EX-99.1 3 d68308_ex99-1.htm PRESS RELEASE

Exhibit 99.1

Media Contacts:

Fred Kornberg, President and Chief Executive Officer

Robert G. Rouse, Executive Vice President

(631) 777-8900

Info@comtechtel.com

 

COMTECH TELECOMMUNICATIONS CORP. ANNOUNCES RESULTS

FOR THE THIRD QUARTER OF FISCAL 2006

 

Melville, New York – June 7, 2006 --- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended April 30, 2006. The results for the quarter were driven by strong performances in all three of the Company’s business segments.

 

Net sales for the three months ended April 30, 2006 were $89.0 million compared to $75.4 million for the three months ended April 30, 2005. Non-GAAP net income, excluding stock option expensing, was $9.7 million, or $0.37 per diluted share, for the three months ended April 30, 2006. GAAP net income was $8.7 million, or $0.33 per diluted share, for the three months ended April 30, 2006 compared to $8.4 million, or $0.32 per diluted share, for the three months ended April 30, 2005. No stock option expense was recorded for GAAP purposes prior to fiscal 2006.

 

Net sales for the nine months ended April 30, 2006 were $291.3 million compared to $209.6 million for the nine months ended April 30, 2005. Non-GAAP net income, excluding stock option expensing, was $36.7 million, or $1.38 per diluted share, for the nine months ended April 30, 2006. GAAP net income for the nine months ended April 30, 2006 was $33.5 million, or $1.27 per diluted share, compared to $25.6 million, or $1.00 per diluted share, for the nine months ended April 30, 2005.

 

GAAP net income in the three and nine months ended April 30, 2006 included $1.4 million and $4.2 million, respectively, of pre-tax compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123(R) which requires the expensing of stock option awards.

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $15.6 million and $12.6 million for the three months ended April 30, 2006 and 2005, respectively. For the nine months ended April 30, 2006 and 2005, EBITDA was $58.0 million and $41.5 million, respectively. Cash flows from operating activities were $9.3 million for the nine months ended April 30, 2006 compared to $49.5 million for the nine months ended April 30, 2005, reflecting an increase in accounts receivable on certain large contracts during the fiscal 2006 period and the liquidation of a significant receivable in the fiscal 2005 period.

 

Backlog as of April 30, 2006 was $138.3 million compared to $153.3 million as of July 31, 2005. Bookings for the three and nine months ended April 30, 2006 were $76.3 million and $276.3 million, respectively.

 

In commenting on the Company’s performance during the three months ended April 30, 2006, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, “Our operating performance in the third quarter of fiscal 2006 represents continuing tangible evidence of the leadership positions we enjoy in the markets we serve. It firmly positions fiscal 2006 to be the Company’s most successful year ever.”

 

Mr. Kornberg added, “Although it is premature to provide specific revenue and earnings guidance for next year, current signs are that fiscal 2007 should also be a record year: our fifth in a row.”

 

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions addressing commercial and government markets. The Company conducts its business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company offers specialized products, systems and services where it believes it has technological, engineering, systems design or other expertise that differentiate its product offerings.

 

The Company has scheduled an investor conference call for 8:30 AM (ET) on Thursday, June 8, 2006. Investors and the public are invited to access a live webcast of the conference call from the news section of the Comtech web site at www.comtechtel.com. A replay of the webcast will be available at the same location for 30 days following the conference call. Alternatively, investors can access the conference call by dialing (800) 540-0559 (domestic), or (785) 832-1508 (international) and using the conference I.D. of “Comtech.” A replay of the conference call will be available

 



 

for seven days by dialing (402) 220-2988. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.

