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Comtech Telecommunications Corp. Announces Results For Fiscal 2012 Fourth Quarter And Full Year And Provides Initial Fiscal 2013 Guidance

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, and 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 its 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 nature and timing of receipt of, and the Company’s performance on, new or existing 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; risks associated with the Company’s legal proceedings and other matters, risks associated with certain U.S. government investigations; risks associated with the Company’s BFT-1 contract, including its ongoing negotiations with the U.S. Army regarding pricing for the engineering services, program management and satellite network operations under its sustainment contract awarded in March 2012, and the post-award audit of its BFT-1 contract; risks associated with the Company’s obligations under its revolving credit facility; 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 July 31,
2012   2011
  Microsatellite  
Product Line
Restructuring
Non-GAAP Adjustments GAAP GAAP
 
Net sales $ 112,775,000 - 112,775,000 140,327,000
Cost of sales   62,370,000   1,270,000   63,640,000   81,396,000  
Gross profit   50,405,000   (1,270,000 ) 49,135,000   58,931,000  
 
Expenses:
Selling, general and administrative 22,050,000 1,307,000 23,357,000 24,399,000
Research and development 9,880,000 - 9,880,000 11,970,000
Amortization of intangibles   1,600,000   -   1,600,000   2,027,000  
  33,530,000   1,307,000   34,837,000   38,396,000  
 
Operating income (loss) 16,875,000 (2,577,000 ) 14,298,000 20,535,000
 
Other expenses (income):
Interest expense 2,311,000 - 2,311,000 2,127,000
Interest income and other   (295,000 ) -   (295,000 ) (544,000 )
 
Income (loss) before provision for income taxes 14,859,000 (2,577,000 ) 12,282,000 18,952,000
Provision for (benefit from) income taxes   5,256,000   (902,000 ) 4,354,000   7,064,000  
 
Net income (loss) $ 9,603,000   (1,675,000 ) 7,928,000   11,888,000  
 
Net income (loss) per share:
Basic $ 0.54   (0.09 ) 0.45   0.47  
Diluted $ 0.45   (0.07 ) 0.38   0.42  
 
Weighted average number of common shares outstanding – basic   17,756,000   17,756,000   17,756,000   25,454,000  
 
Weighted average number of common and common equivalent shares outstanding – diluted   23,777,000   23,777,000   23,777,000   31,300,000  
 
Dividends declared per issued and outstanding common share as of the applicable dividend record date $ 0.275   0.275   0.25  
 
 
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Condensed Consolidated Statements of Operations, continued

 
Twelve months ended July 31,
2012   2011
  Microsatellite  
Product Line
Restructuring and
Proxy Costs
Non-GAAP Adjustments GAAP GAAP
(Unaudited) (Unaudited) (Audited) (Audited)
 
Net sales $ 425,070,000 - 425,070,000 612,379,000
Cost of sales   240,291,000   1,270,000   241,561,000   371,333,000  
Gross profit   184,779,000   (1,270,000 ) 183,509,000   241,046,000  
 
Expenses:
Selling, general and administrative 83,161,000 3,945,000 87,106,000 94,141,000
Research and development 38,489,000 - 38,489,000 43,516,000
Amortization of intangibles 6,637,000 - 6,637,000 8,091,000
Merger termination fee, net   -   -   -   (12,500,000 )
  128,287,000   3,945,000   132,232,000   133,248,000  
 

Operating income (loss)

56,492,000 (5,215,000 ) 51,277,000 107,798,000
 
Other expenses (income):
Interest expense 8,832,000 - 8,832,000 8,415,000
Interest income and other   (1,595,000 ) -   (1,595,000 ) (2,421,000 )
 

Income (loss) before provision for income taxes

49,255,000 (5,215,000 ) 44,040,000 101,804,000

Provision for (benefit from) income taxes

  13,449,000  

(1,825,000

) 11,624,000   33,909,000  
 

Net income (loss)

$ 35,806,000   (3,390,000 ) 32,416,000   67,895,000  
 

Net income (loss) per share:

