Comtech Telecommunications Corp. Announces Results for Fiscal 2006 Fourth Quarter and Full Year
MELVILLE, N.Y., Sep 20, 2006 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported record results for the fiscal year ended July 31, 2006. Net sales, operating profit, EBITDA, net income, diluted earnings per share and ending backlog for fiscal 2006 were at all-time highs.
Net sales for the fourth quarter of fiscal 2006 were $100.2 million compared to $98.3 million in the fourth quarter of fiscal 2005. Non-GAAP net income, which excludes stock option expense, was $12.9 million, or $0.48 per diluted share, for the three months ended July 31, 2006. GAAP net income was $11.8 million, or $0.45 per diluted share, for the three months ended July 31, 2006 compared to $11.0 million, or $0.42 per diluted share, for the three months ended July 31, 2005. No stock option expense was recorded for GAAP purposes prior to fiscal 2006.
Fiscal 2006 fourth quarter sales and gross profit were favorably impacted by $4.1 million and $3.8 million, respectively, due to a gross profit adjustment to the MTS contract in our mobile data communications segment. The adjustment, as well as other adjustments affecting the full year results in both periods, is more fully described in our Form 10-K filed today.
Net sales for fiscal 2006 were $391.5 million compared to $307.9 million in fiscal 2005. Non-GAAP net income, excluding stock option expensing, was $49.6 million, or $1.86 per diluted share, for fiscal 2006. GAAP net income was $45.3 million, or $1.72 per diluted share, for fiscal 2006 compared to $36.7 million, or $1.42 per diluted share, for fiscal 2005.
GAAP net income for the fourth quarter and fiscal year ended July 31, 2006 includes $1.5 million and $5.7 million, respectively, of pre-tax compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123® which requires the expensing of stock-based awards.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $20.3 million and $18.2 million for the three months ended July 31, 2006 and 2005, respectively. EBITDA was $78.3 million for fiscal 2006 versus $59.7 million for fiscal 2005. Cash flows from operating activities were $44.3 million for fiscal 2006 compared to $56.1 million in fiscal 2005.
Backlog as of July 31, 2006 was $186.0 million compared to $153.3 million as of July 31, 2005. Bookings for the quarter and fiscal year ended July 31, 2006 were $147.9 million and $424.2 million, respectively.
In commenting on the Company's performance during the fourth quarter of fiscal 2006, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "Our strong fourth quarter results solidified fiscal 2006 as our most successful year ever."
Mr. Kornberg added, "Our businesses continue to perform well and we believe fiscal 2007 is well-positioned to be another record year for 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.
The Company has scheduled an investor conference call for 8:30 AM (ET) on Thursday, September 21, 2006. 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 (877) 707-9628 (domestic) or (785) 832-1508 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-6083. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.
Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the future performance and financial condition of the Company, the plans and objectives of the Company's management and the Company's assumptions regarding such performance and plans that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company's Securities and Exchange Commission filings identify many such risks and uncertainties, which include the following:
-- Our operating results are difficult to forecast and subject to volatility;
-- Our ability to maintain the level of our U.S. government business;
-- If we are unable to comply with U.S. government regulations, we could be disqualified as a supplier to the U.S. government;
-- Our dependence on international sales and international sales agents;
-- Our ability to keep pace with technological changes;
-- The impact of a domestic or foreign economic slow-down and reduction in telecommunications equipment and systems spending on the demand for our products, systems and services;
-- Our mobile data communications business is subject to unique risks;
-- Our backlog is subject to cancellation or modification;
-- Our dependence on component availability, subcontractor availability and their performance and key suppliers, including the core manufacturing expertise of our high-volume technology manufacturing center located in Tempe, Arizona;
-- Contract cost growth on our fixed price contracts and other contracts may not be recoverable;
-- The impact of adverse regulatory changes on our ability to sell products, systems and services;
-- Acquisitions and strategic investments may divert our resources and management attention;
-- We have investments in recorded goodwill as a result of prior acquisitions, which could become impaired;
-- The impact of losing key technical or management personnel;
-- We may not be able to continuously manage growth in our businesses;
-- The highly competitive nature of our markets;
-- Our ability to protect our proprietary technology;
-- Our operations being subject to environmental regulation;
-- Our fiscal 2004 Federal income tax return is currently under audit;
-- The impact of recently enacted and proposed changes in securities laws and regulations on our costs;
-- The impact of ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002;
-- The impact of recent changes to financial accounting standards related to stock option expensing on our reported results;
-- The impact of prevailing economic and political conditions on our businesses;
-- The impact of terrorist attacks and threats, and government responses thereto, and threats of war, on our businesses;
-- The inability to effectuate a change in control of the Company due to provisions in its certificate of incorporation and by-laws, stockholders' rights plan and Delaware law;
-- Our inability to satisfy our debt obligations, including the convertible senior notes;
-- Our stock price is volatile; and
-- Our current intention not to declare or pay any cash dividends.
