TII Network Technologies Reports 2007 Year End Results

Fourth Quarter Sales Increase 50%

EDGEWOOD, N.Y., March 31 /PRNewswire-FirstCall/ -- TII Network
Technologies, Inc. (Nasdaq: TIII), a company that develops and manufactures
connectivity and data distribution solutions for the communications industry,
today announced its results of operations for the three and twelve months
ended December 31, 2007.
Net sales for the three months ended December 31, 2007 were $12.0 million
compared to $8.0 million for the comparable prior year period, an increase of
$4.0 million or 50.3%. The growth reflects increased sales of connectivity
products, home networking products and digital subscriber line (DSL) products.
Non-GAAP operating income, which excludes restructuring charges of $46,000
related to the closing of our facility in Puerto Rico in 2007, was $734,000
for the three months ended December 31, 2007 compared to a loss of $37,000 for
the comparable prior year period, an improvement of $771,000. Operating
income for the three months ended December 31, 2007 was $688,000 compared to a
loss of $37,000 for the comparable prior year period, an improvement of
$725,000.
Income before taxes in the fourth quarter 2007 was $755,000 compared to
$16,000 in the comparable 2006 period.
Net income for the fourth quarter 2007 period was $6.1 million or $0.44
per diluted share, including a tax benefit of $5.3 million or $0.39 per
diluted share. For the fourth quarter 2006 period, net income was $1.5
million or $0.11 per diluted share, including a tax benefit of $1.5 million or
$0.11 per diluted share. The tax benefit resulted from a reduction of our
deferred tax asset valuation allowance and is net of Federal and state taxes
on pre-tax income at statutory rates.
Net sales for the year ended December 31, 2007 were $46.8 million compared
to $39.1 million for the similar prior year period, an increase of $7.7
million or 19.8%. The growth reflects increased sales of home networking
products and connectivity and DSL products, partially offset by decreases in
sales of our network interface products.
Non-GAAP operating income, which excludes restructuring charges of
$1.1 million related to the closing of our facility in Puerto Rico in 2007,
was $2.6 million for the year ended December 31, 2007 compared to $1.8 million
for the comparable prior year period, an increase of $824,000 or 47%.
Operating income for the year ended December 31, 2007 was $1.5 million
compared to $1.8 million for the comparable prior year period, a decrease of
$300,000 or 14.4%.
Income before taxes in 2007 was $1.7 million compared to $2.0 million in
the comparable 2006 period.
Net income for the year ended December 31, 2007 was $6.4 million, or $0.47
per diluted share, including a tax benefit of $4.8 million or $0.35 per
diluted share. Net income in 2006 was $2.7 million, or $0.20 per diluted
share, including a tax benefit of $710,000 or $0.05 per diluted share. The
tax benefit resulted from a reduction of our deferred tax asset valuation
allowance and is net of Federal and state taxes on pre-tax income at statutory
rates.
A reconciliation of non-GAAP operating income to our GAAP operating income
(the most directly comparable GAAP measure) is set forth at the end of this
press release.
Kenneth A. Paladino, President and Chief Executive Officer, stated, "The
continuation of our sales growth reflects increases across most of our product
lines and resulted in a 47% increase in operating income for the year,
excluding the restructuring charges. The restructuring charges resulted from
the closure of our Puerto Rico facility in September 2007 and the
consolidation of the operations previously conducted in that facility into our
new, owned facility in Edgewood, New York, which we moved into in June 2007.
With the consolidation of operations completed, which improves our operating
efficiencies, and anticipated further growth in sales of our new products
under our product and customer diversification strategy, we believe our
profitability will continue to increase. These improved financial results
validate that we are successfully executing our product and customer
diversification strategy, a strategy that we believe will result in continued
success into 2008."
About TII Network Technologies, Inc.
TII Network Technologies, Inc. (Nasdaq: TIII) headquartered in Edgewood,
New York, is a leader in designing, manufacturing and marketing network
products for the communications industry. Our products are critical to the
delivery of voice, video and data services by the service providers and
include: network interface devices ("NIDs"), network gateways or intelligent
NIDs ("iNIDs"), home networking, overvoltage surge protection and connectivity
solutions. Additional information about the company can be found at
www.tiinettech.com.
Forward Looking Statement
Certain statements are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. When used in this
release, words such as "may," "should," "seek," "believe," "expect,"
"anticipate," "estimate," "project," "intend," "strategy" and similar
expressions are intended to identify forward looking statements regarding
events, conditions and financial trends that may affect our future plans,
operations, business strategies, operating results and financial position.
Forward-looking statements are subject to a number of known and unknown risks
and uncertainties that could cause our actual results, performance or
achievements to differ materially from those described or implied in the
forward-looking statements as a result of several factors, including, but not
limited to, those factors discussed below and elsewhere in this document. We
undertake no obligation to update any forward-looking statement to reflect
events after the date of this Report. Among those factors are:
-- the ability to market and sell products to new markets beyond our
principal copper-based Telco market which has been declining over the
last several years, due principally to the impact of alternate
technologies;
-- exposure to increases in the cost of our products, including increases
in the cost of our petroleum-based plastic products and precious
metals;
-- general economic and business conditions, especially as they pertain to
the Telco industry;
-- the ability to timely develop products and adapt our existing products
to address technological changes, including changes in our principal
market;
-- competition in our traditional Telco market and new markets we are
seeking to penetrate;
-- dependence on, and ability to retain, our "as-ordered" general supply
agreements with our largest customer and ability to win new contracts;
-- potential changes in customers' spending and purchasing policies and
practices;
-- dependence on third parties for certain product development;
-- dependence for products and product components from Pacific Rim
contract manufacturers, including on-time delivery that could be
interrupted as a result of third party labor disputes, political
factors or shipping disruptions, quality control and exposure to
changes in costs and changes in the valuation of the Chinese Yuan;
-- weather and similar conditions, particularly the effect of typhoons on
our assembly and warehouse facilities in the Pacific Rim;
-- the ability to attract and retain technologically qualified personnel,
and
-- the availability of financing on satisfactory terms.

