FORM 8-K |
September 26, 2018 | 0-7928 | |
Date of Report (Date of earliest event reported) | Commission File Number |
(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 |
By: | /s/ Michael D. Porcelain Name: Michael D. Porcelain Title: Senior Vice President and |
• | Net sales for the fourth quarter of fiscal 2018 were $167.4 million as compared to the $147.8 million achieved during the fourth quarter of fiscal 2017. |
• | Bookings during the fourth quarter of fiscal 2018 were $214.4 million, with a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.28. |
• | Comtech received a number of strategic contracts and orders, including: (i) $44.8 million of orders to supply the U.S. Army with advanced VSAT equipment; (ii) a $31.0 million order to supply its Modular Transportable Transmission System troposcatter terminals to a foreign subsidiary of a U.S. based top-tier prime contractor; (iii) an award of over $20.0 million from a systems integrator for its new high-frequency amplifier products to support high-speed satellite networks; (iv) $16.6 million of orders to provide ongoing sustainment services for the U.S. Army's "SNAP" mobile satellite communications program; and (v) multi-year contract renewals worth $14.2 million for various SMS text messaging solutions. |
• | GAAP operating income was $16.0 million and GAAP net income was $7.5 million, or $0.31 per diluted share. GAAP net income was negatively impacted by a net discrete tax expense of $2.3 million, or $0.09 per diluted share ("Tax Expense"), primarily due to updated estimates of the impact of H.R.1, also known as the Tax Cuts and Jobs Act ("Tax Reform"). Excluding the $2.3 million of Tax Expense, GAAP net income would have been $9.7 million, or $0.40 per diluted share. |
• | Adjusted EBITDA was $30.7 million. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined in the below table. |
• | During the fourth quarter of fiscal 2018, the Company generated cash flows from operating activities of $19.7 million and reduced the level of its total indebtedness by $15.0 million. Total indebtedness as of July 31, 2018 was $171.3 million (excluding deferred financing fees) and its current cash borrowing rate is approximately 4.5%. |
• | As of July 31, 2018, the Company had $43.5 million of cash and cash equivalents. |
• | Fiscal 2018 was the third consecutive year of revenue growth. Net sales for the fiscal year ended July 31, 2018 were $570.6 million as compared to the $550.4 million achieved during fiscal 2017. |
• | Backlog as of July 31, 2018 reflects a record high of $630.7 million. Backlog does not include the portions of multi-year contracts that have not been funded. As such, the total value of multi-year contracts that Comtech has received is substantially higher. Bookings during fiscal 2018 were $755.1 million, with a company-wide book-to-bill ratio of 1.32. |
• | GAAP operating income was $35.1 million and GAAP net income was $29.8 million, or $1.24 per diluted share. GAAP net income includes a full year net discrete tax benefit of $11.8 million, or $0.49 per diluted share ("Tax Gain"), primarily due to Tax Reform. Excluding the Tax Gain, GAAP net income would have been $18.0 million or $0.75 per diluted share. |
• | Adjusted EBITDA was $78.4 million for the fiscal year ended July 31, 2018 as compared to the $70.7 million achieved during fiscal 2017. |
• | During the fiscal year ended July 31, 2018, the Company generated cash flows from operating activities of $50.3 million and reduced the level of its total indebtedness by $29.2 million. |
• | Net sales goal with a range of approximately $600.0 million to $625.0 million. |
• | Consolidated fiscal 2019 book-to-bill ratio expected to be in excess of 1.0. |
• | GAAP operating income, as a percentage of net sales, expected to be higher than the 5.9% that Comtech achieved in fiscal 2018 when excluding the $1.7 million of favorable adjustments described in the Company's annual report on Form 10-K. |
• | The Company's effective income tax rate (excluding discrete tax items in fiscal 2019) is expected to approximate 23.25% and reflects the full year benefit of the reduced U.S. statutory income tax rate resulting from Tax Reform. |
• | GAAP diluted EPS goal with a range of approximately $0.89 to $1.10. |
• | Adjusted EBITDA goal in a range of approximately $80.0 million to $86.0 million. |
(Unaudited) | (Audited) | ||||||||||||||
Three months ended July 31, | Twelve months ended July 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 167,435,000 | $ | 147,762,000 | $ | 570,589,000 | $ | 550,368,000 | |||||||
Cost of sales | 104,447,000 | 87,350,000 | 346,648,000 | 332,183,000 | |||||||||||
Gross profit | 62,988,000 | 60,412,000 | 223,941,000 | 218,185,000 | |||||||||||
Expenses: | |||||||||||||||
