FORM 8-K |
October 6, 2016 | 0-7928 | |
Date of Report (Date of earliest event reported) | Commission File Number |
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(Exact name of registrant as specified in its charter) |
Delaware | 11-2139466 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
68 South Service Road, Suite 230 Melville, New York 11747 | ||
(Address of Principal Executive Offices) (Zip Code) | ||
(631) 962-7000 | ||
(Registrant’s telephone number, including area code) |
Exhibit Number | Description |
99.1 | Press Release, dated October 6, 2016, reporting the financial results of the Company for its fourth quarter and fiscal year ended July 31, 2016, and providing initial fiscal 2017 financial guidance (furnished and not filed herewith solely pursuant to Item 2.02). |
99.2 | Press Release, dated October 6, 2016, announcing that the Company’s Board declared a quarterly cash dividend of $0.30 per common share (furnished and not filed herewith solely pursuant to Item 7.01). |
By: | /s/ Michael D. Porcelain Name: Michael D. Porcelain Title: Senior Vice President and |
• | Net sales for the three months ended July 31, 2016 were $152.4 million compared to $77.5 million for the three months ended July 31, 2015. The period-over-period increase in net sales reflects incremental sales of approximately $85.4 million as a result of the acquisition of TeleCommunication Systems, Inc. ("TCS"), partially offset by lower sales of legacy Comtech products. As previously announced, the TCS acquisition closed on February 23, 2016. |
• | The Company achieved bookings of approximately $202.8 million during the fourth quarter of fiscal 2016 which translates into a book-to-bill ratio (bookings divided by net sales) for the quarter of 1.33 compared with an average book-to-bill ratio of 0.96 for the prior three quarters. |
• | Backlog as of July 31, 2016 was $484.0 million. |
• | Operating income was $7.5 million. During the fourth quarter, the Company expensed $0.6 million of pre-tax acquisition plan expenses, related to the Company's acquisition of TCS. Excluding these expenses, the Company would have reported operating income for the fourth quarter of $8.1 million. |
• | GAAP net income was $2.7 million, or $0.14 per diluted share, for the three months ended July 31, 2016. |
• | Adjusted EBITDA was $18.8 million. Adjusted EBITDA is a Non-GAAP financial measure that the Company defines and reconciles to the most directly comparable GAAP financial measure in the below table. |
• | As of July 31, 2016 the Company had $66.8 million of cash and cash equivalents which does not reflect the quarterly dividend payment of $7.0 million that was paid on August 19, 2016. In June 2016, the Company sold an aggregate of 7,145,000 shares of its common stock in a public offering resulting in net proceeds to the Company of $95.0 million. |
• | Net sales for the fiscal year ended July 31, 2016 were $411.0 million compared to $307.3 million for the fiscal year ended July 31, 2015. The year-over-year increase in net sales reflects incremental sales of approximately $151.4 million as a result of the acquisition of TCS in the third fiscal quarter, partially offset by lower sales of legacy Comtech products. |
• | The Company achieved bookings of approximately $451.3 million during fiscal 2016, which translates into a book-to-bill ratio (bookings divided by net sales) for the year of 1.10. |
• | Operating loss was $0.6 million for the fiscal year ended July 31, 2016. During the fiscal year ended July 31, 2016, we expensed $21.3 million of pre-tax acquisition plan expenses, almost all of which relate to the Company's acquisition of TCS. Excluding these expenses, we would have reported operating income for fiscal year ended July 31, 2016 of $20.7 million. |
• | GAAP net loss was $7.7 million, or $(0.46) per diluted share, for the fiscal year ended July 31, 2016. |
• | Adjusted EBITDA was $48.1 million for the fiscal year ended July 31, 2016. |
• | Revenue goal of approximately $600.0 million. |
• | GAAP diluted EPS goal of approximately $0.30. |
• | Adjusted EBITDA goal of approximately $70.0 million. |
• | Total annual amortization of intangibles is expected to range from $22.0 million to $24.0 million. |
• | Total depreciation expense is expected to range from $16.0 million to $18.0 million. |
• | Total amortization of stock-based compensation is expected to be approximately $5.0 million. |
• | Interest expense is expected to reflect a rate (including amortization of deferred financing costs) of 5.0% to 6.0%. |
• | The Company's effective income tax rate (excluding discrete tax items in fiscal 2017) is expected to approximate 33.0%. |
• | Based on the anticipated timing of shipments and performance related to orders currently in backlog as well as expected orders, the Company anticipates its financial performance to be heavily weighted toward the second half of fiscal 2017 with fourth quarter net sales, operating income and Adjusted EBITDA expected to be the peak quarter, by far. As a result, the Company expects to report an operating loss in the first quarter of fiscal 2017 with each of the subsequent fiscal 2017 quarters being profitable. |
