the first quarter of fiscal 2013
from MFS were $9.9 million, including Paragon Dynamics, representing an
increase of $5.8 million from the first quarter of fiscal 2012.

The revenues by operating segment do not include adjustments to eliminate $3.2
million of inter-company revenues included in those operating segments in the
first quarter of fiscal 2013.

Business Outlook

This section presents our current expectations and estimates, given current
visibility, on our business outlook for the current fiscal quarter. It is
possible that actual performance will differ materially from the estimates
given, either on the upside or on the downside. Investors should consider all
of the risks, including those listed in the Safe Harbor Statement below and in
our periodic filings with the U.S. Securities and Exchange Commission, with
respect to these estimates, and make themselves aware of the risk factors that
may impact our actual performance.

For the second quarter of fiscal 2013, revenues are currently forecasted to be
in the range of $43 million to $49 million. At this range, GAAP net loss per
share is expected to be in the range of a net loss of $0.17 to $0.24 per
share. Projected GAAP net loss per share includes $0.06 per share associated
with forecasted amortization of acquired intangible assets and previously
announced restructuring expense.

Adjusted EBITDA for the second quarter of fiscal 2013 is expected to be in the
range of ($2.1) million to $0.7 million.

Recent Highlights

October – Mercury announced that it had entered into a credit agreement with a
syndicate of commercial banks, with KeyBank National Association acting as the
administrative agent. The credit agreement provides for a $200.0 million
senior unsecured revolving line of credit (the "Revolver"). The Revolver is
available for working capital, acquisitions, and general corporate purposes of
Mercury and its subsidiaries. The Revolver is available for borrowing during a
five year period, with interest payable periodically during such period as
provided in the credit agreement and principal due at the maturity of the
Revolver. Mercury has not borrowed under the credit agreement to date. In
connection with entering into the credit agreement, Mercury terminated its
prior revolving line of credit with Silicon Valley Bank.

October – Mercury announced that its KOR Electronics subsidiary received a
five year sole source basic ordering agreement (BOA) from the U.S. Navy. This
BOA supports the continued development of state-of-the-art techniques and
target generation capabilities in conjunction with the advanced Digital RF
Memory (DRFM) architecture developed by KOR Electronics. The BOA provides for
research and development, production, engineering services and ongoing support
and is valued at up to $58 million.

October – Mercury Computer Systems announced it had received a $2.2 million
purchase order relating to an airborne radar application for fighter aircraft.

September – Mercury announced a groundbreaking 6U OpenVPX™ fiber I/O module:
the Echotek® Series SCFE-V6-4QSFP-OVPX. This industry-leading module is the
only one to combine 16 channels of high-speed fiber with three of the most
powerful Xilinx® Virtex®-6 Field Programmable Gate Array (FPGA) processors
available today.

August – Mercury announced the closing of its previously announced acquisition
of Micronetics (NASDAQ: NOIZ), a leading designer and manufacturer of
microwave and radio frequency (RF) subsystems and components for defense and
commercial customers. The closing follows the satisfaction of all conditions
to the closing of the transaction, including approval of the transaction by
Micronetics' stockholders.

August – Mercury announced it received an initial order from a leading defense
prime contractor to design an optimized high performance processing subsystem
based on commercially developed OpenVPX Intel-server class building blocks.
The new design, based on open industry standards, will support an advanced
target tracking application for use on unmanned aerial vehicles. Projected
revenues to Mercury for this program are in excess of $5 million over the next
five years.

July – Mercury announced it received $5.2 million in follow-on orders from a
leading defense prime contractor for rugged high performance digital signal
and image processing modules for multiple airborne radar applications.

Conference Call Information

Mercury will host a conference call on Tuesday, October 23, 2012, at 5:00 p.m.
EDT to discuss the first quarter fiscal 2013 results and review its financial
and business outlook going forward.

To listen to the conference call, dial (888) 599-4879 in the U.S.A. and
Canada, and (913) 312-0419 in all other countries. The conference code number
is 9340984. Please call five to ten minutes prior to the scheduled start time.
This call will also be broadcast live over the web at www.mc.com/investor
under "Financial Events."

