FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
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11-2139466
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(State or other jurisdiction of incorporation /organization)
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(I.R.S. Employer Identification Number)
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68 South Service Road, Suite 230,
Melville, NY
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11747 |
(Address of principal executive offices)
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(Zip Code)
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(631) 962-7000
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(Registrant's telephone number, including area code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.10 per share
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NASDAQ Stock Market LLC
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Series A Junior Participating Cumulative
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Large accelerated filer
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Accelerated filer
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Emerging growth company
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Non-accelerated filer
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Smaller reporting company
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INDEX
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PART I
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ITEM 1.
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ITEM 1A.
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ITEM 1B.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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PART II
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ITEM 5.
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ITEM 6.
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ITEM 7.
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ITEM 7A.
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ITEM 8.
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ITEM 9.
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ITEM 9A.
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ITEM 9B.
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PART III
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ITEM 10.
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ITEM 11.
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ITEM 12.
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ITEM 13.
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ITEM 14.
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PART IV
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ITEM 15.
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Seek leadership positions in markets where we can provide differentiated products and technology solutions;
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Identify and participate in emerging technologies that enhance or expand our product portfolio;
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Maximize responsiveness to our customers, including offering more integrated systems and solutions;
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Expand and further penetrate our diversified and balanced customer base; and
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Pursue acquisitions of complementary businesses and technologies.
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(1)
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We Have Significant Exposure to Large, Growing End Markets
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(2)
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We Believe We Are a Market Leader in the End-Markets That We Serve
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(3)
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We Believe We Provide Industry Leading Innovation, Capabilities and Solutions
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(4)
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We Have a Diverse Global Customer Base
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Satellite-Based Cellular Backhaul.
Demand for satellite-based cellular backhaul services is anticipated to grow rapidly as a result of the increased penetration of smart cellular phones and network upgrades to 3G and 4G in developing regions of the world. As mobile data penetration expands and mobile data consumption increases, wireless carriers must invest in their mobile network infrastructure. In developing regions of the world and in remote areas where terrestrial network infrastructure is lacking, wireless network operators often backhaul, or transport, their wireless data traffic using satellite-based networking technologies. Comtech is well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our leading SCPC modems and solid-state amplifiers.
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New High Throughput Satellites.
There are literally more than 100 new High Throughput Satellite ("HTS") payloads expected to launch over the next decade which we believe is expected to lead to increasingly complex satellite networks. As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new HTS applications, we believe they will require new installations and upgrades of equipment.
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High Definition and Ultra-High Definition Broadcasting.
In recent years, consumers have purchased millions of High Definition televisions and Ultra-High Definition or "4K" televisions. We believe this will require a significant amount of satellite bandwidth, which is expected to require satellite service providers to upgrade equipment and find new ways to manage the cost and transmission efficiency of their networks. We believe that these requirements will drive increased demand for new SCPC-based modems, our Ka-frequency based 500 Watt TWTA, our HEIGHTS products and our SuperPower
TM
TWTAs, which can double TWTA output power and provide direct replacement for bandwidth deficient KPAs.
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In-Flight Connectivity.
Consumer demand for anytime, anywhere connectivity is rapidly rising. As a result, airlines worldwide are deploying in-flight connectivity and entertainment systems. The deployment of in-flight connectivity and entertainment systems by airlines around the world is creating opportunities for us to serve as a key supplier of amplifier components used for in-flight Ku-band connectivity systems.
As airlines move to offer higher speed satellite-based connectivity, we believe this market will experience solid demand over the next few years.
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Commercial Solutions Segment Technologies
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Government Solutions Segment Technologies
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Communication Technologies
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Safety and Security Technologies
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Enterprise Technologies
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Command and Control Technologies
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Troposcatter Technologies
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RF Power and Switching Technologies
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Satellite Earth Station Products
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Ground-based equipment such as single channel per carrier modems and solid-state amplifiers that facilitate the transmission of voice, video and data over satellite links
Traveling Wave Tube Amplifiers
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High power narrow-band amplifiers used to amplify signals from satellite earth stations
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Safety and Security
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Wireless/
VoIP 911 service for network operators
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NextGen 911
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ESInet (Emergency Services IP Network)
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Application Solutions
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Software and equipment for Iocation-based and messaging infrastructure
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Managed “cIoud-services”
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Trusted Location
TM
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Indoor Location
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C4ISR
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Tactical communications, managed networks, logistics, end-to-end integration
Cyber Intelligence Solutions
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Cybersecurity training
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Computer network operations
Mobile Data Communications
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Secure, satellite
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based mobile communications and tracking systems
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Over-the
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Horizon Microwave Systems
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Equipment and systems that can transmit digitized voice
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video and data over unfriendly or inaccessible terrain over distances from 20 to 200 miles using the troposphere
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Solid State Power Amplifiers
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Solid state high power broadband amplifiers designed for radar, electronic warfare
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jamming, medical and aviation applications
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Commercial Solutions Segment Representative Customers
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Government Solutions Segment Representative Customers
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Satellite systems integrators, wireless and other communication service providers, broadcasters.
Domestic and international defense customers, as well as U.S. and foreign governments, prime contractors and system suppliers such as Harris Corporation, General Dynamics Corporation, L-3 Communications, Raytheon Company and ViaSat Inc.
Satellite broadcasters, such as The DIRECTV Group and EchoStar Corporation.
End-customers also include AT&T Inc., BT Group plc., China Mobile Limited, Century Link, Comcast Corporation, Intelsat, Ltd., Globecomm Systems, Inc., Nokia Corporation, O3b Networks, Qualcomm Incorporated, Sprint Corporation and Verizon Communications, Inc.
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U.S. Army logistics community, the U.S. Army war-fighter community, foreign governments, the U.S. Navy, prime contractors to the U.S. Armed Forces and NATO.
Domestic and international defense customers, prime contractors and system suppliers such as Raytheon Company, Exelis Inc., Lockheed Martin Corporation, Telephonics, Inc. and Thales Group.
Medical equipment companies, such as Varian Medical Systems, Inc., and aviation industry system integrators such as Rockwell Collins, Inc.
U.S. government customers in the Middle East, Europe, North Africa and Latin America and related prime contractors and systems integrators.
Oil companies such as Shell Oil Company and Petronas.
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Fiscal Years Ended July 31,
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2017
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2016
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2015
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2017
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2016
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2015
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2017
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2016
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2015
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Commercial Solutions
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Government Solutions
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Consolidated
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U.S. government
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15.1
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%
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25.0
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%
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29.3
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%
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59.2
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%
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65.0
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%
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33.2
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%
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32.7
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%
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40.8
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%
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30.6
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%
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Domestic
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54.4
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%
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40.6
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%
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15.9
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%
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15.5
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%
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11.6
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%
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7.9
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%
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38.9
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%
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29.2
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%
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13.2
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%
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Total U.S.
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69.5
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%
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65.6
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%
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45.2
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%
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74.7
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%
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76.6
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%
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41.1
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%
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71.6
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%
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70.0
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%
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43.8
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%
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International
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30.5
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%
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34.4
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%
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54.8
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%
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25.3
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%
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23.4
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%
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58.9
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%
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28.4
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%
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30.0
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%
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56.2
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%
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Total
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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Difficulty in forecasting our results of operations
- It is difficult to accurately forecast our results of operations during adverse conditions as we cannot predict the severity or the duration of such conditions or the impact it could have on our current and prospective customers. If our current or prospective customers materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we anticipate, our business outlook will prove to be inaccurate.
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Additional reductions in telecommunications equipment and systems spending may occur
- Our businesses have been negatively affected by uncertain economic environments in the overall market and, more specifically, in the telecommunications sector. Our customers have reduced their budgets for spending on telecommunications equipment and systems and in some cases postponed or reduced the purchase of our products and systems. In the future, our customers may reduce their spending on telecommunications equipment and systems which would negatively impact both of our operating segments. If this occurs, it would adversely affect our business outlook, net sales, profitability and the recoverability of our assets, including intangible assets such as goodwill.
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Our customers may not be able to obtain financing
- Although many of our products are relatively inexpensive when compared to the total systems or networks that they are incorporated into, our sales are affected by our customers' ability to obtain the financing they may require to build out their total systems or networks and fund ongoing operations. Many of our emerging market customers obtain financing for network build-outs from European commercial banks and/or governments. Our customers' inability to obtain sufficient financing would adversely affect our net sales. In addition, if the current economic environment and lack of financing results in insolvencies for our customers, it would adversely impact the recoverability of our accounts receivable which would, in turn, adversely impact our results of operations.
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We may not be able to continue to manage organizational changes associated with the TCS acquisition
- As of February 1, 2016, in connection with the acquisition of TCS, we reorganized our business into two reportable operating segments: Commercial Solutions and Government Solutions. Although this integration is largely complete, we may further change our business and organizational structure and streamline and further consolidate certain business processes to achieve greater operating efficiencies. The acquisition of TCS has significantly expanded the types of products and services that we sell, expanded the businesses in which we engage, and increased the number of facilities we operate, thereby presenting us with significant challenges in managing the substantial increase in scale of our business. These challenges include the integration of a large number of systems, both operational and administrative. We may not be able to successfully manage these organizational changes and the unanticipated disruption to our business that might result from these changes could have a material adverse effect on our business, results of operation and financial condition. In addition, the diversion of our management’s attention to these matters and away from other business concerns could have a material adverse effect on our business, results of operation and financial condition.
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We may experience a loss or adverse effect on customer relationships
- The acquisition of TCS may adversely affect the relationships that the combined company has with its customers, service providers and employees. As a result of the acquisition, we may experience a loss of, or changes to, TCS’s relationships with its customers or Comtech’s legacy customers, which could negatively impact our business outlook. Our future growth depends in part on expanding relationships with key distribution channels for TCS products such as Next Generation 911 solutions. If we are unable to capitalize on those relationships or if we lose existing relationships, it could have a material adverse effect on our business, results of operation and financial condition.
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we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows for other purposes, including business development efforts, capital expenditures, dividends or strategic acquisitions;
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if we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, or restructuring our debt;
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we may not be able to fund future working capital, capital investments and other business activities;
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we may not be able to pay dividends or make certain other distributions;
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we may become more vulnerable in the event of a downturn in our business or a worsening of general economic or industry-specific conditions; and
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our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
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properly evaluate the technology;
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accurately forecast the financial impact of the transaction, including accounting charges and transaction expenses;
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integrate the technologies, products and services, research and development, sales and marketing, support and other operations;
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integrate and retain key management personnel and other key employees;
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retain and cross-sell to acquired customers; and
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combine potentially different corporate cultures.
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divert management’s attention away from the operation of our businesses;
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result in significant goodwill and intangibles write-offs in the event an acquisition or investment does not meet expectations; and
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increase expenses, including expenses of managing the growth of such acquired businesses.
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unexpected contract or project terminations or suspensions;
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unpredictable order placements, reductions, delays or cancellations;
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higher than expected final costs, particularly relating to software and hardware development, for work performed under contracts where we commit to specified deliveries for a fixed-price; and
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unpredictable cash collections of unbilled receivables that may be subject to acceptance of contract deliverables by the customer and contract close out procedures, including government audit and approval of final indirect rates.
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Our U.S. government contracts can easily be terminated by the U.S. government
- Our U.S. government contracts can be terminated by the U.S. government for its convenience or upon an event of default by us. Termination for convenience provisions provide us with little to no recourse: our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination.
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Our U.S. government contracts are subject to funding by the U.S. Congress
- U.S. government contracts are conditioned upon the continuing approval by Congress of the necessary funding. Congress usually appropriates funds for a given program on a fiscal year basis even though contract performance may take more than one year. Consequently, at the beginning of a major program, the contract may not be fully funded, and additional monies are normally committed to the contract only if, and when, appropriations are made by Congress for future fiscal years. Delays or changes in funding can impact the timing of awards or lead to changes in program content. We obtain certain of our U.S. government contracts through a competitive bidding process. There can be no assurance that we will win additional contracts or that actual contracts that are awarded will ultimately be profitable.
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We can be disqualified as a supplier to the U.S. government
- As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security, contracting practices and classified information. Failure to comply with these regulations and practices could result in fines being imposed against us or our suspension for a period of time from eligibility for bidding on, or for award of, new government contracts. If we are disqualified as a supplier to government agencies, we would lose most, if not all, of our U.S. government customers and revenues from sales of our products would decline significantly.
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We may not be able to continue to structure our international contracts to reduce risk
- We attempt to reduce the risk of doing business in foreign countries by seeking subcontracts with large systems suppliers, contracts denominated in U.S. dollars, advance or milestone payments and irrevocable letters of credit in our favor. However, we may not be able to reduce the economic risk of doing business in foreign countries in all instances. In such cases, billed and unbilled receivables relating to international sales are subject to increased collectability risk and may result in significant write-offs, which could have a material adverse effect on our business, results of operation and financial condition. In addition, foreign defense contracts generally contain provisions relating to termination at the convenience of the government.
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We rely on a limited number of international sales agents
- In some countries, we rely upon one or a small number of sales agents, exposing us to risks relating to our contracts with, and related performance of, those agents. We attempt to reduce our risk with respect to sales agents by establishing additional foreign sales offices where it is practical and by engaging, where practicable, more than one independent sales representative in a territory. It is our policy to require all sales agents to operate in compliance with applicable laws, rules and regulations. Violations of any of these laws, rules or regulations, and other business practices that are regarded as unethical, could interrupt the sales of our products and services, result in the cancellation of orders or the termination of customer relationships, and could damage our reputation, any of which developments could have a material adverse effect on our business, results of operation and financial condition.
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We currently price virtually all of our products in U.S. dollars
- Today, virtually all of our sales are denominated in U.S. dollars. Over the last few years, the U.S. dollar has strengthened significantly against many international currencies. As such, many of our international customers experienced a drop in their purchasing power as it relates to their ability to purchase our products. To date, we have not materially changed our selling prices and have experienced lower sales volumes. Although monetary conditions in fiscal 2017 improved as compared to recent years, it is possible, that the U.S. dollar will strengthen from current levels against many international currencies. If this occurs, our customers may reduce their spending or postpone purchases of our products and services to a greater extent than we currently anticipate which could have a material adverse effect on our business, results of operation and financial condition.
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We must comply with all applicable export control laws and regulations of the U.S. and other countries
- Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported. In addition, in certain cases, U.S. export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are not U.S. citizens or permanent residents. As a result, in cases where we may need a license, our ability to compete against a non-U.S. domiciled foreign company that may not be subject to the same U.S. laws may be materially adversely affected. U.S. laws and regulations applicable to us include the Arms Export Control Act, the IEEPA, the ITAR, the EAR and the trade sanctions laws and regulations administered by the U.S. Treasury Department's Office of Foreign Asset Control ("OFAC").
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We must comply with the FCPA and similar laws elsewhere
- We are subject to the FCPA and other foreign laws prohibiting corrupt payments to government officials, which generally bar bribes or unreasonable gifts to foreign governments or officials. Violations of these laws or regulations could result in significant sanctions, including disgorgement of profits, fines, criminal sanctions against us, our officers, our directors, or our employees, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. A violation of any of the regulations enumerated above could materially adversely affect our business, financial condition and results of operations. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, agents, or subsidiaries will not violate our policies. Additionally, changes in regulatory requirements which could restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business. For the fiscal years ended July 31, 2017, 2016 and 2015, we have conducted virtually no business with states designated as sponsors of terrorism.
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We must maintain a company-wide Office of Trade Compliance
- In the past, we have self-reported violations of ITAR to the DDTC and had an ITAR compliance audit performed by an independent auditor at the request of the DDTC. Although the audit found no violations of ITAR, we committed to the DDTC that we would enhance and maintain certain policies and procedures and we have established a company-wide Office of Trade Compliance. In October 2014, we self-disclosed to OFAC that we learned during a routine assessment of the adequacy of our export control compliance procedures that we had inadvertently neglected to obtain an OFAC license for a shipment of modems to a Canadian customer who, we learned after the transaction had begun, intended to incorporate our modems in a communication system the ultimate end user of which was the Sudan Civil Aviation Authority. OFAC regulations prohibit U.S. persons from doing business directly or indirectly in Sudan and from facilitating transactions by non-U.S. persons which would be illegal if done by a U.S. person. In late 2015, OFAC issued an administrative subpoena to us seeking further information about the previous voluntarily disclosed transaction and any other transactions involving Sudan. We have responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon after which time the modems were rerouted to Sudan without Comtech’s knowledge.
