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Comtech Telecommunications Corp. Announces Results for the Second Quarter of Fiscal 2006

March 8, 2006 at 12:00 AM EST

MELVILLE, N.Y., Mar 08, 2006 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended January 31, 2006. The results for the quarter were driven by strong performances in all three of the Company's business segments.

Net sales for the second quarter of fiscal 2006 were $95.7 million, compared to $78.1 million in the second quarter of fiscal 2005. GAAP net income in the second quarter of fiscal 2006 was $13.3 million, or $0.50 per diluted share, a significant increase over the second quarter of fiscal 2005 net income of $10.2 million, or $0.39 per diluted share.

Net sales for the six months ended January 31, 2006 were $202.3 million, compared to $134.2 million for the six months ended January 31, 2005. GAAP net income for the six months ended January 31, 2006 was $24.8 million, or $0.94 per diluted share, a significant increase over the corresponding period of fiscal 2005 net income of $17.3 million, or $0.68 per diluted share.

The fiscal 2006 second quarter results were favorably impacted by gross profit adjustments to certain contracts in the mobile data communications and RF microwave amplifiers segments, partially offset by a warranty accrual in the mobile data communications segment. These adjustments are more fully described in our Form 10-Q filed earlier today and contributed sales of $6.7 million and net after-tax earnings of $3.1 million. The second quarter results for fiscal 2005 were impacted by favorable adjustments to certain contracts in the telecommunications transmission and mobile data communications segments that contributed sales of $5.9 million and net after-tax earnings of $2.2 million.

GAAP net income in the three and six months ended January 31, 2006 included $1.5 million and $2.8 million, respectively, of pre-tax compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123(R) which requires the expensing of stock option awards. Excluding stock-based compensation expense, diluted earnings per share for the three and six months ended January 31, 2006 were $0.54 and $1.01, respectively.

Earnings before interest, income taxes, depreciation and amortization (including the amortization of stock-based compensation), or EBITDA, were $22.3 million and $42.4 million for the three and six months ended January 31, 2006 versus $16.6 million and $28.8 million for the three and six months ended January 31, 2005. Cash flow from operating activities for the six months ended January 31, 2006 was $6.3 million compared to $40.5 million for the six months ended January 31, 2005, reflecting an increase in accounts receivable on certain large contracts during the fiscal 2006 period and the liquidation of a significant receivable in the fiscal 2005 period.

Backlog as of January 31, 2006 was $151.0 million compared to $153.3 million at July 31, 2005. Bookings for the three and six months ended January 31, 2006 were $89.9 million and $200.0 million, respectively.

In commenting on the Company's performance during the three months ended January 31, 2006, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "The second quarter of fiscal 2006 was another outstanding showing for Comtech. Our leadership positions in the markets we serve continue to pay big dividends. As can be seen from our segment level results, the strength has been experienced across all of our businesses."

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 8:30 AM (ET) on Thursday, March 9, 2006. 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 (877) 707-9628 (domestic), or (785) 832-2422 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-4973. 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 on our reported results of recent changes to financial reporting standards related to stock option expensing;

-- Our stock price being volatile; and

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

COMTECH TELECOMMUNICATIONS CORP.
                 Consolidated Statements of Operations
                              (Unaudited)

                         Three months ended      Six months ended
                            January 31,            January 31,
                          2006       2005       2006         2005
                       ---------- ----------- ----------- ------------

Net sales             $95,741,000 78,087,000  202,308,000 134,209,000
Cost of sales          54,650,000 45,797,000  121,013,000  74,798,000
                       ---------- ----------- ----------- ------------
 Gross profit          41,091,000 32,290,000   81,295,000  59,411,000
                       ---------- ----------- ----------- ------------

Expenses
 Selling, general
  and administrative   15,809,000 12,033,000   31,857,000  23,257,000
 Research and
  development           6,007,000  4,954,000   12,756,000   9,850,000
 Amortization of
  intangibles             603,000    568,000    1,199,000   1,137,000
                       ---------- ----------- ----------- ------------
                       22,419,000 17,555,000   45,812,000  34,244,000
                       ---------- ----------- ----------- ------------

Operating income       18,672,000 14,735,000   35,483,000  25,167,000

Other expense (income):
 Interest expense         672,000    667,000    1,346,000   1,336,000
 Interest income       (2,172,000)  (905,000)  (3,947,000) (1,548,000)
                       ---------- ----------- ----------- ------------

Income before
 provision for income
 taxes                 20,172,000 14,973,000   38,084,000  25,379,000
Provision for income
 taxes                  6,868,000  4,791,000   13,316,000   8,121,000
                       ---------- ----------- ----------- ------------

Net income            $13,304,000 10,182,000   24,768,000  17,258,000
                       ========== =========== =========== ============

Net income per share
  Basic               $      0.59       0.47         1.09        0.80
                       ========== ========== ============ ===========
  Diluted             $      0.50       0.39         0.94        0.68
                       ========== ========== ============ ===========

Weighted average
 number of common
 shares outstanding -
 basic                 22,741,000 21,486,000   22,694,000  21,441,000
                       ========== =========== =========== ============

Weighted average number
 of common and common
 equivalent shares
 outstanding assuming
 dilution - diluted    27,354,000 27,021,000   27,367,000  26,756,000
                       ========== =========== =========== ============

