FORM 10-Q |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 11-2139466 | |
(State or other jurisdiction of incorporation /organization) | (I.R.S. Employer Identification Number) | |
68 South Service Road, Suite 230, Melville, NY | 11747 | |
(Address of principal executive offices) | (Zip Code) |
(631) 962-7000 |
(Registrant’s telephone number, including area code) |
Large accelerated filer | Accelerated filer | Emerging growth company | |||
Non-accelerated filer | Smaller reporting company |
COMTECH TELECOMMUNICATIONS CORP. INDEX | |||
Page | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 4. | |||
Item 6. | |||
October 31, 2018 | July 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 42,943,000 | 43,484,000 | ||||
Accounts receivable, net | 159,255,000 | 147,439,000 | |||||
Inventories, net | 89,569,000 | 75,076,000 | |||||
Prepaid expenses and other current assets | 13,133,000 | 13,794,000 | |||||
Total current assets | 304,900,000 | 279,793,000 | |||||
Property, plant and equipment, net | 28,543,000 | 28,987,000 | |||||
Goodwill | 290,633,000 | 290,633,000 | |||||
Intangibles with finite lives, net | 236,507,000 | 240,796,000 | |||||
Deferred financing costs, net | 3,678,000 | 2,205,000 | |||||
Other assets, net | 2,679,000 | 2,743,000 | |||||
Total assets | $ | 866,940,000 | 845,157,000 | ||||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 35,340,000 | 43,928,000 | ||||
Accrued expenses and other current liabilities | 68,809,000 | 65,034,000 | |||||
Dividends payable | 2,381,000 | 2,356,000 | |||||
Contract liabilities | 34,460,000 | 34,452,000 | |||||
Current portion of long-term debt | — | 17,211,000 | |||||
Current portion of capital lease and other obligations | 1,579,000 | 1,836,000 | |||||
Interest payable | 26,000 | 499,000 | |||||
Total current liabilities | 142,595,000 | 165,316,000 | |||||
Non-current portion of long-term debt, net | 193,400,000 | 148,087,000 | |||||
Non-current portion of capital lease and other obligations | 586,000 | 765,000 | |||||
Income taxes payable | 407,000 | 2,572,000 | |||||
Deferred tax liability, net | 13,200,000 | 10,927,000 | |||||
Long-term contract liabilities | 6,813,000 | 7,689,000 | |||||
Other liabilities | 3,843,000 | 4,117,000 | |||||
Total liabilities | 360,844,000 | 339,473,000 | |||||
Commitments and contingencies (See Note 18) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.10 per share; shares authorized and unissued 2,000,000 | — | — | |||||
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 38,938,844 shares and 38,860,571 shares at October 31, 2018 and July 31, 2018, respectively | 3,894,000 | 3,886,000 | |||||
Additional paid-in capital | 537,852,000 | 538,453,000 | |||||
Retained earnings | 406,199,000 | 405,194,000 | |||||
947,945,000 | 947,533,000 | ||||||
Less: | |||||||
Treasury stock, at cost (15,033,317 shares at October 31, 2018 and July 31, 2018) | (441,849,000 | ) | (441,849,000 | ) | |||
Total stockholders’ equity | 506,096,000 | 505,684,000 | |||||
Total liabilities and stockholders’ equity | $ | 866,940,000 | 845,157,000 |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Net sales | $ | 160,844,000 | 121,569,000 | ||||
Cost of sales | 103,075,000 | 73,853,000 | |||||
Gross profit | 57,769,000 | 47,716,000 | |||||
Expenses: | |||||||
Selling, general and administrative | 31,847,000 | 28,475,000 | |||||
Research and development | 13,210,000 | 13,750,000 | |||||
Amortization of intangibles | 4,289,000 | 5,269,000 | |||||
Acquisition plan expenses | 1,130,000 | — | |||||
50,476,000 | 47,494,000 | ||||||
Operating income | 7,293,000 | 222,000 | |||||
Other expenses: | |||||||
Interest expense | 2,669,000 | 2,588,000 | |||||
Write-off of deferred financing costs | 3,217,000 | — | |||||
Interest (income) and other | 66,000 | 39,000 | |||||
Income (loss) before benefit from income taxes | 1,341,000 | (2,405,000 | ) | ||||
Benefit from income taxes | (2,127,000 | ) | (745,000 | ) | |||
Net income (loss) | $ | 3,468,000 | (1,660,000 | ) | |||
Net income (loss) per share (See Note 5): | |||||||
Basic | $ | 0.14 | (0.07 | ) | |||
Diluted | $ | 0.14 | (0.07 | ) | |||
Weighted average number of common shares outstanding – basic | 23,999,000 | 23,797,000 | |||||
Weighted average number of common and common equivalent shares outstanding – diluted | 24,375,000 | 23,797,000 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Stockholders' Equity | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balance as of July 31, 2017 | 38,619,467 | $ | 3,862,000 | $ | 533,001,000 | $ | 385,136,000 | 15,033,317 | $ | (441,849,000 | ) | $ | 480,150,000 | |||||||||||||
Equity-classified stock award compensation | — | — | 747,000 | — | — | — | 747,000 | |||||||||||||||||||
Proceeds from issuance of employee stock purchase plan shares | 11,674 | 1,000 | 188,000 | — | — | — | 189,000 | |||||||||||||||||||
Forfeiture of restricted stock | (10,254 | ) | (1,000 | ) | 1,000 | — | — | — | — | |||||||||||||||||
Net settlement of stock-based awards | 19,624 | 2,000 | (997,000 | ) | — | — | — | (995,000 | ) | |||||||||||||||||
Cash dividends declared, net ($0.10 per share) | — | — | — | (2,351,000 | ) | — | — | (2,351,000 | ) | |||||||||||||||||
Accrual of dividend equivalents, net of reversal ($0.10 per share) | — | — | — | (61,000 | ) | — | — | (61,000 | ) | |||||||||||||||||
Net loss | — | — | — | (1,660,000 | ) | — | — | (1,660,000 | ) | |||||||||||||||||
Balance as of October 31, 2017 | 38,640,511 | $ | 3,864,000 | $ | 532,940,000 | $ | 381,064,000 | 15,033,317 | $ | (441,849,000 | ) | $ | 476,019,000 | |||||||||||||
Balance as of July 31, 2018 | 38,860,571 | $ | 3,886,000 | $ | 538,453,000 | $ | 405,194,000 | 15,033,317 | $ | (441,849,000 | ) | $ | 505,684,000 | |||||||||||||
Equity-classified stock award compensation | — | — | 1,046,000 | — | — | — | 1,046,000 | |||||||||||||||||||
Proceeds from exercises of stock options | 6,100 | 1,000 | 173,000 | — | — | — | 174,000 | |||||||||||||||||||
Proceeds from issuance of employee stock purchase plan shares | 8,861 | 1,000 | 240,000 | — | — | — | 241,000 | |||||||||||||||||||
Issuance of restricted stock | 10,386 | 1,000 | (1,000 | ) | — | — | — | — | ||||||||||||||||||
Net settlement of stock-based awards | 52,926 | 5,000 | (2,059,000 | ) | — | — | — | (2,054,000 | ) | |||||||||||||||||
Cash dividends declared ($0.10 per share) | — | — | — | (2,381,000 | ) | — | — | (2,381,000 | ) | |||||||||||||||||
Accrual of dividend equivalents, net of reversal ($0.10 per share) | — | — | — | (82,000 | ) | — | — | (82,000 | ) | |||||||||||||||||
Net income | — | — | — | 3,468,000 | — | — | 3,468,000 | |||||||||||||||||||
Balance as of October 31, 2018 | 38,938,844 | $ | 3,894,000 | $ | 537,852,000 | $ | 406,199,000 | 15,033,317 | $ | (441,849,000 | ) | $ | 506,096,000 |
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 3,468,000 | (1,660,000 | ) | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization of property, plant and equipment | 2,851,000 | 3,346,000 | |||||
Amortization of intangible assets with finite lives | 4,289,000 | 5,269,000 | |||||
Amortization of stock-based compensation | 1,046,000 | 747,000 | |||||
Amortization of deferred financing costs | 548,000 | 548,000 | |||||
Write-off of deferred financing costs | 3,217,000 | — | |||||
Loss on disposal of property, plant and equipment | 32,000 | 2,000 | |||||
(Benefit from) provision for allowance for doubtful accounts | (7,000 | ) | 147,000 | ||||
Provision for excess and obsolete inventory | 747,000 | 693,000 | |||||
Deferred income tax expense | 2,273,000 | 2,718,000 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (12,267,000 | ) | 10,719,000 | ||||
Inventories | (15,240,000 | ) | (10,281,000 | ) | |||
Prepaid expenses and other current assets | 3,054,000 | 1,714,000 | |||||
Other assets | 64,000 | (200,000 | ) | ||||
Accounts payable | (9,180,000 | ) | 610,000 | ||||
Accrued expenses and other current liabilities | 8,526,000 | (2,379,000 | ) | ||||
Contract liabilities | (2,947,000 | ) | (1,635,000 | ) | |||
Other liabilities, non-current | 275,000 | (313,000 | ) | ||||
Interest payable | (455,000 | ) | (213,000 | ) | |||
Income taxes payable | (4,424,000 | ) | (3,346,000 | ) | |||
Net cash (used in) provided by operating activities | (14,130,000 | ) | 6,486,000 | ||||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (1,645,000 | ) | (1,108,000 | ) | |||
Net cash used in investing activities | (1,645,000 | ) | (1,108,000 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings of long-term debt under Credit Facility | 193,400,000 | — | |||||
Net (payments) borrowings under Revolving Loan portion of Prior Credit Facility | (48,603,000 | ) | 6,400,000 | ||||
Repayment of debt under Term Loan portion of Prior Credit Facility | (120,121,000 | ) | (7,127,000 | ) | |||
Remittance of employees' statutory tax withholdings for stock awards | (5,017,000 | ) | (995,000 | ) | |||
Cash dividends paid | (2,615,000 | ) | (2,459,000 | ) | |||
Payment of deferred financing costs | (1,771,000 | ) | — | ||||
Repayment of principal amounts under capital lease and other obligations | (454,000 | ) | (723,000 | ) | |||
Proceeds from issuance of employee stock purchase plan shares | 241,000 | 189,000 | |||||
Proceeds from exercises of stock options | 174,000 | — | |||||
Net cash provided by (used in) financing activities | 15,234,000 | (4,715,000 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (541,000 | ) | 663,000 | ||||
Cash and cash equivalents at beginning of period | 43,484,000 | 41,844,000 | |||||
Cash and cash equivalents at end of period | $ | 42,943,000 | 42,507,000 | ||||
See accompanying notes to condensed consolidated financial statements. (Continued) |
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) | |||||||
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Supplemental cash flow disclosures: | |||||||
Cash paid (received) during the period for: | |||||||
Interest | $ | 2,470,000 | 2,164,000 | ||||
Income taxes, net | $ | 25,000 | (113,000 | ) | |||
Non-cash investing and financing activities: | |||||||
Cash dividends declared but unpaid (including dividend equivalents) | $ | 2,463,000 | 2,412,000 | ||||
Accrued additions to property, plant and equipment | $ | 795,000 | 794,000 | ||||
Accrued deferred financing costs | $ | 41,000 | — | ||||
Issuance (forfeiture) of restricted stock | $ | 1,000 | (1,000 | ) |
• | FASB ASU No. 2014-09 "Revenue from Contracts with Customers (Topic 606)." See Note (3) - "Revenue" for further information. |
• | FASB ASU No. 2016-16 “Intra-Entity Transfers of Assets Other Than Inventory,” which eliminates a prior exception and now requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory (for example, intellectual property and property, plant and equipment) when the transfer occurs. We adopted this ASU on August 1, 2018. There was no material impact to our consolidated financial statements (including any cumulative-effect adjustment) and disclosures upon such adoption. |
As reported at | Adoption of | Balance at | |||||||||
July 31, 2018 | ASC 606 | August 1, 2018 | |||||||||
Accrued expenses and other current liabilities(1) | $ | 65,034,000 | $ | (2,079,000 | ) | $ | 62,955,000 | ||||
Contract liabilities, current and non-current(2) | 42,141,000 | 2,079,000 | 44,220,000 |