OFAC has not responded to our submission of further information and we cannot predict when the agency will complete its review and determine whether any violations occurred. While OFAC could decide not to impose penalties and only issue a no action or cautionary letter, we could face civil and criminal penalties and may suffer reputational harm if we are found to have violated U.S. sanctions laws. Even though we take precautions to prevent transactions with U.S. sanction targets, any such measures, or any new measures we may implement in the future, may be ineffective. As a result, there is risk that in the future we could provide our products to or permit our products to be downloaded or accessed by such targets despite these precautions. This could result in negative consequences to us, including government investigations, penalties and reputational harm.
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We may be subject to future export compliance audits
- We continue to implement policies and procedures to ensure that we comply with all applicable export control laws and regulations. In the future, we may be subjected to compliance audits in the future that may uncover improper or illegal activities that would subject us to material remediation costs, civil and criminal fines and/or penalties and/or an injunction. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Each of these outcomes could, individually or in the aggregate, have a material adverse effect on our business, results of operation and financial condition. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. In addition, in order to ship our products into and implement our services in some countries, the products must satisfy the technical requirements of that particular country. If we were unable to comply with such requirements with respect to a significant quantity of our products, our sales in those countries could be restricted, which could have a material adverse effect on our business, results of operation and financial condition.
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Disrupt the proper functioning of these networks, data center facilities and systems and therefore our operations and/or those of certain of our customers;
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Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
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Compromise national security and other sensitive government functions;
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Require significant management attention and resources to remedy the damages that result; and
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Damage our reputation with our customers (particularly agencies of the U.S. government) and the public generally.
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We must obtain various licenses from the FCC
- We operate FCC licensed teleports that are subject to the Communications Act of 1934, as amended, or the FCC Act, and the rules and regulations of the FCC. We cannot guarantee that the FCC will grant renewals when our existing licenses expire, nor are we assured that the FCC will not adopt new or modified technical requirements that will require us to incur expenditures to modify or upgrade our equipment as a condition of retaining our licenses. We may, in the future, be required to seek FCC or other government approval if foreign ownership of our stock exceeds certain specified criteria. Failure to comply with these policies could result in an order to divest the offending foreign ownership, fines, denial of license renewal and/or license revocation proceedings against the licensee by the FCC, or denial of certain contracts from other U.S. government agencies.
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We are dependent on the allocation and availability of frequency spectrum
- Adverse regulatory changes related to the allocation and availability of frequency spectrum and in the military standards and specifications that define the current satellite networking environment, could materially harm our business by: (i) restricting development efforts by us and our customers, (ii) making our current products less attractive or obsolete, or (iii) increasing the opportunity for additional competition. The increasing demand for wireless communications has exerted pressure on regulatory bodies worldwide to adopt new standards and reassign bandwidth for these products and services. The reduced number of available frequencies for other products and services and the time delays inherent in the government approval process of new products and services have caused, and may continue to cause, our customers to cancel, postpone or reschedule their installation of communications systems including their satellite, over-the-horizon microwave, or terrestrial line-of-sight microwave communication systems. This, in turn, could have a material adverse effect on our sales of products to our customers. Changes in, or our failure to comply with, applicable laws and regulations could materially adversely harm our business, results of operation, and financial condition.
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Our future growth is dependent, in part, on developing NG911 compliant products
- The FCC requires that certain location information be provided to network operators for public safety answering points when a subscriber makes a 911 call. Technical failures, greater regulation by federal, state or foreign governments or regulatory authorities, time delays or the significant costs associated with developing or installing improved location technology could slow down or stop the deployment of our mobile location products. If deployment of improved location technology is delayed, stopped or never occurs, market acceptance of our products and services may be materially adversely affected. Because we rely on some third-party location technology instead of developing all of the technology ourselves, we have little or no influence over its improvement. The technology employed with NG911 services generally anticipates a migration to internet-protocol (“IP”) based communication. Since many companies are proficient in IP-based communication protocols, the barriers to entry to providing NG911 products and services are lower than exist for the traditional switch-based protocols. If we are unable to develop unique and proprietary solutions that are superior to and more cost effective than other market offers, our 911 business could get replaced by new market entrants, resulting in a material adverse effect on our business, results of operation and financial condition.
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Under the FCC’s mandate, our 911 business is dependent on state and local governments
- Under the FCC’s mandate, wireless carriers are required to provide 911 services only if state and local governments request the service. As part of a state or local government’s decision to request 911, they have the authority to develop cost recovery mechanisms. However, cost recovery is no longer a condition to wireless carriers’ obligation to deploy the service. If state and local governments do not widely request that 911 services be provided or we become subject to significant pressures from wireless carriers with respect to pricing of 911 services, our 911 business would be harmed and future growth of our business would be reduced.
|
•
|
We must adhere to existing and potentially new privacy rules related to mobile-location based services
- We believe increased regulation is likely in the area of data privacy, and laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information could affect our customers’ ability to use and share data, potentially reducing our ability to utilize this information for the purpose of continued improvement of the overall mobile subscriber experience. In order for mobile location products and services to function properly, wireless carriers must locate their subscribers and store information on each subscriber’s location. Although data regarding the location of the wireless user resides only on the wireless carrier’s systems, users may not feel comfortable with the idea that the wireless carrier knows and can track their location. Carriers will need to obtain subscribers’ permission to gather and use the subscribers’ personal information, or they may not be able to provide customized mobile location services which those subscribers might otherwise desire. If subscribers view mobile location services as an annoyance or a threat to their privacy, that could reduce demand for our products and services and have a material adverse effect on our business, results of operation and financial condition.
|
•
|
We may face increased compliance costs in connection with health and safety requirements for mobile devices
- If wireless handsets pose health and safety risks, we may be subject to new regulations and demand for our products and services may decrease. Media reports have suggested that certain radio frequency emissions from wireless handsets may be linked to various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Concerns over radio frequency emissions may have the effect of discouraging the use of wireless handsets, which would decrease demand for our services. In recent years, the FCC and foreign regulatory agencies have updated the guidelines and methods they use for evaluating radio frequency emissions from radio equipment, including wireless handsets. In addition, interest groups have requested that the FCC investigate claims that wireless technologies pose health concerns and cause interference with airbags, hearing aids and other medical devices. There also are some safety risks associated with the use of wireless handsets while driving. Concerns over these safety risks and the effect of any legislation that may be adopted in response to these risks could limit our ability to market and sell our products and services.
|
•
|
The regulatory environment for VoIP services is developing
- The FCC has determined that VoIP services are not subject to the same regulatory scheme as traditional wireline and wireless telephone services. If the regulatory environment for VoIP services evolves in a manner other than the way we anticipate, our 911 business would be significantly harmed and future growth of our business would be significantly reduced. For example, the regulatory scheme for wireless and wireline service providers requires those carriers to allow service providers such as us to have access to certain databases that make the delivery of a 911 call possible. No such requirements exist for VoIP service providers, so carriers could prevent us from continuing to provide VoIP 911 service by denying us access to the required databases.
|
•
|
If we identify a material weakness in the future, our costs may unexpectedly increase
- Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related SEC rules, we are required to furnish a report of management’s assessment of the effectiveness of our internal controls as part of our Annual Report on Form 10-K. Our independent registered public accountants are required to attest to and provide a separate opinion. To issue our report, we document our internal control design and the testing processes that support our evaluation and conclusion, and then we test and evaluate the results. There can be no assurance, however, that we will be able to remediate material weaknesses, if any, that may be identified in future periods, or maintain all of the controls necessary for continued compliance. There likewise can be no assurance that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.
|
•
|
Stock-based compensation accounting standards could negatively impact our stock
- Since our inception, we have used stock-based awards as a fundamental component of our employee compensation packages. We believe that stock-based awards directly motivate our employees to maximize long-term stockholder value and, through the use of long-term vesting, encourage employees to remain with us. We apply the provisions of Accounting Standards Codification ("ASC") 718, "
Compensation - Stock Compensation,
" which requires us to record compensation expense in our statement of operations for employee and director stock-based awards using a fair value method. In the first quarter of fiscal 2018, we adopted FASB ASU No. 2016-09 which modified certain aspects of ASC 718, including the requirement to recognize excess tax benefits and shortfalls in the income statement. The ongoing application of this standard will have a significant effect on our reported earnings, and could adversely impact our ability to provide accurate guidance on our future reported financial results due to the variability of the factors used to estimate the value of stock-based awards (including long-term performance shares which are subject to the achievement of three-year goals which are based on several performance metrics). The ongoing application of this standard could impact the future value of our common stock and may result in greater stock price volatility. To the extent that this accounting standard makes it less attractive to grant stock-based awards to employees, we may incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could have a material adverse effect on our business, results of operation and financial condition.
|
•
|
We must adopt new complex revenue recognition rules
- The accounting rules and regulations that we must comply with are complex. Accounting rules and regulations are continually changing in ways that could materially impact our financial statements. The FASB has recently issued new guidance for revenue recognition. The new guidance replaces the prior revenue recognition guidance in its entirety. We have not yet selected a transition method and continue to evaluate the impact that this guidance will have on our business, results of operation and financial condition. This evaluation and the implementation must be completed by August 1, 2018 (our first quarter of fiscal 2019). Due to the complexity of the new standard and our organizational structure, we may not be able to complete such timely. Regardless of the transition method, the application of this new guidance may result in certain adjustments to our financial statements, which could have a material adverse effect on our net income. Because of the uncertainty of the estimates, judgments and assumptions associated with our accounting policies, we cannot provide any assurances that we will not make subsequent significant adjustments to our consolidated financial statements.
|
•
|
Changes in securities laws, regulations and financial reporting standards are increasing our costs
- The Sarbanes-Oxley Act of 2002 required changes in some of our corporate governance, public disclosure and compliance practices. These changes have resulted in increased costs. The SEC has promulgated and proposed new rules on a variety of subjects including the requirement to use the interactive data format eXtensible Business Reporting Language (commonly referred to as "XBRL") in our financial statements, which we began including in our quarterly reports filed with the SEC in the first quarter of fiscal 2011, and the possibility that we would be required to adopt International Financial Reporting Standards ("IFRS"). In April 2016, as part of its Disclosure Effectiveness Initiative, the SEC published a concept release which considers various business and financial disclosures that public companies make in investor reports and seeks the public’s input on ways to further improve that disclosure. The issues raised by the SEC in the concept release have the potential to dramatically change the way in which companies prepare and deliver disclosure to investors and the burdens of preparing that disclosure. In August 2012, the SEC adopted new rules establishing additional disclosure, supply chain verification and reporting requirements regarding a public company's use of Conflict Minerals procured from Covered Countries (as both of those terms are defined by the SEC). These SEC rules and reporting requirements have resulted in us incurring additional costs to document and perform supplier due diligence. As these rules impact our suppliers, the availability of raw materials used in our operations could be negatively impacted and/or raw material prices could increase. Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage and could harm our reputation.
|
•
|
The loss of key technical or management personnel could adversely affect our business
- Our future success depends on the continued contributions of key technical management personnel. Many of our key technical management personnel would be difficult to replace, and are not subject to employment or non-competition agreements. We currently have research and development employees in areas that are located a great distance away from our U.S. headquarters. Managing remote product development operations is difficult and we may not be able to manage the employees in these remote centers successfully. Our expected growth and future success will depend, in large part, upon our ability to attract and retain highly qualified engineering, sales and marketing personnel. Competition for such personnel from other companies, academic institutions, government entities and other organizations is intense. Although we believe that we have been successful to date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and operate profitably. Also, the management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify.
|
•
|
We may not be able to improve our processes and systems to keep pace with anticipated growth
- The future growth of our business may place significant demands on our managerial, operational and financial resources. In order to manage that growth, we must be prepared to improve and expand our management, operational and financial systems and controls. We also need to continue to recruit and retain personnel and train and manage our employee base. We must carefully manage research and development capabilities and production and inventory levels to meet product demand, new product introductions and product and technology transitions. If we are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and potential customers, it could have a material adverse effect on our business, results of operation and financial condition.
|
•
|
Our markets are highly competitive and there can be no assurance that we can continue our success
- The markets for our products are highly competitive. There can be no assurance that we will be able to continue to compete successfully or that our competitors will not develop new technologies and products that are more effective than our own. We expect the Department of Defense’s increased use of commercial off-the-shelf products and components in military equipment will encourage new competitors to enter the market. Also, although the implementation of advanced telecommunications services is in its early stages in many developing countries, we believe competition will continue to intensify as businesses and foreign governments realize the market potential of telecommunications services. Many of our competitors have financial, technical, marketing, sales and distribution resources greater than ours.
|
•
|
We may not be able to obtain sufficient components to meet expected demand
- Our dependence on component availability, government furnished equipment, subcontractors and key suppliers, including the core manufacturing expertise of our high-volume technology manufacturing center located in Tempe, Arizona, exposes us to risk. Although we obtain certain components and subsystems from a single source or a limited number of sources, we believe that most components and subsystems are available from alternative suppliers and subcontractors. A significant interruption in the delivery of such items, however, could have a material adverse effect on our business, results of operation and financial condition. In addition, if our high-volume technology manufacturing center located in Tempe, Arizona is unable to produce sufficient product or maintain quality, it could have a material adverse effect on our business, results of operation and financial condition.
|
•
|
Our ability to maintain affordable credit insurance may become more difficult
- In the normal course of our business, we purchase credit insurance to mitigate some of our domestic and international credit risk. Although credit insurance remains generally available, upon renewal, it may become more expensive to obtain or may not be available for existing or new customers in certain international markets and it might require higher deductibles than in the past. If we acquire a company with a different customer base, we may not be able to obtain credit insurance for those sales. As such, there can be no assurance that, in the future, we will be able to obtain credit insurance on a basis consistent with our past practices.
|
•
|
The loss of mapping and third party content
- The wireless data services provided to our customers are dependent on real-time, continuous feeds from map data, points of interest data, traffic information, gas prices, theater, event and weather information from vendors and others. Any disruption of this third-party content from our satellite feeds or backup landline feeds or other disruption could result in delays in our subscribers’ ability to receive information. We obtain this data that we sell to our customers from companies owned by current and potential competitors, who may act in a manner that is not in our best interest. If our suppliers of this data or content were to enter into exclusive relationships with other providers of location-based services or were to discontinue providing such information and we were unable to replace them cost effectively, or at all, our ability to provide the services of our wireless applications business would be materially adversely affected. Our gross margins may also be materially adversely affected if the cost of third party data and content increases substantially.
|
•
|
Third party data centers or third party networks may fail
- Many products and services of our advanced communication solutions, in particular our public safety and enterprise technology solutions, are provided through a combination of our servers, which we house at third party data centers, and the networks of our wireless carrier partners. As such, our business relies to a significant degree on the efficient and uninterrupted operation of the third-party data centers we use. Our hosted data centers are currently located in third party facilities located in the Irvine and San Francisco, California areas, and we may use others as required. We also use third party data center facilities in the Phoenix, Arizona area to provide for disaster recovery. Network failures, disruptions or capacity constraints in our third-party data center facilities or in our servers maintained at their location could affect the performance of the products and services of our wireless applications and 911 business and harm our reputation and our revenue. The ability of our subscribers to receive critical location and business information requires timely and uninterrupted connections with our wireless network carriers. Any disruption from our satellite feeds or backup landline feeds could also result in delays in our subscribers’ ability to receive information.
|
•
|
We must integrate our technologies and routinely upgrade them
- We may not be able to upgrade our location-based services platform to support certain advanced features and functionality without obtaining technology licenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality, and these licenses may not be available on commercially favorable terms, or at all. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve assumptions, or materials and components could prevent us from achieving contractual obligations. In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen problems. The inability to offer advanced features or functionality, or a delay in our ability to upgrade our location-based services platform, may materially adversely affect demand for our products and services and, consequently, have a material adverse effect on our business, results of operation and financial condition.
|
•
|
We rely upon “open-source” software
- We have incorporated some types of open-source software into our products, allowing us to enhance certain solutions without incurring substantial additional research and development costs. Thus far, we have encountered no unanticipated material problems arising from our use of open-source software. However, as the use of open-source software becomes more widespread, certain open-source technology could become competitive with our proprietary technology, which could cause sales of our products to decline or force us to reduce the fees we charge for our products, which could have a material adverse effect on our business, results of operation and financial condition.
