COMTECH TELECOMMUNICATIONS CORP /DE/ — Interim / Quarterly Report 2004

Dec 9, 2003

10-Q 1 d57671_10-q.htm FORM 10-Q Created by EDGAR Ease Plus (EDGAR Ease+ 1.2cb) Project: X:\JOBS\03-57671\d03-57671.eep Control Number: 03-57671 Rev Number: 1.0 Client Name: Comtech Telecommunications Corp. Project Name: Form Type: 10-Q Firm Name: Comtech Telecommunications Corp. Form 10-Q MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20459 Form 10-Q (Mark One)

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

For the quarterly period ended October 31, 2003

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

For the transition period from __ to __

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Commission File Number: 0-7928

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMTECH TELECOMMUNICATIONS CORP. (Exact name of registrant as specified in its charter)

MARKER FORMAT-SHEET="Reg Cover Table 2 Col 10" FSL="Project"

Delaware (State or other jurisdiction of incorporation /organization) 11-2139466 (I.R.S. Employer Identification Number)

MARKER FORMAT-SHEET="Reg Cover Table 2 Col 10" FSL="Project"

105 Baylis Road, Melville, New York (Address of principal executive offices) 11747 (Zip Code)

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

(631) 777-8900 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes || No Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). |X| Yes || No APPLICABLE ONLY TO CORPORATE ISSUERS: As of December 2, 2003, the number of outstanding shares of Common Stock, par value $.10 per share, of the Registrant was 14,063,183.

*********** MARKER PAGE="sheet: 1; page: 1" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMTECH TELECOMMUNICATIONS CORP. INDEX

	Page
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
Consolidated
Balance Sheets – October 31, 2003 (Unaudited) and July 31, 2003	2
Consolidated
Statements of Operations – Three Months Ended October 31, 2003	3
and
2002 (Unaudited)
Consolidated
Statements of Cash Flows – Three Months Ended October 31, 2003
and
2002 (Unaudited)
Notes to Consolidated Financial Statements	5- 9
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations	9-13
Item
3. Quantitative and Qualitative Disclosures about Market Risk	14
Item
4. Controls and Procedures	14
PART
II. OTHER INFORMATION	14
Item
6. Exhibits and Reports on Form 8-K	14
Signature
Page	15
Certifications	16-1 9

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

1

*********** MARKER PAGE="sheet: 2; page: 2" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

PART I FINANCIAL INFORMATION COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

| Item
1. — Assets | October 31, 2003 — (Unaudited) | | July 31, 2003 | |
| --- | --- | --- | --- | --- |
| Current
assets: | | | | |
| Cash
and cash equivalents | $ 49,604,000 | | 48,617,000 | |
| Restricted
cash | 4,280,000 | | 4,288,000 | |
| Accounts
receivable, less allowance for doubtful accounts of $714,000 | | | | |
| at
October 31, 2003 and $912,000 at July 31, 2003 | 34,336,000 | | 26,696,000 | |
| Inventories,
net | 33,517,000 | | 34,048,000 | |
| Prepaid
expenses and other current assets | 2,198,000 | | 1,742,000 | |
| Deferred
tax asset – current | 5,699,000 | | 5,699,000 | |
| Total
current assets | 129,634,000 | | 121,090,000 | |
| Property,
plant and equipment, net | 12,502,000 | | 12,328,000 | |
| Goodwill
and other intangibles with indefinite lives | 17,726,000 | | 17,726,000 | |
| Intangibles
with definite lives, net of accumulated amortization of | | | | |
| $5,220,000
at October 31, 2003 and $4,720,000 at July 31, 2003 | 10,853,000 | | 11,353,000 | |
| Other
assets, net | 378,000 | | 390,000 | |
| Deferred
tax asset – non-current | 1,363,000 | | 1,363,000 | |
| Total
assets | $ 172,456,000 | | 164,250,000 | |
| Liabilities
and Stockholders’ Equity | | | | |
| Current
liabilities: | | | | |
| Current
installments of capital lease obligations | $ 706,000 | | 899,000 | |
| Accounts
payable | 13,296,000 | | 11,527,000 | |
| Accrued
expenses and other current liabilities | 12,497,000 | | 13,267,000 | |
| Customer
advances and deposits | 2,516,000 | | 2,491,000 | |
| Deferred
service revenue | 11,279,000 | | 11,160,000 | |
| Income
taxes payable | 7,614,000 | | 6,945,000 | |
| Total
current liabilities | 47,908,000 | | 46,289,000 | |
| Capital
lease obligations, less current installments | 320,000 | | 393,000 | |
| Total
liabilities | 48,228,000 | | 46,682,000 | |
| Stockholders’
equity: | | | | |
| Preferred
stock, par value $.10 per share; shares authorized and | | | | |
| unissued
2,000,000 | — | | — | |
| Common
stock, par value $.10 per share; authorized 30,000,000 shares, | | | | |
| issued
14,194,233 shares at October 31, 2003 and 14,020,769 shares | | | | |
| at
July 31, 2003 | 1,419,000 | | 1,402,000 | |
| Additional
paid-in capital | 108,468,000 | | 107,573,000 | |
| Retained
earnings | 14,627,000 | | 8,884,000 | |
| | 124,514,000 | | 117,859,000 | |
| Less: | | | | |
| Treasury
stock (140,625 shares) | (185,000 | ) | (185,000 | ) |
| Deferred
compensation | (101,000 | ) | (106,000 | ) |
| Total
stockholders’ equity | 124,228,000 | | 117,568,000 | |
| Total
liabilities and stockholders’ equity | $ 172,456,000 | | 164,250,000 | |
| Commitments
and contingencies | | | | |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

