UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
March 7, 2007 0-7928
Date of Report Commission File Number
(Date of earliest event reported)  
 
 
(Exact name of registrant as specified in its charter)
 
Delaware 11-2139466
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)  
   
68 South Service Road, Suite 230
Melville, New York 11747
(Address of Principal Executive Offices) (Zip Code)
 
(631) 962-7000
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
   
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


Item 2.02

Results of Operations and Financial Condition.

 

On March 8, 2007, Comtech Telecommunications Corp. (the “Company”) issued a press release announcing its results of operations for its second quarter ended January 31, 2007.

 

A copy of the press release issued by the Company concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference. The information in this Item 2.02 (including the exhibit hereto) relating to this announcement shall not be deemed filed under the Securities and Exchange Commission’s rules and regulations and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 

Item 5.02 (d)

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On March 7, 2007, the Board of Directors of the Company unanimously appointed Robert G. Paul as a Director and member of the Audit Committee. In connection with Mr. Paul’s appointment, the Board of Directors increased the size of the Board to six members. As a director who is not an employee of the Company, Mr. Paul is entitled to receive an annual retainer of $37,500 and, under the Company’s 2000 Stock Incentive Plan, an option grant to purchase: (i) 4,500 shares of Common Stock as of the date he begins service on the Board and (ii) 12,500 shares of Common Stock on each August 1st. The exercise price of all such options is equal to the stock’s fair market value on the date of grant. The options expire five years after the date of grant, and become exercisable as to 25% of the underlying shares on the first and second anniversaries of the date of grant and as to the remaining 50% of the underlying shares on the third anniversary of the date of grant, subject to accelerated vesting upon death of the director or a change in control.

 

Item 5.02 (e)

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On March 7, 2007, the Board of Directors approved and authorized the Company to enter into agreements with each of its non-employee directors, its principal executive officer, principal financial officer, other named executive officers and other corporate officers, pursuant to which the directors and such officers shall be entitled to be indemnified by the Company, to the extent permitted by the General Corporation Law of the State of Delaware, against liabilities incurred in the performance of their duties, subject to certain exceptions. The foregoing description of such agreements does not purport to be complete and is qualified in its entirety by reference to the form of Indemnification Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

 

 

Item 9.01                 Financial Statements and Exhibits.

 

(d) Exhibits.

 

 

 

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Comtech Telecommunications Corp. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



  COMTECH TELECOMMUNICATIONS CORP.
     
Dated:    March 8, 2007    
  By:    /s/ Michael D. Porcelain 
   
    Name:    Michael D. Porcelain
    Title:      Senior Vice President and 
                   Chief Financial Officer

 

 

 


Exhibit 10.1

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made as of ________ by and among Comtech Telecommunications Corp., a Delaware corporation (the “ Company ”), and ___________________ (“ Indemnitee ”).

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance and/or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.

WHEREAS, the Company has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.

WHEREAS, the Delaware General Corporation Law (“ DGCL ”), expressly provides that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between companies and members of the board of directors, officers and others with respect to indemnification.

WHEREAS, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

WHEREAS, Indemnitee may not be willing to serve as an officer and/or director of the Company without the additional protection provided for under this Agreement, and the Company desires Indemnitee to serve in such capacities and Indemnitee is willing to serve and continue to serve on the condition that he be so indemnified;

NOW, THEREFORE, the Company and Indemnitee do hereby agree as follows:

 

 

1.                SERVICES TO THE COMPANY . Indemnitee will serve, or continue to serve, at the will of the Company in accordance with the Bylaws, as an officer and/or director of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his resignation; provided, however, that nothing herein is intended to modify or alter the rights and obligations of the Company and Indemnitee under any employment agreement between the Company and Indemnitee that is now in effect or that hereafter comes into effect.

 

2.

DEFINITIONS . As used in this Agreement:

(a)            “ Action ” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature.

(b)            “ Beneficial Owner ” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided , that Beneficial Owner shall exclude any person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

 

(c)

“ Board ” means the Board of Directors of the Company.

(d)            “ Bylaws ” means the Amended and Restated Bylaws of the Company, as such Amended and Restated Bylaws may hereafter be further amended from time to time.

(e)            “ Certificate of Incorporation ” means the Restated Certificate of Incorporation of the Company, as such Restated Certificate of Incorporation may hereafter be further amended from time to time.