Selling, general and administrative | 27,822,000 | 26,484,000 | 113,922,000 | 116,080,000 | |||||||||||
Research and development | 13,906,000 | 13,889,000 | 53,869,000 | 54,260,000 | |||||||||||
Amortization of intangibles | 5,269,000 | 5,268,000 | 21,075,000 | 22,823,000 | |||||||||||
Settlement of intellectual property litigation | — | — | — | (12,020,000 | ) | ||||||||||
46,997,000 | 45,641,000 | 188,866,000 | 181,143,000 | ||||||||||||
Operating income | 15,991,000 | 14,771,000 | 35,075,000 | 37,042,000 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense and other | 2,588,000 | 2,691,000 | 10,195,000 | 11,629,000 | |||||||||||
Interest (income) and other | 65,000 | (80,000 | ) | 254,000 | (68,000 | ) | |||||||||
Income before provision for (benefit from) income taxes | 13,338,000 | 12,160,000 | 24,626,000 | 25,481,000 | |||||||||||
Provision for (benefit from) income taxes | 5,880,000 | 4,846,000 | (5,143,000 | ) | 9,654,000 | ||||||||||
Net income | $ | 7,458,000 | $ | 7,314,000 | $ | 29,769,000 | $ | 15,827,000 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 1.25 | $ | 0.68 | |||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 1.24 | $ | 0.67 | |||||||
Weighted average number of common shares outstanding – basic | 23,857,000 | 23,470,000 | 23,825,000 | 23,433,000 | |||||||||||
Weighted average number of common and common equivalent shares outstanding – diluted | 24,270,000 | 23,566,000 | 24,040,000 | 23,489,000 | |||||||||||
Dividends declared per issued and outstanding common share as of the applicable dividend record date | $ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.60 |
July 31, 2018 | July 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 43,484,000 | $ | 41,844,000 | |||
Accounts receivable, net | 147,439,000 | 124,962,000 | |||||
Inventories, net | 75,076,000 | 60,603,000 | |||||
Prepaid expenses and other current assets | 13,794,000 | 13,635,000 | |||||
Total current assets | 279,793,000 | 241,044,000 | |||||
Property, plant and equipment, net | 28,987,000 | 32,847,000 | |||||
Goodwill | 290,633,000 | 290,633,000 | |||||
Intangibles with finite lives, net | 240,796,000 | 261,871,000 | |||||
Deferred financing costs, net | 2,205,000 | 3,065,000 | |||||
Other assets, net | 2,743,000 | 2,603,000 | |||||
Total assets | $ | 845,157,000 | $ | 832,063,000 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 43,928,000 | $ | 29,402,000 | |||
Accrued expenses and other current liabilities | 65,034,000 | 68,610,000 | |||||
Dividends payable | 2,356,000 | 2,343,000 | |||||
Customer advances and deposits, current | 34,452,000 | 25,771,000 | |||||
Current portion of long-term debt | 17,211,000 | 15,494,000 | |||||
Current portion of capital lease and other obligations | 1,836,000 | 2,309,000 | |||||
Interest payable | 499,000 | 282,000 | |||||
Total current liabilities | 165,316,000 | 144,211,000 | |||||
Non-current portion of long-term debt, net | 148,087,000 | 176,228,000 | |||||
Non-current portion of capital lease and other obligations | 765,000 | 1,771,000 | |||||
Income taxes payable | 2,572,000 | 2,515,000 | |||||
Deferred tax liability, net | 10,927,000 | 17,306,000 | |||||
Customer advances and deposits, non-current | 7,689,000 | 7,227,000 | |||||
Other liabilities | 4,117,000 | 2,655,000 | |||||
Total liabilities | 339,473,000 | 351,913,000 | |||||
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 38,860,571 shares and 38,619,467 shares at July 31, 2018 and 2017, respectively | 3,886,000 | 3,862,000 | |||||
Additional paid-in capital | 538,453,000 | 533,001,000 | |||||
Retained earnings | 405,194,000 | 385,136,000 | |||||
947,533,000 | 921,999,000 | ||||||
Less: | |||||||
Treasury stock, at cost (15,033,317 shares at July 31, 2018 and 2017) | (441,849,000 | ) | (441,849,000 | ) | |||
Total stockholders’ equity | 505,684,000 | 480,150,000 | |||||
Total liabilities and stockholders’ equity | $ | 845,157,000 | $ | 832,063,000 |
Three months ended July 31, | Twelve months ended July 31, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA: | ||||||||||||
Net income | $ | 7,458,000 | 7,314,000 | 29,769,000 | 15,827,000 | |||||||
Provision for (benefit from) income taxes | 5,880,000 | 4,846,000 | (5,143,000 | ) | 9,654,000 | |||||||
Interest (income) and other | 65,000 | (80,000 | ) | 254,000 | (68,000 | ) | ||||||
Interest expense | 2,588,000 | 2,691,000 | 10,195,000 | 11,629,000 | ||||||||
Amortization of stock-based compensation | 5,638,000 | 5,526,000 | 8,569,000 | 8,506,000 | ||||||||
Amortization of intangibles | 5,269,000 | 5,268,000 | 21,075,000 | 22,823,000 | ||||||||
Depreciation | 3,822,000 | 3,505,000 | 13,655,000 | 14,354,000 | ||||||||
Settlement of intellectual property litigation | — | — | — | (12,020,000 | ) | |||||||
Adjusted EBITDA | $ | 30,720,000 | 29,070,000 | 78,374,000 | 70,705,000 |