See accompanying notes to consolidated financial statements. 2

*********** MARKER PAGE="sheet: 3; page: 3" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

| | Three
months ended October 31, (Unaudited) — 2003 | 2002 | | |
| --- | --- | --- | --- | --- |
| Net
sales | $ 56,296,000 | | 31,273,000 | |
| Cost of sales | 35,316,000 | | 19,596,000 | |
| Gross
profit | 20,980,000 | | 11,677,000 | |
| Expenses: | | | | |
| Selling,
general and administrative | 8,574,000 | | 6,328,000 | |
| Research
and development | 3,541,000 | | 3,016,000 | |
| Amortization
of intangibles | 500,000 | | 526,000 | |
| | 12,615,000 | | 9,870,000 | |
| Operating
income | 8,365,000 | | 1,807,000 | |
| Other expense
(income): | | | | |
| Interest
expense | 24,000 | | 691,000 | |
| Interest
income | (105,000 | ) | (59,000 | ) |
| Income before
provision for income taxes | 8,446,000 | | 1,175,000 | |
| Provision
for income taxes | 2,703,000 | | 376,000 | |
| Net income | $ 5,743,000 | | 799,000 | |
| Net income
per share: | | | | |
| Basic | $ 0.41 | | 0.07 | |
| Diluted | $ 0.37 | | 0.07 | |
| Weighted
average number of common shares | | | | |
| outstanding
– basic | 13,953,000 | | 11,265,000 | |
| Potential
dilutive common shares | 1,407,000 | | 395,000 | |
| Weighted
average number of common and | | | | |
| common
equivalent shares outstanding assuming | | | | |
| dilution
– diluted | 15,360,000 | | 11,660,000 | |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

See accompanying notes to consolidated financial statements. 3

*********** MARKER PAGE="sheet: 4; page: 4" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

| | Three
months ended October 31, (Unaudited) — 2003 | 2002 | | |
| --- | --- | --- | --- | --- |
| Cash
flows from operating activities: | | | | |
| Net
income | $ 5,743,000 | | 799,000 | |
| Adjustments
to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation
and amortization | 1,562,000 | | 1,539,000 | |
| Provision
for doubtful accounts | 13,000 | | 23,000 | |
| Provision
for inventory reserves | 589,000 | | 453,000 | |
| Changes
in assets and liabilities: | | | | |
| Restricted
cash securing letter of credit obligations | 8,000 | | — | |
| Accounts
receivable | (7,653,000 | ) | (1,450,000 | ) |
| Inventories | (58,000 | ) | 884,000 | |
| Prepaid
expenses and other current assets | (456,000 | ) | 102,000 | |
| Other
assets | 12,000 | | 96,000 | |
| Accounts
payable | 1,769,000 | | (2,661,000 | ) |
| Accrued
expenses and other current liabilities | (770,000 | ) | 48,000 | |
| Customer
advances and deposits | 25,000 | | 5,525,000 | |
| Deferred
service revenue | 119,000 | | 235,000 | |
| Income
taxes payable | 669,000 | | 456,000 | |
| Other
liabilities | — | | (27,000 | ) |
| Net
cash provided by operating activities | 1,572,000 | | 6,022,000 | |
| Cash
flows from investing activities: | | | | |
| Purchases
of property, plant and equipment | (1,231,000 | ) | (870,000 | ) |
| Purchase
of technology license | — | | (75,000 | ) |
| Net
cash used in investing activities | (1,231,000 | ) | (945,000 | ) |
| Cash
flows from financing activities: | | | | |
| Principal
payments on capital lease obligations | (266,000 | ) | (263,000 | ) |
| Proceeds
from exercises of stock options, warrants and | | | | |
| employee
stock purchase plan shares | 912,000 | | 51,000 | |
| Net
cash provided by (used in) financing activities | 646,000 | | (212,000 | ) |
| Net
increase in cash and cash equivalents | 987,000 | | 4,865,000 | |
| Cash
and cash equivalents at beginning of period | 48,617,000 | | 15,510,000 | |
| Cash
and cash equivalents at end of period | $ 49,604,000 | | 20,375,000 | |
| Supplemental
cash flow disclosure: | | | | |
| Cash
paid during the period for: | | | | |
| Interest | $ 24,000 | $ | 46,000 | |
| Income
taxes | $ 2,034,000 | | — | |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