(f)             A “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i)             Upon any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities;

(ii)            During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (i), (iii), or (iv) of this Section or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were

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directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board;

(iii)          Upon a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in (i) above) acquires more than 50% of the combined voting power of the Company’s then outstanding securities shall not constitute a Change in Control of the Company; or.

(iv)           Upon approval by the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least 50% or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.

(g)            “ Corporate Status ” describes a person who is or was serving as a director, officer, employee or agent of the Company or, at the request of the Company, as a director, officer, employee, agent or trustee of any other Enterprise. References to “ serving at the request of the Company ” shall include, without limitation, any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.

(h)            “ Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(i)             “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(j)             “ Enterprise ” means the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise.

(k)            “ Expenses ” means all disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding, including (without limitation) attorneys’ fees and expenses, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, and delivery service fees. Expenses also include disbursements and expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent.

(l)             Reference to “ fines ” shall include any excise tax assessed with respect to any employee benefit plan.

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(m)           A person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the Company ”.

(n)            References “ to the fullest extent permitted by applicable law ” shall include, but not be limited to:

(i)             to the fullest extent permitted by the provision of the DGCL, as applicable, that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, as applicable;

(ii)            to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and/or directors; and

(iii)          with respect to the advancement of Expenses, to the fullest extent not prohibited by Section 402 of the Sarbanes-Oxley Act of 2002 or any successor provision of law.

(o)            “ Proceeding ” means any Action in which Indemnitee was, is or will be involved (as a party or otherwise) by reason of Indemnitee’s Corporate Status, or any action taken by him or of any action on his part while acting in his Corporate Status, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.

(p)            “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to any such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing any of the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company shall pay the reasonable fees and expenses of the Independent Counsel and fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

3.              THIRD-PARTY PROCEEDINGS . If Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor against Indemnitee, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement directly or indirectly incurred by or behalf of Indemnitee in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that

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his conduct was unlawful.

4.              PROCEEDINGS BY OR IN THE RIGHT OF A COMPANY . If Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses directly or indirectly incurred by or on behalf of Indemnitee in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company unless the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

 

5.

PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL .

(a)            Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law:

(i)             To the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses directly or indirectly incurred by or on behalf of Indemnitee in connection therewith.

(ii)            If Indemnitee is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses directly or indirectly incurred by or on behalf of Indemnitee in connection with (x) each successfully resolved claim, issue or matter and (y) each claim, issue, or matter related to any claim, issue or matter on which the Indemnitee was successful.

(b)            For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

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6.              INDEMNIFICATION FOR EXPENSES OF A WITNESS . Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law, the Company shall indemnify Indemnitee against all Expenses directly or indirectly incurred by or on behalf of Indemnitee if, by reason of his Corporate Status, Indemnitee is a witness in any Action to which Indemnitee is not a party.

7.              ADDITIONAL INDEMNIFICATION . Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement in connection with the Proceeding; provided , that the Company shall have the right to consent to any settlement, which consent shall not be unreasonably withheld.

8.              EXCLUSIONS . The Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a)            for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Parent within the meaning of Section 16(b) of the Exchange Act, or similar provisions of other federal or state statutory law or common law; or

(b)            in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, unless (i) such indemnification is expressly required to be made by applicable law; (ii) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation; or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company to the fullest extent permitted by applicable law.

9.              ADVANCES OF EXPENSES . Notwithstanding any provision of this Agreement, to the fullest extent permitted by applicable law, the Company shall advance the Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within 20 days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free, and made without regard to Indemnitee’s ability to repay the expenses or ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include all reasonable Expenses incurred pursuing an Action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances solely upon the execution and delivery to the Company of an undertaking to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8.

 

10.

PROCEDURE FOR NOTIFICATION AND DEFENSE OF CLAIM .

(a)            Within 30 days after service of process of Indemnitee relating to notice of the commencement of any Proceeding, Indemnitee shall submit to the Company a written request, including such documentation and information as is reasonably available to Indemnitee

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and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The failure to notify the Company within such period will not relieve the Company from any liability that it may have to Indemnitee (i) under this Agreement except to the extent the failure adversely affects the Company’s rights, legal position, ability to defend or ability to obtain insurance coverage with respect to such Proceeding or (ii) otherwise than under this Agreement. The Secretary of the Company shall advise the Board in writing within 72 hours after receipt of such a request for indemnification.