• | Over time - We recognize revenue using the over time method when there is a continuous transfer of control to the customer over the contractual period of performance. This generally occurs when we enter into a long-term contract relating to the design, development or manufacture of complex equipment or technology platforms to a buyer’s specification (or to provide services related to the performance of such contracts). Continuous transfer of control is typically supported by contract clauses which allow our customers to unilaterally terminate a contract for convenience, pay for costs incurred plus a reasonable profit and take control of work-in-process. Revenue recognized over time is generally based on the extent of progress toward completion of the related performance obligations. The selection of the method to measure progress requires judgment and is based on the nature of the products or services provided. In certain instances, typically for firm fixed-price contracts, we use the cost-to-cost measure because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion, including warranty costs. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Costs to fulfill generally include direct labor, materials, subcontractor costs, other direct costs and an allocation of indirect costs. When these contracts are modified, the additional goods or services are generally not distinct from those already provided. As a result, these modifications form part of an existing contract and we must update the transaction price and our measure of progress for the single performance obligation and recognize a cumulative catch-up to revenue and gross profits. |
• | Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer. This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times. Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices. |
Three months ended October 31, | ||||||
2018 | 2017 | |||||
United States | ||||||
U.S. government | 44.2 | % | 32.4 | % | ||
Domestic | 31.4 | % | 44.3 | % | ||
Total United States | 75.6 | % | 76.7 | % | ||
International | 24.4 | % | 23.3 | % | ||
Total | 100.0 | % | 100.0 | % |
Three months ended October 31, 2018 | |||||||||||
Commercial Solutions | Government Solutions | Total | |||||||||
Geographical region and customer type | |||||||||||
U.S. government | $ | 14,220,000 | 56,824,000 | $ | 71,044,000 | ||||||
Domestic | 42,237,000 | 8,274,000 | 50,511,000 | ||||||||
Total United States | 56,457,000 | 65,098,000 | 121,555,000 | ||||||||
International | 21,516,000 | 17,773,000 | 39,289,000 | ||||||||
Total | $ | 77,973,000 | 82,871,000 | $ | 160,844,000 | ||||||
Contract type | |||||||||||
Firm fixed price | $ | 76,290,000 | 63,611,000 | $ | 139,901,000 | ||||||
Cost reimbursable | 1,683,000 | 19,260,000 | 20,943,000 | ||||||||
Total | $ | 77,973,000 | 82,871,000 | $ | 160,844,000 | ||||||
Transfer of control | |||||||||||
Point in time | $ | 37,945,000 | 52,623,000 | $ | 90,568,000 | ||||||
Over time | 40,028,000 | 30,248,000 | 70,276,000 | ||||||||
Total | $ | 77,973,000 | 82,871,000 | $ | 160,844,000 |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net income (loss) for basic calculation | $ | 3,468,000 | (1,660,000 | ) | |||
Numerator for diluted calculation | $ | 3,468,000 | (1,660,000 | ) | |||
Denominator: | |||||||
Denominator for basic calculation | 23,999,000 | 23,797,000 | |||||
Effect of dilutive securities: | |||||||
Stock-based awards | 376,000 | — | |||||
Denominator for diluted calculation | 24,375,000 | 23,797,000 |
October 31, 2018 | July 31, 2018 | ||||||
Receivables from commercial and international customers | $ | 77,771,000 | 83,411,000 | ||||
Unbilled receivables from commercial and international customers | 19,549,000 | 19,731,000 | |||||
Receivables from the U.S. government and its agencies | 61,370,000 | 26,251,000 | |||||
Unbilled receivables from the U.S. government and its agencies | 2,217,000 | 19,807,000 | |||||
Total accounts receivable | 160,907,000 | 149,200,000 | |||||
Less allowance for doubtful accounts | 1,652,000 | 1,761,000 | |||||
Accounts receivable, net | $ | 159,255,000 | 147,439,000 |
October 31, 2018 | July 31, 2018 | ||||||
Raw materials and components | $ | 56,815,000 | 53,649,000 | ||||
Work-in-process and finished goods | 49,295,000 | 38,854,000 | |||||
Total inventories | 106,110,000 | 92,503,000 | |||||
Less reserve for excess and obsolete inventories | 16,541,000 | 17,427,000 | |||||
Inventories, net | $ | 89,569,000 | 75,076,000 |
October 31, 2018 | July 31, 2018 | ||||||
Accrued wages and benefits | $ | 22,506,000 | 23,936,000 | ||||
Accrued contract costs | 13,285,000 | 10,016,000 | |||||
Accrued warranty obligations | 9,982,000 | 11,738,000 | |||||
Accrued legal costs | 6,946,000 | 6,179,000 | |||||
Accrued commissions and royalties | 4,605,000 | 4,654,000 | |||||
Other | 11,485,000 | 8,511,000 | |||||
Accrued expenses and other current liabilities | $ | 68,809,000 | 65,034,000 |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Balance at beginning of period | $ | 11,738,000 | 17,617,000 | ||||
Reclass to contract liabilities as of August 1, 2018 | (1,679,000 | ) | — | ||||
Provision for warranty obligations | 1,020,000 | 1,106,000 | |||||
Charges incurred | (1,515,000 | ) | (1,830,000 | ) | |||
Warranty settlement and reclass (see below) | 418,000 | (3,892,000 | ) | ||||
Balance at end of period | $ | 9,982,000 | 13,001,000 |
July 31, 2018 | ||||
Term Loan Facility | $ | 120,121,000 | ||
Less unamortized deferred financing costs related to Term Loan Facility | 3,427,000 | |||
Term Loan Facility, net | 116,694,000 | |||
Revolving Loan Facility | 48,604,000 | |||
Amount outstanding under Prior Credit Facility, net | 165,298,000 | |||
Less current portion of long-term debt | 17,211,000 | |||
Non-current portion of long-term debt | $ | 148,087,000 |
Remainder of fiscal 2019 | $ | 1,495,000 | |
Fiscal 2020 | 780,000 | ||
Fiscal 2021 and beyond | — | ||
Total minimum lease payments | 2,275,000 | ||
Less: amounts representing interest | 110,000 | ||
Present value of net minimum lease payments | 2,165,000 | ||
Current portion of capital lease and other obligations | 1,579,000 | ||
Non-current portion of capital lease and other obligations | $ | 586,000 |
Stock options | 1,590,045 | |
Performance shares | 260,262 | |
RSUs and restricted stock | 440,829 | |
Share units | 155,806 | |
Total | 2,446,942 |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Cost of sales | $ | 58,000 | 40,000 | ||||
Selling, general and administrative expenses | 905,000 | 654,000 | |||||
Research and development expenses | 83,000 | 53,000 | |||||
Stock-based compensation expense before income tax benefit | 1,046,000 | 747,000 | |||||
Estimated income tax benefit | (228,000 | ) | (260,000 | ) | |||
Net stock-based compensation expense | $ | 818,000 | 487,000 |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Stock options | $ | 171,000 | 267,000 | ||||
Performance shares | 406,000 | 112,000 | |||||
RSUs and restricted stock | 547,000 | 385,000 | |||||
ESPP | 52,000 | 45,000 | |||||
Share units | (130,000 | ) | (62,000 | ) | |||
Stock-based compensation expense before income tax benefit | 1,046,000 | 747,000 | |||||
Estimated income tax benefit | (228,000 | ) | (260,000 | ) | |||
Net stock-based compensation expense | $ | 818,000 | 487,000 |
Awards (in Shares) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||
Outstanding at July 31, 2018 | 1,668,975 | $ | 28.72 | ||||||||||
Exercised | (78,930 | ) | 28.37 | ||||||||||
Outstanding at October 31, 2018 | 1,590,045 | $ | 28.74 | 4.27 | $ | 741,000 | |||||||
Exercisable at October 31, 2018 | 1,388,123 | $ | 28.74 | 3.94 | $ | 574,000 | |||||||
Vested and expected to vest at October 31, 2018 | 1,555,133 | $ | 28.73 | 4.22 | $ | 712,000 |
Awards (in Shares) | Weighted Average Grant Date Fair Value | Aggregate Intrinsic Value | |||||||||
Outstanding at July 31, 2018 | 818,438 | $ | 19.78 | ||||||||
Granted | 177,908 | 34.27 | |||||||||
Settled | (121,790 | ) | 21.08 | ||||||||
Forfeited | (17,659 | ) | 27.23 | ||||||||
Outstanding at October 31, 2018 | 856,897 | $ | 22.44 | $ | 23,925,000 | ||||||
Vested at October 31, 2018 | 216,718 | $ | 27.71 | $ | 6,051,000 | ||||||
Vested and expected to vest at October 31, 2018 | 819,625 | $ | 22.58 | $ | 22,884,000 |
Three months ended October 31, 2018 | ||||||||||||||
Commercial Solutions | Government Solutions | Unallocated | Total | |||||||||||
Net sales | $ | 77,973,000 | 82,871,000 | — | $ | 160,844,000 | ||||||||
Operating income (loss) | $ | 7,058,000 | 6,644,000 | (6,409,000 | ) | $ | 7,293,000 | |||||||
Net income (loss) | $ | 6,971,000 | 6,609,000 | (10,112,000 | ) | $ | 3,468,000 | |||||||
Provision for (benefit from) income taxes | 12,000 | — | (2,139,000 | ) | (2,127,000 | ) | ||||||||
Interest (income) and other | 53,000 | 32,000 | (19,000 | ) | 66,000 | |||||||||
Write-off of deferred financing costs | — | — | 3,217,000 | 3,217,000 | ||||||||||
Interest expense | 22,000 | 3,000 | 2,644,000 | 2,669,000 | ||||||||||
Amortization of stock-based compensation | — | — | 1,046,000 | 1,046,000 | ||||||||||
Amortization of intangibles | 3,445,000 | 844,000 | — | 4,289,000 | ||||||||||
Depreciation | 2,228,000 | 379,000 | 244,000 | 2,851,000 | ||||||||||
Acquisition plan expenses | — | — | 1,130,000 | 1,130,000 | ||||||||||
Facility exit costs | — | 1,373,000 | — | 1,373,000 | ||||||||||
Adjusted EBITDA | $ | 12,731,000 | 9,240,000 | (3,989,000 | ) | $ | 17,982,000 | |||||||
Purchases of property, plant and equipment | $ | 892,000 | 629,000 | 124,000 | $ | 1,645,000 | ||||||||
Total assets at October 31, 2018 | $ | 602,567,000 | 222,587,000 | 41,786,000 | $ | 866,940,000 |
Three months ended October 31, 2017 | ||||||||||||||
Commercial Solutions | Government Solutions | Unallocated | Total | |||||||||||
Net sales | $ | 76,114,000 | 45,455,000 | — | $ | 121,569,000 | ||||||||
Operating income (loss) | $ | 4,792,000 | (641,000 | ) | (3,929,000 | ) | $ | 222,000 | ||||||
Net income (loss) | $ | 4,702,000 | (642,000 | ) | (5,720,000 | ) | $ | (1,660,000 | ) | |||||
Provision for (benefit from) income taxes | 6,000 | — | (751,000 | ) | (745,000 | ) | ||||||||
Interest (income) and other | 48,000 | (2,000 | ) | (7,000 | ) | 39,000 | ||||||||
Interest expense | 36,000 | 3,000 | 2,549,000 | 2,588,000 | ||||||||||
Amortization of stock-based compensation | — | — | 747,000 | 747,000 | ||||||||||
Amortization of intangibles | 4,425,000 | 844,000 | — | 5,269,000 | ||||||||||
Depreciation | 2,444,000 | 616,000 | 286,000 | 3,346,000 | ||||||||||
Adjusted EBITDA | $ | 11,661,000 | 819,000 | (2,896,000 | ) | $ | 9,584,000 | |||||||
Purchases of property, plant and equipment | $ | 959,000 | 93,000 | 56,000 | $ | 1,108,000 | ||||||||
Total assets at October 31, 2017 | $ | 600,649,000 | 181,739,000 | 43,844,000 | $ | 826,232,000 |
Commercial Solutions | Government Solutions | Total | |||||||||
Goodwill | $ | 231,440,000 | 59,193,000 | $ | 290,633,000 | ||||||
As of October 31, 2018 | |||||||||||||
Weighted Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Customer relationships | 21.0 | $ | 249,831,000 | 57,969,000 | $ | 191,862,000 | |||||||
Technologies | 12.8 | 82,370,000 | 55,585,000 | 26,785,000 | |||||||||
Trademarks and other | 16.4 | 28,894,000 | 11,034,000 | 17,860,000 | |||||||||
Total | $ | 361,095,000 | 124,588,000 | $ | 236,507,000 |
As of July 31, 2018 | |||||||||||||
Weighted Average Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Customer relationships | 21.0 | $ | 249,831,000 | 55,350,000 | $ | 194,481,000 | |||||||
Technologies | 12.8 | 82,370,000 | 54,386,000 | 27,984,000 | |||||||||
Trademarks and other | 16.4 | 28,894,000 | 10,563,000 | 18,331,000 | |||||||||
Total | $ | 361,095,000 | 120,299,000 | $ | 240,796,000 |
