Tii Network Technologies Reports Third Quarter 2009 Results

EDGEWOOD, N.Y., Nov. 9 /PRNewswire-FirstCall/ -- Tii Network Technologies,
Inc. (Nasdaq: TIII), a leader in designing, manufacturing and marketing
network products for the communications industry, today reported results of
operations for the three and nine months ended September 30, 2009.

Net sales for the three months ended September 30, 2009 were $7,460,000
compared to $8,521,000 in the comparable prior year period, a decrease of
$1,061,000 or 12.5%. Net sales for the nine months ended September 30, 2009
were $19,703,000 compared to $27,248,000 in the comparable prior year period,
a decrease of $7,545,000 or 27.7%. The decrease in the 2009 periods was
primarily due to the economic downturn, which has negatively impacted sales of
our connectivity and network interface device products, and the loss of
landlines by the service providers which has negatively impacted sales of our
network interface device products. Additionally, in the three months ended
September 30, 2009, the decrease in sales was partially offset by an increase
in sales of our broadband products into the growing broadband market and to
new customers.

Operating income for the three months ended September 30, 2009 was $90,000
compared to $311,000 in the comparable prior year period, a decrease of
$221,000. The decrease was primarily attributable to a $650,000 decrease in
gross profit, partially offset by a $429,000 reduction in operating expenses.
Operating loss for the nine months ended September 30, 2009 was $24,000
compared to operating income of $1,207,000 in the comparable prior year
period, a decrease of $1,231,000. The decrease was primarily attributable to
a $3,086,000 decrease in gross profit, partially offset by a $1,855,000
reduction in operating expenses. The decrease in our gross profit in the 2009
periods was due to the decrease in sales and an increase in air freight and
expediting costs incurred to satisfy an increase in demand for products with
contracted delivery requirements. We previously reduced the production of
these products due to the sharp reduction in demand from our customers in the
prior quarters as a result of the impact of the global recession. The
reduction in operating expenses in the 2009 periods was primarily due to cost
reduction measures implemented in 2008 and early 2009 (the largest being a
decrease in salary and related benefits resulting from a decrease in
headcount), a decrease in commission expense resulting from the decrease in
sales and, in the 2009 nine month period, there was a decrease in professional
and consulting fees.

Net income for the three months ended September 30, 2009 was $104,000, or
$0.01 per diluted share, compared to $126,000, or $0.01 per diluted share, for
the same prior year period, a decrease of $22,000. The current quarter
results include a tax benefit of $13,000 compared to a tax provision of
$192,000 in the same prior year period. Net loss for the nine months ended
September 30, 2009 was $81,000, or $0.01 per diluted share, compared to net
income of $646,000, or $0.05 per diluted share, for the same prior year
period, a decrease of $727,000. The results for the nine months ended
September 30, 2009 include a tax provision of $62,000 compared to $591,000 in
the same prior year period. Our income tax provision for each period consists
of amounts necessary to align our year-to-date tax provision with the
effective tax rate we expect to achieve for the full year. That rate differs
from the U.S. statutory rate primarily as a result of the non-deductibility of
certain share-based compensation expense for income tax purposes that has been
recognized for financial statement purposes, state taxes and, additionally, in
the 2009 periods, an increase in the valuation allowance against deferred tax
assets for our estimate of state net operating losses that are likely to
expire unutilized.

Kenneth A. Paladino, President and Chief Executive Officer, stated, "The
sequential increase in sales for the quarter was due to the improving
economy's positive impact on our markets and sales to new customers from
recent market share gains. Though total sales for the quarter were lower than
the comparable prior year period, we are very pleased that sales of our more
advanced broadband products were higher by almost 25%.

The decrease in gross profit margin for the quarter was to due to freight and
expediting costs incurred to satisfy an increase in demand for certain
products with contracted delivery requirements where inventory levels for
these products had been reduced due to the economic downturn. Increased
production levels of these products have enabled us to significantly reduce
expediting costs and as a result we expect to return to historical gross
profit margin levels in the fourth quarter.

We continue to manage our other operating expenses and balance sheet closely.
Our operating expenses are down 22% or $1.9 million for the first nine months.
Cash is now $12.3 million, up $4.0 million for the same period.