See accompanying notes to consolidated financial statements. 4

*********** MARKER PAGE="sheet: 5; page: 5" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(1) General

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The accompanying consolidated financial statements at and for the three months ended October 31, 2003 and 2002 are unaudited. In the opinion of management, the information furnished reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the unaudited interim periods. The results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full year.

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended July 31, 2003 and the notes thereto contained in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, and the Company’s other filings with the Securities and Exchange Commission.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(2) Reclassification

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Certain reclassifications have been made to previously reported statements to conform to the Company’s current financial statement format.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(3) Accounts Receivable

| Accounts
receivable consist of the following: | October
31, 2003 | July 31, 2003 |
| --- | --- | --- |
| Accounts
receivable from commercial customers | $ 13,917,000 | 10,952,000 |
| Unbilled
receivables (including retainages) on contracts-in-progress | 12,282,000 | 10,084,000 |
| Amounts receivable
from the United States government and its | | |
| agencies | 8,851,000 | 6,572,000 |
| | 35,050,000 | 27,608,000 |
| Less allowance
for doubtful accounts | 714,000 | 912,000 |
| Accounts
receivable, net | $ 34,336,000 | 26,696,000 |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The amount of retainages included in unbilled receivables was $72,000 at October 31, 2003. In the opinion of management, substantially all of the unbilled balances will be billed and collected within one year.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(4) Inventories

| Inventories
consist of the following: | October
31, 2003 | |
| --- | --- | --- |
| Raw
materials and components | $ 17,297,000 | 16,431,000 |
| Work-in-process
and finished goods | 21,531,000 | 22,716,000 |
| | 38,828,000 | 39,147,000 |
| Less: | | |
| Reserve
for anticipated losses on contracts and inventory reserves | 5,311,000 | 5,099,000 |
| Inventories,
net | $ 33,517,000 | 34,048,000 |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Inventories directly related to long-term contracts were $9,329,000 and $13,742,000 at October 31, 2003 and July 31, 2003, respectively.

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

5

*********** MARKER PAGE="sheet: 6; page: 6" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(5) Accrued Expenses and Other Current Liabilities

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Accrued expenses and other current liabilities consist of the following:

| Accrued
wages and benefits | October 31,
2003 — $ 5,040,000 | 5,724,000 |
| --- | --- | --- |
| Accrued commissions | 2,359,000 | 1,993,000 |
| Accrued warranty | 3,382,000 | 3,139,000 |
| Other | 1,716,000 | 2,411,000 |
| | $ 12,497,000 | 13,267,000 |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Default"

Changes in the Company’s product warranty liability during the three months ended October 31, 2003 and 2002 were as follows:

| | Three months
ended October 31, — 2003 | | 2002 | |
| --- | --- | --- | --- | --- |
| Balance
at beginning of period | $ 3,139,000 | | 2,975,000 | |
| Provision
for warranty obligations | 839,000 | | 471,000 | |
| Charges incurred | (596,000 | ) | (854,000 | ) |
| Balance at
end of period | $ 3,382,000 | | 2,592,000 | |

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(6) Earnings Per Share

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The Company calculates earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share”. Basic EPS is computed based on the weighted average number of shares outstanding. Diluted EPS reflects the maximum dilution from potential common stock issuable pursuant to the exercise of stock options and warrants, if dilutive, outstanding during each period. All share and per share amounts have been restated to reflect a three-for-two stock split effective July 2003.