2019 | $ | 17,155,000 | |
2020 | 17,155,000 | ||
2021 | 16,196,000 | ||
2022 | 14,955,000 | ||
2023 | 14,955,000 |
ITEM 2. | |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION | |
AND RESULTS OF OPERATIONS |
• | Commercial Solutions - serves commercial customers and smaller governments, such as state and local governments, that require advanced communication technologies to meet their needs. This segment also serves certain large government customers (including the U.S. government) that have requirements for off-the-shelf commercial equipment. We believe this segment is a leading provider of satellite communications (such as satellite earth station modems and traveling wave tube amplifiers ("TWTA")), public safety systems (such as next generation 911 ("NG911") technologies) and enterprise application technologies (such as a messaging and trusted location-based technologies). |
• | Government Solutions - serves large government end-users (including those of foreign countries) that require mission critical technologies and systems. We believe this segment is a leading provider of command and control applications (such as the design, installation and operation of data networks that integrate computing and communications (including both satellite and terrestrial links)), ongoing network operation and management support services including project management and fielding and maintenance solutions related to satellite ground terminals), troposcatter communications (such as digital troposcatter multiplexers, digital over-the-horizon modems, troposcatter systems, and frequency converter systems) and RF power and switching technologies (such as solid state high-power broadband amplifiers, enhanced position location reporting system (or commonly known as "EPLRS") amplifier assemblies, identification friend or foe amplifiers, and amplifiers used in the counteraction of improvised explosive devices). |
• | Over time - We recognize revenue using the over time method when there is a continuous transfer of control to the customer over the contractual period of performance. This generally occurs when we enter into a long-term contract relating to the design, development or manufacture of complex equipment or technology platforms to a buyer’s specification (or to provide services related to the performance of such contracts). Continuous transfer of control is typically supported by contract clauses which allow our customers to unilaterally terminate a contract for convenience, pay for costs incurred plus a reasonable profit and take control of work-in-process. Revenue recognized over time is generally based on the extent of progress toward completion of the related performance obligations. The selection of the method to measure progress requires judgment and is based on the nature of the products or services provided. In certain instances, typically for firm fixed-price contracts, we use the cost-to-cost measure because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion, including warranty costs. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Costs to fulfill generally include direct labor, materials, subcontractor costs, other direct costs and an allocation of indirect costs. When these contracts are modified, the additional goods or services are generally not distinct from those already provided. As a result, these modifications form part of an existing contract and we must update the transaction price and our measure of progress for the single performance obligation and recognize a cumulative catch-up to revenue and gross profits. |
• | Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer. This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times. Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices. |
• | Net sales of $160.8 million; |
• | Operating income of $7.3 million; |
• | Net income of $3.5 million; and |
• | Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $18.0 million. |
• | We successfully consolidated our Government Solutions segment’s manufacturing facility located in Tampa, Florida with another facility that we maintain in Orlando, Florida; and in doing so, we incurred $1.4 million of facility exit costs; |
• | We initiated a targeted acquisition plan related to a small but growing technology solutions company and incurred $1.1 million of acquisition plan expenses through our first quarter of fiscal 2019. Our acquisition plan efforts are ongoing and we currently expect to incur approximately $1.0 million of additional expenses in the second quarter of fiscal 2019. We anticipate making an announcement related to this potential acquisition in the near term. There is no certainty that our acquisition plan efforts will be successful; |
• | We entered into a new $550.0 million credit facility (the “Credit Facility”) and wrote-off $3.2 million of deferred financing costs. Our new Credit Facility is intended to provide us with, among other things, increased balance sheet flexibility, improved interest rate pricing and less restrictive covenants as compared to our prior credit facility; and |
• | We recorded a net discrete tax benefit of approximately $2.4 million primarily related to the favorable resolution with the IRS with respect to their audit of our fiscal 2016 federal income tax return and for tax benefits associated with stock-based awards that were settled during the quarter. |
Three months ended October 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||
Commercial Solutions | Government Solutions | Consolidated | ||||||||||||||||
U.S. government | 18.2 | % | 15.7 | % | 68.6 | % | 60.5 | % | 44.2 | % | 32.4 | % | ||||||
Domestic | 54.2 | % | 58.1 | % | 10.0 | % | 21.1 | % | 31.4 | % | 44.3 | % | ||||||
Total U.S. | 72.4 | % | 73.8 | % | 78.6 | % | 81.6 | % | 75.6 | % | 76.7 | % | ||||||
International | 27.6 | % | 26.2 | % | 21.4 | % | 18.4 | % | 24.4 | % | 23.3 | % | ||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Three months ended October 31, | ||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
($ in millions) | Commercial Solutions | Government Solutions | Unallocated | Consolidated | ||||||||||||||||||||||
Operating income (loss) | $ | 7.1 | 4.8 | 6.7 | (0.6 | ) | (6.4 | ) | (3.9 | ) | $ | 7.3 | 0.2 | |||||||||||||
Percentage of related net sales | 9.1 | % | 6.3 | % | 8.1 | % | (1.3 | )% | NA | NA | 4.5 | % | 0.2 | % |
Three months ended October 31, | ||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
($ in millions) | Commercial Solutions | Government Solutions | Unallocated | Consolidated | ||||||||||||||||||||||
Net income (loss) | $ | 7.0 | 4.7 | 6.6 | (0.6 | ) | (10.1 | ) | (5.7 | ) | $ | 3.5 | (1.7 | ) | ||||||||||||
Benefit from income taxes | — | — | — | — | (2.1 | ) | (0.8 | ) | (2.1 | ) | (0.7 | ) | ||||||||||||||
Interest (income) and other | 0.1 | — | — | — | — | — | 0.1 | — | ||||||||||||||||||
Write-off of deferred financing costs | — | — | — | — | 3.2 | — | 3.2 | — | ||||||||||||||||||
Interest expense | — | — | — | — | 2.6 | 2.5 | 2.7 | 2.6 | ||||||||||||||||||
Amortization of stock-based compensation | — | — | — | — | 1.0 | 0.7 | 1.0 | 0.7 | ||||||||||||||||||
Amortization of intangibles | 3.4 | 4.4 | 0.8 | 0.8 | — | — | 4.3 | 5.3 | ||||||||||||||||||
Depreciation | 2.2 | 2.4 | 0.4 | 0.6 | 0.2 | 0.3 | 2.9 | 3.3 | ||||||||||||||||||
Acquisition plan expenses | — | — | — | — | 1.1 | — | 1.1 | — | ||||||||||||||||||
Facility exit costs | — | — | 1.4 | — | — | — | 1.4 | — | ||||||||||||||||||
Adjusted EBITDA | $ | 12.7 | 11.7 | 9.2 | 0.8 | (4.0 | ) | (2.9 | ) | $ | 18.0 | 9.6 | ||||||||||||||
Percentage of related net sales | 16.3 | % | 15.3 | % | 11.1 | % | 1.8 | % | NA | NA | 11.2 | % | 7.9 | % |
($ in millions) | Fiscal Year 2018 | ||
Reconciliation of GAAP Net Income to Adjusted EBITDA: | |||
Net income | $ | 29.8 | |
Income taxes | (5.1 | ) | |
Interest (income) and other | 0.3 | ||
Interest expense | 10.2 | ||
Amortization of stock-based compensation | 8.6 | ||
Amortization of intangibles | 21.1 | ||
Depreciation | 13.7 | ||
Adjusted EBITDA | $ | 78.4 |
Three months ended October 31, 2018 | ||||||||||||
($ in millions, except for per share amount) | Operating Income | Net Income | Net Income per Diluted Share | |||||||||
Reconciliation of GAAP to Non-GAAP Earnings: | ||||||||||||
GAAP measures, as reported | $ | 7.3 | $ | 3.5 | $ | 0.14 | ||||||
Facility exit costs | 1.4 | 1.1 | 0.04 | |||||||||
Acquisition plan expenses | 1.1 | 0.9 | 0.04 | |||||||||
Write-off of deferred financing costs | — | 2.5 | 0.10 | |||||||||
Net discrete tax benefit | — | (2.4 | ) | (0.10 | ) | |||||||
Non-GAAP measures | $ | 9.8 | $ | 5.5 | $ | 0.22 |
• | Net cash used in operating activities was $14.1 million for the three months ended October 31, 2018 as compared to net cash provided by operating activities of $6.5 million for the three months ended October 31, 2017. The period-over-period decrease in cash flow from operating activities is attributable to overall changes in net working capital requirements, principally the timing of shipments, billings and payments. We expect cash flow from operating activities during the remainder of fiscal 2019 to be positive. |
• | Net cash used in investing activities for the three months ended October 31, 2018 was $1.6 million as compared to $1.1 million for the three months ended October 31, 2017. Both of these amounts primarily represent expenditures relating to ongoing equipment upgrades and enhancements. |
• | Net cash provided by financing activities was $15.2 million for the three months ended October 31, 2018 as compared to net cash used in financing activities of $4.7 million for the three months ended October 31, 2017. During the three months ended October 31, 2018, we entered into a new Credit Facility and repaid in full the outstanding borrowings under our Prior Credit Facility. In order to fund our operating cash flow usage, we borrowed from our new Credit Facility. As we expect to generate significant cash flows from operating activities during the remainder of fiscal 2019, borrowings under our new Credit Facility are expected to decline from current levels. During the three months ended October 31, 2018 and 2017, we paid $2.6 million and $2.5 million, respectively, in cash dividends to our stockholders. We also made $5.0 million and $1.0 million, respectively, of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the three months ended October 31, 2018 and 2017. |
Obligations Due by Fiscal Years or Maturity Date (in thousands) | |||||||||||||||
Total | Remainder of 2019 | 2020 and 2021 | 2022 and 2023 | After 2023 | |||||||||||
Credit Facility - principal payments | $ | 193,400 | — | — | — | 193,400 | |||||||||
Credit Facility - interest payments | 41,827 | 6,244 | 16,751 | 16,751 | 2,081 | ||||||||||
Operating lease commitments | 46,508 | 7,675 | 16,905 | 11,168 | 10,760 | ||||||||||
Capital lease and other obligations | 2,275 | 1,495 | 780 | — | — | ||||||||||
Net contractual cash obligations | $ | 284,010 | 15,414 | 34,436 | 27,919 | 206,241 |
• | FASB ASU No. 2014-09 "Revenue from Contracts with Customers (Topic 606)." See "Notes to Condensed Consolidated Financial Statements - Note (3) -Revenue," for further information. |
• | FASB ASU No. 2016-16, issued in October 2016, which eliminates a prior exception and now requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory (for example, intellectual property and property, plant and equipment) when the transfer occurs. We adopted this ASU on August 1, 2018. There was no material impact to our condensed consolidated financial statements (including any cumulative-effect adjustment) and disclosures upon such adoption. |