(Unaudited) | (Audited) | ||||||||||||||
Three months ended July 31, | Twelve months ended July 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 152,377,000 | $ | 77,463,000 | $ | 411,004,000 | $ | 307,289,000 | |||||||
Cost of sales | 90,171,000 | 44,087,000 | 239,767,000 | 168,405,000 | |||||||||||
Gross profit | 62,206,000 | 33,376,000 | 171,237,000 | 138,884,000 | |||||||||||
Expenses: | |||||||||||||||
Selling, general and administrative | 34,114,000 | 16,123,000 | 94,932,000 | 62,680,000 | |||||||||||
Research and development | 13,974,000 | 7,649,000 | 42,190,000 | 35,916,000 | |||||||||||
Acquisition plan expenses | 587,000 | — | 21,276,000 | — | |||||||||||
Amortization of intangibles | 6,067,000 | 1,529,000 | 13,415,000 | 6,211,000 | |||||||||||
54,742,000 | 25,301,000 | 171,813,000 | 104,807,000 | ||||||||||||
Operating income (loss) | 7,464,000 | 8,075,000 | (576,000 | ) | 34,077,000 | ||||||||||
Other expenses (income): | |||||||||||||||
Interest expense and other | 4,129,000 | 73,000 | 7,750,000 | 479,000 | |||||||||||
Interest income and other | 93,000 | (124,000 | ) | (134,000 | ) | (405,000 | ) | ||||||||
Income (loss) before provision for income taxes | 3,242,000 | 8,126,000 | (8,192,000 | ) | 34,003,000 | ||||||||||
Provision for (benefit from) income taxes | 540,000 | 2,651,000 | (454,000 | ) | 10,758,000 | ||||||||||
Net income (loss) | $ | 2,702,000 | $ | 5,475,000 | $ | (7,738,000 | ) | $ | 23,245,000 | ||||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | 0.14 | $ | 0.34 | $ | (0.46 | ) | $ | 1.43 | ||||||
Diluted | $ | 0.14 | $ | 0.34 | $ | (0.46 | ) | $ | 1.42 | ||||||
Weighted average number of common shares outstanding – basic | 19,318,000 | 16,153,000 | 16,972,000 | 16,203,000 | |||||||||||
Weighted average number of common and common equivalent shares outstanding – diluted | 19,341,000 | 16,277,000 | 16,972,000 | 16,418,000 | |||||||||||
Dividends declared per issued and outstanding common share as of the applicable dividend record date | $ | 0.30 | $ | 0.30 | $ | 1.20 | $ | 1.20 |
July 31, 2016 | July 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 66,805,000 | $ | 150,953,000 | |||
Accounts receivable, net | 150,967,000 | 69,255,000 | |||||
Inventories, net | 71,354,000 | 62,068,000 | |||||
Prepaid expenses and other current assets | 14,513,000 | 7,396,000 | |||||
Deferred tax asset, net | — | 11,084,000 | |||||
Total current assets | 303,639,000 | 300,756,000 | |||||
Property, plant and equipment, net | 38,667,000 | 15,370,000 | |||||
Goodwill | 287,618,000 | 137,354,000 | |||||
Intangibles with finite lives, net | 284,694,000 | 20,009,000 | |||||
Deferred financing costs, net | 3,309,000 | — | |||||
Other assets, net | 3,269,000 | 388,000 | |||||
Total assets | $ | 921,196,000 | $ | 473,877,000 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 33,462,000 | $ | 15,708,000 | |||
Accrued expenses and other current liabilities | 98,034,000 | 29,470,000 | |||||
Dividends payable | 7,005,000 | 4,839,000 | |||||
Customer advances and deposits, current | 29,665,000 | 14,320,000 | |||||
Current portion of long-term debt | 11,067,000 | — | |||||
Current portion of capital lease obligations | 3,592,000 | — | |||||
Interest payable | 1,321,000 | — | |||||
Total current liabilities | 184,146,000 | 64,337,000 | |||||
Non-current portion of long-term debt, net | 239,969,000 | — | |||||
Non-current portion of capital lease obligations | 4,021,000 | — | |||||
Income taxes payable | 2,992,000 | 1,573,000 | |||||
Deferred tax liability, net | 9,798,000 | 2,925,000 | |||||
Customer advances and deposits, non-current | 5,764,000 | — | |||||
Other liabilities | 4,105,000 | 3,633,000 | |||||
Total liabilities | 450,795,000 | 72,468,000 | |||||
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 38,367,997 shares and 31,165,401 shares at July 31, 2016 and 2015, respectively | 3,837,000 | 3,117,000 | |||||
Additional paid-in capital | 524,797,000 | 427,083,000 | |||||
Retained earnings | 383,616,000 | 413,058,000 | |||||
912,250,000 | 843,258,000 | ||||||
Less: | |||||||
Treasury stock, at cost (15,033,317 shares at July 31, 2016 and 2015) | (441,849,000 | ) | (441,849,000 | ) | |||
Total stockholders’ equity | 470,401,000 | 401,409,000 | |||||
Total liabilities and stockholders’ equity | $ | 921,196,000 | $ | 473,877,000 |
Three months ended July 31, | Twelve months ended July 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA: | ||||||||||||
GAAP net (loss) income | $ | 2,702,000 | 5,475,000 | (7,738,000 | ) | 23,245,000 | ||||||
Income taxes | 540,000 | 2,651,000 | (454,000 | ) | 10,758,000 | |||||||
Net interest (income) expense and other | 4,222,000 | (51,000 | ) | 7,616,000 | 74,000 | |||||||
Amortization of stock-based compensation | 951,000 | 721,000 | 4,117,000 | 4,363,000 | ||||||||
Depreciation and other amortization | 9,819,000 | 3,158,000 | 23,245,000 | 12,736,000 | ||||||||
Acquisition plan expenses | 587,000 | — | 21,276,000 | — | ||||||||
Strategic alternatives analysis expenses | — | — | — | 585,000 | ||||||||
Adjusted EBITDA | $ | 18,821,000 | 11,954,000 | 48,062,000 | 51,761,000 |