|
•
|
our ability to successfully integrate TCS and manage our combined company;
|
•
|
strategic transactions, such as acquisitions and divestures;
|
•
|
issuance of potentially dilutive equity or equity-type securities;
|
•
|
issuance of debt;
|
•
|
future announcements concerning us or our competitors;
|
•
|
receipt or non-receipt of substantial orders for products and services;
|
•
|
quality deficiencies in services or products;
|
•
|
results of technological innovations;
|
•
|
new commercial products;
|
•
|
changes in recommendations of securities analysts;
|
•
|
government regulations;
|
•
|
changes in the status or outcome of government audits;
|
•
|
proprietary rights or product or patent litigation;
|
•
|
changes in U.S. government policies;
|
•
|
changes in economic conditions generally, particularly in the telecommunications sector;
|
•
|
changes in securities market conditions, generally;
|
•
|
changes in the status of litigation and legal matters (including changes in the status of export matters);
|
•
|
cyber-attacks;
|
•
|
energy blackouts;
|
•
|
acts of terrorism or war;
|
•
|
inflation or deflation; and
|
•
|
rumors or allegations regarding our financial disclosures or practices.
|
Location
|
|
|
|
Property Type
|
|
Square Footage
|
|
Lease Expiration
|
|
Commercial Solutions Segment
|
|
|
|
|
|
|
|
|
|
Tempe, Arizona
|
|
(A)
|
|
Manufacturing and Engineering
|
|
161,000
|
|
|
February 2021
|
Phoenix, Arizona
|
|
(B)
|
|
General office (currently vacated)
|
|
75,000
|
|
|
October 2018
|
Seattle, Washington
|
|
(C)
|
|
Network Operations, R&D, Engineering and Sales
|
|
57,000
|
|
|
December 2022
|
Santa Clara, California
|
|
(D)
|
|
Manufacturing and Engineering
|
|
47,000
|
|
|
April 2019
|
Various facilities
|
|
(E)
|
|
Engineering and General Office
|
|
35,000
|
|
|
Various
|
Aliso Viejo, California
|
|
(F)
|
|
R&D and Engineering
|
|
29,000
|
|
|
December 2017
|
Greenwood Village, Colorado
|
|
(F)
|
|
Network Operations
|
|
17,000
|
|
|
July 2020
|
Moscow, Idaho
|
|
(G)
|
|
Support, Engineering and Sales
|
|
13,000
|
|
|
February 2020
|
Annapolis, Maryland
|
|
(F)
|
|
Support, Engineering and Sales
|
|
12,000
|
|
|
July 2019
|
Fremont, California
|
|
(G)
|
|
Support, Engineering and Sales
|
|
10,000
|
|
|
April 2020
|
Germantown, Maryland
|
|
(H)
|
|
Engineering and General Office
|
|
6,000
|
|
|
May 2025
|
|
|
|
|
|
|
462,000
|
|
|
|
Government Solutions Segment
|
|
|
|
|
|
|
|
|
|
Orlando, Florida
|
|
(I)
|
|
Manufacturing and Engineering
|
|
99,000
|
|
|
April 2026
|
Tampa, Florida
|
|
(F)
|
|
Manufacturing
|
|
46,000
|
|
|
April 2022
|
Melville, New York
|
|
(J)
|
|
Manufacturing and Engineering
|
|
45,000
|
|
|
December 2021
|
Torrance, California
|
|
(F)
|
|
Support, Engineering and Sales
|
|
35,000
|
|
|
January 2018
|
Germantown, Maryland
|
|
(H)
|
|
Engineering and General Office
|
|
26,000
|
|
|
May 2025
|
Various facilities
|
|
(K)
|
|
Support, Engineering and Sales
|
|
14,000
|
|
|
Various
|
Richardson, Texas
|
|
(F)
|
|
R&D and Engineering
|
|
13,000
|
|
|
July 2020
|
Annapolis, Maryland
|
|
(F)
|
|
Support, Engineering and Sales
|
|
12,000
|
|
|
July 2019
|
Manassas, Virginia
|
|
(F)
|
|
Support, Engineering and Sales
|
|
11,000
|
|
|
November 2017
|
|
|
|
|
|
|
301,000
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
Annapolis, Maryland
|
|
(F)
|
|
General Office and common areas
|
|
19,000
|
|
|
July 2019
|
Melville, New York
|
|
(L)
|
|
Corporate headquarters and general office
|
|
9,600
|
|
|
August 2027
|
|
|
|
|
|
|
28,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Square Footage
|
|
|
|
|
|
791,600
|
|
|
|
(A)
|
Although primarily used for our satellite earth station product lines, which are part of the Commercial Solutions segment, both of our business segments utilize, from time to time, our high-volume technology manufacturing facilities located in Tempe, Arizona. These manufacturing facilities utilize state-of-the-art design and production techniques, including analog, digital and RF microwave production, hardware assembly and full service engineering. Our leases for these facilities expire from fiscal 2018 through fiscal 2021. We have the option to extend the lease terms for up to an additional five-year period.
|
(B)
|
As a result of the August 1, 2008 Radyne acquisition, we also assumed a lease of building space in Phoenix, Arizona that was previously used for manufacturing. In connection with our fiscal 2009 Radyne acquisition restructuring plan, we vacated and subleased this space through October 2015. We are currently seeking to sublease this space.
|
(C)
|
Our office in Seattle, Washington is used primarily for servicing and hosting our wireless and VoIP E9-1-1 public safety support services.
|
(D)
|
Our Commercial Solutions segment manufactures our traveling wave tube amplifiers in a leased manufacturing facility located in Santa Clara, California. Our Commercial Solutions segment also operates a small office in the United Kingdom with a lease that expires in October 2021.
|
(E)
|
Our Commercial Solutions segment also leases an additional twelve facilities, three of which are located in the U.S. The U.S. facilities aggregate 7,000 square feet and are primarily utilized for engineering and general office use. Our Commercial Solutions segment also operates nine small offices in Brazil, Canada, China, India, Singapore, Australia and the United Kingdom, all of which aggregate 28,000 square feet and are primarily utilized for customer support, engineering and sales.
|
(F)
|
We have leases for facilities in Annapolis, Maryland, Aliso Viejo, California, and Greenwood Village, Colorado used primarily for the design and development of our software based systems and applications and network operations. Major manufacturing and engineering facilities for our Government Solutions segment are in Tampa, Florida, Torrance, California, Richardson, Texas and Manassas, Virginia. We are currently finalizing plans to move our Aliso Viejo, California and Torrance, California office facilities to new facilities when the current leases expire. In addition, we are in the process of closing our Manassas, Virginia facility.
|
(G)
|
Our offices in Moscow, Idaho and Fremont, California are primarily used for research and development, engineering and sales of our satellite earth station products.
|
(H)
|
Our Government Solutions segment leases a 32,000 square foot facility located in Germantown, Maryland which is primarily used for BFT-1 sustainment activities, engineering and general office use. Our Government Solutions segment occupies 26,000 feet of the facility with the remainder utilized by our Commercial Solutions segment.
|
(I)
|
Our Government Solutions segment manufactures our over-the-horizon microwave systems in a leased facility in Orlando, Florida. This business also leases a small office in North Africa.
|
(J)
|
Our Government Solutions segment manufactures our solid-state, high-power, broadband amplifiers in a 45,000 square foot engineering and manufacturing facility on more than two acres of land in Melville, New York and an 8,000 square foot facility in Topsfield, Massachusetts. We lease the New York facility from a partnership controlled by our President and CEO. The lease provides for our use of the premises as they exist through December 2021 with an option to renew for an additional ten-year period. We have a right of first refusal in the event of a sale of the facility. Our Massachusetts lease is currently on a month-to-month basis.
|
(K)
|
Our Government Solutions segment also leases an additional four facilities located in the U.S. that are primarily used for engineering, sales and software development. Our leases for these facilities expire from fiscal 2018 through fiscal 2021.
|
(L)
|
Our corporate headquarters are located in an office building complex in Melville, New York. The lease provides for our use of the premises through August 2027.
|
|
|
Common Stock
|
|||||
|
|
High
|
|
Low
|
|||
Fiscal Year Ended July 31, 2016
|
|
|
|
|
|||
First Quarter
|
|
$
|
29.31
|
|
|
20.30
|
|
Second Quarter
|
|
25.85
|
|
|
17.27
|
|
|
Third Quarter
|
|
25.09
|
|
|
18.01
|
|
|
Fourth Quarter
|
|
24.93
|
|
|
11.24
|
|
|
|
|
|
|
|
|||
Fiscal Year Ended July 31, 2017
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
13.84
|
|
|
9.84
|
|
Second Quarter
|
|
12.81
|
|
|
9.52
|
|
|
Third Quarter
|
|
15.25
|
|
|
10.53
|
|
|
Fourth Quarter
|
|
19.80
|
|
|
13.75
|
|
|
|
Fiscal Years Ended July 31,
(In thousands, except per share amounts)
|
||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||
Net sales
|
|
$
|
550,368
|
|
|
411,004
|
|
|
307,289
|
|
|
347,150
|
|
|
319,797
|
|
Cost of sales
|
|
332,183
|
|
|
239,767
|
|
|
168,405
|
|
|
195,712
|
|
|
178,967
|
|
|
Gross profit
|
|
218,185
|
|
|
171,237
|
|
|
138,884
|
|
|
151,438
|
|
|
140,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
116,080
|
|
|
94,932
|
|
|
62,680
|
|
|
67,147
|
|
|
63,265
|
|
|
Research and development
|
|
54,260
|
|
|
42,190
|
|
|
35,916
|
|
|
34,108
|
|
|
36,748
|
|
|
Amortization of intangibles
|
|
22,823
|
|
|
13,415
|
|
|
6,211
|
|
|
6,285
|
|
|
6,328
|
|
|
Settlement of intellectual property litigation
|
|
(12,020
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Acquisition plan expenses
|
|
—
|
|
|
21,276
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
181,143
|
|
|
171,813
|
|
|
104,807
|
|
|
107,540
|
|
|
106,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income (loss)
|
|
37,042
|
|
|
(576
|
)
|
|
34,077
|
|
|
43,898
|
|
|
34,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
11,629
|
|
|
7,750
|
|
|
479
|
|
|
6,304
|
|
|
8,163
|
|
|
Interest income and other
|
|
(68
|
)
|
|
(134
|
)
|
|
(405
|
)
|
|
(913
|
)
|
|
(1,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) before provision for (benefit from) income taxes
|
|
25,481
|
|
|
(8,192
|
)
|
|
34,003
|
|
|
38,507
|
|
|
27,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Provision for (benefit from) income taxes
|
|
9,654
|
|
|
(454
|
)
|
|
10,758
|
|
|
13,356
|
|
|
9,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
15,827
|
|
|
(7,738
|
)
|
|
23,245
|
|
|
25,151
|
|
|
17,808
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.68
|
|
|
(0.46
|
)
|
|
1.43
|
|
|
1.58
|
|
|
1.05
|
|
Diluted
|
|
$
|
0.67
|
|
|
(0.46
|
)
|
|
1.42
|
|
|
1.37
|
|
|
0.97
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average number of common shares outstanding – basic
|
|
23,433
|
|
|
16,972
|
|
|
16,203
|
|
|
15,943
|
|
|
16,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average number of common and common equivalent shares outstanding – diluted
|
|
23,489
|
|
|
16,972
|
|
|
16,418
|
|
|
20,906
|
|
|
23,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Dividends declared per issued and outstanding common share as of the applicable dividend record date
|
|
$
|
0.60
|
|
|
1.20
|
|
|
1.20
|
|
|
1.175
|
|
|
1.10
|
|
|
|
Fiscal Years Ended July 31,
(In thousands)
|
||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||
Other Consolidated Operating Data:
|
|
|
|
|
|
|
|
|
|
|
||||||
Backlog at period-end
|
|
$
|
446,230
|
|
|
484,005
|
|
|
117,744
|
|
|
133,412
|
|
|
189,742
|
|
New orders
|
|
512,593
|
|
|
451,278
|
|
|
291,621
|
|
|
290,820
|
|
|
355,600
|
|
|
Research and development expenditures - internal and customer funded
|
|
81,310
|
|
|
59,622
|
|
|
45,144
|
|
|
47,211
|
|
|
41,920
|
|
|
Adjusted EBITDA
|
|
70,705
|
|
|
48,062
|
|
|
51,761
|
|
|
61,336
|
|
|
52,242
|
|
|
|
As of July 31,
(In thousands)
|
||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||
Total assets
|
|
$
|
832,063
|
|
|
921,196
|
|
|
473,877
|
|
|
473,852
|
|
|
681,815
|
|
Working capital
|
|
96,833
|
|
|
119,493
|
|
|
236,419
|
|
|
224,656
|
|
|
220,560
|
|
|
Debt, including capital leases
|
|
195,802
|
|
|
258,649
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Convertible senior notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
|
Other long-term obligations
|
|
2,655
|
|
|
4,105
|
|
|
3,633
|
|
|
4,364
|
|
|
3,958
|
|
|
Stockholders’ equity
|
|
480,150
|
|
|
470,401
|
|
|
401,409
|
|
|
396,925
|
|
|
404,062
|
|
|
|
Fiscal Years Ended July 31,
(In thousands)
|
||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
15,827
|
|
|
(7,738
|
)
|
|
23,245
|
|
|
25,151
|
|
|
17,808
|
|
Income taxes
|
|
9,654
|
|
|
(454
|
)
|
|
10,758
|
|
|
13,356
|
|
|
9,685
|
|
|
Interest (income) and other expense
|
|
(68
|
)
|
|
(134
|
)
|
|
(405
|
)
|
|
(913
|
)
|
|
(1,167
|
)
|
|
Interest expense
|
|
11,629
|
|
|
7,750
|
|
|
479
|
|
|
6,304
|
|
|
8,163
|
|
|
Amortization of stock-based compensation
|
|
8,506
|
|
|
4,117
|
|
|
4,363
|
|
|
4,263
|
|
|
3,130
|
|
|
Amortization of intangibles
|
|
22,823
|
|
|
13,415
|
|
|
6,211
|
|
|
6,285
|
|
|
6,328
|
|
|
Depreciation
|
|
14,354
|
|
|
9,830
|
|
|
6,525
|
|
|
6,721
|
|
|
7,837
|
|
|
Settlement of intellectual property litigation
|
|
(12,020
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Acquisition plan expenses
|
|
—
|
|
|
21,276
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Restructuring (benefits) charges related to the wind-down of microsatellite product line
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
458
|
|
|
Strategic alternatives analysis
|
|
—
|
|
|
—
|
|
|
585
|
|
|
225
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
$
|
70,705
|
|
|
48,062
|
|
|
51,761
|
|
|
61,336
|
|
|
52,242
|
|
•
|
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 telecom expense management, 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).
|
|
|
Fiscal Years Ended July 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Gross margin
|
|
39.6
|
%
|
|
41.7
|
%
|
|
45.2
|
%
|
Selling, general and administrative expenses
|
|
21.1
|
%
|
|
23.1
|
%
|
|
20.4
|
%
|
Research and development expenses
|
|
9.9
|
%
|
|
10.3
|
%
|
|
11.7
|
%
|
Settlement of intellectual property litigation
|
|
(2.2
|
)%
|
|
—
|
%
|
|
—
|
%
|
Acquisition plan expenses
|
|
—
|
%
|
|
5.2
|
%
|
|
—
|
%
|
Amortization of intangibles
|
|
4.1
|
%
|
|
3.3
|
%
|
|
2.0
|
%
|
Operating income (loss)
|
|
6.7
|
%
|
|
(0.1
|
)%
|
|
11.1
|
%
|
Interest expense (income) and other, net
|
|
2.1
|
%
|
|
1.9
|
%
|
|
—
|
%
|
Income (loss) before provision for income taxes
|
|
4.6
|
%
|
|
(2.0
|
)%
|
|
11.1
|
%
|
Net income (loss)
|
|
2.9
|
%
|
|
(1.9
|
)%
|
|
7.5
|
%
|
Adjusted EBITDA (a Non-GAAP measure)
|
|
12.8
|
%
|
|
11.7
|
%
|
|
16.8
|
%
|
•
|
Net sales of
$550.4 million
;
|
•
|
Operating income of
$37.0 million
;
|
•
|
Net income of
$15.8 million
;
|
•
|
Cash flows from operating activities of
$66.7 million
; and
|
•
|
Adjusted EBITDA (a Non-GAAP financial measure discussed below) of
$70.7 million
.
|
•
|
Our Commercial Solutions segment is expected to benefit from increased fiscal 2018 sales of satellite earth station products (which include satellite modems and solid-state power amplifiers ("SSPAs")). We experienced satellite earth station revenue growth to international customers in fiscal 2017, and our international markets continue to show signs of strengthening. In addition, we expect to benefit from recent new product introductions. For instance, during the fourth quarter of fiscal 2017, we announced the general availability of our Heights
TM
Dynamic Network Access Technology ("HEIGHTS"), a potentially revolutionary technology designed to deliver the highest Internet Protocol bits per Hertz in its class, as well as robust reliability. HEIGHTS has and will continue to be a cornerstone of our future research and development efforts. To-date, we have announced several important customer wins for this product line and our pipeline of opportunities is growing. As such, we anticipate that fiscal 2018 will be the break-out year for sales of our HEIGHTS products. We also expect incremental fiscal 2018 revenue contributions from our recently introduced series of compact high-power GaN SSPAs, which are ideal for transportable and mobile applications as well as tactical communications. Additionally, sales of our SSPAs used in airborne, in-flight connectivity applications are expected to remain strong.
