Good day and welcome everyone to the Mercury Computer Systems Incorporated Fourth Quarter Fiscal 2010 Earnings Results Conference Call. Today’s call is being recorded. At this time for opening remarks and introduction, I would like to turn the call over to the company’s Senior Vice President and Chief Financial Officer Mr. 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 press release, you can find it on our website at www.mc.com. We’d 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 as that term is defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by the use of the words may, will, should, plans, expects, anticipates, continue, estimate, project, intent and similar expressions. Such forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks include, but are not limited to general economic and business conditions including un-foreseen weaknesses in the company’s markets. Effects have continued geo-political 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, continued funding of defense programs, the timings of such funding, changes in US 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 outsource components. Inability to fully realize the expected benefits from acquisitions and divestitures or delays in realizing such benefits. Challenges in the integrating and acquired businesses and achieving anticipated synergies and difficulties in maintaining key customers. Additional information regarding forward looking statements and risk factors is included 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. I’d also like to mention that in addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, during our call, we will discuss a non-GAAP financial measure, specifically adjusted EBIDTA. Adjusted EBIDTA excludes interest income and expense, income taxes, depreciation, amortization of acquired intangible assets, restructuring expense, impairment of long lived assets, acquisition and other related expense and stock-based compensation costs. A reconciliation of adjusted EBIDTA to GAAP net income from continuing operations is included 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’ll begin with an update on our business for the fourth quarter. Bob will review the financials and discuss our guidance. And then we’ll open it up for your questions. Q4 was the strong financial two year of solid progress for Mercury. On our call a year ago, we said the business was positioned to expand on both the top and bottom lines. We produced consistent growth in revenues from adjusted EBITDA since then. Total revenue for the fourth quarter is $63.6 million, exceeded the high end of our guidance range by 3.6 million. Total defense revenue including ACS and Mercury Federal, increased 40% sequentially and by 20% year over year to $47.9 million. This growth was mainly driven by the $19 million Aegis missile defense order we shipped as planned in the quarter. This was also a strong quarter for commercial revenue, which grew 87% year-over-year to $15.8 million. The work we’ve done to restructure, refocus and strengthen our defense business over the past two years, has significantly improved Mercury’s operating leverage. Our GAAP earnings from continuing operations in the fourth quarter of fiscal 2010, was $0.77 per diluted share, compared with guidance of $0.25 to $0.28 per share. The major variances to guidance were approximately a $0.32 gain due to the partial release of a tax valuation allowance, as well as a $0.14 gain due to higher revenues and lower operating expenses. Adjusted EBITDA for Q4, increased from $5.9 million a year ago to $12.4 million, compared with our guidance of 9.3 million to 9.9 million. We ended fiscal 2010 with a positive book-to-bill of 1.03. Total backlog including both defense and commercial is up 6% year-over-year and our 12 months backlog is up 27% year-over-year. We…

Thank you, Mark. As a reminder I will be discussing our result on a GAAP basis. Please note that commencing with FY 2010, our non-GAAP measure for reporting financial performance is adjusted EBITDA, we believe that GAAP combined with adjusted EBITDA is consistent with practices in the defense industry. In addition since we had divested all of our non-core businesses and have been treating them as discontinued operations since the end of FY '09, the numbers I will be discussing relate only to continuing operations. Mercury's total revenue for the fourth quarter of fiscal 2010 was $63.6 million, exceeding the top end of our guidance range of $58 million to $60 million. This compares with $48.4 million in revenue for the fourth quarter of fiscal 2009. For the full 2010 fiscal year, total revenue increased nearly 6% to $199.8 million from $188.9 million in fiscal 2009. Please note that in Q1 of fiscal 2010, Mercury elected to adopt a new EITF 08-1 revenue arrangements with multiple deliverables. Although Mercury was not required to adopt this guidance until Q1 of FY '11, we elected to early adopt as the company believes this guidance allows for the recognition of revenue for an arrangement of multiple deliverables and will closely mirror the economics of the arrangement. As result of this adoption, in the first, second, and third quarters of fiscal 2010, Mercury recognized a net $2 million, $2.3 million and $3.2 million respectively. That would have been deferred under the previous guidance EITF 00-21 with multiple element arrangements. We recognized a net $17.6 million in Q4, the majority of which was from our large Aegis program shipment, resulting in incremental revenue of $25.1 million for full year FY 2010. GAAP income from continuing operations for the fourth quarter of fiscal 2010 was $18.0…

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions). And we will go to Jim McIlree with Merrill Lynch.

