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

December 4, 2006 at 12:00 AM EST

MELVILLE, N.Y., Dec 04, 2006 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (NASDAQ: CMTL) today reported its operating results for the three months ended October 31, 2006. Net sales for the first quarter of fiscal 2007 were $97.1 million compared to $106.6 million in the first quarter of fiscal 2006, reflecting growth in the telecommunications transmission segment offset by lower sales, as anticipated, in the mobile data communications and RF microwave amplifiers segments.

GAAP net income was $10.8 million, or $0.41 per diluted share, for the three months ended October 31, 2006 compared to $11.5 million, or $0.43 per diluted share, for the three months ended October 31, 2005. Non-GAAP net income, which excludes the amortization of stock-based compensation expense, was $12.1 million, or $0.45 per diluted share, for the three months ended October 31, 2006 as compared to Non-GAAP net income of $12.5 million, or $0.47 per diluted share, for the three months ended October 31, 2005.

In commenting on the Company's performance during the first quarter of fiscal 2007, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., said, "We are very pleased with our first quarter results which are expected to serve as the foundation for another record year in fiscal 2007 on our top and bottom lines."

Mr. Kornberg added, "Average quarterly sales for the Company are expected to increase for the remainder of fiscal 2007 as a result of our anticipated ongoing support of Movement Tracking System program activities and as deliveries occur on recently received orders, including our contract to upgrade the U.S. D.o.D.'s AN/TRC-170 digital troposcatter terminals."

Selected First Quarter Fiscal 2007 Financial Metrics and Other Items

-- Bookings for the first quarter of fiscal 2007 were $121.4 million compared to $110.1 million in the first quarter of fiscal 2006. Backlog as of October 31, 2006 was a record $210.4 million compared to $186.0 million as of July 31, 2006.

-- Earnings before interest, taxes, depreciation and amortization (EBITDA) were $19.2 million and $20.1 million for the three months ended October 31, 2006 and 2005, respectively.

-- Cash used in operating activities for the first quarter of fiscal 2007 was $3.6 million compared to cash provided by operating activities of $7.2 million for the first quarter of fiscal 2006, reflecting a significant increase in inventory that is currently anticipated to be delivered to our customers (primarily the U.S. government) throughout fiscal 2007, as well as the timing of payments for accounts payable and certain accrued expenses that occurred in the first quarter of fiscal 2007.

-- Fiscal 2007 first quarter net sales and gross profit were favorably impacted by $1.2 million and $1.1 million, respectively, due to a gross profit adjustment to the MTS contract in our mobile data communications segment. The adjustment is more fully described in our Form 10-Q filed earlier today.

-- The Company completed the acquisition of certain assets and assumption of certain liabilities of Insite Consulting, Inc. ("Insite") and the consolidation of Comtech Tolt Technologies, Inc. ("Tolt"). Sales relating to Insite's geoOps™ Enterprise Location Monitoring software and Tolt's turnkey employee mobility solution products were insignificant during the first quarter of fiscal 2007.

-- As disclosed in our Form 10-Q filed earlier today, the Company has added a risk factor relating to a notification it received from the Company's auditors, KPMG LLP, concerning KPMG's independence with respect to the Company.

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Tuesday, December 5, 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. Alternatively, investors can access the conference call by dialing (800) 540-0559 (domestic) or (785) 832-1508 (international) and using the conference I.D. of "Comtech." A replay of the conference call will be available for seven days by dialing (402) 220-6933. 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 October 31,
                                            2006            2005
                                       ---------------- --------------
Net sales                                 $ 97,070,000    106,567,000
Cost of sales                               57,695,000     66,363,000
                                       ---------------- --------------
   Gross profit                             39,375,000     40,204,000
                                       ---------------- --------------

Expenses:
   Selling, general and administrative      16,587,000     16,048,000
   Research and development                  7,157,000      6,749,000
   Amortization of intangibles                 649,000        596,000
                                       ---------------- --------------
                                            24,393,000     23,393,000
                                       ---------------- --------------

Operating income                            14,982,000     16,811,000

Other expenses (income):
   Interest expense                            695,000        674,000
   Interest income                          (3,175,000)    (1,775,000)
                                       ---------------- --------------

Income before provision for income
 taxes                                      17,462,000     17,912,000
Provision for income taxes                   6,635,000      6,448,000
                                       ---------------- --------------
Net income                                $ 10,827,000     11,464,000
                                       ================ ==============

