Fourth quarter GAAP losses per share from continuing operations of $0.90

Fourth quarter non-GAAP earnings per share from continuing operations of $0.01

CHELMSFORD, Mass., July 30 /PRNewswire-FirstCall/ -- Mercury Computer Systems, Inc. (NASDAQ: MRCY), a leading provider of high-performance computing solutions for image, sensor, and signal processing applications, reported operating results for its fourth quarter and fiscal year ended June 30, 2008.

In the fourth quarter, Mercury's subsidiary, Visage Imaging(R), sold its Embedded Systems and Professional Services businesses. All historical statements have been adjusted to reflect the sale of these businesses as a discontinued operation.

Fourth quarter revenues were $55.2 million, down 5% from the prior year's fourth quarter and approximately flat with the third quarter of the current fiscal year.

Fourth quarter GAAP operating losses were $21.0 million. These losses include $18.0 million in goodwill impairment charges relating to our Visage Imaging and Avionics and Unmanned Systems Group (AUSG) businesses, and a $3.2 million gain relating to the sale of our AUSG intellectual property and inventory. Fourth quarter GAAP net losses from continuing operations were $19.5 million. GAAP diluted losses per share from continuing operations were $0.90 for the fourth quarter. GAAP operating losses include $21.3 million in charges, consisting of $1.0 million in stock-based compensation costs, $1.8 million in amortization of acquired intangible assets, $18.0 million in goodwill impairment, $3.7 million in restructuring costs, and the $3.2 million AUSG gain. Excluding the impact of these charges and the gain, fourth quarter non-GAAP operating income was $0.3 million. Fourth quarter non-GAAP net income from continuing operations was $0.2 million. Non-GAAP diluted earnings per share from continuing operations were $0.01 for the fourth quarter.

For the fiscal 2008 year, revenues were $209.9 million, a 3% decline from the 2007 fiscal year. GAAP operating losses were $37.9 million. Full-year GAAP net losses from continuing operations were $35.4 million. GAAP diluted losses per share from continuing operations were $1.64 for fiscal year 2008. GAAP operating losses include $38.5 million in charges, consisting of $10.4 million in stock-based compensation costs, $7.3 million in amortization of acquired intangible assets, $18.0 million in goodwill impairment charges relating to our Visage Imaging and AUSG businesses, $5.2 million in restructuring costs, the $3.2 million AUSG gain, and a $0.8 million inventory write-down associated with AUSG. Excluding the impact of these charges and the gain, full-year non- GAAP operating income was $0.6 million. Full-year non-GAAP net income from continuing operations was $3.3 million. Non-GAAP diluted earnings per share from continuing operations were $0.15 for fiscal year 2008.

Cash flows from operating activities were a net inflow of $2.5 million in the fourth quarter. Cash, cash equivalents, and marketable securities as of June 30, 2008 were $166.5 million, an increase of $4.3 million from the third quarter and an increase of $9.4 million for the full fiscal year.

'We continued to execute against our turnaround plan this quarter,' said President and Chief Executive Officer Mark Aslett. 'Over the last eight months, we have made measurable progress operationally and financially, delivering financial results at or near the top end of our guidance range. The strategy we are executing is focused on unlocking the fundamental value of Mercury's core ACS business, returning the Company to profitable operations, and preparing the business for renewed growth. Fiscal 2009 will be a pivotal transition year for the Company. We currently expect to exit the new fiscal year a more focused and profitable business, repositioned for sustainable growth in fiscal 2010 and beyond.'

Backlog

The Company's total backlog at the end of the fourth quarter was $87.1 million, an $8.5 million increase from the same quarter last year. The total backlog decreased by $10.9 million from the third quarter of the current fiscal year. Of the current total backlog, $80.6 million represents shipments scheduled over the next 12 months. The book-to-bill ratio was 0.80 for the quarter and 1.04 for the full year.

Advanced Computing Solutions (ACS) -- Revenues for the fourth quarter from ACS were $49.3 million, down $1.0 million or 2% from the third quarter, and represent 89% of the Company's total revenues. Approximately 74% of ACS's revenues related to defense, compared to approximately 62% in the same quarter last year. For the fiscal year, ACS revenues were $188.5 million.

