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Comtech Telecommunications Corp. Announces Results for the Third Quarter of Fiscal 2007

June 6, 2007 at 12:00 AM EDT

MELVILLE, N.Y., Jun 06, 2007 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended April 30, 2007. Net sales for the third quarter of fiscal 2007 were $119.4 million compared to $89.0 million for the third 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 $19.1 million, or $0.71 per diluted share, for the three months ended April 30, 2007 compared to $8.7 million, or $0.33 per diluted share, for the three months ended April 30, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $20.5 million, or $0.75 per diluted share, for the three months ended April 30, 2007 as compared to Non-GAAP net income of $9.7 million, or $0.37 per diluted share, for the three months ended April 30, 2006.

Net sales for the nine months ended April 30, 2007 were $327.9 million, compared to $291.3 million for the nine months ended April 30, 2006. GAAP net income was $48.1 million, or $1.80 per diluted share, for the nine months ended April 30, 2007 compared to $33.5 million, or $1.27 per diluted share, for the nine months ended April 30, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $51.8 million, or $1.90 per diluted share, for the nine months ended April 30, 2007 as compared to Non-GAAP net income of $36.7 million, or $1.38 per diluted share, for the nine months ended April 30, 2006.

In commenting on the Company's performance during the third quarter of fiscal 2007, Fred Kornberg, President and Chief Executive Officer, noted, "The third quarter was yet another strong showing in a sustained period of outstanding performance by Comtech. Virtually all of our growth has been organic and driven by our significant investments in technology and research and development which have translated into well-entrenched leadership positions in high growth markets and participation in high growth programs."

Mr. Kornberg concluded, "Anchored by our strong performance during the first nine months, fiscal 2007 is expected to be another record year for us, on the top and bottom lines, by a wide margin. We are excited about the many large growth opportunities we see as we look to fiscal 2008 and beyond."

Selected Third Quarter Fiscal 2007 Financial Metrics and Other Items

-- Bookings for the three and nine months ended April 30, 2007 were $68.9 million and $294.9 million, respectively, compared to $76.3 million and $276.3 million for the three and nine months ended April 30, 2006, respectively. Backlog as of April 30, 2007 was $153.0 million compared to $203.5 million as of January 31, 2007 and $186.0 million as of July 31, 2006.

-- Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $28.7 million and $75.3 million for the three and nine months ended April 30, 2007, respectively, versus $15.6 million and $58.0 million for the three and nine months ended April 30, 2006, respectively.

-- Cash provided by operating activities for the first nine months of fiscal 2007 was $65.4 million compared to $9.3 million for the first nine months of fiscal 2006, reflecting an increase in net income and cash collected from customers (including advanced payments received), partially offset by the timing of payments for accounts payable and a decrease in deferred service revenue.

-- In our mobile data communications segment, during the three months ended April 30, 2007, we increased the estimated gross profit at completion on the MTS contract, which resulted in an increase to net sales and operating income of $4.6 million and $3.9 million, respectively. This adjustment is more fully described in our Form 10-Q filed earlier today.

-- Our effective tax rate of 29.0% in the third quarter of fiscal 2007 reflects (i) the passage of legislation, in fiscal 2007, extending 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 without limitation under ss.162(m) of the Internal Revenue Code; (iii) a $1.0 million reduction of income tax reserves that we determined were no longer needed due to the expiration of applicable statutes of limitations; and (iv) $0.6 million of tax benefits primarily associated with an adjustment relating to the differences between the estimates used in the computation of the fiscal 2006 income tax provision and the actual amounts reported in the fiscal 2006 income tax returns. We estimate that our effective tax rate for fiscal 2007, excluding adjustments, will approximate 35.0%.

-- Amortization of stock-based compensation expense for the three months ended April 30, 2007 and 2006 was $1.9 million and $1.4 million, respectively. Amortization of stock-based compensation expense for the nine months ended April 30, 2007 and 2006 was $5.3 million and $4.2 million, respectively.

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Thursday, June 7, 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.

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.

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
           Condensed Consolidated Statements of Operations
                             (Unaudited)

                      Three months ended         Nine months ended
                           April 30,                 April 30,
                   ------------------------- -------------------------
                       2007         2006         2007         2006
                   ------------- ----------- ------------ ------------

Net sales          $119,417,000  88,997,000  327,870,000  291,305,000
Cost of sales        67,842,000  54,784,000  187,070,000  175,797,000
                   ------------- ----------- ------------ ------------
  Gross profit       51,575,000  34,213,000  140,800,000  115,508,000
                   ------------- ----------- ------------ ------------

Expenses:
 Selling,
  general and
  administrative     18,626,000  15,413,000   53,470,000   47,270,000
 Research and
  development         8,050,000   6,136,000   22,823,000   18,892,000
 Amortization of
  intangibles           700,000     597,000    2,028,000    1,796,000
                   ------------- ----------- ------------ ------------
                     27,376,000  22,146,000   78,321,000   67,958,000
                   ------------- ----------- ------------ ------------

Operating income     24,199,000  12,067,000   62,479,000   47,550,000

Other expense
 (income):
  Interest expense      685,000     671,000    2,052,000    2,017,000
  Interest income
   and other         (3,415,000) (2,457,000)  (9,905,000)  (6,404,000)
                   ------------- ----------- ------------ ------------