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

Three months ended Years ended
December 31, December 31,
2007 2006 2007 2006
(unaudited)

Net sales $11,984 $7,971 $46,846 $39,104
Cost of sales (includes
restructuring charges of
$46 and $1,076 in the three
and twelve months ended
December 31, 2007, respectively) 7,670 5,508 32,204 25,730

Gross profit 4,314 2,463 14,642 13,374

Operating expenses:
Selling, general and
administrative 2,964 2,026 10,926 9,721
Research and development 662 474 2,214 1,899
Total operating expenses 3,626 2,500 13,140 11,620

Operating income 688 (37) 1,502 1,754

Interest expense (2) (2) (12) (7)
Interest income 48 56 172 226
Other income (expense) 21 (1) 9 (2)

Income before income taxes 755 16 1,671 1,971

Income tax benefit (5,301) (1,486) (4,769) (710)

Net income $6,056 $1,502 $6,440 $2,681

Net income per common share:
Basic $0.46 $0.12 $0.50 $0.22
Diluted $0.44 $0.11 $0.47 $0.20

Weighted average common shares
outstanding:
Basic 13,300 12,479 12,821 12,397
Diluted 13,670 13,653 13,639 13,474

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents 3,261 5,362
Accounts receivable, net of allowance
of $90 and $30 at December 31, 2007
and 2006, respectively 6,994 3,068
Inventories 9,219 8,364
Deferred tax assets, net 674 1,251
Other current assets 372 277
Total current assets 20,520 18,322

Property, plant and equipment, net 9,680 7,119
Deferred tax assets, net 9,358 3,899
Other assets, net 93 125
Total assets $39,651 $29,465

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable 2,301 718
Accrued liabilities 1,856 1,914
Total current liabilities and
total liabilities 4,157 2,632

Commitments and contingencies

Stockholders' equity:
Preferred stock, par value $1.00 per share;
1,000,000 shares authorized, including
30,000 shares of series D junior
participating; no shares outstanding - -
Common stock, par value $.01 per share;
30,000,000 shares authorized;
13,499,541 shares issued and
13,481,904 shares outstanding as of
December 31, 2007, and 12,550,306 shares
issued and 12,532,669 shares outstanding
as of December 31, 2006 135 126
Additional paid-in capital 41,358 39,146
Accumulated deficit (5,718) (12,158)
35,775 27,114
Less: Treasury shares, at cost,
17,637 common shares at

December 31, 2007 and 2006 (281) (281)
Total stockholders' equity 35,494 26,833

Total liabilities and stockholders' equity $39,651 $29,465

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(in thousands)
(unaudited)

Three months ended Years ended
December 31, December 31,
2007 2006 2007 2006
Reconciliation of Non-GAAP operating
income to GAAP operating income:
Non-GAAP operating income $734 $(37) $2,578 $1,754
Restructuring charges (46) - (1,076) -
GAAP operating income $688 $(37) $1,502 $1,754

SOURCE TII Network Technologies, Inc.

TII Network Technologies, Inc., +1-631-789-5000