(b)            If the Company shall be obligated to pay the Expenses in connection with any Proceeding against the Indemnitee, the Company shall be entitled to assume and control the defense of such Proceeding (with counsel consented to by the Indemnitee, which consent shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election so to do. After delivery of such notice, consent to such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of separate counsel subsequently incurred by the Indemnitee with respect to the same Proceeding, provided that the reasonable fees and expenses of Indemnitee’s counsel shall be at the expense of the Company if:

(i)             the employment of separate counsel by the Indemnitee has been previously authorized by the Company;

(ii)            the Indemnitee or counsel selected by the Company shall have concluded that there may be a conflict of interest between the Company and the Indemnitee or among Indemnitees jointly represented in the conduct of any such defense; or

(iii)          the Company shall not, in fact, have employed counsel, to which Indemnitee has consented as aforesaid, to assume the defense of such Proceeding.

(c)            The Company may participate in the Proceeding at its own expense. The Company will not, without prior written consent of the Indemnitee, effect any settlement of a claim in any threatened or pending Proceeding unless such settlement solely involves the payment of money and includes an unconditional release of the Indemnitee from all liability on any claims that are or were threatened to be made against the Indemnitee in the Proceeding.

 

11.

PROCEDURE UPON APPLICATION FOR INDEMNIFICATION .

(a)            Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case:

(i)             if a Change in Control has occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or

 

(ii)

if a Change in Control has not occurred,

(A)           by a majority vote of the Disinterested Directors, even though less than a quorum of the Board,

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(B)           by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board,

(C)           if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or

(D)           if so directed by the Board, by the stockholders of the Company.

If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 10 days after such determination.

Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b)            If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as follows.

(i)             If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected.

(ii)            If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless he shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected.

In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for

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resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

12.

PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS .

(a)            In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

(b)            Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(c)            If the person, persons or entity empowered or selected to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law; provided , that

(i)             such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and

(ii)            the provisions of this Section 12(c) shall not apply (1) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 11(a) of this Agreement and if (A) within 15 days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such

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determination is made thereat, or (2) if the determination of entitlement to indemnification is made by Independent Counsel pursuant to Section 11(a) of this Agreement.

(d)            The termination of a Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(e)            Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 12(e) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(f)             The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

13.

REMEDIES OF INDEMNITEE .

 

(a)

If

(i)             a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement,

(ii)            advancement of Expenses is not timely made pursuant to Section 9 of this Agreement,

(iii)          no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within 60 days (or, if Section 12(c)(ii) shall apply, 90 days) after receipt by the Company of the request for indemnification,

(iv)           payment of indemnification is not made pursuant to Section 5 or 6 or the last sentence of Section 11(a) of this Agreement within 10 days after receipt by the Company of a written request therefor, or

(v)            payment of indemnification pursuant to Section 3, 4 or 7 of this Agreement is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification,

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Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses, as the case may be. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)            If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c)            If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent a prohibition of such indemnification under applicable law.

(d)            The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within 10 days after receipt by the Company of a written request therefor), to the fullest extent permitted by applicable law, advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any Action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery.

14.            NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; SUBROGATION .

(a)            The rights provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any

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right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)          To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which such person serves at the request of the Company, Indemnitee shall be an insured under such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. The Company shall promptly notify Indemnitee of any material change in any such policy. The Company may, but will not be required to, create a trust fund, grant a security interest or use other means, including, without limitation, a letter of credit, to ensure the payment of such amounts as may be necessary to satisfy the obligations to indemnify and advance Expenses pursuant to this Agreement. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company and Indemnitee shall mutually cooperate and take all reasonable actions to cause such insurers to pay on behalf of the insureds, all amounts payable as a result of such proceeding in accordance with the terms of all applicable policies.

(c)            The Company shall be subrogated to the extent of any payment under this Agreement to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d)            The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, the Certificate of Incorporation, the Bylaws, contract, agreement or otherwise.

(e)            The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other Enterprise.

15.            DURATION OF AGREEMENT, SUCCESSORS AND ASSIGNS . This Agreement shall continue until and terminate upon the later of: (a) ten years after Indemnitee has ceased to occupy any positions or have any relationships described in Section 1 of this Agreement; and (b) the final termination of all Actions pending or threatened during such period to which Indemnitee may be subject by reason of Indemnitee’s Corporate Status or by reason of anything done or not done by Indemnitee in any such capacity. This Agreement shall be binding upon each of the Company and its successors and assigns and shall inure to the benefit of and be enforceable by Indemnitee and his personal and legal representatives, heirs, executors, administrators, distributees, legatees and other successors.

