Comtech Telecommunications Corp. Announces Results For The Third Quarter Of Fiscal 2012 And Provides Updated Fiscal 2012 Guidance

June 7, 2012 --Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three and nine months ended April 30, 2012.

Net sales for the third quarter of fiscal 2012 were $99.8 million compared to $131.1 million for the third quarter of fiscal 2011. The period-over-period decrease in net sales is due to lower sales in both the Company’s telecommunications transmission and mobile data communications segments, partially offset by higher sales in the Company’s RF microwave amplifiers segment. GAAP net income was $6.1 million, or $0.29 per diluted share, for the third quarter of fiscal 2012 compared to $14.3 million, or $0.47 per diluted share, for the third quarter of fiscal 2011.

Net sales for the nine months ended April 30, 2012 were $312.3 million compared to $472.1 million for the nine months ended April 30, 2011. GAAP net income was $24.5 million, or $1.04 per diluted share, for the nine months ended April 30, 2012 compared to $56.0 million, or $1.79 per diluted share, for the nine months ended April 30, 2011.

The Company also announced that it is tightening its fiscal 2012 revenue and Adjusted EBITDA guidance and increasing its diluted earnings per share guidance. The Company now expects its fiscal 2012: (i) revenue to range from $420.0 million to $425.0 million, (ii) Adjusted EBITDA to range from $73.0 million to $76.0 million and (iii) diluted earnings per share to range from $1.40 to $1.48. The updated diluted earnings per share guidance reflects the impact of the Company’s repurchases of its common stock through June 6, 2012.

In commenting on the Company’s performance and business outlook, Fred Kornberg, President and Chief Executive Officer, stated, “Although market conditions remain challenging, we posted solid results in the third quarter. During the quarter, we achieved our highest level of quarterly bookings in fiscal 2012 and continue to focus on our long-term growth plans.”

Selected Fiscal 2012 Third Quarter Financial Metrics and Other Items

  • Backlog as of April 30, 2012 was $137.4 million compared to $126.3 million as of January 31, 2012.
  • Total bookings for the three and nine months ended April 30, 2012 were $110.9 million and $304.7 million, respectively, compared to $127.7 million and $330.2 million for the three and nine months ended April 30, 2011, respectively.
  • Earnings before interest, taxes, depreciation and amortization (including amortization of intangibles and stock-based compensation) and costs related to a withdrawn fiscal 2011 contested proxy solicitation (“Adjusted EBITDA”) was $15.4 million and $54.6 million for the three and nine months ended April 30, 2012, respectively, as compared to $28.9 million and $107.7 million for the three and nine months ended April 30, 2011, respectively.
  • The Company’s income tax provision for the three months ended April 30, 2012 reflects a net discrete tax benefit of $0.4 million. The Company’s effective income tax rate for the twelve months ending July 31, 2012 is expected to approximate 35.0%, excluding any discrete tax adjustments.
  • At April 30, 2012, the Company had $367.6 million of cash and cash equivalents which does not reflect the subsequent (i) repurchase of an additional 433,892 shares of the Company’s common stock for an aggregate cost of approximately $13.0 million (including transaction costs) from May 1, 2012 through June 6, 2012; (ii) quarterly dividend payment of $5.1 million which was paid on May 22, 2012; or (iii) May 2012 collection of $10.0 million of intellectual property license fees from the U.S. Army.
  • During the nine months ended April 30, 2012, the Company repurchased 6,054,022 shares of its common stock at an aggregate cost of approximately $188.1 million (including transaction costs). From May 1, 2012 through June 6, 2012, the Company repurchased an additional 433,892 shares at an aggregate cost of approximately $13.0 million (including transaction costs). Since the establishment of the Company’s repurchase programs, it has purchased a total of 10,785,422 shares of common stock for approximately $322.7 million (including transaction costs). The Company can make additional repurchases of up to $27.6 million pursuant to its existing $250.0 million repurchase program.
  • During the three months ended April 30, 2012, the Company paid $5.4 million of cash dividends to its stockholders.
  • Additional information about the Company’s updated fiscal 2012 guidance is contained in the Company’s Third Quarter investor presentation which is located on the Company’s website at www.comtechtel.com.

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Friday, June 8, 2012. Investors and the public are invited to access a live webcast of the conference call from the investor relations section of the Comtech web site at www.comtechtel.com. Alternatively, investors can access the conference call by dialing (800) 862-9098 (domestic), or (785) 424-1051 (international) and using the conference I.D. of “Comtech.” A replay of the conference call will be available for seven days by dialing (800) 723-0389 or (402) 220-2647. In addition, an updated investor presentation, including earnings guidance, is available on the Company’s web site.