• | FASB ASU No. 2016-02, issued in February 2016, which requires lessees to recognize the following for all leases (with the exception of short-term leases): (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, initially measured at the present value of the lease payments; and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. In January 2018, FASB ASU No. 2018-01 was issued to permit an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842. In July 2018, the FASB issued ASU Nos. 2018-10 and 2018-11, which provide further codification improvements and relieves the requirement to present prior comparative year results when adopting the new lease standard. Instead, companies can choose to recognize the cumulative-effect of applying the new standard to leased assets and liabilities as an adjustment to opening retained earnings. These ASUs are effective for fiscal years beginning after December 15, 2018 (our fiscal year beginning on August 1, 2019), including interim periods within those fiscal years and should be applied with a modified retrospective approach. Early adoption is permitted. We are evaluating the impact of these ASUs on our condensed consolidated financial statements and disclosures. |
• | FASB ASU No. 2016-13 issued in June 2016 and, as clarified by ASU No. 2018-19 issued in November 2018, which requires the measurement of expected credit losses for financial assets held at the reporting date to be based on historical experience, current conditions and reasonable and supportable forecasts. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020), including interim periods within those fiscal years. All entities may adopt the amendments in this ASU earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Except for a prospective transition approach required for debt securities for which an other-than-temporary impairment had been recognized before the effective date, an entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, on a modified-retrospective approach). We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures. |
• | FASB ASU No. 2017-11, issued in July 2017, which provides guidance on the accounting for certain financial instruments with embedded features that result in the strike price of the instrument or embedded conversion option being reduced on the basis of the pricing of future equity offerings (commonly referred to as "down round" features). This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (our fiscal year beginning on August 1, 2019) and early adoption is permitted, including adoption in an interim period. This ASU should be applied retrospectively in accordance with the provisions of the ASU. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we currently do not have any financial instruments with such “down round” features. |
• | FASB ASU No. 2017-12, issued in August 2017, which expands and refines hedge accounting for both nonfinancial and financial risk components and simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU is effective for fiscal years beginning after December 15, 2018 (our fiscal year beginning on August 1, 2019) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we are currently not a party to any such hedging transactions. |
• | FASB ASU No. 2018-07, issued in June 2018, which expands the scope of Topic 718 to include certain share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for fiscal years beginning after December 15, 2018 (our fiscal year beginning on August 1, 2019), including interim periods within that fiscal year. Early adoption is permitted. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established, through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we currently do not have any such outstanding share-based awards with nonemployees. |
• | FASB ASU No. 2018-13, issued in August 2018, which modifies the disclosure requirements for fair value measurements in Topic 820. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020). Upon the effective date, certain provisions are to be applied prospectively, while others are to be applied retrospectively to all periods presented. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. We are evaluating the impact of this ASU on our condensed consolidated financial statement disclosures. |
• | FASB ASU No. 2018-15, issued in August 2018, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020), and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. This ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures. |
• | FASB ASU No. 2018-16, issued in October 2018, which expands the list of eligible U.S. benchmark interest rates permitted in the application of hedge accounting due to broad concerns about the long-term sustainability of the LIBO rate. This ASU adds the Overnight Index Swap (“OIS”) rate, based on the Secured Overnight Financing Rate (“SOFR”), as an eligible U.S. benchmark interest rate. This ASU is effective for fiscal years beginning after December 15, 2018 (our fiscal year beginning on August 1, 2019) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we are currently not a party to any such hedging transactions. |
• | FASB ASU No. 2018-17, issued in October 2018, which requires entities to consider indirect interests held through related parties under common control on a proportional basis, rather than as the equivalent of a direct interest in its entirety when determining whether a decision-making fee is a variable interest. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we currently do not have any indirect interests held through related parties in common control. |
• | FASB ASU No. 2018-18, issued in November 2018, which clarifies when certain transactions between collaborative arrangement participants should be accounted for under ASC 606 and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. The ASU also precludes entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we are currently not engaged in such collaborative arrangement transactions. |
Date: | December 6, 2018 | By: /s/ Fred Kornberg |
Fred Kornberg | ||
Chairman of the Board | ||
Chief Executive Officer and President | ||
(Principal Executive Officer) | ||
Date: | December 6, 2018 | By: /s/ Michael A. Bondi |
Michael A. Bondi | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Fred Kornberg | |
Fred Kornberg Chairman of the Board Chief Executive Officer and President |
1. | I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Michael A. Bondi | |
Michael A. Bondi Chief Financial Officer |
/s/ Fred Kornberg | |
Fred Kornberg Chairman of the Board Chief Executive Officer and President |
/s/ Michael A. Bondi | |
Michael A. Bondi Chief Financial Officer |
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M,$UP0V5H:4AZ
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Oct. 31, 2018 |
Nov. 30, 2018 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Oct. 31, 2018 | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Registrant Name | COMTECH TELECOMMUNICATIONS CORP /DE/ | |
Entity Central Index Key | 0000023197 | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 23,905,893 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Oct. 31, 2018 |
Jul. 31, 2018 |
---|---|---|
Stockholders’ equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 38,938,844 | 38,860,571 |
Treasury stock, shares (in shares) | 15,033,317 | 15,033,317 |
General |
3 Months Ended |
---|---|
Oct. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | General The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our") as of and for the three months ended October 31, 2018 and 2017 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year. The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reported period. Actual results may differ from those estimates. Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission ("SEC"), for the fiscal year ended July 31, 2018 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC. As disclosed in more detail in Note (14) - "Segment Information," we manage our business in two reportable segments: Commercial Solutions and Government Solutions. Certain reclassifications have been made to previously reported condensed consolidated financial statements to conform to the current fiscal period presentation. |
Adoption of Accounting Standards and Updates |
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Oct. 31, 2018 | |||||||||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||||||||
Adoption of Accounting Standards and Updates | Adoption of Accounting Standards and Updates We are required to prepare our condensed consolidated financial statements in accordance with the Financial Accounting Standard Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which are commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs"). During the three months ended October 31, 2018, we adopted:
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Revenue (Notes) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue On August 1, 2018, we adopted ASU No. 2014-09 "Revenue from Contracts with Customers (Topic 606)” or “ASC 606” applying the modified retrospective transition method. Except for new presentation or disclosure requirements, the impact of adoption, both as of August 1, 2018 and for the three months ended October 31, 2018, was not material to our business, results of operations or financial condition. As a practical expedient, we adopted the new standard only for existing contracts as of August 1, 2018. All periods prior to August 1, 2018 will continue to be reported under the accounting standards in effect in those periods. As a result of ASC 606, we made the following adjustments to our Condensed Consolidated Balance Sheet as of August 1, 2018:
(1) See Note (8) - "Accrued expenses and other current liabilities" for further discussion of reclassification. (2) Formerly presented on the face of our Condensed Consolidated Balance Sheet as "Customer advances and deposits, current and non-current" prior to our adoption of ASC 606. The core principle of ASC 606 is that revenue should be recorded in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. Under ASC 606, we follow a five-step model to (1) identify the contract with our customer; (2) identify our performance obligations in our contract; (3) determine the transaction price for our contract; (4) allocate the transaction price to our performance obligations; and (5) recognize revenue using one of the following two methods:
For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion (“EAC”) process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Since certain contracts extend over a long period of time, the impact of revisions in revenue and or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment. Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly. The cost-to-cost method is principally used to account for contracts in our command and control solutions and over-the-horizon microwave systems product lines and, to a lesser extent, certain location based and messaging infrastructure contracts in our enterprise technology solutions product line. For service-based contracts in both our enterprise technology solutions and safety and security technology solutions product lines, we recognize revenue over time. These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide.
