Good day and welcome everyone to the Mercury Computer Systems fourth quarter fiscal 2009 earnings results conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Company's Senior Vice President and Chief Financial Officer, Bob Hult. Please go ahead, sir.

Good afternoon and thank you for joining us. With me today is our President and Chief Executive Officer, Mark Aslett. If you have not received the copy of the earnings release, you can find it on our website at www.mc.com. We would like to remind you that remarks that we may make during this call about future expectations, trends, and plans for the Company and its business constitute forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Additional information regarding forward-looking statements and risk factors is included in the press release we issued this afternoon reporting the Company’s fourth quarter and fiscal year 2009 results and in the Company’s periodic reports filed with the SEC. We caution listeners of today’s conference call not to place undue reliance upon any forward-looking statements, which speak only as of the date of this call. We undertake no obligation to update any forward-looking statements. In addition to reporting financial results, in accordance with Generally Accepted Accounting Principles or GAAP, we will also be discussing non-GAAP financial measures adjusted to exclude certain charges which we will specifically identify. 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 in the marketplace, and to establish operational goals; however, they are not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial results discussed in today's conference call is contained in the press release we issued this afternoon. I am now pleased to turn the call over to Mercury's President and CEO, Mark Aslett.

Thanks Bob. Good afternoon everyone and thank you for joining us. I will begin with an update on the business while Bob will review the financials and discuss our guidance for the first quarter, and then we will open it up for your questions. On our call 12 months ago, we said fiscal 2009 would be a pivotal transition year for Mercury and it was. We executed successfully on each of the three goals on our turnaround strategy. We refocused the business and completed the divestiture of our non-core businesses in a very challenging M&A environment. We improved the underlying operations of the business and return the Company to profitability and we developed a strong and growing position for Mercury in the defense, intelligence, surveillance and reconnaissance or ISR space. As a result, we exited fiscal 2009 a more focused and profitable enterprise. From a financial reporting standpoint, we have finally unmasked the two profitability and potential in our core business. Now, it is all about growth. The progress we made in fiscal 2009 positions us well to expand our business on both the top and bottom line as we begin the new fiscal year. We are in a design-win led business so if you look at the factors that we believe will drive our growth going forward, the first is growth in the number and value of our design wins. Fiscal 2009 was a great year in this regard as the five year probable value of our defense design wins increased 51% from fiscal 2008. The second growth driver will be growth and complementary ISR related services and systems integration business in ASC. We also made excellent progress in expanding this part of our business in fiscal 2009 delivering year-over-year revenue growth of 157%. Our third growth driver is…

Thank you, Mark. As a reminder, I will be discussing our fourth quarter and fiscal year 2009 results and first quarter guidance on both a GAAP and non-GAAP basis. In addition, now that we have divested all of our non-core businesses and treated them as discontinued operations, the numbers I will be discussing relate only for continuing operations. Also note that we replaced non-GAAP earnings with adjusted EBITDA as one of our guidance measures. Starting on the top line. Total revenue for the fourth quarter of fiscal 2009 was $48.4 million, slightly above the top end of our guidance range of $46 million to $48 million. This compares with revenues of $50.6 million for the sequential third quarter and $49.6 million for the fourth quarter of fiscal 2008. For fiscal year 2009 as a whole, Mercury's total revenues were $188.9 million, down 1% from the prior fiscal year. Non-GAAP earnings from continuing operations for the fourth quarter of fiscal 2009 were $0.013 per diluted share, also above the high end of our guidance range, which was $0.05 to $0.08 per share. For the full year, non-GAAP earnings from continuing operations were $0.49 per diluted share compared with $0.51 for fiscal 2008. Looking at our revenues by operating unit, revenue in ACS including both defense and commercial were $47.2 million, down 4.5% from the sequential third quarter and down 4.3% from Q4 of fiscal 2008. For the full year fiscal 2009, ACS revenue was down by 1.7% to $185.3 million from $188.5 million in fiscal 2008. Our Mercury Federal system segment had an outstanding year. Revenue increased from $200,000 in FY08 to $5.7 million in FY09. Mercury's total book-to-bill ratio, including ACS and Mercury Federal for the fourth quarter, was 1.33 and for the full year, 1.11. Our fourth quarter total…

(Operator Instructions) Your first question comes from the line of Tyler Hojo - Sidoti & Company. Tyler Hojo - Sidoti & Company: I was hoping maybe you could talk a little bit more about the systems integration and services business and ACS. Last quarter, I think you gave us a number just in terms of what that contributed in revenue in the quarter and I am hoping that you can start maybe the dialogue by giving that again.

Okay, so the revenue in services and systems integration this quarter was $7 million. Tyler Hojo - Sidoti & Company: Okay, that is more than double what it was in the third quarter. Can you maybe talk about what drove that and what your expectations are for that little niche in the segment as we move in to fiscal 2010 and beyond?

