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Comtech Telecommunications Corp. Announces Record Results for Fiscal 2005 Fourth Quarter and Full Year

September 22, 2005 at 8:00 AM EDT

MELVILLE, N.Y., Sep 22, 2005 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported record results for the fourth quarter and fiscal year ended July 31, 2005. Net sales, operating profit, EBITDA, net income and diluted earnings per share for the quarter and full year were at all-time highs.

Net sales for the fourth quarter of fiscal 2005 soared to $98.3 million, compared to $59.1 million in the fourth quarter of fiscal 2004. Net income in the fourth quarter of fiscal 2005 was $11.0 million, or $0.42 per diluted share, a substantial increase over the fourth quarter fiscal 2004 net income of $6.1 million, or $0.25 per diluted share. The fourth quarter of fiscal 2004 included a pre-tax charge of $0.9 million for acquired in-process research and development in connection with the acquisition of certain assets and liabilities of Memotec, Inc. in May 2004. Excluding the tax-effected impact of the in-process research and development charge, fourth quarter net income for fiscal 2004 was $6.7 million, or $0.27 per diluted share.

Net sales for fiscal 2005 were $307.9 million as compared to $223.4 million in fiscal 2004, representing a 38% increase. This was on top of the 28% increase in sales from fiscal 2003 to fiscal 2004. Fiscal 2005 net income of $36.7 million, or $1.42 per diluted share, was substantially higher than the fiscal 2004 net income of $21.8 million, or $0.92 per diluted share. The record level of earnings per share represents a 54% increase over the previous high set in fiscal 2004. Excluding the tax-effected impact of the in-process research and development charge, fiscal 2004 net income was $22.5 million, or $0.94 per share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $18.2 million for the fourth quarter of fiscal 2005 versus $12.0 million for the same period in fiscal 2004, after adjusting for the fiscal 2004 in-process research and development charge. EBITDA was $59.7 million for fiscal 2005 versus $40.1 million for fiscal 2004, after adjusting for the fiscal 2004 in-process research and development charge. Cash flows from operating activities for fiscal 2005 were $56.1 million, a significant increase over the $24.3 million in fiscal 2004.

The record performances for the quarter and full year in fiscal 2005 were driven by strong demand for the Company's products across all three business segments.

Backlog as of July 31, 2005 was $153.3 million compared to $83.5 million a year ago. Bookings for the quarter and year ended July 31, 2005 were $98.1 million and $377.7 million, respectively.

In commenting on the Company's performance during the fourth quarter of fiscal 2005, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "The fourth quarter of fiscal 2005 was truly outstanding in every respect. We posted record levels of sales, operating profit, net income and earnings per share as we continue to benefit from strong demand for our product offerings."

Mr. Kornberg added, "The record fourth quarter was a strong finish to the third consecutive record-breaking year for Comtech. We were able to, once again, post significant sales growth accompanied by increased operating efficiencies in fiscal 2005 despite the fact that fiscal 2004 and 2003 were, in themselves, years of tremendous growth and profitability."

Mr. Kornberg noted, "In my comments in our fiscal 2002 Annual Report, I predicted that we would reach $300 million in sales by fiscal 2005. At the time, I envisioned that a significant contributor to the goal would be sales associated with acquisitions. The fact that we surpassed the $300 million sales goal in fiscal 2005 without a large acquisition is a testament to the strength of our core business."

Mr. Kornberg concluded, "We remain optimistic about our businesses and believe fiscal 2006 is well-positioned to be another record year for Comtech."

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions addressing commercial and government markets. The Company conducts its business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company offers specialized products, systems and services where it believes it has technological, engineering, systems design or other expertise that differentiate its product offerings.

The Company has scheduled an investor conference call for 11:30 AM (ET) on Thursday, September 22, 2005. Investors and the public are invited to access a live webcast of the conference call from the news section of the Comtech web site at www.comtechtel.com. A replay of the webcast will be available at the same location for 30 days following the conference call. Alternatively, investors can access the conference call by dialing (800) 905-0392 (domestic), or (785) 830-1914 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-6054. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.