Point in time accounting is principally applied to contracts in our satellite earth station product line (which includes satellite modems, traveling wave tube amplifiers (“TWTAs”) and solid-state power amplifiers ("SSPAs")) and solid-state high-power narrow and broadband amplifiers. Point in time accounting is also applied to certain contracts in our command and control solutions product line. The contracts related to these product lines do not meet the requirements for over time revenue recognition because our customers cannot utilize the equipment for its intended purpose during any phase of our manufacturing process; customers do not simultaneously receive and or consume the benefits provided by our performance; customers do not control the asset (i.e., prior to delivery, customers cannot direct the use of the asset, sell or exchange the equipment, etc.); and, although many of our contracts have termination for convenience clauses and or an enforceable right to payment for performance completed to date, our performance creates an asset with an alternative use through the point of delivery. In determining that our equipment has alternative use, we considered the underlying manufacturing process for our products. In the early phases of manufacturing, raw materials and work in process (including subassemblies) consist of common parts that are highly fungible among many different types of products and customer applications. Finished products are either configured to our standard configuration or based on our customers’ specifications. Finished products, whether built to our standard specification or to a customers’ specification, can be sold to a variety of customers and across many different end use applications with minimal rework, if needed, and without incurring a significant economic loss. When identifying a contract with our customer, we consider when it has approval and commitment from both parties, if the rights of the parties are identified, if the payment terms are identified, if it has commercial substance and if collectability is probable. When identifying performance obligations, we consider whether there are multiple promises and how to account for them. In our contracts, multiple promises are separated if they are distinct, both individually and in the context of the contract. If multiple promises in a contract are highly interrelated or comprise a series of distinct services performed over time, they are combined into a single performance obligation. In some cases, we may also provide the customer with an additional service-type warranty, which we recognize as a separate performance obligation. Service-type warranties do not represent a significant portion of our consolidated net sales. When service-type warranties represent a separate performance obligation, the revenue is deferred and recognized ratably over the extended warranty period. Our contracts, from time-to-time, may also include options for additional goods and services. To-date, these options have not represented material rights to the customer as the pricing for them reflects standalone selling prices. As a result, we do not consider options we offer to be performance obligations for which we must allocate a portion of the transaction price. In many cases, we provide assurance-type warranty coverage for some of our products for a period of at least one year from the date of delivery. When identifying the transaction price, we typically utilize the contract's stated price as a starting point. The transaction price in certain arrangements may include estimated amounts of variable consideration, including award fees, incentive fees or other provisions that can either increase or decrease the transaction price. We estimate variable consideration as the amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the estimation uncertainty is resolved. The estimation of this variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (e.g., historical, current and forecasted) that is reasonably available to us. When allocating the contract’s transaction price, we consider each distinct performance obligation. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions, including geographic or regional specific factors, competitive positioning, internal costs, profit objectives and internally approved pricing guidelines related to the performance obligations. Almost all of our contracts with customers are denominated in U.S. dollars and typically either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. Transaction prices for contracts with U.S. domestic and international customers are usually based on specific negotiations with each customer and in the case of the U.S. government, sometimes based on estimated or actual costs of providing the goods or services in accordance with applicable regulations. Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:
Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Included in domestic sales, are sales to Verizon Communications Inc. ("Verizon"). Sales to Verizon were 11.7% of consolidated net sales for the three months ended October 31, 2017. International sales for the three months ended October 31, 2018 and 2017 include sales to U.S. domestic companies for inclusion in products that are sold to international customers. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for the three months ended October 31, 2018 and 2017. The following tables summarize our disaggregation of revenue consistent with information reviewed by our chief operating decision-maker ("CODM") for the three months ended October 31, 2018. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors which impact our business:
The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Condensed Consolidated Balance Sheet. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones. For certain contracts with provisions that are intended to protect customers in the event we do not satisfy our performance obligations, billings occur subsequent to revenue recognition, resulting in what we have historically presented as unbilled receivables. Under ASC 606, unbilled receivables constitute contract assets. There were no material impairment losses recognized on contract assets during the three months ended October 31, 2018. On large long term contracts, and for contracts with international customers that do not do business with us regularly, payment terms typically require advanced payments and deposits. Under ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability. These contract liabilities are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract. Under the typical payment terms for our contracts accounted for at a point in time, costs are accumulated in inventory until the time of billing, which generally coincides with revenue recognition. Of the total contract liabilities at August 1, 2018, $23,127,000 was recognized as revenue during the three months ended October 31, 2018. We recognize the incremental costs to obtain or fulfill a contract as expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material. As commissions payable to our sales and marketing employees or contractors are contingent upon multiple factors, such commissions are not considered direct costs to obtain or fulfill a contract with a customer and are expensed as incurred in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. Commissions payable to our third party sales representatives related to large long-term contracts are included in total estimated costs at completion for such contracts and are expensed over time through cost of sales on our Condensed Consolidated Statements of Operations, as we consider these types of commissions direct and incremental costs to obtain and fulfill such contracts. Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the end of a fiscal period. Remaining performance obligations, which we refer to as backlog, exclude unexercised contract options and potential orders under indefinite delivery / indefinite quantity ("IDIQ") contracts. As of October 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was $627,252,000. We expect that a significant portion of our remaining performance obligations at October 31, 2018 will be completed and recognized as revenue during the year. During the three months ended October 31, 2018, revenue recognized from performance obligations satisfied, or partially satisfied, in previous periods (for example due to changes in the transaction price) was not material. |
Fair Value Measurements and Financial Instruments |
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Oct. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Using the fair value hierarchy described in FASB ASC 820 "Fair Value Measurements and Disclosures," we valued our cash and cash equivalents using Level 1 inputs that were based on quoted market prices. We believe that the carrying amounts of our other current financial assets (such as accounts receivable) and other current liabilities (including accounts payable, accrued expenses and the current portion of our favorable AT&T warranty settlement) approximate their fair values due to their short-term maturities. The fair value of our Credit Facility that we entered into on October 31, 2018 approximates its carrying amount due to its variable interest rate and pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter. We believe the fair value of our non-current portion of capital lease and other obligations, which currently has a blended interest rate of 7.1%, would not be materially different than its carrying value as of October 31, 2018. The fair value of the non-current portion of our favorable AT&T warranty settlement would not be materially different than its carrying value as of as of October 31, 2018, given our belief that the present value of such liability reflects market participants' assumptions for a similar junior, unsecured debt instrument. See Note (8) - "Accrued Expenses and Other Current Liabilities" for further discussion of the favorable AT&T warranty settlement. As of October 31, 2018 and July 31, 2018, other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Condensed Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820. |
Earnings Per Share |
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Earnings Per Share | Earnings Per Share Our basic earnings per share ("EPS") is computed based on the weighted average number of common shares (including vested but unissued stock units, share units, performance shares and restricted stock units ("RSUs")), outstanding during each respective period. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards, if dilutive, outstanding during each respective period. Pursuant to FASB ASC 260 "Earnings Per Share," equity-classified stock-based awards that are subject to performance conditions are not considered in our diluted EPS calculations until the respective performance conditions have been satisfied. When calculating our diluted earnings per share, we consider the amount an employee must pay upon assumed exercise of stock-based awards and the amount of stock-based compensation cost attributed to future services and not yet recognized. There were no purchases of our common stock during the three months ended October 31, 2018 or 2017. See Note (17) - "Stockholders’ Equity" for more information. Weighted average stock options, RSUs and restricted stock outstanding of 279,000 and 2,246,000 for the three months ended October 31, 2018 and 2017, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Our EPS calculations exclude 236,000 and 252,000 weighted average performance shares outstanding for the three months ended October 31, 2018 and 2017, respectively, as the performance conditions have not yet been satisfied. However, the compensation expense related to these awards is included in net income (loss) (the numerator) for EPS calculations for each respective period. The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:
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Accounts Receivable |
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Accounts Receivable Additional Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Accounts receivable consist of the following at:
Unbilled receivables as of October 31, 2018 relate to contracts-in-progress for which revenue has been recognized, but for which we have not yet earned the right to bill the customer for work performed to-date. Under ASC 606, which we adopted on August 1, 2018 (see Note (3) - “Revenue”), unbilled receivables constitute contract assets. Management estimates that substantially all amounts not yet billed at October 31, 2018 will be billed and collected within one year. Of the unbilled receivables from commercial and international customers at October 31, 2018 and July 31, 2018, approximately $1,592,000 and $1,558,000, respectively, relates to a large over-the-horizon microwave system contract with our large U.S. prime contractor customer (all of which related to our North African country end-customer). As of October 31, 2018, except for the U.S. government (and its agencies), which represented 39.5% of total accounts receivable, there were no other customers which accounted for greater than 10.0% of total accounts receivable. As of July 31, 2018, the U.S. government (and its agencies) and Verizon represented 30.9% and 10.1%, respectively, of total accounts receivable. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consist of the following at:
As of October 31, 2018 and July 31, 2018, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $1,235,000 and $1,249,000, respectively, and the amount of inventory related to contracts from third party commercial customers who outsource their manufacturing to us was $1,334,000 and $1,310,000, respectively. |
Accrued Expenses and Other Current Liabilities |
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Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following at:
On August 1, 2018, in connection with our adoption of ASC 606, $2,079,000 of accrued expenses and other current liabilities were reclassified to contract liabilities on our Condensed Consolidated Balance Sheet. Of this total amount, $1,679,000 and $400,000, respectively, was reclassified from the “accrued warranty obligations” and “other” categories presented in the above table to contract liabilities as they represented deferred revenue related to service-type warranty performance obligations. See Note (3) - "Revenue" for further discussion of our adoption of ASC 606. Other accrued expenses as of October 31, 2018 include $992,000 for the current portion of the facility exit costs related to the closure of a manufacturing facility, as discussed in more detail in Note (9) - "Cost Reduction Actions." Accrued legal costs as of October 31, 2018 and July 31, 2018 include $3,314,000 and $3,372,000, respectively, related to estimated costs associated with certain TeleCommunication Systems, Inc. ("TCS") intellectual property matters. The accrued potential settlement costs do not reflect the final amounts we may actually pay. Ongoing legal costs associated with defending legacy TCS intellectual property matters and the ultimate resolution could vary and have a material adverse effect on our future consolidated results of operations, financial position or cash flows. TCS intellectual property matters are discussed in more detail in Note (18) - "Legal Proceedings and Other Matters." Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable. Accrued warranty obligations as of October 31, 2018 relate to estimated liabilities for assurance-type warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, a consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs. Changes in our accrued warranty obligations during the three months ended October 31, 2018 and 2017 were as follows:
Our current accrued warranty obligations at October 31, 2018 and July 31, 2018 include $4,402,000 and $4,650,000, respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TCS. During the three months ended October 31, 2017, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2018, the total present value of these monthly credits is $3,232,000, of which $1,621,000 is included in our current accrued warranty obligations and $1,611,000 is reflected in other liabilities (non-current) on our Condensed Consolidated Balance Sheet. In connection with this favorable settlement, during the three months ended October 31, 2017, we recorded a benefit to cost of sales of $660,000. |
Cost Reduction Actions |
3 Months Ended |
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Oct. 31, 2018 | |
Restructuring and Related Activities [Abstract] | |