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Stock options to purchase approximately 2,000 and 1,406,000 shares for the three months ended October 31, 2003 and 2002, respectively, were out of the money and therefore were not included in the EPS calculation because their effect would have been anti-dilutive.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(7) Stock-Based Compensation Plans

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Default"

The Company accounts for its stock option plans under the intrinsic value method of APB Opinion No. 25, and as a result no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company’s net income and income per share would have been reduced to the following pro forma amounts:

| | Three
months ended October 31, — 2003 | 2002 | | |
| --- | --- | --- | --- | --- |
| Net
income, as reported | $ 5,743,000 | | 799,000 | |
| Less: Total
stock-based employee compensation | | | | |
| expense
determined under fair value based | | | | |
| method
for all awards, net of related tax effects | (343,000 | ) | (155,000 | ) |
| Pro forma
net income | $ 5,400,000 | | 644,000 | |
| Net income
per share: | | | | |
| As
reported Basic | $ 0.41 | | 0.07 | |
| Diluted | $ 0.37 | | 0.07 | |
| Pro
forma Basic | $ 0.39 | | 0.06 | |
| Diluted | $ 0.35 | | 0.06 | |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The per share weighted average fair value of stock options granted during the three months ended October 31, 2003 and 2002 was $7.72 and $2.75, respectively, on the date of grant. These fair values were determined using the Black Scholes option-pricing model with the following weighted average assumptions: 2003 – expected dividend yield of 0%, risk free interest rate of 3.25%, expected volatility of 45.90% and an expected option life of 5 years; 2002 – expected dividend yield of 0%, risk free interest rate of 3.36%, expected volatility of 56.01%, and an expected option life of 5 years.

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

6

*********** MARKER PAGE="sheet: 7; page: 7" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(8) Segment and Principal Customer Information

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Default"

Reportable operating segments are determined based on the Company’s management approach. The management approach, as defined by SFAS No. 131, is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making operating decisions and assessing performance. While the Company’s results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker also manages the enterprise in three segments: (i) Telecommunications Transmission, (ii) RF Microwave Amplifiers and (iii) Mobile Data Communications. Telecommunications Transmission products include modems, frequency converters, satellite VSAT transceivers and antennas and over-the-horizon microwave communications products and systems. RF Microwave Amplifier products include high-power amplifier products that use the microwave and radio frequency spectrums. Mobile Data Communications provide satellite-based mobile tracking and messaging hardware and related services. Unallocated assets consist principally of cash and deferred tax assets. Unallocated losses result from such corporate expenses as legal, accounting and executive. Corporate management defines and reviews segment profitability based on the same allocation methodology as presented in the segment data tables. Inter-segment sales have been eliminated from the tables below. Intersegment sales in the three months ended October 31, 2003 and 2002, by the telecommunications transmission segment to the RF microwave amplifiers segment were $629,000 and $863,000, respectively. Intersegment sales in the three months ended October 31, 2003 by the telecommunications transmission segment to the mobile data communications segment were $1,573,000. Substantially all of the Company’s long-lived assets are located in the United States.

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

Three months ended October 31, 2003 (in thousands)

| Net
sales | Telecommunications Transmission — $ 35,089 | 4,892 | 16,315 | — | | 56,296 |
| --- | --- | --- | --- | --- | --- | --- |
| Operating
income (loss) | 7,205 | 186 | 2,529 | (1,555 | ) | 8,365 |
| Interest
income | 9 | — | 3 | 93 | | 105 |
| Interest
expense | 18 | 6 | — | — | | 24 |
| Depreciation
and | | | | | | |
| amortization | 1,142 | 271 | 122 | 27 | | 1,562 |
| Expenditures
for | | | | | | |
| long-lived
assets, | | | | | | |
| including
intangibles | 1,089 | 40 | 102 | — | | 1,231 |
| Total
assets | 72,726 | 20,241 | 23,988 | 55,501 | | 172,456 |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

Three months ended October 31, 2002 (in thousands)

| Net
sales | Telecommunications Transmission — $ 21,818 | 6,525 | 2,930 | | — | | 31,273 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Operating
income (loss) | 2,098 | 723 | (106 | ) | (908 | ) | 1,807 |
| Interest
income | 5 | — | — | | 54 | | 59 |
| Interest
expense | 468 | 223 | — | | — | | 691 |
| Depreciation
and | | | | | | | |
| amortization | 1,132 | 270 | 78 | | 59 | | 1,539 |
| Expenditures
for | | | | | | | |
| long-lived
assets, | | | | | | | |
| including
intangibles | 657 | 201 | 79 | | 8 | | 945 |
| Total
assets | 60,164 | 25,229 | 20,175 | | 25,237 | | 130,805 |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

7

*********** MARKER PAGE="sheet: 8; page: 8" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

During the three months ended October 31, 2003, sales to one customer, a prime contractor, represented 20.1% of net sales. There were no customers for the three months ended October 31, 2002, other than the U.S. government, that represented 10% or more of net sales. During the three months ended October 31, 2003 and 2002, approximately 40.3% and 31.2%, respectively, of the Company’s net sales resulted from contracts with the U.S. government or prime contractors to the U.S. government. Direct and indirect sales to an African country, including sales to the prime contractor mentioned above, during the three months ended October 31, 2003 represented 16.9% of net sales. International sales comprised 43.3% and 45.6% of net sales during the three months ended October 31, 2003 and 2002, respectively. International sales include sales to domestic companies for inclusion in products, which will be sold to international customers.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(9) Accounting for Business Combinations, Goodwill and Other Intangible Assets

