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Comtech Telecommunications Corp. Announces Results for the Second Quarter of Fiscal 2007

March 8, 2007 at 12:00 AM EST

MELVILLE, N.Y., Mar 08, 2007 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended January 31, 2007. Net sales for the second quarter of fiscal 2007 were $111.4 million compared to $95.7 million in the second quarter of fiscal 2006, reflecting growth in the telecommunications transmission and mobile data communications segments, partially offset by lower sales, as anticipated, in the RF microwave amplifiers segment.

GAAP net income was $18.2 million, or $0.68 per diluted share, for the three months ended January 31, 2007 compared to $13.3 million, or $0.50 per diluted share, for the three months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $19.1 million, or $0.70 per diluted share, for the three months ended January 31, 2007 as compared to Non-GAAP net income of $14.5 million, or $0.54 per diluted share, for the three months ended January 31, 2006.

Net sales for the six months ended January 31, 2007 were $208.5 million, compared to $202.3 million for the six months ended January 31, 2006. GAAP net income was $29.0 million, or $1.09 per diluted share, for the six months ended January 31, 2007 compared to $24.8 million, or $0.94 per diluted share, for the six months ended January 31, 2006. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $31.3 million, or $1.15 per diluted share, for the six months ended January 31, 2007 as compared to Non-GAAP net income of $27.0 million, or $1.01 per diluted share, for the six months ended January 31, 2006.

In commenting on the Company's performance during the second quarter of fiscal 2007, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "Our outstanding second quarter fiscal 2007 results once again demonstrated the strong growth characteristics of the markets we address as well as our leadership position in each of our businesses. We remain confident that fiscal 2007 will be another record year."

Selected Second Quarter Fiscal 2007 Financial Metrics and Other Items

-- Bookings for the three and six months ended January 31, 2007 were $104.5 million and $226.0 million, respectively, compared to $89.9 million and $200.0 million for the three and six months ended January 31, 2006, respectively. Backlog as of January 31, 2007 was $203.5 million compared to $210.4 as of October 31, 2006 and $186.0 million as of July 31, 2006.

-- Earnings before interest, taxes, depreciation and amortization (EBITDA) were $27.3 million and $46.5 million for the three and six months ended January 31, 2007, respectively, versus $22.3 million and $42.4 million for the three and six months ended January 31, 2006, respectively.

-- Cash provided by operating activities for the first six months of fiscal 2007 was $17.2 million compared to $6.3 million for the first six months of fiscal 2006, reflecting an increase in net income, partially offset by an increase in inventory that is currently anticipated to be reduced in the second half of fiscal 2007, as well as the timing of payments for accounts payable and certain accrued expenses that occurred in the first half of fiscal 2007.

-- Fiscal 2007 second quarter net sales and operating income were favorably impacted by $5.0 million and $3.8 million, respectively, due to certain adjustments in our telecommunications transmission and mobile data communications segments. Fiscal 2006 second quarter net sales and operating income were favorably impacted by $6.7 million and $4.8 million, respectively, due to certain adjustments in our mobile data communications and RF microwave amplifiers segments. These adjustments are more fully described in our Form 10-Q filed earlier today.

-- Our effective tax rate of 30.0% in the second quarter of fiscal 2007 reflects (i) the passage of legislation relating to the retroactive extension of the Federal research and experimentation credit; (ii) the approval by our stockholders of an amendment to the 2000 Stock Incentive Plan (the "Plan") which will permit us to claim tax deductions for cash awards anticipated to be paid under the Plan; and (iii) a tax benefit of $0.2 million relating to disqualifying dispositions of incentive stock options. Included in the tax provision for the three months ended January 31, 2007 is a $0.6 million tax benefit related to the retroactive application of the Federal research and experimentation credit to fiscal 2006. Excluding the tax benefit relating to fiscal 2006, we now estimate our effective tax rate for fiscal 2007 will approximate 35.0%.

-- Amortization of stock-based compensation expense for both the three months ended January 31, 2007 and 2006 was $1.5 million. Stock-based compensation expense for the three months ended January 31, 2007 was favorably impacted by a $0.4 million reduction associated with an increase in the estimated forfeiture rate of stock-based awards.

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Friday, March 9, 2007. 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. Alternatively, investors can access the conference call by dialing (800) 896-8445 (domestic) or (785) 830-1916 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-0868. In addition, an updated investor presentation, including earnings guidance, will be available on our web site shortly after the conference call.