Certain information in this press release 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 Securities and Exchange Commission filings identify many such risks and uncertainties, which include the following:

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

-- Our inability to maintain our government business;

-- Our inability to keep pace with technological changes;

-- Our dependence on international sales;

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

-- Our mobile data communications business being subject to unique risks;

-- Our backlog being subject to cancellation or modification;

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

-- Our fixed price contracts being subject to risk;

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

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

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

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

-- The highly competitive nature of our markets;

-- Our inability to protect our proprietary technology;

-- Our operations being subject to environmental regulation;

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

-- The impact of ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002;

-- The impact of terrorist attacks and threats, and government responses thereto, and threats of war on our businesses;

-- The inability to effectuate a change in control of the Company due to provisions in its certificate of incorporation and by-laws, stockholders' rights plan and Delaware law;

-- Our inability to satisfy our debt obligations, including the convertible senior notes;

-- The impact of recent changes to financial reporting standards related to stock option expensing on our reported results;

-- Our stock price being volatile; and

-- Our current intention not to declare or pay any cash dividends.

COMTECH TELECOMMUNICATIONS CORP.
                 Consolidated Statements of Operations

                         Three Months Ended       Fiscal Year Ended
                              July 31,                July 31,
                       ---------------------  -----------------------
                          2005       2004         2005        2004
                       ---------- ----------  ----------- -----------

Net sales             $98,293,000 59,056,000  307,890,000 223,390,000
Costs of sales         59,816,000 33,726,000  180,524,000 135,858,000
                       ---------- ----------  ----------- -----------
        Gross profit   38,477,000 25,330,000  127,366,000  87,532,000
                       ---------- ----------  ----------- -----------

Expenses:
   Selling, general
    and administrative 15,707,000  9,863,000   51,819,000  36,016,000
   Research and
    development         5,980,000  4,709,000   21,155,000  15,907,000
   In-process research
    and development             -    940,000            -     940,000
   Amortization of
    intangibles           594,000    569,000    2,328,000   2,067,000
                       ---------- ----------  ----------- -----------
                       22,281,000 16,081,000   75,302,000  54,930,000
                       ---------- ----------  ----------- -----------

Operating income       16,196,000  9,249,000   52,064,000  32,602,000

Other expenses
 (income):
   Interest expense       674,000    675,000    2,679,000   1,425,000
   Interest income     (1,333,000)  (378,000)  (4,072,000)   (921,000)
                       ---------- ----------  ----------- -----------

Income before
 provision for income
 taxes                 16,855,000  8,952,000   53,457,000  32,098,000
Provision for income
 taxes                  5,830,000  2,864,000   16,802,000  10,271,000
                       ---------- ----------  ----------- -----------

        Net income    $11,025,000  6,088,000   36,655,000  21,827,000
                       ========== ==========  =========== ===========

Net income per share:
        Basic         $      0.50       0.29         1.69        1.03
                       ========== ==========  =========== ===========
        Diluted       $      0.42       0.25         1.42        0.92
                       ========== ==========  =========== ===========

Weighted average
 number of common
 shares
 Outstanding - basic   22,176,000 21,339,000   21,673,000  21,178,000
                       ========== ==========  =========== ===========

Weighted average
 number of common and
 common equivalent
 shares outstanding
 assuming dilution -
 diluted               27,449,000 26,139,000   27,064,000  24,781,000
                       ========== ==========  =========== ===========

                      Non-GAAP Financial Measures

EBITDA and the other non-GAAP operating measures presented below are
used by management in assessing the Company's operating results and
ability to meet debt service requirements. These non-GAAP measures are
frequently requested by the Company's investors and analysts. The
Company believes that investors and analysts may use these non-GAAP
measures, along with other information contained in its SEC filings,
in assessing the Company's operating results and ability to generate
cash flow and service debt.