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, inefficient or too expensive. The Company conducts business through three complementary segments: telecommunications transmission, RF microwave amplifiers and mobile data communications. 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, 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 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 (“SEC”).
     
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)
 
Three months ended April 30, Nine months ended April 30,
2012   2011 2012 2011
 
 
Net sales $ 99,793,000 131,081,000 312,295,000 472,052,000
Cost of sales   58,115,000   74,110,000   177,921,000   289,937,000  
Gross profit   41,678,000   56,971,000   134,374,000   182,115,000  
 
Expenses:
Selling, general and administrative 20,005,000 22,552,000 63,749,000 69,742,000
Research and development 9,481,000 10,328,000 28,609,000 31,546,000
Amortization of intangibles 1,626,000 2,173,000 5,037,000 6,064,000
Merger termination fee, net   -   -   -   (12,500,000 )
  31,112,000   35,053,000   97,395,000   94,852,000  
 
Operating income 10,566,000 21,918,000 36,979,000 87,263,000
 
Other expenses (income):
Interest expense 2,192,000 2,135,000 6,521,000 6,288,000
Interest income and other   (370,000 ) (557,000 ) (1,300,000 ) (1,877,000 )
 
Income before provision for income taxes 8,744,000 20,340,000 31,758,000 82,852,000
Provision for income taxes   2,678,000   6,085,000   7,270,000   26,845,000  
 
Net income $ 6,066,000   14,255,000   24,488,000   56,007,000  
 
Net income per share:
Basic $ 0.32   0.54   1.18   2.05  
Diluted $ 0.29   0.47   1.04   1.79  
 
Weighted average number of common shares outstanding – basic   18,853,000   26,577,000   20,746,000   27,310,000  
 
Weighted average number of common and common equivalent shares outstanding – diluted   24,910,000   32,378,000   26,724,000   33,069,000  
 
Dividends declared per issued and outstanding common share as of the applicable dividend record date $ 0.275   0.25   0.825   0.75  
 
   
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
 
April 30, 2012 July 31, 2011
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 367,649,000 558,804,000
Accounts receivable, net 73,009,000 70,801,000
Inventories, net 76,664,000 74,661,000
Prepaid expenses and other current assets 10,248,000 7,270,000
Deferred tax asset, net   12,983,000   11,529,000  
Total current assets 540,553,000 723,065,000
 
Property, plant and equipment, net 23,879,000 26,638,000
Goodwill 137,354,000 137,354,000
Intangibles with finite lives, net 40,433,000 45,470,000
Deferred financing costs, net 2,947,000 3,823,000
Other assets, net   1,194,000   1,159,000  
Total assets $ 746,360,000   937,509,000  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 18,363,000 23,501,000
Accrued expenses and other current liabilities 38,505,000 49,858,000
Dividends payable 5,071,000 6,100,000
Customer advances and deposits 17,151,000 11,011,000
Interest payable 3,044,000 1,531,000
Income taxes payable   -   4,056,000  
Total current liabilities 82,134,000 96,057,000
 
Convertible senior notes 200,000,000 200,000,000
Other liabilities 5,581,000 6,360,000
Income taxes payable 3,297,000 3,811,000
Deferred tax liability   1,041,000   2,101,000  
Total liabilities 292,053,000 308,329,000
 
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 28,905,281 shares and 28,731,265 shares at April 30, 2012 and July 31, 2011, respectively 2,891,000 2,873,000
Additional paid-in capital 360,208,000 355,001,000
Retained earnings   401,072,000   393,109,000  
764,171,000 750,983,000
Less:
Treasury stock, at cost (10,562,467 shares and 4,508,445 shares at April 30, 2012 and July 31, 2011, respectively)  

(309,864,000

)

(121,803,000

)
Total stockholders’ equity   454,307,000   629,180,000  
Total liabilities and stockholders’ equity $ 746,360,000   937,509,000  
 
 
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

(Unaudited)
   
Three Months Ended April 30, Nine months Ended April 30,
2012   2011 2012   2011
 
 
Reconciliation of GAAP Net Income to Adjusted EBITDA(1):
GAAP net income $ 6,066,000 14,255,000 24,488,000 56,007,000
Income taxes 2,678,000 6,085,000 7,270,000 26,845,000
Net interest expense and other 1,822,000 1,578,000 5,221,000 4,411,000
Amortization of stock-based compensation 809,000 1,118,000 2,718,000 3,977,000
Depreciation and other amortization 4,064,000 5,905,000 12,256,000 16,416,000
Costs related to withdrawn fiscal 2011 contested proxy solicitation   - - 2,638,000 -
Adjusted EBITDA $ 15,439,000 28,941,000 54,591,000 107,656,000
 

(1)
Represents earnings before interest, income taxes, depreciation and amortization of intangibles, stock-based compensation 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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