 

Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the future performance and financial condition of the Company, the plans and objectives of the Company’s management and the Company’s assumptions regarding such performance and plans that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company’s Securities and Exchange Commission filings identify many such risks and uncertainties, which include the following:

 

 

Our operating results being difficult to forecast and subject to volatility;

 

Our inability to maintain our government business;

 

Our inability to keep pace with technological changes;

 

Our dependence on international sales;

 

The impact of a domestic or foreign economic slow-down and reduction in telecommunications equipment and systems spending on the demand for our products, systems and services;

 

Our mobile data communications business being subject to unique risks;

 

Our backlog being subject to cancellation or modification;

 

Our dependence on component availability, subcontractor availability and performance by key suppliers;

 

Our fixed price contracts being subject to risk;

 

The impact of adverse regulatory changes on our ability to sell products, systems and services;

 

The impact of prevailing economic and political conditions on our businesses;

 

Whether we can successfully integrate and assimilate the operations of acquired businesses;

 

The impact of the loss of key technical or management personnel;

 

The highly competitive nature of our markets;

 

Our inability to protect our proprietary technology;

 

Our operations being subject to environmental regulation;

 

The impact of recently enacted and proposed changes in securities laws and regulations on our costs;

 

The impact of ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002;

 

The impact of terrorist attacks and threats, and government responses thereto, and threats of war on our businesses;

 

The inability to effectuate a change in control of the Company due to provisions in its certificate of incorporation and by-laws, stockholders’ rights plan and Delaware law;

 

Our inability to satisfy our debt obligations, including the convertible senior notes;

 

The impact on our reported results of recent changes to financial reporting standards related to stock option expensing;

 

Our stock price being volatile; and

 

Our current intention not to declare or pay any cash dividends.

 

– Tables follow –

 



 

 

COMTECH TELECOMMUNICATIONS CORP.
Condensed Consolidated Statements of Operations
(Unaudited)

Three months ended
April 30,

  Nine months ended
April 30,

 
2006   2005   2006   2005  






                             
Net sales     $ 88,997,000     75,388,000     291,305,000     209,597,000  
Cost of sales       54,784,000     45,910,000     175,797,000     120,708,000  




    Gross profit       34,213,000     29,478,000     115,508,000     88,889,000  




     
Expenses:                            
    Selling, general and administrative       15,413,000     12,855,000     47,270,000     36,112,000  
    Research and development       6,136,000     5,325,000     18,892,000     15,175,000  
    Amortization of intangibles       597,000     597,000     1,796,000     1,734,000  




        22,146,000     18,777,000     67,958,000     53,021,000  




     
Operating income       12,067,000     10,701,000     47,550,000     35,868,000  
     
Other expense (income):                            
    Interest expense       671,000     669,000     2,017,000     2,005,000  
    Interest income       (2,457,000 )   (1,191,000 )   (6,404,000 )   (2,739,000 )




     
Income before provision for income taxes       13,853,000     11,223,000     51,937,000     36,602,000  
Provision for income taxes       5,131,000     2,851,000     18,447,000     10,972,000  




     
Net income     $ 8,722,000     8,372,000     33,490,000     25,630,000  




     
Net income per share:                            
    Basic     $ 0.38     0.39     1.47     1.19  




    Diluted     $ 0.33     0.32     1.27     1.00  




     
Weighted average number of common shares
   outstanding - basic
      22,795,000     21,666,000     22,727,000     21,505,000  




     
Weighted average number of common and
    common equivalent shares outstanding
        assuming dilution - diluted
      27,275,000     27,327,000     27,336,000     26,936,000  




 



 

 

Reconciliations of Non-GAAP Financial Measures to GAAP Financial Measures

Three months ended April 30,
  Nine months ended April 30,
 
2006
  2005
  2006
  2005
 
Reconciliation of Non-GAAP Net Income, Excluding Stock-based Compensation Expense, To GAAP Net Income(1):                            
     Non-GAAP net income, excluding stock-based
          compensation expense
    $ 9,749,000     8,372,000     36,726,000     25,630,000  
     Pre-tax stock-based compensation expense       (1,378,000 )       (4,212,000 )    
     Tax effect of stock-based compensation expense       351,000         976,000      




     GAAP net income     $ 8,722,000     8,372,000     33,490,000     25,630,000  




     
Three months ended April 30,
  Nine months ended April 30,
 
2006
  2005
  2006
  2005
 
Reconciliation of Non-GAAP Diluted Earnings Per Share, Excluding Stock-based Compensation Expense, To GAAP Diluted Earnings Per Share(1):                            
     Non-GAAP diluted earnings per share, excluding           stock-based compensation     $ 0.37     0.32     1.38     1.00  
     Pre-tax stock-based compensation expense       (0.05 )       (0.15 )    
     Tax effect of stock-based compensation expense       0.01         0.04      