Yes, so if you look at what we are trying to do at a corporate level, we are really positioning the Company as an ISR subsystems integrator that kind of building upon our expertise in high performance signal processing and adding complementary services and systems integration to increase the size of the deals that we are going after. So, what we are starting to see is more and more opportunity for deals that are within our existing pipeline to provide more of those types of services to our existing prime defense contract to customers. So, that is kind of what we are trying to do and I think we expect good growth out of that business going forward. Tyler Hojo - Sidoti & Company: Okay, great and maybe you could just comment on, I am not sure if you are familiar with, I imagine you are familiar with the OCI clause in the new defense procurement legislation and I am just wondering if you think this impacts basically the business model going forward and if potentially put some risk to some of the things we are trying to accomplish here.

Okay. Let me start out by talking about the rules as they stand today. I mean we have done a pretty thorough OCI review and through that review, we determined two things that currently we have no work or plan projects that trigger the current OCI rules and secondly, the way in which Mercury and Merc Fed work together does not trigger the existing OCI rules. So, I think we believe that we are fine today. Looking at the new pieces of legislation of which these two, the National Defense Authorization Act as well as the Weapon Systems Acquisition Reform Act, over the next 12 months, that could result in the definition of new best practices or changes of the defaults. Our best view of it is that the primary focus area of the government is likely to be the large primes under the definition and potential conflicts associated with being classified as the lead systems integrator, neither Mercury nor Merc Fed is the lead systems integrator. So, basically we do not believe we got a problem. What we are going to continue to do is basically monitor any potential changes and make sure that we are in compliance with it going forward, Tyler. Tyler Hojo - Sidoti & Company: Okay that sounds good and just lastly for me, on the R&D side, I think you were down somewhere in the mid teen sequentially. Obviously, you are up sequentially in design wins. I mean just on the R&D front obviously part of the story has been trying to leverage those R&D dollars but I mean, is this downward trend something to expect going forward or have you kind of bottomed out here?

If you look at the R&D, yes, it can be lumpy quarter to quarter depending upon things like the timing of prototype deliveries, etc. Our expectation is that R&D will remain relatively flat overall for FY10 and so, that is our expectation. It may be up a little or may be down a little on the quarterly basis.

Your next question comes from the line of Mark Jordan - Noble Financial.

Just following up a little more explicitly on the R&D, it is flat year over year. You did say that you saw op expenses being flat sequentially so that would imply probably a little bit higher R&D in the out quarters of fiscal 2010?

Mark, it is Bob. We are really trying to stand firm on not getting into the business of forward guidance beyond the next immediate quarter but going back to Mark Aslett's point on R&D, there is operating leverage in our model so we are not looking at much growth across OpEx as we grow into our model with top line growth over the next couple of years.

So that is kind of consistent with what we said in terms of our pro forma model structure.

Relative to that, just to make sure that I heard things properly on your revised model, you said on a blended basis, you are looking for 14% to 15% operating margins on a non-GAAP basis, is that correct?

That is correct, on a non-GAAP basis and we believe that will deliver…

Will the GAAP adjustment be crudely a 150 to 200 basis points if you were to look at that on a GAAP basis?

It is in that range but the big adjustment there is really depreciation to get from an EBITDA. I would rather go to EBITDA, Mark, if you know what I am saying.

Yes.

I think what we are trying to do is to provide guidance on a GAAP basis going forward in an EBITDA basis. I reset the model on a non-GAAP basis so that you could compare yesterday's Mercury model to tomorrow and I think our big message is yesterday's model had a non-GAAP operating percentage of 15 and we are ranging at 14 to 15 now.

Just because of the succession you see in Merc Fed.

It is really coming down to mix with Merc Fed over the planning horizon next two or three years becoming 10% to 15% of our total revenues and that will run with 10 to 12 points on the bottom line, again non-GAAP. So, if you want to adjust our non-GAAP down to a GAAP, you will probably going to have to take some of the historical charges that you got in your model and attempt to model those going forward. I am going to try to stay away from that.

Okay. Two more questions if I may, one, your restructuring charge was up to almost a million dollars, was that kind of clean up case and what should we look for in sort of moving forward…

Yes, sure.

And then secondly, will you be reporting a tax rate in the upcoming year? You did say that you had adjusted; you had a tax rate of 27% assumed in some of your calculations. When will your results reflect a reported tax?

Let me just quickly hit the tax rate. Our best estimate right now is that we will average at 27% rate for 2010. Onto restructuring, we did incur about a million dollar restructuring expense in the fourth quarter. It was a little bit more than clean up frankly. We sold our final non-core asset in the June quarter which gave us the opportunity to reorganize our corporate functions and that is primarily what that charge is all about is a more focused Mercury going forward, ACS and Merc Fed, having sold five businesses in the last 18 months. So, we took advantage with that opportunity in the fourth quarter restructured. We do not expect much in the way of restructuring charges going forward.

Your next question comes from the line of Stephen Levenson - Stifel Nicolaus.

On you ISR subsystems integration efforts, where do you think you are going to run into and how do you think you are going to beat them?

