EDGEWOOD, N.Y., Nov. 15, 2010 /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, 2010.
Net sales for the three months ended September 30, 2010
were $18,625,000 compared to
$7,460,000 in the comparable prior
year period, an increase of $11,165,000 or 150%. Net sales for the nine
months ended September 30, 2010 were $36,713,000 compared to $19,703,000 in the comparable prior year period,
an increase of $17,010,000 or 86%.
The sales growth was primarily due to the sales from our
newly acquired Copper Products Division ("CPD"), which Tii acquired
from Porta Systems Corp. in May 2010,
increased sales to existing customers and sales to new customers
from market share gains made in the fourth quarter of last year.
Sales from the newly acquired CPD totaled $7,530,000 and $9,400,000 during the three and nine months ended
September 30, 2010, respectively, accounting for 67% and 55%
of the total sales increase for the three and nine month periods,
respectively.
Operating income for the three months ended September 30,
2010 was $1,308,000 compared to
$90,000 in the comparable prior year
period, an increase of $1,218,000.
The increase is primarily attributable to a $2,497,000 increase in gross profit as a result
of the increase in sales, partially offset by a $1,279,000 increase in operating expenses.
Operating income for the nine months ended September 30,
2010 was $2,388,000 compared to an
operating loss of $24,000 in the
comparable prior year period, an improvement of $2,412,000. The improvement is primarily
attributable to a $4,981,000 increase
in gross profit as a result of the increase in sales, partially
offset by a $2,569,000 increase in
operating expenses.
The increases in operating expenses in the 2010 periods from the
2009 periods were primarily attributable to additional salaries and
related benefits resulting from the CPD acquisition, an increase in
commissions resulting from the increase in sales, and transaction
and integration costs of approximately $96,000 and $840,000 incurred during the three and nine
months ended September 30, 2010, respectively, in connection
with the CPD acquisition. Under revised guidance on
accounting for business combinations, all acquisition costs are
expensed as incurred instead of constituting part of the purchase
price of the acquired business.
Net income for the three months ended September 30, 2010
was $815,000, or $0.06 per diluted share, compared to $104,000, or $0.01
per diluted share, for the same prior year period, an increase of
$711,000. The current quarter
results include a tax provision of $511,000 compared to a $13,000 tax benefit in the same prior year
period. Net income for the nine months ended
September 30, 2010 was $1,470,000, or $0.10 per diluted share, compared to net loss of
$81,000, or $0.01 per diluted share, for the same prior year
period, an improvement of $1,551,000.
The results for the nine months ended September 30, 2010
include a tax provision of $945,000
compared to $62,000 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 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, a foreign tax rate differential and
state taxes.
Kenneth A. Paladino, President
and Chief Executive Officer, stated, "The third quarter sales level
of $18.6 million represents the
highest in the company's history, and an increase of 150% over the
prior year period. Our operating income for the quarter was
also up significantly to $1.3 million
compared to $90,000 in the prior year
period and, excluding legal settlement payments received in a
quarter many years ago, also represents the highest in the
Company's history.
The quarter's increased sales level results from incremental
business from our recent acquisition, which accounted for 67% of
the increase, as well as an increase in sales of our historical
products. Our business was strong across all of our product
lines this past quarter due to the improved economy and the
continued replenishment of supply chains by our customers.
The integration of the Copper Products Division continues to go
as planned, the associated costs are diminishing and we expect to
be substantially complete by year-end. As we expected, our
margins as a percent of sales were down for the quarter but with
the critical integration issues behind us, we will now be able to
increase our efforts on improving operating efficiencies.
We are very pleased with the tangible benefits we are realizing
from our recent acquisition which has increased our business base,
broadened our product lines and increased our sales channels.
These new sales, together with strength in our core business,
have combined for record results this quarter confirming that we
are successfully executing the right strategy."
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 in the Telco Central Office, outdoors
in the service providers' distribution network, at the interface
where the service providers' network connects to the users'
network, and inside the users' 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 future events.
Among those factors are:
Relating specifically to our recent acquisition:
- our ability to successfully complete the integration of the
acquired products and sales force into our business;
- our ability to execute our plans with our manufacturing partner
to improve gross margins of the acquired products; and
- the stability of the Pound Sterling and Mexican Peso relative
to the U.S. dollar exchange rate.
Relating to our overall business:
- 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;
- pressures 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;
- the ability to timely develop products and adapt our existing
products to address technological changes, including changes in our
principal market;
- 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 obtain raw materials and components used in
manufacturing our products given the supply shortages of these
items resulting from increased economic activity;
- competition in our principal 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 customers and our ability to win
new contracts;
- dependence on third parties for certain product
development;
- dependence for products and product components from
Pacific Rim and Mexican 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, including wages, and changes in the valuation of the Chinese
Yuan and Mexican Peso;
- weather and similar conditions, including the effect of
typhoons or hurricanes on our assembly facilities in the
Pacific Rim and Mexico, which can disrupt production;
- the effect of hurricanes in the
United States which can effect the demand for our products
and the effect of harsh winter conditions in the United States 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.