Cost Reduction Actions | Cost Reduction Actions During the three months ended three months ended October 31, 2018, we took steps to improve our future operating results and we successfully consolidated our Government Solutions segment’s manufacturing facility located in Tampa, Florida with another facility that we maintain in Orlando, Florida; and in doing so, incurred $1,373,000 of facility exit costs, which are recorded in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. Of this amount, $992,000 and $381,000, respectively, was included in accrued expenses and other current liabilities and other liabilities (non-current) on our Condensed Consolidated Balance Sheet as of October 31, 2018. To-date, we have incurred an immaterial amount of severance and retention costs related to our shift in strategy. |
Secured Credit Facility |
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Line of Credit Facility [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Secured Credit Facility | Credit Facility On October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the “Credit Facility”) with a syndicate of lenders, replacing our prior Credit Agreement dated as of February 23, 2016 (as amended by that certain First Amendment, dated as of June 6, 2017 (the “Prior Credit Facility”)). In connection with the establishment of our new Credit Facility, we wrote-off $3,217,000 of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility and capitalized deferred financing costs of $1,812,000 related to the new Credit Facility. The new Credit Facility provides a senior secured loan facility of up to $550,000,000 consisting of: (i) a revolving loan facility (“Revolving Loan Facility”) with a borrowing limit of $300,000,000; (ii) an accordion feature allowing us to borrow up to an additional $250,000,000; (iii) a $35,000,000 letter of credit sublimit; and (iv) a swingline loan credit sublimit of $25,000,000. The Credit Facility matures on October 31, 2023 (the “Revolving Maturity Date”). If we issue new unsecured debt in excess of $5,000,000 with a maturity date that is less than 91 days from October 31, 2023, the Revolving Maturity Date would automatically accelerate so that it would be 91 days earlier than the maturity date of the new unsecured debt. The proceeds of the new Credit Facility were used, in part, to repay in full the outstanding borrowings under the Prior Credit Facility, and additional proceeds of the Credit Facility are expected to be used by us for working capital and other general corporate purposes. As of October 31, 2018, the amount outstanding under our Credit Facility was $193,400,000, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet. At October 31, 2018, we had $2,705,000 of standby letters of credit outstanding under our Credit Facility related to guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. As of October 31, 2018, total net deferred financing costs related to the Credit Facility were $3,678,000 and will be amortized over the term of our Credit Facility through October 31, 2023. Interest expense, including amortization of deferred financing costs, recorded during the three months ended October 31, 2018 and 2017, was: (i) $2,542,000 and $2,465,000, respectively; (ii) principally related to the Prior Credit Facility; and (iii) reflects a blended interest rate of approximately 6.00% and 5.30%, respectively. Borrowings under the Credit Facility shall be either: (i) Alternate Base Rate borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the greatest of (a) the Prime Rate (as defined) in effect on such day, (b) the Federal Funds Effective Rate (as defined) in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBO Rate (as defined) on such day (or, if such day is not a business day, the immediately preceding business day) plus 1.00% per annum, plus (y) the Applicable Rate (as defined), or (ii) Eurodollar borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the Adjusted LIBO Rate for such interest period plus (y) the Applicable Rate. Determination of the Applicable Rate is based on a pricing grid that is dependent upon our Secured Leverage Ratio (as defined) as of the end of each fiscal quarter for which consolidated financial statements have been most recently delivered. The Credit Facility contains customary representations, warranties and affirmative covenants. The Credit Facility also contains customary negative covenants, subject to negotiated exceptions, including but not limited to: (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) restricted payments, including stockholder dividends, and (vii) certain other restrictive agreements. The Credit Facility also contains certain financial covenants and customary events of default (subject to grace periods, as appropriate), such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of our business. In addition, under certain circumstances, we may be required to enter into amendments to the Credit Facility in connection with any further syndication of the Credit Facility. The Credit Facility provides for, among other things: (i) a significant increase in our balance sheet flexibility; (ii) no scheduled payments of principal until maturity; (iii) a maximum Secured Leverage Ratio of 3.75x trailing twelve months ("TTM") Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") and a Maximum Total Leverage Ratio of 4.50x TTM Adjusted EBITDA, each with no step downs; (iv) a Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA; (v) reduced interest rates of approximately 25 basis points as compared to the Prior Credit Facility (based on our Secured Leverage Ratio as of July 31, 2018); and (vi) the elimination or relaxation of many restrictive covenants in our Prior Credit Facility. As of October 31, 2018, our Secured Leverage Ratio was 2.25x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA. Our Interest Expense Coverage Ratio as of October 31, 2018 was 11.31x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future. The obligations under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the “Guarantors”). As collateral security under the Credit Facility and the guarantees thereof, we and the Guarantors have granted to the administrative agent, for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets. On December 6, 2018, we entered into the first amendment to the Credit Facility. The purpose of the amendment is to provide for a mechanism to replace the LIBO rate for Eurodollar borrowings with an alternative benchmark interest rate, should the LIBO rate generally become unavailable in the future on an other-than-temporary basis. The Prior Credit Facility was a $400,000,000 secured credit facility, and comprised of a senior secured term loan A facility of $250,000,000 (the "Term Loan Facility") and a secured revolving loan facility of up to $150,000,000, including a $25,000,000 letter of credit sublimit (the "Revolving Loan Facility"). The proceeds of the Prior Credit Facility were primarily used to finance our acquisition of TCS, including the repayment of certain existing indebtedness of TCS. Under the Revolving Loan Facility, during the three months ended October 31, 2018, we had outstanding balances ranging from $34,904,000 to $63,804,000. As of July 31, 2018, the net amount outstanding under the Prior Credit Facility was as follows:
Capitalized terms used but not defined herein have the meanings set forth for such terms in the Credit Facility and the Prior Credit Facility, which have been documented and filed with the SEC. |
Capital Lease and Other Obligations |
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Capital Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Capital Lease and Other Obligations | Capital Lease and Other Obligations We lease certain equipment under capital leases. As of October 31, 2018 and July 31, 2018, the net book value of the leased assets which collateralize the capital lease and other obligations was $2,001,000 and $2,547,000, respectively, and consisted primarily of machinery and equipment. Depreciation of leased assets is included in depreciation expense. As of October 31, 2018, our capital lease and other obligations reflect a blended interest rate of approximately 7.1%. Our capital leases generally contain provisions whereby we can purchase the equipment at the end of the lease for a one dollar buyout. Future minimum payments under capital lease and other obligations consisted of the following at October 31, 2018:
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Income Taxes |
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Oct. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes On December 22, 2017, H.R.1, also known as the Tax Cuts and Jobs Act ("Tax Reform"), was enacted in the U.S. Tax Reform significantly lowered the amount of our current and future income tax expense primarily due to the reduction in the U.S. statutory income tax rate from 35.0% to 21.0%. This provision went into effect on January 1, 2018 and required us to remeasure our deferred tax assets and liabilities. In fiscal 2019 and beyond, Tax Reform will result in the loss of our ability to take the domestic production activities deduction, which has been repealed, and is also likely to result in lower tax deductions for certain executive compensation expenses. For fiscal 2018, we were subject to a 35.0% statutory income tax rate with respect to the period August 1, 2017 through December 31, 2017 and a 21.0% statutory income tax rate with respect to the period January 1, 2018 through July 31, 2018, or a blended statutory income tax rate for fiscal 2018 of approximately 27.0%. As such, our effective tax rate for accounting purposes in fiscal 2018, excluding discrete items, was 27.0%. We expect to fully benefit from the lower statutory income tax rate in fiscal 2019 and thereafter. The remeasurement of deferred taxes as a result of Tax Reform is an estimate and will be finalized after we file our federal and state income tax returns for fiscal 2018. The estimated impact recorded in fiscal 2018 will change if the timing of the deferred tax impacts shift between fiscal 2018 and fiscal 2019 and beyond. In addition, it is possible that the Internal Revenue Service ("IRS") will issue clarifying or interpretive guidance related to Tax Reform, which may ultimately result in a change to our estimated income tax. At October 31, 2018 and July 31, 2018, total unrecognized tax benefits were $7,324,000 and $9,339,000, respectively, including interest of $52,000 and $202,000, respectively. At October 31, 2018 and July 31, 2018, $407,000 and $2,572,000, respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable in our Condensed Consolidated Balance Sheets. The remaining unrecognized tax benefits of $6,917,000 and $6,767,000 at October 31, 2018 and July 31, 2018, respectively, were presented as an offset to the associated non-current deferred tax assets in our Condensed Consolidated Balance Sheets. Of the total unrecognized tax benefits, $6,693,000 and $8,563,000, at October 31, 2018 and July 31, 2018, respectively, net of the reversal of the federal benefit recognized as a deferred tax asset relating to state reserves, would favorably impact our effective tax rate, if recognized. Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our condensed consolidated financial statements. Our policy is to recognize interest and penalties relating to uncertain tax positions in income tax expense. During the three months ended October 31, 2018, the IRS finalized its audit of our federal income tax return for fiscal 2016 without assessing additional taxes. Our federal income tax returns for fiscal 2015 and 2017 are subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2014 are subject to audit. TCS' federal income tax returns for tax year 2015 and the tax period from January 1, 2016 to February 23, 2016 are subject to potential future IRS audit. None of TCS' state income tax returns prior to calendar year 2014 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Overview We issue stock-based awards to certain of our employees and our Board of Directors pursuant to our 2000 Stock Incentive Plan, as amended, (the "Plan") and our 2001 Employee Stock Purchase Plan, as amended and restated effective December 4, 2018 (the "ESPP"), and recognize related stock-based compensation in our condensed consolidated financial statements. The Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, "share units") and (vi) stock appreciation rights ("SARs"), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations. As of October 31, 2018, the aggregate number of shares of common stock which may be issued, pursuant to the Plan, may not exceed 10,362,500. Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting power, no more than five years. We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock. As of October 31, 2018, we had granted stock-based awards pursuant to the Plan representing the right to purchase and/or acquire an aggregate of 8,327,069 shares (net of 3,944,088 expired and canceled awards), of which an aggregate of 5,880,127 have been exercised or settled. As of October 31, 2018, the following stock-based awards, by award type, were outstanding:
Our ESPP provides for the issuance of up to 1,050,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value at the date of issuance. Through October 31, 2018, we have cumulatively issued 752,596 shares of our common stock to participating employees in connection with our ESPP. Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:
Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At October 31, 2018, unrecognized stock-based compensation of $11,084,000, net of estimated forfeitures of $925,000, is expected to be recognized over a weighted average period of 3.2 years. Total stock-based compensation capitalized and included in ending inventory at both October 31, 2018 and July 31, 2018 was $48,000. There are no liability-classified stock-based awards outstanding as of October 31, 2018 or July 31, 2018. Stock-based compensation expense (benefit), by award type, is summarized as follows:
ESPP stock-based compensation expense primarily relates to the 15% discount offered to participants in the ESPP. During the three months ended October 31, 2018 and 2017, we recorded benefits of $130,000 and $62,000, respectively, which primarily represents the recoupment of certain share units. The estimated income tax benefit as shown in the above table was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability in our Condensed Consolidated Balance Sheet as of October 31, 2018 and July 31, 2018. The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting. Stock Options The following table summarizes the Plan's activity during the three months ended October 31, 2018:
Stock options outstanding as of October 31, 2018 have exercise prices ranging from $20.90 to $33.94, representing the fair market value of our common stock on the date of grant, a contractual term of five or ten years and a vesting period of three or five years. The total intrinsic value relating to stock options exercised during the three months ended October 31, 2018 was $561,000. There were no stock options exercised during the three months ended October 31, 2017. There were no stock options granted since fiscal 2017. During the three months ended October 31, 2018, at the election of certain holders of vested stock options, 72,830 stock options were net settled upon exercise. As a result, 9,345 net shares of our common stock were issued during the three months ended October 31, 2018 after reduction of shares retained to satisfy the exercise price and minimum statutory tax withholding requirements. Performance Shares, RSUs, Restricted Stock and Share Unit Awards The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units:
The total intrinsic value relating to fully-vested awards settled during the three months ended October 31, 2018 and 2017 was $4,210,000 and $1,937,000, respectively. The performance shares granted to employees since fiscal 2014 principally vest over a three-year performance period, if pre-established performance goals are attained or as specified pursuant to the Plan and related agreements. As of October 31, 2018, the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level. RSUs and restricted stock granted to non-employee directors have a vesting period of three years and are convertible into shares of our common stock generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. RSUs granted to employees have a vesting period of five years and are convertible into shares of our common stock, generally at the time of vesting, on a one-for-one basis for no cash consideration. Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock, generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of non-equity incentive compensation and are convertible into shares of our common stock on the one-year anniversary of the respective grant date. Cumulatively through October 31, 2018, 270,979 share units granted have been settled. The fair value of performance shares, RSUs, restricted stock and share units is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for post vesting restrictions. RSUs, performance shares and restricted stock granted since fiscal 2013 are entitled to dividend equivalents unless forfeited before vesting occurs; however, performance shares granted in fiscal 2013 were not entitled to such dividend equivalents until our Board of Directors determined that the pre-established performance goals were met. Share units granted prior to fiscal 2014 are not entitled to dividend equivalents. Share units granted since fiscal 2014 are entitled to dividend equivalents while the underlying shares are unissued. Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying shares into shares of our common stock. During the three months ended October 31, 2018, we accrued $82,000 of dividend equivalents (net of forfeitures) and paid out $259,000. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of October 31, 2018 and July 31, 2018, accrued dividend equivalents were $536,000 and $713,000, respectively. During the three months ended October 31, 2018, we recorded $457,000 of income tax benefits in our Condensed Consolidated Statements of Operations, which represents net excess income tax benefits from the settlement of stock-based awards. During the three months ended October 31, 2017, we recorded $85,000 of income tax expense in our Condensed Consolidated Statements of Operations, which represents net income tax shortfalls from the settlement of stock-based awards and the reversal of deferred tax assets associated with expired and unexercised stock-based awards. |
Segment Information |
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Segment Information | Segment Information Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" is based on the way that the CODM organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our Chief Executive Officer and President. Our Commercial Solutions segment serves commercial customers and smaller government customers, such as state and local governments, that require advanced communication technologies to meet their needs. This segment also serves certain large government customers (including the U.S. government) that have requirements for off-the-shelf commercial equipment. We believe this segment is a leading provider of satellite communications (such as satellite earth station modems and TWTAs), public safety systems (such as NG911 technologies) and enterprise application technologies (such as messaging and trusted location-based technologies). Our Government Solutions segment serves large government end-users (including those of foreign countries) that require mission-critical technologies and systems. Government solutions products include command and control applications (such as the design, installation and operation of data networks that integrate computing and communications, including both satellite and terrestrial links), ongoing network operation and management support services (including project management and fielding and maintenance solutions related to satellite ground terminals), troposcatter communications (such as digital troposcatter multiplexers, digital over-the-horizon modems, troposcatter systems and frequency converter systems) and RF power and switching technologies (such as solid-state high-power broadband amplifiers, enhanced position location reporting system (commonly known as "EPLRS") amplifier assemblies, identification friend or foe ("IFF") amplifiers and amplifiers used in the counteraction of improvised explosive devices). Our CODM primarily uses a metric that we refer to as Adjusted EBITDA to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric for the Commercial Solutions and Government Solutions segments do not consider any allocation of indirect expenses, including the following: income taxes, interest (income) and other, interest expense, write-off of deferred financing costs, amortization of stock-based compensation, amortization of intangibles, depreciation expense, facility exit costs, settlement of intellectual property litigation, acquisition plan expenses or strategic alternatives analysis expenses and other expenses that relate to our Unallocated segment. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Any amounts shown in the Adjusted EBITDA calculation for our Commercial Solutions and Government Solutions segments are directly attributable to those segments. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than the Consolidated EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies. Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net income (loss) to Adjusted EBITDA is presented in the tables below:
During the three months ended October 31, 2018, we exited our Government Solutions segment's manufacturing facility located in Tampa, Florida and recorded a related charge of $1,373,000 in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. See Note (9) - "Cost Reduction Actions." Unallocated expenses result from corporate expenses such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. During the three months ended October 31, 2018, unallocated expenses also include $1,130,000 of acquisition plan expenses incurred as part of an ongoing effort to acquire a small but growing technology solutions company. There is no certainty that our acquisition plan efforts will be successful. Interest expense for the three months ended October 31, 2018 and 2017 includes $2,542,000 and $2,465,000, respectively, principally related to our Prior Credit Facility and includes amortization of deferred financing costs. In addition, on October 31, 2018, we recorded a $3,217,000 loss from the write-off of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility. See Note (10) - "Credit Facility" for further discussion. Intersegment sales for the three months ended October 31, 2018 and 2017 by the Commercial Solutions segment to the Government Solutions segment were $8,540,000 and $2,621,000, respectively. There were nominal sales by the Government Solutions segment to the Commercial Solutions segment for these periods. All intersegment sales are eliminated in consolidation and are excluded from the tables above. Unallocated assets at October 31, 2018 consist principally of cash and cash equivalents, income taxes receivable, corporate property, plant and equipment and deferred financing costs. Substantially all of our long-lived assets are located in the U.S. |
Goodwill |
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Goodwill [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill The following table represents goodwill by reportable operating segment as of October 31, 2018 and July 31, 2018:
In accordance with FASB ASC 350 "Intangibles - Goodwill and Other," we perform a goodwill impairment analysis at least annually (in the first quarter of each fiscal year), unless indicators of impairment exist in interim periods. If we fail the quantitative assessment of goodwill impairment ("quantitative assessment"), pursuant to our adoption of FASB ASU No. 2017-04 in fiscal 2017, we would be required to recognize an impairment loss equal to the amount that a reporting unit's carrying value exceeded its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. On August 1, 2018 (the first day of our fiscal 2019), we performed our annual quantitative assessment using market participant assumptions to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value. In making this assessment, we considered, among other things, expectations of projected net sales and cash flows, assumptions impacting the weighted average cost of capital, trends in trading multiples of comparable companies, changes in our stock price and changes in the carrying values of our reporting units with goodwill. We also considered overall business conditions. In performing the quantitative assessment, we estimated the fair value of each of our reporting units using a combination of the income and market approaches. The income approach, also known as the discounted cash flow ("DCF") method, utilizes the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). For purposes of conducting our impairment analysis, we assumed revenue growth rates and cash flow projections that are below our actual long-term expectations. The discount rates used in our DCF method were based on a weighted-average cost of capital ("WACC") determined from relevant market comparisons, adjusted upward for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). A terminal value growth rate was applied to the final year of the projected period and reflected our estimate of stable, perpetual growth. We then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach. Under the market approach, we estimated a fair value based on comparable companies' market multiples of revenues and earnings before interest, taxes, depreciation and amortization and factored in a control premium. Finally, we compared our estimates of fair values to our August 1, 2018 total public market capitalization and assessed implied control premiums based on our common stock price of $33.70 as of August 1, 2018. Based on our quantitative evaluation, we determined that our Commercial Solutions and Government Solutions reporting units had estimated fair values in excess of their carrying values of at least 42.5% and 105.5%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment. It is possible that, during fiscal 2019 or beyond, business conditions (both in the U.S. and internationally) could deteriorate from the current state, our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we currently anticipate or our common stock price could decline. A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2019 or beyond. If assumed net sales and cash flow projections are not achieved in future periods or our common stock price significantly declines from current levels, our Commercial Solutions and Government Solutions reporting units could be at risk of failing the quantitative assessment and goodwill assigned to the respective reporting units could be impaired. In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2019 (the start of our fiscal 2020). If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (e.g., a sustained decrease in the price of our common stock (considered on both absolute terms and relative to peers)), we may be required to record impairment charges when we perform these tests, or in other future periods. Any impairment charges that we may record in the future could be material to our results of operation and financial condition. |
Intangible Assets |
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Intangible Assets | Intangible Assets Intangible assets with finite lives are as follows:
The weighted average amortization period in the above table excludes fully amortized intangible assets. Amortization expense for the three months ended October 31, 2018 and 2017 was $4,289,000 and $5,269,000, respectively. The estimated amortization expense consists of the following for the fiscal years ending July 31:
We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. No such event has occurred during the three months ended October 31, 2018. We believe that the carrying values of our net intangible assets were recoverable as of October 31, 2018. Any impairment charges that we may record in the future could be material to our results of operations and financial condition. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Sale of Common Stock In June 2016, we sold 7,145,000 shares of our common stock in a public offering at a price to the public of $14.00 per share, resulting in proceeds to us of $95,029,000, net of underwriting discounts and commissions. As of October 31, 2018 and December 6, 2018, an aggregate registered amount of $74,970,000 under our existing shelf registration statement filed with the SEC remains available for sale of various types of securities, including debt. This existing shelf registration is expected to expire on December 23, 2018. As such, on December 6, 2018, we filed a new $400,000,000 shelf registration statement with the SEC for the sale of various types of securities, including debt. Stock Repurchase Program As of October 31, 2018 and December 6, 2018, we were authorized to repurchase up to an additional $8,664,000 of our common stock, pursuant to our current $100,000,000 stock repurchase program. Our stock repurchase program has no time restrictions and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC Rule 10b5-1 trading plans. There were no repurchases made during the three months ended October 31, 2018 or 2017. Dividends Since September 2010, we have paid quarterly dividends pursuant to an annual targeted dividend amount that was established by our Board of Directors. On September 26, 2018, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 16, 2018. On December 6, 2018, our Board of Directors declared a dividend of $0.10 per common share, payable on February 15, 2019 to stockholders of record at the close of business on January 16, 2019. Future dividends remain subject to compliance with financial covenants under our Credit Facility as well as Board approval. |
Legal Proceedings and Other Matters |
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Oct. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings and Other Matters | Legal Proceedings and Other Matters Legacy TCS Intellectual Property Matter - Vehicle IP In December 2009, Vehicle IP, LLC ("Vehicle IP") filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware (the "District Court"), seeking monetary damages, fees and expenses and other relief from, among others, our customer Verizon Wireless ("Verizon"), based on the VZ Navigator product, and TCS is defending Verizon against Vehicle IP. In 2013, the District Court granted the defendants’ motion for summary judgment on the basis that the products in question did not infringe plaintiff’s patent. Plaintiff appealed that decision and, in 2014, the U.S. Court of Appeals for the Federal Circuit reversed the District Court's claim construction, overturned the District Court's grant of summary judgment of noninfringement, and remanded the case for further proceedings. Fact discovery and expert discovery has closed. Substantive settlement conversations have occurred but, to-date, the parties have been unable to reach a settlement. As discussed in Note (8) -"Accrued Expenses and Other Current Liabilities," we have accrued certain legal and settlement costs related to the Vehicle IP matter. The accrued settlement costs related to this matter do not reflect the final amounts we actually may pay, if any. On May 30, 2017, we received positive news that the District Court issued a supplemental claim construction order in our favor. As a result, the plaintiff agreed to file a joint status report to the District Court that requested that the District Court cancel the trial date (which was scheduled for July 2017). On July 28, 2017, the parties entered into a stipulation that the defendants’ accused products do not infringe Vehicle IP’s patent under the District Court’s current revised construction of the disputed patent claim term and requested that the District Court therefore enter a judgment of noninfringement. On August 18, 2017, the court entered such a judgment of noninfringement. As expected, following the judgment, Vehicle IP filed a notice of appeal on August 29, 2017. Vehicle IP's opening brief on appeal of the District Court's claim construction was submitted in October 2017. TCS’ brief in response was filed on January 19, 2018. Vehicle IP's reply brief was filed on February 23, 2018. Oral argument was held on August 8, 2018 and an appellate ruling may take several months to be issued. If the District Court's current claim construction is ultimately upheld at the appellate level, it is possible that we may not have to go to trial or pay any monetary damages. Ongoing legal expenses associated with defending this matter and its ultimate resolution could vary and have a material adverse effect on our consolidated results of operations, financial position or cash flows in future periods. Other Matters In October 2014, we disclosed to the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") that we learned during a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech EF Data Corp. was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority. The sales value of this equipment was approximately $288,000. At the time of shipment, OFAC regulations prohibited U.S. persons from doing business directly or indirectly with Sudan. In late 2015, OFAC issued an administrative subpoena seeking information about the disclosed transaction. We have responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon who may have rerouted the