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Intangibles with definite lives arising from acquisitions as of October 31, 2003 and July 31, 2003 are as follows:

| | October
31, 2003 — Gross Carrying Amount | Accumulated Amortization | July
31, 2003 — Gross Carrying Amount | Accumulated Amortization |
| --- | --- | --- | --- | --- |
| Existing
technology | $ 12,266,000 | 4,692,000 | 12,266,000 | 4,261,000 |
| Core technology | 1,315,000 | 183,000 | 1,315,000 | 146,000 |
| Technology
license | 2,229,000 | 233,000 | 2,229,000 | 206,000 |
| Trade name | 175,000 | 24,000 | 175,000 | 19,000 |
| Order backlog | 88,000 | 88,000 | 88,000 | 88,000 |
| Total | $ 16,073,000 | 5,220,000 | 16,073,000 | 4,720,000 |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The aggregate amortization expense for the three months ended October 31, 2003 and 2002 was $500,000 and $526,000, respectively. The estimated amortization expense for the twelve months ending October 31, 2004, 2005, 2006, 2007 and 2008 is $2,012,000, $2,012,000, $2,012,000, $1,533,000 and $640,000, respectively.

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

Intangibles with indefinite lives by reporting unit as of October 31, 2003 are as follows:

| Telecommunications
transmission | 7,870,000 |
| --- | --- |
| RF microwave
amplifiers | 8,422,000 |
| Mobile data
communications services | 1,434,000 |
| $ | 17,726,000 |

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

The Company performed its annual required impairment test for goodwill and other intangibles with indefinite lives as of August 1, 2003. Based on this evaluation, the Company determined that no impairment existed as of August 1, 2003.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(10) Recent Accounting Pronouncements

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation as originally provided by SFAS No. 123 “Accounting for Stock-Based Compensation.” Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 in both annual and interim financial statements. The adoption did not have any impact on the Company’s consolidated financial statements. The FASB recently indicated that it will eventually require stock-based employee compensation to be recorded as a charge to earnings. We will monitor the FASB’s progress on the issuance of a new standard and its impact on our consolidated financial statements.

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities,” which addresses consolidation by business enterprises of variable interest entities that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) the equity investors lack an essential characteristic of a controlling financial interest. The adoption did not have a material impact on the Company’s consolidated financial statements.

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to address decisions reached by the Derivatives Implementation Group, developments in other Board projects that address financial instruments, and implementation issues related to the definition of a derivative. The adoption did not have a material impact on the Company’s consolidated financial statements.

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

8

*********** MARKER PAGE="sheet: 9; page: 9" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Project"

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. The adoption did not have a material impact on the Company’s consolidated financial statements.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

OVERVIEW We design, develop, produce and market innovative products, systems and services for advanced communications solutions. We conduct our business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. We offer niche product lines where we believe we have technological, engineering, systems design or other expertise that differentiate our product offerings. We believe we are leaders in the market segments that we serve. Our telecommunications transmission segment, which is our largest business segment, provides sophisticated products and systems for satellite, over-the-horizon microwave and wireless line-of-sight telecommunication systems. Our mobile data communications segment provides satellite-based mobile tracking and messaging services and mobile satellite transceivers primarily for defense applications, including logistics, support and battlefield command and control. Our RF microwave amplifier segment designs, manufactures and markets solid-state high power, broadband RF microwave amplifier products. All of our products and services are used in a variety of commercial and defense applications by domestic and international customers. A substantial portion of our sales may be derived from a limited number of relatively large customer contracts, the timing of revenues from which cannot be predicted. Quarterly sales and operating results may be significantly affected by one or more of such contracts. Accordingly, we can experience significant fluctuations in sales and operating results from quarter to quarter. We generally recognize income on contracts only when the products are shipped. However, when the performance of a contract will extend beyond a 12-month period, revenue is recognized on the percentage-of-completion method. Profits expected to be realized on contracts are based on total estimated sales value as related to estimated costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts-in-progress are recorded in the period in which such losses become known. Since our contract with the U.S. Army for the Movement Tracking System is for an eight-year period, revenue recognition is based on the percentage-of-completion method. The gross margin is based on the estimated sales and expenses for the entire eight-year contract. The amount of revenue recognized has been limited to the amount of funded orders received from the U.S. Army. The portion of such orders representing prepaid service time revenue is being deferred until the service time is used by the customer. Significant changes in the estimates used to derive the gross profit margin can materially impact our operating results and financial condition in future periods (see Critical Accounting Policies below for more information). 9

