Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Oct. 31, 2017 | Dec. 01, 2017 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Oct. 31, 2017 | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 | |
Entity Registrant Name | COMTECH TELECOMMUNICATIONS CORP /DE/ | |
Entity Central Index Key | 23,197 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 23,607,565 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 42,507,000 | $ 41,844,000 |
Accounts receivable, net | 113,943,000 | 124,962,000 |
Inventories, net | 70,191,000 | 60,603,000 |
Prepaid expenses and other current assets | 15,302,000 | 13,635,000 |
Total current assets | 241,943,000 | 241,044,000 |
Property, plant and equipment, net | 31,401,000 | 32,847,000 |
Goodwill | 290,633,000 | 290,633,000 |
Intangibles with finite lives, net | 256,602,000 | 261,871,000 |
Deferred financing costs, net | 2,850,000 | 3,065,000 |
Other assets, net | 2,803,000 | 2,603,000 |
Total assets | 826,232,000 | 832,063,000 |
Current liabilities: | ||
Accounts payable | 30,512,000 | 29,402,000 |
Accrued expenses and other current liabilities | 63,103,000 | 68,610,000 |
Dividends payable | 2,351,000 | 2,343,000 |
Customer advances and deposits | 22,668,000 | 25,771,000 |
Current portion of long-term debt | 16,135,000 | 15,494,000 |
Current portion of capital lease obligations | 2,064,000 | 2,309,000 |
Interest payable | 69,000 | 282,000 |
Total current liabilities | 136,902,000 | 144,211,000 |
Non-current portion of long-term debt, net | 175,193,000 | 176,228,000 |
Non-current portion of capital lease obligations | 1,293,000 | 1,771,000 |
Income taxes payable | 2,550,000 | 2,515,000 |
Deferred tax liability, net | 20,024,000 | 17,306,000 |
Customer advances and deposits, non-current | 8,695,000 | 7,227,000 |
Other liabilities | 5,556,000 | 2,655,000 |
Total liabilities | 350,213,000 | 351,913,000 |
Commitments and contingencies (See Note 18) | ||
Stockholders’ equity: | ||
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000 | 0 | 0 |
Common stock, par value $.10 per share; authorized 100,000,000 shares; issued 38,640,511 shares and 38,619,467 shares at October 31, 2017 and July 31, 2017, respectively | 3,864,000 | 3,862,000 |
Additional paid-in capital | 532,940,000 | 533,001,000 |
Retained earnings | 381,064,000 | 385,136,000 |
Stockholders' equity before treasury stock | 917,868,000 | 921,999,000 |
Treasury stock, at cost (15,033,317 shares at October 31, 2017 and July 31, 2017) | (441,849,000) | (441,849,000) |
Total stockholders’ equity | 476,019,000 | 480,150,000 |
Total liabilities and stockholders’ equity | $ 826,232,000 | $ 832,063,000 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Oct. 31, 2017 | Jul. 31, 2017 |
Stockholders’ equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 38,640,511 | 38,619,467 |
Treasury stock, shares (in shares) | 15,033,317 | 15,033,317 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Income Statement [Abstract] | ||
Net sales | $ 121,569,000 | $ 135,786,000 |
Cost of sales | 73,853,000 | 83,678,000 |
Gross profit | 47,716,000 | 52,108,000 |
Expenses: | ||
Selling, general and administrative | 28,475,000 | 32,685,000 |
Research and development | 13,750,000 | 14,096,000 |
Amortization of intangibles | 5,269,000 | 6,055,000 |
Total operating expenses | 47,494,000 | 52,836,000 |
Operating income (loss) | 222,000 | (728,000) |
Other expenses (income): | ||
Interest expense | 2,588,000 | 3,325,000 |
Interest (income) and other | 39,000 | (2,000) |
Loss before benefit from income taxes | (2,405,000) | (4,051,000) |
Benefit from income taxes | (745,000) | (1,562,000) |
Net loss | $ (1,660,000) | $ (2,489,000) |
Net loss per share (See Note 4): | ||
Basic (in dollars per share) | $ (0.07) | $ (0.11) |
Diluted (in dollars per share) | $ (0.07) | $ (0.11) |
Weighted average number of common shares outstanding – basic (in shares) | 23,797,000 | 23,385,000 |
Weighted average number of common and common equivalent shares outstanding – diluted (in shares) | 23,797,000 | 23,385,000 |
Dividends declared per issued and outstanding common share as of the applicable dividend record date (in dollars per share) | $ 0.10 | $ 0.3 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Stockholders' Equity - USD ($) | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock |
Beginning balance at Jul. 31, 2016 | $ 470,401,000 | $ 3,837,000 | $ 524,797,000 | $ 383,616,000 | $ (441,849,000) |
Common stock, beginning balance (in shares) at Jul. 31, 2016 | 38,367,997 | ||||
Treasury stock, beginning balance (in shares) at Jul. 31, 2016 | 15,033,317 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity-classified stock award compensation | 970,000 | 970,000 | |||
Proceeds from issuance of employee stock purchase plan shares | 183,000 | $ 2,000 | 181,000 | ||
Proceeds from issuance of employee stock purchase plan shares (in shares) | 16,812 | ||||
Issuance of restricted stock | 0 | $ 14,000 | (14,000) | ||
Issuance of restricted stock (in shares) | 144,899 | ||||
Net settlement of stock-based awards | (163,000) | $ 3,000 | (166,000) | ||
Net settlement of stock-based awards (in shares) | 25,697 | ||||
Cash dividends declared | (7,008,000) | (7,008,000) | |||
Accrual of dividend equivalents | (129,000) | (129,000) | |||
Net income tax shortfall from settlement of stock-based awards | (161,000) | (161,000) | |||
Reversal of deferred tax assets associated with expired and unexercised stock-based awards | (316,000) | (316,000) | |||
Net loss | (2,489,000) | (2,489,000) | |||
Ending balance at Oct. 31, 2016 | 461,288,000 | $ 3,856,000 | 525,291,000 | 373,990,000 | $ (441,849,000) |
Common stock, ending balance (in shares) at Oct. 31, 2016 | 38,555,405 | ||||
Treasury stock, ending balance (in shares) at Oct. 31, 2016 | 15,033,317 | ||||
Beginning balance at Jul. 31, 2017 | $ 480,150,000 | $ 3,862,000 | 533,001,000 | 385,136,000 | $ (441,849,000) |
Common stock, beginning balance (in shares) at Jul. 31, 2017 | 38,619,467 | 38,619,467 | |||
Treasury stock, beginning balance (in shares) at Jul. 31, 2017 | 15,033,317 | 15,033,317 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity-classified stock award compensation | $ 747,000 | 747,000 | |||
Proceeds from issuance of employee stock purchase plan shares | 189,000 | $ 1,000 | 188,000 | ||
Proceeds from issuance of employee stock purchase plan shares (in shares) | 11,674 | ||||
Forfeiture of restricted stock | 0 | $ (1,000) | 1,000 | ||
Forfeiture of restricted stock (in shares) | (10,254) | ||||
Net settlement of stock-based awards | (995,000) | $ 2,000 | (997,000) | ||
Net settlement of stock-based awards (in shares) | 19,624 | ||||
Cash dividends declared | (2,351,000) | (2,351,000) | |||
Accrual of dividend equivalents | (61,000) | (61,000) | |||
Net loss | (1,660,000) | (1,660,000) | |||
Ending balance at Oct. 31, 2017 | $ 476,019,000 | $ 3,864,000 | $ 532,940,000 | $ 381,064,000 | $ (441,849,000) |
Common stock, ending balance (in shares) at Oct. 31, 2017 | 38,640,511 | 38,640,511 | |||
Treasury stock, ending balance (in shares) at Oct. 31, 2017 | 15,033,317 | 15,033,317 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (1,660,000) | $ (2,489,000) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization of property, plant and equipment | 3,346,000 | 3,749,000 |
Amortization of intangible assets with finite lives | 5,269,000 | 6,055,000 |
Amortization of stock-based compensation | 747,000 | 970,000 |
Amortization of deferred financing costs | 548,000 | 484,000 |
Loss on disposal of property, plant and equipment | 2,000 | 1,000 |
Provision for allowance for doubtful accounts | 147,000 | 339,000 |
Provision for excess and obsolete inventory | 693,000 | 637,000 |
Excess income tax benefit from stock-based awards | 0 | (50,000) |
Deferred income tax expense (benefit) | 2,718,000 | (120,000) |
Changes in assets and liabilities: | ||
Accounts receivable | 10,719,000 | 13,680,000 |
Inventories | (10,281,000) | (4,942,000) |
Prepaid expenses and other current assets | 1,714,000 | 473,000 |
Other assets | (200,000) | 86,000 |
Accounts payable | 610,000 | (3,348,000) |
Accrued expenses and other current liabilities | (2,379,000) | (2,105,000) |
Customer advances and deposits | (1,635,000) | (1,691,000) |
Other liabilities, non-current | (313,000) | (420,000) |
Interest payable | (213,000) | (77,000) |
Income taxes payable | (3,346,000) | (3,446,000) |
Net cash provided by operating activities | 6,486,000 | 7,786,000 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (1,108,000) | (2,075,000) |
Net cash used in investing activities | (1,108,000) | (2,075,000) |
Cash flows from financing activities: | ||
Net borrowings under Revolving Loan Facility | 6,400,000 | 1,000,000 |
Repayment of long-term debt under Term Loan Facility | (7,127,000) | (2,212,000) |
Cash dividends paid | (2,459,000) | (7,123,000) |
Remittance of employees' statutory tax withholdings for stock awards | (995,000) | (163,000) |
Repayment of principal amounts under capital lease obligations | (723,000) | (943,000) |
Proceeds from issuance of employee stock purchase plan shares | 189,000 | 183,000 |
Payment of issuance costs related to equity offering | 0 | (492,000) |
Payment of deferred financing costs | 0 | (105,000) |
Excess income tax benefit from stock-based awards | 0 | 50,000 |
Net cash used in financing activities | (4,715,000) | (9,805,000) |
Net increase (decrease) in cash and cash equivalents | 663,000 | (4,094,000) |
Cash and cash equivalents at beginning of period | 41,844,000 | 66,805,000 |
Cash and cash equivalents at end of period | 42,507,000 | 62,711,000 |
Cash paid (received) during the period for: | ||
Interest | 2,164,000 | 2,849,000 |
Income taxes, net | (113,000) | 2,004,000 |
Non-cash investing and financing activities: | ||
Cash dividends declared but unpaid (including dividend equivalents) | 2,412,000 | 7,137,000 |
Accrued additions to property, plant and equipment | 794,000 | 1,225,000 |
(Forfeiture) issuance of restricted stock | $ (1,000) | $ 14,000 |
General
General | 3 Months Ended |
Oct. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | General The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and its subsidiaries (“Comtech,” “we,” “us,” or “our”) as of and for the three months ended October 31, 2017 and 2016 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year. The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reported period. Actual results may differ from those estimates. Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission (“SEC”), for the fiscal year ended July 31, 2017 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC. As disclosed in more detail in Note (14) - "Segment Information," we manage our business in two reportable segments: Commercial Solutions and Government Solutions. Certain reclassifications have been made to previously reported condensed consolidated financial statements to conform to the current fiscal period presentation. |
Adoption of Accounting Standard
Adoption of Accounting Standards and Updates | 3 Months Ended |
Oct. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Adoption of Accounting Standards and Updates | Adoption of Accounting Standards and Updates We are required to prepare our condensed consolidated financial statements in accordance with the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) which is the source for all authoritative U.S. generally accepted accounting principles, which are commonly referred to as “GAAP.” The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates (“ASUs”). During the three months ended October 31, 2017 , we adopted FASB ASU 2016-09 "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which amends several aspects of the accounting for and reporting of share-based payment transactions. Our adoption of this ASU, on August 1, 2017, did not have a material impact on our condensed consolidated financial statements. See Note (12) - "Stock-Based Compensation" for further information regarding our adoption of this ASU. |
Fair Value Measurements and Fin
Fair Value Measurements and Financial Instruments | 3 Months Ended |