A replay of the call by telephone will be available from approximately 8:00
p.m. EDT on Tuesday, October 23, 2012, through 8:00 p.m. EDT on Sunday,
November 4, 2012. To access the replay, dial (888) 203-1112 in the U.S.A. and
Canada, and (719) 457-0820 in all other countries. Enter access code 9340984.
A replay of the webcast of the call will be available for an extended period
of time on the Financial Events page of the Company's website at
www.mc.com/investor.

Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides adjusted EBITDA
and free cash flow, which are non-GAAP financial measures. Adjusted EBITDA
excludes certain non-cash and other specified charges. Free cash flow is
defined as cash flow from operating activities less capital expenditures. The
Company believes these non-GAAP financial measures provide an enhanced
understanding of its past financial performance and prospects for the future.
However, the presentation of adjusted EBITDA and free cash flow is not meant
to be considered in isolation or as a substitute for financial information
provided in accordance with GAAP. Management believes the adjusted EBITDA and
free cash flow financial measures assist in providing an enhanced
understanding of the Company's underlying operational results and trends, and
management uses these measures along with the corresponding GAAP financial
measures to manage the Company's business, to evaluate its performance
compared to prior periods and the marketplace, and to establish operational
goals. A reconciliation of GAAP measures to the corresponding non-GAAP
financial measures included in this press release is contained in the attached
exhibits.

Mercury Computer Systems, Inc. – Where Challenges Drive Innovation^®

Mercury Computer Systems (www.mc.com) (Nasdaq:MRCY) is a best-of-breed
provider of commercially developed, open sensor and Big Data processing
systems, software and services for critical commercial, defense and
intelligence applications. With over 30 years of experience in embedded
computing, superior domain expertise in radar, EW, SIGINT, EO/IR and C4I
applications, and more than 300 successful program deployments including
Aegis, Patriot, SEWIP, Gorgon Stare and Predator/Reaper, Mercury's Services
and Systems Integration (SSI) team leads the industry in partnering with
defense prime contractors to design and integrate system-level solutions that
minimize program risk, maximize application portability, and accelerate
customers' time to market.

Mercury is based in Chelmsford, Massachusetts, and serves customers worldwide
through a broad network of direct sales offices, subsidiaries, and
distributors.

Forward-Looking Safe Harbor Statement

This press release contains certain forward-looking statements, as that term
is defined in the Private Securities Litigation Reform Act of 1995, including
those relating to fiscal 2013 business performance and beyond and the
Company's plans for growth and improvement in profitability and cash flow. You
can identify these statements by the use of the words "may," "will," "could,"
"should," "would," "plans," "expects," "anticipates," "continue," "estimate,"
"project," "intend," "likely," "forecast," "probable," and similar
expressions. These forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those projected or
anticipated. Such risks and uncertainties include, but are not limited to,
continued funding of defense programs, the timing of such funding, general
economic and business conditions, including unforeseen weakness in the
Company's markets, effects of continued geopolitical unrest and regional
conflicts, competition, changes in technology and methods of marketing, delays
in completing engineering and manufacturing programs, changes in customer
order patterns, changes in product mix, continued success in technological
advances and delivering technological innovations, changes in the U.S.
Government's interpretation of federal procurement rules and regulations,
market acceptance of the Company's products, shortages in components,
production delays due to performance quality issues with outsourced
components, inability to fully realize the expected benefits from acquisitions
or delays in realizing such benefits, challenges in integrating acquired
businesses and achieving anticipated synergies, changes to export regulations,
increases in tax rates, changes to generally accepted accounting principles,
difficulties in retaining key employees and customers, unanticipated costs
under fixed-price service and system integration engagements, and various
other factors beyond our control. These risks and uncertainties also include
such additional risk factors as are discussed in the Company's filings with
the U.S. Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended June 30, 2012. The Company cautions
readers not to place undue reliance upon any such forward-looking statements,
which speak only as of the date made. The Company undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made.

Challenges Drive Innovation, Echotek and Ensemble are registered trademarks
and Application Ready Subsystem and ARS are trademarks of Mercury Computer
Systems, Inc. Other product and company names mentioned may be trademarks
and/or registered trademarks of their respective holders.