*********** MARKER PAGE="sheet: 10; page: 10" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

Our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiency, price competition and general economic conditions. Selling, general and administrative expenses consist primarily of salaries and benefits for marketing, sales and administrative employees, advertising and trade show costs, professional fees and other administrative costs. Our research and development expenses relate to both existing product enhancement and new product development. A portion of our research and development efforts is related to specific contracts and is recoverable under those contracts because they are funded by the customers. Such customer-funded expenditures are not included in research and development expenses for financial reporting purposes, but are reflected in cost of sales. CRITICAL ACCOUNTING POLICIES We consider certain accounting policies to be critical due to the estimation process involved in each. Revenue Recognition on Long-Term Contracts. As discussed above, when the performance of a contract will extend beyond a 12-month period, revenue and related costs are recognized on the percentage-of-completion method of accounting. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to total estimated costs at completion of the contract. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become known. Some of our largest contracts, including our contract with the U.S. Army for the Movement Tracking System, are accounted for using the percentage-of-completion method. We have been engaged in the production and delivery of goods and services on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate revenues and expenses relating to our long-term contracts. However, there exist inherent risks and uncertainties in estimating revenues and expenses, particularly on larger or longer-term contracts. If we do not accurately estimate the total sales and related costs on such contracts, the estimated gross margins may be significantly impacted or losses may need to be recognized in future periods. Any such resulting reductions in margins or contract losses could be material to our results of operations and financial position. In addition, most government contracts have termination for convenience clauses that provide the customer with the right to terminate the contract at any time. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized in recognizing profit under the percentage-of-completion method of accounting. Changes to these assumptions could materially impact our results of operations and financial position. Historically, we have not experienced material terminations of our long-term contracts. We also address customer acceptance provisions in assessing our ability to perform our contractual obligations under long-term contracts. Our inability to perform on our long-term contracts could materially impact our results of operations and financial position. Historically, we have been able to perform on our long-term contracts. Impairment of Intangible Assets. As of October 31, 2003, our company’s intangible assets, including goodwill, aggregated $28.6 million. In assessing the recoverability of goodwill and other intangibles, we must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets in future periods. Any such resulting impairment charges could be material to our results of operations. Provisions for Excess and Obsolete Inventory. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based on historical and future usage trends. Several factors may influence the sale and use of our inventories, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charges could be material to our results of operations and financial position. Allowance for Doubtful Accounts. We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain international customers that we have determined could be a credit risk. However, we are not able to obtain irrevocable letters of credit or credit insurance in all instances. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the allowances established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and financial health of specific customers. Changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial position. 10

*********** MARKER PAGE="sheet: 11; page: 11" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2003 AND OCTOBER 31, 2002 Net Sales. Consolidated net sales were $56.3 million and $31.3 million for the three months ended October 31, 2003 and 2002, respectively, representing an increase of $25.0 million, or 79.9%. The increase was driven by significant growth in our telecommunications transmission and mobile data communications segments, as described below. Sales from our telecommunications transmission segment were $35.1 million for the three months ended October 31, 2003, as compared to sales of $21.8 million for the three months ended October 31, 2002, an increase of $13.3 million, or 61.0%. The sales growth in this segment resulted primarily from (i) incremental sales of our over-the-horizon microwave systems in connection with two large contract awards received in fiscal 2003 and (ii) strong sales of our satellite earth station products. Our telecommunications transmission segment represented 62.3% of total net sales for the three months ended October 31, 2003, as compared to 69.6% for the prior year period. Mobile data communications segment sales increased $13.3 million, or 443.3%, from $3.0 million for the three months ended October 31, 2002 to $16.3 million for the three months ended October 31, 2003. The substantial sales growth in this segment was primarily the result of (i) higher sales of our Movement Tracking System to the U.S. Army and (ii) sales during the three months ended October 31, 2003 relating to a battle command application for the U.S. Army. Our mobile data communications segment represented 29.0% of total net sales for the three months ended October 31, 2003 compared to 9.6% for the three months ended October 31, 2002. Sales from our RF microwave amplifier segment were $4.9 million for the three months ended October 31, 2003 compared to $6.5 million for the three months ended October 31, 2002, representing a decrease of $1.6 million or 24.6%. The decrease was the result of continued softness in certain commercial product lines, including our commercial aviation product line. Our RF microwave amplifier segment represented 8.7% of total net sales for the three months ended October 31, 2003 compared to 20.8% for the three months ended October 31, 2002. During the three months ended October 31, 2003, one customer represented 20.1% of total net sales. No customer, other than the U.S. government, represented more than 10% of total net sales for the three months ended October 31, 2002. Direct and indirect sales to an African country during the three months ended October 31, 2003 were 16.9% of total net sales. International sales (including sales to domestic companies for inclusion in products which are sold to international customers) represented 43.3% and 45.6% of total net sales for the three months ended October 31, 2003 and 2002, respectively. Domestic commercial sales represented 16.4% and 23.2% of total net sales for the three months ended October 31, 2003 and 2002, respectively. Sales to the U.S. government (including sales to prime contractors to the U.S. government) represented 40.3% and 31.2% of total net sales for the three months October 31, 2003 and 2002, respectively. Gross Profit. Gross profit was $21.0 million and $11.7 million for the three months ended October 31, 2003 and 2002, respectively, representing an increase of $9.3 million. The increase was primarily due to the higher sales during the first quarter of fiscal 2004, as discussed above. Gross margin, as a percentage of net sales, was 37.3% for both the three months ended October 31, 2003 and 2002. Although the three months ended October 31, 2003 contained a significantly higher proportion of mobile data communications segment sales, which generally are at lower margins than our other businesses, the impact was offset by sales of high margin earth station products and greater operating efficiencies associated with the increase in sales. Included in cost of sales for the three months ended October 31, 2003 and 2002, respectively, are provisions for excess and obsolete inventory of $0.6 million and $0.5 million. As discussed above under “Critical Accounting Policies – Provisions for Excess and Obsolete Inventory”, we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and future usage assumptions. 11