Oct. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Using the fair value hierarchy described in FASB ASC 820 “Fair Value Measurements and Disclosures,” we valued our cash and cash equivalents using Level 1 inputs that were based on quoted market prices. We believe that the carrying amounts of our other current financial assets (such as accounts receivable) and other current liabilities (including accounts payable, accrued expenses and the current portions of our Secured Credit Facility and favorable AT&T warranty settlement) approximate their fair values due to their short-term maturities. The fair value of the non-current portion of our Secured Credit Facility as of October 31, 2017 approximates its carrying amount due to its variable interest rate and pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter. We believe the fair value of our non-current portion of capital lease obligations, which currently has a blended interest rate of 5.9% , would not be materially different than its carrying value as of October 31, 2017 . The fair value of the non-current portion of our favorable AT&T warranty settlement as of October 31, 2017 approximates its carrying amount given our belief that the present value of such liability reflects market participants' assumptions for a similar junior, unsecured debt instrument. See Note (7) - "Accrued Expenses and Other Current Liabilities" for further discussion of the favorable AT&T warranty settlement. As of October 31, 2017 and July 31, 2017 , other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Condensed Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Oct. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Our basic earnings per share ("EPS") is computed based on the weighted average number of common shares (including vested but unissued stock units, share units, performance shares and restricted stock units ("RSUs")), outstanding during each respective period. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards, if dilutive, outstanding during each respective period. Pursuant to FASB ASC 260 " Earnings Per Share, " equity-classified stock-based awards that are subject to performance conditions are not considered in our diluted EPS calculations until the respective performance conditions have been satisfied. When calculating our diluted earnings per share, we consider the amount an employee must pay upon assumed exercise of stock-based awards and the amount of stock-based compensation cost attributed to future services and not yet recognized. On August 1, 2017, we adopted ASU 2016-09, which amends several aspects of the accounting for and reporting of share-based payment transactions. As a result of our adoption of ASU 2016-09, the amount of excess tax benefits assuming exercise of in-the-money stock-based awards is no longer included in the calculation of diluted earnings per share on a prospective basis and the denominator for our diluted calculations could increase in the future as compared to prior calculations. See Note (12) - "Stock-Based Compensation" for more information on the impact of adopting ASU 2016-09. There were no purchases of our common stock during the three months ended October 31, 2017 or 2016. See Note (17) - "Stockholders’ Equity" for more information. Weighted average stock options, performance shares (for which performance conditions have been satisfied), RSUs and restricted stock outstanding of 2,246,000 and 2,419,000 for the three months ended October 31, 2017 and 2016 , respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Our EPS calculations exclude 252,000 and 227,000 weighted average performance shares outstanding for the three months ended October 31, 2017 and 2016 , respectively, as the performance conditions have not yet been satisfied. However, the compensation expense related to these awards is included in net loss (the numerator) for EPS calculations for each respective period. The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations: Three months ended October 31, 2017 2016 Numerator: Net loss for basic calculation $ (1,660,000 ) (2,489,000 ) Numerator for diluted calculation $ (1,660,000 ) (2,489,000 ) Denominator: Denominator for basic calculation 23,797,000 23,385,000 Denominator for diluted calculation 23,797,000 23,385,000 |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Oct. 31, 2017 | |
Accounts Receivable Additional Disclosures [Abstract] | |
Accounts Receivable | Accounts Receivable Accounts receivable consist of the following at: October 31, 2017 July 31, 2017 Billed receivables from commercial and international customers $ 66,349,000 71,404,000 Unbilled receivables from commercial and international customers 17,215,000 24,668,000 Billed receivables from the U.S. government and its agencies 14,709,000 18,497,000 Unbilled receivables from the U.S. government and its agencies 17,172,000 11,693,000 Total accounts receivable 115,445,000 126,262,000 Less allowance for doubtful accounts 1,502,000 1,300,000 Accounts receivable, net $ 113,943,000 124,962,000 Unbilled receivables relate to contracts-in-progress for which revenue has been recognized but we have not yet billed the customer for work performed. We had $108,000 and $118,000 of retainage included in unbilled receivables at October 31, 2017 and July 31, 2017 , respectively, and management estimates that substantially all of the unbilled receivables at October 31, 2017 will be billed and collected within one year . Of the unbilled receivables from commercial and international customers at October 31, 2017 and July 31, 2017 , approximately $2,839,000 and $2,995,000 , respectively, relates to a large over-the-horizon microwave system contract with our large U.S. prime contractor customer (all of which related to our North African country end-customer). As of October 31, 2017 and July 31, 2017 , the U.S. government (and its agencies) represented 27.6% and 23.9% , respectively, of total accounts receivable. There were no other customers which accounted for greater than 10.0% of total accounts receivable at both October 31, 2017 and July 31, 2017 . |
Inventories
Inventories | 3 Months Ended |
Oct. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following at: October 31, 2017 July 31, 2017 Raw materials and components $ 51,237,000 50,569,000 Work-in-process and finished goods 34,188,000 26,053,000 Total inventories 85,425,000 76,622,000 Less reserve for excess and obsolete inventories 15,234,000 16,019,000 Inventories, net $ 70,191,000 60,603,000 As of October 31, 2017 and July 31, 2017 , the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $2,018,000 and $2,148,000 , respectively. As of October 31, 2017 and July 31, 2017 , $1,507,000 and $1,718,000 , respectively, of the inventory balance above related to contracts from third party commercial customers who outsource their manufacturing to us. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 3 Months Ended |
Oct. 31, 2017 | |
Accrued Liabilities, Current [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following at: October 31, 2017 July 31, 2017 Accrued wages and benefits $ 20,436,000 19,622,000 Accrued warranty obligations 13,001,000 17,617,000 Accrued contract costs 8,363,000 8,644,000 Accrued legal costs 7,983,000 8,402,000 Accrued commissions and royalties 2,540,000 3,600,000 Other 10,780,000 10,725,000 Accrued expenses and other current liabilities $ 63,103,000 68,610,000 Accrued legal costs as of October 31, 2017 and July 31, 2017 include $3,739,000 and $4,120,000 , respectively, related to estimated costs associated with certain TCS intellectual property matters. The accrued potential settlement costs do not reflect the final amounts we may actually pay. Ongoing legal costs associated with defending the legacy TCS intellectual property matters and the ultimate resolution could vary and have a material adverse effect on our future consolidated results of operations, financial position or cash flows. TCS intellectual property matters are discussed in more detail in Note (18) - "Legal Proceedings and Other Matters. " Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable. Accrued warranty obligations relate to estimated liabilities for warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, a consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs. Changes in our current accrued warranty obligations during the three months ended October 31, 2017 and 2016 were as follows: Three months ended October 31, 2017 2016 Balance at beginning of period $ 17,617,000 15,362,000 Provision for warranty obligations 1,106,000 1,083,000 Charges incurred (1,830,000 ) (1,461,000 ) Warranty settlement (see below) (3,892,000 ) — Balance at end of period $ 13,001,000 $ 14,984,000 Our current accrued warranty obligations at October 31, 2017 and July 31, 2017 include $5,546,000 and $9,909,000 , respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TCS. During the three months ended October 31, 2017, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2017, the total present value of these monthly credits is $4,721,000 , of which $1,489,000 is included in our current accrued warranty obligations and $3,232,000 is reflected in other liabilities (non-current) on our Condensed Consolidated Balance Sheet. In connection with this favorable settlement, we recorded a benefit to cost of sales of $660,000 . |
Acquisition-Related Restructuri
Acquisition-Related Restructuring Plans | 3 Months Ended |
Oct. 31, 2017 | |
Restructuring and Related Activities [Abstract] | |
Acquisition-Related Restructuring Plans | Acquisition-Related Restructuring Plans Radyne In connection with our August 1, 2008 acquisition of Radyne, we adopted a restructuring plan for which we recorded $2,713,000 of estimated restructuring costs. Of this amount, $613,000 related to severance for Radyne employees which was paid in fiscal 2009. The remaining estimated amounts relate to facility exit costs and were determined as follows: 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 Our total non-cancelable lease obligations were based on the actual lease term which runs from November 1, 2008 through October 31, 2018 . We estimated sublease income based on (i) the terms of a fully executed sublease agreement that expired on October 31, 2015 , and (ii) our assessment of future uncertainties relating to the commercial real estate market. Based on our assessment of commercial real estate market conditions, we currently believe that it is not probable that we will be able to sublease the facility for the remaining lease term. As such, in accordance with grandfathered accounting standards that were not incorporated into the FASB’s ASC, we recorded these costs, at fair value, as assumed liabilities as of August 1, 2008, with a corresponding increase to goodwill. As of October 31, 2017 , the amount of the acquisition-related restructuring reserve is as follows: Cumulative Present value of estimated facility exit costs at August 1, 2008 $ 2,100,000 Cash payments made (10,985,000 ) Cash payments received 8,600,000 Accreted interest recorded 1,861,000 Liability recorded as of period end as accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet $ 1,576,000 As of July 31, 2017 , the present value of the estimated facility exit costs was $1,941,000 . During the three months ended October 31, 2017 , we made cash payments of $397,000 . Interest accreted for the three months ended October 31, 2017 and 2016 was $32,000 and $56,000 , respectively, and is included in interest expense for each respective fiscal period. Future cash payments associated with our restructuring plan are summarized below: As of October 31, 2017 Future lease payments to be made $ 1,576,000 Interest expense to be accreted in future periods 180,000 Total remaining payments $ 1,756,000 TCS In connection with our February 23, 2016 acquisition of TCS, we continue to implement a tactical shift in strategy in our Government Solutions segment and have initiated certain cost reduction actions. To date, we have incurred an immaterial amount of severance and retention costs related to our shift in strategy. |
Secured Credit Facility
Secured Credit Facility | 3 Months Ended |
Oct. 31, 2017 | |
Line of Credit Facility [Abstract] | |
Secured Credit Facility | Secured Credit Facility On February 23, 2016 , in connection with our acquisition of TCS, we entered into a $400,000,000 secured credit facility (the "Secured Credit Facility") with a syndicate of lenders. The Secured Credit Facility, as amended June 6, 2017 (the “June 2017 Amendment”), comprises a senior secured term loan A facility of $250,000,000 (the “Term Loan Facility”) and a secured revolving loan facility of up to $150,000,000 , including a $25,000,000 letter of credit sublimit (the “Revolving Loan Facility”) and, together, with the Term Loan Facility, matures on February 23, 2021. The proceeds of these borrowings were primarily used to finance our acquisition of TCS, including the repayment of certain existing indebtedness of TCS. The Term Loan Facility requires mandatory quarterly repayments. During the three months ended October 31, 2017 and 2016 , we repaid $7,127,000 and $2,212,000 , respectively, principal amount of borrowings under the Term Loan Facility. Under the Revolving Loan Facility, we had outstanding balances ranging from $41,904,000 to $63,804,000 during the three months ended October 31, 2017 . As of October 31, 2017 and July 31, 2017 , amounts outstanding under our Secured Credit Facility, net, were as follows: October 31, 2017 July 31, 2017 Term Loan Facility $ 131,953,000 139,080,000 Less unamortized deferred financing costs related to Term Loan Facility 4,430,000 4,763,000 Term Loan Facility, net 127,523,000 134,317,000 Revolving Loan Facility 63,805,000 57,405,000 Amount outstanding under Secured Credit Facility, net 191,328,000 191,722,000 Less current portion of long-term debt 16,135,000 15,494,000 Non-current portion of long-term debt $ 175,193,000 176,228,000 Interest expense, including amortization of deferred financing costs, recorded during the three months ended October 31, 2017 and 2016 related to the Secured Credit Facility was $2,465,000 and $3,175,000 , respectively and reflects a blended interest rate of approximately 5.30% and 5.00% in the three months ended October 31, 2017 and 2016 , respectively. At October 31, 2017 , we had $3,013,000 of standby letters of credit outstanding under our Secured Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. The Revolving Loan Facility is primarily used for working capital and other general corporate purposes of the Company and its subsidiaries, including the issuance of letters of credit. Borrowings under the Secured Credit Facility, pursuant to terms defined in the Secured Credit Facility, shall be either (i) Alternate Base Rate ("ABR") borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% per annum and (c) the Adjusted LIBO Rate on such day (or, if such day is not a business day, the immediately preceding business day) plus 1.00% per annum (provided that if the LIBO Rate is less than 1.00% , then the LIBO Rate shall be deemed to be 1.00% ), plus (y) the Applicable Rate, or (ii) Eurodollar borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the Adjusted LIBO Rate for such interest period (provided that if the LIBO Rate is less than 1.00% , then the LIBO Rate shall be deemed to be 1.00% ) plus (y) the Applicable Rate. The Applicable Rate is determined based on a pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter. The Secured Credit Facility contains customary representations, warranties and affirmative covenants and customary negative covenants, subject to negotiated exceptions, on (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) restricted payments, including stockholder dividends, and (vii) certain other restrictive agreements. The Secured Credit Facility also contains certain financial covenants and customary events of default (subject to grace periods, as appropriate), such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of our business. The June 2017 Amendment is expected to result in increased operating and acquisition flexibility and simplify the calculations of our financial covenants. The June 2017 Amendment resulted in, among other things, that the: (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. In connection with the June 2017 Amendment, there were no changes to: (i) the committed borrowing capacity; (ii) the maturity date; or (iii) interest rates payable (except that the interest rate pricing grid will now be based on the new Leverage Ratio). Also, the June 2017 Amendment did not result in an extinguishment for accounting purposes (as such term is defined in ASC 470 - “ Debt ”); instead, the June 2017 Amendment was accounted for as a debt modification. As a result, deferred financing costs (including incremental fees for the June 2017 Amendment) will continue to be amortized over the remaining maturity term of the Secured Credit Facility. As of October 31, 2017 , our Leverage Ratio was 2.83 x TTM Consolidated EBITDA compared to the maximum allowable Leverage Ratio of 3.50 x TTM Consolidated EBITDA. In fiscal 2018, the maximum allowable Leverage Ratio will decrease each quarter until reaching 3.00 x TTM Consolidated EBITDA in the fourth quarter of fiscal 2018, with no further reductions thereafter. Our Fixed Charge Coverage Ratio as of October 31, 2017 was 2.03 x compared to the minimum required Fixed Charge Coverage Ratio of 1.25 x, which will not change for the remaining term of the Secured Credit Facility, as amended. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Secured Credit Facility, as amended, for the foreseeable future. The obligations under the Secured Credit Facility, as amended, are guaranteed by certain of our domestic subsidiaries (the “Subsidiary Guarantors”). As collateral security for amounts outstanding under our Secured Credit Facility, as amended, and the guarantees thereof, we and our Subsidiary Guarantors have granted to an administrative agent, for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets. Capitalized terms used but not defined herein have the meanings set forth for such terms in the Secured Credit Facility, dated as of February 23, 2016, and the First Amendment of the Secured Credit Facility, dated as of June 6, 2017, both of which have been documented and filed with the SEC. |
Capital Lease Obligations
Capital Lease Obligations | 3 Months Ended |
Oct. 31, 2017 | |
Capital Leases [Abstract] | |
Capital Lease Obligations | Capital Lease Obligations We lease certain equipment under capital leases, the majority of which we assumed in connection with our acquisition of TCS. As of October 31, 2017 and July 31, 2017 , the net book value of the leased assets which collateralize the capital lease obligations was $4,698,000 and $5,419,000 , respectively, and consisted primarily of machinery and equipment. As of October 31, 2017 , our capital lease obligations reflect a blended interest rate of approximately 5.9% . Our capital leases generally contain provisions whereby we can purchase the equipment at the end of the lease for a one dollar buyout. Depreciation of leased assets is included in depreciation expense. Future minimum payments under capital lease obligations consisted of the following at October 31, 2017 : Remainder of fiscal 2018 $ 1,719,000 Fiscal 2019 1,492,000 Fiscal 2020 318,000 Fiscal 2021 and beyond — Total minimum lease payments 3,529,000 Less: amounts representing interest 172,000 Present value of net minimum lease payments 3,357,000 Current portion of capital lease obligations 2,064,000 Non-current portion of capital lease obligations $ 1,293,000 |
Income Taxes
Income Taxes | 3 Months Ended |
Oct. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes At October 31, 2017 and July 31, 2017 , total unrecognized tax benefits were $8,880,000 and $8,681,000 , respectively, including interest of $121,000 and $95,000 , respectively. At October 31, 2017 and July 31, 2017 , $2,550,000 and $2,515,000 , respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable in our Condensed Consolidated Balance Sheets. The remaining unrecognized tax benefits of $6,330,000 and $6,166,000 at October 31, 2017 and July 31, 2017 , respectively, were presented as an offset to the associated non-current deferred tax assets in our Condensed Consolidated Balance Sheets. Of the total unrecognized tax benefits, $7,875,000 and $7,727,000 , at October 31, 2017 and July 31, 2017 , respectively, net of the reversal of the Federal benefit recognized as a deferred tax asset relating to state reserves, excluding interest, would positively impact our effective tax rate, if recognized. Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our condensed consolidated financial statements. Our policy is to recognize interest and penalties relating to uncertain tax positions in income tax expense. In November 2017, we received notification from the Internal Revenue Service (“IRS”) that it will audit our Federal income tax return for fiscal 2016. Our Federal income tax return for fiscal 2015 is also subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2013 are subject to audit. TCS’s Federal income tax returns for tax years 2014 and 2015 and the tax period from January 1, 2016 to February 23, 2016 are subject to potential future IRS audit. None of TCS’s state income tax returns prior to calendar year 2013 are subject to audit. The results of the IRS tax audit for fiscal 2016, future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Oct. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock Based Compensation Overview We issue stock-based awards to certain of our employees and our Board of Directors pursuant to our 2000 Stock Incentive Plan, as amended, (the “Plan”) and our 2001 Employee Stock Purchase Plan (the “ESPP”), and recognize related stock-based compensation in our condensed consolidated financial statements. The Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, “share units”) and (vi) stock appreciation rights (“SARs”), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations. On August 1, 2017, we adopted ASU 2016-09, which amended several aspects of the accounting for and reporting of our share-based payment transactions, including: Excess tax benefits and shortfalls - ASU 2016-09 requires that all tax effects related to our share-based awards be recognized in the Condensed Consolidated Statement of Operations. ASU 2016-09 also removes the prior requirement to delay recognition of excess tax benefits until it reduces current taxes payable; instead, we are now required to recognize excess tax benefits as discrete items in the interim period in which they occur, subject to normal valuation allowance considerations. As ASU 2016-09 eliminated the concept of accumulated hypothetical tax benefits, excess tax benefits and shortfalls are no longer recognized in stockholders’ equity. As a result, ASU 2016-09 is expected to result in future volatility of our income tax expense (as the future tax effects of share-based awards will be dependent on the price of our common stock at the time of settlement). Additionally, on a prospective basis, excess income tax benefits from the settlement of share-based awards are presented as a cash inflow from operating activities in our Condensed Consolidated Statement of Cash Flows. Diluted earnings per share - Prior to the adoption of ASU 2016-09, in addition to considering the amount an employee must pay upon assumed exercise of stock-based awards and the amount of stock-based compensation cost attributed to future services and not yet recognized, when calculating our diluted earnings per share, the assumed proceeds also included the amount of excess tax benefits, if any, that would have been credited to additional paid-in capital assuming exercise of in-the-money stock-based awards. Effective with our adoption of ASU 2016-09, excess tax benefits are to be excluded from the calculation on a prospective basis. As a result, the denominator for our diluted calculations could increase in the future as compared to prior calculations. Forfeitures - As permitted by ASU 2016-09, we elected to continue to estimate forfeitures of share-based awards. Statutory Tax Withholding Requirements - ASU 2016-09 now allows us, when net settling share-based awards, to withhold an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction, without resulting in liability classification of the award. To qualify, we must have at least some withholding obligation. This aspect of adopting ASU 2016-09 did not have any material impact on us. However, with respect to cash payments that we make to taxing authorities on behalf of employees for such shares withheld, on a retrospective basis, we are required to present such payments as a cash outflow from financing activities in our Condensed Consolidated Statements of Cash Flows (as opposed to operating activities). As of October 31, 2017, the aggregate number of shares of common stock which may be issued, pursuant to the Plan, may not exceed 9,462,500 . At the Fiscal 2017 Annual Meeting of Stockholders held on December 5, 2017 , stockholders approved an amendment to our Plan to increase the share reserve under the Plan by 900,000 shares, making the aggregate number of shares of common stock which may be issued pursuant to the Plan 10,362,500 . Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting power, no more than five years . We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock. As of October 31, 2017 , we had granted stock-based awards pursuant to the Plan representing the right to purchase and/or acquire an aggregate of 8,100,581 shares (net of 3,826,857 expired and canceled awards), of which an aggregate of 5,310,196 have been exercised or settled. As of October 31, 2017 , the following stock-based awards, by award type, were outstanding: Stock options 1,814,835 Performance shares 277,881 RSUs and restricted stock 430,063 Share units 267,606 Total 2,790,385 Our ESPP provides for the issuance of up to 800,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value at the date of issuance. Through October 31, 2017 , we have cumulatively issued 710,413 shares of our common stock to participating employees in connection with our ESPP. Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations: Three months ended October 31, 2017 2016 Cost of sales $ 40,000 48,000 Selling, general and administrative expenses 654,000 851,000 Research and development expenses 53,000 71,000 Stock-based compensation expense before income tax benefit 747,000 970,000 Estimated income tax benefit (260,000 ) (341,000 ) Net stock-based compensation expense $ 487,000 629,000 Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At October 31, 2017 , unrecognized stock-based compensation of $ 10,222,000 , net of estimated forfeitures of $ 812,000 , is expected to be recognized over a weighted average period of 3.2 years. Total stock-based compensation capitalized and included in ending inventory at both October 31, 2017 and July 31, 2017 was $12,000 . There are no liability-classified stock-based awards outstanding as of October 31, 2017 or July 31, 2017 . Stock-based compensation expense (benefit), by award type, is summarized as follows: Three months ended October 31, 2017 2016 Stock options $ 267,000 246,000 Performance shares 112,000 494,000 RSUs and restricted stock 385,000 188,000 ESPP 45,000 42,000 Share units (62,000 ) — Stock-based compensation expense before income tax benefit 747,000 970,000 Estimated income tax benefit (260,000 ) (341,000 ) Net stock-based compensation expense $ 487,000 629,000 ESPP stock-based compensation expense primarily relates to the 15% discount offered to participants in the ESPP. During the three months ended October 31, 2017 , we recorded a $62,000 net benefit which primarily represents the recoupment of certain share units. The estimated income tax benefit as shown in the above table was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability in our Condensed Consolidated Balance Sheet as of October 31, 2017 and July 31, 2017 . The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting. Stock Options The following table summarizes the Plan's activity during the three months ended October 31, 2017 : Awards (in Shares) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at