COMTECH TELECOMMUNICATIONS CORP /DE/ - 10-Q filing on 2017-06-07

Acquisition-Related Restructuring Plans

9 Months Ended

Apr. 30, 2017

Restructuring and Related Activities [Abstract]

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 April 30, 2017, the amount of the acquisition-related restructuring reserve is as follows:



	Cumulative Activity Through April 30, 2017
Present value of estimated facility exit costs at August 1, 2008	$	2,100,000
Cash payments made	(10,191,000		)
Cash payments received	8,600,000
Accreted interest recorded	1,791,000
Liability as of April 30, 2017	2,300,000
Amount recorded as accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet	1,497,000
Amount recorded as other liabilities in the Condensed Consolidated Balance Sheet	$	803,000

As of July 31, 2016, the present value of the estimated facility exit costs was $3,327,000. During the nine months ended April 30, 2017, we made cash payments of $1,178,000. Interest accreted for the three and nine months ended April 30, 2017 and 2016 was $44,000 and $151,000, respectively, and $68,000 and $216,000, 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 April 30, 2017
Future lease payments to be made	$	2,300,000
Interest expense to be accreted in future periods	250,000
Total remaining payments	$	2,550,000

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.