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended Fiscal Year Ended
July 31, July 31,
2006 2005 2006 2005
------------- ----------- ------------ ------------
Net sales $100,206,000 98,293,000 391,511,000 307,890,000
Cost of sales 56,413,000 59,816,000 232,210,000 180,524,000
------------- ----------- ------------ ------------
Gross profit 43,793,000 38,477,000 159,301,000 127,366,000
------------- ----------- ------------ ------------
Expenses:
Selling, general
and
administrative 19,801,000 15,707,000 67,071,000 51,819,000
Research and
development 6,942,000 5,980,000 25,834,000 21,155,000
Amortization of
intangibles 669,000 594,000 2,465,000 2,328,000
------------- ----------- ------------ ------------
27,412,000 22,281,000 95,370,000 75,302,000
------------- ----------- ------------ ------------
Operating income 16,381,000 16,196,000 63,931,000 52,064,000
Other expenses
(income):
Interest expense 670,000 674,000 2,687,000 2,679,000
Interest income (2,839,000) (1,333,000) (9,243,000) (4,072,000)
------------- ----------- ------------ ------------
Income before
provision for
income taxes 18,550,000 16,855,000 70,487,000 53,457,000
Provision for
income taxes 6,771,000 5,830,000 25,218,000 16,802,000
------------- ----------- ------------ ------------
Net income $ 11,779,000 11,025,000 45,269,000 36,655,000
============= =========== ============ ============
Net income per
share:
Basic $ 0.52 0.50 1.99 1.69
============= =========== ============ ============
Diluted $ 0.45 0.42 1.72 1.42
============= =========== ============ ============
Weighted average
number of common
shares outstanding
- basic 22,830,000 22,176,000 22,753,000 21,673,000
============= =========== ============ ============
Weighted average
number of common
and common
equivalent shares
outstanding
assuming dilution
- diluted 27,289,000 27,449,000 27,324,000 27,064,000
============= =========== ============ ============
Reconciliation of Non-GAAP Financial Measures to
GAAP Financial Measures
Three Months Ended Fiscal Year Ended
July 31, July 31,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- -----------------------
Reconciliation of Non-
GAAP Net Income,
Excluding Stock-based
Compensation Expense,
To GAAP Net
Income(1):
Non-GAAP net income,
excluding
stock-based
compensation
expense $ 12,912,000 11,025,000 49,638,000 36,655,000
Pre-tax stock-based
compensation
expense (1,469,000) - (5,681,000) -
Tax effect of
stock-based
compensation
expense 336,000 - 1,312,000 -
------------- ----------- ---------- -----------
GAAP net income $ 11,779,000 11,025,000 45,269,000 36,655,000
============= =========== ========== ===========
Reconciliation of Non-
GAAP Diluted Earnings
Per Share, Excluding
Stock-based
Compensation Expense,
To GAAP Diluted
Earnings Per
Share(1):
Non-GAAP diluted
earnings per share,
excluding
stock-based
compensation $ 0.48 0.42 1.86 1.42
Pre-tax stock-based
compensation
expense (0.04) - (0.19) -
Tax effect of
stock-based
compensation
expense 0.01 - 0.05 -
------------- ----------- ---------- -----------
GAAP diluted
earnings per
share $ 0.45 0.42 1.72 1.42
============= =========== ========== ===========
Reconciliation of GAAP
Net Income to
EBITDA(2):
GAAP net income $ 11,779,000 11,025,000 45,269,000 36,655,000
Income taxes 6,771,000 5,830,000 25,218,000 16,802,000
Net interest income (2,169,000) (659,000) (6,556,000)(1,393,000)
Amortization of
stock-based
compensation 1,469,000 - 5,681,000 -
Depreciation and
amortization 2,443,000 2,034,000 8,707,000 7,643,000
------------- ----------- ---------- -----------
EBITDA $ 20,293,000 18,230,000 78,319,000 59,707,000
============= =========== ========== ===========
(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
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.
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 31,
-------------------------
Assets 2006 2005
------------ ------------
Current assets:
Cash and cash equivalents $251,587,000 214,413,000
Restricted cash 1,003,000 1,034,000
Accounts receivable, net 70,047,000 56,052,000
Inventories, net 61,043,000 45,103,000
Prepaid expenses and other current assets 7,178,000 4,387,000
Deferred tax asset - current 7,591,000 8,092,000
------------ ------------
Total current assets 398,449,000 329,081,000
Property, plant and equipment, net 24,732,000 18,683,000
Goodwill 22,244,000 22,244,000
Intangibles with finite lives, net 6,855,000 9,123,000
Deferred financing costs, net 2,449,000 2,995,000
Other assets, net 537,000 277,000
------------ ------------
Total assets $455,266,000 382,403,000
============ ============
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $ 28,337,000 23,577,000
Accrued expenses and other current
liabilities 41,230,000 34,497,000
Customer advances and deposits 3,544,000 5,282,000
Deferred service revenue 9,896,000 8,210,000
Current installments of other obligations 154,000 235,000
Interest payable 1,050,000 1,050,000
Income taxes payable 5,252,000 1,540,000
------------ ------------
Total current liabilities 89,463,000 74,391,000
Convertible senior notes 105,000,000 105,000,000
Other obligations, less current installments 243,000 396,000
Deferred tax liability - non-current 6,318,000 5,987,000
------------ ------------
Total liabilities 201,024,000 185,774,000
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 and
30,000,000 shares at July 31, 2006 and
July 31, 2005, respectively; issued
23,052,593 shares and 22,781,678 shares
at July 31, 2006 and 2005, respectively 2,305,000 2,278,000
Additional paid-in capital 139,487,000 127,170,000
Retained earnings 112,635,000 67,366,000
------------ ------------
254,427,000 196,814,000
Less:
Treasury stock (210,937 shares) (185,000) (185,000)
------------ ------------
Total stockholders'
equity 254,242,000 196,629,000
------------ ------------
Total liabilities and
stockholders' equity $455,266,000 382,403,000
============ ============
ECMTL
SOURCE: Comtech Telecommunications Corp.
Comtech Telecommunications Corp.
Robert G. Rouse 631-962-7000
Info@comtechtel.com