July 31, 2017 1,855,875 $ 28.60 Expired/canceled (41,040 ) 28.97 Outstanding at October 31, 2017 1,814,835 $ 28.59 5.32 $ 6,000 Exercisable at October 31, 2017 1,368,086 $ 28.62 4.80 $ 1,000 Vested and expected to vest at October 31, 2017 1,768,467 $ 28.57 5.27 $ 6,000 Stock options outstanding as of October 31, 2017 have exercise prices ranging from $ 20.90 to $ 33.94 , representing the fair market value of our common stock on the date of grant, a contractual term of five or ten years and a vesting period of three or five years. There were no stock options granted or exercised during the three months ended October 31, 2017 and 2016 . As there were no exercises during the three months ended October 31, 2017 and 2016 , there were no net settlements of stock options or the related issuance of common stock during the respective periods. Performance Shares, RSUs, Restricted Stock and Share Unit Awards The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units: Awards (in Shares) Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Outstanding at July 31, 2017 830,197 $ 16.95 Granted 307,194 18.25 Settled (100,321 ) 20.67 Forfeited (61,520 ) 18.88 Outstanding at October 31, 2017 975,550 $ 16.86 $ 20,984,000 Vested at October 31, 2017 309,853 $ 17.55 $ 6,665,000 Vested and expected to vest at October 31, 2017 941,258 $ 16.87 $ 20,246,000 The total intrinsic value relating to fully-vested awards settled during the three months ended October 31, 2017 and 2016 was $1,937,000 and $425,000 , respectively. Performance shares granted to employees prior to fiscal 2014 generally vest over a 5.3 year period, beginning on the date of grant once pre-established performance goals were attained, and are convertible into shares of our common stock at the time of vesting, on a one -for-one basis for no cash consideration. The performance shares granted to employees since fiscal 2014 principally vest over a three -year performance period, if pre-established performance goals are attained or as specified pursuant to the Plan and related agreements. As of October 31, 2017 , the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level. RSUs and restricted stock granted to non-employee directors have a vesting period of three years and are convertible into shares of our common stock generally at the time of termination, on a one -for-one basis for no cash consideration, or earlier under certain circumstances. RSUs granted to employees have a vesting period of five years and are convertible into shares of our common stock generally at the time of vesting, on a one -for-one basis for no cash consideration. Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock generally at the time of termination, on a one -for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of fiscal 2017 non-equity incentive compensation and are convertible into shares of our common stock on the one -year anniversary of the grant date. Cumulatively through October 31, 2017 , 14,777 share units granted have been settled. The fair value of performance shares, RSUs, restricted stock and share units is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for post vesting restrictions. RSUs, performance shares and restricted stock granted since fiscal 2013 are entitled to dividend equivalents unless forfeited before vesting occurs; however, performance shares granted in fiscal 2013 were not entitled to such dividend equivalents until our Board of Directors determined that the pre-established performance goals were met. Share units granted prior to fiscal 2014 are not entitled to dividend equivalents. Share units granted since fiscal 2014 are entitled to dividend equivalents while the underlying shares are unissued. Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying shares into our common stock. During the three months ended October 31, 2017 , we accrued $61,000 of dividend equivalents and paid out $115,000 . Such amounts were recorded as a reduction to retained earnings. As of October 31, 2017 and July 31, 2017 , accrued dividend equivalents were $500,000 and $554,000 , respectively. We recorded $85,000 of income tax expense in our Condensed Consolidated Statements of Operations for the three months ended October 31, 2017 , which represents net income tax shortfalls from the settlement of stock-based awards and the reversal of deferred tax assets associated with expired and unexercised stock-based awards. During the three months ended October 31, 2016, net income tax shortfalls from similar items totaled $477,000 and, pursuant to prior GAAP, were recorded as a reduction to additional paid-in capital. |
Customer and Geographic Informa
Customer and Geographic Information | 3 Months Ended |
Oct. 31, 2017 | |
Geographic Areas, Revenues from External Customers [Abstract] | |
Customer and Geographic Information | Customer and Geographic Information Sales by geography and customer type, as a percentage of consolidated net sales, are as follows: Three months ended October 31, 2017 2016 United States U.S. government 32.4 % 35.3 % Domestic 44.3 % 36.8 % Total United States 76.7 % 72.1 % International 23.3 % 27.9 % Total 100.0 % 100.0 % Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Included in domestic sales, are sales to Verizon Communications Inc. (“Verizon”) which represented 11.7% of consolidated net sales for the three months ended October 31, 2017. Sales to Verizon were less than 10% of consolidated net sales for the three months ended October 31, 2016. International sales for the three months ended October 31, 2017 and 2016 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $28,315,000 and $37,833,000 , respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for the three months ended October 31, 2017 and 2016 . |
Segment Information
Segment Information | 3 Months Ended |
Oct. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" is based on the way that the chief operating decision-maker ("CODM") organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our Chief Executive Officer and President. Our Commercial Solutions segment serves commercial customers and smaller government customers, such as state and local governments, that require advanced communications technologies to meet their needs. This segment also serves certain large government customers (including the U.S. government) when they have requirements for off-the-shelf commercial equipment. Commercial solutions products include satellite earth station communications equipment such as modems and traveling wave tube amplifiers, public safety technologies including those that are utilized in next generation 911 systems and enterprise technologies such as trusted location and text-messaging platforms. Our Government Solutions segment serves large U.S. and foreign government end-users that require mission critical technologies and systems. Government solutions products include command and control technologies (such as remote sensing tracking systems, rugged solid state drives, land mobile products and quick deploy satellite systems), troposcatter technologies systems (such as digital troposcatter multiplexers, digital over-the-horizon modems, troposcatter systems and frequency converter systems) and RF power and switching technologies products (such as solid-state high-power narrow and broadband amplifiers, enhanced position location reporting system ("EPLRS") amplifier assemblies, identification friend or foe amplifiers and amplifiers used in the counteraction of improvised explosive devices). Our CODM primarily uses a metric that we refer to as Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric does not consider any allocation of the following: income taxes, interest (income) and other expense, interest expense, amortization of stock-based compensation, amortization of intangibles, depreciation expense, settlement of intellectual property litigation, acquisition plan expenses or strategic alternatives analysis expenses and other. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than the Consolidated EBITDA (as such term is defined in our Secured Credit Facility, as amended) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies. Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net loss to Adjusted EBITDA is presented in the tables below: Three months ended October 31, 2017 Commercial Solutions Government Solutions Unallocated Total Net sales $ 76,114,000 45,455,000 — $ 121,569,000 Operating income (loss) $ 4,792,000 (641,000 ) (3,929,000 ) $ 222,000 Net income (loss) $ 4,702,000 (642,000 ) (5,720,000 ) $ (1,660,000 ) Provision for (benefit from) income taxes 6,000 — (751,000 ) (745,000 ) Interest (income) and other expense 48,000 (2,000 ) (7,000 ) 39,000 Interest expense 36,000 3,000 2,549,000 2,588,000 Amortization of stock-based compensation — — 747,000 747,000 Amortization of intangibles 4,425,000 844,000 — 5,269,000 Depreciation 2,444,000 616,000 286,000 3,346,000 Adjusted EBITDA $ 11,661,000 819,000 (2,896,000 ) $ 9,584,000 Purchases of property, plant and equipment $ 959,000 93,000 56,000 $ 1,108,000 Total assets at October 31, 2017 $ 600,649,000 181,739,000 43,844,000 $ 826,232,000 Three months ended October 31, 2016 Commercial Solutions Government Solutions Unallocated Total Net sales $ 76,178,000 59,608,000 — $ 135,786,000 Operating income (loss) $ 3,098,000 2,500,000 (6,326,000 ) $ (728,000 ) Net income (loss) $ 3,013,000 2,503,000 (8,005,000 ) $ (2,489,000 ) Provision for (benefit from) income taxes 23,000 — (1,585,000 ) (1,562,000 ) Interest (income) and other expense (2,000 ) (3,000 ) 3,000 (2,000 ) Interest expense 64,000 — 3,261,000 3,325,000 Amortization of stock-based compensation — — 970,000 970,000 Amortization of intangibles 4,436,000 1,619,000 — 6,055,000 Depreciation 2,587,000 751,000 411,000 3,749,000 Adjusted EBITDA $ 10,121,000 4,870,000 (4,945,000 ) $ 10,046,000 Purchases of property, plant and equipment $ 1,995,000 10,000 70,000 $ 2,075,000 Total assets at October 31, 2016 $ 623,510,000 211,021,000 68,921,000 $ 903,452,000 Unallocated expenses result from corporate expenses such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. Interest expense for the three months ended October 31, 2017 and 2016 includes $2,465,000 and $3,175,000 respectively, related to our Secured Credit Facility, as amended, and includes the amortization of deferred financing costs. See Note (9) - “ Secured Credit Facility ” for further discussion of such debt. Intersegment sales for the three months ended October 31, 2017 and 2016 by the Commercial Solutions segment to the Government Solutions segment were $2,621,000 and $3,426,000 , respectively. There were nominal sales by the Government Solutions segment to the Commercial Solutions segment for these periods. All intersegment sales are eliminated in consolidation and are excluded from the tables above. Unallocated assets at October 31, 2017 consist principally of cash and cash equivalents, income taxes receivable, corporate property, plant and equipment and deferred financing costs. Substantially all of our long-lived assets are located in the U.S. |
Goodwill
Goodwill | 3 Months Ended |
Oct. 31, 2017 | |
Goodwill [Abstract] | |
Goodwill | Goodwill The following table represents goodwill by reportable operating segment as of October 31, 2017 and July 31, 2017 : Commercial Solutions Government Solutions Total Goodwill $ 231,440,000 $ 59,193,000 $ 290,633,000 In accordance with FASB ASC 350 "Intangibles - Goodwill and Other," we perform a goodwill impairment analysis at least annually (in the first quarter of each fiscal year), unless indicators of impairment exist in interim periods. If we fail the quantitative assessment of goodwill impairment ("quantitative assessment"), pursuant to our adoption of FASB ASU No. 2017-04 in fiscal 2017, we would be required to recognize an impairment loss equal to the amount that a reporting unit's carrying value exceeded its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. On August 1, 2017 (the first day of our fiscal 2018 ), we performed our annual quantitative assessment using market participant assumptions to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value. In making this assessment, we considered, among other things, expectations of projected net sales and cash flows, assumptions impacting the weighted average cost of capital, trends in trading multiples of comparable companies, changes in our stock price and changes in the carrying values of our reporting units with goodwill. We also considered overall business conditions. In performing the quantitative assessment, we estimated the fair value of each of our reporting units using a combination of the income and market approaches. The income approach, also known as the discounted cash flow ("DCF") method, utilizes the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). For purposes of conducting our impairment analysis, we assumed revenue growth rates and cash flow projections that are below our actual long-term expectations. The discount rates used in our DCF method were based on a weighted-average cost of capital ("WACC") determined from relevant market comparisons, adjusted upward for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). A terminal value growth rate was applied to the final year of the projected period and reflected our estimate of stable, perpetual growth. We then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach. Under the market approach, we estimated a fair value based on comparable