|
•
|
Sales of our satellite earth station products and technologies in our Commercial Solutions segment are also expected to benefit from increased sales to the U.S. government. During the fourth quarter of fiscal 2017, the U.S. Space and Naval Warfare System Command, in support of the Program Executive Office for Command, Control, Communications, Computer and Intelligence, publicly announced its intention to sole-source a five year, indefinite delivery / indefinite quantity ("IDIQ") contract to procure our SLM-5650B satellite modems and upgrade kits. There are over eight-hundred older generation modems currently utilized by multiple Navy programs and our new modems and related upgrade kits will meet critical Navy requirements. We believe no other competitor responded to the Navy’s Request for Proposal ("RFP") and we are expecting to receive a contract award in fiscal 2018, with related shipments occurring in the latter part of the second half of fiscal 2018.
|
•
|
We continue to invest in and upgrade our Commercial Solutions segment’s enterprise technology solutions (such as our location and messaging platforms) and safety and security technology solutions (such as our wireless and next generation 911 ("NG911") platforms). These technologies have been deployed around the U.S., are used by wireless carriers to provide Short-Message-Service ("SMS") texts to end-customers and are also used to communicate with 911 public safety answering points ("PSAPs"). We are currently pursuing a number of large multi-year, multi-million dollar NG911 and enterprise and trusted location-based technology solutions opportunities. Although the size and timing of these contract awards are difficult to predict, we are confident that fiscal 2018 will benefit from one or more NG911 awards.
|
•
|
We believe we are seeing benefits of our tactical shift in strategy in our Government Solutions segment away from bidding on large commodity service contracts and toward pursuing contracts for our niche solutions with higher margins. Our field-proven technologies and support services are ideally suited to meet the U.S. DoD’s C4ISR needs and we are actively pursuing many opportunities. During the fourth quarter of fiscal 2017, we achieved a quarterly book-to-bill ratio of 1.26 and booked a number of important orders, including: (i) a $14.5 million contract modification from the Defense Information Systems Agency ("DISA") which exercised an option under an existing contract that enables us to continue to provide Ku satellite bandwidth and support services for the U.S. Marine Corps' ("USMC") Tactical Satellite Communications Network; (ii) an $8.6 million contract modification to provide enhanced communications infrastructure for U.S. forces in the Central Command Area of Responsibility; (iii) $6.9 million in orders for our cyber-training solutions; and (iv) $4.1 million in orders for high-power amplifiers and control components from multiple domestic original equipment manufacturers. Fiscal 2018 is expected to reflect sales and operating income contributions from these orders. In addition to these funded orders, we were named a final awardee on a ten-year, $2.5 billion IDIQ contract commonly referred to as “Complex Commercial SATCOM Solutions” (or “CS3”) from the General Services Administration, which allows U.S. federal agencies to purchase end-to-end, turnkey solutions which incorporate commercial satellite solutions. Over time, we would expect to secure new orders from the CS3 contract.
|
•
|
Our Government Solutions segment’s strategy to focus efforts on supporting the U.S. Army on a possible next generation Blue Force Tracking ("BFT") program appears to be gaining ground. During the third quarter of fiscal 2017, we received a new $42.7 million five-year contract to provide the U.S. Army with continued BFT-1 sustainment support, for which we have received $7.7 million of funding to-date. We were also awarded a sole-source firm-fixed price IDIQ contract to provide BFT-1 aviation transceivers to the Defense Logistics Agency ("DLA") and have received $4.2 million of funded orders to-date. We believe that the U.S. Army has a requirement for a next generation system (referred to commonly as "BFT-3") and, based on our recent interactions with the U.S. Army, we are becoming increasingly optimistic that we will be able to participate in future BFT program awards.
|
•
|
Our Government Solutions segment has also responded to a large multi-million dollar competitive solicitation from the U.S. Army to provide sustainment services to its AN/TSC-198 family of communication systems that are commonly referred to as “SNAP” (“Secret Internet Protocol Router (“SIPR”) and Non-secure Internet Protocol Router (“NIPR”) Access Point) Very Small Aperture Terminals (“VSATs”). We are the incumbent on this program. The U.S. Army is expected to announce the winner of this solicitation shortly. We believe this decision will largely be based on lowest price and believe we have appropriately and responsibly bid on this program. As such, we are optimistic that the U.S. Army will select us to continue to perform this important work. Sales in fiscal 2017 for this program were $32.4 million and, as of July 31, 2017, we had $26.0 million in our backlog related to this contract, for which we expect to perform work on during fiscal 2018.
|
•
|
Our Government Solutions segment is also preparing to respond to an expected large multi-year RFP for the supply of new troposcatter communications equipment to replace hundreds of the U.S. DoD’s AN/TRC-170 terminals. A draft RFP has been circulated to prospective vendors and we believe a final proposal will be issued sometime in fiscal 2018. Although an award of this program would likely not affect fiscal 2018 revenue, we would expect it to make significant contributions to revenue in subsequent years.
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Consolidated
|
||||||||||||
U.S. government
|
|
15.1
|
%
|
|
25.0
|
%
|
|
59.2
|
%
|
|
65.0
|
%
|
|
32.7
|
%
|
|
40.8
|
%
|
Domestic
|
|
54.4
|
%
|
|
40.6
|
%
|
|
15.5
|
%
|
|
11.6
|
%
|
|
38.9
|
%
|
|
29.2
|
%
|
Total U.S.
|
|
69.5
|
%
|
|
65.6
|
%
|
|
74.7
|
%
|
|
76.6
|
%
|
|
71.6
|
%
|
|
70.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
International
|
|
30.5
|
%
|
|
34.4
|
%
|
|
25.3
|
%
|
|
23.4
|
%
|
|
28.4
|
%
|
|
30.0
|
%
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
($ in millions)
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Consolidated
|
||||||||||||||||||||||||
Operating income (loss)
|
|
$
|
33.2
|
|
|
$
|
23.3
|
|
|
$
|
9.4
|
|
|
$
|
23.0
|
|
|
$
|
(5.6
|
)
|
|
$
|
(46.8
|
)
|
|
$
|
37.0
|
|
|
$
|
(0.6
|
)
|
Percentage of related net sales
|
|
10.0
|
%
|
|
9.3
|
%
|
|
4.3
|
%
|
|
14.2
|
%
|
|
NA
|
|
|
NA
|
|
|
6.7
|
%
|
|
NA
|
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||
($ in millions)
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Consolidated
|
||||||||||||||||||
Net income (loss)
|
|
$
|
32.9
|
|
|
22.8
|
|
|
9.4
|
|
|
23.0
|
|
|
(26.5
|
)
|
|
(53.5
|
)
|
|
$
|
15.8
|
|
|
(7.7
|
)
|
Income taxes
|
|
0.3
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
9.4
|
|
|
(0.5
|
)
|
|
9.7
|
|
|
(0.5
|
)
|
||
Interest (income) and other expense
|
|
(0.1
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||
Interest expense
|
|
0.2
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
11.4
|
|
|
7.5
|
|
|
11.6
|
|
|
7.8
|
|
||
Amortization of stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.5
|
|
|
4.1
|
|
|
8.5
|
|
|
4.1
|
|
||
Amortization of intangibles
|
|
17.7
|
|
|
10.6
|
|
|
5.1
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
22.8
|
|
|
13.4
|
|
||
Depreciation
|
|
9.9
|
|
|
7.1
|
|
|
2.9
|
|
|
2.0
|
|
|
1.5
|
|
|
0.8
|
|
|
14.4
|
|
|
9.8
|
|
||
Settlement of intellectual property litigation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.0
|
)
|
|
—
|
|
|
(12.0
|
)
|
|
—
|
|
||
Acquisition plan expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21.3
|
|
|
—
|
|
|
21.3
|
|
||
Adjusted EBITDA
|
|
$
|
60.9
|
|
|
40.9
|
|
|
17.5
|
|
|
27.8
|
|
|
(7.6
|
)
|
|
(20.7
|
)
|
|
$
|
70.7
|
|
|
48.1
|
|
Percentage of related net sales
|
|
18.4
|
%
|
|
16.4
|
%
|
|
8.0
|
%
|
|
17.2
|
%
|
|
NA
|
|
|
NA
|
|
|
12.8
|
%
|
|
11.7
|
%
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Consolidated
|
||||||||||||
U.S. government
|
|
25.0
|
%
|
|
29.3
|
%
|
|
65.0
|
%
|
|
33.2
|
%
|
|
40.8
|
%
|
|
30.6
|
%
|
Domestic
|
|
40.6
|
%
|
|
15.9
|
%
|
|
11.6
|
%
|
|
7.9
|
%
|
|
29.2
|
%
|
|
13.2
|
%
|
Total U.S.
|
|
65.6
|
%
|
|
45.2
|
%
|
|
76.6
|
%
|
|
41.1
|
%
|
|
70.0
|
%
|
|
43.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
International
|
|
34.4
|
%
|
|
54.8
|
%
|
|
23.4
|
%
|
|
58.9
|
%
|
|
30.0
|
%
|
|
56.2
|
%
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||
($ in millions)
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Consolidated
|
||||||||||||||||||||||||
Operating income (loss)
|
|
$
|
23.3
|
|
|
$
|
20.7
|
|
|
$
|
23.0
|
|
|
$
|
30.0
|
|
|
$
|
(46.8
|
)
|
|
$
|
(16.7
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
34.1
|
|
Percentage of related net sales
|
|
9.3
|
%
|
|
10.2
|
%
|
|
14.2
|
%
|
|
29.0
|
%
|
|
NA
|
|
|
NA
|
|
|
(0.1
|
)%
|
|
11.1
|
%
|
|
|
Fiscal Years Ended July 31,
|
||||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||
($ in millions)
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Consolidated
|
||||||||||||||||||
Net income (loss)
|
|
$
|
22.8
|
|
|
20.5
|
|
|
23.0
|
|
|
30.0
|
|
|
(53.5
|
)
|
|
(27.3
|
)
|
|
(7.7
|
)
|
|
$
|
23.2
|
|
Income taxes
|
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
10.9
|
|
|
(0.5
|
)
|
|
10.8
|
|
||
Interest (income) and other expense
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
(0.4
|
)
|
||
Interest expense
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
7.5
|
|
|
0.2
|
|
|
7.8
|
|
|
0.5
|
|
||
Amortization of stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
4.4
|
|
|
4.1
|
|
|
4.4
|
|
||
Amortization of intangibles
|
|
10.6
|
|
|
6.2
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13.4
|
|
|
6.2
|
|
||
Depreciation
|
|
7.1
|
|
|
5.3
|
|
|
2.0
|
|
|
1.2
|
|
|
0.8
|
|
|
—
|
|
|
9.8
|
|
|
6.5
|
|
||
Acquisition plan expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21.3
|
|
|
—
|
|
|
21.3
|
|
|
—
|
|
||
Strategic alternatives analysis
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
||
Adjusted EBITDA
|
|
$
|
40.9
|
|
|
32.2
|
|
|
27.8
|
|
|
31.2
|
|
|
(20.7
|
)
|
|
(11.7
|
)
|
|
48.1
|
|
|
$
|
51.8
|
|
Percentage of related net sales
|
|
16.4
|
%
|
|
15.8
|
%
|
|
17.2
|
%
|
|
30.2
|
%
|
|
NA
|
|
|
NA
|
|
|
11.7
|
%
|
|
16.8
|
%
|
•
|
Net cash provided by operating activities was
$66.7 million
for fiscal
2017
as compared to $
15.0 million
for fiscal
2016
. The period-over-period increase in cash flow from operating activities is attributable to overall changes in net working capital requirements, the timing of billings and payments and the inclusion of full fiscal-year operating results from the TCS business in fiscal 2017. Net cash provided by operating activities in fiscal 2016 reflects significant acquisition plan expenses associated with our TCS acquisition.
|
•
|
Net cash used in investing activities for fiscal
2017
was
$8.2 million
as compared to
$286.2 million
for fiscal
2016
. The period-over-period decrease in net cash used in investing activities is primarily due to the payment of $280.5 million related to the acquisition of TCS in February 2016, net of cash acquired.
|
•
|
Net cash used in financing activities was
$83.5 million
for fiscal
2017
as compared to net cash provided of
$187.1 million
for fiscal
2016
. During fiscal
2017
, we made
$26.5 million
of net payments under our Revolving Loan Facility and
$33.6 million
of principal repayments related to our Term Loan Facility. During fiscal
2016
,
$83.9 million
of net proceeds were received from borrowings under our Revolving Loan Facility,
$250.0 million
of proceeds were received from borrowings under our Term Loan Facility and
$95.0 million
of net proceeds were received from a public offering of our common stock which occurred in June 2016. These proceeds were partially offset by a payment of
$134.1 million
for debt assumed in connection with the acquisition of TCS and
$77.4 million
of principal repayments related to our Term Loan Facility. During fiscal
2017
and
2016
, we paid
$3.6 million
and
$1.8 million
, respectively, of principal repayments related to our capital lease obligations and
$1.1 million
and
$9.5 million
, respectively, of financing costs associated with the Secured Credit Facility, as amended. During fiscal
2017
and
2016
, we also paid
$18.9 million
and
$19.4 million
, respectively, in cash dividends to our stockholders.
|
(i)
|
Consolidated EBITDA definition more closely aligns with our Adjusted EBITDA metric by eliminating favorable adjustments to operating income related to settlements of TCS intellectual property matters;
|
(ii)
|
Leverage Ratio is calculated on a “gross” basis using the quotient of Total Indebtedness (excluding unamortized deferred financing costs) divided by our TTM Consolidated EBITDA. The prior Leverage Ratio was calculated on a “net” basis but did not include a reduction for any cash or cash equivalents above
$50.0 million
;
|
(iii)
|
Fixed Charge Coverage Ratio includes a deduction for all cash dividends, regardless of the amount of our cash and cash equivalents and the related allowable Quarterly Dividend Amount, as defined, will now align with our current quarterly dividend target of
$0.10
per common share;
|
(iv)
|
Balloon or final payment of the Term Loan Facility, which is not due until February 23, 2021, was reduced by
$22.5 million
through increased borrowings from the Revolving Loan Facility, which does not expire until February 23, 2021; and
|
(v)
|
Leverage Ratios will be adjusted, in certain conditions, to provide for additional flexibility for us to make acquisitions.
|
|
|
Obligations Due by Fiscal Years or Maturity Date (in thousands)
|
||||||||||||||
|
|
Total
|
|
2018
|
|
2019
and 2020 |
|
2021
and 2022 |
|
After
2022 |
||||||
Secured Credit Facility - principal payments
|
|
$
|
196,485
|
|
|
15,494
|
|
|
35,415
|
|
|
145,576
|
|
|
—
|
|
Secured Credit Facility - interest payments
|
|
23,284
|
|
|
7,331
|
|
|
12,798
|
|
|
3,155
|
|
|
—
|
|
|
Operating lease commitments
|
|
45,622
|
|
|
12,374
|
|
|
15,856
|
|
|
9,538
|
|
|
7,854
|
|
|
Capital lease obligations
|
|
4,304
|
|
|
2,494
|
|
|
1,810
|
|
|
—
|
|
|
—
|
|
|
Net contractual cash obligations
|
|
$
|
269,695
|
|
|
37,693
|
|
|
65,879
|
|
|
158,269
|
|
|
7,854
|
|
•
|
FASB ASU No. 2014-12, which requires that a performance target which affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Our adoption of this FASB ASU did not impact our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2014-15, which provides guidance about management's responsibility to evaluate whether there is a substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. Our adoption of this ASU did not impact our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2015-11, which simplifies the guidance on the subsequent measurement of inventory other than inventory measured using the last-in, first out or the retail inventory method. This ASU requires in-scope inventory to be subsequently measured at the lower of cost and net realizable value, the latter of which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-06, which clarifies the requirements for assessing whether contingent call (put) options, that can accelerate the payment of principal on debt instruments, are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this ASU is required to assess the embedded call (put) options solely in accordance with the Derivatives Implementation Group’s four-step decision sequence. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-07, which eliminates the requirement to retroactively adopt the equity method of accounting for an investment as a result of an increase in the level of ownership interest or degree of influence. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-17, which amends the consolidation guidance on how a reporting entity (that is the single decision maker of a Variable Interest Entity (“VIE”)) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-18, which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2017-04, which simplifies the measurement of goodwill impairment by eliminating Step Two from the goodwill impairment test. Instead, impairment will be measured using the excess amount that a reporting unit's carrying value exceeds its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2014-09 "Revenue from Contracts with Customers (Topic 606)," issued in May 2014, which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for contracts with customers. The core principle of the new standard is that a company should record revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, FASB ASU No. 2015-14 "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" was issued to defer the effective date of FASB ASU No. 2014-09 by one year. As a result, FASB ASU No. 2014-09 is effective for fiscal years beginning after December 15, 2017 (our fiscal year beginning on August 1, 2018), including interim reporting periods within those fiscal years and can be adopted either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted only as of fiscal years beginning after December 15, 2016 (our fiscal year beginning on August 1, 2017), including interim reporting periods within those fiscal years. In March 2016, April 2016, May 2016 and February 2017, FASB ASU Nos. 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)," 2016-10 "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," 2016-12 "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients" and 2017-05 "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets" were issued, respectively, to clarify certain implementation matters related to the new revenue standard. The effective dates for these ASUs coincide with the effective date of FASB ASU 2014-09. Because of the broad scope of this new standard, it could impact our net sales and operating income across our two operating segments as well as related business processes and IT systems. We have formed a project team to perform a detailed evaluation of the operational impact of this new ASU, which transition approach to use and the overall impact of these ASUs on our consolidated financial statements and disclosures. This evaluation is ongoing and is expected to be completed shortly before our first quarter of fiscal 2019.
