EX-99.1 4 d71130_ex99-1.htm PRESS RELEASE

 

Exhibit 99.1

 

Media Contacts:

Robert G. Rouse, Executive Vice President and Chief Operating Officer

Jerome Kapelus, Senior Vice President, Strategy and Business Development

(631) 962-7000

Info@comtechtel.com

 

COMTECH TELECOMMUNICATIONS CORP. ANNOUNCES

RESULTS FOR THE SECOND QUARTER OF FISCAL 2007

 

Melville, New York – March 8, 2007 – Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended January 31, 2007. Net sales for the second quarter of fiscal 2007 were $111.4 million compared to $95.7 million in the second quarter of fiscal 2006, reflecting growth in the telecommunications transmission and mobile data communications segments, partially offset by lower sales, as anticipated, in the RF microwave amplifiers segment.

 

GAAP net income was $18.2 million, or $0.68 per diluted share, for the three months ended January 31, 2007 compared to $13.3 million, or $0.50 per diluted share, for the three months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $19.1 million, or $0.70 per diluted share, for the three months ended January 31, 2007 as compared to Non-GAAP net income of $14.5 million, or $0.54 per diluted share, for the three months ended January 31, 2006.

 

Net sales for the six months ended January 31, 2007 were $208.5 million, compared to $202.3 million for the six months ended January 31, 2006. GAAP net income was $29.0 million, or $1.09 per diluted share, for the six months ended January 31, 2007 compared to $24.8 million, or $0.94 per diluted share, for the six months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $31.3 million, or $1.15 per diluted share, for the six months ended January 31, 2007 as compared to Non-GAAP net income of $27.0 million, or $1.01 per diluted share, for the six months ended January 31, 2006.

 

In commenting on the Company’s performance during the second quarter of fiscal 2007, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, “Our outstanding second quarter fiscal 2007 results once again demonstrated the strong growth characteristics of the markets we address as well as our leadership position in each of our businesses. We remain confident that fiscal 2007 will be another record year.”

 

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Selected Second Quarter Fiscal 2007 Financial Metrics and Other Items

 

 

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Bookings for the three and six months ended January 31, 2007 were $104.5 million and $226.0 million, respectively, compared to $89.9 million and $200.0 million for the three and six months ended January 31, 2006, respectively. Backlog as of January 31, 2007 was $203.5 million compared to $210.4 as of October 31, 2006 and $186.0 million as of July 31, 2006.

 

 

•

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $27.3 million and $46.5 million for the three and six months ended January 31, 2007, respectively, versus $22.3 million and $42.4 million for the three and six months ended January 31, 2006, respectively.

 

 

•

Cash provided by operating activities for the first six months of fiscal 2007 was $17.2 million compared to $6.3 million for the first six months of fiscal 2006, reflecting an increase in net income, partially offset by an increase in inventory that is currently anticipated to be reduced in the second half of fiscal 2007, as well as the timing of payments for accounts payable and certain accrued expenses that occurred in the first half of fiscal 2007.

 

 

•

Fiscal 2007 second quarter net sales and operating income were favorably impacted by $5.0 million and $3.8 million, respectively, due to certain adjustments in our telecommunications transmission and mobile data communications segments. Fiscal 2006 second quarter net sales and operating income were favorably impacted by $6.7 million and $4.8 million, respectively, due to certain adjustments in our mobile data communications and RF microwave amplifiers segments. These adjustments are more fully described in our Form 10-Q filed earlier today.

 

 

•

Our effective tax rate of 30.0% in the second quarter of fiscal 2007 reflects (i) the passage of legislation relating to the retroactive extension of the Federal research and experimentation credit; (ii) the approval by our stockholders of an amendment to the 2000 Stock Incentive Plan (the “Plan”) which will permit us to claim tax deductions for cash awards anticipated to be paid under the Plan; and (iii) a tax benefit of $0.2 million relating to disqualifying dispositions of incentive stock options. Included in the tax provision for the three months ended January 31, 2007 is a $0.6 million tax benefit related to the retroactive application of the Federal research and experimentation credit to fiscal 2006. Excluding the tax benefit relating to fiscal 2006, we now estimate our effective tax rate for fiscal 2007 will approximate 35.0%.

