XML 33 R21.htm IDEA: XBRL DOCUMENT v3.20.2
Segment Information
 3 Months Ended
Oct. 31, 2020
Segment Reporting [Abstract]  
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.

Our Commercial Solutions segment offers satellite ground station technologies (such as modems and amplifiers) and public safety and location technologies (such as 911 call routing and mapping solutions) to commercial customers and smaller government customers, such as state and local governments. This segment also serves certain large government customers (including the U.S. government) that have requirements for off-the-shelf commercial equipment.

Our Government Solutions segment provides mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communications networks) and high-performance transmission technologies (such as troposcatter systems and solid-state, high-power amplifiers) to large government end-users (including those of foreign countries), large international customers and domestic prime contractors.
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 expense, or any of the following: income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangible assets, depreciation expense, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, facility exit costs, strategic alternatives analysis expenses and other 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 and consolidated net (loss) income to Adjusted EBITDA is presented in the tables below:
 Three months ended October 31, 2020
 Commercial SolutionsGovernment SolutionsUnallocatedTotal
Net sales$81,802,000 53,416,000 — $135,218,000 
Operating income (loss)$8,750,000 2,585,000 (97,051,000)$(85,716,000)
Net income (loss)
$8,315,000 2,691,000 (96,846,000)$(85,840,000)
     Provision for (benefit from) income taxes
339,000 (126,000)(2,452,000)(2,239,000)
     Interest (income) and other
96,000 (40,000)10,000 66,000 
     Interest expense— 60,000 2,237,000 2,297,000 
     Amortization of stock-based compensation
— — 699,000 699,000 
     Amortization of intangibles
4,287,000 1,279,000 — 5,566,000 
     Depreciation
1,996,000 403,000 153,000 2,552,000 
     Acquisition plan expenses
(1,052,000)— 92,235,000 91,183,000 
Adjusted EBITDA
$13,981,000 4,267,000 (3,964,000)$14,284,000 
Purchases of property, plant and equipment
$389,000 421,000 80,000 $890,000 
Total assets at October 31, 2020
$646,264,000 238,172,000 34,075,000 $918,511,000 
 Three months ended October 31, 2019
 Commercial SolutionsGovernment SolutionsUnallocatedTotal
Net sales$94,314,000 75,953,000 — $170,267,000 
Operating income (loss)$9,841,000 7,083,000 (7,664,000)$9,260,000 
Net income (loss)
$9,867,000 7,095,000 (10,574,000)$6,388,000 
     Provision for income taxes
13,000 — 1,132,000 1,145,000 
     Interest (income) and other
(47,000)(13,000)(17,000)(77,000)
     Interest expense8,000 1,000 1,795,000 1,804,000 
     Amortization of stock-based compensation
— — 879,000 879,000 
     Amortization of intangibles
4,362,000 844,000 — 5,206,000 
     Depreciation
2,196,000 313,000 142,000 2,651,000 
     Estimated contract settlement costs
230,000 — — 230,000 
     Acquisition plan expenses
— — 2,389,000 2,389,000 
Adjusted EBITDA
$16,629,000 $8,240,000 $(4,254,000)$20,615,000 
Purchases of property, plant and equipment
$1,000,000 224,000 26,000 $1,250,000 
Total assets at October 31, 2019
$675,344,000 211,125,000 44,553,000 $931,022,000 

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, 2020 and 2019, we recorded $91,183,000 and $2,389,000 of acquisition plan expenses, respectively, all of which were recorded in our unallocated expenses. See Note (2) - "Acquisitions" for further information.

Interest expense in the tables above primarily relates to our Credit Facility, and includes the amortization of deferred financing costs. See Note (10) - "Credit Facility" for further discussion. In addition, interest expense for the three months ended October 31, 2020 includes $1,178,000 of incremental interest expense for ticking fees related to a now terminated financing commitment letter, as discussed in more detail in Note (2) - "Acquisitions." There were no such charges recorded in the three months ended October 31, 2019.

Intersegment sales for the three months ended October 31, 2020 and 2019 by the Commercial Solutions segment to the Government Solutions segment were $851,000 and $1,899,000, 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, 2020 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.