modems from Lebanon to Sudan without the required U.S. licensing authorization. In September 2018, Comtech agreed to enter into a Tolling Agreement with OFAC, which extends the statute of limitations in this matter through December 31, 2019. The Tolling Agreement was shortly followed by a second administrative subpoena seeking additional information about the disclosed transaction. We are in the process of responding to OFAC’s additional request for information. U.S. sanctions with respect to Sudan were revoked in 2017. Consistent with the revocation of the Sudan Sanction Regulations ("SSR"), shipments to the Sudan Civil Aviation Authority by U.S. persons are now permissible. We are not able to predict whether OFAC will take any enforcement action against us in light of the recent revocation of the SSR. If OFAC determines that we have violated U.S. trade sanctions, civil and criminal penalties could apply, and we may suffer reputational harm. Even though we take precautions to avoid engaging in transactions that may violate U.S. trade sanctions, those measures may not be effective in every instance. In May 2018, we were informed by the Office of Export Enforcement ("OEE") of the Department of Commerce ("DoC") that it was forwarding to the DoC's Office of Chief Counsel, the results of its audit of international shipments by Comtech Xicom Technology, Inc. for further review and possible determination of an administrative penalty. We fully cooperated with the OEE in their audit and, based on our self-assessment of the approximately 7,800 individual transactions audited, have determined that six (6) transactions may not have been fully in compliance with the Export Administration Regulations ("EAR"). These six (6) items, for which export licenses were not obtained, were either spares or repaired power amplifier subassembly components valued at less than $100,000 (in aggregate) and were shipped to Brazil, Italy, Russia, Thailand and the United Arab Emirates. The EAR provides an exception to the requirement to obtain an export license for the replacement of a defective or damaged component. During our self-assessment, we determined that we inadvertently did not obtain export licenses for the spares, or had evidence of the return or destruction of the defective or damaged components necessary to authorize our use of the export license exception for the replacements. Since discovering this issue, we have implemented additional controls and procedures and have increased awareness of these specific export requirements throughout the Company to help avoid similar occurrences in the future. Administrative penalties under the EAR can range from a warning letter to a denial of export privileges. A civil monetary penalty not to exceed the amount set forth in the Export Administration Act ("EAA") may be imposed for each violation, and in the event that any provision of the EAR is continued by any other authority, the maximum monetary civil penalty for each violation shall be that provided by such other authority. Administrative penalties under the EAR are currently determined pursuant to the International Emergency Economic Powers Act ("IEEPA"), which can reach the greater of twice the amount of the transaction that is the basis of the violation or approximately $300,000 per violation. We have not recorded an accrual related to a possible administrative penalty and continue to work cooperatively with the OEE. In the ordinary course of business, we include indemnification provisions in certain of our customer contracts to indemnify, hold harmless and reimburse such customers for certain losses, including but not limited to losses related to third-party claims of intellectual property infringement arising from the customer’s use of our products or services. We may also, from time to time, receive indemnification requests from customer related to third-party claims that 911 calls were improperly routed during an emergency. We evaluate such claims as and when they arise. We do not always agree with customers that they are entitled to indemnification and in such cases reject their claims. Despite maintaining that we have properly carried out our duties, we may seek coverage under our various insurance policies; however, we cannot be sure that we will be able to maintain or obtain insurance coverage at acceptable costs or in sufficient amounts or that our insurer will not disclaim coverage as to such claims. Accordingly, pending or future claims asserted against us by a party that we agree to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition. There are certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations. |
Adoption of Accounting Standards and Updates Adoption of Accounting Standards and Updates (Policies) |
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Accounting Policies [Abstract] | |||||||||
Adoption of Accounting Standards and Updates | Adoption of Accounting Standards and Updates We are required to prepare our condensed consolidated financial statements in accordance with the Financial Accounting Standard Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which are commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs"). During the three months ended October 31, 2018, we adopted:
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Revenue (Tables) |
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Schedule of adjustments made | As a result of ASC 606, we made the following adjustments to our Condensed Consolidated Balance Sheet as of August 1, 2018:
(1) See Note (8) - "Accrued expenses and other current liabilities" for further discussion of reclassification. (2) Formerly presented on the face of our Condensed Consolidated Balance Sheet as "Customer advances and deposits, current and non-current" prior to our adoption of ASC 606. |
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Schedules of concentration of risk | Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:
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Earnings Per Share (Tables) |
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Schedule of numerators and denominators used in basic and diluted EPS calculations | The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:
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Accounts Receivable (Tables) |
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Accounts receivable | Accounts receivable consist of the following at:
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Inventories (Tables) |
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Inventories | Inventories consist of the following at:
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Accrued Expenses and Other Current Liabilities (Tables) |
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Accrued expenses and other current liabilities | Accrued expenses and other current liabilities consist of the following at:
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Schedule of changes in current accrued warranty obligations | Changes in our accrued warranty obligations during the three months ended October 31, 2018 and 2017 were as follows:
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Secured Credit Facility (Tables) |
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Schedule of Line of Credit Facilities | As of July 31, 2018, the net amount outstanding under the Prior Credit Facility was as follows:
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Capital Lease and Other Obligations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||
Capital Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments for Capital Lease and Other Obligations | Future minimum payments under capital lease and other obligations consisted of the following at October 31, 2018:
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Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-based Awards Outstanding by Award Type | As of October 31, 2018, the following stock-based awards, by award type, were outstanding:
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Stock-based compensation for awards detailing where recorded in Condensed Consolidated Statement of Operations | Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:
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Summary of net stock-based compensation expense by award type | Stock-based compensation expense (benefit), by award type, is summarized as follows:
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Summary of the Plan's activity relating to stock options | The following table summarizes the Plan's activity during the three months ended October 31, 2018:
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Summary of the Plan's activity relating to performance shares, RSUs, restricted stock and share units | The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units:
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Segment Information (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information | Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net income (loss) to Adjusted EBITDA is presented in the tables below:
|
Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill by segment | The following table represents goodwill by reportable operating segment as of October 31, 2018 and July 31, 2018:
|
Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets with finite lives | Intangible assets with finite lives are as follows:
|
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The estimated amortization expense consists of the following for the fiscal years ending July 31:
|
General Narrative (Details) |
3 Months Ended |
---|---|
Oct. 31, 2018
operating_segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 2 |
Revenue Revenue - Sale Information, Percent (Details) |
3 Months Ended | |
---|---|---|
Oct. 31, 2018 |
Oct. 31, 2017 |
|
Concentration Risk [Line Items] | ||
Entity wide revenue percentage by major customer type | 100.00% | 100.00% |
U.S. government | ||
Concentration Risk [Line Items] | ||
Entity wide revenue percentage by major customer type | 44.20% | 32.40% |
Domestic | ||
Concentration Risk [Line Items] | ||
Entity wide revenue percentage by major customer type | 31.40% | 44.30% |
Total United States | ||
Concentration Risk [Line Items] | ||
Entity wide revenue percentage by major customer type | 75.60% | 76.70% |
International | ||
Concentration Risk [Line Items] | ||
Entity wide revenue percentage by major customer type | 24.40% | 23.30% |
Revenue - Narrative (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Oct. 31, 2018 |
Oct. 31, 2017 |
|
Concentration Risk [Line Items] | ||
Revenue recognized | $ 23,127,000 | |
Remaining performance obligation, amount | $ 627,252,000 | |
Sales Revenue, Net | Verizon Communications Inc. | Major customer | ||
Concentration Risk [Line Items] | ||
Percentage of revenue generated from external customer type | 11.70% |
Fair Value Measurements and Financial Instruments (Details) |
3 Months Ended |
---|---|
Oct. 31, 2018
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Facility exit cost | $ 1,373,000 |
Non-current portion of capital lease and other obligations, a blended interest rate (percent) | 7.10% |
Inventories (Details) - USD ($) |
Oct. 31, 2018 |
Jul. 31, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials and components | $ 56,815,000 | $ 53,649,000 |
Work-in-process and finished goods | 49,295,000 | 38,854,000 |
Total inventories | 106,110,000 | 92,503,000 |
Less reserve for excess and obsolete inventories | 16,541,000 | 17,427,000 |
Inventories, net | 89,569,000 | 75,076,000 |
Inventory directly related to long-term contracts | 1,235,000 | 1,249,000 |
Inventory related to contracts from third party commercial customers who outsource their manufacturing to us | $ 1,334,000 | $ 1,310,000 |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) |
Oct. 31, 2018 |
Jul. 31, 2018 |
Oct. 31, 2017 |
Jul. 31, 2017 |
---|---|---|---|---|
Business Acquisition [Line Items] | ||||
Accrued wages and benefits | $ 22,506,000 | $ 23,936,000 | ||
Accrued contract costs | 13,285,000 | 10,016,000 | ||
Accrued warranty obligations | 9,982,000 | 11,738,000 | $ 13,001,000 | $ 17,617,000 |
Accrued legal costs | 6,946,000 | 6,179,000 | ||
Accrued commissions and royalties | 4,605,000 | 4,654,000 | ||
Other | 11,485,000 | 8,511,000 | ||
Accrued expenses and other current liabilities | 68,809,000 | 65,034,000 | ||
TeleCommunication Systems Inc. | Pre-Acquisition Contingencies Related to TCS Intellectual Property | ||||
Business Acquisition [Line Items] | ||||
Accrued legal costs | $ 3,314,000 | $ 3,372,000 |
Acquisition-Related Restructuring Plan - Narrative (Details) |
3 Months Ended |
---|---|
Oct. 31, 2018
USD ($)
| |
Restructuring Cost and Reserve [Line Items] | |
Facility exit cost | $ 1,373,000 |
Accrued expenses and other current liabilities | |
Restructuring Cost and Reserve [Line Items] | |
Business acquisition restructuring costs facility related exit costs | 992,000 |
Other Noncurrent Liabilities | |
Restructuring Cost and Reserve [Line Items] | |
Business acquisition restructuring costs facility related exit costs | $ 381,000 |
Capital Lease and Other Obligations (Details) - USD ($) |
Oct. 31, 2018 |
Jul. 31, 2018 |
---|---|---|
Capital Leases [Abstract] | ||
Net book value of the leased assets that collateralize the capital lease and ther obligations | $ 2,001,000 | $ 2,547,000 |
Blended interest rate | 7.10% | |
Capital leases and other, option to buy leased asset | $ 1 | |
Remainder of fiscal 2019 | 1,495,000 | |
Fiscal 2020 | 780,000 | |
Fiscal 2021 and beyond | 0 | |
Total minimum lease payments | 2,275,000 | |
Less: amounts representing interest | 110,000 | |
Present value of net minimum lease payments | 2,165,000 | |
Current portion of capital lease and other obligations | 1,579,000 | 1,836,000 |
Non-current portion of capital lease and other obligations | $ 586,000 | $ 765,000 |
Income Taxes (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jul. 31, 2018 |
Oct. 31, 2018 |
|
Income Tax Contingency [Line Items] | ||
Blended federal income tax rate | 27.00% | |
Unrecognized tax benefits | $ 9,339,000 | $ 7,324,000 |
Interest accrued relating to income taxes | 202,000 | 52,000 |
Unrecognized tax benefits that would positively impact our effective tax rate, if recognized | 8,563,000 | 6,693,000 |
Non-current income taxes payable | ||
Income Tax Contingency [Line Items] | ||
Unrecognized tax benefits | 2,572,000 | 407,000 |
Included in the non-current deferred tax liabilities (as an offset to the associated deferred tax asset) | ||
Income Tax Contingency [Line Items] | ||
Unrecognized tax benefits | $ 6,767,000 | $ 6,917,000 |
Stock-Based Compensation - Income Tax Benefit From Stock-based Awards (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Oct. 31, 2018 |
Oct. 31, 2017 |
|
Income Tax Expense | Impact of Accounting Standards Update 2016-09 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Net income tax shortfalls and reversal of deferred tax assets | $ (457,000) | |
Reduction to Additional Paid-In Capital | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Net income tax shortfalls and reversal of deferred tax assets | $ 85,000 |
Goodwill (Details) |
3 Months Ended | ||
---|---|---|---|
Oct. 31, 2018
USD ($)
operating_segment
|
Aug. 01, 2018
$ / shares
|
Jul. 31, 2018
USD ($)
|
|
Goodwill [Line Items] | |||
Goodwill | $ 290,633,000 | $ 290,633,000 | |
Number of reportable segments | operating_segment | 2 | ||
Commercial Solutions Segment | |||
Goodwill [Line Items] | |||
Goodwill | $ 231,440,000 | 231,440,000 | |
Reporting unit, percentage of fair value in excess of carrying amount | 42.50% | ||
Government Solutions Segment | |||
Goodwill [Line Items] | |||
Goodwill | $ 59,193,000 | $ 59,193,000 | |
Reporting unit, percentage of fair value in excess of carrying amount | 105.50% | ||
Common Stock | |||
Goodwill [Line Items] | |||
Common stock price (in dollars per share) | $ / shares | $ 33.7 |
Legal Proceedings and Other Matters Commitments and Contingencies (Details) - Other Matters |
1 Months Ended | |||
---|---|---|---|---|
May 31, 2018
USD ($)
|
May 31, 2018
action
|
May 31, 2018
transaction
|
Oct. 31, 2014
USD ($)
|
|
Loss Contingencies [Line Items] | ||||
Sales value of equipment | $ 288,000 | |||
Approximate number of transactions audited by the Office of Export Enforcement relating to international shipments by Xicom Technologies, Inc. | transaction | 7,800 | |||
Number of transactions that may not have been fully in compliance with the Export Administrative Regulations, based on Company's self assessment of transactions audited | 6 | 6 | ||
Aggregated value of international shipments that may not have been fully in compliance with Export Administration Regulations (less than) | $ 100,000 |
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