*********** MARKER PAGE="sheet: 12; page: 12" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

Selling, General and Administrative Expenses. Selling, general and administrative activities were $8.6 million and $6.3 million for the three months ended October 31, 2003 and 2002, respectively, representing an increase of $2.3 million. The increase was due to higher expenses relating to the significant increase in sales and profitability during the fiscal 2004 period. As a percentage of net sales, selling, general and administrative expenses were 15.2% and 20.2% for the three months ended October 31, 2003 and 2002, respectively. Research and Development Expenses. Research and development expenses were $3.5 million and $3.0 million for the three months ended October 31, 2003 and 2002, respectively. Approximately $3.3 million and $2.8 million of such amounts, respectively, related to our telecommunications transmission segment. As an investment for the future, we are continually enhancing our existing products and developing new products and technologies. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended October 31, 2003 and 2002, customers reimbursed us $0.8 million and $0.6 million, respectively, which amounts are not reflected in the reported research and development expenses, but are included in sales with the related estimated costs included in cost of sales. Amortization of Intangibles. Amortization of intangibles of $0.5 million in both periods represents the amortization of intangibles with definite lives we acquired in connection with various acquisitions. Operating Income. Operating income for the three months ended October 31, 2003 and 2002, respectively, was $8.4 million and $1.8 million. The increase was the result of the higher sales and gross profit, discussed above, partially offset by higher operating expenses. Operating income in our telecommunications transmission segment increased to $7.2 million for the three months ended October 31, 2003 from $2.1 million for the three months ended October 31, 2002 as a result of significantly higher sales combined with increased operating efficiencies and overhead absorption. Our mobile data communications segment generated operating income of $2.5 million for the three months ended October 31, 2003 versus an operating loss of $0.1 million during the three months ended October 31, 2002 as a result of the substantial increase in sales. Operating income in our RF microwave amplifier segment decreased to $0.2 million for the three months ended October 31, 2003 from $0.7 million for the three months ended October 31, 2002 as a result of the decrease in sales. Unallocated expenses increased to $1.5 million for the three months ended October 31, 2003 from $0.9 million for the three months ended October 31, 2002 as a result of higher incentive compensation expense, as well as increased costs in connection with recent corporate governance regulations. Interest Expense. Interest expense decreased from $0.7 million for the three months ended October 31, 2002 to $24,000 for the three months ended October 31, 2003 as a result of the prepayment of our long-term debt in July 2003. Interest Income. Interest income of $0.1 million was consistent between the periods. Provision for Income Taxes. The provision for income taxes was $2.7 million and $0.4 million for the three months ended October 31, 2003 and 2002, respectively, as a result of the significant increase in pre-tax profit. The effective tax rate was 32% in both periods. LIQUIDITY AND CAPITAL RESOURCES Our cash and cash equivalents increased to $49.6 million at October 31, 2003 from $48.6 million at July 31, 2003. Net cash provided by operating activities was $1.6 million for the three months ended October 31, 2003. Such amount reflects (i) net income of $5.7 million plus the impact of depreciation, amortization and the provision for inventory reserves aggregating $2.2 million; and (ii) changes in working capital balances, most notably an increase in accounts receivable of $7.7 million. The increase in billed receivables is the result of the increase in sales during the three months ended October 31, 2003. The increase in unbilled receivables reflects additional work performed on our long-term contracts. Net cash used in investing activities for capital expenditures for the three months ended October 31, 2003 was $1.2 million. Net cash provided by financing activities was $0.6 million. Principal payments on capital lease obligations amounted to $0.3 million. This use of cash was more than offset by proceeds from stock option and warrant exercises and employee stock purchase plan shares aggregating $0.9 million. 12

