<< Back

Comtech Telecommunications Corp. Announces Results for the Third Quarter of Fiscal 2006

June 7, 2006 at 12:00 AM EDT

MELVILLE, N.Y., Jun 07, 2006 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended April 30, 2006. The results for the quarter were driven by strong performances in all three of the Company's business segments.

Net sales for the three months ended April 30, 2006 were $89.0 million compared to $75.4 million for the three months ended April 30, 2005. Non-GAAP net income, excluding stock option expensing, was $9.7 million, or $0.37 per diluted share, for the three months ended April 30, 2006. GAAP net income was $8.7 million, or $0.33 per diluted share, for the three months ended April 30, 2006 compared to $8.4 million, or $0.32 per diluted share, for the three months ended April 30, 2005. No stock option expense was recorded for GAAP purposes prior to fiscal 2006.

Net sales for the nine months ended April 30, 2006 were $291.3 million compared to $209.6 million for the nine months ended April 30, 2005. Non-GAAP net income, excluding stock option expensing, was $36.7 million, or $1.38 per diluted share, for the nine months ended April 30, 2006. GAAP net income for the nine months ended April 30, 2006 was $33.5 million, or $1.27 per diluted share, compared to $25.6 million, or $1.00 per diluted share, for the nine months ended April 30, 2005.

GAAP net income in the three and nine months ended April 30, 2006 included $1.4 million and $4.2 million, respectively, of pre-tax compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123(R) which requires the expensing of stock option awards.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $15.6 million and $12.6 million for the three months ended April 30, 2006 and 2005, respectively. For the nine months ended April 30, 2006 and 2005, EBITDA was $58.0 million and $41.5 million, respectively. Cash flows from operating activities were $9.3 million for the nine months ended April 30, 2006 compared to $49.5 million for the nine months ended April 30, 2005, reflecting an increase in accounts receivable on certain large contracts during the fiscal 2006 period and the liquidation of a significant receivable in the fiscal 2005 period.

Backlog as of April 30, 2006 was $138.3 million compared to $153.3 million as of July 31, 2005. Bookings for the three and nine months ended April 30, 2006 were $76.3 million and $276.3 million, respectively.

In commenting on the Company's performance during the three months ended April 30, 2006, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "Our operating performance in the third quarter of fiscal 2006 represents continuing tangible evidence of the leadership positions we enjoy in the markets we serve. It firmly positions fiscal 2006 to be the Company's most successful year ever."

Mr. Kornberg added, "Although it is premature to provide specific revenue and earnings guidance for next year, current signs are that fiscal 2007 should also be a record year: our fifth in a row."

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions addressing commercial and government markets. The Company conducts its business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company offers specialized products, systems and services where it believes it has technological, engineering, systems design or other expertise that differentiate its product offerings.

The Company has scheduled an investor conference call for 8:30 AM (ET) on Thursday, June 8, 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. A replay of the webcast will be available at the same location for 30 days following the conference call. Alternatively, investors can access the conference call by dialing (800) 540-0559 (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) 220-2988. 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 being difficult to forecast and subject to volatility;

-- Our inability to maintain our government business;

-- Our inability to keep pace with technological changes;

-- Our dependence on international sales;

-- 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 being subject to unique risks;

-- Our backlog being subject to cancellation or modification;

-- Our dependence on component availability, subcontractor availability and performance by key suppliers;

-- Our fixed price contracts being subject to risk;

-- The impact of adverse regulatory changes on our ability to sell products, systems and services;

-- The impact of prevailing economic and political conditions on our businesses;

-- Whether we can successfully integrate and assimilate the operations of acquired businesses;

-- The impact of the loss of key technical or management personnel;

-- The highly competitive nature of our markets;

-- Our inability to protect our proprietary technology;

-- Our operations being subject to environmental regulation;

-- 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 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;

-- The impact on our reported results of recent changes to financial reporting standards related to stock option expensing;

-- Our stock price being volatile; and

-- Our current intention not to declare or pay any cash dividends.


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

                      Three months ended         Nine months ended
                           April 30,                 April 30,
                   ------------------------- -------------------------
                       2006         2005         2006         2005
                   ------------ ------------ ------------ ------------

Net sales          $88,997,000   75,388,000  291,305,000  209,597,000
Cost of sales       54,784,000   45,910,000  175,797,000  120,708,000
                   ------------ ------------ ------------ ------------
  Gross profit      34,213,000   29,478,000  115,508,000   88,889,000
                   ------------ ------------ ------------ ------------

Expenses:
  Selling, general
   and
   administrative   15,413,000   12,855,000   47,270,000   36,112,000
  Research and
   development       6,136,000    5,325,000   18,892,000   15,175,000
  Amortization of
   intangibles         597,000      597,000    1,796,000    1,734,000
                   ------------ ------------ ------------ ------------
                    22,146,000   18,777,000   67,958,000   53,021,000
                   ------------ ------------ ------------ ------------

Operating income    12,067,000   10,701,000   47,550,000   35,868,000

Other expense
 (income):
  Interest expense     671,000      669,000    2,017,000    2,005,000
  Interest income   (2,457,000)  (1,191,000)  (6,404,000)  (2,739,000)
                    ----------- ------------ ------------ ------------

Income before
 provision for
 income taxes       13,853,000   11,223,000   51,937,000   36,602,000
Provision for
 income taxes        5,131,000    2,851,000   18,447,000   10,972,000
                   ------------ ------------ ------------ ------------

Net income         $ 8,722,000    8,372,000   33,490,000   25,630,000
                   ============ ============ ============ ============