                                                                  
                                                                  
MERCURY COMPUTER SYSTEMS, INC.                                     
UNAUDITED CONSOLIDATED BALANCE SHEETS                              
(In thousands)                                       September 30, June 30,
                                                    2012          2012
                                                                 
Assets                                                            
Current assets:                                                   
Cash and cash equivalents                            $30,568     $115,964
Accounts receivable, net                             40,503       38,532
Unbilled receivables and costs in excess of billings 10,959       10,918
Inventory                                            40,438       25,845
Deferred income taxes                                12,258       7,653
Prepaid income taxes                                 2,307        2,585
Prepaid expenses and other current assets            6,253        6,206
Total current assets                                 143,286      207,703
                                                                 
Restricted cash                                      3,546        3,281
Property and equipment, net                          19,738       15,929
Goodwill                                             177,517      132,621
Acquired intangible assets, net                      41,795       25,083
Other non-current assets                             1,098        989
Total assets                                         $386,980    $385,606
                                                                 
Liabilities and Shareholders' Equity                              
Current liabilities:                                              
Accounts payable                                     $10,888     $9,002
Accrued expenses                                     12,673       9,895
Accrued compensation                                 8,341        13,190
Deferred revenues and customer advances              4,602        4,855
Total current liabilities                            36,504       36,942
                                                                 
Deferred gain on sale-leaseback                      4,110        4,399
Deferred income taxes                                13,537       7,197
Income taxes payable                                 2,596        2,597
Other non-current liabilities                        1,679        1,367
Total liabilities                                    58,426       52,502
                                                                 
Shareholders' equity:                                             
Common stock                                         300          297
Additional paid-in capital                           225,384      222,769
Retained earnings                                    101,532      108,732
Accumulated other comprehensive income               1,338        1,306
Total shareholders' equity                           328,554      333,104
                                                                 
Total liabilities and shareholders' equity           $386,980    $385,606

                                                                   
                                                                   
                                                                   
MERCURY COMPUTER SYSTEMS, INC.                                      
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                                   
                                                         Three Months Ended
                                                         September 30,
                                                         2012       2011
Net revenues                                              $49,428  $49,122
Cost of revenues (1)                                     29,038    19,206
Gross margin                                              20,390    29,916
                                                                   
Operating expenses:                                                 
Selling, general and administrative (1)                  14,533    13,645
Research and development (1)                              10,039    11,865
Amortization of acquired intangible assets                1,788     816
Restructuring and other charges                           4,984     --
Acquisition costs and other related expenses              230       25
Total operating expenses                                  31,574    26,351
                                                                   
(Loss) income from operations                             (11,184)  3,565
                                                                   
Interest income                                           2         6
Interest expense                                          (8)       (9)
Other income, net                                         339       405
                                                                   
(Loss) income from operations before income taxes         (10,851)  3,967
(benefit)
                                                                   
Tax (benefit) provision                                   (3,651)   1,314
                                                                   
Net (loss) income                                        $(7,200) $2,653
                                                                   
Basic net (loss) earnings per share:                      $(0.24)  $0.09
                                                                   
Diluted net (loss) earnings per share:                    $(0.24)  $0.09
                                                                   
Weighted-average shares outstanding:                                
Basic                                                     29,883     29,277
Diluted                                                  29,883     30,033
                                                                   
                                                                   
(1) Includes stock-based compensation expense, allocated as follows:
Cost of revenues                                          $131     $88
Selling, general and administrative                      $1,903   $1,675
Research and development                                 $311     $277

                                                                  
                                                                  
                                                                  
MERCURY COMPUTER SYSTEMS, INC.                                     
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS           
(In thousands)                                           
                                                        Three Months Ended
                                                        September 30,
                                                        2012       2011
Cash flows from operating activities:                              
Net (loss) income                                        $(7,200) $2,653
Depreciation and amortization                            3,999     2,671
Other non-cash items, net                                (1,189)   2,018
Changes in operating assets and liabilities, net of      (5,559)   (3,126)
effect of business acquired
                                                                  
Net cash (used in) provided by operating activities      (9,949)   4,216
                                                                  
Cash flows from investing activities:                              
Acquisition of business, net of cash acquired            (67,721)  --
Purchases of property and equipment                      (980)     (1,646)
Increase in restricted cash                              (265)     --
Payments for acquired intangible assets                  --        (20)
                                                                  
Net cash used in investing activities                    (68,966)  (1,666)
                                                                  
Cash flows from financing activities:                              
Proceeds from employee stock plans                       133       90
Payments of deferred offering costs                      --        (30)
Payment of acquired debt                                 (6,575)   --
Payments of capital lease obligations                    (46)      (59)
Excess tax benefits from stock-based compensation        9         405
                                                                  
