·	At January 31, 2011, the Company had $593.3 million of cash and cash equivalents. Net cash provided by operating activities was $44.2 million for the six months ended January 31, 2011 compared to $28.0 million for the six months ended January 31, 2010.

·	During the six months ended January 31, 2011, the Company repurchased 1,628,848 shares of its common stock under its $100.0 million stock repurchase plan in open-market transactions for an aggregate cost of $46.8 million (including transaction costs) with an average price per share of $28.73.

·	Backlog as of January 31, 2011 was $199.6 million. Bookings for the three and six months ended January 31, 2011 were $95.0 million and $202.5 million, respectively, compared to $82.3 million and $202.9 million for the three and six months ended January 31, 2010, respectively.

·	Earnings before interest, taxes, depreciation and amortization, (“Adjusted EBITDA”), was $32.3 million and $78.7 million for the three and six months ended January 31, 2011, respectively, versus $33.7 million and $55.1 million for the three and six months ended January 31, 2010, respectively.

·

The Company’s effective tax rate for the three months ended January 31, 2011 reflects net discrete tax benefits of approximately $0.6 million, which primarily relates to the passage of legislation that included the retroactive extension of the federal research and experimentation credit from December 31, 2009 to December 31, 2011.

·

In January 2011, an independent audit of Comtech’s compliance of International Traffic in Arms Regulations (“ITAR”) was completed and the results of that audit were provided to the Enforcement Division of the Office of Defense Trade Controls Compliance (“DDTC”) of the U.S. Department of State. The audit found no violations of ITAR, that the Company has taken numerous steps to significantly improve export control processes and that the Company made demonstrable efforts in developing an export compliance program. Such audit was previously requested by the DDTC in connection with previously reported violations.

 

 

 

 

		Three months ended January 31,								Six months ended January 31,
		2011				2010				2011				2010
Net sales		$	162,811,000				171,132,000				340,971,000				304,948,000
Cost of sales			101,901,000				107,631,000				215,827,000				191,673,000
Gross profit			60,910,000				63,501,000				125,144,000				113,275,000
Expenses:
Selling, general and administrative			23,175,000				22,909,000				47,190,000				44,628,000
Research and development			10,467,000				11,431,000				21,218,000				22,755,000
Amortization of intangibles			2,004,000				1,765,000				3,891,000				3,529,000
Merger termination fee, net			-				-				(12,500,000	)			-
			35,646,000				36,105,000				59,799,000				70,912,000
Operating income			25,264,000				27,396,000				65,345,000				42,363,000
Other expenses (income):
Interest expense			2,090,000				1,966,000				4,153,000				3,933,000
Interest income and other			(626,000	)			(178,000	)			(1,320,000	)			(413,000	)
Income before provision for income taxes			23,800,000				25,608,000				62,512,000				38,843,000
Provision for income taxes			7,704,000				9,275,000				20,760,000				13,478,000
Net income		$	16,096,000				16,333,000				41,752,000				25,365,000
Net income per share:
Basic		$	0.59				0.58				1.51				0.90
Diluted		$	0.52				0.51				1.32				0.81
Weighted average number of common shares outstanding – basic			27,209,000				28,250,000				27,664,000				28,236,000
Weighted average number of common and common equivalent shares outstanding – diluted			32,983,000				34,080,000				33,403,000				34,069,000
Dividends declared per issued and outstanding common share as of the applicable dividend record date		$	0.25				-				0.50				-

 

 

 

 

 

		January 31, 2011				July 31, 2010
Assets		(Unaudited)				(Audited)
Current assets:
Cash and cash equivalents		$	593,338,000				607,594,000
Accounts receivable, net			80,864,000				135,840,000
Inventories, net			79,947,000				73,562,000
Prepaid expenses and other current assets			7,356,000				8,876,000
Deferred tax asset			13,843,000				14,947,000
Total current assets			775,348,000				840,819,000
Property, plant and equipment, net			30,491,000				33,727,000
Goodwill			137,354,000				137,354,000
Intangibles with finite lives, net			49,670,000				48,091,000
Deferred financing costs, net			4,515,000				4,675,000
Other assets, net			1,185,000				1,896,000
Total assets		$	998,563,000				1,066,562,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	23,391,000				77,844,000
Accrued expenses and other current liabilities			41,784,000				53,398,000
Dividends payable			6,699,000				-
Customer advances and deposits			18,889,000				12,780,000
Interest payable			1,531,000				1,531,000
Income taxes payable			5,521,000				8,666,000
Total current liabilities			97,815,000				154,219,000
Convertible senior notes			200,000,000				200,000,000
Other liabilities			6,307,000				2,518,000
Income taxes payable			4,729,000				5,220,000
Deferred tax liability			3,464,000				2,973,000
Total liabilities			312,315,000				364,930,000
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000			-				-
Common stock, par value $.10 per share; authorized 100,000,000 shares; issued 28,634,650 shares and 28,542,535 shares at January 31, 2011 and July 31, 2010, respectively			2,863,000				2,854,000
Additional paid-in capital			350,787,000				347,514,000
Retained earnings			379,587,000				351,449,000
			733,237,000				701,817,000
Less:
Treasury stock, at cost (1,839,785 shares and 210,937 shares at January 31, 2011 and July 31, 2010, respectively)			(46,989,000	)			(185,000	)
Total stockholders’ equity			686,248,000				701,632,000
Total liabilities and stockholders’ equity		$	998,563,000				1,066,562,000

		Three Months Ended January 31,								Six Months Ended January 31,
		2011				2010				2011				2010
Reconciliation of GAAP Net Income to Adjusted EBITDA(1):
GAAP net income		$	16,096,000				16,333,000				41,752,000				25,365,000
Income taxes			7,704,000				9,275,000				20,760,000				13,478,000
Net interest expense and other			1,464,000				1,788,000				2,833,000				3,520,000
Amortization of stock-based compensation			1,351,000				1,650,000				2,859,000				3,426,000
Depreciation and other amortization			5,686,000				4,683,000				10,511,000				9,349,000
Adjusted EBITDA		$	32,301,000				33,729,000				78,715,000				55,138,000

(1)

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