                         Three Months Ended       Fiscal Year Ended
                              July 31,                July 31,
                       ---------------------  -----------------------
                          2005       2004         2005        2004
                       ---------- ----------   ----------  ----------
Reconciliation of
 Non-GAAP Net Income
 to GAAP Net Income:
--------------------

 Non-GAAP net income  $11,025,000  6,727,000   36,655,000  22,466,000
 In-process research
  and development
  charge, net of
  income taxes                  -   (639,000)           -    (639,000)
                       ---------- ----------  ----------- -----------
 GAAP net income      $11,025,000  6,088,000   36,655,000  21,827,000
                       ========== ==========  =========== ===========

Reconciliation of
 Adjusted EBITDA to
 GAAP Net Income:
-------------------

 Adjusted EBITDA      $18,230,000 11,965,000   59,707,000  40,056,000
 Net interest income
  (expense)               659,000   (297,000)   1,393,000    (504,000)
 Depreciation and
  amortization         (2,034,000)(1,776,000)  (7,643,000) (6,514,000)
 Income taxes          (5,830,000)(2,864,000) (16,802,000)(10,271,000)
 In-process research
 and development
 charge                         -   (940,000)           -    (940,000)
                       ---------- ----------   ----------  ----------
 GAAP net income      $11,025,000  6,088,000   36,655,000  21,827,000
                       ========== ==========   ==========  ==========

                   COMTECH TELECOMMUNICATIONS CORP.
                      Consolidated Balance Sheets

                                                      July 31,
                                              ------------------------
          Assets                                  2005        2004
                                              ----------- ------------
Current assets:
 Cash and cash equivalents                   $214,413,000 163,292,000
 Restricted cash                                1,034,000   4,054,000
 Accounts receivable, net                      56,052,000  43,002,000
 Inventories, net                              45,103,000  39,758,000
 Prepaid expenses and other current assets      4,387,000   1,817,000
 Deferred tax asset - current                   8,092,000   6,501,000
                                              ----------- ------------
          Total current assets                329,081,000 258,424,000

Property, plant and equipment, net             18,683,000  14,652,000
Goodwill                                       22,244,000  18,721,000
Intangibles with definite lives, net            9,123,000  10,706,000
Deferred financing costs, net                   2,995,000   3,541,000
Other assets, net                                 277,000     346,000
                                              ----------- ------------
          Total assets                       $382,403,000 306,390,000
                                              =========== ============

          Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable                            $ 23,577,000   9,566,000
 Accrued expenses and other current
  liabilities                                  34,497,000  20,515,000
 Customer advances and deposits                 5,282,000   7,290,000
 Deferred service revenue                       8,210,000  13,716,000
 Current installments of other obligations        235,000     234,000
 Interest payable                               1,050,000   1,073,000
 Income taxes payable                           1,540,000   4,812,000
                                              ----------- ------------
          Total current liabilities            74,391,000  57,206,000

Convertible senior notes                      105,000,000 105,000,000
Other obligations, less current installments      396,000     158,000
Deferred tax liability - non-current            5,987,000   1,628,000
                                              ----------- ------------
          Total liabilities                   185,774,000 163,992,000

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 30,000,000 shares,
  issued 22,781,678 shares and 21,557,002
  shares at July 31, 2005 and 2004,
  respectively                                  2,278,000   2,156,000
 Additional paid-in capital                   127,170,000 109,716,000
 Retained earnings                             67,366,000  30,711,000
                                              ----------- ------------
                                              196,814,000 142,583,000
 Less:
  Treasury stock (210,937 shares)                (185,000)   (185,000)
                                              ----------- ------------
          Total stockholders' equity          196,629,000 142,398,000
                                              ----------- ------------
          Total liabilities and
           stockholders' equity              $382,403,000 306,390,000
                                              =========== ============

ECMTL

                                  ###

SOURCE: Comtech Telecommunications Corp.

Comtech Telecommunications Corp.
Fred Kornberg, President and Chief Executive Officer
Robert G. Rouse, Chief Financial Officer
631-777-8900
info@comtechtel.com

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