|
•
|
FASB ASU No. 2016-01, issued January 2016, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments, such as: amending the initial and subsequent measurement requirements for certain equity investments; eliminating the disclosure requirements related to the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet; requiring the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset or liability on the balance sheet or the accompanying notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2017 (our fiscal year beginning on August 1, 2018), including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, except for the provisions related to equity securities without readily determinable fair values which are to be adopted prospectively. Under certain circumstances, early adoption is permitted. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.
|
•
|
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. This ASU is 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 this ASU on our consolidated financial statements and disclosures.
|
•
|
FASB ASU No. 2016-09, issued in March 2016, which amends several aspects of the accounting for and reporting of share-based payment transactions, including: the recognition of excess tax benefits and shortfalls in the income statement; the classification of excess tax benefits as an operating activity in the statement of cash flows; the timing of recognizing forfeitures; permitting the withholding of statutory taxes up to the maximum rate in the applicable jurisdictions; and the classification of cash paid by an employer, when withholding shares for tax withholdings, as a financing activity. The amendments related to this ASU are effective for fiscal years beginning after December 15, 2016 (our fiscal year beginning on August 1, 2017), and interim periods within those fiscal years and should be applied either retrospectively or prospectively, as applicable. Our adoption of this ASU, on August 1, 2017, did not have a material impact on our consolidated financial statements and the changes in presentation required by this ASU will be reflected commencing in fiscal 2018. See "
Notes to Consolidated Financial Statements – Note (11) Stock-Based Compensation
" included in "
Part II - Item 8. - Financial Statements and Supplementary Data
" for further information regarding our adoption of this ASU.
|
•
|
FASB ASU No. 2016-13, issued in June 2016, 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 consolidated financial statements and disclosures.
|
•
|
FASB ASU No. 2016-15, issued in August 2016, which amends the guidance on the following cash flow related issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon and similar type debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims (including those related to certain life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and cash receipts or payments with more than one class of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017 (our fiscal year beginning on August 1, 2018), and interim periods within those fiscal years and shall be applied using the retrospective transition method to each period presented. Early adoption is permitted; however, all of the amendments must be adopted in the same period. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.
|
•
|
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. This ASU is effective for fiscal years beginning after December 15, 2017 (our fiscal year beginning on August 1, 2018), and interim periods within those fiscal years and shall be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.
|
•
|
FASB ASU No. 2017-09, issued in May 2017, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. This ASU is effective for fiscal years beginning after December 15, 2017 (our fiscal year beginning on August 1, 2018) and early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. This ASU should be applied prospectively to an award modified on or after the adoption date of this ASU. We are evaluating the impact of this ASU on our 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 consolidated financial statements and disclosures.
|
(a)
|
|
(1) The Registrant’s financial statements together with a separate index are annexed hereto.
|
|
|
(2) The Financial Statement Schedule listed in a separate index is annexed hereto.
|
|
|
(3) Exhibits required by Item 601 of Regulation S-K are listed below.
|
Exhibit
Number
|
|
Description of Exhibit
|
|
Incorporated By
Reference to Exhibit
|
|
|
|
Exhibit 3(a)(i) to the Registrant’s 2006 Form 10-K
|
|
|
|
|
|
|
|
|
|
Exhibit 10.1 to the Registrant’s Form 10-Q, filed December 7, 2016
|
|
|
|
|
Exhibit 10.7 to the Registrant’s Form 8-K, filed June 7, 2017
|
|
|
|
Exhibit 10(s) to the Registrant's 2011 Form 10-K
|
||
|
|
Appendix B to the Registrant’s Proxy Statement, filed November 3, 2000
|
||
|
|
Appendix A to the Registrant’s Proxy Statement, filed November 21, 2016
|
||
|
|
|
Exhibit 10(f)(7) to the Registrant’s 2005 Form 10-K
|
|
|
|
|
Exhibit 10(f)(8) to the Registrant’s 2006 Form 10-K
|
|
|
|
|
Exhibit 10(s) to the Registrant’s 2012 Form 10-K
|
|
|
|
|
Exhibit 10(z) to the Registrant's 2013 Form 10-K
|
|
|
|
|
Exhibit 10(aa) to the Registrant's 2013 Form 10-K
|
|
|
Form of Long-Term Performance Share Award Agreement pursuant to the 2000 Stock Incentive Plan - 2014
|
|
Exhibit 10(ab) to the Registrant's 2014 Form 10-K
|
|
|
Form of Long-Term Performance Share Award Agreement pursuant to the 2000 Stock Incentive Plan - 2017
|
|
Exhibit 10.8 to the Registrant's Form 8-K, filed June 7, 2017
|
|
|
|
|
Exhibit 10(y) to the Registrant’s 2016 Form 10-K
|
Exhibit
Number
|
|
Description of Exhibit
|
|
Incorporated By
Reference to Exhibit
|
|
|
|
Exhibit 10(ab) to the Registrant’s 2016 Form 10-K
|
|
|
|
|
|
|
|
|
|
Exhibit 10(z) to the Registrant’s 2016 Form 10-K
|
|
|
|
|
Exhibit 10(w) to the Registrant's 2013 Form 10-K
|
|
|
|
|
Exhibit 10.2 to the Registrant's Form 10-Q, filed June 7, 2012
|
|
|
|
|
Exhibit 10(aa) to the Registrant’s 2016 Form 10-K
|
|
|
|
|
Exhibit 10(x) to the Registrant's 2013 Form 10-K
|
|
|
|
|
Exhibit 10.1 to the Registrant's Form 10-Q, filed June 7, 2012
|
|
|
|
|
Exhibit 10(v) to the Registrant's 2013 Form 10-K
|
|
|
|
Exhibit 10.2 to the Registrant's Form 10-Q, filed December 9, 2013
|
||
|
|
|
|
|
|
|
|
Exhibit 10.1 to Registrant’s Form 8-K, filed on March 8, 2007
|
|
|
|
Exhibit 10.2 to the Registrant’s Form 8-K, filed June 7, 2017
|
||
|
|
|
Exhibit 10.3 to the Registrant’s Form 8-K, filed June 7, 2017
|
|
|
|
Exhibit 10.4 to the Registrant’s Form 8-K, filed June 7, 2017
|
||
|
|
|
Exhibit 10.5 to the Registrant’s Form 8-K, filed June 7, 2017
|
Exhibit
Number
|
|
Description of Exhibit
|
|
Incorporated By
Reference to Exhibit
|
|
|
|
Exhibit 10.6 to the Registrant’s Form 8-K, filed June 7, 2017
|
|
|
|
|
Exhibit 2.1 to the Registrant’s Form 8-K, filed November 23, 2015
|
|
|
|
|
Exhibit 10.1 to the Registrant’s Form 8-K, filed February 29, 2016
|
|
|
|
|
Exhibit 10.1 to the Registrant’s Form 8-K, filed June 7, 2017
|
|
|
|
|
Exhibit 10(ac) to the Registrant’s 2016 Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
COMTECH TELECOMMUNICATIONS CORP.
|
|
|
September 27, 2017
|
By: /s/Fred Kornberg
|
(Date)
|
Fred Kornberg, Chairman of the Board
Chief Executive Officer and President
|
|
Signature
|
Title
|
|
|
|
September 27, 2017
|
/s/Fred Kornberg
|
Chairman of the Board
|
(Date)
|
Fred Kornberg
|
Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
|
|
|
September 27, 2017
|
/s/Michael D. Porcelain
|
Senior Vice President and
|
(Date)
|
Michael D. Porcelain
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
September 27, 2017
|
/s/Edwin Kantor
|
Director
|
(Date)
|
Edwin Kantor
|
|
|
|
|
|
|
|
September 27, 2017
|
/s/Ira S. Kaplan
|
Director
|
(Date)
|
Ira S. Kaplan
|
|
|
|
|
|
|
|
September 27, 2017
|
/s/Robert G. Paul
|
Director
|
(Date)
|
Robert G. Paul
|
|
|
|
|
|
|
|
September 27, 2017
|
/s/Dr. Yacov A. Shamash
|
Director
|
(Date)
|
Dr. Yacov A. Shamash
|
|
|
|
|
|
|
|
September 27, 2017
|
/s/Lawrence J. Waldman
|
Director
|
(Date)
|
Lawrence J. Waldman
|
|
|
Page
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Financial Information Pursuant to the Requirements of Form 10-K:
|
|
|
|
|
|
Schedules not listed above have been omitted because they are either not applicable or the required information has been provided elsewhere in the consolidated financial statements or notes thereto.
|
|
Assets
|
|
2017
|
|
2016
|
|||
Current assets:
|
|
|
|
|
|||
Cash and cash equivalents
|
|
$
|
41,844,000
|
|
|
66,805,000
|
|
Accounts receivable, net
|
|
124,962,000
|
|
|
150,967,000
|
|
|
Inventories, net
|
|
60,603,000
|
|
|
71,354,000
|
|
|
Prepaid expenses and other current assets
|
|
13,635,000
|
|
|
14,513,000
|
|
|
Total current assets
|
|
241,044,000
|
|
|
303,639,000
|
|
|
|
|
|
|
|
|||
Property, plant and equipment, net
|
|
32,847,000
|
|
|
38,667,000
|
|
|
Goodwill
|
|
290,633,000
|
|
|
287,618,000
|
|
|
Intangibles with finite lives, net
|
|
261,871,000
|
|
|
284,694,000
|
|
|
Deferred financing costs, net
|
|
3,065,000
|
|
|
3,309,000
|
|
|
Other assets, net
|
|
2,603,000
|
|
|
3,269,000
|
|
|
Total assets
|
|
$
|
832,063,000
|
|
|
921,196,000
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
29,402,000
|
|
|
33,462,000
|
|
Accrued expenses and other current liabilities
|
|
68,610,000
|
|
|
98,034,000
|
|
|
Dividends payable
|
|
2,343,000
|
|
|
7,005,000
|
|
|
Customer advances and deposits
|
|
25,771,000
|
|
|
29,665,000
|
|
|
Current portion of long-term debt
|
|
15,494,000
|
|
|
11,067,000
|
|
|
Current portion of capital lease obligations
|
|
2,309,000
|
|
|
3,592,000
|
|
|
Interest payable
|
|
282,000
|
|
|
1,321,000
|
|
|
Total current liabilities
|
|
144,211,000
|
|
|
184,146,000
|
|
|
|
|
|
|
|
|||
Non-current portion of long-term debt, net
|
|
176,228,000
|
|
|
239,969,000
|
|
|
Non-current portion of capital lease obligations
|
|
1,771,000
|
|
|
4,021,000
|
|
|
Income taxes payable
|
|
2,515,000
|
|
|
2,992,000
|
|
|
Deferred tax liability, net
|
|
17,306,000
|
|
|
9,798,000
|
|
|
Customer advances and deposits, non-current
|
|
7,227,000
|
|
|
5,764,000
|
|
|
Other liabilities
|
|
2,655,000
|
|
|
4,105,000
|
|
|
Total liabilities
|
|
351,913,000
|
|
|
450,795,000
|
|
|
Commitments and contingencies (See Note 14)
|
|
|
|
|
|
|
|
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; issued 38,619,467 shares and 38,367,997 shares at July 31, 2017 and 2016, respectively
|
|
3,862,000
|
|
|
3,837,000
|
|
|
Additional paid-in capital
|
|
533,001,000
|
|
|
524,797,000
|
|
|
Retained earnings
|
|
385,136,000
|
|
|
383,616,000
|
|
|
|
|
921,999,000
|
|
|
912,250,000
|
|
|
Less:
|
|
|
|
|
|
|
|
Treasury stock, at cost (15,033,317 shares at July 31, 2017 and 2016)
|
|
(441,849,000
|
)
|
|
(441,849,000
|
)
|
|
Total stockholders’ equity
|
|
480,150,000
|
|
|
470,401,000
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
832,063,000
|
|
|
921,196,000
|
|
|
|
2017
|
|
2016
|
|
2015
|
||||
Net sales
|
|
$
|
550,368,000
|
|
|
411,004,000
|
|
|
307,289,000
|
|
Cost of sales
|
|
332,183,000
|
|
|
239,767,000
|
|
|
168,405,000
|
|
|
Gross profit
|
|
218,185,000
|
|
|
171,237,000
|
|
|
138,884,000
|
|
|
|
|
|
|
|
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
116,080,000
|
|
|
94,932,000
|
|
|
62,680,000
|
|
|
Research and development
|
|
54,260,000
|
|
|
42,190,000
|
|
|
35,916,000
|
|
|
Amortization of intangibles
|
|
22,823,000
|
|
|
13,415,000
|
|
|
6,211,000
|
|
|
Settlement of intellectual property litigation
|
|
(12,020,000
|
)
|
|
—
|
|
|
—
|
|
|
Acquisition plan expenses
|
|
—
|
|
|
21,276,000
|
|
|
—
|
|
|
|
|
181,143,000
|
|
|
171,813,000
|
|
|
104,807,000
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss)
|
|
37,042,000
|
|
|
(576,000
|
)
|
|
34,077,000
|
|
|
|
|
|
|
|
|
|
||||
Other expenses (income):
|
|
|
|
|
|
|
|
|
|
|
Interest expense and other
|
|
11,629,000
|
|
|
7,750,000
|
|
|
479,000
|
|
|
Interest income and other
|
|
(68,000
|
)
|
|
(134,000
|
)
|
|
(405,000
|
)
|
|
|
|
|
|
|
|
|
||||
Income (loss) before provision for (benefit from) income taxes
|
|
25,481,000
|
|
|
(8,192,000
|
)
|
|
34,003,000
|
|
|
Provision for (benefit from) income taxes
|
|
9,654,000
|
|
|
(454,000
|
)
|
|
10,758,000
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
15,827,000
|
|
|
(7,738,000
|
)
|
|
23,245,000
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.68
|
|
|
(0.46
|
)
|
|
1.43
|
|
Diluted
|
|
$
|
0.67
|
|
|
(0.46
|
)
|
|
1.42
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding – basic
|
|
23,433,000
|
|
|
16,972,000
|
|
|
16,203,000
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common and common equivalent shares outstanding – diluted
|
|
23,489,000
|
|
|
16,972,000
|
|
|
16,418,000
|
|
|
|
|
|
|
|
|
|
||||
Dividends declared per issued and outstanding common share as of the applicable dividend record date
|
|
$
|
0.60
|
|
|
1.20
|
|
|
1.20
|
|
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Retained Earnings
|
|
Treasury Stock
|
|
Stockholders'
Equity
|
||||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|||||||||||||||
Balance as of July 31, 2014
|
|
31,016,469
|
|
|
$
|
3,102,000
|
|
|
$
|
421,240,000
|
|
|
$
|
409,443,000
|
|
|
14,857,582
|
|
|
$
|
(436,860,000
|
)
|
|
$
|
396,925,000
|
|
Equity-classified stock award compensation
|
|
—
|
|
|
—
|
|
|
4,387,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,387,000
|
|
|||||
Proceeds from exercise of options
|
|
50,000
|
|
|
5,000
|
|
|
1,434,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,439,000
|
|
|||||
Proceeds from issuance of employee stock purchase plan shares
|
|
34,310
|
|
|
3,000
|
|
|
914,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
917,000
|
|
|||||
Common stock issued for net settlement of stock-based awards
|
|
64,622
|
|
|
7,000
|
|
|
(480,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(473,000
|
)
|
|||||
Cash dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,406,000
|
)
|
|
—
|
|
|
—
|
|
|
(19,406,000
|
)
|
|||||
Accrual of dividend equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(224,000
|
)
|
|
—
|
|
|
—
|
|
|
(224,000
|
)
|
|||||
Net income tax shortfall from settlement of stock-based awards
|
|
—
|
|
|
—
|
|
|
(341,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(341,000
|
)
|
|||||
Reversal of deferred tax assets associated with debt converted to shares of common stock
|
|
—
|
|
|
—
|
|
|
(58,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,000
|
)
|
|||||
Reversal of deferred tax assets associated with expired and unexercised stock-based awards
|
|
—
|
|
|
—
|
|
|
(13,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,000
|
)
|
|||||
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