About Comtech

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company believes many of its solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable or ineffective. The Company conducts business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company sells products to a diverse customer base in the global commercial and government communications markets. The Company believes it is a market leader in the market segments that it serves.

Cautionary Statement Regarding Forward-Looking Statements

Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the Company's future performance and financial condition, plans and objectives of the Company's management and the Company's assumptions regarding such future performance, financial condition, plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under the Company's control which may cause actual results, future performance and financial condition, and achievement of plans and objectives of the Company's management to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include the timing of receipt of, and the Company's performance on, new orders that can cause significant fluctuations in net sales and operating results, the timing and funding of government contracts, adjustments to gross profits on long-term contracts, risks associated with international sales, rapid technological change, evolving industry standards, frequent new product announcements and enhancements, changing customer demands, changes in prevailing economic and political conditions, and other factors described in the Company's filings with the Securities and Exchange Commission.

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
           Condensed Consolidated Statements of Operations
                             (Unaudited)

                      Three months ended         Six months ended
                          January 31,               January 31,
                   ------------------------- -------------------------
                       2007         2006        2007         2006
                   ------------- ----------- ------------ ------------

Net sales          $111,383,000  95,741,000  208,453,000  202,308,000
Cost of sales        61,533,000  54,650,000  119,228,000  121,013,000
                   ------------- ----------- ------------ ------------
    Gross profit     49,850,000  41,091,000   89,225,000   81,295,000
                   ------------- ----------- ------------ ------------

Expenses:
    Selling,
     general and
     administrative  18,257,000  15,809,000   34,844,000   31,857,000
    Research and
     development      7,616,000   6,007,000   14,773,000   12,756,000
    Amortization of
     intangibles        679,000     603,000    1,328,000    1,199,000
                   ------------- ----------- ------------ ------------
                     26,552,000  22,419,000   50,945,000   45,812,000
                   ------------- ----------- ------------ ------------

Operating income     23,298,000  18,672,000   38,280,000   35,483,000

Other expense
 (income):
    Interest
     expense            672,000     672,000    1,367,000    1,346,000
    Interest income  (3,315,000) (2,172,000)  (6,490,000)  (3,947,000)
                   ------------- ----------- ------------ ------------

Income before
 provision for
 income taxes        25,941,000  20,172,000   43,403,000   38,084,000
Provision for
 income taxes         7,770,000   6,868,000   14,405,000   13,316,000
                   ------------- ----------- ------------ ------------
Net income         $ 18,171,000  13,304,000   28,998,000   24,768,000
                   ============= =========== ============ ============

Net income per
 share:
  Basic            $       0.79        0.59         1.26         1.09
                   ============= =========== ============ ============
  Diluted          $       0.68        0.50         1.09         0.94
                   ============= =========== ============ ============

Weighted average
 number of common
 shares outstanding
 - basic             23,095,000  22,741,000   23,022,000   22,694,000
                   ============= =========== ============ ============

Weighted average
 number of common
 and common
 equivalent
 shares outstanding
 assuming dilution
 - diluted           27,491,000  27,354,000   27,440,000   27,367,000
                   ============= =========== ============ ============

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
                Condensed Consolidated Balance Sheets

                                             January 31,    July 31,
                                                2007          2006
                                            ------------- ------------
                  Assets                     (Unaudited)
Current assets:
  Cash and cash equivalents                 $266,214,000  251,587,000
  Restricted cash                                      -    1,003,000
  Accounts receivable, net                    68,700,000   70,047,000
  Inventories, net                            73,816,000   61,043,000
  Prepaid expenses and other current assets    5,676,000    7,178,000
  Deferred tax asset - current                 8,205,000    7,591,000
                                            ------------- ------------
                Total current assets         422,611,000  398,449,000

Property, plant and equipment, net            26,060,000   24,732,000
Goodwill                                      24,387,000   22,244,000
Intangibles with finite lives, net             6,276,000    6,855,000
Deferred financing costs, net                  2,176,000    2,449,000
Other assets, net                                431,000      537,000
                                            ------------- ------------
                Total assets                $481,941,000  455,266,000
                                            ============= ============