Reconciliations of Non-GAAP Financial Measures to GAAP
        ------------------------------------------------------
                          Financial Measures
                          ------------------

                        Three months ended        Six months ended
                            January 31,              January 31,
                        --------------------- ------------------------
                         2006        2005        2006        2005
                       ---------- ----------- ----------- ------------
Reconciliation of Non-
 GAAP Net Income,
 Excluding Stock-based
 Compensation Expense,
 To GAAP Net Income(1):

Non-GAAP net income,
 excluding stock-based
 compensation expense $14,491,000  10,182,000  26,977,000  17,258,000

Pre-tax stock-based
 compensation expense  (1,538,000)          -  (2,834,000)          -

Tax effect of stock-
 based compensation
 expense                  351,000           -     625,000           -
                       ----------- ----------- ----------- -----------
GAAP net income       $13,304,000  10,182,000  24,768,000  17,258,000
                       =========== =========== =========== ===========

hree months ended        Six months ended
                            January 31,              January 31,
                       ---------------------- ------------------------
                          2006       2005        2006        2005
                       ---------- ----------- ----------- ------------
Reconciliation of Non-
 GAAP Diluted Earnings
 Per Share, Excluding
 Stock-based
 Compensation Expense,
 To GAAP Diluted
 Earnings Per Share(1):

Non-GAAP diluted
 earnings per share,
 excluding stock-based
 compensation         $      0.54        0.39        1.01        0.68

Pre-tax stock-based
 compensation expense       (0.05)          -       (0.09)          -

Tax effect of
 stock-based
 compensation
 expense                     0.01           -        0.02           -
                      ----------- ----------- ----------- -----------
GAAP diluted
 earnings per share   $      0.50        0.39        0.94        0.68
                       ========== =========== =========== ===========

hree months ended        Six months ended
                             January 31,             January 31,
                       ---------------------- ------------------------
                          2006        2005        2006        2005
                       ----------  ---------- ------------ -----------
Reconciliation of GAAP
Net Income to EBITDA
(2):

    GAAP net income   $13,304,000  10,182,000  24,768,000  17,258,000

    Income taxes        6,868,000   4,791,000  13,316,000   8,121,000

    Net interest
     expense (income)  (1,500,000)   (238,000) (2,601,000)   (212,000)

    Stock-based
     compensation
     expense            1,538,000           -   2,834,000           -

    Depreciation and
     amortization       2,107,000   1,852,000   4,074,000   3,666,000
                       ----------  ---------- -----------  ----------

    EBITDA            $22,317,000  16,587,000  42,391,000  28,833,000
                       ==========  ========== ============ ===========




(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 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 (including the amortization of 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.


COMTECH TELECOMMUNICATIONS CORP.

                      Consolidated Balance Sheets

                                              January 31,   July 31,
                                                 2006         2005
                                             ------------ ------------
                   Assets                     (Unaudited)
Current assets:
 Cash and cash equivalents                   $218,677,000 214,413,000
 Restricted cash                                1,003,000   1,034,000
 Accounts receivable, net                      75,989,000  56,052,000
 Inventories, net                              53,920,000  45,103,000
 Prepaid expenses and other current assets      5,846,000   4,387,000
 Deferred tax asset - current                   8,047,000   8,092,000
                                              ----------- ------------
    Total current assets                      363,482,000 329,081,000

Property, plant and equipment, net             20,435,000  18,683,000
Goodwill                                       22,244,000  22,244,000
Intangibles with definite lives, net            8,121,000   9,123,000
Deferred financing costs, net                   2,722,000   2,995,000
Other assets, net                                 315,000     277,000
                                              ----------- ------------
    Total assets                             $417,319,000 382,403,000
                                              =========== ============

    Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                           $ 21,951,000  23,577,000
  Accrued expenses and other current
   liabilities                                 35,990,000  34,497,000
  Customer advances and deposits                5,093,000   5,282,000
  Deferred service revenue                     10,245,000   8,210,000
  Current installments of other obligations       210,000     235,000
  Interest payable                              1,050,000   1,050,000
  Income taxes payable                          3,696,000   1,540,000
                                              ----------- ------------
    Total current liabilities                  78,235,000  74,391,000

Convertible senior notes                      105,000,000 105,000,000
Other obligations, less current installments      306,000     396,000
Deferred tax liability - non-current            6,592,000   5,987,000
                                              ----------- ------------
    Total liabilities                         190,133,000 185,774,000

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 and
  30,000,000  shares at January 31, 2006
  and July 31, 2005, respectively; issued
  22,994,853 shares and 22,781,678 shares
  at January 31, 2006 and July 31, 2005,
  respectively                                  2,299,000   2,278,000
 Additional paid-in capital                   132,938,000 127,170,000
 Retained earnings                             92,134,000  67,366,000
                                              ----------- ------------
                                              227,371,000 196,814,000
 Less:
   Treasury stock (210,937 shares)               (185,000)   (185,000)
                                              ----------- ------------
    Total stockholders' equity                227,186,000 196,629,000
                                              ----------- ------------
    Total liabilities and stockholders'
     equity                                  $417,319,000 382,403,000
                                              =========== ============

ECMTL

SOURCE: Comtech Telecommunications Corp.

Comtech Telecommunications Corp.
Fred Kornberg or Robert G. Rouse
631/777-8900
Info@comtechtel.com

Copyright Business Wire 2006

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