EF Johnson Technologies Announces Third Quarter 2008 Results

Oct. 29, 2008

Reports Quarterly Revenues of $34.5 million, Gross Margin of 37%, and $0.4 million in Third Quarter Net Income

IRVING, Texas , Oct. 29 /PRNewswire-FirstCall/ -- EF Johnson Technologies, Inc. (Nasdaq: EFJI), a leading provider of secure wireless solutions, today announced its results for the quarter ended September 30, 2008 . Revenues were $34.5 million, gross margin was 37% and net income was $0.4 million or $0.02 per diluted share, for the three months ended September 30, 2008 .

"This quarter's financial performance reflects actions taken earlier this year to improve our product line, improve margins, and reduce costs; a continuing effort to focus the company on profitability in 2008," said Michael E. Jalbert , chairman and chief executive officer. "Additionally, our third quarter order performance was strong with several strategic wins, including:

-- a $48.0 million contract from the U.S. Navy to test and implement a Navy-wide Virtual Perimeter Monitoring System (NVPMS) under which we have received task orders totaling $19.0 million to date; -- an order valued at $3.8 million from a US Department of Defense (DoD) customer to develop an advanced security and encryption solution; -- an order from the City of Norfolk to provide a secure video surveillance solution featuring military grade encryption that is FIPS 140-2 Validated; -- multiple state and local orders totaling $7 million; and -- several orders for the federal Departments of Defense and Homeland Security."

Revenues increased $0.8 million, or 2%, to $34.5 million, as compared to last year's third quarter revenues of $33.7 million. Additionally, gross profit increased $3.0 million, or 31%, to $12.6 million in the three months ended September 30, 2008 , from $9.6 million for the same period in 2007. Gross profit as a percentage of revenues ("Gross Margin") was 37% for the three months ended September 30, 2008 , versus 29% for the same period a year ago. The improved Gross Margin in the three months ended September 30, 2008 was primarily due to favorable margins associated with revenues from products delivered in the third quarter of 2008, coupled with cost reduction programs, as compared to the lower margins achieved from the large deliveries against Department of Defense contracts in 2007.

Operating expenses declined $1.3 million, or 9%, to $11.9 million in the third quarter of 2008, as compared to last year's third quarter of $13.2 million, primarily due to cost reduction programs put in place in the first quarter of 2008 associated with the integration of our businesses.

Net income was $0.4 million, or $0.02 per diluted share, for the three months ended September 30, 2008 , as compared to net loss of $3.4 million, or $0.13 per share, for the same period last year. Net income was higher in the third quarter of 2008 due to the improvement in gross profit together with a lower operating expense structure.

For the nine months ended September 30, 2008 , revenues decreased $29.0 million, or 22%, to $101.0 million, as compared to $130.0 million for the nine months of 2007. The lower year to date revenues compared with the prior year are due to the cumulative shipments against the large DoD contract shipped in the first nine months of 2007, not replicated in 2008. Net loss for the first nine months of 2008 was $0.7 million as compared to net income of $0.1 million for the first nine months of 2007. Loss per share for the first nine months of 2008 was $0.03 per share as compared to breakeven earnings per share for the same period in 2007.

The Company recorded non-cash expenses of $5.2 million for the first nine months of 2008 related to $1.7 million of stock based compensation and $3.4 million of depreciation and amortization.

At September 30, 2008 , the company had $6.2 million in cash, compared with $15.6 million at December 31, 2007 , reflecting cash used in operations. The company had $2.0 million borrowings against its revolving credit facility at September 30, 2008 . The use of cash was primarily due to delayed collection of certain receivables which was resolved subsequent to the end of the quarter.

Commenting on the Company's business outlook, Mr. Jalbert said, "Although ongoing uncertainty surrounding the U.S. economy and federal government funding during an election year may impact purchasing decisions by key customers in the fourth quarter and into 2009, we remain cautiously optimistic."