I think if you look at our traditional competitors given what we have done, we are not looking to branch out into other areas of technical capabilities. We are still focusing very much on the digitalization, signal processing, and compute capability for the platforms that we are selling into. So, I think our competitor set remains relatively stable. What we are starting to see really is the primes looking to outsource more of the stuff that they themselves may have done historically and this ground base radar program to see the missile defense is the great example. The last time around, in terms of this particular program, the primes themselves did much of the work. This time around, they have outsourced it to Mercury.

Second, on the sales mix. I do not know if this is something you have but it will be helpful. Can you break it out between the upgrade and reset work that you are doing and what you are doing on new platforms?

No, we have not got that information, Steve.

Okay, if you wanted to take a guess, do you believe it skewed heavily one way or the other?

I would say the majority of the work today is on upgrades to existing platforms, specifically in ACS. If you look at Merc Fed, they are more focused on new starts in the ISR space and the Golgan Stare program that I mentioned is a very good example of a next generation ISR platform and system that start into incorporate in our converged sense of network architecture capability.

Okay, if you can say, is the customer there General Atomics is the maker of the aircraft or Sierra Nevada, the maker of the sensor package?

We are not at liberty to say which one it is.

Okay and I guess last is, do you think the mix is going to stay this way at least for fiscal 2010?

In terms of upgrades versus new?

Right.

Yes, because I think if you look at the focus on much of the defense budget today, it is providing, upgrade that capabilities onto existing platform. So, yes my belief is that that mix would remain relatively stable.

(Operator's instruction) Your next question comes from the line of Philip Friedman - PW Partners.

I got two questions. Do you know about what percent of last year's continuing ops backlog of the shippable? Was it comparable to the 71% going into this year?

Phil, all the backlog numbers we have given has the discontinued operations taken out of them.

Alright. Okay, so the question is maybe I missed it when you reported it, therefore, this year's number; you said I think was 71% is shippable for the next 12 months so going into next year that helps us. So I am trying to figure out what the percent shippable was last year or into the next 12 months.

Yes, I can do a quick calculation. It was much higher, Phil, 90%+.

Okay.

Now, quick reminder there, total backlog is up over $20 million year on year and I think what I want to make sure you are understanding here is good example is the program that Mark was just talking about where we are doing engineering services and systems integration work and the program that he broke down there, it is an $18 million program with the hard purchase order. Three chunks, $6 million products, $6 million engineering services and another $6 million with systems integration. That plays out over a greater than 12-month period. So, I think it is good news is what you are observed in the numbers.

There is one other point that if you look with the commercial business being down, there is a much greater percentage of the backlog associated with the defense business this year than last.

Okay and then just the second last question is a follow up to the margin question on the 14% to 15%, just to help frame it, the Q1 guidance you gave, the amortization I think of $400,000, the depreciation of $1.3 million and the stock-based comp of $1.0 million, those were really the three items, right, that would be excluded from a reported GAAP EBIT margin, right?

That is correct.

Okay, so if I take that $2.7 million and very simplistically multiply it times four and again $10.8 million, I am not sure if that is all close to reasonable and say, you guys you have typically go at the high end or better of your revenue numbers of 45 and 180. You have simply take 200, my number not yours, right. So that would say the numbers closer to 550 basis points close, not the 150 to 200 of the prior questionnaire so is my math wrong or…?

Well, you have put yourself in the annual guidance business there for 2010 and we are trying to stay out of that but…

But is my logic of annualizing those items wrong?

No, you are dealing with the correct item but you need to find obviously an algorithm to annualize them. I will go back to Mark Jordan's question, he took a non-GAAP target bottom line of 14% to 15% and he was trying to get it down to GAAP and without parsing all the individual pieces but you have itemized them for us or enumerated them, it is two to three points…

But then I am off in the stock based compensation or is that more first quarter loaded?

No, stock-based compensation is past year. Total year run about $5 million and it will run somewhere in a similar range next year.

And same thing though with the amortization and depreciation should be fairly linear I would think.

Depreciation will not move around too much and a note on the amortization of intangibles, you set this up when you acquire companies and the intangibles that we have been amortizing relate to acquisitions that Mercury made back in the 2004 and 2005 timeframe, not the ones we sold, the ones we still have like our Equitech business in Huntsville. These tend to run out variably depending on what the asset is in the three, four and five timeframe. So, they burn off all the time. So, we do have some moving parts there. I think you should stick with two or three points with some variability, adjust non-GAAP down to GAAP in terms of a target business model. I would also encourage you to stay on point and we are pretty comfortable looking at in adjusted EBITDA which is go in the other way of 17% to 18% as a target business model and I think you will find that easier to work with as a comparable to other companies.

You have a follow up question from the line of Tyler Hojo - Sidoti & Company. Tyler Hojo - Sidoti & Company: I was just wondering if you had the operating margins for the segments or do I have to wait for the 10-K.

I think we should wait for the K to get filed.

And it appears there are no more questions at this time. I would like to turn the conference back over to our speakers for any closing remarks.

Okay. Thanks, Ryan and thanks to everyone for listening. We look forward to speaking with you again next quarter. This concludes our call.

That does conclude today's conference. We thank you for your participation.