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16.            SEVERABILITY . If any provision or provisions of this Agreement or any application of any provision hereof shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

17.

ENFORCEMENT .

(a)            The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby to induce Indemnitee to serve as an officer and/or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer and/or director of the Company.

(b)            This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

18.            MODIFICATION AND WAIVER . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

19.            NOTICE BY INDEMNITEE . Indemnitee agrees to promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

20.            NOTICES . Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing and shall be deemed to have been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile transmission (but only if followed by transmittal by national overnight courier or hand delivery on the next business day) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next business day if transmitted by national overnight courier, in each case as follows: (i) if to the Company, directed to the Chief Operating Officer

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at his principal place of business; and (ii) if to the Indemnitee, to such address as set forth below his name on the signature page to this Agreement; or such other persons or addresses as shall be furnished in writing by the Indemnitee to the Company.

21.            CONTRIBUTION . To the fullest extent permissible by applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

22.            APPLICABLE LAW AND CONSENT TO JURISDICTION . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13 of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “ Delaware Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably Corporation Service Company, 2711 Centreville Road, Suite 400, Wilmington, Delaware 19808 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

23.            IDENTICAL COUNTERPARTS . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

24.            MISCELLANEOUS . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

COMTECH TELECOMMUNICATIONS CORP.

By:_____________________________________

________________________________________

[Officer and/or Director]

 

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Exhibit 99.1

 

Media Contacts:

Robert G. Rouse, Executive Vice President and Chief Operating Officer

Jerome Kapelus, Senior Vice President, Strategy and Business Development

(631) 962-7000

Info@comtechtel.com

 

COMTECH TELECOMMUNICATIONS CORP. ANNOUNCES

RESULTS FOR THE SECOND QUARTER OF FISCAL 2007

 

Melville, New York – March 8, 2007 – Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended January 31, 2007. Net sales for the second quarter of fiscal 2007 were $111.4 million compared to $95.7 million in the second quarter of fiscal 2006, reflecting growth in the telecommunications transmission and mobile data communications segments, partially offset by lower sales, as anticipated, in the RF microwave amplifiers segment.

 

GAAP net income was $18.2 million, or $0.68 per diluted share, for the three months ended January 31, 2007 compared to $13.3 million, or $0.50 per diluted share, for the three months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $19.1 million, or $0.70 per diluted share, for the three months ended January 31, 2007 as compared to Non-GAAP net income of $14.5 million, or $0.54 per diluted share, for the three months ended January 31, 2006.

 

Net sales for the six months ended January 31, 2007 were $208.5 million, compared to $202.3 million for the six months ended January 31, 2006. GAAP net income was $29.0 million, or $1.09 per diluted share, for the six months ended January 31, 2007 compared to $24.8 million, or $0.94 per diluted share, for the six months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $31.3 million, or $1.15 per diluted share, for the six months ended January 31, 2007 as compared to Non-GAAP net income of $27.0 million, or $1.01 per diluted share, for the six months ended January 31, 2006.

 

In commenting on the Company’s performance during the second quarter of fiscal 2007, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, “Our outstanding second quarter fiscal 2007 results once again demonstrated the strong growth characteristics of the markets we address as well as our leadership position in each of our businesses. We remain confident that fiscal 2007 will be another record year.”

 

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Selected Second Quarter Fiscal 2007 Financial Metrics and Other Items

 

 

•

Bookings for the three and six months ended January 31, 2007 were $104.5 million and $226.0 million, respectively, compared to $89.9 million and $200.0 million for the three and six months ended January 31, 2006, respectively. Backlog as of January 31, 2007 was $203.5 million compared to $210.4 as of October 31, 2006 and $186.0 million as of July 31, 2006.

 

 

•

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $27.3 million and $46.5 million for the three and six months ended January 31, 2007, respectively, versus $22.3 million and $42.4 million for the three and six months ended January 31, 2006, respectively.