     GAAP diluted earnings per share     $ 0.33     0.32     1.27     1.00  




     
Three months ended April 30,
  Nine months ended April 30,
 
2006
  2005
  2006
  2005
 
Reconciliation of GAAP Net Income to EBITDA(2):                            
    GAAP net income     $ 8,722,000     8,372,000     33,490,000     25,630,000  
    Income taxes       5,131,000     2,851,000     18,447,000     10,972,000  
    Net interest expense (income)       (1,786,000 )   (522,000 )   (4,387,000 )   (734,000 )
    Pre-tax stock-based compensation expense       1,378,000         4,212,000      
    Depreciation and amortization       2,190,000     1,943,000     6,264,000     5,609,000  




    EBITDA     $ 15,635,000     12,644,000     58,026,000     41,477,000  




(1) Non-GAAP net income is used by management in assessing the Company’s operating results. The Company believes that investors and analysts may use non-GAAP measures that exclude stock-based compensation, along with other information contained in its SEC filings, in assessing the Company’s operating results.

(2) Represents earnings before interest, income taxes, depreciation and amortization (including the amortization of stock-based compensation). EBITDA is a non-GAAP operating metric used by management in assessing the Company’s operating results and ability to meet debt service requirements. The Company’s definition of EBITDA may differ from the definition of EBITDA used by other companies and may not be comparable to similarly titled measures used by other companies. EBITDA is also a measure frequently requested by the Company’s investors and analysts. The Company believes that investors and analysts may use EBITDA, along with other information contained in its SEC filings, in assessing its ability to generate cash flow and service debt.

 



 

COMTECH TELECOMMUNICATIONS CORP.
Condensed Consolidated Balance Sheets

April 30,
2006

  July 31,
2005

 
                                     (Unaudited)  
                                                    Assets                
Current assets:                
      Cash and cash equivalents     $ 220,446,000     214,413,000  
      Restricted cash       1,003,000     1,034,000  
      Accounts receivable, net       86,851,000     56,052,000  
      Inventories, net       52,890,000     45,103,000  
      Prepaid expenses and other current assets       7,602,000     4,387,000  
      Deferred tax asset - current       8,136,000     8,092,000  


                       Total current assets       376,928,000     329,081,000  
                 
Property, plant and equipment, net       21,842,000     18,683,000  
Goodwill       22,244,000     22,244,000  
Intangibles with definite lives, net       7,524,000     9,123,000  
Deferred financing costs, net       2,586,000     2,995,000  
Other assets, net       476,000     277,000  


                       Total assets     $ 431,600,000     382,403,000  


                       Liabilities and Stockholders’ Equity                
Current liabilities:                
     Accounts payable     $ 22,358,000     23,577,000  
     Accrued expenses and other current liabilities       36,951,000     34,497,000  
     Customer advances and deposits       6,542,000     5,282,000  
     Deferred service revenue       10,374,000     8,210,000  
     Current installments of other obligations       182,000     235,000  
     Interest payable       525,000     1,050,000  
     Income taxes payable       2,945,000     1,540,000  


                       Total current liabilities       79,877,000     74,391,000  
                 
Convertible senior notes       105,000,000     105,000,000  
Other obligations, less current installments       275,000     396,000  
Deferred tax liability - non-current       7,286,000     5,987,000  


                       Total liabilities       192,438,000     185,774,000  

   
Commitments and contingencies                
                 
Stockholders’ equity:                
      Preferred stock, par value $.10 per share; shares authorized
         and unissued 2,000,000
           
      Common stock, par value $.10 per share; authorized 100,000,000 shares
         and 30,000,000 shares at April 30, 2006 and July 31, 2005,
         respectively; issued 23,022,393 shares and 22,781,678 shares at April
         30, 2006 and July 31, 2005, respectively
      2,302,000     2,278,000  
      Additional paid-in capital       136,189,000     127,170,000  
      Retained earnings       100,856,000     67,366,000  


        239,347,000     196,814,000  
       Less:    
         Treasury stock (210,937 shares)       (185,000 )   (185,000 )


                       Total stockholders’ equity       239,162,000     196,629,000  


                       Total liabilities and stockholders’ equity     $ 431,600,000     382,403,000  




ECMTL

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