Income before
 provision for
 income taxes        26,929,000  13,853,000   70,332,000   51,937,000
Provision for
 income taxes         7,801,000   5,131,000   22,206,000   18,447,000
                   ------------- ----------- ------------ ------------
Net income         $ 19,128,000   8,722,000   48,126,000   33,490,000
                   ============= =========== ============ ============

Net income per
 share:
 Basic             $       0.83        0.38         2.09         1.47
                   ============= =========== ============ ============
 Diluted           $       0.71        0.33         1.80         1.27
                   ============= =========== ============ ============

Weighted average
 number of common
 shares
 outstanding -
 basic               23,157,000  22,795,000   23,067,000   22,727,000
                   ============= =========== ============ ============

Weighted average
 number of common
 and common
 equivalent shares
 outstanding
 assuming
 dilution -
 diluted             27,552,000  27,275,000   27,478,000   27,336,000
                   ============= =========== ============ ============

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
                Condensed Consolidated Balance Sheets

                                              April 30,     July 31,
                                                2007          2006
                                            ------------- ------------
                   Assets                    (Unaudited)
Current assets:
  Cash and cash equivalents                 $310,975,000  251,587,000
  Restricted cash                                      -    1,003,000
  Accounts receivable, net                    64,494,000   70,047,000
  Inventories, net                            64,304,000   61,043,000
  Prepaid expenses and other current assets    7,408,000    7,178,000
  Deferred tax asset - current                 8,756,000    7,591,000
                                            ------------- ------------
                Total current assets         455,937,000  398,449,000

Property, plant and equipment, net            26,846,000   24,732,000
Goodwill                                      24,387,000   22,244,000
Intangibles with finite lives, net             6,168,000    6,855,000
Deferred financing costs, net                  2,040,000    2,449,000
Other assets, net                                448,000      537,000
                                            ------------- ------------
                Total assets                $515,826,000  455,266,000
                                            ============= ============

    Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                          $ 19,213,000   28,337,000
  Accrued expenses and other current
   liabilities                                43,846,000   41,230,000
  Customer advances and deposits              19,610,000    3,544,000
  Deferred service revenue                     2,453,000    9,896,000
  Current installments of other obligations      132,000      154,000
  Interest payable                               525,000    1,050,000
  Income taxes payable                         4,938,000    5,252,000
                                            ------------- ------------
                Total current liabilities     90,717,000   89,463,000

Convertible senior notes                     105,000,000  105,000,000
Other obligations, less current installments     143,000      243,000
Deferred tax liability - non-current           6,533,000    6,318,000
                                            ------------- ------------
                Total liabilities            202,393,000  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
   23,391,023 shares and 23,052,593 shares
   at April 30, 2007 and July 31, 2006,
   respectively                                2,339,000    2,305,000
  Additional paid-in capital                 150,518,000  139,487,000
  Retained earnings                          160,761,000  112,635,000
                                            ------------- ------------
                                             313,618,000  254,427,000
    Less:
     Treasury stock (210,937 shares)            (185,000)    (185,000)
                                            ------------- ------------
                Total stockholders' equity   313,433,000  254,242,000
                                            ------------- ------------
                Total liabilities and
                 stockholders' equity       $515,826,000  455,266,000
                                            ============= ============

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
   Reconciliation of Non-GAAP Financial Measures to GAAP Financial
                               Measures

                         Three Months Ended       Nine Months Ended
                             April 30,                April 30,
                      ------------------------ -----------------------
                          2007        2006        2007        2006
                      ------------ ----------- ----------- -----------
Reconciliation of
 Non-GAAP Net Income
 To GAAP Net
 Income(1):
  Non-GAAP net income $20,494,000   9,749,000  51,765,000  36,726,000
  Amortization of
   stock-based
   compensation        (1,946,000) (1,378,000) (5,293,000) (4,212,000)
  Tax effect of stock-
   based compensation
   expense                580,000     351,000   1,654,000     976,000
                      ------------ ----------- ----------- -----------
GAAP net income       $19,128,000   8,722,000  48,126,000  33,490,000
                      ============ =========== =========== ===========

Reconciliation of Non-
 GAAP Diluted Earnings
 Per Share To GAAP
 Diluted Earnings Per
 Share(1):
  Non-GAAP diluted
   earnings per share $      0.75        0.37        1.90        1.38
  Amortization of
   stock-based
   compensation             (0.06)      (0.05)      (0.16)      (0.15)
  Tax effect of stock-
   based compensation
   expense                   0.02        0.01        0.06        0.04
                      ------------ ----------- ----------- -----------
  GAAP diluted
   earnings per share $      0.71        0.33        1.80        1.27
                      ============ =========== =========== ===========

Reconciliation of GAAP
 Net Income to
 EBITDA(2):
  GAAP net income     $19,128,000   8,722,000  48,126,000  33,490,000
  Income taxes          7,801,000   5,131,000  22,206,000  18,447,000
  Net interest income
   and other           (2,730,000) (1,786,000) (7,853,000) (4,387,000)
  Amortization of
   stock-based
   compensation         1,946,000   1,378,000   5,293,000   4,212,000
  Depreciation and
   amortization         2,601,000   2,190,000   7,487,000   6,264,000
                      ------------ ----------- ----------- -----------
  EBITDA              $28,746,000  15,635,000  75,259,000  58,026,000
                      ============ =========== =========== ===========

(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

SOURCE: Comtech Telecommunications Corp.

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

Copyright Business Wire 2007

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