Net cash (used in) provided by financing activities      (6,479)   406
                                                                  
Effect of exchange rate changes on cash and cash         (2)       31
equivalents
                                                                  
Net (decrease) increase in cash and cash equivalents     (85,396)  2,987
                                                                  
Cash and cash equivalents at beginning of period         115,964   162,875
                                                                  
Cash and cash equivalents at end of period               $30,568  $165,862




UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands)                                            
                                                         
Adjusted EBITDA, a non-GAAP measure for reporting financial performance,
excludes the impact of certain items and, therefore, has not been calculated
in accordance with GAAP.Management believes that exclusion of these items
assists in providing a more complete understanding of the Company's
underlying operational results and trends, and management uses these
measures along with the corresponding GAAP financial measures to manage the
Company's business, to evaluate its performance compared to prior periods
and the marketplace, and to establish operational goals. The adjustments to
calculate this non-GAAP financial measure, and the basis for such
adjustments, are outlined below:
                                                         
Interest income and expense.The Company receives interest income on
investments and incurs interest expense on loans, capital leases and other
financing arrangements.These amounts may vary from period to period due to
changes in cash and debt balances and interest rates driven by general
market conditions or other circumstances outside of the normal course of
Mercury's operations.
                                                         
Income taxes.The Company's GAAP tax expense can fluctuate materially from
period to period due to tax adjustments that are not directly related to
underlying operating performance or to the current period of operations.
                                                         
Depreciation.The Company incurs depreciation expense related to capital
assets purchased to support the ongoing operations of the business.These
assets are recorded at cost or fair value and are depreciated using the
straight-line method over the useful life of the asset.Purchases of such
assets may vary significantly from period to period and without any direct
correlation to underlying operating performance.
                                                         
Amortization of acquired intangible assets.The Company incurs amortization
of intangibles related to various acquisitions it has made and license
agreements.These intangible assets are valued at the time of acquisition,
are amortized over a period of several years after acquisition and generally
cannot be changed or influenced by management after acquisition.
                                                         
Restructuring.The Company incurs restructuring charges in connection with
management's decisions to undertake certain actions to realign operating
expenses through workforce reductions and the closure of certain Company
facilities, businesses and product lines.Management believes this item is
outside the normal operations of the Company's business and is not
indicative of ongoing operating results.
                                                         
Impairment of long-lived assets.The Company incurs impairment charges of
long-lived assets based on events that may or may not be within the control
of management.Management believes these items are outside the normal
operations of the Company's business and are not indicative of ongoing
operating results.
                                                         
Acquisition costs and other related expenses.The Company incurs costs
associated with third-party professional services related to acquisition and
potential acquisition opportunities, such as legal and accounting
fees.Although we may incur such costs and other related charges and
adjustments, it is not indicative that any transaction will be
consummated.Management believes the exclusion of these items eliminates
fluctuations in our selling, general, and administrative expenses related to
acquisition activities which are unrelated to ongoing operations.
                                                         
Fair value adjustments from purchase accounting.As a result of applying
purchase accounting rules to acquired assets and liabilities, certain fair
value adjustments are recorded in the opening balance sheet of acquired
companies.These adjustments are then reflected in the Company's income
statements in periods subsequent to the acquisition.In addition, the impact
of any changes to originally recorded contingent consideration amounts are
reflected in the income statements in the period of the change. Management
believes these items are outside the normal operations of the Company and
are not indicative of ongoing operating results.
                                                         
Stock-based compensation expense. The Company incurs expense related to
stock-based compensation included in its GAAP presentation of cost of
revenues, selling, general and administrative expense and research and
development expense.Although stock-based compensation is an expense of the
Company and viewed as a form of compensation, these expenses vary in amount
from period to period, and are affected by market forces that are difficult
to predict and are not within the control of management, such as the market
price and volatility of the Company's shares, risk-free interest rates and
the expected term and forfeiture rates of the awards.Management believes
that exclusion of these expenses allows comparisons of operating results to
those of other companies, both public, private or foreign, that disclose
non-GAAP financial measures that exclude stock-based compensation.
                                                         