Net income per
 share:
  Basic            $      0.38         0.39         1.47         1.19
                   ============ ============ ============ ============
  Diluted          $      0.33         0.32         1.27         1.00
                   ============ ============ ============ ============

Weighted average
 number of common
 shares
 outstanding -
 basic              22,795,000   21,666,000   22,727,000   21,505,000
                   ============ ============ ============ ============

Weighted average
 number of common
 and common
 equivalent shares
 outstanding
 assuming dilution
 - diluted          27,275,000   27,327,000   27,336,000   26,936,000
                   ============ ============ ============ ============


        Reconciliations of Non-GAAP Financial Measures to GAAP
                          Financial Measures
       --------------------------------------------------------

                      Three months ended         Nine months ended
                           April 30,                 April 30,
                   ------------------------- -------------------------
                       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         $ 9,749,000    8,372,000   36,726,000   25,630,000
  Pre-tax stock-
   based
   compensation
   expense          (1,378,000)           -   (4,212,000)           -
  Tax effect of
   stock-based
   compensation
   expense             351,000            -      976,000            -
                   ------------ ------------ ------------ ------------
  GAAP net income  $ 8,722,000    8,372,000   33,490,000   25,630,000
                   ============ ============ ============ ============


                      Three months ended         Nine months ended
                           April 30,                 April 30,
                   ------------------------- -------------------------
                       2006         2005         2006         2005
                   ------------ ------------ ------------ ------------
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    $      0.37         0.32         1.38         1.00
  Pre-tax stock-
   based
   compensation
   expense               (0.05)           -        (0.15)           -
  Tax effect of
   stock-based
   compensation
   expense                0.01            -         0.04            -
                   ------------ ------------ ------------ ------------
  GAAP diluted
   earnings per
   share           $      0.33         0.32         1.27         1.00
                   ============ ============ ============ ============

                      Three months ended         Nine months ended
                           April 30,                 April 30,
                   ------------------------- -------------------------
                       2006         2005         2006         2005
                   ------------ ------------ ------------ ------------
Reconciliation of
 GAAP Net Income
 to EBITDA(2):
  GAAP net income  $ 8,722,000    8,372,000   33,490,000   25,630,000
  Income taxes       5,131,000    2,851,000   18,447,000   10,972,000
  Net interest
   expense (income) (1,786,000)    (522,000)  (4,387,000)    (734,000)
  Pre-tax stock-
   based
   compensation
   expense           1,378,000            -    4,212,000            -
  Depreciation and
   amortization      2,190,000    1,943,000    6,264,000    5,609,000
                   ------------ ------------ ------------ ------------
  EBITDA           $15,635,000   12,644,000   58,026,000   41,477,000
                   ============ ============ ============ ============


(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 (including the amortization of 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.
                 Condensed Consolidated Balance Sheets

                                            April 30,       July 31,
                                              2006           2005
                                         -------------- --------------
                 Assets                   (Unaudited)

Current assets:
  Cash and cash equivalents              $ 220,446,000    214,413,000
  Restricted cash                            1,003,000      1,034,000
  Accounts receivable, net                  86,851,000     56,052,000
  Inventories, net                          52,890,000     45,103,000
  Prepaid expenses and other current
   assets                                    7,602,000      4,387,000
  Deferred tax asset - current               8,136,000      8,092,000
                                         -------------- --------------
      Total current assets                 376,928,000    329,081,000

Property, plant and equipment, net          21,842,000     18,683,000
Goodwill                                    22,244,000     22,244,000
Intangibles with definite lives, net         7,524,000      9,123,000
Deferred financing costs, net                2,586,000      2,995,000
Other assets, net                              476,000        277,000
                                         -------------- --------------
      Total assets                       $ 431,600,000    382,403,000
                                         ============== ==============

      Liabilities and Stockholders' Equity

Current liabilities:
 Accounts payable                        $  22,358,000     23,577,000
 Accrued expenses and other current
  liabilities                               36,951,000     34,497,000
 Customer advances and deposits              6,542,000      5,282,000
 Deferred service revenue                   10,374,000      8,210,000
 Current installments of other
  obligations                                  182,000        235,000
 Interest payable                              525,000      1,050,000
 Income taxes payable                        2,945,000      1,540,000
                                         -------------- --------------
      Total current liabilities             79,877,000     74,391,000

Convertible senior notes                   105,000,000    105,000,000
Other obligations, less current
 installments                                  275,000        396,000
Deferred tax liability - non-current         7,286,000      5,987,000
                                         -------------- --------------
      Total liabilities                    192,438,000    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 April 30,
   2006 and July 31, 2005, respectively;
   issued 23,022,393 shares and
   22,781,678 shares at April 30, 2006
   and July 31, 2005, respectively           2,302,000      2,278,000
  Additional paid-in capital               136,189,000    127,170,000
  Retained earnings                        100,856,000     67,366,000
                                         -------------- --------------
                                           239,347,000    196,814,000
  Less:
     Treasury stock (210,937 shares)          (185,000)      (185,000)
                                         -------------- --------------
      Total stockholders' equity           239,162,000    196,629,000
                                         -------------- --------------
      Total liabilities and
       stockholders' equity              $ 431,600,000    382,403,000
                                         ============== ==============


                                                                 ECMTL


SOURCE: Comtech Telecommunications Corp.

Media:
Comtech Telecommunications Corp.
Fred Kornberg, President and Chief Executive Officer
Robert G. Rouse, Executive Vice President
631-777-8900
Info@comtechtel.com
www.comtechtel.com

Copyright Business Wire 2006

News Provided by COMTEX