 

 

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Amortization of stock-based compensation expense for both the three months ended January 31, 2007 and 2006 was $1.5 million. Stock-based compensation expense for the three months ended January 31, 2007 was favorably impacted by a $0.4 million reduction associated with an increase in the estimated forfeiture rate of stock-based awards.

 

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Friday, March 9, 2007. Investors and the public are invited to access a live webcast of the conference call from the news section of the Comtech web site at www.comtechtel.com. Alternatively, investors can access the conference call by dialing (800) 896-8445 (domestic) or (785) 830-1916 (international) and using the conference I.D. of “Comtech.” A replay of the conference call will be available for seven days by dialing (402) 220-0868. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.

 

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About Comtech

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company believes many of its solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable or ineffective. The Company conducts business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company sells products to a diverse customer base in the global commercial and government communications markets. The Company believes it is a market leader in the market segments that it serves.

 

Cautionary Statement Regarding Forward-Looking Statements

Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the Company’s future performance and financial condition, plans and objectives of the Company’s management and the Company’s assumptions regarding such future performance, financial condition, plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under the Company’s control which may cause actual results, future performance and financial condition, and achievement of plans and objectives of the Company’s management to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include the timing of receipt of, and the Company’s performance on, new orders that can cause significant fluctuations in net sales and operating results, the timing and funding of government contracts, adjustments to gross profits on long-term contracts, risks associated with international sales, rapid technological change, evolving industry standards, frequent new product announcements and enhancements, changing customer demands, changes in prevailing economic and political conditions, and other factors described in the Company’s filings with the Securities and Exchange Commission.

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 

Three months ended January 31,
  Six months ended January 31,
2007
  2006
  2007
  2006
 
                             
Net sales     $ 111,383,000     95,741,000     208,453,000     202,308,000  
Cost of sales       61,533,000     54,650,000     119,228,000     121,013,000  
         Gross profit       49,850,000     41,091,000     89,225,000     81,295,000  
                             
Expenses:                            
         Selling, general and administrative       18,257,000     15,809,000     34,844,000     31,857,000  
         Research and development       7,616,000     6,007,000     14,773,000     12,756,000  
         Amortization of intangibles       679,000     603,000     1,328,000     1,199,000  
        26,552,000     22,419,000     50,945,000     45,812,000  
                             
Operating income       23,298,000     18,672,000     38,280,000     35,483,000  
                             
Other expense (income):                            
         Interest expense       672,000     672,000     1,367,000     1,346,000  
         Interest income       (3,315,000 )   (2,172,000 )   (6,490,000 )   (3,947,000 )
                             
Income before provision for income taxes       25,941,000     20,172,000     43,403,000     38,084,000  
Provision for income taxes       7,770,000     6,868,000     14,405,000     13,316,000  
Net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
                             
Net income per share:                            
       Basic     $ 0.79     0.59     1.26     1.09  
       Diluted     $ 0.68     0.50     1.09     0.94  
                             
Weighted average number of common                            
   shares outstanding - basic       23,095,000     22,741,000     23,022,000     22,694,000  
                             
Weighted average number of common and                            
   common equivalent shares outstanding                            
   assuming dilution - diluted       27,491,000     27,354,000     27,440,000     27,367,000  

 

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

January 31,
2007
July 31,
2006
(Unaudited)
Assets                
Current assets:                
    Cash and cash equivalents     $ 266,214,000     251,587,000  
    Restricted cash       —     1,003,000  
    Accounts receivable, net       68,700,000     70,047,000  
    Inventories, net       73,816,000     61,043,000  
    Prepaid expenses and other current assets       5,676,000     7,178,000  
    Deferred tax asset - current       8,205,000     7,591,000  
                     Total current assets       422,611,000     398,449,000  
                 