 

 

•

Cash provided by operating activities for the first six months of fiscal 2007 was $17.2 million compared to $6.3 million for the first six months of fiscal 2006, reflecting an increase in net income, partially offset by an increase in inventory that is currently anticipated to be reduced in the second half of fiscal 2007, as well as the timing of payments for accounts payable and certain accrued expenses that occurred in the first half of fiscal 2007.

 

 

•

Fiscal 2007 second quarter net sales and operating income were favorably impacted by $5.0 million and $3.8 million, respectively, due to certain adjustments in our telecommunications transmission and mobile data communications segments. Fiscal 2006 second quarter net sales and operating income were favorably impacted by $6.7 million and $4.8 million, respectively, due to certain adjustments in our mobile data communications and RF microwave amplifiers segments. These adjustments are more fully described in our Form 10-Q filed earlier today.

 

 

•

Our effective tax rate of 30.0% in the second quarter of fiscal 2007 reflects (i) the passage of legislation relating to the retroactive extension of the Federal research and experimentation credit; (ii) the approval by our stockholders of an amendment to the 2000 Stock Incentive Plan (the “Plan”) which will permit us to claim tax deductions for cash awards anticipated to be paid under the Plan; and (iii) a tax benefit of $0.2 million relating to disqualifying dispositions of incentive stock options. Included in the tax provision for the three months ended January 31, 2007 is a $0.6 million tax benefit related to the retroactive application of the Federal research and experimentation credit to fiscal 2006. Excluding the tax benefit relating to fiscal 2006, we now estimate our effective tax rate for fiscal 2007 will approximate 35.0%.

 

 

•

Amortization of stock-based compensation expense for both the three months ended January 31, 2007 and 2006 was $1.5 million. Stock-based compensation expense for the three months ended January 31, 2007 was favorably impacted by a $0.4 million reduction associated with an increase in the estimated forfeiture rate of stock-based awards.

 

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Friday, March 9, 2007. Investors and the public are invited to access a live webcast of the conference call from the news section of the Comtech web site at www.comtechtel.com . Alternatively, investors can access the conference call by dialing (800) 896-8445 (domestic) or (785) 830-1916 (international) and using the conference I.D. of “Comtech.” A replay of the conference call will be available for seven days by dialing (402) 220-0868. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.

 

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About Comtech

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company believes many of its solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable or ineffective. The Company conducts business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company sells products to a diverse customer base in the global commercial and government communications markets. The Company believes it is a market leader in the market segments that it serves.

 

Cautionary Statement Regarding Forward-Looking Statements

Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the Company’s future performance and financial condition, plans and objectives of the Company’s management and the Company’s assumptions regarding such future performance, financial condition, plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under the Company’s control which may cause actual results, future performance and financial condition, and achievement of plans and objectives of the Company’s management to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include the timing of receipt of, and the Company’s performance on, new orders that can cause significant fluctuations in net sales and operating results, the timing and funding of government contracts, adjustments to gross profits on long-term contracts, risks associated with international sales, rapid technological change, evolving industry standards, frequent new product announcements and enhancements, changing customer demands, changes in prevailing economic and political conditions, and other factors described in the Company’s filings with the Securities and Exchange Commission.

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 

Three months ended January 31,
  Six months ended January 31,
2007
  2006
  2007
  2006
 
                             
Net sales     $ 111,383,000     95,741,000     208,453,000     202,308,000  
Cost of sales       61,533,000     54,650,000     119,228,000     121,013,000  
         Gross profit       49,850,000     41,091,000     89,225,000     81,295,000  
                             
Expenses:                            
         Selling, general and administrative       18,257,000     15,809,000     34,844,000     31,857,000  
         Research and development       7,616,000     6,007,000     14,773,000     12,756,000  
         Amortization of intangibles       679,000     603,000     1,328,000     1,199,000  
        26,552,000     22,419,000     50,945,000     45,812,000  
                             
Operating income       23,298,000     18,672,000     38,280,000     35,483,000  
                             
Other expense (income):                            
         Interest expense       672,000     672,000     1,367,000     1,346,000  
         Interest income       (3,315,000 )   (2,172,000 )   (6,490,000 )   (3,947,000 )
                             
Income before provision for income taxes       25,941,000     20,172,000     43,403,000     38,084,000  
Provision for income taxes       7,770,000     6,868,000     14,405,000     13,316,000  
Net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
                             
Net income per share:                            
       Basic     $ 0.79     0.59     1.26     1.09  
       Diluted     $ 0.68     0.50     1.09     0.94  
                             
