Comtech Telecommunications Corp. Announces Results for the Second Quarter of Fiscal 2013 and Provides Updated Fiscal 2013 Guidance
March 7, 2013--Comtech Telecommunications Corp. (NASDAQ: CMTL) today
reported its operating results for the three and six months ended
January 31, 2013.
Net sales for the second quarter of fiscal 2013 were $74.6 million
compared to $99.1 million for the second quarter of fiscal 2012. The
period-over-period decrease in net sales is due to lower net sales in
all three of its operating segments. GAAP net income was $2.4 million,
or $0.14 per diluted share, for the second quarter of fiscal 2013 as
compared to $5.8 million, or $0.27 per diluted share, for the second
quarter of fiscal 2012.
Net sales for the six months ended January 31, 2013 were $165.5 million
compared to $212.5 million for the six months ended January 31, 2012.
GAAP net income was $9.8 million, or $0.51 per diluted share, for the
six months ended January 31, 2013 as compared to $18.4 million, or $0.75
per diluted share, for the six months ended January 31, 2012.
The Company also provided updated fiscal 2013 guidance. Fiscal 2013
revenue is now expected to range from $320.0 million to $330.0 million
and GAAP diluted earnings per share is now expected to be between $0.80
and $0.92. Adjusted EBITDA for fiscal 2013 is now expected to be in the
range of $48.0 million to $52.0 million.
In commenting on the Company’s second quarter results and updated fiscal
2013 guidance, Fred Kornberg, President and Chief Executive Officer,
noted, “Our second quarter results were impacted by a weak global
economic environment and the U.S. government’s failure to resolve its
budget issues. We believe these issues have resulted in increased
uncertainty amongst our global customer base and we have adjusted our
guidance accordingly.”
Mr. Kornberg added, “Although we are clearly experiencing significant
headwinds from a variety of global economic issues, we continue to spend
the research and development dollars necessary to maintain our
leadership position during these difficult times and position us for
growth as economic conditions improve and government funding frees up.”
Selected Fiscal 2013 Second Quarter Financial Metrics and Other Items
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Backlog as of January 31, 2013 was $126.4 million compared to $133.3
million as of October 31, 2012.
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Total bookings for the three and six months ended January 31, 2013
were $67.7 million and $138.0 million, respectively, compared to $98.4
million and $193.8 million for the three and six months ended January
31, 2012, respectively.
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The Company’s second quarter results for fiscal 2013 include a pre-tax
benefit of $0.9 million related to a change in fair value of the
earn-out liability associated with the Company’s acquisition of
Stampede Technologies, Inc. and also includes a reversal of previously
accrued costs of $0.2 million associated with its restructuring plan
to wind-down the microsatellite product line of the Company’s mobile
data communications segment.
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Adjusted EBITDA was $10.1 million and $28.6 million for the three and
six months ended January 31, 2013, respectively, as compared to $15.7
million and $39.2 million for the three and six months ended January
31, 2012. Adjusted EBITDA is a Non-GAAP financial measure and is
defined in the below table.
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The Company’s effective income tax rate for the three months ended
January 31, 2013 was 44.1%, which reflects a net discrete tax expense
of approximately $0.4 million, of which $0.7 million relates to the
establishment of a valuation allowance on certain deferred tax assets
of one of its foreign subsidiaries, offset, in part, by a $0.3 million
discrete tax benefit related to the passage of legislation that
included the retroactive extension of the federal research and
experimentation credit from December 31, 2011 to December 31, 2013.
The Company’s effective income tax rate for the twelve months ending
July 31, 2013 is expected to approximate 35.5%, excluding discrete tax
adjustments.
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During the three months ended January 31, 2013, the Company paid $9.6
million of cash dividends to its stockholders and repurchased 397,798
shares of its common stock at an aggregate cost of approximately $10.5
million (including transaction costs).
-
At January 31, 2013, the Company had $352.9 million of cash and cash
equivalents which does not reflect the subsequent repurchase of an
additional 214,194 shares of the Company’s common stock for an
aggregate cost of approximately $5.7 million (including transaction
costs) from February 1, 2013 through March 6, 2013. Since establishing
the Company’s first repurchase program on September 23, 2010, the
Company has repurchased a total of 11,965,114 shares of common stock
for approximately $355.2 million (including transaction costs). The
Company can make additional repurchases of up to $45.1 million
pursuant to its existing $50.0 million repurchase program.
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Additional information about the Company’s updated fiscal 2013
guidance is contained in the Company’s second quarter investor
presentation which is located on the Company’s website at www.comtechtel.com.