Net income per share:
   Basic                                  $       0.47           0.51
                                       ================ ==============
   Diluted                                $       0.41           0.43
                                       ================ ==============

Weighted average number of common
 shares outstanding - basic                 22,948,000     22,646,000
                                       ================ ==============

Weighted average number of common and
 common equivalent shares outstanding
 assuming dilution - diluted                27,389,000     27,379,000
                                       ================ ==============


                   COMTECH TELECOMMUNICATIONS CORP.
                           AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets

                                            October 31,     July 31,
                                                2006          2006
                                            ------------- ------------
                   Assets                    (Unaudited)
Current assets:
  Cash and cash equivalents                 $245,560,000  251,587,000
  Restricted cash                              1,003,000    1,003,000
  Accounts receivable, net                    69,300,000   70,047,000
  Inventories, net                            72,046,000   61,043,000
  Prepaid expenses and other current assets    6,949,000    7,178,000
  Deferred tax asset - current                 7,211,000    7,591,000
                                            ------------- ------------
                Total current assets         402,069,000  398,449,000

Property, plant and equipment, net            25,755,000   24,732,000
Goodwill                                      24,387,000   22,244,000
Intangibles with finite lives, net             6,955,000    6,855,000
Deferred financing costs, net                  2,312,000    2,449,000
Other assets, net                                364,000      537,000
                                            ------------- ------------
                Total assets                $461,842,000  455,266,000
                                            ============= ============

    Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                          $ 26,182,000   28,337,000
  Accrued expenses and other current
   liabilities                                31,468,000   41,230,000
  Customer advances and deposits               6,393,000    3,544,000
  Deferred service revenue                     7,360,000    9,896,000
  Current installments of other obligations      138,000      154,000
  Interest payable                               525,000    1,050,000
  Income taxes payable                         8,677,000    5,252,000
                                            ------------- ------------
                Total current liabilities     80,743,000   89,463,000

Convertible senior notes                     105,000,000  105,000,000
Other obligations, less current installments     210,000      243,000
Deferred tax liability - non-current           6,398,000    6,318,000
                                            ------------- ------------
                Total liabilities            192,351,000  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
   23,287,098 shares and 23,052,593 shares
   at October 31, 2006 and July 31, 2006,
   respectively                                2,329,000    2,305,000
  Additional paid-in capital                 143,885,000  139,487,000
  Retained earnings                          123,462,000  112,635,000
                                            ------------- ------------
                                             269,676,000  254,427,000
    Less:
     Treasury stock (210,937 shares)            (185,000)    (185,000)
                                            ------------- ------------
                Total stockholders' equity   269,491,000  254,242,000
                                            ------------- ------------
                Total liabilities and
                 stockholders' equity       $461,842,000  455,266,000
                                            ============= ============


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

                                                Three Months Ended
                                                     October 31,
                                              ------------------------
                                                  2006        2005
                                              ------------ -----------
Reconciliation of Non-GAAP Net Income To GAAP
 Net Income(1):
  Non-GAAP net income                         $12,142,000  12,486,000
  Amortization of stock-based compensation     (1,810,000) (1,296,000)
  Tax effect of stock-based compensation
   expense                                        495,000     274,000
                                              ------------ -----------
  GAAP net income                             $10,827,000  11,464,000
                                              ============ ===========

Reconciliation of Non-GAAP Diluted Earnings
 Per Share To GAAP Diluted Earnings Per
 Share(1):
  Non-GAAP diluted earnings per share         $      0.45        0.47
  Amortization of stock-based compensation          (0.06)      (0.05)
  Tax effect of stock-based compensation
   expense                                           0.02        0.01
                                              ------------ -----------
  GAAP diluted earnings per share             $      0.41        0.43
                                              ============ ===========

Reconciliation of GAAP Net Income to
 EBITDA(2):
    GAAP net income                           $10,827,000  11,464,000
    Income taxes                                6,635,000   6,448,000
    Net interest income                        (2,480,000) (1,101,000)
    Amortization of stock-based compensation    1,810,000   1,296,000
    Depreciation and amortization               2,417,000   1,967,000
                                              ------------ -----------
    EBITDA                                    $19,209,000  20,074,000
                                              ============ ===========

(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

Copyright Business Wire 2006

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