*********** MARKER PAGE="sheet: 13; page: 13" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

In the normal course of business, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment, and from time to time, technology licenses. We do not expect that these commitments as of October 31, 2003 will materially adversely affect our liquidity. At October 31, 2003 we had contractual cash obligations to repay capital lease obligations and to make payments under operating leases. Payments due under these long-term obligations are as follows:

| | Obligations due
by fiscal year (in thousands) — Total | Remainder
of 2004 | 2005 and 2006 | 2007 and 2008 | After 2008 |
| --- | --- | --- | --- | --- | --- |
| Capital
lease obligations | $ 1,026 | 633 | 364 | 29 | — |
| Operating
lease commitments | 15,378 | 5,967 | 5,998 | 1,580 | 1,833 |
| Total contractual
cash obligations | $ 16,404 | 6,600 | 6,362 | 1,609 | 1,833 |

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

We have entered into standby letter of credit agreements with financial institutions relating to the guarantee of future performance on certain contracts. At October 31, 2003, the balance of these agreements was $4.7 million. Cash we have pledged against such agreements aggregating $4.3 million has been classified as restricted cash in the consolidated balance sheet. We believe that our cash and cash equivalents will be sufficient to meet our operating cash requirements for at least the foreseeable future. In the event that we identify a significant acquisition that requires additional cash, we would seek to borrow funds or raise additional equity capital. FORWARD-LOOKING STATEMENTS Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements, including but not limited to, information relating to the future performance and financial condition of the Company, the plans and objectives of the Company’s management and the Company’s assumptions regarding such performance and plans that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company’s Form 10-K filed with the Securities and Exchange Commission identifies many of such risks and uncertainties, which include the following:

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our operating results being difficult to forecast and subject to volatility;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our inability to maintain our government business;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our inability to keep pace with technological changes;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our dependence on international sales;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of a continued domestic and foreign economic slow-down and reduction in telecommunications equipment and systems spending on the demand for our products, systems and services;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our mobile data communications business being in an early stage;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our backlog being subject to cancellation or modification;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our dependence on component availability, subcontractor availability and performance by key suppliers;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our fixed price contracts being subject to risk;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of adverse regulatory changes on our ability to sell products, systems and services;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of prevailing economic and political conditions on our businesses;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Whether we can successfully integrate and assimilate the operations of acquired businesses;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of the loss of key technical or management personnel;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The highly competitive nature of our markets;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our inability to protect our proprietary technology;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• Our operations being subject to environmental regulation;

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of recently enacted and proposed changes in securities laws and regulations on our costs; and

MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project"

• The impact of terrorist attacks and threats, and government responses thereto, and threats of war on our businesses.

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

13

*********** MARKER PAGE="sheet: 14; page: 14" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

The Company’s earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from its investment of available cash balances in money market funds and short-term U.S. treasury securities. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes. If the interest rate the Company receives on its investment of available cash balances were to change by 10%, the effect would be immaterial.

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

ITEM 4. Controls and Procedures

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was carried out by the Company under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures have been designed and are being operated in a manner that provides reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. There have been no changes in the Company’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. PART II OTHER INFORMATION

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

ITEM 6. Exhibits and Reports on Form 8-K

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(a) Exhibits

MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Project"

Exhibit 31.1 — Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Project"

Exhibit 31.2 — Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Project"

Exhibit 32.1 — Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Project"

Exhibit 32.1 — Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project"

(b) Reports on Form 8-K

MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Project"

Form 8-K dated September 23, 2003 – Item 7 – Press release announcing Results of Operations for the fiscal year ended July 31, 2003

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

14

*********** MARKER PAGE="sheet: 15; page: 15" MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMTECH TELECOMMUNICATIONS CORP. (Registrant)

Date: December 9, 2003	By: /s/ Fred Kornberg —————————————— Fred Kornberg Chairman of the Board Chief Executive Officer and President (Principal Executive Officer)
Date: December 9, 2003	By: /s/ Robert G. Rouse —————————————— Robert G. Rouse Senior Vice President and Chief Financial Officer (Principal Financial and Accounting
Officer)

MARKER FORMAT-SHEET="Page Width Begin" FSL="Project"

15