Exhibit 99.1
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CONTACTS:
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Kenneth A. Paladino, COO/CFO | | Van Negris/Lexi Terrero | |
| TII Network Technologies, Inc. | | Van Negris and Company, Inc. | |
| (631) 789-5000 | | (212) 396-0606 | |
FOR IMMEDIATE RELEASE | |
TII NETWORK TECHNOLOGIES REPORTS FISCAL 2005
THIRD QUARTER AND FIRST NINE MONTHS RESULTS
COPIAGUE, NY – MAY 9, 2005 — TII Network Technologies, Inc. (NASDAQ: TIII), a leading provider of telecommunications network protection and management products, today announced its results of operations for the third quarter and first nine months of fiscal 2005, ended March 25, 2005.
Net sales for the third quarter of fiscal 2005 were $5.2 million compared to $6.0 million for the comparative prior year period, a decrease of approximately $807,000 or 13.4%. This decrease was primarily due to the extreme winter weather conditions, which resulted in lower than normal NID (Network Interface Devices) installations in the Northeast. Net sales for the first nine months of fiscal 2005 were $19.2 million compared to $22.3 million for the similar prior year period, a decrease of approximately $3.0 million or 13.5%. The lower comparative sales for the first nine months of fiscal 2005 was due to the lower fiscal 2005 third quarter sales, together with the sharp increase in sales that occurred in the first quarter of fiscal 2004, primarily due to the need to replace damaged NIDs as a result of the hurricanes that occurred during that summer.
Gross profit for the third quarter of fiscal 2005 was $1.4 million compared to $1.9 million for the comparable prior year period, a decrease of $547,000 or 28.3%, while gross profit margins for those quarters were 26.5% and 32.0%, respectively. The lower gross profit levels and margin is due to the effect of fixed overhead costs and the lower sales levels. Gross profit for the nine months ended March 25, 2005 was $5.6 million compared to $6.8 million for the similar prior year period, a decrease of approximately $1.2 million or 17.6%, while gross profit margins for those periods were 29.1% and 30.5%, respectively. The lower gross profit level for the first nine months of fiscal 2005 compared to the prior year ago period was primarily due to the lower sales levels.
Net loss for the third quarter of fiscal 2005 was $53,000, which included non-recurring gains of $371,000, compared to net earnings of $217,000 or $0.02 per diluted share in the year ago quarter. For the nine months ended March 25, 2005, net earnings were $798,000 or $0.06 per diluted share, which included non-recurring gains of $487,000, compared to net earnings of $1.5 million or $0.11 per diluted share for the comparable prior year period.
Commenting on the fiscal 2005 third quarter results, Timothy J. Roach, President and Chief Executive Officer, stated: “Our third quarter results are typically affected by seasonal buying trends associated with winter weather conditions that hinder on-site installations of Network Interface Devices (NIDs) by our customers. The lower sequential sales in the third quarter reflect a combination of this seasonality and the severe winter experienced in the Northeast. For the fourth quarter, we anticipate that we will report financial results similar to those achieved for each of the quarters during the first half of the fiscal year.”
Mr. Roach further commented, “The communications industry is continuing to experience rapid changes in technology. Large service providers are increasingly relying on suppliers to help with conceptual solutions. TII is uniquely situated with both proprietary technology and the ability to quickly turn concepts into cost-effective products. An example is our new HomePlug® embedded surge protector. This product was designed in conjunction with CATV service providers who needed surge protection with their deployment of power-line communication home networking products.
“We are confident that our fundamental strategy of leveraging our core competencies into emerging and growing markets with new proprietary products will be successful. In addition, we will also continue to focus on our objective of diversifying our customer base by actively pursuing relationships with new customers in our core Telco business.”
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TII Network Technologies, Inc.
May 9, 2005
Page Two
About TII Network Technologies, Inc.
TII is a proven technology leader specializing in providing the telecommunications industry with innovative network protection and management products, including station protectors, network interface devices, DSL protectors, filters and splitters, power and data-line protectors and a multi-service residential gateway, as well as creative, custom design solutions to meet customers’ individual requirements.
Statements in this release that are not strictly historical are “forward-looking” statements and should be considered as subject to the risks and uncertainties that exist in the Company’s operations and business environment. These factors include, but are not limited to: dependence on, and ability to retain, its “as-ordered” general supply agreements with its largest three customers and win new contracts; the ability of the Company to market and sell products to new markets beyond its principal market – the copper-based Telco market; the Company’s ability to timely develop products and adapt its existing products to address technological changes, including changes in its principal market; exposure to increases in the cost of the Company’s products, including increases in the cost of the Company’s petroleum-based plastic products; the Company’s dependence for products and product components on Pacific Rim contract manufacturers, including on-time delivery, quality and exposure to changes in the cost in the event of changes in the valuation of the Chinese Yuan; the Company’s dependence upon one of its principal contract manufacturers; the potential for the disruption of shipments as a result of, among other things, third party labor disputes, political unrest in or shipping disruptions from countries in which the Company’s contract manufacturers produce the Company’s products; weather and similar conditions, such as the effect of hurricanes/typhoons on the Company’s manufacturing, assembly and warehouse facilities in Puerto Rico or the Pacific Rim; competition in the Company’s traditional telecommunications market and new markets the Company is seeking to penetrate; potential changes in customers’ spending and purchasing policies and practices; general economic and business conditions, especially as they pertain to the telecommunications industry; dependence on third parties for product development; risks inherent in new product development and sales, such as start-up delays and uncertainty of customer acceptance; the Company’s ability to attract and retain technologically qualified personnel; the Company’s ability to fulfill its growth strategies; the level of inventories maintained by the Company’s customers; the ability to maintain listing of its Common Stock on the Nasdaq SmallCap market; the availability of financing on satisfactory terms and other factors from time to time discussed in the Company’s SEC reports.