Basic $ 1.79   (0.17 ) 1.62   2.53  
Diluted $ 1.55   (0.13 ) 1.42   2.22  
 
Weighted average number of common shares outstanding – basic   19,995,000   19,995,000   19,995,000   26,842,000  
 
Weighted average number of common and common equivalent shares outstanding – diluted   25,991,000   25,991,000   25,991,000   32,623,000  
 
Dividends declared per issued and outstanding common share as of the applicable dividend record date $ 1.10   1.10   1.00  
 
 
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Audited)

 
July 31, 2012 July 31, 2011
Assets
Current assets:
Cash and cash equivalents $ 367,894,000 558,804,000
Accounts receivable, net 56,242,000 70,801,000
Inventories, net 72,361,000 74,661,000
Prepaid expenses and other current assets 8,196,000 7,270,000
Deferred tax asset, net   12,183,000   11,529,000  
Total current assets 516,876,000 723,065,000
 
Property, plant and equipment, net 22,832,000 26,638,000
Goodwill 137,354,000 137,354,000
Intangibles with finite lives, net 38,833,000 45,470,000

Deferred tax asset, net, non-current

438,000 -
Deferred financing costs, net 2,487,000 3,823,000
Other assets, net   958,000   1,159,000  
Total assets $ 719,778,000   937,509,000  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 20,967,000 23,501,000
Accrued expenses and other current liabilities 40,870,000 49,858,000
Dividends payable 4,773,000 6,100,000
Customer advances and deposits 14,516,000 11,011,000
Interest payable 1,529,000 1,531,000
Income taxes payable   -   4,056,000  
Total current liabilities 82,655,000 96,057,000
 
Convertible senior notes 200,000,000 200,000,000
Other liabilities 5,098,000 6,360,000
Income taxes payable 2,624,000 3,811,000
Deferred tax liability   -   2,101,000  
Total liabilities 290,377,000 308,329,000
 
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 28,931,679 shares and 28,731,265 shares at July 31, 2012 and July 31, 2011, respectively 2,893,000 2,873,000
Additional paid-in capital 361,458,000 355,001,000
Retained earnings   404,227,000   393,109,000  
768,578,000 750,983,000
Less:
Treasury stock, at cost (11,564,059 shares and 4,508,445 shares at July 31, 2012 and July 31, 2011, respectively)   (339,177,000 )

(121,803,000

)

Total stockholders’ equity   429,401,000   629,180,000  
Total liabilities and stockholders’ equity $ 719,778,000   937,509,000  
 
 
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(Unaudited)
 
Three Months Ended July 31, Twelve Months Ended July 31,
2012   2011 2012   2011
 
 
Reconciliation of GAAP Net Income to Adjusted EBITDA (1) :

GAAP net income

$ 7,928,000 11,888,000 32,416,000 67,895,000

Income taxes

4,354,000 7,064,000 11,624,000 33,909,000

Net interest expense and other

2,016,000 1,583,000 7,237,000 5,994,000

Amortization of stock-based compensation

854,000 1,380,000 3,572,000 5,357,000

Depreciation and other amortization

3,906,000 5,928,000 16,162,000 22,344,000

Accelerated depreciation expense related to the wind-down of microsatellite product line

680,000 - 680,000 -

Other restructuring charges related to the wind-down of microsatellite product line

1,897,000 - 1,897,000 -

Costs related to withdrawn fiscal 2011 contested proxy solicitation

  - - 2,638,000 -

Adjusted EBITDA

$ 21,635,000 27,843,000 76,226,000 135,499,000

(1)

  Represents earnings before interest, income taxes, depreciation and amortization of intangibles and stock-based compensation, accelerated depreciation expense and other restructuring charges related to the wind-down of the Company’s mobile data communications segment’s microsatellite product line and costs related to a withdrawn fiscal 2011 contested proxy solicitation. Adjusted EBITDA is a non-GAAP operating metric used by management in assessing the Company’s operating results. The Company’s definition of Adjusted 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. Adjusted EBITDA is also a measure frequently requested by the Company’s investors and analysts. The Company believes that investors and analysts may use Adjusted 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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