companies' market multiples of revenues and earnings before interest, taxes, depreciation and amortization and factored in a control premium. Finally, we compared our estimates of fair values to our August 1, 2017 total public market capitalization and assessed implied control premiums based on our common stock price of $18.47 as of August 1, 2017 . Based on our quantitative evaluation, we determined that our Commercial Solutions and Government Solutions reporting units had estimated fair values in excess of their carrying values of at least 17.8% and 52.9% , respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment. However, in order to sensitize our goodwill impairment test, we performed a second analysis using only the income approach and concluded that neither reporting units' goodwill was impaired or at risk of failing the quantitative assessment. It is possible that, during fiscal 2018 or beyond, business conditions (both in the U.S. and internationally) could deteriorate from the current state, our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we currently anticipate, or our common stock price could decline. A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2018 or beyond. If assumed net sales and cash flow projections are not achieved in future periods or our common stock price significantly declines from current levels, our Commercial Solutions and Government Solutions reporting units could be at risk of failing the quantitative assessment and goodwill assigned to the respective reporting units could be impaired. Any impairment charges that we may record in the future could be material to our results of operation and financial condition. In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2018 (the start of our fiscal 2019 ). If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (e.g., a sustained decrease in the price of our common stock (considered on both absolute terms and relative to peers)), we may be required to record impairment charges when we perform these tests, or in other future periods. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Oct. 31, 2017 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangible Assets | Intangible Assets Intangible assets with finite lives are as follows: As of October 31, 2017 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 20.3 $ 249,831,000 45,280,000 $ 204,551,000 Technologies 12.3 82,370,000 50,064,000 32,306,000 Trademarks and other 16.4 28,894,000 9,149,000 19,745,000 Total $ 361,095,000 104,493,000 $ 256,602,000 As of 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 The weighted average amortization period in the above table excludes fully amortized intangible assets. Amortization expense for the three months ended October 31, 2017 and 2016 was $5,269,000 and $6,055,000 , respectively. The estimated amortization expense consists of the following for the fiscal years ending July 31,: 2018 $ 21,075,000 2019 17,155,000 2020 17,155,000 2021 16,196,000 2022 14,955,000 We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. No such event has occurred during the three months ended October 31, 2017. We believe that the carrying values of our net intangible assets were recoverable as of October 31, 2017. Any impairment charges that we may record in the future could be material to our results of operation and financial condition. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Oct. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Sale of Common Stock In June 2016, the Company sold 7,145,000 shares of its common stock in a public offering at a price to the public of $14.00 per share, resulting in proceeds to the Company of $95,029,000 , net of underwriting discounts and commissions. As of October 31, 2017 and December 6, 2017 , an aggregate registered amount of $74,970,000 under the Company's existing Shelf Registration Statement filed with the SEC remains available for sale of various types of securities, including debt. Stock Repurchase Program As of October 31, 2017 and December 6, 2017 , we were authorized to repurchase up to an additional $8,664,000 of our common stock, pursuant to our current $100,000,000 stock repurchase program. Our stock repurchase program has no time restrictions and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC Rule 10b5-1 trading plans. There were no repurchases made during the three months ended October 31, 2017 or 2016 . Dividends Since September 2010, we have paid quarterly dividends pursuant to an annual targeted dividend amount that was established by our Board of Directors. On September 27, 2017 , our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 17, 2017 to stockholders of record at the close of business on October 18, 2017. On December 6, 2017 , our Board of Directors declared a dividend of $0.10 per common share, payable on February 16, 2018 to stockholders of record at the close of business on January 17, 2018 . Future dividends remain subject to compliance with financial covenants under our Secured Credit Facility, as amended, as well as Board approval. |
Legal Proceedings and Other Mat
Legal Proceedings and Other Matters | 3 Months Ended |
Oct. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings and Other Matters | Legal Proceedings and Other Matters Legacy TCS Intellectual Property Matter - Vehicle IP In December 2009, Vehicle IP, LLC ("Vehicle IP") filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware (the "District Court"), seeking monetary damages, fees and expenses and other relief from, among others, our customer Verizon Wireless ("Verizon"), based on the VZ Navigator product, and TCS is defending Verizon against Vehicle IP. In 2013, the District Court granted the defendants’ motion for summary judgment on the basis that the products in question did not infringe plaintiff’s patent. Plaintiff appealed that decision and, in 2014, the U.S. Court of Appeals for the Federal Circuit reversed the District Court's claim construction, overturned the District Court's grant of summary judgment of noninfringement, and remanded the case for further proceedings. Fact discovery and expert discovery has closed. Substantive settlement conversations have occurred but, to date, the parties have been unable to reach a settlement. As discussed in Note (7) -“Accrued Expenses and Other Current Liabilities," we have accrued certain legal and settlement costs related to the Vehicle IP matter. The accrued settlement costs related to this matter do not reflect the final amounts we actually may pay, if any. On May 30, 2017, we received positive news that the District Court issued a supplemental claim construction order in our favor. As a result, the plaintiff agreed to file a joint status report to the District Court that requested that the District Court cancel the trial date (which was scheduled for July 2017). On July 28, 2017, the parties entered into a stipulation that the defendants’ accused products do not infringe Vehicle IP’s patent under the District Court’s current revised construction of the disputed patent claim term and requested that the District Court therefore enter a judgment of noninfringement. On August 18, 2017, the court entered such a judgment of noninfringment. As expected, following the judgment, Vehicle IP filed a notice of appeal on August 29, 2017. Vehicle IP's opening brief on appeal of the District Court's claim construction was submitted in October 2017. TCS’s brief in response is currently due January 19, 2018. An appellate ruling may take a year or so to be issued. If the District Court's current claim construction is ultimately upheld at the appellate level, it is possible that we may not have to go to trial or pay any monetary damages. Ongoing legal expenses associated with defending this matter and its ultimate resolution could vary and have a material adverse effect on our consolidated results of operations, financial position or cash flows in future periods. Other Matters In October 2014, we disclosed to the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) that we learned during a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech EF Data Corp. was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority. The sales value of this equipment was approximately $288,000 . At the time of shipment, OFAC regulations prohibited U.S. persons from doing business directly or indirectly with Sudan. In late 2015, OFAC issued an administrative subpoena seeking further information about the disclosed transaction. We have responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon who may have rerouted the modems from Lebanon to Sudan without the required U.S. licensing authorization. Subsequently, in October 2017, U.S. sanctions with respect to Sudan were revoked. Consistent with the revocation of the Sudan Sanction Regulations (“SSR”), shipments to the Sudan Civil Aviation Authority by U.S. persons are now permissible. We are not able to predict when OFAC will complete its review, nor whether it will take any enforcement action against us in light of the recent revocation of the SSR. If OFAC determines that we have violated U.S. trade sanctions, civil and criminal penalties could apply, and we may suffer reputational harm. Even though we take precautions to avoid engaging in transactions that may violate U.S. trade sanctions, those measures may not be effective in every instance. There are certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations. |
Adoption of Accounting Standa25
Adoption of Accounting Standards and Updates Adoption of Accounting Standards and Updates (Policies) | 3 Months Ended |
Oct. 31, 2017 | |
Accounting Policies [Abstract] | |
Adoption of Accounting Standards and Updates | Adoption of Accounting Standards and Updates We are required to prepare our condensed consolidated financial statements in accordance with the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) which is the source for all authoritative U.S. generally accepted accounting principles, which are commonly referred to as “GAAP.” The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates (“ASUs”). During the three months ended October 31, 2017 , we adopted FASB ASU 2016-09 "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which amends several aspects of the accounting for and reporting of share-based payment transactions. Our adoption of this ASU, on August 1, 2017, did not have a material impact on our condensed consolidated financial statements. See Note (12) - "Stock-Based Compensation" for further information regarding our adoption of this ASU. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of numerators and denominators used in basic and diluted EPS calculations | The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations: Three months ended October 31, 2017 2016 Numerator: Net loss for basic calculation $ (1,660,000 ) (2,489,000 ) Numerator for diluted calculation $ (1,660,000 ) (2,489,000 ) Denominator: Denominator for basic calculation 23,797,000 23,385,000 Denominator for diluted calculation 23,797,000 23,385,000 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Accounts Receivable Additional Disclosures [Abstract] | |
Accounts receivable | Accounts receivable consist of the following at: October 31, 2017 July 31, 2017 Billed receivables from commercial and international customers $ 66,349,000 71,404,000 Unbilled receivables from commercial and international customers 17,215,000 24,668,000 Billed receivables from the U.S. government and its agencies 14,709,000 18,497,000 Unbilled receivables from the U.S. government and its agencies 17,172,000 11,693,000 Total accounts receivable 115,445,000 126,262,000 Less allowance for doubtful accounts 1,502,000 1,300,000 Accounts receivable, net $ 113,943,000 124,962,000 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories consist of the following at: October 31, 2017 July 31, 2017 Raw materials and components $ 51,237,000 50,569,000 Work-in-process and finished goods 34,188,000 26,053,000 Total inventories 85,425,000 76,622,000 Less reserve for excess and obsolete inventories 15,234,000 16,019,000 Inventories, net $ 70,191,000 60,603,000 |
Accrued Expenses and Other Cu29
Accrued Expenses and Other Current Liabilities (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Accrued Liabilities, Current [Abstract] | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities consist of the following at: October 31, 2017 July 31, 2017 Accrued wages and benefits $ 20,436,000 19,622,000 Accrued warranty obligations 13,001,000 17,617,000 Accrued contract costs 8,363,000 8,644,000 Accrued legal costs 7,983,000 8,402,000 Accrued commissions and royalties 2,540,000 3,600,000 Other 10,780,000 10,725,000 Accrued expenses and other current liabilities $ 63,103,000 68,610,000 |
Schedule of changes in current accrued warranty obligations | Changes in our current accrued warranty obligations during the three months ended October 31, 2017 and 2016 were as follows: Three months ended October 31, 2017 2016 Balance at beginning of period $ 17,617,000 15,362,000 Provision for warranty obligations 1,106,000 1,083,000 Charges incurred (1,830,000 ) (1,461,000 ) Warranty settlement (see below) (3,892,000 ) — Balance at end of period $ 13,001,000 $ 14,984,000 |
Acquisition-Related Restructu30
Acquisition-Related Restructuring Plan (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Restructuring and Related Activities [Abstract] | |
