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