Though our sales have not yet recovered to prior year levels, we are confident
that we are executing the right strategy and with the improved economic
outlook, we expect that our profitability will also continue to improve."

About Tii Network Technologies, Inc.
Tii Network Technologies, Inc. (Nasdaq: TIII) headquartered in Edgewood, New
York, designs, manufactures and sells products to the service providers in the
communications industry for use in their networks. Our products are typically
found outdoors in the service provider's distribution network, at the
interface where the service provider's network connects to the user's network,
and inside the user's home or apartment, and are critical to the successful
delivery of voice and broadband communication services. 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. We undertake no obligation to
update any forward-looking statement to reflect events after the date of this
Report. Among those factors are:

-- general economic and business conditions, especially as they pertain
to
the telecommunications industry;
-- potential changes in customers' spending and purchasing policies and
practices, which are effected by customers' internal budgetary
allotments that may be impacted by the current economic climate,
particularly in the United States;
-- pressure from customers to reduce pricing without achieving a
commensurate reduction in costs;
-- the ability to market and sell products to new markets beyond our
principal copper-based telephone operating company ("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;
-- 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 into which
we have been seeking to expand;
-- dependence on, and ability to retain, our "as-ordered" general supply
agreements with our largest customer and our ability to win new
contracts;
-- 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, including the effect of typhoons on
our
assembly facilities in the Pacific Rim which can disrupt product
production, the effect of hurricanes in the United States which can
increase the demand for our products and harsh winter conditions which
can temporarily disrupt the installation of certain of our products by
Telcos;
-- the ability to attract and retain technologically qualified personnel;
and

-- the availability of financing on satisfactory terms.

.

-- Statistical Tables Follow --

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

Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
------ ------ ------ ------
Net sales $7,460 $8,521 $19,703 $27,248
Cost of sales 5,237 5,648 13,110 17,569
------ ------ ------ ------
Gross profit 2,223 2,873 6,593 9,679
------ ------ ------ ------

Operating expenses:
Selling, general and
administrative 1,767 2,067 5,417 6,854
Research and development 366 495 1,200 1,618
------ ------ ------ ------
Total operating expenses 2,133 2,562 6,617 8,472
------ ------ ------ ------

Operating income (loss) 90 311 (24) 1,207

Interest expense (3) (2) (5) (6)
Interest income 4 9 10 36
------ ------ ------ ------

Income (loss) before income taxes 91 318 (19) 1,237

Income tax (benefit) provision (13) 192 62 591
------ ------ ------ ------

Net income (loss) $104 $126 $(81) $646
====== ====== ====== ======

Net income (loss) per common
share:
Basic and Diluted $0.01 $0.01 $(0.01) $0.05
====== ====== ====== ======

Weighted average common shares
outstanding:
Basic 13,595 13,560 13,577 13,533
Diluted 13,846 13,723 13,577 13,985

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

September 30, December 31,
2009 2008
(unaudited)
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $12,279 $8,282
Accounts receivable, net of
allowance of $69 and $88 at 2,125 3,906
September 30, 2009 and December 31,
2008, respectively
Inventories, net 7,447 9,031
Deferred tax assets, net 611 697
Other current assets 439 175
--- ---
Total current assets 22,901 22,091

Property, plant and equipment, net 8,248 8,877
Deferred tax assets, net 8,638 8,599
Other assets, net 184 154
--- ---
Total assets $39,971 $39,721
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,897 $2,090
Accrued liabilities 599 652
--- ---
Total current liabilities and total
liabilities 2,496 2,742
----- -----

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 at December
31, 2008;
no shares outstanding
Common stock, par value $.01 per
share; 30,000,000 shares
authorized; 140 138
14,015,853 shares issued and
13,998,216 shares outstanding as of
September 30, 2009, and 13,787,429
shares issued and 13,769,792 shares
outstanding as of December 31, 2008
Additional paid-in capital 42,837 42,262
Accumulated deficit (5,221) (5,140)
------ ------
37,756 37,260
Less: Treasury shares, at cost,
17,637 common shares at (281) (281)
September 30, 2009 and December 31,
2008 ---- ----
Total stockholders' equity 37,475 36,979
------ ------

Total liabilities and stockholders'
equity $39,971 $39,721
======= =======

SOURCE Tii Network Technologies, Inc.

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