Weighted average number of common                            
   shares outstanding - basic       23,095,000     22,741,000     23,022,000     22,694,000  
                             
Weighted average number of common and                            
   common equivalent shares outstanding                            
   assuming dilution - diluted       27,491,000     27,354,000     27,440,000     27,367,000  

 

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

January 31,
2007
July 31,
2006
(Unaudited)
Assets                
Current assets:                
    Cash and cash equivalents     $ 266,214,000     251,587,000  
    Restricted cash       —     1,003,000  
    Accounts receivable, net       68,700,000     70,047,000  
    Inventories, net       73,816,000     61,043,000  
    Prepaid expenses and other current assets       5,676,000     7,178,000  
    Deferred tax asset - current       8,205,000     7,591,000  
                     Total current assets       422,611,000     398,449,000  
                 
Property, plant and equipment, net       26,060,000     24,732,000  
Goodwill       24,387,000     22,244,000  
Intangibles with finite lives, net       6,276,000     6,855,000  
Deferred financing costs, net       2,176,000     2,449,000  
Other assets, net       431,000     537,000  
                     Total assets     $ 481,941,000     455,266,000  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
    Accounts payable     $ 19,553,000     28,337,000  
    Accrued expenses and other current liabilities       38,126,000     41,230,000  
    Customer advances and deposits       9,147,000     3,544,000  
    Deferred service revenue       4,906,000     9,896,000  
    Current installments of other obligations       129,000     154,000  
    Interest payable       1,050,000     1,050,000  
    Income taxes payable       5,585,000     5,252,000  
                     Total current liabilities       78,496,000     89,463,000  
                 
Convertible senior notes       105,000,000     105,000,000  
Other obligations, less current installments       177,000     243,000  
Deferred tax liability - non-current       6,592,000     6,318,000  
                     Total liabilities       190,265,000     201,024,000  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
    Preferred stock, par value $.10 per share; shares authorized                
        and unissued 2,000,000       —     —  
    Common stock, par value $.10 per share; authorized 100,000,000                
        shares, issued 23,348,622 shares and 23,052,593 shares at                
        January 31, 2007 and July 31, 2006, respectively       2,335,000     2,305,000  
    Additional paid-in capital       147,893,000     139,487,000  
    Retained earnings       141,633,000     112,635,000  
        291,861,000     254,427,000  
      Less:                
        Treasury stock (210,937 shares)       (185,000 )   (185,000 )
                     Total stockholders’ equity       291,676,000     254,242,000  
                     Total liabilities and stockholders’ equity     $ 481,941,000     455,266,000  

 

 

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

 

Three Months Ended January 31,
  Six Months Ended January 31,
 
2007
  2006
  2007
  2006
 
Reconciliation of Non-GAAP Net Income To                            
   GAAP Net Income(1):                            
    Non-GAAP net income     $ 19,129,000     14,491,000     31,271,000     26,977,000  
    Amortization of stock-based compensation       (1,537,000 )   (1,538,000 )   (3,347,000 )   (2,834,000 )
    Tax effect of stock-based compensation expense       579,000     351,000     1,074,000     625,000  
    GAAP net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
                             
Reconciliation of Non-GAAP Diluted Earnings Per                            
   Share To GAAP Diluted Earnings Per Share(1):                            
    Non-GAAP diluted earnings per share     $ 0.70     0.54     1.15     1.01  
    Amortization of stock-based compensation       (0.04 )   (0.05 )   (0.10 )   (0.09 )
    Tax effect of stock-based compensation expense       0.02     0.01     0.04     0.02  
    GAAP diluted earnings per share     $ 0.68     0.50     1.09     0.94  
                             
Reconciliation of GAAP Net Income to EBITDA(2):                            
    GAAP net income     $ 18,171,000     13,304,000     28,998,000     24,768,000  
    Income taxes       7,770,000     6,868,000     14,405,000     13,316,000  
    Net interest income       (2,643,000 )   (1,500,000 )   (5,123,000 )   (2,601,000 )
    Amortization of stock-based compensation       1,537,000     1,538,000     3,347,000     2,834,000  
    Depreciation and amortization       2,469,000     2,107,000     4,886,000     4,074,000  
    EBITDA     $ 27,304,000     22,317,000     46,513,000     42,391,000  

(1)

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

 

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

ECMTL

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