Determination of estimated facility exit costs table | The remaining estimated amounts relate to facility exit costs and were determined as follows: 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 |
Summary of acquisition-related restructuring liabilities | As of October 31, 2017 , the amount of the acquisition-related restructuring reserve is as follows: Cumulative Present value of estimated facility exit costs at August 1, 2008 $ 2,100,000 Cash payments made (10,985,000 ) Cash payments received 8,600,000 Accreted interest recorded 1,861,000 Liability recorded as of period end as accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet $ 1,576,000 |
Summary of future cash payments associated with estimated facility exit costs | Future cash payments associated with our restructuring plan are summarized below: As of October 31, 2017 Future lease payments to be made $ 1,576,000 Interest expense to be accreted in future periods 180,000 Total remaining payments $ 1,756,000 |
Secured Credit Facility (Tables
Secured Credit Facility (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Line of Credit Facility [Abstract] | |
Schedule of Line of Credit Facilities | As of October 31, 2017 and July 31, 2017 , amounts outstanding under our Secured Credit Facility, net, were as follows: October 31, 2017 July 31, 2017 Term Loan Facility $ 131,953,000 139,080,000 Less unamortized deferred financing costs related to Term Loan Facility 4,430,000 4,763,000 Term Loan Facility, net 127,523,000 134,317,000 Revolving Loan Facility 63,805,000 57,405,000 Amount outstanding under Secured Credit Facility, net 191,328,000 191,722,000 Less current portion of long-term debt 16,135,000 15,494,000 Non-current portion of long-term debt $ 175,193,000 176,228,000 |
Capital Lease Obligations (Tabl
Capital Lease Obligations (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Capital Leases [Abstract] | |
Schedule of Future Minimum Lease Payments for Capital Leases | Future minimum payments under capital lease obligations consisted of the following at October 31, 2017 : Remainder of fiscal 2018 $ 1,719,000 Fiscal 2019 1,492,000 Fiscal 2020 318,000 Fiscal 2021 and beyond — Total minimum lease payments 3,529,000 Less: amounts representing interest 172,000 Present value of net minimum lease payments 3,357,000 Current portion of capital lease obligations 2,064,000 Non-current portion of capital lease obligations $ 1,293,000 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock-based Awards Outstanding by Award Type | As of October 31, 2017 , the following stock-based awards, by award type, were outstanding: Stock options 1,814,835 Performance shares 277,881 RSUs and restricted stock 430,063 Share units 267,606 Total 2,790,385 |
Stock-based compensation for awards detailing where recorded in Condensed Consolidated Statement of Operations | Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations: Three months ended October 31, 2017 2016 Cost of sales $ 40,000 48,000 Selling, general and administrative expenses 654,000 851,000 Research and development expenses 53,000 71,000 Stock-based compensation expense before income tax benefit 747,000 970,000 Estimated income tax benefit (260,000 ) (341,000 ) Net stock-based compensation expense $ 487,000 629,000 |
Summary of net stock-based compensation expense by award type | Stock-based compensation expense (benefit), by award type, is summarized as follows: Three months ended October 31, 2017 2016 Stock options $ 267,000 246,000 Performance shares 112,000 494,000 RSUs and restricted stock 385,000 188,000 ESPP 45,000 42,000 Share units (62,000 ) — Stock-based compensation expense before income tax benefit 747,000 970,000 Estimated income tax benefit (260,000 ) (341,000 ) Net stock-based compensation expense $ 487,000 629,000 |
Summary of the Plan's activity relating to stock options | The following table summarizes the Plan's activity during the three months ended October 31, 2017 : Awards (in Shares) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at July 31, 2017 1,855,875 $ 28.60 Expired/canceled (41,040 ) 28.97 Outstanding at October 31, 2017 1,814,835 $ 28.59 5.32 $ 6,000 Exercisable at October 31, 2017 1,368,086 $ 28.62 4.80 $ 1,000 Vested and expected to vest at October 31, 2017 1,768,467 $ 28.57 5.27 $ 6,000 |
Summary of the Plan's activity relating to performance shares, RSUs, restricted stock and share units | The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units: Awards (in Shares) Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Outstanding at July 31, 2017 830,197 $ 16.95 Granted 307,194 18.25 Settled (100,321 ) 20.67 Forfeited (61,520 ) 18.88 Outstanding at October 31, 2017 975,550 $ 16.86 $ 20,984,000 Vested at October 31, 2017 309,853 $ 17.55 $ 6,665,000 Vested and expected to vest at October 31, 2017 941,258 $ 16.87 $ 20,246,000 |
Customer and Geographic Infor34
Customer and Geographic Information (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Geographic Areas, Revenues from External Customers [Abstract] | |
Schedule of net sales, as a percentage, by geography and customer type | Sales by geography and customer type, as a percentage of consolidated net sales, are as follows: Three months ended October 31, 2017 2016 United States U.S. government 32.4 % 35.3 % Domestic 44.3 % 36.8 % Total United States 76.7 % 72.1 % International 23.3 % 27.9 % Total 100.0 % 100.0 % |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment information | Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net loss to Adjusted EBITDA is presented in the tables below: Three months ended October 31, 2017 Commercial Solutions Government Solutions Unallocated Total Net sales $ 76,114,000 45,455,000 — $ 121,569,000 Operating income (loss) $ 4,792,000 (641,000 ) (3,929,000 ) $ 222,000 Net income (loss) $ 4,702,000 (642,000 ) (5,720,000 ) $ (1,660,000 ) Provision for (benefit from) income taxes 6,000 — (751,000 ) (745,000 ) Interest (income) and other expense 48,000 (2,000 ) (7,000 ) 39,000 Interest expense 36,000 3,000 2,549,000 2,588,000 Amortization of stock-based compensation — — 747,000 747,000 Amortization of intangibles 4,425,000 844,000 — 5,269,000 Depreciation 2,444,000 616,000 286,000 3,346,000 Adjusted EBITDA $ 11,661,000 819,000 (2,896,000 ) $ 9,584,000 Purchases of property, plant and equipment $ 959,000 93,000 56,000 $ 1,108,000 Total assets at October 31, 2017 $ 600,649,000 181,739,000 43,844,000 $ 826,232,000 Three months ended October 31, 2016 Commercial Solutions Government Solutions Unallocated Total Net sales $ 76,178,000 59,608,000 — $ 135,786,000 Operating income (loss) $ 3,098,000 2,500,000 (6,326,000 ) $ (728,000 ) Net income (loss) $ 3,013,000 2,503,000 (8,005,000 ) $ (2,489,000 ) Provision for (benefit from) income taxes 23,000 — (1,585,000 ) (1,562,000 ) Interest (income) and other expense (2,000 ) (3,000 ) 3,000 (2,000 ) Interest expense 64,000 — 3,261,000 3,325,000 Amortization of stock-based compensation — — 970,000 970,000 Amortization of intangibles 4,436,000 1,619,000 — 6,055,000 Depreciation 2,587,000 751,000 411,000 3,749,000 Adjusted EBITDA $ 10,121,000 4,870,000 (4,945,000 ) $ 10,046,000 Purchases of property, plant and equipment $ 1,995,000 10,000 70,000 $ 2,075,000 Total assets at October 31, 2016 $ 623,510,000 211,021,000 68,921,000 $ 903,452,000 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Goodwill [Abstract] | |
Schedule of goodwill by segment | The following table represents goodwill by reportable operating segment as of October 31, 2017 and July 31, 2017 : Commercial Solutions Government Solutions Total Goodwill $ 231,440,000 $ 59,193,000 $ 290,633,000 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Oct. 31, 2017 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangible assets with finite lives | Intangible assets with finite lives are as follows: As of October 31, 2017 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 20.3 $ 249,831,000 45,280,000 $ 204,551,000 Technologies 12.3 82,370,000 50,064,000 32,306,000 Trademarks and other 16.4 28,894,000 9,149,000 19,745,000 Total $ 361,095,000 104,493,000 $ 256,602,000 As of 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 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The estimated amortization expense consists of the following for the fiscal years ending July 31,: 2018 $ 21,075,000 2019 17,155,000 2020 17,155,000 2021 16,196,000 2022 14,955,000 |
General Narrative (Details)
General Narrative (Details) | 3 Months Ended |
Oct. 31, 2017operating_segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 2 |
Fair Value Measurements and F39
Fair Value Measurements and Financial Instruments (Details) | Oct. 31, 2017 |
Fair Value Disclosures [Abstract] | |
Non-current portion of capital lease obligations, a blended interest rate (percent) | 5.90% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Weighted average performance shares outstanding during the period that are excluded from EPS Calculation (in shares) | 252,000 | 227,000 |
Net loss for basic calculation | $ (1,660,000) | $ (2,489,000) |
Numerator for diluted calculation | $ (1,660,000) | $ (2,489,000) |
Denominator for basic calculation (in shares) | 23,797,000 | 23,385,000 |
Denominator for diluted calculation (in shares) | 23,797,000 | 23,385,000 |
Stock options, performance shares (with the performance conditions satisfied), RSUs and restricted stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive equity-classified stock-based awards not included in calculation of diluted earnings per share (in shares) | 2,246,000 | 2,419,000 |
Accounts Receivable (Details)
Accounts Receivable (Details) | Oct. 31, 2017USD ($)customer | Jul. 31, 2017USD ($)customer |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 115,445,000 | $ 126,262,000 |
Less allowance for doubtful accounts | 1,502,000 | 1,300,000 |
Accounts receivable, net | $ 113,943,000 | $ 124,962,000 |
Accounts Receivable | Major customer | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of customers accounted for greater than 10% of total accounts receivable other than disclosed | customer | 0 | 0 |
Minimum percentage of total accounts receivable outstanding by one customer or individual country requiring additional and separate disclosure | 10.00% | 10.00% |
Accounts Receivable | Major customer | U.S. government and its agencies | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Percentage of total accounts receivable | 27.60% | 23.90% |
Billed Receivables | Commercial and International | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 66,349,000 | $ 71,404,000 |
Billed Receivables | U.S. government and its agencies | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | 14,709,000 | 18,497,000 |
Unbilled Receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Retainage | $ 108,000 | 118,000 |
Maximum period that management estimates unbilled accounts receivable to be billed and collected | 1 year | |
Unbilled Receivables | Commercial and International | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 17,215,000 | 24,668,000 |
Unbilled Receivables | U.S. government and its agencies | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | 17,172,000 | 11,693,000 |
Unbilled Receivables | Major customer | U.S. Prime Contractor | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Unbilled receivable related to our large over-the-horizon microwave system contracts | $ 2,839,000 | $ 2,995,000 |
Inventories (Details)
Inventories (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials and components | $ 51,237,000 | $ 50,569,000 |
Work-in-process and finished goods | 34,188,000 | 26,053,000 |
Total inventories | 85,425,000 | 76,622,000 |
Less reserve for excess and obsolete inventories | 15,234,000 | 16,019,000 |
Inventories, net | 70,191,000 | 60,603,000 |
Inventory directly related to long-term contracts | 2,018,000 | 2,148,000 |
Inventory related to contracts from third party commercial customers who outsource their manufacturing to us | $ 1,507,000 | $ 1,718,000 |
Accrued Expenses and Other Cu43
Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 | Oct. 31, 2016 | Jul. 31, 2016 |
Business Acquisition [Line Items] | ||||
Accrued wages and benefits | $ 20,436,000 | $ 19,622,000 | ||
Accrued warranty obligations | 13,001,000 | 17,617,000 | $ 14,984,000 | $ 15,362,000 |
Accrued contract costs | 8,363,000 | 8,644,000 | ||
Accrued legal costs | 7,983,000 | 8,402,000 | ||
Accrued commissions and royalties | 2,540,000 | 3,600,000 | ||
Other | 10,780,000 | 10,725,000 | ||
Accrued expenses and other current liabilities | 63,103,000 | 68,610,000 | ||
TeleCommunication Systems Inc. | Pre-Acquisition Contingencies Related to TCS Intellectual Property | ||||
Business Acquisition [Line Items] | ||||
Accrued legal costs | $ 3,739,000 | $ 4,120,000 |
Accrued Expenses and Other Cu44
Accrued Expenses and Other Current Liabilities - Product Warranty Rollforward (Details) | 3 Months Ended | ||
Oct. 31, 2017USD ($)credit | Oct. 31, 2016USD ($) | Oct. 31, 2017USD ($) | |
Business Acquisition [Line Items] | |||
Minimum coverage period of product warranty from the date of shipment | 1 year | ||
Accrued warranty obligations | $ 17,617,000 | $ 15,362,000 | $ 13,001,000 |
Changes in Product Warranty Liability | |||
Accrued warranty obligations, as of the beginning of the period | 17,617,000 | 15,362,000 | |
Provision for warranty obligations | 1,106,000 | 1,083,000 | |
Charges incurred | (1,830,000) | (1,461,000) | |
Warranty settlement (see below) | (3,892,000) | 0 | |
Accrued warranty obligations, as of the end of the period | 13,001,000 | $ 14,984,000 | |
