MELVILLE, N.Y., Dec 7, 2004 (BUSINESS WIRE) -- Comtech Telecommunications Corp. (Nasdaq: CMTL) today reported its results for the first quarter of fiscal 2005. Net sales for the three months ended October 31, 2004 were $56.1 million compared to $56.3 million for the three months ended October 31, 2003. Net sales for the first quarter of fiscal 2005 reflected growth in the telecommunications transmission and RF microwave amplifier segments, offset by lower sales in the mobile data communications segment. Quarterly sales in the mobile data communications segment are expected to increase dramatically for the remainder of fiscal 2005 as deliveries occur on recently received orders, as well as pending orders, from the U.S. Army.

Net income of $7.1 million, or $0.46 per diluted share, for the three months ended October 31, 2004 was an increase over net income of $5.7 million, or $0.37 per diluted share, for the three months ended October 31, 2003. Earnings for the first quarter of fiscal 2005 were affected by increased margins due to a more favorable product mix and a net-of-tax adjustment of $1.4 million associated with increased estimated margins at completion on two large over-the-horizon microwave system contracts as they draw nearer to completion.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $12.2 million and $9.9 million for the three months ended October 31, 2004 and 2003, respectively. Cash flows from operating activities for the three months ended October 31, 2004 were $20.3 million compared to $1.6 million for the three months ended October 31, 2003. The increase in cash flows from operating activities was, in part, due to a $12.0 million decrease in accounts receivable, much of which related to one of the over-the-horizon microwave contracts which is winding down.

Backlog as of October 31, 2004 was at an all-time high of $162.6 million compared to $99.0 million last year and $83.5 million as of July 31, 2004.

In commenting on the Company's performance during the first quarter of fiscal 2005, Fred Kornberg, President and Chief Executive Officer, noted, "We handily beat our revenue and EPS guidance and achieved strong operating results, as evidenced by record levels of net income, earnings per share and EBITDA, all while significantly increasing our R&D spending and absorbing increased operating expenses, many of which are fixed. These expenses are expected to be leveraged over a greater revenue base for the balance of the year."

Mr. Kornberg added, "We generated more than $20 million in cash flow from operating activities during the quarter as we collected a significant amount of receivables on a large over-the-horizon microwave contract as it neared completion."

Mr. Kornberg concluded, "The receipt of a $77.0 million over-the-horizon microwave contract in September, the strong bookings in our mobile data communications segment over the past few months and continued strong demand for our satellite earth station products have set a strong foundation for record results in fiscal 2005. Looking ahead, we are also ramping up our R&D spending for the balance of the year to ensure that we continue to introduce the next generation of advanced products and solutions to our customers."

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 Tuesday, December 7, 2004. 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 (800) 540-0559 (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) 530-9025. 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
                                                       October 31,
                                              ------------------------
                                                 2004           2003
                                              ------------ -----------

Net sales                                     $56,122,000  56,296,000
Cost of sales                                  29,001,000  35,316,000
                                               ---------- ------------
                Gross profit                   27,121,000  20,980,000
                                               ---------- ------------

Expenses:
    Selling, general and administrative        11,224,000   8,574,000
    Research and development                    4,896,000   3,541,000
    Amortization of intangibles                   569,000     500,000
                                               ---------- ------------
                                               16,689,000  12,615,000
                                               ---------- ------------

Operating income                               10,432,000   8,365,000
Other expense (income):
   Interest expense                               669,000      24,000
   Interest income                               (643,000)   (105,000)
                                               ---------- ------------

Income before provision for income taxes       10,406,000   8,446,000
Provision for income taxes                      3,330,000   2,703,000
                                               ---------- ------------
                  Net income                  $ 7,076,000   5,743,000
                                               ========== ============

Net income per share:
   Basic                                      $      0.50        0.41
                                               ========== ============
   Diluted                                    $      0.46        0.37
                                               ========== ============

Weighted average number of common shares
 outstanding - Basic                           14,242,000  13,953,000
Potential dilutive common shares                1,176,000   1,407,000
                                               ---------- ------------
Weighted average number of common and common
 equivalent shares
    outstanding assuming dilution - Diluted    15,418,000  15,360,000
                                               ========== ============

EBITDA  (1)                                   $12,246,000   9,927,000
                                               ========== ============

Reconciliation of net income to EBITDA:
    Net income                                 $ 7,076,000  5,743,000
    Income taxes                                 3,330,000  2,703,000
    Net interest expense (income)                   26,000    (81,000)
    Depreciation and amortization                1,814,000  1,562,000
                                                --------- ------------
    EBITDA                                     $12,246,000  9,927,000
                                                ========= ============

(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

                                             October 31,    July 31,
Item 1.                                         2004          2004
                                            ------------- ------------
                        Assets               (Unaudited)
Current assets:
    Cash and cash equivalents               $182,080,000  163,292,000
    Restricted cash                            2,103,000    4,054,000
    Accounts receivable, net                  30,940,000   43,002,000
    Inventories, net                          43,360,000   39,758,000
    Prepaid expenses and other current
     assets                                    3,687,000    1,817,000
    Deferred tax asset - current               6,501,000    6,501,000
                                             ------------ ------------
            Total current assets             268,671,000  258,424,000

Property, plant and equipment, net            15,164,000   14,652,000
Goodwill                                      18,721,000   18,721,000
Intangibles with definite lives, net          10,137,000   10,706,000
Deferred financing costs, net                  3,404,000    3,541,000
Other assets, net                                404,000      346,000
                                             ------------ ------------

            Total assets                    $316,501,000  306,390,000
                                             ============ ============

 Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                        $ 12,283,000    9,566,000
    Accrued expenses                          19,394,000   20,515,000
    Customer advances and deposits             5,870,000    7,290,000
    Deferred service revenue                  13,751,000   13,716,000
    Current installments of capital lease
     obligations                                 194,000      234,000
    Interest payable                             525,000    1,073,000
    Income taxes payable                       7,936,000    4,812,000
                                             ------------ ------------
             Total current liabilities        59,953,000   57,206,000

Convertible senior notes                     105,000,000  105,000,000
Capital lease obligations, less current
 installments                                    124,000      158,000
Deferred tax liability - non-current           1,628,000    1,628,000
                                             ------------ ------------
            Total liabilities                166,705,000  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 14,403,938 shares at October
         31, 2004 and 14,371,335 shares
        at July 31, 2004                       1,440,000    1,437,000
    Additional paid-in capital               110,754,000  110,435,000
    Retained earnings                         37,787,000   30,711,000
                                             ------------ ------------
                                             149,981,000  142,583,000
    Less:
        Treasury stock (140,625 shares)         (185,000)    (185,000)
                                             ------------ ------------
         Total stockholders' equity          149,796,000  142,398,000
                                             ------------ ------------
        Total liabilities and stockholders'
         equity                             $316,501,000  306,390,000
                                             ============ ============
Commitments and contingencies

ECMTL

SOURCE: Comtech Telecommunications Corp.

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

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