175,735
|
|
|
(4,989,000
|
)
|
|
(4,989,000
|
)
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,245,000
|
|
|
—
|
|
|
—
|
|
|
23,245,000
|
|
|||||
Balance as of July 31, 2015
|
|
31,165,401
|
|
|
3,117,000
|
|
|
427,083,000
|
|
|
413,058,000
|
|
|
15,033,317
|
|
|
(441,849,000
|
)
|
|
401,409,000
|
|
|||||
Common stock issued from equity offering, net of issuance costs
|
|
7,145,000
|
|
|
715,000
|
|
|
93,355,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94,070,000
|
|
|||||
Equity-classified stock award compensation
|
|
—
|
|
|
—
|
|
|
4,076,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,076,000
|
|
|||||
Proceeds from issuance of employee stock purchase plan shares
|
|
45,319
|
|
|
4,000
|
|
|
672,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
676,000
|
|
|||||
Common stock issued for net settlement of stock-based awards
|
|
12,277
|
|
|
1,000
|
|
|
(106,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(105,000
|
)
|
|||||
Cash dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,549,000
|
)
|
|
—
|
|
|
—
|
|
|
(21,549,000
|
)
|
|||||
Accrual of dividend equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(155,000
|
)
|
|
—
|
|
|
—
|
|
|
(155,000
|
)
|
|||||
Net income tax shortfall from settlement of stock-based awards
|
|
—
|
|
|
—
|
|
|
(27,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,000
|
)
|
|||||
Reversal of deferred tax assets associated with expired and unexercised stock-based awards
|
|
—
|
|
|
—
|
|
|
(256,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256,000
|
)
|
|||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,738,000
|
)
|
|
—
|
|
|
—
|
|
|
(7,738,000
|
)
|
|||||
Balance as of July 31, 2016
|
|
38,367,997
|
|
|
3,837,000
|
|
|
524,797,000
|
|
|
383,616,000
|
|
|
15,033,317
|
|
|
(441,849,000
|
)
|
|
470,401,000
|
|
|||||
Equity-classified stock award compensation
|
|
—
|
|
|
—
|
|
|
8,467,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,467,000
|
|
|||||
Proceeds from issuance of employee stock purchase plan shares
|
|
64,367
|
|
|
7,000
|
|
|
687,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
694,000
|
|
|||||
Issuance of restricted stock, net
|
|
144,988
|
|
|
14,000
|
|
|
(14,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock issued for net settlement of stock-based awards
|
|
42,115
|
|
|
4,000
|
|
|
(266,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(262,000
|
)
|
|||||
Cash dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,034,000
|
)
|
|
—
|
|
|
—
|
|
|
(14,034,000
|
)
|
|||||
Accrual of dividend equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(273,000
|
)
|
|
—
|
|
|
—
|
|
|
(273,000
|
)
|
|||||
Net income tax shortfall from settlement of stock-based awards
|
|
—
|
|
|
—
|
|
|
(248,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(248,000
|
)
|
|||||
Reversal of deferred tax assets associated with expired and unexercised stock-based awards
|
|
—
|
|
|
—
|
|
|
(422,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(422,000
|
)
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,827,000
|
|
|
—
|
|
|
—
|
|
|
15,827,000
|
|
|||||
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
|
|
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended July 31, 2017, 2016 and 2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
15,827,000
|
|
|
(7,738,000
|
)
|
|
23,245,000
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, plant and equipment
|
|
14,354,000
|
|
|
9,830,000
|
|
|
6,525,000
|
|
|
|
Amortization of intangible assets with finite lives
|
|
22,823,000
|
|
|
13,415,000
|
|
|
6,211,000
|
|
|
|
Amortization of stock-based compensation
|
|
8,506,000
|
|
|
4,117,000
|
|
|
4,363,000
|
|
|
|
Amortization of deferred financing costs
|
|
1,977,000
|
|
|
795,000
|
|
|
65,000
|
|
|
|
Settlement of intellectual property litigation
|
|
(12,020,000
|
)
|
|
—
|
|
|
—
|
|
|
|
Change in fair value of contingent liability
|
|
—
|
|
|
(359,000
|
)
|
|
—
|
|
|
|
(Gain) loss on disposal of property, plant and equipment
|
|
(126,000
|
)
|
|
(21,000
|
)
|
|
3,000
|
|
|
|
Provision for allowance for doubtful accounts
|
|
497,000
|
|
|
907,000
|
|
|
764,000
|
|
|
|
Provision for excess and obsolete inventory
|
|
2,900,000
|
|
|
2,780,000
|
|
|
2,813,000
|
|
|
|
Excess income tax benefit from stock-based award exercises
|
|
(82,000
|
)
|
|
(28,000
|
)
|
|
(148,000
|
)
|
|
|
Deferred income tax expense (benefit)
|
|
9,056,000
|
|
|
(3,241,000
|
)
|
|
(2,365,000
|
)
|
|
|
Changes in assets and liabilities, net of effects of business acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
25,508,000
|
|
|
5,806,000
|
|
|
(15,132,000
|
)
|
|
|
Inventories
|
|
7,812,000
|
|
|
8,280,000
|
|
|
(3,446,000
|
)
|
|
|
Prepaid expenses and other current assets
|
|
(956,000
|
)
|
|
2,112,000
|
|
|
543,000
|
|
|
|
Other assets
|
|
666,000
|
|
|
(86,000
|
)
|
|
(39,000
|
)
|
|
|
Accounts payable
|
|
(4,472,000
|
)
|
|
(1,255,000
|
)
|
|
(3,194,000
|
)
|
|
|
Accrued expenses and other current liabilities
|
|
(22,058,000
|
)
|
|
(13,465,000
|
)
|
|
(815,000
|
)
|
|
|
Customer advances and deposits
|
|
(2,431,000
|
)
|
|
(6,397,000
|
)
|
|
1,631,000
|
|
|
|
Other liabilities, non-current
|
|
(1,442,000
|
)
|
|
(882,000
|
)
|
|
(931,000
|
)
|
|
|
Interest payable
|
|
(1,039,000
|
)
|
|
1,292,000
|
|
|
(29,000
|
)
|
|
|
Income taxes payable
|
|
1,355,000
|
|
|
(892,000
|
)
|
|
1,662,000
|
|
|
|
Net cash provided by operating activities
|
|
66,655,000
|
|
|
14,970,000
|
|
|
21,726,000
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(8,150,000
|
)
|
|
(5,667,000
|
)
|
|
(3,362,000
|
)
|
|
|
Payments for business acquisition, net of cash acquired
|
|
—
|
|
|
(280,535,000
|
)
|
|
—
|
|
|
|
Net cash used in investing activities
|
|
(8,150,000
|
)
|
|
(286,202,000
|
)
|
|
(3,362,000
|
)
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of long-term debt under Term Loan Facility
|
|
(33,567,000
|
)
|
|
(77,353,000
|
)
|
|
—
|
|
|
|
Net (payments) borrowings under Revolving Loan Facility
|
|
(26,500,000
|
)
|
|
83,904,000
|
|
|
—
|
|
|
|
Cash dividends paid
|
|
(18,872,000
|
)
|
|
(19,406,000
|
)
|
|
(19,426,000
|
)
|
|
|
Repayment of principal amounts under capital lease obligations
|
|
(3,592,000
|
)
|
|
(1,753,000
|
)
|
|
—
|
|
|
|
Payment of deferred financing costs
|
|
(1,085,000
|
)
|
|
(9,464,000
|
)
|
|
—
|
|
|
|
Payment of issuance costs related to equity offering
|
|
(626,000
|
)
|
|
(476,000
|
)
|
|
—
|
|
|
|
Proceeds from issuance of employee stock purchase plan shares
|
|
694,000
|
|
|
676,000
|
|
|
917,000
|
|
|
|
Excess income tax benefit from stock-based award exercises
|
|
82,000
|
|
|
28,000
|
|
|
148,000
|
|
|
|
Borrowings of long-term debt under Term Loan Facility
|
|
—
|
|
|
250,000,000
|
|
|
—
|
|
|
|
Proceeds received from equity offering
|
|
—
|
|
|
95,029,000
|
|
|
—
|
|
|
|
Required payments for debt assumed for business acquisition
|
|
—
|
|
|
(134,101,000
|
)
|
|
—
|
|
|
|
Proceeds from exercises of stock options
|
|
—
|
|
|
—
|
|
|
1,439,000
|
|
|
|
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
(4,989,000
|
)
|
|
|
Net cash (used in) provided by financing activities
|
|
(83,466,000
|
)
|
|
187,084,000
|
|
|
(21,911,000
|
)
|
|
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Fiscal Years Ended July 31, 2017, 2016 and 2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
||||
|
|
|
|
|
|
(Continued)
|
|
|
|||
Net decrease in cash and cash equivalents
|
|
$
|
(24,961,000
|
)
|
|
(84,148,000
|
)
|
|
(3,547,000
|
)
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents at beginning of year
|
|
66,805,000
|
|
|
150,953,000
|
|
|
154,500,000
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents at end of year
|
|
$
|
41,844,000
|
|
|
66,805,000
|
|
|
150,953,000
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental cash flow disclosure
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the year for:
|
|
|
|
|
|
|
|
||||
Interest
|
|
$
|
10,424,000
|
|
|
5,307,000
|
|
|
117,000
|
|
|
Income taxes, net
|
|
$
|
(758,000
|
)
|
|
3,678,000
|
|
|
11,441,000
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
||||
Capital lease obligations incurred (excluding the effect of business acquisition)
|
|
$
|
68,000
|
|
|
373,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued fixed asset additions
|
|
$
|
1,221,000
|
|
|
346,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends declared but unpaid (including accrual of dividend equivalents)
|
|
$
|
2,616,000
|
|
|
7,462,000
|
|
|
5,164,000
|
|
|
|
|
|
|
|
|
|
|
||||
Issuance of restricted stock
|
|
$
|
14,000
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued issuance costs related to equity offering
|
|
$
|
—
|
|
|
636,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued deferred financing costs
|
|
$
|
—
|
|
|
155,000
|
|
|
—
|
|
|
(a)
|
Principles of Consolidation
|
(b)
|
Nature of Business
|
(c)
|
Revenue Recognition
|
(d)
|
Cash and Cash Equivalents
|
(e)
|
Inventories
|
(f)
|
Long-Lived Assets
|
(g)
|
Research and Development Costs
|
(h)
|
Income Taxes
|
(i)
|
Earnings Per Share
|
|
|
Fiscal Years Ended July 31,
|
||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||
Numerator:
|
|
|
|
|
|
|
||||
Net income (loss) for basic calculation
|
|
$
|
15,827,000
|
|
|
(7,738,000
|
)
|
|
23,245,000
|
|
Numerator for diluted calculation
|
|
$
|
15,827,000
|
|
|
(7,738,000
|
)
|
|
23,245,000
|
|
|
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic calculation
|
|
23,433,000
|
|
|
16,972,000
|
|
|
16,203,000
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Stock-based awards
|
|
56,000
|
|
|
—
|
|
|
215,000
|
|
|
Denominator for diluted calculation
|
|
23,489,000
|
|
|
16,972,000
|
|
|
16,418,000
|
|
(j)
|
Fair Value Measurements and Financial Instruments
|
(k)
|
Use of Estimates
|
(l)
|
Comprehensive Income
|
(m)
|
Reclassifications
|
(n)
|
Adoption of Accounting Standards and Updates
|
•
|
FASB ASU No. 2014-12, which requires that a performance target which affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Our adoption of this FASB ASU did not impact our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2014-15, which provides guidance about management's responsibility to evaluate whether there is a substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. Our adoption of this ASU did not impact our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2015-11, which simplifies the guidance on the subsequent measurement of inventory other than inventory measured using the last-in, first out or the retail inventory method. This ASU requires in-scope inventory to be subsequently measured at the lower of cost and net realizable value, the latter of which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-06, which clarifies the requirements for assessing whether contingent call (put) options, that can accelerate the payment of principal on debt instruments, are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this ASU is required to assess the embedded call (put) options solely in accordance with the Derivatives Implementation Group’s four-step decision sequence. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-07, which eliminates the requirement to retroactively adopt the equity method of accounting for an investment as a result of an increase in the level of ownership interest or degree of influence. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-17, which amends the consolidation guidance on how a reporting entity (that is the single decision maker of a Variable Interest Entity (“VIE”)) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2016-18, which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
•
|
FASB ASU No. 2017-04, which simplifies the measurement of goodwill impairment by eliminating Step Two from the goodwill impairment test. Instead, impairment will be measured using the excess amount that a reporting unit's carrying value exceeds its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.
|
|
Purchase Price Allocation
|
|
||
Shares of TCS common stock purchased
|
$
|
318,605,000
|
|
|
Stock-based awards settled
|
21,827,000
|
|
|
|
Aggregate purchase price at fair value
|
$
|
340,432,000
|
|
|
Allocation of aggregate purchase price:
|
|
|
||
Cash and cash equivalents
|
$
|
59,897,000
|
|
|
Current assets
|
115,913,000
|
|
|
|
Deferred tax assets, net, non-current
|
85,490,000
|
|
|
|
Property, plant and equipment
|
25,689,000
|
|
|
|
Other assets, non-current
|
2,641,000
|
|
|
|
Current liabilities (excluding interest accrued on debt)
|
(123,956,000
|
)
|
|
|
Debt (including interest accrued)
|
(134,101,000
|
)
|
|
|
Capital lease obligations
|
(8,993,000
|
)
|
|
|
Other liabilities
|
(9,156,000
|
)
|
|
|
Net tangible assets at fair value
|
$
|
13,424,000
|
|
|
Identifiable intangible assets, deferred taxes and goodwill:
|
|
Estimated Useful Lives
|
||
Customer relationships and backlog
|
$
|
223,100,000
|
|
21 years
|
Trade names
|
20,000,000
|
|
10 to 20 years
|
|
Technology
|
35,000,000
|
|
5 to 15 years
|
|
Deferred tax liabilities
|
(104,371,000
|
)
|
|
|
Goodwill
|
153,279,000
|
|
Indefinite
|
|
Allocation of aggregate purchase price
|
$
|
340,432,000
|
|
|
•
|
The elimination of historical sales between Comtech and TCS of
$8,601,000
and
$293,000
for the fiscal years ended
July 31, 2016
and
2015
, respectively.
|
•
|
The reduction to capitalized software amortization of
$2,566,000
and
$3,529,000
for the fiscal years ended
July 31, 2016
and
2015
, respectively, related to the difference between the historical value and the estimated fair value of TCS's capitalized software.
|
•
|
The elimination of acquisition plan expenses of
$36,212,000
for the fiscal year ended
July 31, 2016
and additions of
$35,890,000
for the fiscal year ended
July 31, 2015
, due to the assumption that all of the acquisition plan expenses were incurred on August 1, 2014.
|
•
|
The incremental amortization expense of
$7,113,000
and
$15,662,000
for the fiscal years ended
July 31, 2016
and
2015
, respectively, associated with the increase in acquired other intangible assets.
|
•
|
The increase in interest expense of
$2,339,000
and
$7,915,000
for the fiscal years ended
July 31, 2016
and
July 31, 2015
, respectively, due to the assumed August 1, 2014 repayment of TCS's legacy debt and related new borrowings under our Secured Credit Facility which was utilized to partially fund the TCS acquisition.
|
•
|
The reduction to interest income of
$577,000
and
$705,000
for the fiscal years ended
July 31, 2016
and
2015
, respectively, due to the assumed cash payments relating to the TCS acquisition.
|
•
|
The related increase or decrease to the provision for income taxes, based on Comtech’s effective tax rate for the respective periods.
