Operating Segment, Geographic Information And Significant Customers

9 Months Ended

Mar. 31, 2012

Operating Segment, Geographic Information And Significant Customers [Abstract]

Operating Segment, Geographic Information And Significant Customers

J. Operating Segment, Geographic Information and Significant Customers

Operating segments are defined as components of an enterprise evaluated regularly by the Company's senior management in deciding how to allocate resources and assess performance. The Company is organized in two operating segments. These reportable segments were determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company's management structure:

• Advanced Computing Solutions: this operating segment is focused on specialized, high-performance embedded, real-time digital image and complete signal processing solutions that encompass signal acquisition including microwave front-end, digitalization, computing, storage and communications, targeted to key market segments, including defense, communications and other commercial applications. With the addition of KOR, the ACS segment also designs and develops DRFM units for a variety of modern EW applications, as well as radar environment simulation and test systems for defense applications.

• Mercury Federal Systems: this services-oriented operating segment supports work for the Department of Defense as well as intelligence and homeland security agencies, including the design, development, and implementation of new ISR capabilities to address present and emerging threats to U.S. forces. With the addition of PDI, the MFS segment also provides sophisticated analytic exploitation, multi-sensor fusion, and data processing services for the U.S. intelligence community.

The accounting policies of the reportable segments are the same as those described in "Note B: Summary of Significant Accounting Policies." Beginning with the three months ended March 31, 2012, the profitability measure employed by the Company and its chief operating decision maker ("CODM") as the basis for allocating resources to segments and assessing segment performance is adjusted EBITDA, The Company believes the adjusted EBITDA financial measure assists in providing an enhanced understanding of its underlying operational measures to manage its business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. The Company believes that adjusted EBITDA provides a more comprehensive basis for decision making and assessing segment performance than income (loss) from operations prior to stock compensation expense which was used in prior reporting periods. Adjusted EBITDA is defined as 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. Prior year's balances have been presented to reflect the current profitability measures for comparative purposes. Additionally, asset information by reportable segment is not reported because the Company and its CODM utilize consolidated asset information when making business decisions. The following is a summary of the performance of the Company's operations by reportable segment:

	ACS		MFS		Eliminations			Total
THREE MONTHS ENDED MARCH 31, 2012
Net revenues to unaffiliated customers	$	56,408	$	8,837	$	1,744		$	66,989
Intersegment revenues		4,018		—		(4,018	)		—
Net revenues	$	60,426	$	8,837	$	(2,274	)	$	66,989
Adjusted EBITDA	$	10,164	$	1,437	$	406		$	12,007
THREE MONTHS ENDED MARCH 31, 2011
Net revenues to unaffiliated customers	$	56,364	$	3,452	$	39		$	59,855
Intersegment revenues		1,728		—		(1,728	)		—
Net revenues	$	58,092	$	3,452	$	(1,689	)	$	59,855
Adjusted EBITDA	$	10,964	$	420	$	(125	)	$	11,259
NINE MONTHS ENDED MARCH 31, 2012
Net revenues to unaffiliated customers	$	165,866	$	18,200	$	4		$	184,070
Intersegment revenues		7,947		—		(7,947	)		—
Net revenues	$	173,813	$	18,200	$	(7,943	)	$	184,070
Adjusted EBITDA	$	36,415	$	3,010	$	147		$	39,572
NINE MONTHS ENDED MARCH 31, 2011
Net revenues to unaffiliated customers	$	158,732	$	8,872	$	(128	)	$	167,476
Intersegment revenues		4,499		—		(4,499	)		—
Net revenues	$	163,231	$	8,872	$	(4,627	)	$	167,476
Adjusted EBITDA	$	31,250	$	6	$	(468	)	$	30,788

The following table reconciles the Company's income from continuing operations, the most directly comparable GAAP financial measures, to its adjusted EBITDA:

	Three Months Ended March 31,					Nine Months Ended March 31,
	2012			2011		2012			2011
Income from continuing operations	$	5,245		$	5,378	$	16,943		$	14,243
Interest expense, net		5			4		14			49
Income taxes		2,380			2,007		8,522			5,780
Depreciation		1,970			1,660		5,730			4,640
Amortization of acquired intangible assets		1,143			663		2,651			1,299
Acquisition costs and other related expenses		145			100		763			407
Fair value adjustments from purchase accounting		(223	)		148		(245	)		148
Stock-based compensation cost		1,342			1,299		5,194			4,222
Adjusted EBITDA	$	12,007		$	11,259	$	39,572		$	30,788

The geographic distribution of the Company's revenues from continuing operations is summarized as follows:

	U.S.		Europe		Asia Pacific		Eliminations			Total
THREE MONTHS ENDED MARCH 31, 2012
Net revenues to unaffiliated customers	$	62,751	$	2,906	$	1,332	$	—		$	66,989
Inter-geographic revenues		1,627		165		56		(1,848	)		—
Net revenues	$	64,378	$	3,071	$	1,388	$	(1,848	)	$	66,989
THREE MONTHS ENDED MARCH 31, 2011
Net revenues to unaffiliated customers	$	58,441	$	381	$	1,033	$	—		$	59,855
Inter-geographic revenues		905		573		120		(1,598	)		—
Net revenues	$	59,346	$	954	$	1,153	$	(1,598	)	$	59,855
NINE MONTHS ENDED MARCH 31, 2012
Net revenues to unaffiliated customers	$	176,086	$	4,046	$	3,938	$	—		$	184,070
Inter-geographic revenues		4,571		600		87		(5,258	)		—
Net revenues	$	180,657	$	4,646	$	4,025	$	(5,258	)	$	184,070
NINE MONTHS ENDED MARCH 31, 2011
Net revenues to unaffiliated customers	$	159,746	$	2,743	$	4,987	$	—		$	167,476
Inter-geographic revenues		4,781		1,735		240		(6,756	)		—
Net revenues	$	164,527	$	4,478	$	5,227	$	(6,756	)	$	167,476

Foreign revenue is based on the country in which the Company's legal subsidiary is domiciled.

The geographic distribution of the Company's long-lived assets from continuing operations is summarized as follows:

	U.S.		Europe		Asia Pacific		Eliminations		Total
March 31, 2012	$	15,320	$	28	$	3	$	—	$	15,351
June 30, 2011	$	15,390	$	24	$	704	$	—	$	16,118

Identifiable long-lived assets exclude goodwill and intangible assets.

Customers comprising 10% or more of the Company's revenues for the periods shown below are as follows:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2012			2011			2012			2011
Raytheon Company		19	%		14	%		24	%		18	%
Northrop Grumman Corporation		13	%		22	%		20	%		20	%
Lockheed Martin Corporation		11	%		*			13	%		11	%
KLA-Tencor Corporation		*			13	%		*			10	%
		43	%		49	%		57	%		59	%

Although the Company typically has several customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms. Programs comprising 10% or more of the Company's revenue are as follows:

	Three Months Ended March 31,					Nine Months Ended March 31,
	2012			2011		2012			2011
Patriot Missile		11	%		*		*			*
Aegis		10	%		*		11	%		*
Joint Strike Fighter		*			*		12	%		*
		21	%		*		23	%		*

* Indicates that the amount is less than 10% of the Company's revenues for the respective period.