Property, plant and equipment, net       26,060,000     24,732,000  
Goodwill       24,387,000     22,244,000  
Intangibles with finite lives, net       6,276,000     6,855,000  
Deferred financing costs, net       2,176,000     2,449,000  
Other assets, net       431,000     537,000  
                     Total assets     $ 481,941,000     455,266,000  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
    Accounts payable     $ 19,553,000     28,337,000  
    Accrued expenses and other current liabilities       38,126,000     41,230,000  
    Customer advances and deposits       9,147,000     3,544,000  
    Deferred service revenue       4,906,000     9,896,000  
    Current installments of other obligations       129,000     154,000  
    Interest payable       1,050,000     1,050,000  
    Income taxes payable       5,585,000     5,252,000  
                     Total current liabilities       78,496,000     89,463,000  
                 
Convertible senior notes       105,000,000     105,000,000  
Other obligations, less current installments       177,000     243,000  
Deferred tax liability - non-current       6,592,000     6,318,000  
                     Total liabilities       190,265,000     201,024,000  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
    Preferred stock, par value $.10 per share; shares authorized                
        and unissued 2,000,000       —     —  
    Common stock, par value $.10 per share; authorized 100,000,000                
        shares, issued 23,348,622 shares and 23,052,593 shares at                
        January 31, 2007 and July 31, 2006, respectively       2,335,000     2,305,000  
    Additional paid-in capital       147,893,000     139,487,000  
    Retained earnings       141,633,000     112,635,000  
        291,861,000     254,427,000  
      Less:                
        Treasury stock (210,937 shares)       (185,000 )   (185,000 )
                     Total stockholders’ equity       291,676,000     254,242,000  
                     Total liabilities and stockholders’ equity     $ 481,941,000     455,266,000  

 

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

 

Three Months Ended January 31,
  Six Months Ended January 31,
 
2007
  2006
  2007
  2006
 
Reconciliation of Non-GAAP Net Income To                            
  GAAP Net Income(1):                            
    Non-GAAP net income     $ 19,129,000     14,491,000     31,271,000     26,977,000  
    Amortization of stock-based compensation       (1,537,000 )   (1,538,000 )   (3,347,000 )   (2,834,000 )
    Tax effect of stock-based compensation expense       579,000     351,000     1,074,000     625,000  
    GAAP net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
                             
Reconciliation of Non-GAAP Diluted Earnings Per                            
  Share To GAAP Diluted Earnings Per Share(1):                            
    Non-GAAP diluted earnings per share     $ 0.70     0.54     1.15     1.01  
    Amortization of stock-based compensation       (0.04 )   (0.05 )   (0.10 )   (0.09 )
    Tax effect of stock-based compensation expense       0.02     0.01     0.04     0.02  
    GAAP diluted earnings per share     $ 0.68     0.50     1.09     0.94  
                             
Reconciliation of GAAP Net Income to EBITDA(2):                            
    GAAP net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
    Income taxes       7,770,000     6,868,000     14,405,000     13,316,000  
    Net interest income       (2,643,000 )   (1,500,000 )   (5,123,000 )   (2,601,000 )
    Amortization of stock-based compensation       1,537,000     1,538,000     3,347,000     2,834,000  
    Depreciation and amortization       2,469,000     2,107,000     4,886,000     4,074,000  
    EBITDA     $ 27,304,000     22,317,000     46,513,000     42,391,000  

(1)

Non-GAAP net income is used by management in assessing the Company’s operating results. The Company believes that investors and analysts may use non-GAAP measures that exclude the amortization of stock-based compensation, along with other information contained in its SEC filings, in assessing the Company’s operating results.

 

(2) Represents earnings before interest, income taxes, depreciation and amortization of intangibles and stock-based compensation. EBITDA is a non-GAAP operating metric used by management in assessing the Company’s operating results and ability to meet debt service requirements. The Company’s definition of EBITDA may differ from the definition of EBITDA used by other companies and may not be comparable to similarly titled measures used by other companies. EBITDA is also a measure frequently requested by the Company’s investors and analysts. The Company believes that investors and analysts may use EBITDA, along with other information contained in its SEC filings, in assessing its ability to generate cash flow and service debt.

ECMTL

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