|
|
|
2017
|
|
2016
|
|||
Billed receivables from commercial and international customers
|
|
$
|
71,404,000
|
|
|
90,185,000
|
|
Unbilled receivables from commercial and international customers
|
|
24,668,000
|
|
|
19,333,000
|
|
|
Billed receivables from the U.S. government and its agencies
|
|
18,497,000
|
|
|
21,465,000
|
|
|
Unbilled receivables on U.S government and its agencies
|
|
11,693,000
|
|
|
21,013,000
|
|
|
Total accounts receivable
|
|
126,262,000
|
|
|
151,996,000
|
|
|
Less allowance for doubtful accounts
|
|
1,300,000
|
|
|
1,029,000
|
|
|
Accounts receivable, net
|
|
$
|
124,962,000
|
|
|
150,967,000
|
|
|
|
2017
|
|
2016
|
|||
Raw materials and components
|
|
$
|
50,569,000
|
|
|
54,723,000
|
|
Work-in-process and finished goods
|
|
26,053,000
|
|
|
32,829,000
|
|
|
Total inventories
|
|
76,622,000
|
|
|
87,552,000
|
|
|
Less reserve for excess and obsolete inventories
|
|
16,019,000
|
|
|
16,198,000
|
|
|
Inventories, net
|
|
$
|
60,603,000
|
|
|
71,354,000
|
|
|
|
2017
|
|
2016
|
|||
Machinery and equipment
|
|
$
|
146,459,000
|
|
|
137,595,000
|
|
Leasehold improvements
|
|
13,624,000
|
|
|
13,784,000
|
|
|
|
|
160,083,000
|
|
|
151,379,000
|
|
|
Less accumulated depreciation and amortization
|
|
127,236,000
|
|
|
112,712,000
|
|
|
Property, plant and equipment, net
|
|
$
|
32,847,000
|
|
|
38,667,000
|
|
|
|
2017
|
|
2016
|
|||
Accrued wages and benefits
|
|
$
|
19,622,000
|
|
|
23,394,000
|
|
Accrued legal costs
|
|
8,402,000
|
|
|
32,469,000
|
|
|
Accrued warranty obligations
|
|
17,617,000
|
|
|
15,362,000
|
|
|
Accrued acquisition-related costs
|
|
—
|
|
|
2,119,000
|
|
|
Accrued contract costs
|
|
8,644,000
|
|
|
8,348,000
|
|
|
Accrued commissions and royalties
|
|
3,600,000
|
|
|
3,473,000
|
|
|
Other
|
|
10,725,000
|
|
|
12,869,000
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
68,610,000
|
|
|
98,034,000
|
|
|
|
2017
|
|
2016
|
|||
Balance at beginning of year
|
|
$
|
15,362,000
|
|
|
8,638,000
|
|
Provision for warranty obligations
|
|
5,394,000
|
|
|
4,264,000
|
|
|
Adjustment to TCS pre-acquisition contingent liability
|
|
4,200,000
|
|
|
7,419,000
|
|
|
Charges incurred
|
|
(7,339,000
|
)
|
|
(4,959,000
|
)
|
|
Balance at end of year
|
|
$
|
17,617,000
|
|
|
15,362,000
|
|
|
At August 1, 2008
|
||
Total non-cancelable lease obligations
|
$
|
12,741,000
|
|
Less: Estimated sublease income
|
8,600,000
|
|
|
Total net estimated facility exit costs
|
4,141,000
|
|
|
Less: Interest expense to be accreted
|
2,041,000
|
|
|
Present value of estimated facility exit costs
|
$
|
2,100,000
|
|
|
Cumulative Activity Through
July 31, 2017 |
||
Present value of estimated facility exit costs at August 1, 2008
|
$
|
2,100,000
|
|
Cash payments made
|
(10,588,000
|
)
|
|
Cash payments received
|
8,600,000
|
|
|
Accreted interest recorded
|
1,829,000
|
|
|
Liability as of July 31, 2017
|
1,941,000
|
|
|
Amount recorded as accrued expenses and other current liabilities in the Consolidated Balance Sheet
|
1,535,000
|
|
|
Amount recorded as other liabilities in the Consolidated Balance Sheet
|
$
|
406,000
|
|
|
As of
|
||
|
July 31, 2017
|
||
Future lease payments to be made
|
$
|
1,941,000
|
|
Interest expense to be accreted in future periods
|
212,000
|
|
|
Total remaining payments
|
$
|
2,153,000
|
|
|
2017
|
|
2016
|
|||
Term Loan Facility
|
$
|
139,080,000
|
|
|
172,647,000
|
|
Less unamortized deferred financing costs related to Term Loan Facility
|
4,763,000
|
|
|
5,515,000
|
|
|
Term Loan Facility, net
|
134,317,000
|
|
|
167,132,000
|
|
|
Revolving Loan Facility
|
57,405,000
|
|
|
83,904,000
|
|
|
Amount outstanding under Secured Credit Facility, net
|
191,722,000
|
|
|
251,036,000
|
|
|
Less current portion of long-term debt
|
15,494,000
|
|
|
11,067,000
|
|
|
Non-current portion of long-term debt
|
$
|
176,228,000
|
|
|
239,969,000
|
|
(i)
|
Consolidated EBITDA definition more closely aligns with our Adjusted EBITDA metric by eliminating favorable adjustments to operating income related to settlements of TCS intellectual property matters;
|
(ii)
|
Leverage Ratio is calculated on a “gross” basis using the quotient of Total Indebtedness (excluding unamortized deferred financing costs) divided by our TTM Consolidated EBITDA. The prior Leverage Ratio was calculated on a “net” basis but did not include a reduction for any cash or cash equivalents above
$50,000,000
;
|
(iii)
|
Fixed Charge Coverage Ratio includes a deduction for all cash dividends, regardless of the amount of our cash and cash equivalents and the related allowable Quarterly Dividend Amount, as defined, will now align with our current quarterly dividend target of
$0.10
per common share;
|
(iv)
|
Balloon or final payment of the Term Loan Facility, which is not due until February 23, 2021, was reduced by
$22,500,000
through increased borrowings from the Revolving Loan Facility, which does not expire until February 23, 2021; and
|
(v)
|
Leverage Ratios will be adjusted, in certain conditions, to provide for additional flexibility for us to make acquisitions.
|
Fiscal 2018
|
$
|
2,494,000
|
|
Fiscal 2019
|
1,492,000
|
|
|
Fiscal 2020
|
318,000
|
|
|
Fiscal 2021 and beyond
|
—
|
|
|
Total minimum lease payments
|
4,304,000
|
|
|
Less: amounts representing interest
|
224,000
|
|
|
Present value of net minimum lease payments
|
4,080,000
|
|
|
Current portion of capital lease obligations
|
2,309,000
|
|
|
Non-current portion of capital lease obligations
|
$
|
1,771,000
|
|
|
|
Fiscal Years Ended July 31,
|
||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||
Federal – current
|
|
$
|
(441,000
|
)
|
|
2,297,000
|
|
|
12,367,000
|
|
Federal – deferred
|
|
8,399,000
|
|
|
(2,930,000
|
)
|
|
(2,342,000
|
)
|
|
|
|
|
|
|
|
|
||||
State and local – current
|
|
608,000
|
|
|
408,000
|
|
|
931,000
|
|
|
State and local – deferred
|
|
659,000
|
|
|
(310,000
|
)
|
|
(25,000
|
)
|
|
|
|
|
|
|
|
|
||||
Foreign – current
|
|
413,000
|
|
|
81,000
|
|
|
(173,000
|
)
|
|
Foreign – deferred
|
|
16,000
|
|
|
—
|
|
|
—
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
9,654,000
|
|
|
(454,000
|
)
|
|
10,758,000
|
|
|
|
Fiscal Years Ended July 31,
|
|||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|||||||
Computed “expected” tax expense
|
|
$
|
8,919,000
|
|
|
35.0
|
%
|
|
(2,867,000
|
)
|
|
35.0
|
%
|
|
11,901,000
|
|
|
35.0
|
%
|
Increase (reduction) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local income taxes, net of Federal benefit
|
|
1,257,000
|
|
|
4.9
|
|
|
23,000
|
|
|
(0.3
|
)
|
|
720,000
|
|
|
2.1
|
|
|
Nondeductible stock-based compensation
|
|
78,000
|
|
|
0.3
|
|
|
68,000
|
|
|
(0.8
|
)
|
|
86,000
|
|
|
0.2
|
|
|
Domestic production activities deduction
|
|
(269,000
|
)
|
|
(1.1
|
)
|
|
(198,000
|
)
|
|
2.4
|
|
|
(1,030,000
|
)
|
|
(3.0
|
)
|
|
Research and experimentation credits
|
|
(919,000
|
)
|
|
(3.6
|
)
|
|
(1,106,000
|
)
|
|
13.5
|
|
|
(793,000
|
)
|
|
(2.3
|
)
|
|
Acquisition-related tax contingencies
|
|
—
|
|
|
—
|
|
|
1,962,000
|
|
|
(24.0
|
)
|
|
—
|
|
|
—
|
|
|
Nondeductible transaction costs
|
|
—
|
|
|
—
|
|
|
1,279,000
|
|
|
(15.6
|
)
|
|
—
|
|
|
—
|
|
|
Foreign income taxes
|
|
(151,000
|
)
|
|
(0.6
|
)
|
|
289,000
|
|
|
(3.5
|
)
|
|
(372,000
|
)
|
|
(1.1
|
)
|
|
Other
|
|
739,000
|
|
|
3.0
|
|
|
96,000
|
|
|
(1.2
|
)
|
|
246,000
|
|
|
0.7
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
9,654,000
|
|
|
37.9
|
%
|
|
(454,000
|
)
|
|
5.5
|
%
|
|
10,758,000
|
|
|
31.6
|
%
|
|
|
2017
|
|
2016
|
|||
Deferred tax assets:
|
|
|
|
|
|||
Inventory and warranty reserves
|
|
$
|
7,854,000
|
|
|
8,383,000
|
|
Compensation and commissions
|
|
3,807,000
|
|
|
5,842,000
|
|
|
Federal, state and foreign research and experimentation credits
|
|
16,286,000
|
|
|
16,364,000
|
|
|
Stock-based compensation
|
|
7,767,000
|
|
|
5,743,000
|
|
|
Acquisition-related contingent liabilities
|
|
4,687,000
|
|
|
12,929,000
|
|
|
Federal and state NOLs
|
|
19,880,000
|
|
|
25,760,000
|
|
|
Other
|
|
11,416,000
|
|
|
10,885,000
|
|
|
Less valuation allowance
|
|
(8,633,000
|
)
|
|
(9,624,000
|
)
|
|
Total deferred tax assets
|
|
63,064,000
|
|
|
76,282,000
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Plant and equipment
|
|
(1,309,000
|
)
|
|
(1,882,000
|
)
|
|
Intangibles
|
|
(79,061,000
|
)
|
|
(84,198,000
|
)
|
|
Total deferred tax liabilities
|
|
(80,370,000
|
)
|
|
(86,080,000
|
)
|
|
Net deferred tax (liabilities) assets
|
|
$
|
(17,306,000
|
)
|
|
(9,798,000
|
)
|
|
|
2017
|
|
2016
|
|
2015
|
||||
Balance at beginning of period
|
|
$
|
9,108,000
|
|
|
2,728,000
|
|
|
2,703,000
|
|
Increase related to current period
|
|
587,000
|
|
|
2,487,000
|
|
|
410,000
|
|
|
Increase related to prior periods
|
|
86,000
|
|
|
4,490,000
|
|
|
144,000
|
|
|
Expiration of statute of limitations
|
|
(404,000
|
)
|
|
(580,000
|
)
|
|
(468,000
|
)
|
|
Decrease related to prior periods
|
|
(791,000
|
)
|
|
(17,000
|
)
|
|
(61,000
|
)
|
|
Balance at end of period
|
|
$
|
8,586,000
|
|
|
9,108,000
|
|
|
2,728,000
|
|
|
July 31, 2017
|
|
Stock options
|
1,855,875
|
|
Performance shares
|
252,089
|
|
RSUs and restricted stock
|
292,260
|
|
Share units
|
285,848
|
|
Total
|
2,686,072
|
|
|
|
Fiscal Years Ended July 31,
|
||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||
Cost of sales
|
|
$
|
760,000
|
|
|
296,000
|
|
|
245,000
|
|
Selling, general and administrative expenses
|
|
7,071,000
|
|
|
3,407,000
|
|
|
3,507,000
|
|
|
Research and development expenses
|
|
675,000
|
|
|
414,000
|
|
|
611,000
|
|
|
Stock-based compensation expense before income tax benefit
|
|
8,506,000
|
|
|
4,117,000
|
|
|
4,363,000
|
|
|
Estimated income tax benefit
|
|
(3,065,000
|
)
|
|
(1,434,000
|
)
|
|
(1,523,000
|
)
|
|
Net stock-based compensation expense
|
|
$
|
5,441,000
|
|
|
2,683,000
|
|
|
2,840,000
|
|
|
|
Fiscal Years Ended July 31,
|
||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||
Stock options
|
|
$
|
1,400,000
|
|
|
2,353,000
|
|
|
2,842,000
|
|
Performance shares
|
|
1,607,000
|
|
|
1,374,000
|
|
|
890,000
|
|
|
ESPP
|
|
162,000
|
|
|
163,000
|
|
|
206,000
|
|
|
RSUs and restricted stock
|
|
829,000
|
|
|
227,000
|
|
|
397,000
|
|
|
Share units
|
|
4,508,000
|
|
|
—
|
|
|
28,000
|
|
|
Stock-based compensation expense before income tax benefit
|
|
8,506,000
|
|
|
4,117,000
|
|
|
4,363,000
|
|
|
Estimated income tax benefit
|
|
(3,065,000
|
)
|
|
(1,434,000
|
)
|
|
(1,523,000
|
)
|
|
Net stock-based compensation expense
|
|
$
|
5,441,000
|
|
|
2,683,000
|
|
|
2,840,000
|
|
|
|
Fiscal Years Ended July 31,
|
||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||
Actual income tax benefit recorded for the tax deductions relating to the settlement of stock-based awards
|
|
$
|
372,000
|
|
|
196,000
|
|
|
1,108,000
|
|
Less: Tax benefit initially recognized on settled stock-based awards vesting subsequent to the adoption of accounting standards that require us to expense stock-based awards
|
|
290,000
|
|
|
168,000
|
|
|
960,000
|
|
|
Excess income tax benefit from settled equity-classified stock-based awards recorded as an increase to additional paid-in capital and reported as a cash inflow from financing activities in our Consolidated Statements of Cash Flows
|
|
$
|
82,000
|
|
|
28,000
|
|
|
148,000
|
|
|
|
Awards
(in Shares)
|
|
Weighted Average
Exercise Price
|
|
Weighted Average
Remaining Contractual
Term (Years)
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding at July 31, 2014
|
|
2,132,896
|
|
|
$
|
28.17
|
|
|
|
|
|
||
Granted
|
|
416,525
|
|
|
33.78
|
|
|
|
|
|
|||
Expired/canceled
|
|
(46,400
|
)
|
|
30.20
|
|
|
|
|
|
|||
Exercised
|
|
(383,338
|
)
|
|
27.61
|
|
|
|
|
|
|||
Outstanding at July 31, 2015
|
|
2,119,683
|
|
|
29.33
|
|
|
|
|
|
|||
Granted
|
|
552,806
|
|
|
27.15
|
|
|
|
|
|
|||
Expired/canceled
|
|
(396,610
|
)
|
|
28.99
|
|
|
|
|
|
|||
Exercised
|
|
(19,200
|
)
|
|
27.24
|
|
|
|
|
|
|||
Outstanding at July 31, 2016
|
|
2,256,679
|
|
|
28.87
|
|
|
|
|
|
|||
Expired/canceled
|
|
(400,804
|
)
|
|
30.15
|
|
|
|
|
|
|||
Outstanding at July 31, 2017
|
|
1,855,875
|
|
|
$
|
28.60
|
|
|
5.56
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable at July 31, 2017
|
|
1,261,529
|
|
|
$
|
28.55
|
|
|
4.84
