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Comtech Telecommunications Corp. Announces Results For The Second Quarter Of Fiscal 2013 And Provides Updated 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 contracts, including its ongoing negotiations with the U.S. Army regarding pricing for the engineering services, program management and satellite network operations, and the post-award audit of its original 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.




Condensed Consolidated Statements of Operations


Three months ended January 31, Six months ended January 31,
  2013       2012   2013   2012  
Net sales $ 74,577,000 99,141,000 165,530,000 212,502,000
Cost of sales   42,337,000   57,725,000   91,487,000   119,806,000  
Gross profit   32,240,000   41,416,000   74,043,000   92,696,000  
Selling, general and administrative 15,433,000 19,626,000 32,243,000 43,744,000
Research and development 9,278,000 9,444,000 19,327,000 19,128,000
Amortization of intangibles   1,582,000   1,692,000   3,164,000   3,411,000  
  26,293,000   30,762,000   54,734,000   66,283,000  
Operating income 5,947,000 10,654,000 19,309,000 26,413,000
Other expenses (income):
Interest expense 2,030,000 2,183,000 4,141,000 4,329,000
Interest income and other   (315,000 ) (434,000 ) (591,000 ) (930,000 )
Income before provision for income taxes 4,232,000 8,905,000 15,759,000 23,014,000
Provision for income taxes   1,867,000   3,084,000   5,959,000   4,592,000  
Net income $ 2,365,000   5,821,000   9,800,000   18,422,000  
Net income per share:
Basic $ 0.14   0.29   0.57   0.85  
Diluted $ 0.14   0.27   0.51   0.75  
Weighted average number of common shares outstanding – basic   17,300,000   20,087,000   17,340,000   21,672,000  
Weighted average number of common and common equivalent shares outstanding – diluted   17,401,000   26,056,000   23,394,000   27,588,000  
Dividends declared per issued and outstanding common share as of the applicable dividend record date $ 0.275   0.275   0.55   0.55  



Condensed Consolidated Balance Sheets

January 31, 2013 July 31, 2012
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 352,927,000 367,894,000
Accounts receivable, net 42,236,000 56,242,000
Inventories, net 70,156,000 72,361,000
Prepaid expenses and other current assets 11,541,000 8,196,000
Deferred tax asset, net   10,877,000   12,183,000  
Total current assets 487,737,000 516,876,000
Property, plant and equipment, net 21,238,000 22,832,000
Goodwill 137,354,000 137,354,000
Intangibles with finite lives, net 35,669,000 38,833,000
Deferred tax asset, net, non-current - 438,000
Deferred financing costs, net 1,806,000 2,487,000
Other assets, net   943,000   958,000  
Total assets $ 684,747,000   719,778,000  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 14,068,000 20,967,000
Accrued expenses and other current liabilities 30,818,000 40,870,000
Dividends payable - 4,773,000
Customer advances and deposits 10,530,000 14,516,000
Interest payable   1,529,000   1,529,000  
Total current liabilities 56,945,000 82,655,000
Convertible senior notes 200,000,000 200,000,000
Other liabilities 3,811,000 5,098,000
Income taxes payable 3,074,000 2,624,000
Deferred tax liability, net   2,240,000   -  
Total liabilities 266,070,000 290,377,000
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 28,978,701 shares and 28,931,679 shares at January 31, 2013 and July 31, 2012, respectively 2,898,000 2,893,000
Additional paid-in capital 360,968,000 361,458,000
Retained earnings   404,465,000   404,227,000  
768,331,000 768,578,000
Treasury stock, at cost (11,961,857 shares and 11,564,059 shares at January 31, 2013 and July 31, 2012, respectively)   (349,654,000 ) (339,177,000 )
Total stockholders’ equity   418,677,000   429,401,000  
Total liabilities and stockholders’ equity $ 684,747,000   719,778,000  



Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures


Three Months Ended January 31, Six Months Ended January 31,
2013     2012 2013     2012
Reconciliation of GAAP Net Income to Adjusted EBITDA (1) :

GAAP net income

$ 2,365,000 5,821,000 9,800,000 18,422,000

Income taxes

1,867,000 3,084,000 5,959,000 4,592,000

Net interest expense and other

1,715,000 1,749,000 3,550,000 3,399,000

Amortization of stock-based compensation

806,000 1,036,000 1,551,000 1,909,000

Depreciation and other amortization

3,576,000 4,053,000 7,183,000 8,192,000

Restructuring charges related to the wind-down of microsatellite product line

(253,000 ) - 569,000 -

Costs related to withdrawn fiscal 2011 contested proxy solicitation

  -   - - 2,638,000

Adjusted EBITDA

$ 10,076,000   15,743,000 28,612,000 39,152,000



Represents earnings before interest, income taxes, depreciation and amortization of intangibles and stock-based compensation and restructuring charges related to the wind-down of the microsatellite product line of the Company’s mobile data communications segment 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.


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