Conference Call
The Company has scheduled an investor conference call for 8:30 AM (ET)
on Friday, March 8, 2013. Investors and the public are invited to access
a live webcast of the conference call from the investor relations
section of the Comtech web site at www.comtechtel.com.
Alternatively, investors can access the conference call by dialing (866)
952-1906 (domestic), or (785) 424-1825 (international) and using the
conference I.D. of “Comtech.” A replay of the conference call will be
available for seven days by dialing (800) 283-8520 or (402) 220-0870. In
addition, an updated investor presentation, including earnings guidance,
is available on the Company’s web site.
About Comtech
Comtech Telecommunications Corp. designs, develops, produces and markets
innovative products, systems and services for advanced communications
solutions. The Company believes many of its solutions play a vital role
in providing or enhancing communication capabilities when terrestrial
communications infrastructure is unavailable, inefficient or too
expensive. The Company conducts business through three complementary
segments: telecommunications transmission, RF microwave amplifiers and
mobile data communications. The Company sells products to a diverse
customer base in the global commercial and government communications
markets. The Company believes it is a market leader in the market
segments that it serves.
Cautionary Statement Regarding Forward-Looking Statements
Certain information in this press release contains forward-looking
statements, including but not limited to, information relating to the
Company’s future performance and financial condition, plans and
objectives of the Company’s management and the Company’s assumptions
regarding such future performance, financial condition, and plans and
objectives that involve certain significant known and unknown risks and
uncertainties and other factors not under the Company’s control which
may cause its actual results, future performance and financial
condition, and achievement of plans and objectives of the Company’s
management to be materially different from the results, performance or
other expectations implied by these forward-looking statements. These
factors include the nature and timing of receipt of, and the Company’s
performance on, new or existing orders that can cause significant
fluctuations in net sales and operating results; the timing and funding
of government contracts; adjustments to gross profits on long-term
contracts; risks associated with international sales; rapid
technological change; evolving industry standards; frequent new product
announcements and enhancements; changing customer demands; changes in
prevailing economic and political conditions; risks associated with the
Company’s legal proceedings and other matters; risks associated with
certain U.S. government investigations; risks associated with the
Company’s BFT-1 contracts, including its ongoing negotiations with the
U.S. Army regarding pricing for the engineering services, program
management and satellite network operations, and the post-award audit of
its original BFT-1 contract; risks associated with the Company’s
obligations under its revolving credit facility; and other factors
described in the Company’s filings with the Securities and Exchange
Commission.
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COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended January 31,
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Six months ended January 31,
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2013
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2012
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2013
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2012
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Net sales
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$
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74,577,000
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99,141,000
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165,530,000
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212,502,000
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Cost of sales
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42,337,000
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57,725,000
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91,487,000
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119,806,000
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Gross profit
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32,240,000
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41,416,000
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74,043,000
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92,696,000
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Expenses:
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Selling, general and administrative
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15,433,000
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19,626,000
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32,243,000
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43,744,000
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Research and development
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9,278,000
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9,444,000
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19,327,000
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19,128,000
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Amortization of intangibles
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1,582,000
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1,692,000
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3,164,000
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3,411,000
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26,293,000
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30,762,000
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54,734,000
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66,283,000
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Operating income
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5,947,000
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10,654,000
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19,309,000
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26,413,000
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Other expenses (income):
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Interest expense
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2,030,000
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2,183,000
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4,141,000
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4,329,000
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Interest income and other
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(315,000
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)
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(434,000
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)
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(591,000
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)
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(930,000
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Income before provision for income taxes
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4,232,000
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8,905,000
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15,759,000
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23,014,000
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Provision for income taxes
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1,867,000
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3,084,000
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5,959,000
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4,592,000
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Net income
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$
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2,365,000
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5,821,000
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9,800,000
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18,422,000
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Net income per share:
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Basic
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$
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0.14
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0.29
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0.57
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0.85
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Diluted
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$
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0.14
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0.27
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0.51
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0.75
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Weighted average number of common shares outstanding – basic
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17,300,000
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20,087,000
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17,340,000
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21,672,000
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Weighted average number of common and common equivalent shares
outstanding – diluted
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17,401,000
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26,056,000
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23,394,000
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27,588,000
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Dividends declared per issued and outstanding common share as of the
applicable dividend record date
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$
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0.275
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0.275
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0.55
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0.55
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COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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January 31, 2013
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July 31, 2012
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Assets
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(Unaudited)
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(Audited)