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Vested and expected to vest at July 31, 2017
|
|
1,799,732
|
|
|
$
|
28.58
|
|
|
5.51
|
|
$
|
—
|
|
|
|
Fiscal Years Ended July 31,
|
|||||
|
|
|
2016
|
|
2015
|
||
Expected dividend yield
|
|
|
4.46
|
%
|
|
3.55
|
%
|
Expected volatility
|
|
|
34.44
|
%
|
|
28.19
|
%
|
Risk-free interest rate
|
|
|
1.52
|
%
|
|
1.61
|
%
|
Expected life (years)
|
|
|
5.15
|
|
|
5.44
|
|
|
|
Awards (in Shares)
|
|
Weighted Average
Grant Date
Fair Value
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding at July 31, 2014
|
|
180,097
|
|
|
$
|
26.20
|
|
|
|
||
Granted
|
|
66,294
|
|
|
33.96
|
|
|
|
|||
Converted to common stock
|
|
(18,422
|
)
|
|
27.79
|
|
|
|
|||
Forfeited
|
|
(3,804
|
)
|
|
32.47
|
|
|
|
|||
Outstanding at July 31, 2015
|
|
224,165
|
|
|
28.26
|
|
|
|
|||
Granted
|
|
71,605
|
|
|
27.45
|
|
|
|
|||
Converted to common stock
|
|
(16,439
|
)
|
|
26.35
|
|
|
|
|||
Forfeited
|
|
(62,118
|
)
|
|
27.62
|
|
|
|
|||
Outstanding at July 31, 2016
|
|
217,213
|
|
|
28.32
|
|
|
|
|||
Granted
|
|
705,241
|
|
|
14.31
|
|
|
|
|||
Converted to common stock
|
|
(61,462
|
)
|
|
26.63
|
|
|
|
|||
Forfeited
|
|
(30,795
|
)
|
|
17.13
|
|
|
|
|||
Outstanding at July 31, 2017
|
|
830,197
|
|
|
$
|
16.95
|
|
|
$
|
14,943,546
|
|
|
|
|
|
|
|
|
|||||
Vested at July 31, 2017
|
|
531,885
|
|
|
$
|
18.51
|
|
|
$
|
9,573,930
|
|
|
|
|
|
|
|
|
|||||
Vested and expected to vest at July 31, 2017
|
|
802,715
|
|
|
$
|
16.96
|
|
|
$
|
14,448,867
|
|
|
|
Fiscal Years Ended July 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
United States
|
|
|
|
|
|
|
|||
U.S. government
|
|
32.7
|
%
|
|
40.8
|
%
|
|
30.6
|
%
|
Domestic
|
|
38.9
|
%
|
|
29.2
|
%
|
|
13.2
|
%
|
Total United States
|
|
71.6
|
%
|
|
70.0
|
%
|
|
43.8
|
%
|
|
|
|
|
|
|
|
|||
International
|
|
|
|
|
|
|
|||
North African country
|
|
1.8
|
%
|
|
3.6
|
%
|
|
13.8
|
%
|
Other international
|
|
26.6
|
%
|
|
26.4
|
%
|
|
42.4
|
%
|
Total International
|
|
28.4
|
%
|
|
30.0
|
%
|
|
56.2
|
%
|
|
|
Fiscal Year Ended July 31, 2017
|
||||||||||||
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Total
|
||||||
Net sales
|
|
$
|
330,867,000
|
|
|
219,501,000
|
|
|
—
|
|
|
$
|
550,368,000
|
|
Operating income (loss)
|
|
$
|
33,234,000
|
|
|
9,393,000
|
|
|
(5,585,000
|
)
|
|
$
|
37,042,000
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
32,871,000
|
|
|
9,421,000
|
|
|
(26,465,000
|
)
|
|
$
|
15,827,000
|
|
Provision for income taxes
|
|
258,000
|
|
|
—
|
|
|
9,396,000
|
|
|
9,654,000
|
|
||
Interest (income) and other expense
|
|
(108,000
|
)
|
|
(34,000
|
)
|
|
74,000
|
|
|
(68,000
|
)
|
||
Interest expense
|
|
213,000
|
|
|
6,000
|
|
|
11,410,000
|
|
|
11,629,000
|
|
||
Amortization of stock-based compensation
|
|
—
|
|
|
—
|
|
|
8,506,000
|
|
|
8,506,000
|
|
||
Amortization of intangibles
|
|
17,698,000
|
|
|
5,125,000
|
|
|
—
|
|
|
22,823,000
|
|
||
Depreciation
|
|
9,938,000
|
|
|
2,938,000
|
|
|
1,478,000
|
|
|
14,354,000
|
|
||
Settlement of intellectual property litigation
|
|
—
|
|
|
—
|
|
|
(12,020,000
|
)
|
|
(12,020,000
|
)
|
||
Adjusted EBITDA
|
|
$
|
60,870,000
|
|
|
17,456,000
|
|
|
(7,621,000
|
)
|
|
$
|
70,705,000
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases of property, plant and equipment
|
|
$
|
7,007,000
|
|
|
1,046,000
|
|
|
97,000
|
|
|
$
|
8,150,000
|
|
Total assets at July 31, 2017
|
|
$
|
606,436,000
|
|
|
185,234,000
|
|
|
40,393,000
|
|
|
$
|
832,063,000
|
|
|
|
Fiscal Year Ended July 31, 2016
|
||||||||||||
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Total
|
||||||
Net sales
|
|
$
|
248,955,000
|
|
|
162,049,000
|
|
|
—
|
|
|
$
|
411,004,000
|
|
Operating income (loss)
|
|
$
|
23,255,000
|
|
|
23,006,000
|
|
|
(46,837,000
|
)
|
|
$
|
(576,000
|
)
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
22,785,000
|
|
|
23,018,000
|
|
|
(53,541,000
|
)
|
|
$
|
(7,738,000
|
)
|
Provision for (benefit from) income taxes
|
|
72,000
|
|
|
—
|
|
|
(526,000
|
)
|
|
(454,000
|
)
|
||
Interest (income) and other expense
|
|
109,000
|
|
|
(11,000
|
)
|
|
(232,000
|
)
|
|
(134,000
|
)
|
||
Interest expense
|
|
289,000
|
|
|
(1,000
|
)
|
|
7,462,000
|
|
|
7,750,000
|
|
||
Amortization of stock-based compensation
|
|
—
|
|
|
—
|
|
|
4,117,000
|
|
|
4,117,000
|
|
||
Amortization of intangibles
|
|
10,592,000
|
|
|
2,823,000
|
|
|
—
|
|
|
13,415,000
|
|
||
Depreciation
|
|
7,073,000
|
|
|
2,006,000
|
|
|
751,000
|
|
|
9,830,000
|
|
||
Acquisition plan expenses
|
|
—
|
|
|
—
|
|
|
21,276,000
|
|
|
21,276,000
|
|
||
Adjusted EBITDA
|
|
$
|
40,920,000
|
|
|
27,835,000
|
|
|
(20,693,000
|
)
|
|
$
|
48,062,000
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases of property, plant and equipment
|
|
$
|
4,614,000
|
|
|
978,000
|
|
|
75,000
|
|
|
$
|
5,667,000
|
|
Long-lived assets acquired in connection with the TCS acquisition
|
|
$
|
367,865,000
|
|
|
82,860,000
|
|
|
4,359,000
|
|
|
$
|
455,084,000
|
|
Total assets at July 31, 2016
|
|
$
|
631,936,000
|
|
|
226,865,000
|
|
|
62,395,000
|
|
|
$
|
921,196,000
|
|
|
|
Fiscal Year Ended July 31, 2015
|
||||||||||||
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Unallocated
|
|
Total
|
||||||
Net sales
|
|
$
|
203,674,000
|
|
|
103,615,000
|
|
|
—
|
|
|
$
|
307,289,000
|
|
Operating income (loss)
|
|
$
|
20,733,000
|
|
|
30,004,000
|
|
|
(16,660,000
|
)
|
|
$
|
34,077,000
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
20,502,000
|
|
|
30,033,000
|
|
|
(27,290,000
|
)
|
|
$
|
23,245,000
|
|
(Benefit from) provision for income taxes
|
|
(142,000
|
)
|
|
—
|
|
|
10,900,000
|
|
|
10,758,000
|
|
||
Interest (income) and other expense
|
|
92,000
|
|
|
(30,000
|
)
|
|
(467,000
|
)
|
|
(405,000
|
)
|
||
Interest expense
|
|
281,000
|
|
|
—
|
|
|
198,000
|
|
|
479,000
|
|
||
Amortization of stock-based compensation
|
|
—
|
|
|
—
|
|
|
4,363,000
|
|
|
4,363,000
|
|
||
Amortization of intangibles
|
|
6,211,000
|
|
|
—
|
|
|
—
|
|
|
6,211,000
|
|
||
Depreciation
|
|
5,250,000
|
|
|
1,242,000
|
|
|
33,000
|
|
|
6,525,000
|
|
||
Strategic alternatives analysis expenses and other
|
|
—
|
|
|
—
|
|
|
585,000
|
|
|
585,000
|
|
||
Adjusted EBITDA
|
|
$
|
32,194,000
|
|
|
31,245,000
|
|
|
(11,678,000
|
)
|
|
$
|
51,761,000
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases of property, plant and equipment
|
|
$
|
2,233,000
|
|
|
1,063,000
|
|
|
66,000
|
|
|
$
|
3,362,000
|
|
Total assets at July 31, 2015
|
|
$
|
233,965,000
|
|
|
95,314,000
|
|
|
144,598,000
|
|
|
$
|
473,877,000
|
|
|
|
Commercial Solutions
|
|
Government Solutions
|
|
Total
|
|||||
Balance as of July 31, 2016
|
|
$
|
229,273,000
|
|
|
58,345,000
|
|
|
$
|
287,618,000
|
|
Additions resulting from TCS acquisition
|
|
2,167,000
|
|
|
848,000
|
|
|
3,015,000
|
|
||
Balance as of July 31, 2017
|
|
$
|
231,440,000
|
|
|
59,193,000
|
|
|
$
|
290,633,000
|
|
|
|
July 31, 2017
|
|||||||||||
|
|
Weighted Average
Amortization Period
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|||||
Customer relationships
|
|
20.3
|
|
$
|
249,831,000
|
|
|
41,923,000
|
|
|
$
|
207,908,000
|
|
Technologies
|
|
12.3
|
|
82,370,000
|
|
|
48,623,000
|
|
|
33,747,000
|
|
||
Trademarks and other
|
|
16.4
|
|
28,894,000
|
|
|
8,678,000
|
|
|
20,216,000
|
|
||
Total
|
|
|
|
$
|
361,095,000
|
|
|
99,224,000
|
|
|
$
|
261,871,000
|
|
|
|
July 31, 2016
|
|||||||||||
|
|
Weighted Average
Amortization Period
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|||||
Customer relationships
|
|
20.3
|
|
$
|
249,831,000
|
|
|
28,497,000
|
|
|
$
|
221,334,000
|
|
Technologies
|
|
12.3
|
|
82,370,000
|
|
|
42,860,000
|
|
|
39,510,000
|
|
||
Trademarks and other
|
|
16.3
|
|
28,894,000
|
|
|
5,044,000
|
|
|
23,850,000
|
|
||
Total
|
|
|
|
$
|
361,095,000
|
|
|
76,401,000
|
|
|
$
|
284,694,000
|
|
2018
|
$
|
21,075,000
|
|
2019
|
17,155,000
|
|
|
2020
|
17,155,000
|
|
|
2021
|
16,196,000
|
|
|
2022
|
14,955,000
|
|
Fiscal 2017
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Total
|
|
|
|||||||
Net sales
|
|
$
|
135,786,000
|
|
|
139,028,000
|
|
|
127,792,000
|
|
|
147,762,000
|
|
|
$
|
550,368,000
|
|
|
|
Gross profit
|
|
52,108,000
|
|
|
53,204,000
|
|
|
52,461,000
|
|
|
60,412,000
|
|
|
218,185,000
|
|
|
|
||
Net (loss) income
|
|
(2,489,000
|
)
|
|
6,585,000
|
|
|
4,417,000
|
|
|
7,314,000
|
|
|
15,827,000
|
|
|
|
||
Diluted (loss) income per share
|
|
(0.11
|
)
|
|
0.28
|
|
|
0.19
|
|
|
0.31
|
|
|
0.67
|
|
|
|
Fiscal 2016
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Total
|
|
|
|||||||
Net sales
|
|
$
|
64,117,000
|
|
|
70,323,000
|
|
|
124,187,000
|
|
|
152,377,000
|
|
|
$
|
411,004,000
|
|
|
|
Gross profit
|
|
28,202,000
|
|
|
29,438,000
|
|
|
51,391,000
|
|
|
62,206,000
|
|
|
171,237,000
|
|
|
|
||
Net income (loss)
|
|
1,439,000
|
|
|
2,476,000
|
|
|
(14,355,000
|
)
|
|
2,702,000
|
|
|
(7,738,000
|
)
|
|
|
||
Diluted income (loss) per share
|
|
0.09
|
|
|
0.15
|
|
|
(0.89
|
)
|
|
0.14
|
|
|
(0.46
|
)
|
|
*
|
Fiscal 2015
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Total
|
|
|
|||||||
Net sales
|
|
$
|
76,391,000
|
|
|
81,802,000
|
|
|
71,633,000
|
|
|
77,463,000
|
|
|
$
|
307,289,000
|
|
|
|
Gross profit
|
|
35,325,000
|
|
|
37,875,000
|
|
|
32,308,000
|
|
|
33,376,000
|
|
|
138,884,000
|
|
|
|
||
Net income
|
|
5,225,000
|
|
|
7,585,000
|
|
|
4,960,000
|
|
|
5,475,000
|
|
|
23,245,000
|
|
|
|
||
Diluted income per share
|
|
0.32
|
|
|
0.46
|
|
|
0.30
|
|
|
0.34
|
|
|
1.42
|
|
|
|
Column A
|
|
Column B
|
|
Column C Additions
|
|
|
|
Column D
|
|
|
|
Column E
|
|||||||||||
Description
|
|
Balance at
beginning of
period
|
|
Charged to
cost and
expenses
|
|
|
|
Charged to
other accounts
- describe
|
|
|
|
Transfers
(deductions)
- describe
|
|
|
|
Balance at
end of
period
|
|||||||
Allowance for doubtful accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Year ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
2017
|
|
$
|
1,029,000
|
|
|
497,000
|
|
|
(A)
|
|
—
|
|
|
|
|
(226,000
|
)
|
|
(B)
|
|
$
|
1,300,000
|
|
2016
|
|
1,206,000
|
|
|
907,000
|
|
|
(A)
|
|
—
|
|
|
|
|
(1,084,000
|
)
|
|
(B)
|
|
1,029,000
|
|
||
2015
|
|
627,000
|
|
|
764,000
|
|
|
(A)
|
|
—
|
|
|
|
|
(185,000
|
)
|
|
(B)
|
|
1,206,000
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Inventory reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Year ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2017
|
|
$
|
16,198,000
|
|
|
2,900,000
|
|
|
(C)
|
|
—
|
|
|
|
|
(3,079,000
|
)
|
|
(D)
|
|
$
|
16,019,000
|
|
2016
|
|
16,904,000
|
|
|
2,780,000
|
|
|
(C)
|
|
—
|
|
|
|
|
(3,486,000
|
)
|
|
(D)
|
|
16,198,000
|
|
||
2015
|
|
16,309,000
|
|
|
2,813,000
|
|
|
(C)
|
|
—
|
|
|
|
|
(2,218,000
|
)
|
|
(D)
|
|
16,904,000
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Valuation allowance for deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Year ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2017
|
|
$
|
9,624,000
|
|
|
324,000
|
|
|
(E)
|
|
121,000
|
|
|
(F)
|
|
(1,436,000
|
)
|
|
(F)
|
|
$
|
8,633,000
|
|
2016
|
|
4,442,000
|
|
|
524,000
|
|
|
(E)
|
|
4,658,000
|
|
|
(F)
|
|
—
|
|
|
|
|
9,624,000
|
|
||
2015
|
|
2,958,000
|
|
|
1,484,000
|
|
|
(E)
|
|
—
|
|
|
|
|
—
|
|
|
|
|
4,442,000
|
|
(A)
|
Provision for doubtful accounts.
|
(B)
|
Write-off of uncollectible receivables.
|
(C)
|
Provision for excess and obsolete inventory.
|
(D)
|
Write-off of inventory.
|
(E)
|
Change in valuation allowance.
|
(F)
|
Acquisition related valuation allowance charged to (deducted) from goodwill.
|
1.
|
I have reviewed this annual report on Form 10-K 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(s) 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(s) 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 annual report on Form 10-K 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(s) 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(s) 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 D. Porcelain
|
|
Michael D. Porcelain
Senior Vice President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Fred Kornberg
|
|
Fred Kornberg
Chairman of the Board
Chief Executive Officer and President |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Michael D. Porcelain
|
|
Michael D. Porcelain
Senior Vice President and Chief Financial Officer
|