I apologize if you went over this at the beginning of the call. But did you talk about design wins during the quarter? The numbers and the dollar amounts?

We actually did mention some of that in my script, so the total design wins for the quarter were 11. We had a 11 in defense which was one more than what we had in the same period last year.

And then typically you gave a five year probable value attached to that, did you that as well?

Yeah. The five year probable value of our defense design wins on a year-over-year basis in Q4 was up 17%. For the year as a whole the five year probable value of our defense design wins was actually up 19% on a year-over-year basis.

About this, does your tax rate assumption assume the R&D tax credit is reenacted or not?

The 37% rate for ‘11?

Correct.

No it does not, should it be and it probably will get another one or two points out of that, so we could move down modestly by one or two points from 37, but we did not plug in to it that rate, we’ll wait till it’s actually done.

Why is gross margin up substantially quarter-to-quarter on a sequentially lower revenue anticipation?

What’s always the case with us is the product mix was in the given quarter varies according to the program and the business mix Jim.

I was hoping you wouldn’t say that but I thought you would.

Well product and business so, business being the mix between defense and commercial, it could also be influenced by the SSI business, how large is that in the given quarter, because there is a number of variables there. I think big picture if you look back on it this past year, we kind of modulated around very narrow range and I would expect that for FY’11 we are going to see the same thing but, it’s again mix can change it one quarter to the next.

We’ll go next to Tyler Hojo with Sidoti & Company. Tyler Hojo - Sidoti & Company: Through your script there Mark, you kind of mentioned solid growth in fiscal ‘11, I guess several times and, so my question is what is that in context to is that in context to kind of what you have historically done or is that in context to kind of the ISR space as a whole. Can you kind of walk us through that a little bit?

My comments were really in relation to what we delivered in financial year ‘10, so it's kind of a year-over-year comparison. Tyler Hojo - Sidoti & Company: Okay, I see, and maybe you can talk about a little bit about Mercury's growth prospects relative to kind of the market as a whole. Some of the larger players are playing kind of the same space that you guys do have indicated somewhere in the high single digit kind of C4 ISR growth rates on a go forward basis and is it too aggressive to assume that perhaps you could outpace that growth just given your size and some of the platform opportunities you have?

Yeah, I think is it unreasonable maybe, maybe not. I think we are kind of looking at the high single digits to low double digits depending on what happens with our major program drivers. I think we feel that we are well positioned within certain areas of the defense budgets and we have talked bit about those being ISR missile defense and EW and then potentially longer term counter ID. So, we think we have dropped the right mix of programs, the programs that we are on it performing well, we think our business model is in line with the acquisition reform that we are seeing out of the administration. So I think we are in a good position to grow, but it all depends on the timing and the funding of certain programs. Tyler Hojo - Sidoti & Company: Okay thanks for that color. And just on Merc Fed, was that profitable in the quarter?

Merc Fed.

Almost. We’re having around breakeven kind of... Tyler Hojo - Sidoti & Company: Maybe you could just comment on how the transition in leadership is going there and I guess that you have touched on kind of near term expectations, but maybe if you could just touch on that?

So I think Dave and the team is doing a great job. We actually did recruit another individual into the Merc Fed leadership team this quarter to kind of lead the systems and technology push. As we’ve talked about business is highly concentrated around a large single program where you know we are providing a next generation to systemize our image processing sub system, we believe that we’re well aligned for Phase II. If the program is awarded and the development and the funding moves ahead this year as we think it may, then we could start and see a more rapid ramp in bookings in MFS than maybe even more we anticipated last quarter when we spoke. So we’ll see Tyler Hojo - Sidoti & Company: Okay very good and just lastly from me, if you can perhaps comment on the [e-Mars] program, I know you highlighted it last quarter I think when I asked you the question, but it seems like some of the primes are really starting to talk about that one?

We believe that we could be well positioned for [e-mars] in the second side of things. We are one prime in particular so we will have to wait and see how the program progresses but we are part of several [e-moss] bids. Tyler Hojo - Sidoti & Company: Okay. Several meaning more than two?