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Current assets:
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Cash and cash equivalents
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$
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352,927,000
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367,894,000
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Accounts receivable, net
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42,236,000
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56,242,000
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Inventories, net
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70,156,000
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72,361,000
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Prepaid expenses and other current assets
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11,541,000
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8,196,000
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Deferred tax asset, net
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10,877,000
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12,183,000
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Total current assets
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487,737,000
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516,876,000
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Property, plant and equipment, net
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21,238,000
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22,832,000
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Goodwill
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137,354,000
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137,354,000
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Intangibles with finite lives, net
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35,669,000
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38,833,000
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Deferred tax asset, net, non-current
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-
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438,000
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Deferred financing costs, net
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1,806,000
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2,487,000
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Other assets, net
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943,000
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958,000
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Total assets
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$
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684,747,000
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719,778,000
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Accounts payable
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$
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14,068,000
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20,967,000
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Accrued expenses and other current liabilities
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30,818,000
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40,870,000
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Dividends payable
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-
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4,773,000
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Customer advances and deposits
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10,530,000
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14,516,000
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Interest payable
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1,529,000
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1,529,000
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Total current liabilities
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56,945,000
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82,655,000
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Convertible senior notes
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200,000,000
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200,000,000
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Other liabilities
|
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3,811,000
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5,098,000
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Income taxes payable
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|
3,074,000
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2,624,000
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Deferred tax liability, net
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2,240,000
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-
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Total liabilities
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266,070,000
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290,377,000
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Commitments and contingencies
|
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Stockholders’ equity:
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Preferred stock, par value $.10 per share; shares authorized and
unissued 2,000,000
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-
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-
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Common stock, par value $.10 per share; authorized 100,000,000
shares; issued 28,978,701 shares and 28,931,679 shares at January
31, 2013 and July 31, 2012, respectively
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|
2,898,000
|
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|
|
2,893,000
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Additional paid-in capital
|
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|
|
360,968,000
|
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|
|
361,458,000
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Retained earnings
|
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|
404,465,000
|
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|
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404,227,000
|
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|
|
|
|
|
768,331,000
|
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|
|
768,578,000
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Less:
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Treasury stock, at cost (11,961,857 shares and 11,564,059 shares at
January 31, 2013 and July 31, 2012, respectively)
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(349,654,000
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)
|
|
|
(339,177,000
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)
|
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Total stockholders’ equity
|
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|
|
418,677,000
|
|
|
|
429,401,000
|
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Total liabilities and stockholders’ equity
|
|
|
$
|
684,747,000
|
|
|
|
719,778,000
|
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COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
(Unaudited)
|
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Three Months Ended January 31,
|
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Six Months Ended January 31,
|
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2013
|
|
|
2012
|
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|
2013
|
|
|
2012
|
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|
|
|
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Reconciliation of GAAP Net Income to Adjusted EBITDA(1):
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GAAP net income
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$
|
2,365,000
|
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|
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5,821,000
|
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9,800,000
|
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|
18,422,000
|
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Income taxes
|
|
|
|
1,867,000
|
|
|
|
3,084,000
|
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|
5,959,000
|
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|
4,592,000
|
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Net interest expense and other
|
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|
|
1,715,000
|
|
|
|
1,749,000
|
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|
3,550,000
|
|
|
3,399,000
|
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Amortization of stock-based compensation
|
|
|
|
806,000
|
|
|
|
1,036,000
|
|
|
1,551,000
|
|
|
1,909,000
|
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Depreciation and other amortization
|
|
|
|
3,576,000
|
|
|
|
4,053,000
|
|
|
7,183,000
|
|
|
8,192,000
|
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Restructuring charges related to the wind-down of microsatellite
product line
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|
(253,000
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)
|
|
|
-
|
|
|
569,000
|
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|
-
|
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Costs related to withdrawn fiscal 2011 contested proxy solicitation
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,638,000
|
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Adjusted EBITDA
|
|
|
$
|
10,076,000
|
|
|
|
15,743,000
|
|
|
28,612,000
|
|
|
39,152,000
|
|
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(1)
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Represents earnings before interest, income taxes, depreciation
and amortization of intangibles and stock-based compensation and
restructuring charges related to the wind-down of the
microsatellite product line of the Company’s mobile data
communications segment and costs related to a withdrawn fiscal
2011 contested proxy solicitation. Adjusted EBITDA is a non-GAAP
operating metric used by management in assessing the Company’s
operating results. The Company’s definition of Adjusted 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. Adjusted EBITDA is also a measure frequently requested
by the Company’s investors and analysts. The Company believes that
investors and analysts may use Adjusted EBITDA, along with other
information contained in its SEC filings, in assessing its ability
to generate cash flow and service debt.
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ECMTL