Visage Imaging (Visage) -- Revenues for the fourth quarter for Mercury's wholly owned subsidiary were $2.5 million, an increase of $0.7 million from the third quarter of the fiscal year. For the fiscal year, Visage Imaging revenues were $8.7 million.

Other -- Combined revenues for the fourth quarter from Mercury's other business segments totaled $3.4 million. For the fiscal year, the revenues were $12.7 million.

Business Outlook

This section presents our current expectations and estimates, given current visibility, on our business outlook for the upcoming 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, with respect to these estimates, and make themselves aware of the risk factors that may impact the Company's actual performance.

For the first quarter of fiscal 2009, revenues are currently expected to be in the range of approximately $47 million to $49 million. At this range, GAAP earnings per share are currently expected to approximate breakeven. Management currently expects to be in a position to record a tax benefit against expected GAAP losses in the first quarter. Excluding the impact of stock-based compensation costs, amortization of acquired intangible assets, restructuring costs, and the difference between expected GAAP and non-GAAP tax benefit rates, first quarter fiscal year 2009 non-GAAP per share estimates are currently expected to be in the range of a loss of $0.07 to a loss of $0.03.

Fourth Quarter Highlights

April -- Mercury announced it exclusively licensed the VistaNav(R) Synthetic Vision IP (intellectual property), developed by its Avionics and Unmanned Systems Group, to the Aerospace division of Honeywell International, Inc. Honeywell assumed sales and support of the VistaNav CIS (Cockpit Information System) situational awareness products.

April -- Mercury announced that Visage Imaging GmbH, a component of its wholly owned subsidiary Visage Imaging, Inc., reached an agreement to sell the assets of its ES/PS businesses to companies held by Orgabit Datenservice GmbH, based in Germany. The ES/PS businesses were part of Mercury's acquisition of SOHARD AG in July 2005.

May -- Mercury debuted the PowerBlock(TM) 50 system, a high-performance, ultra-compact computer, at Critical Embedded Systems MediaFest 2008 in Scottsdale, AZ. Optimized for real-time image, sensor, and signal processing and ruggedized for harsh environments, the PowerBlock 50 packs 5x performance improvement over available systems, in a six-inch footprint that weighs in at 7 pounds. The PowerBlock 50 extends Mercury's robust offering of computing

solutions available in very small to large form factors to suit a broad range of customer applications.

May -- Visage Imaging, Inc. announced it was selected by Dartmouth- Hitchcock Medical Center (DHMC) in New Hampshire to provide a 16-user Visage(R) CS Thin Client/Server system. DHMC, recently named one of the nation's top hospitals by U.S. News and World Report, will be using Visage Imaging's unique technology to further improve patient care.

May -- Visage Imaging, Inc. announced it was selected by Tufts Medical Center, Boston, MA to provide a Visage CS Thin Client/Server system with the fully integrated Visage Cardiac Analysis Package. Tufts Medical Center is a world-class academic medical center offering outstanding patient care, teaching generations of future physicians the most advanced medical science and breaking new ground with ongoing, innovative research.

June -- Mercury announced availability of the SR-110 10GE VXS Gateway, a revolutionary network-centric building block for VXS systems. The SR-110 10GE VXS Gateway brings the flexibility and extensibility of 10 Gigabit Ethernet to embedded signal processing, transporting data among multiple switch fabrics and I/O protocols and efficiently linking sub-systems based on different communications standards, without user intervention or translation.

Conference Call Information

Mercury will host a conference call on Wednesday, July 30, 2008 at 5:00 p.m. EDT to discuss the fourth quarter and fiscal 2008 results, and to review the financial and business outlook going forward.

To listen to the conference call, dial (888) 609-5666 in the USA and Canada, and (913) 312-1240 for all other countries. The conference code number is 7236243. 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 Wednesday, July 30 through 12:00 a.m. EDT on Friday, August 8. To access the replay, dial (888) 203-1112 in the USA and Canada, and (719) 457-0820 for all other countries. Enter access code 7236243. 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 non-GAAP financial measures adjusted to exclude certain non-cash and other specified charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. However, the presentation of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management believes these non-GAAP financial measures assist in providing a more complete understanding of the Company's underlying operational results and trends, and management uses these measures along with their 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.