We undertake no obligation to update any forward-looking
statement to reflect events after the date of this Report.
-- Statistical Tables Follow --
|
|
TII NETWORK
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(LOSS)
|
|
(in
thousands, except per share data)
|
|
(Unaudited)
|
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net sales
|
$ 18,625
|
|
$ 7,460
|
|
$ 36,713
|
|
$ 19,703
|
|
Cost of sales
|
13,905
|
|
5,237
|
|
25,139
|
|
13,110
|
|
Gross profit
|
4,720
|
|
2,223
|
|
11,574
|
|
6,593
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling, general
and administrative (including acquisition-related expenses of $96
and $840 in the three and nine months ended September 30, 2010,
respectively)
|
2,788
|
|
1,767
|
|
7,690
|
|
5,417
|
|
Research and
development
|
624
|
|
366
|
|
1,496
|
|
1,200
|
|
Total operating
expenses
|
3,412
|
|
2,133
|
|
9,186
|
|
6,617
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
1,308
|
|
90
|
|
2,388
|
|
(24)
|
|
|
|
|
|
|
|
|
|
|
Foreign currency transaction
gain
|
18
|
|
-
|
|
18
|
|
-
|
|
Interest expense
|
-
|
|
(3)
|
|
-
|
|
(5)
|
|
Interest income
|
-
|
|
4
|
|
9
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
1,326
|
|
91
|
|
2,415
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
(benefit)
|
511
|
|
(13)
|
|
945
|
|
62
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
815
|
|
$
104
|
|
$ 1,470
|
|
$
(81)
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
62
|
|
-
|
|
141
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss)
|
$
877
|
|
$
104
|
|
$ 1,611
|
|
$
(81)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
0.06
|
|
$
0.01
|
|
$
0.11
|
|
$
(0.01)
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
$
0.06
|
|
$
0.01
|
|
$
0.10
|
|
$
(0.01)
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
13,712
|
|
13,595
|
|
13,662
|
|
13,577
|
|
Diluted
|
14,361
|
|
13,846
|
|
14,220
|
|
13,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TII NETWORK
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands, except share and per share data)
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
1,393
|
|
$
5,129
|
|
|
Certificate of
deposit
|
-
|
|
7,000
|
|
|
Accounts receivable, net of
allowance of $86 and $82 at
September 30, 2010
and December 31, 2009, respectively
|
11,490
|
|
3,468
|
|
|
Other receivable
|
605
|
|
-
|
|
|
Inventories, net
|
12,555
|
|
8,044
|
|
|
Deferred tax assets,
net
|
1,445
|
|
1,100
|
|
|
Other current assets
|
988
|
|
235
|
|
|
Total current
assets
|
28,476
|
|
24,976
|
|
|
|
|
|
|
|
Property, plant and equipment,
net
|
9,271
|
|
8,020
|
|
Deferred tax assets,
net
|
7,193
|
|
7,791
|
|
Intangible assets,
net
|
1,007
|
|
-
|
|
Goodwill
|
5,469
|
|
-
|
|
Other assets, net
|
208
|
|
175
|
|
|
Total assets
|
$
51,624
|
|
$
40,962
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$
9,054
|
|
$
2,429
|
|
|
Accrued liabilities
|
2,079
|
|
688
|
|
|
Other current
liabilities
|
492
|
|
-
|
|
|
Total current
liabilities
|
11,625
|
|
3,117
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred stock, par value $1.00
per share; 1,000,000 shares authorized;
no shares
outstanding
|
-
|
|
-
|
|
|
Common stock, par value $.01 per
share; 30,000,000 shares authorized;
14,503,484
shares issued and
14,485,847 shares outstanding as
of
September 30,
2010, and 14,240,853 shares issued and 14,223,216 shares
outstanding as of
December 31, 2009
|
145
|
|
143
|
|
|
Additional paid-in
capital
|
43,591
|
|
43,050
|
|
|
Accumulated deficit
|
(3,597)
|
|
(5,067)
|
|
|
Accumulated other comprehensive
income - foreign currency translation
|
141
|
|
-
|
|
|
|
40,280
|
|
38,126
|
|
|
Less: Treasury shares, at cost,
17,637 common shares at
September 30,
2010 and December 31, 2009
|
(281)
|
|
(281)
|
|
|
Total
stockholders' equity
|
39,999
|
|
37,845
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
51,624
|
|
$
40,962
|
|
|
|
|
|
|
|
|
|
|
SOURCE Tii Network Technologies, Inc.