June 5, 2014--Comtech Telecommunications Corp. (NASDAQ:CMTL) today reported its operating results for the three and nine months ended April 30, 2014.
Net sales for the third quarter of fiscal 2014 were $88.9 million compared to $69.9 million for the third quarter of fiscal 2013. The period-over-period increase reflects higher sales in the Company's telecommunications transmission and RF microwave amplifiers segments, partially offset by lower sales in its mobile data communications segment. GAAP net income was $5.9 million, or $0.32 per diluted share, for the third quarter of fiscal 2014 as compared to $2.9 million, or $0.17 per diluted share, for the third quarter of fiscal 2013.
Net sales for the nine months ended April 30, 2014 were $257.8 million compared to $235.4 million for the nine months ended April 30, 2013. GAAP net income was $17.2 million, or $0.92 per diluted share, for the nine months ended April 30, 2014 as compared to $12.7 million, or $0.69 per diluted share, for the nine months ended April 30, 2013.
Based on the Company's year-to-date results and anticipated fourth quarter performance, the Company is updating its fiscal 2014 guidance. Fiscal 2014 revenue is now expected to range from $342.0 million to $346.0 million, adjusted EBITDA, as defined in the below table, is now expected to be in the range of $58.0 million to $60.0 million and GAAP diluted earnings per share is now expected to be in the range of $1.25 to $1.30.
In commenting on the Company's performance and updated fiscal 2014 business outlook, Fred Kornberg, President and Chief Executive Officer, stated, “We are extremely pleased with our solid third quarter financial results. Our business looks like it is firming up and our outlook for fiscal 2014 has improved.”
Mr. Kornberg added, "We are excited about the many large growth opportunities we see and are increasingly optimistic that, as we look to next year, fiscal 2015 will be another year of growth on both the top and bottom lines."
Selected Fiscal 2014 Third Quarter Financial Metrics and Other Items
- Backlog as of April 30, 2014 was $160.7 million compared to $168.0 million as of January 31, 2014.
- Total bookings for the three and nine months ended April 30, 2014 were $81.6 million and $228.8 million, respectively, compared to $73.6 million and $211.5 million for the three and nine months ended April 30, 2013, respectively.
- Adjusted EBITDA was $14.8 million and $44.6 million for the three and nine months ended April 30, 2014, respectively, as compared to $9.6 million and $38.2 million for the three and nine months ended April 30, 2013, respectively. Adjusted EBITDA is a Non-GAAP financial measure and is defined in the below table.
- The Company's effective income tax rate for the three months ended April 30, 2014 was 33.5%, which reflects a discrete tax benefit of approximately $0.3 million. The Company’s effective income tax rate for the twelve months ending July 31, 2014 is expected to approximate 36.5%, excluding any discrete tax adjustments.
- During the three months ended April 30, 2014, the Company repurchased 915,311 shares of its common stock in open-market transactions with an average price per share of $31.70 and at an aggregate cost of $29.0 million (including transaction costs).
- As of April 30, 2014, the Company had $295.0 million of cash and cash equivalents and $191.5 million principal amount of its 3.0% convertible senior notes outstanding. However, subsequently, the Company utilized a portion of its cash and cash equivalents to: (i) redeem and repurchase $150.0 million principal amount of its 3.0% convertible senior notes (with the remaining $41.5 million principal amount converted into shares of the Company's common stock); (ii) repurchase $12.0 million of its common stock; and (iii) make a quarterly cash dividend payment of $4.9 million on May 30, 2014. After accounting solely for the aforementioned items, the Company has approximately $128.0 million of cash and cash equivalents and expects to generate significant positive cash flows from operations during the fourth quarter of fiscal 2014.
-
As of June 4, 2014, the Company can repurchase approximately $14.3
million of additional common stock pursuant to its stock repurchase
program and, after considering the impact of the conversion of a
portion of its 3.0% convertible senior notes into shares of common
stock, and stock repurchases subsequent to April 30, 2014, the Company
currently has approximately 16,000,000 common shares outstanding.
Additional information about the Company’s updated fiscal 2014 guidance is included in the Company’s third 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, June 6, 2014. 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) 839-5125 or (402) 220-1502. 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; 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 large contracts; 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.
