March 9, 2005

Comtech Telecommunications Corp. Announces Record Results for the Second Quarter of Fiscal 2005 and Declares 3-for-2 Stock Split

MELVILLE, N.Y., Mar 09, 2005 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (Nasdaq: CMTL) today reported record results for the second quarter of fiscal 2005. Sales, operating profit, EBITDA, net income and diluted earnings per share shattered all previous highs. The Company also announced that its Board of Directors has approved a three-for-two stock split to be effected in the form of a stock dividend. The financial information in this press release has not been adjusted for the stock split. Such information will be restated to reflect the stock split once it becomes effective.

Quarterly sales soared past the $70 million mark for the first time in the Company's history. Net sales for the three months ended January 31, 2005 were $78.1 million compared to $56.8 million for the three months ended January 31, 2004. Strong increases in sales were experienced in all three business segments.

Net income of $10.2 million, or $0.59 per diluted share, for the three months ended January 31, 2005 was nearly double the $5.2 million, or $0.34 per diluted share, for the three months ended January 31, 2004. The diluted earnings per share amount for the second quarter of fiscal 2005 reflects $0.05 of dilution in connection with the required adoption of new accounting rules regarding the impact of contingently convertible debt on the calculation of diluted earnings per share.

The second quarter results were impacted by favorable adjustments to certain long-term contracts in our telecommunications transmission and mobile data communications segments which reflect continuing positive trends in our performance on these contracts, as well as increased funding on the Movement Tracking System contract with the U.S. Army. These adjustments, which are more fully described in our Form 10-Q filed earlier today, contributed $5.9 million, $3.7 million, $3.3 million and $2.2 million, respectively, to the quarter's net sales, gross profit, operating profit and net income.

Net sales for the six months ended January 31, 2005 were $134.2 million compared to $113.1 million for the six months ended January 31, 2004. Net income for the six months ended January 31, 2005 was $17.3 million, or $1.02 per diluted share, versus $11.0 million, or $0.71 per diluted share, for the six months ended January 31, 2004.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $16.6 million and $9.2 million for the three months ended January 31, 2005 and 2004, respectively. For the six months ended January 31, 2005 and 2004, EBITDA was $28.8 million and $19.1 million, respectively. Cash flows from operating activities were an impressive $40.5 million for the six months ended January 31, 2005.

Backlog as of January 31, 2005 remained strong at $159.0 million. Bookings for the three and six months ended January 31, 2005 were $74.4 million and $209.6 million, respectively.

The additional shares relating to the stock split will be issued on April 4, 2005 to stockholders of record on March 21, 2005. Cash will be distributed in lieu of any fractional shares. The Company currently has 14,436,919 shares outstanding. After the split, there will be approximately 21,655,000 shares outstanding.

In commenting on the Company's performance during the second quarter of fiscal 2005, Fred Kornberg, President and Chief Executive Officer, noted, "The quarter was truly outstanding in every sense of the word, as evidenced by our operating results which were impressive based on any measure. We view our performance in recent years as a tangible validation of our strategic vision."

Mr. Kornberg added, "Fiscal 2005 is expected to be another record year for us on the top and bottom lines: the third in a row. In fact, our sales for the first six months of fiscal 2005 exceeded our sales for all of fiscal 2002. The vast majority of the sales growth was organic; further validating that we enjoy solid leadership positions in high growth markets. We look forward to the balance of fiscal 2005 and beyond with continued enthusiasm."

In commenting on the Company's stock split, Mr. Kornberg noted, "We believe the stock split will enhance the liquidity in the market for our shares and make our shares more accessible to individual and institutional investors."

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company conducts its business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. The Company offers niche 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 Wednesday, March 9, 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, www.comtechtel.com. Alternatively, investors can access the conference call by dialing (877) 707-9631 (domestic), or (785) 832-0326 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-1550. In addition, an updated investor presentation, including updated 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 in an early stage;

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

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

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

-- 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,
                      ----------------------- ------------------------
                          2005      2004        2005         2004
                      ----------- ----------- ----------- ------------

Net sales             $78,087,000 56,794,000  134,209,000 113,090,000
Cost of sales          45,797,000 36,181,000   74,798,000  71,497,000
                      ----------- ----------- ----------- ------------
    Gross profit       32,290,000 20,613,000   59,411,000  41,593,000
                      ----------- ----------- ----------- ------------

Expenses:
  Selling, general
   and administrative  12,033,000  8,804,000   23,257,000  17,378,000
  Research and
   development          4,954,000  3,664,000    9,850,000   7,205,000
  Amortization of
   intangibles            568,000    499,000    1,137,000     999,000
                      ----------- ----------- ----------- ------------
                       17,555,000 12,967,000   34,244,000  25,582,000
                      ----------- ----------- ----------- ------------
Operating income       14,735,000  7,646,000   25,167,000  16,011,000