                Liabilities and
                 Stockholders' Equity
Current liabilities:
  Accounts payable                          $ 19,553,000   28,337,000
  Accrued expenses and other current
   liabilities                                38,126,000   41,230,000
  Customer advances and deposits               9,147,000    3,544,000
  Deferred service revenue                     4,906,000    9,896,000
  Current installments of other obligations      129,000      154,000
  Interest payable                             1,050,000    1,050,000
  Income taxes payable                         5,585,000    5,252,000
                                            ------------- ------------
                Total current liabilities     78,496,000   89,463,000

Convertible senior notes                     105,000,000  105,000,000
Other obligations, less current
 installments                                    177,000      243,000
Deferred tax liability - non-current           6,592,000    6,318,000
                                            ------------- ------------
                Total liabilities            190,265,000  201,024,000

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
   23,348,622 shares and 23,052,593 shares
   at January 31, 2007 and July 31, 2006,
   respectively                                2,335,000    2,305,000
  Additional paid-in capital                 147,893,000  139,487,000
  Retained earnings                          141,633,000  112,635,000
                                            ------------- ------------
                                             291,861,000  254,427,000
    Less:
     Treasury stock (210,937 shares)            (185,000)    (185,000)
                                            ------------- ------------
                Total stockholders' equity   291,676,000  254,242,000
                                            ------------- ------------
                Total liabilities and
                 stockholders' equity       $481,941,000  455,266,000
                                            ============= ============

                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
   Reconciliation of Non-GAAP Financial Measures to GAAP Financial
                               Measures

                        Three Months Ended        Six Months Ended
                             January 31,             January 31,
                      ------------------------ -----------------------
                         2007         2006        2007        2006
---------------------------------- ----------- ----------- -----------
Reconciliation of
 Non-GAAP Net Income
 To GAAP Net
 Income(1):
  Non-GAAP net income $19,129,000  14,491,000  31,271,000  26,977,000
  Amortization of
   stock-based
   compensation        (1,537,000) (1,538,000) (3,347,000) (2,834,000)
  Tax effect of
   stock-based
   compensation
   expense                579,000     351,000   1,074,000     625,000
                      ------------ ----------- ----------- -----------
  GAAP net income     $18,171,000  13,304,000  28,998,000  24,768,000
                      ============ =========== =========== ===========

Reconciliation of
 Non-GAAP Diluted
 Earnings Per Share
 To GAAP Diluted
 Earnings Per
 Share(1):
  Non-GAAP diluted
   earnings per share $      0.70        0.54        1.15        1.01
  Amortization of
   stock-based
   compensation             (0.04)      (0.05)      (0.10)      (0.09)
  Tax effect of
   stock-based
   compensation
   expense                   0.02        0.01        0.04        0.02
                      ------------ ----------- ----------- -----------
  GAAP diluted
   earnings per share $      0.68        0.50        1.09        0.94
                      ============ =========== =========== ===========

Reconciliation of
 GAAP Net Income to
 EBITDA(2):
  GAAP net income     $18,171,000  13,304,000  28,998,000  24,768,000
  Income taxes          7,770,000   6,868,000  14,405,000  13,316,000
  Net interest income  (2,643,000) (1,500,000) (5,123,000) (2,601,000)
  Amortization of
   stock-based
   compensation         1,537,000   1,538,000   3,347,000   2,834,000
  Depreciation and
   amortization         2,469,000   2,107,000   4,886,000   4,074,000
                      ------------ ----------- ----------- -----------
  EBITDA              $27,304,000  22,317,000  46,513,000  42,391,000
                      ============ =========== =========== ===========

(1) Non-GAAP net income is used by management in assessing the Company's operating results. The Company believes that investors and analysts may use non-GAAP measures that exclude the amortization of stock-based compensation, along with other information contained in its SEC filings, in assessing the Company's operating results.

(2) Represents earnings before interest, income taxes, depreciation and amortization of intangibles and stock-based compensation. EBITDA is a non-GAAP operating metric used by management in assessing the Company's operating results and ability to meet debt service requirements. The Company's definition of 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. EBITDA is also a measure frequently requested by the Company's investors and analysts. The Company believes that investors and analysts may use EBITDA, along with other information contained in its SEC filings, in assessing its ability to generate cash flow and service debt.

ECMTL

SOURCE: Comtech Telecommunications Corp.

Comtech Telecommunications Corp.
Robert G. Rouse, Executive Vice President and Chief
Operating Officer, 631-962-7000
or
Jerome Kapelus, Senior Vice President, Strategy and
Business Development, 631-962-7000
Info@comtechtel.com

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