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— Statistical Tables Follow —
TII Network Technologies, Inc.
May 9, 2005
Page Three
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three months ended
| Nine months ended
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| March 25, 2005
| March 26, 2004
| March 25, 2005
| March 26, 2004
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| (Unaudited) | (Unaudited) |
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| Net sales | | $ | 5,231 | | | $ | 6,038 | | $ | 19,236 | | $ | 22,251 | |
| Cost of sales | | | 3,843 | | | | 4,103 | | | 13,639 | | | 15,459 | |
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| Gross profit | | | 1,388 | | | | 1,935 | | | 5,597 | | | 6,792 | |
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| Operating expenses: | | |
| Selling, general and administrative | | | 1,327 | | | | 1,374 | | | 4,099 | | | 4,312 | |
| Research and development | | | 405 | | | | 343 | | | 987 | | | 1,037 | |
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| Total operating expenses | | | 1,732 | | | | 1,717 | | | 5,086 | | | 5,349 | |
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| Operating (loss) income | | | (344 | ) | | | 218 | | | 511 | | | 1,443 | |
| Interest expense | | | -- | | | | -- | | | (4 | ) | | (12 | ) |
| Interest income | | | 26 | | | | 8 | | | 62 | | | 25 | |
| Other income | | | 263 | | | | 6 | | | 258 | | | 21 | |
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| (Loss) earnings before income taxes | | | (55 | ) | | | 232 | | | 827 | | | 1,477 | |
| (Recovery) provision for income taxes | | | (2 | ) | | | 15 | | | 29 | | | 27 | |
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| Net (loss) earnings | | $ | (53 | ) | | $ | 217 | | $ | 798 | | $ | 1,450 | |
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| Net (loss) earnings per common share: | | |
| Basic | | $ | -- | | | $ | 0.02 | | $ | 0.07 | | $ | 0.12 | |
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| Diluted | | $ | -- | | | $ | 0.02 | | $ | 0.06 | | $ | 0.11 | |
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| Weighted average common shares outstanding: | | |
| Basic | | | 11,908 | | | | 11,905 | | | 11,908 | | | 11,791 | |
| Diluted | | | 11,908 | | | | 13,167 | | | 12,641 | | | 12,675 | |
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TII Network Technologies, Inc.
May 9, 2005
Page Four
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| March 25, 2005
| June 25, 2004
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| (Unaudited) | |
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| ASSETS | | | | | | | | |
| Current Assets: | | |
| Cash and cash equivalents | | | $ | 5,260 | | $ | 4,164 | |
| Accounts receivable, net of allowance for doubtful accounts of $100,000 at | | |
| March 25, 2005 and June 25, 2004 | | | | 2,674 | | | 3,435 | |
| Inventories | | | | 5,987 | | | 5,405 | |
| Prepaid expenses and other current assets | | | | 616 | | | 374 | |
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| Total current assets | | | | 14,537 | | | 13,378 | |
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| Property, plant and equipment, net | | | | 4,298 | | | 3,947 | |
| Other assets | | | | 190 | | | 477 | |
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| TOTAL ASSETS | | | $ | 19,025 | | $ | 17,802 | |
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| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| Current Liabilities: | | |
| Accounts payable and accrued liabilities | | | $ | 2,766 | | $ | 2,341 | |
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| Total current liabilities | | | | 2,766 | | | 2,341 | |
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| Commitments and contingencies | | |
| Stockholders' Equity: | | |
| Preferred stock, par value $1.00 per share; 1,000,000 shares authorized; | | |
| Series D Junior Participating, no shares outstanding | | | | -- | | | -- | |
| Common stock, par value $.01 per share; 30,000,000 shares authorized; | | |
| 11,925,421 shares issued at March 25, 2005 and June 25, 2004 and | | |
| 11,907,784 shares outstanding at March 25, 2005 and June 25, 2004 | | | | 119 | | | 119 | |
| Additional paid-in capital | | | | 37,992 | | | 37,992 | |
| Accumulated deficit | | | | (21,571 | ) | | (22,369 | ) |
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| | | | | 16,540 | | | 15,742 | |
| Less: 17,637 common treasury shares, at cost | | | | (281 | ) | | (281 | ) |
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| Total stockholders' equity | | | | 16,259 | | | 15,461 | |
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| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | | $ | 19,025 | | $ | 17,802 | |
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