Other expense
 (income):
  Interest expense        667,000     51,000    1,336,000      75,000
  Interest income        (905,000)  (114,000)  (1,548,000)   (219,000)
                      ----------- ----------- ----------- ------------
Income before
 provision for income
 taxes                 14,973,000  7,709,000   25,379,000  16,155,000
Provision for income
 taxes                  4,791,000  2,466,000    8,121,000   5,169,000
                      ----------- ----------- ----------- ------------

Net income            $10,182,000  5,243,000   17,258,000  10,986,000
                      =========== =========== ============ ===========

Net income per share:
  Basic                     $0.71       0.37         1.21        0.78
                      =========== =========== ============ ===========
  Diluted                   $0.59       0.34         1.02        0.71
                      =========== =========== ============ ===========

Weighted average
 number of common
 shares outstanding -
     basic             14,324,000 14,080,000   14,294,000  14,017,000
                      =========== =========== ============ ===========
Weighted average
 number of common and
 common equivalent shares
 outstanding assuming
 dilution - diluted    18,014,000 15,671,000   17,838,000  15,517,000
                      =========== =========== ============ ===========

EBITDA  (1)           $16,587,000  9,200,000   28,833,000  19,127,000
                      =========== =========== ============ ===========

Reconciliation of net
 income to EBITDA:
  Net income          $10,182,000  5,243,000   17,258,000  10,986,000
  Income taxes          4,791,000  2,466,000    8,121,000   5,169,000
  Net interest expense
   (income)              (238,000)   (63,000)    (212,000)   (144,000)
  Depreciation and
   amortization         1,852,000  1,554,000    3,666,000   3,116,000
                      ----------- ---------- ------------  -----------
  EBITDA              $16,587,000  9,200,000   28,833,000  19,127,000
                      =========== =========== ============ ===========

    (1) Represents earnings before interest, income taxes,
        depreciation and amortization. EBITDA is a non-GAAP operating
        metric used by management in assessing the Company's operating
        results and ability to meet debt service requirements. 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,
Item 1.                                         2005          2004
                                            ------------- ------------
                        Assets               (Unaudited)
Current assets:
  Cash and cash equivalents                 $201,743,000  163,292,000
  Restricted cash                              1,044,000    4,054,000
  Accounts receivable, net                    41,412,000   43,002,000
  Inventories, net                            38,555,000   39,758,000
  Prepaid expenses and other current assets    5,107,000    1,817,000
  Deferred tax asset - current                 6,501,000    6,501,000
                                            ------------- ------------
                 Total current assets        294,362,000  258,424,000

Property, plant and equipment, net            15,450,000   14,652,000
Goodwill                                      18,721,000   18,721,000
Intangibles with definite lives, net           9,569,000   10,706,000
Deferred financing costs, net                  3,267,000    3,541,000
Other assets, net                                413,000      346,000
                                            ------------- ------------

                 Total assets               $341,782,000  306,390,000
                                            ============= ============

  Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                           $16,808,000    9,566,000
  Accrued expenses                            24,264,000   20,515,000
  Customer advances and deposits              11,045,000    7,290,000
  Deferred service revenue                    10,248,000   13,716,000
  Current installments of capital
   lease obligations                             162,000      234,000
  Interest payable                             1,050,000    1,073,000
  Income taxes payable                         9,885,000    4,812,000
                                            ------------- ------------
                 Total current liabilities    73,462,000   57,206,000

Convertible senior notes                     105,000,000  105,000,000
Capital lease obligations,
 less current installments                        90,000      158,000
Deferred tax liability - non-current           1,628,000    1,628,000
                                            ------------- ------------
                 Total liabilities           180,180,000  163,992,000
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 14,562,794 shares at
   January 31, 2005 and 14,371,335 shares at
   July 31, 2004                               1,456,000    1,437,000
  Additional paid-in capital                 112,362,000  110,435,000
  Retained earnings                           47,969,000   30,711,000
                                            ------------- ------------
                                             161,787,000  142,583,000
  Less:
      Treasury stock (140,625 shares)           (185,000)    (185,000)
                                            ------------- ------------
                 Total stockholders' equity  161,602,000  142,398,000
                                            ------------- ------------
                 Total liabilities and
                  stockholders' equity      $341,782,000  306,390,000
                                            ============= ============
Commitments and contingencies

ECMTL

SOURCE: Comtech Telecommunications Corp.

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

Copyright Business Wire 2005

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