Mercury uses adjusted EBITDA as an important indicator of the operating
performance of its business.Management excludes the above-described items
from its internal forecasts and models when establishing internal operating
budgets, supplementing the financial results and forecasts reported to the
Company's board of directors, determining the portion of bonus compensation
for executive officers and other key employees based on operating
performance, evaluating short-term and long-term operating trends in the
Company's operations, and allocating resources to various initiatives and
operational requirements.The Company believes that adjusted EBITDA permits
a comparative assessment of its operating performance, relative to its
performance based on its GAAP results, while isolating the effects of
charges that may vary from period to period without any correlation to
underlying operating performance.The Company believes that these non-GAAP
financial adjustments are useful to investors because they allow investors
to evaluate the effectiveness of the methodology and information used by
management in its financial and operational decision-making.The Company
believes that trends in its adjusted EBITDA are valuable indicators of its
operating performance.
                                                         
Adjusted EBITDA is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided in
accordance with GAAP.This non-GAAP financial measure may not be computed in
the same manner as similarly titled measures used by other companies.The
Company expects to continue to incur expenses similar to the adjusted EBITDA
financial adjustments described above, and investors should not infer from
the Company's presentation of this non-GAAP financial measure that these
costs are unusual, infrequent or non-recurring.
                                                         
The following table reconciles the most directly comparable GAAP financial
measure to the non-GAAP financial measure.
                                                         
                                     Three Months Ended
                                     September 30,                         
                                     2012                 2011
(Loss) income from continuing         $(7,200)           $2,653
operations
Interest expense, net                 6                   3
Income tax (benefit) expense          (3,651)             1,314
Depreciation                          2,211               1,855
Amortization of acquired intangible   1,788               816
assets
Restructuring                         4,984               --
Acquisition costs and other related   230                 25
expenses
Fair value adjustments from purchase  925                 23
accounting
Stock-based compensation expense      2,345               2,040
Adjusted EBITDA                       $1,638             $8,729
                                                         
Free cash flow, a non-GAAP measure for reporting cash flow, is defined as
cash provided by operating activities less capital expenditures and,
therefore, has not been calculated in accordance with GAAP. Management
believes free cash flow provides investors with an important perspective on
cash available for investment and acquisitions after making capital
investments required to support ongoing business operations and long-term
value creation. The Company believes that trends in its free cash flow are
valuable indicators of its operating performance and liquidity.
                                                         
Free cash flow is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided in
accordance with GAAP.This non-GAAP financial measure may not be computed in
the same manner as similarly titled measures used by other companies.The
Company expects to continue to incur expenditures similar to the free cash
flow financial adjustment described above, and investors should not infer
from the Company's presentation of this non-GAAP financial measure that
these expenditures reflect all of the Company's obligations which require
cash.
                                                         
The following table reconciles the most directly comparable GAAP financial
measure to the non-GAAP financial measure.
                                                         
                                     Three Months Ended
                                     September 30,                         
                                     2012                 2011
Cash flows from operations            $(9,949)           $4,216
Capital expenditures                  (980)               (1,646)
Free cash flow                        $(10,929)          $2,570




MERCURY COMPUTER SYSTEMS, INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE RANGE              
Quarter Ending December 31, 2012                             
(In thousands, except per share data)                        
                                                            
The Company defines adjusted EBITDA as income from continuing operations
before interest, income taxes, depreciation, amortization of acquired
intangible assets, restructuring, impairment of long-lived assets, acquisition
costs and other related expenses, fair value adjustments from purchase
accounting, and stock-based compensation costs.
                                                            
The following table reconciles the adjusted EBITDA financial measure to its
most directly comparable GAAP measure:
                                                            
                                         Range
                                         Low                 High
                                                            
GAAP expectation --- (Loss) income from   $(0.24)           $(0.17)
operations per diluted share
                                                            
                                                            
GAAP expectation --- (Loss) income from   $(7,106)          $(5,204)
operations
                                                            
Adjust for:                                                  
Interest expense, net                     9                  9
Income taxes                              (3,504)            (2,566)
Depreciation                              2,208              2,208
Amortization of acquired intangible       2,230              2,230
assets
Restructuring                             599                599
Acquisition costs and other related       --                --
expenses
Fair value adjustments from purchase      1,271              1,271
accounting
Stock-based compensation expense          2,202              2,202
Adjusted EBITDA expectation               $(2,091)          $749

CONTACT: Kevin M. Bisson, CFO, Mercury Computer Systems, Inc.
         978-967-1990

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