Not necessarily.

We will go next to Mark Jordan with Noble Financial.

Question relative to the Aegis program, obviously a significant surge in revenues Q4. Could you give us a sense as to the order of magnitude as Aegis potential for 2011? And how would that program be spread out over the year?

Yeah, Aegis as we talked about is we expect it to be roughly at 10% program going forward. We still believe that’s very much the case. That 10% is based around kind of the existing program and the way in which we expect that to play out. As we talked about however though we do see additional upside opportunities around Aegis longer term associated with taking out capability and maybe putting it on to different platforms, additional shifts that maybe funded in the budgets and then maybe taking the Aegis capability and putting it over the shore. So I think if you stick with the goal of having as approximately 10% program you are not going to be far wrong from a planning perspective. This year total bookings in Aegis actually totaled over 35 million. So we got more business this year, than what the 10% that we have been planning against. As it relates to the timing, again as we find out during this year, it could be somewhat lumpy so we are not I think going to forecast how that may play out on a quarter-by-quarter basis.

Okay, looking at, Aegis is in a early phase of what generation rollout, are you shipping and into fiscal ‘11, third generation product and how does that shift to fourth generation impact your revenue streams?

So the products that we are shipping now are part of the 4.01 system, so it’s our latest generation of product that will be going into production.

Okay and could you give a little color as to when the timing or what or dating issues relative to for military sales on Patriot?

Yeah, so today we received a PO for a single country which is the UAE and we received that booking in the fourth quarter of FY ‘09, as Raytheon mentioned on that earnings call last week, they are obviously pursuing a number of different countries. What they are highlighting is that they believe that Saudi Arabia is likely next in line and that; they could see Turkey later this year. In addition, I think as we have spoken about in the past Congress has already approved the sale of Patriot systems to Taiwan. So out of all of the loans that they are pursuing, there are the three that we see in the near term.

And if you were to look at value of ex-award for military sale, Patriot sale announcement from Raytheon is your content in the order magnitude of 10% or can you give us a sense of size on what that might represent?

Not, really. We expect that it’s going to be pretty significant for us, as we are going forward, I'm not prepared at this point to kind of put a number on it.

We'll go next to Kevin Ciabattoni with Boenning and Scattergood.

First looking at Boeings acquisition of Argon ST, can you provide us with some color regarding what you see there in terms of opportunities or challenges for Mercury?

Argon is clearly an important customer, we think that we have been doing pretty good job for them on some of their most important programs. Yeah, I think as we are looking at the acquisition, we believe that the sale to Boeing is something that will benefit us in the longer term. Argon is being particularly strong in the Navy around their SSEE Increment E and SSEE Increment F programs which were a part and if you look at Boeing’s strength, clearly they are very strong in the airborne domain. So I think one of our beliefs is that Boeing will help transition some of Argon’s SIGINT capabilities more quickly into airborne production platforms and we could benefit as a result of that.

Okay, that’s helpful. And then L3 recently received a pretty sizeable order for airport scanners, is that something that you guys are involved in?

Not to my knowledge, no.

We'll go next to Jonathan Ho with William Blair.

Good afternoon. Can you just give us sort of your thoughts right now in terms of the timing for ASML's ramp up relative to the KLA I guess wind down and maybe your thoughts in terms of how that’s going to impact the commercial side of ACS throughout the year?

Yes sure. I think we’re definitely starting to see the ramp. We saw over 50% increase in terms of the bookings with ASML in the fourth quarter as compared with the third. We do believe that we are going to continue to see that growth as we are looking forward into financial year ’11. Basically, I think as we said in the past, we are part of both of their next generation systems, and on the call last quarter, we mentioned that we thought that most of their growth to date was coming from their lower end platform, which we are not a part. It looks as if things are shifting more in line with their next generation systems of which we are a part. So I think what we are expecting is the ramp will continue, they had a great quarter in terms of bookings, backlog and have record growth and we believe that we’ll be a part of that. What we expect to have happened is that over time, our business with ASML, will compensate for the expected decline in revenue from KLA Tencor beyond financial year ’11. So that’s kind of where we stand at this point, Jonathan.