TeleCommunication Systems Inc. | TCS 911 call handling software solution | |||
Business Acquisition [Line Items] | |||
Accrued warranty obligations | 9,909,000 | 5,546,000 | |
Changes in Product Warranty Liability | |||
Accrued warranty obligations, as of the beginning of the period | 9,909,000 | ||
Accrued warranty obligations, as of the end of the period | $ 5,546,000 | ||
TeleCommunication Systems Inc. | TCS 911 call handling software solution | Full and final warranty settlement with AT&T | |||
Business Acquisition [Line Items] | |||
Number of monthly credits issued | credit | 36 | ||
Amount of monthly credit | 153,000 | ||
Present value of monthly credits | 4,721,000 | ||
TeleCommunication Systems Inc. | TCS 911 call handling software solution | Full and final warranty settlement with AT&T | Accounts Payable and Accrued Liabilities | |||
Business Acquisition [Line Items] | |||
Present value of monthly credits | 1,489,000 | ||
TeleCommunication Systems Inc. | TCS 911 call handling software solution | Full and final warranty settlement with AT&T | Other Noncurrent Liabilities | |||
Business Acquisition [Line Items] | |||
Present value of monthly credits | $ 3,232,000 | ||
TeleCommunication Systems Inc. | TCS 911 call handling software solution | Full and final warranty settlement with AT&T | Cost of sales | |||
Business Acquisition [Line Items] | |||
A benefit in connection with favorable settlement | $ 660,000 |
Acquisition-Related Restructu45
Acquisition-Related Restructuring Plan - Summary of Radyne Acquisition Related Restructuring Plan (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 | Aug. 01, 2008 | Jul. 31, 2008 |
Restructuring and Related Activities [Abstract] | ||||
Business acquisition restructuring costs | $ 2,713,000 | |||
Business acquisition restructuring costs related to severance for employees | 613,000 | |||
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 | $ 1,576,000 | $ 1,941,000 | $ 2,100,000 | $ 2,100,000 |
Acquisition-Related Restructu46
Acquisition-Related Restructuring Plan - Activity of Facility Related Exit Costs (Details) - USD ($) | 3 Months Ended | 111 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2017 | |
Restructuring Reserve [Roll Forward] | |||
Present value of estimated facility-related exit costs, beginning balance | $ 1,941,000 | $ 2,100,000 | |
Cash payments made | (397,000) | (10,985,000) | |
Cash payments received | 8,600,000 | ||
Accreted interest recorded | 32,000 | $ 56,000 | 1,861,000 |
Present value of estimated facility-related exit costs, ending balance | $ 1,576,000 | $ 1,576,000 |
Acquisition-Related Restructu47
Acquisition-Related Restructuring Plan - Details of Future Cash Payments (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 | Aug. 01, 2008 | Jul. 31, 2008 |
Restructuring and Related Activities [Abstract] | ||||
Future lease payments to be made | $ 1,576,000 | $ 1,941,000 | $ 2,100,000 | $ 2,100,000 |
Interest expense to be accreted in future periods | 180,000 | |||
Total remaining payments | $ 1,756,000 |
Secured Credit Facility (Detail
Secured Credit Facility (Details) | Oct. 31, 2017USD ($)$ / shares | Oct. 31, 2017USD ($) | Oct. 31, 2016USD ($) | Jul. 31, 2017USD ($) | Feb. 23, 2016USD ($) |
Line of Credit Facility [Line Items] | |||||
Current portion of long-term debt | $ 16,135,000 | $ 16,135,000 | $ 15,494,000 | ||
Non-current portion of long-term debt, net | 175,193,000 | 175,193,000 | 176,228,000 | ||
Repayment of term loan facility | 7,127,000 | $ 2,212,000 | |||
Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Long-term Debt | 191,328,000 | 191,328,000 | 191,722,000 | ||
Current portion of long-term debt | 16,135,000 | 16,135,000 | 15,494,000 | ||
Non-current portion of long-term debt, net | $ 175,193,000 | 175,193,000 | 176,228,000 | ||
Secured credit facility, maximum borrowing capacity | $ 400,000,000 | ||||
Interest expense including amortization of deferred financing costs | $ 2,465,000 | $ 3,175,000 | |||
Blended interest rate (percent) | 5.30% | 5.30% | 5.00% | ||
Outstanding standby letters of credit at period end | $ 3,013,000 | $ 3,013,000 | |||
Outstanding commercial letters of credit at period end | 0 | 0 | |||
Maximum amount of available cash on hand that can be used in leverage ratio calculation | $ 50,000,000 | 50,000,000 | |||
Leverage ratio | 2.83 | ||||
Fixed charge coverage ratio | 2.03 | ||||
Targeted quarterly dividend per share | $ / shares | $ 0.10 | ||||
Term Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Long-term debt, gross | $ 131,953,000 | 131,953,000 | 139,080,000 | ||
Unamortized deferred financing costs | 4,430,000 | 4,430,000 | 4,763,000 | ||
Long-term Debt | 127,523,000 | 127,523,000 | 134,317,000 | ||
Secured credit facility, maximum borrowing capacity | 250,000,000 | ||||
Repayment of term loan facility | 7,127,000 | $ 2,212,000 | |||
Revolving Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Long-term Debt | $ 63,805,000 | $ 63,805,000 | $ 57,405,000 | ||
Secured credit facility, maximum borrowing capacity | 150,000,000 | ||||
Revolving Loan Facility | Letter of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Secured credit facility, maximum borrowing capacity | $ 25,000,000 | ||||
Federal Funds Effective Rate | Revolving Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Variable interest rate (percent) | 0.50% | ||||
Adjusted LIBO rate | Revolving Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Variable interest rate (percent) | 1.00% | ||||
Floor interest rate | 1.00% | ||||
Minimum | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Fixed charge coverage ratio | 1.25 | ||||
Minimum | Revolving Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Long-term Debt | $ 41,904,000 | $ 41,904,000 | |||
Maximum | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Leverage ratio | 3.50 | ||||
Maximum | Revolving Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Long-term Debt | $ 63,804,000 | 63,804,000 | |||
Fourth quarter of fiscal 2018 and thereafter | Maximum | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Leverage ratio | 3 | ||||
Due by February 23, 2021 | Term Loan Facility | Secured Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Balloon payment to be made | $ 22,500,000 | $ 22,500,000 |
Capital Lease Obligations (Deta
Capital Lease Obligations (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 |
Capital Leases [Abstract] | ||
Net book value of the leased assets | $ 4,698,000 | $ 5,419,000 |
Blended interest rate | 5.90% | |
Capital Leases, Option To Buy Leased Asset | $ 1 | |
Remainder of fiscal 2018 | 1,719,000 | |
Fiscal 2,019 | 1,492,000 | |
Fiscal 2,020 | 318,000 | |
Fiscal 2021 and beyond | 0 | |
Total minimum lease payments | 3,529,000 | |
Less: amounts representing interest | 172,000 | |
Present value of net minimum lease payments | 3,357,000 | |
Current portion of capital lease obligations | 2,064,000 | 2,309,000 |
Non-current portion of capital lease obligations | $ 1,293,000 | $ 1,771,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 |
Income Tax Contingency [Line Items] | ||
Unrecognized tax benefits | $ 8,880,000 | $ 8,681,000 |
Interest accrued relating to income taxes | 121,000 | 95,000 |
Unrecognized tax benefits that would positively impact our effective tax rate, if recognized | 7,875,000 | 7,727,000 |
Non-current income taxes payable | ||
Income Tax Contingency [Line Items] | ||
Unrecognized tax benefits | 2,550,000 | 2,515,000 |
Included in the non-current deferred tax liabilities (as an offset to the associated deferred tax asset) | ||
Income Tax Contingency [Line Items] | ||
Unrecognized tax benefits | $ 6,330,000 | $ 6,166,000 |
Stock-Based Compensation - Over
Stock-Based Compensation - Overview (Details) - shares | Dec. 05, 2017 | Oct. 31, 2017 | Jul. 31, 2017 |
Stock options | |||
Stock-Based Awards Outstanding By Award Type | |||
Number of stock-based option awards outstanding at period end (in shares) | 1,814,835 | 1,855,875 | |
2000 Stock Incentive Plan | |||
2000 Stock Incentive Plan | |||
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares) | 9,462,500 | ||
Aggregate net number of stock-based awards granted (in shares) | 8,100,581 | ||
Aggregate number of stock based awards expired and canceled (in shares) | 3,826,857 | ||
Aggregate number of stock-based awards exercised or settled (in shares) | 5,310,196 | ||
Stock-Based Awards Outstanding By Award Type | |||
Number of total stock-based awards outstanding (in shares) | 2,790,385 | ||
2000 Stock Incentive Plan | Stock options | |||
2000 Stock Incentive Plan | |||
Maximum term for grants of incentive and non-qualified stock-based awards, excluding incentive stock-based awards granted to stockholders who own more than 10% of the voting power | 10 years | ||
Percentage of a stockholder's voting power that limits the contractual term of an incentive stock-based award | 10.00% | ||
Maximum term for incentive stock-based awards granted to stockholders who own more than 10% of the voting power | 5 years | ||
Stock-Based Awards Outstanding By Award Type | |||
Number of stock-based option awards outstanding at period end (in shares) | 1,814,835 | ||
2000 Stock Incentive Plan | Performance shares | |||
Stock-Based Awards Outstanding By Award Type | |||
Number of stock-based non-option awards outstanding at period end (in shares) | 277,881 | ||
2000 Stock Incentive Plan | RSUs and restricted stock | |||
Stock-Based Awards Outstanding By Award Type | |||
Number of stock-based non-option awards outstanding at period end (in shares) | 430,063 | ||
2000 Stock Incentive Plan | Share units | |||
Stock-Based Awards Outstanding By Award Type | |||
Number of stock-based non-option awards outstanding at period end (in shares) | 267,606 | ||
2001 Employee Stock Purchase Plan | Employee Stock Purchase Plan - ESPP | |||
2000 Stock Incentive Plan | |||
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares) | 800,000 | ||
2001 Employee Stock Purchase Plan | |||
Discount rate from market value, on purchase date, offered to employees participating in the Employee Stock Purchase Plan (ESPP) | 85.00% | ||
Total number of shares of common stock issued to employees under employee stock purchase plan and through the end of the reporting period (in shares) | 710,413 | ||
Subsequent Event | 2000 Stock Incentive Plan | |||
2000 Stock Incentive Plan | |||
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares) | 10,362,500 | ||
Number of additional shares authorized (in shares) | 900,000 |
Stock-Based Compensation - Expe
Stock-Based Compensation - Expenses (Details) - USD ($) | Oct. 31, 2017 | Oct. 31, 2017 | Oct. 31, 2016 | Jul. 31, 2017 |
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ 747,000 | $ 970,000 | ||
Estimated income tax benefit | (260,000) | (341,000) | ||
Net stock-based compensation expense | 487,000 | 629,000 | ||
Total remaining unrecognized compensation cost related to the unvested stock-based awards | $ 10,222,000 | 10,222,000 | ||
Estimated forfeitures related to unvested stock-based awards | $ 812,000 | 812,000 | ||
Weighted average number of years net compensation cost is expected to be recognized over | 3 years 2 months 4 days | |||
Stock-based compensation capitalized and included in ending inventory | $ 12,000 | 12,000 | $ 12,000 | |
Stock Options | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ 267,000 | 246,000 | ||
Number of stock-based option awards outstanding at period end (in shares) | 1,814,835 | 1,814,835 | 1,855,875 | |
Performance Shares | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ 112,000 | 494,000 | ||
RSUs and restricted stock | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | 385,000 | 188,000 | ||
Employee Stock Purchase Plan - ESPP | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | 45,000 | 42,000 | ||
Share units | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ (62,000) | 0 | ||
Stock Appreciation Rights (SARs) | ||||
Stock-based Compensation Expenses | ||||
Number of stock-based option awards outstanding at period end (in shares) | 0 | 0 | 0 | |
Cost of sales | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ 40,000 | 48,000 | ||
Selling, general and administrative expenses | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | 654,000 | 851,000 | ||
Research and development expenses | ||||
Stock-based Compensation Expenses | ||||
Stock-based compensation expense before income tax benefit | $ 53,000 | $ 71,000 | ||
2001 Employee Stock Purchase Plan | Employee Stock Purchase Plan - ESPP | ||||
Stock-based Compensation Expenses | ||||
Discount offered to employees participating in the ESPP as a percentage of market price | 15.00% | 15.00% |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - Stock Options - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Awards (in Shares) | ||
Outstanding, Beginning Balance (in shares) | 1,855,875 | |
Expired/canceled (in shares) | (41,040) | |
Outstanding, Ending Balance (in shares) | 1,814,835 | |
Exercisable, Ending Balance (in shares) | 1,368,086 | |
Vested and Expected to Vest, Ending Balance (in shares) | 1,768,467 | |
Weighted Average Exercise Price | ||
Outstanding, Beginning Balance (in dollars per share) | $ 28.60 | |
Expired/canceled (in dollars per share) | 28.97 | |
Outstanding, Ending Balance (in dollars per share) | 28.59 | |
Exercisable, Ending Balance (in dollars per share) | 28.62 | |
Vested and Expected to Vest, Ending Balance (in dollars per share) | $ 28.57 | |
Weighted Average Remaining Contractual Term (Years) | ||