COMTECH TELECOMMUNICATIONS CORP. | |||||||||||||||
AND SUBSIDIARIES | |||||||||||||||
Condensed Consolidated Statements of Operations | |||||||||||||||
(Unaudited) | |||||||||||||||
Three months ended April 30, | Nine months ended April 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net sales | $ | 88,905,000 | 69,856,000 | 257,772,000 | 235,386,000 | ||||||||||
Cost of sales | 50,559,000 | 38,429,000 | 145,679,000 | 129,916,000 | |||||||||||
Gross profit | 38,346,000 | 31,427,000 | 112,093,000 | 105,470,000 | |||||||||||
Expenses: | |||||||||||||||
Selling, general and administrative | 17,320,000 | 15,374,000 | 49,867,000 | 47,617,000 | |||||||||||
Research and development | 8,899,000 | 9,080,000 | 25,664,000 | 28,407,000 | |||||||||||
Amortization of intangibles | 1,560,000 | 1,582,000 | 4,724,000 | 4,746,000 | |||||||||||
27,779,000 | 26,036,000 | 80,255,000 | 80,770,000 | ||||||||||||
Operating income | 10,567,000 | 5,391,000 | 31,838,000 | 24,700,000 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense | 1,993,000 | 2,009,000 | 6,009,000 | 6,150,000 | |||||||||||
Interest income and other | (256,000 | ) | (287,000 | ) | (757,000 | ) | (878,000 | ) | |||||||
Income before provision for income taxes | 8,830,000 | 3,669,000 | 26,586,000 | 19,428,000 | |||||||||||
Provision for income taxes | 2,955,000 | 817,000 | 9,423,000 | 6,776,000 | |||||||||||
Net income | $ | 5,875,000 | 2,852,000 | 17,163,000 | 12,652,000 | ||||||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.39 | 0.17 | 1.08 | 0.74 | ||||||||||
Diluted | $ | 0.32 | 0.17 | 0.92 | 0.69 | ||||||||||
Weighted average number of common | 15,200,000 | 16,731,000 | 15,882,000 | 17,141,000 | |||||||||||
Weighted average number of common | 21,764,000 | 16,827,000 | 22,324,000 | 23,221,000 | |||||||||||
Dividends declared per issued and | $ | 0.30 | 0.275 | 0.875 | 0.825 | ||||||||||
COMTECH TELECOMMUNICATIONS CORP. | |||||||||
AND SUBSIDIARIES | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
April 30, 2014 | July 31, 2013 | ||||||||
(Unaudited) | (Audited) | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 295,033,000 | 356,642,000 | ||||||
Accounts receivable, net | 65,024,000 | 49,915,000 | |||||||
Inventories, net | 68,316,000 | 65,482,000 | |||||||
Prepaid expenses and other current assets | 8,734,000 | 7,428,000 | |||||||
Deferred tax asset, net | 10,585,000 | 10,184,000 | |||||||
Total current assets | 447,692,000 | 489,651,000 | |||||||
Property, plant and equipment, net | 19,820,000 | 20,333,000 | |||||||
Goodwill | 137,354,000 | 137,354,000 | |||||||
Intangibles with finite lives, net | 27,781,000 | 32,505,000 | |||||||
Deferred financing costs, net | 139,000 | 1,093,000 | |||||||
Other assets, net | 819,000 | 879,000 | |||||||
Total assets | $ | 633,605,000 | 681,815,000 | ||||||
Liabilities and Stockholders’ Equity | |||||||||
Current liabilities: | |||||||||
Convertible senior notes, current | $ | 191,499,000 | 200,000,000 | ||||||
Accounts payable | 16,346,000 | 18,390,000 | |||||||
Accrued expenses and other current liabilities | 29,357,000 | 29,892,000 | |||||||
Dividends payable | 4,513,000 | 4,531,000 | |||||||
Customer advances and deposits | 18,041,000 | 14,749,000 | |||||||
Interest payable | 2,902,000 | 1,529,000 | |||||||
Income taxes payable | 8,000 | — | |||||||
Total current liabilities | 262,666,000 | 269,091,000 | |||||||
Other liabilities | 4,256,000 | 3,958,000 | |||||||
Income taxes payable | 2,886,000 | 2,963,000 | |||||||
Deferred tax liability, net | 1,148,000 | 1,741,000 | |||||||
Total liabilities | 270,956,000 | 277,753,000 | |||||||
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; | 2,950,000 | 2,907,000 | |||||||
Additional paid-in capital | 377,239,000 | 363,888,000 | |||||||
Retained earnings | 406,713,000 | 403,398,000 | |||||||
786,902,000 | 770,193,000 | ||||||||
Less: | |||||||||
Treasury stock, at cost (14,459,804 shares and 12,608,501 shares at | (424,253,000 | ) | (366,131,000 | ) | |||||
Total stockholders’ equity | 362,649,000 | 404,062,000 | |||||||
Total liabilities and stockholders’ equity | $ | 633,605,000 | 681,815,000 | ||||||
COMTECH TELECOMMUNICATIONS CORP. | ||||||||||||||
AND SUBSIDIARIES | ||||||||||||||
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures | ||||||||||||||
(Unaudited) | ||||||||||||||
Three months ended April 30, | Nine months ended April 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA(1): | ||||||||||||||
GAAP net income | $ | 5,875,000 | 2,852,000 | 17,163,000 | 12,652,000 | |||||||||
Income taxes | 2,955,000 | 817,000 | 9,423,000 | 6,776,000 | ||||||||||
Net interest expense and other | 1,737,000 | 1,722,000 | 5,252,000 | 5,272,000 | ||||||||||
Amortization of stock-based compensation | 1,070,000 | 694,000 | 3,086,000 | 2,245,000 | ||||||||||
Depreciation and other amortization | 3,210,000 | 3,522,000 | 9,757,000 | 10,705,000 | ||||||||||
Restructuring (benefit) charges related to the | (56,000 | ) | — | (56,000 | ) | 569,000 | ||||||||
Adjusted EBITDA | $ | 14,791,000 | 9,607,000 | 44,625,000 | 38,219,000 | |||||||||
(1) | Represents earnings before interest, income taxes, depreciation and amortization of intangibles and stock-based compensation and restructuring (benefits) charges related to the wind-down of the microsatellite product line of the Company’s mobile data communications segment. 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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