And on the SSI business, can you guys talk about maybe this sentiment that’s out there. I know some of the other larger defense contractors have pointed to an anti contractor sentiment and some slowing on the services sides. Are you guys seeing that or a potential push outs that are related to some of the ways in the supplemental out there. Just want to get a sense for what's driving the impact to that business?

I’m not sure I would tie it to our SSI business per se, but you know I think we did experience some timing issues which related to some bookings in the second-half of the year and in the fourth quarter in particular. Nothing that we were pursuing was lost per se, just kind of moved across quarterly boundaries. So at this point we believe that we are in a good position to basically grow our defense bookings and revenues on a year-over-year basis as well as grow Mercury as a whole.

Okay, last question from me is on the Gorgon Stare program, I think you have talked about business being sort of a poster child for some of the defense procurement that’s out there, defense procurement reforms. Can you maybe give us a sense of whether this is, I guess being more broadly implemented by the government or whether you are seeing some changes in the attitude towards contracting?

The major program that we are pursuing in Merc-Fed is a persistent ISR program that we talked about in the past. We think that is still a very important program, it’s a QRC program today. We believe it’s likely to transition into a phase II and if that happens the program is funded and the development works out then you know we are expecting to see a pick up in MFS bookings. The way in which the governments has approached the development of that program I think portends to the way in which we see acquisition reform taking place going forward. We talked about a shift towards more best of breed, we talked about spiral upgrade capabilities and that’s exactly what we are doing on this program as a best of breed sub-contractor for the signal processing. So we think it’s an important program, we are expecting additional business from it and we are hoping that it ultimately it becomes the program of record in the budget. So, there is more to go on that and things will unfold over the next year or so.

And we will take a follow-up from Jim McIlree with Merriman.

Mark, relative to that persistent ISR program in Merc Fed you said, that it might ramp up in fiscal ‘11, is that part of the fiscal ’11 budget or is that part of the fiscal ‘10 supplemental that has just passed?

It’s likely to be part of the fiscal ‘11 budget, but there is also money is coming from elsewhere and I can’t really go too much into detail.

That’s fine. And then again I apologize if you’ve been over this earlier, but Aegis revenue contribution in Fiscal ‘10, have you disclosed what that was?

No we did not.

Would you like to?

The bookings were approximately 35 million in revenue, it’s approximately 15%.

Okay great. Any other, any other programs over 10% for the year?

No, that was the only 10% program that we had.

Okay, great. And then finally, it sounds like commercially you are expecting to be up, fiscal ‘11 versus fiscal ’10, is that a reasonable expectation?

No, as I said on the call, we are expecting the commercial revenues in financial year ‘11 to be basically roughly flat on a year-over-year basis.

Okay, I misunderstood. All right, so ASML was compensating for KLA decline and that's how you get to flat?

Yes, So KLA we had huge bookings in the fourth quarter, but it’s really in relation to the product transition, so in effect we were getting earlier bookings than what we were previously anticipating. So the revenues is going to kind of play out throughout the year and when you kind of net everything out it hasn’t really changed the picture and we are expecting roughly flat revenues on a year-over-year basis.

And is that roughly equally divided between the four quarters or is it going to be skewed in any particular quarter or half of the year?

No, I don’t see there is a particular skew, it’s going to kind of play out the way in which the business typically plays out which is smaller getting larger as the year progresses.

Then my last one, I think Bob you said that you are looking for OpEx to be 26 million?

Correct.

In the first fiscal quarter?

Right.

I'm trying to understand what are you spending it on? It’s a pretty significant increase over Q1 of fiscal ‘10 and I wouldn’t call it significant increase over the June quarter, but it’s an increase. Is it SG&A or fee or a little of both or what?

Well, it is a little bit in the R&D space with regards to our product development but I think the best comparison is to look at it sequentially, I would not go year-over-year. We did have some spending delays in the first quarter of this past year particularly with regard to some of our outside spend also associated with product development. So I would just go sequentially and when you do that, the increase is only a few hundred K and it’s clearly driven by us cost of living, merit increases which we are actually doing this quarter, effective the beginning of the quarter. So not much in the way of hiring, very selective on that front.

That concludes the question and answer sessions. I would like to turn the call back over to Mr. Aslett for any additional or closing remarks.

Ok thank you Celia and thanks to everyone for listening. We look forward to speaking with you again next quarter and this concludes our call.

That concludes today’s conference; we thank you for your participation.