Outstanding, Ending Balance | 5 years 3 months 24 days | |
Exercisable, Ending Balance | 4 years 9 months 19 days | |
Vested And Expected To Vest, Ending Balance | 5 years 3 months 8 days | |
Aggregate Intrinsic Value | ||
Outstanding, Ending Balance | $ 6,000 | |
Exercisable, Ending Balance | 1,000 | |
Vested and Expected to Vest, Ending Balance | $ 6,000 | |
Additional Disclosures | ||
Exercise price, lower range limit (in dollars per share) | $ 20.90 | |
Exercise price, upper range limit (in dollars per share) | $ 33.94 | |
Granted (in shares) | 0 | 0 |
Exercised (in shares) | 0 | 0 |
Vested stock based awards net settled upon exercise (in shares) | 0 | 0 |
Minimum | ||
Additional Disclosures | ||
Contractual term (in years) | 5 years | |
Vesting period (in years) | 3 years | |
Maximum | ||
Additional Disclosures | ||
Contractual term (in years) | 10 years | |
Vesting period (in years) | 5 years |
Stock-Based Compensation - Perf
Stock-Based Compensation - Performance Shares, RSUs, Restricted Stock and Share Unit Awards (Details) | 3 Months Ended | ||
Oct. 31, 2017USD ($)$ / sharesshares | Oct. 31, 2016USD ($) | Jul. 31, 2017USD ($) | |
Additional Disclosures | |||
Accrual of dividend equivalents, net of reversal | $ | $ 61,000 | $ 129,000 | |
Carrying value at period end | $ | $ 350,213,000 | $ 351,913,000 | |
Performance Shares, RSUs, Restricted Stock and Share Units | |||
Awards (in Shares) | |||
Outstanding, Beginning Balance (in shares) | 830,197 | ||
Granted (in shares) | 307,194 | ||
Settled (in shares) | (100,321) | ||
Forfeited (in shares) | (61,520) | ||
Outstanding, Ending Balance (in shares) | 975,550 | ||
Vested, Ending Balance (in shares) | 309,853 | ||
Vested and Expected to Vest, Ending Balance (in shares) | 941,258 | ||
Weighted Average Grant Date Fair Value | |||
Outstanding, Beginning Balance (in dollars per share) | $ / shares | $ 16.95 | ||
Granted (in dollars per share) | $ / shares | 18.25 | ||
Settled (in dollars per share) | $ / shares | 20.67 | ||
Forfeited (in dollars per share) | $ / shares | 18.88 | ||
Outstanding, Ending Balance (in dollars per share) | $ / shares | 16.86 | ||
Vested, Ending Balance (in dollars per share) | $ / shares | 17.55 | ||
Vested and Expected to Vest, Ending Balance (in dollars per share) | $ / shares | $ 16.87 | ||
Aggregate Intrinsic Value | |||
Outstanding, Ending Balance | $ | $ 20,984,000 | ||
Vested, Ending Balance | $ | 6,665,000 | ||
Vested and Expected to Vest, Ending Balance | $ | 20,246,000 | ||
Additional Disclosures | |||
Total intrinsic value of stock-based awards settled | $ | $ 1,937,000 | $ 425,000 | |
Performance Shares | Employees | |||
Additional Disclosures | |||
Common Stock conversion ratio | 1 | ||
Performance Shares | Employees | Granted prior to fiscal 2014 | |||
Additional Disclosures | |||
Vesting period (in years) | 5 years 3 months 19 days | ||
Performance Shares | Employees | Granted since fiscal 2014 | |||
Additional Disclosures | |||
Performance period (in years) | 3 years | ||
RSUs and restricted stock | Non-Employee Director | |||
Additional Disclosures | |||
Vesting period (in years) | 3 years | ||
Common Stock conversion ratio | 1 | ||
RSUs and restricted stock | Employees | |||
Additional Disclosures | |||
Vesting period (in years) | 5 years | ||
Common Stock conversion ratio | 1 | ||
Share units | |||
Additional Disclosures | |||
Common Stock conversion ratio | 1 | ||
Cumulative number of units settled as of the date (in shares) | 14,777 | ||
Share units | Granted on or after July 31, 2017 | |||
Additional Disclosures | |||
Conversion period of fully-vested share units into Common Stock from grant date (in years) | 1 year | ||
Dividend Equivalents | |||
Additional Disclosures | |||
Accrual of dividend equivalents, net of reversal | $ | $ 61,000 | ||
Dividend equivalents paid | $ | 115,000 | ||
Carrying value at period end | $ | $ 500,000 | $ 554,000 | |
2000 Stock Incentive Plan | Performance Shares | |||
Awards (in Shares) | |||
Outstanding, Ending Balance (in shares) | 277,881 | ||
2000 Stock Incentive Plan | RSUs and restricted stock | |||
Awards (in Shares) | |||
Outstanding, Ending Balance (in shares) | 430,063 | ||
2000 Stock Incentive Plan | Share units | |||
Awards (in Shares) | |||
Outstanding, Ending Balance (in shares) | 267,606 |
Stock-Based Compensation - Inco
Stock-Based Compensation - Income Tax Benefit From Stock-based Awards (Details) - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Income Tax Expense | Impact of Accounting Standards Update 2016-09 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Net income tax shortfalls and reversal of deferred tax assets | $ 85,000 | |
Reduction to Additional Paid-In Capital | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Net income tax shortfalls and reversal of deferred tax assets | $ 477,000 |
Customer and Geographic Infor56
Customer and Geographic Information (Details) - USD ($) | 3 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
Revenues from External Customers | ||
Entity wide revenue percentage by major customer type | 100.00% | 100.00% |
Major customer | ||
Revenues from External Customers | ||
Minimum percentage of consolidated net sales sold to one customer or individual country requiring additional and separate disclosure | 10.00% | 10.00% |
U.S. government | ||
Revenues from External Customers | ||
Entity wide revenue percentage by major customer type | 32.40% | 35.30% |
Commercial (United States) | ||
Revenues from External Customers | ||
Entity wide revenue percentage by major customer type | 44.30% | 36.80% |
Total United States | ||
Revenues from External Customers | ||
Entity wide revenue percentage by major customer type | 76.70% | 72.10% |
International | ||
Revenues from External Customers | ||
Entity wide revenue percentage by major customer type | 23.30% | 27.90% |
Revenue generated from external customers | $ 28,315,000 | $ 37,833,000 |
Verizon Communications Inc. | Major customer | Sales Revenue, Net | ||
Revenues from External Customers | ||
Percentage of revenue generated from external customer type | 11.70% |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Jul. 31, 2017 | |
Segment Reporting Information [Line Items] | |||
Net sales | $ 121,569,000 | $ 135,786,000 | |
Operating income (loss) | 222,000 | (728,000) | |
Net income (loss) | (1,660,000) | (2,489,000) | |
Provision for (benefit from) income taxes | (745,000) | (1,562,000) | |
Interest (income) and other expense | 39,000 | (2,000) | |
Interest expense | 2,588,000 | 3,325,000 | |
Amortization of stock-based compensation | 747,000 | 970,000 | |
Amortization of intangibles | 5,269,000 | 6,055,000 | |
Depreciation | 3,346,000 | 3,749,000 | |
Adjusted EBITDA | 9,584,000 | 10,046,000 | |
Purchases of property, plant and equipment | 1,108,000 | 2,075,000 | |
Total assets | 826,232,000 | 903,452,000 | $ 832,063,000 |
Secured Credit Facility | |||
Segment Reporting Information [Line Items] | |||
Interest expense related to Credit Facility | 2,465,000 | 3,175,000 | |
Unallocated | |||
Segment Reporting Information [Line Items] | |||
Net sales | 0 | 0 | |
Operating income (loss) | (3,929,000) | (6,326,000) | |
Net income (loss) | (5,720,000) | (8,005,000) | |
Provision for (benefit from) income taxes | (751,000) | (1,585,000) | |
Interest (income) and other expense | (7,000) | 3,000 | |
Interest expense | 2,549,000 | 3,261,000 | |
Amortization of stock-based compensation | 747,000 | 970,000 | |
Amortization of intangibles | 0 | 0 | |
Depreciation | 286,000 | 411,000 | |
Adjusted EBITDA | (2,896,000) | (4,945,000) | |
Purchases of property, plant and equipment | 56,000 | 70,000 | |
Total assets | 43,844,000 | 68,921,000 | |
Commercial Solutions Segment | Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Net sales | 76,114,000 | 76,178,000 | |
Operating income (loss) | 4,792,000 | 3,098,000 | |
Net income (loss) | 4,702,000 | 3,013,000 | |
Provision for (benefit from) income taxes | 6,000 | 23,000 | |
Interest (income) and other expense | 48,000 | (2,000) | |
Interest expense | 36,000 | 64,000 | |
Amortization of stock-based compensation | 0 | 0 | |
Amortization of intangibles | 4,425,000 | 4,436,000 | |
Depreciation | 2,444,000 | 2,587,000 | |
Adjusted EBITDA | 11,661,000 | 10,121,000 | |
Purchases of property, plant and equipment | 959,000 | 1,995,000 | |
Total assets | 600,649,000 | 623,510,000 | |
Commercial Solutions Segment | Intersegment Eliminations | |||
Segment Reporting Information [Line Items] | |||
Intersegment sales | 2,621,000 | 3,426,000 | |
Government Solutions Segment | Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Net sales | 45,455,000 | 59,608,000 | |
Operating income (loss) | (641,000) | 2,500,000 | |
Net income (loss) | (642,000) | 2,503,000 | |
Provision for (benefit from) income taxes | 0 | 0 | |
Interest (income) and other expense | (2,000) | (3,000) | |
Interest expense | 3,000 | 0 | |
Amortization of stock-based compensation | 0 | 0 | |
Amortization of intangibles | 844,000 | 1,619,000 | |
Depreciation | 616,000 | 751,000 | |
Adjusted EBITDA | 819,000 | 4,870,000 | |
Purchases of property, plant and equipment | 93,000 | 10,000 | |
Total assets | $ 181,739,000 | $ 211,021,000 |
Goodwill (Details)
Goodwill (Details) | 3 Months Ended | ||
Oct. 31, 2017USD ($)operating_segment | Aug. 01, 2017$ / shares | Jul. 31, 2017USD ($) | |
Goodwill [Line Items] | |||
Goodwill | $ 290,633,000 | $ 290,633,000 | |
Number of reportable segments | operating_segment | 2 | ||
Commercial Solutions Segment | |||
Goodwill [Line Items] | |||
Goodwill | $ 231,440,000 | 231,440,000 | |
Reporting unit, percentage of fair value in excess of carrying amount | 17.80% | ||
Government Solutions Segment | |||
Goodwill [Line Items] | |||
Goodwill | $ 59,193,000 | $ 59,193,000 | |
Reporting unit, percentage of fair value in excess of carrying amount | 52.90% | ||
Common Stock | |||
Goodwill [Line Items] | |||
Common stock price (in dollars per share) | $ / shares | $ 18.47 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Oct. 31, 2017 | Jul. 31, 2017 | Oct. 31, 2017 | Oct. 31, 2016 |
Finite-Lived Intangible Assets [Line Items] | ||||
Gross carrying amount | $ 361,095,000 | $ 361,095,000 | $ 361,095,000 | |
Accumulated amortization | 104,493,000 | 99,224,000 | 104,493,000 | |
Net carrying amount | 256,602,000 | $ 261,871,000 | 256,602,000 | |
Amortization of intangibles | 5,269,000 | $ 6,055,000 | ||
Amortization expense - year one | 21,075,000 | 21,075,000 | ||
Amortization expense - year two | 17,155,000 | 17,155,000 | ||
Amortization expense - year three | 17,155,000 | 17,155,000 | ||
Amortization expense - year four | 16,196,000 | 16,196,000 | ||
Amortization expense - year five | $ 14,955,000 | 14,955,000 | ||
Customer Relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted average amortization period | 20 years 3 months 18 days | 20 years 3 months 18 days | ||
Gross carrying amount | $ 249,831,000 | $ 249,831,000 | 249,831,000 | |
Accumulated amortization | 45,280,000 | 41,923,000 | 45,280,000 | |
Net carrying amount | $ 204,551,000 | $ 207,908,000 | 204,551,000 | |
Technologies | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted average amortization period | 12 years 3 months 18 days | 12 years 3 months 18 days | ||
Gross carrying amount | $ 82,370,000 | $ 82,370,000 | 82,370,000 | |
Accumulated amortization | 50,064,000 | 48,623,000 | 50,064,000 | |
Net carrying amount | $ 32,306,000 | $ 33,747,000 | 32,306,000 | |
Trademarks and other | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted average amortization period | 16 years 4 months 22 days | 16 years 4 months 22 days | ||
Gross carrying amount | $ 28,894,000 | $ 28,894,000 | 28,894,000 | |
Accumulated amortization | 9,149,000 | 8,678,000 | 9,149,000 | |
Net carrying amount | $ 19,745,000 | $ 20,216,000 | $ 19,745,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | Nov. 17, 2017 | Jun. 30, 2016 | Oct. 31, 2017 | Oct. 31, 2016 | Dec. 06, 2017 | Sep. 27, 2017 |
Class of Stock [Line Items] | ||||||
Number of common stock sold in public offering (in shares) | 7,145,000 | |||||
Price per share (in dollars per share) | $ 14 | |||||
Proceeds from sale of common stock | $ 95,029,000 | |||||
Aggregate registered amount available for sale of securities under shelf registration statement | $ 74,970,000 | |||||
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract] | ||||||
Stock repurchase program, remaining authorized repurchase amount | 8,664,000 | |||||
Maximum amount authorized by the Board of Directors for repurchases of the Company's common stock | $ 100,000,000 | |||||
Repurchases of common stock (in shares) | 0 | 0 | ||||
Dividends [Abstract] | ||||||
Quarterly dividend payment amount per share (in dollars per share) | $ 0.10 | |||||
Subsequent Event | ||||||
Class of Stock [Line Items] | ||||||
Aggregate registered amount available for sale of securities under shelf registration statement | $ 74,970,000 | |||||
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract] | ||||||
Stock repurchase program, remaining authorized repurchase amount | $ 8,664,000 | |||||
Dividends [Abstract] | ||||||
Quarterly dividend payment amount per share (in dollars per share) | $ 0.10 | |||||
Dividends, cash paid (in dollars per share) | $ 0.10 |
Legal Proceedings and Other M61
Legal Proceedings and Other Matters Commitments and Contingencies (Details) | 1 Months Ended |
Oct. 31, 2014USD ($) | |
Other Matters | |
Loss Contingencies [Line Items] | |
Sales value of equipment | $ 288,000 |