The Company's management plans to discuss the financial results and provide an operational progress report on its investor call today at 3:30 p.m. (CDT) . The investor conference call will be available via live webcast on the EF Johnson Technologies Inc. website at www.efji.com under the tab "Investor Relations." Investors are advised to go to the website at least 15 minutes prior to the call to register, download and install any necessary audio software. The webcast will be archived for 60 days.

To participate by telephone, the domestic dial-in number is 877-407-8031 and the international dial-in number is 201-689-8031. Participants are urged to call in to the conference call at least 10 minutes prior to the start time.

About EF Johnson Technologies, Inc.

Headquartered in Irving, Texas , EF Johnson Technologies, Inc. focuses on innovating, developing and marketing the highest quality secure communications solutions to organizations whose mission is to protect and save lives. The Company's customers include first responders in public safety and public service, the federal government, and industrial organizations. The Company's products are marketed under the EFJohnson, 3e Technologies International, and Transcrypt International brand names. For more information, visit http://www.efji.com.

Safe Harbor

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results, performance or achievements to differ materially from those expressed, suggested or implied by the forward-looking statements due to a number of risk factors including, but not limited to, the level of demand for the company's products and services, increased competition, reliance on contract manufacturers, the timely procurement of necessary manufacturing components, implementation of application software, successful integration of the system components, dependence on continued funding of governmental agency programs, general economic and business conditions, and other risks detailed in the company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the period ended December 31, 2007 and in the company's subsequent filings with the SEC. These forward-looking statements are made as of the date of this press release and the company's undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.

EF JOHNSON TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the three and nine months ended September 30, 2008 and 2007 (Unaudited and in thousands, except share and per share data) Three Months Nine Months Ended Ended September 30, September 30, 2008 2007 2008 2007 Revenues $34,500 $33,715 $100,969 $129,959 Cost of sales 21,872 24,065 66,284 89,305 Gross profit 12,628 9,650 34,685 40,654 Operating expenses: Research and development, net of reimbursements 3,559 3,929 6,935 11,504 Sales and marketing 3,275 3,163 9,689 10,288 General and administrative 4,756 5,699 16,862 17,537 Amortization of intangibles 357 407 1,170 1,202 Total operating expenses 11,947 13,198 34,656 40,531 Income (loss) from operations 681 (3,548) 29 123 Interest income (expense), net (259) 33 (707) 12 Income (loss) before income taxes $422 $(3,515) (678) 135 Income tax benefit (expense) - 137 - (22) Net income (loss) $422 $(3,378) $(678) $113 Net income (loss) per share - Basic $0.02 $(0.13) $(0.03) $- Net income (loss) per share - Diluted $0.02 $(0.13) $(0.03) $- Weighted average common shares - Basic 26,121,544 26,035,933 26,088,648 26,032,312 Weighted average common shares - Diluted 26,687,013 26,035,933 26,088,648 26,397,343 EF JOHNSON TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2008 and December 31, 2007 (Unaudited and in thousands, except share and per share data) ASSETS September 30, December 31, 2008 2007 Current assets: Cash and cash equivalents $6,241 $15,636 Accounts receivable, net of allowance for returns and doubtful accounts of $1,890 and $1,642, respectively 32,097 21,345 Receivables - other 5,218 6,944 Cost in excess of billings on uncompleted contracts 3,241 3,275 Inventories 33,663 33,871 Prepaid expenses 1,171 1,109 Total current assets 81,631 82,180 Property, plant and equipment, net 6,397 7,096 Restricted cash 2,012 - Goodwill 20,040 20,040 Other intangible assets, net of accumulated amortization 12,651 13,821 Other assets 215 352 TOTAL ASSETS $122,946 $123,489 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $2,000 $- Current portion of long-term debt obligations 9 8 Accounts payable 11,476 13,411 Accrued expenses 9,636 11,232 Billings in excess of cost on uncompleted contracts 289 221 Deferred revenues 817 1,010 Total current liabilities 24,227 25,882 Long-term debt obligations, net of current portion 15,008 15,015 Deferred income taxes 1,489 1,489 Other liabilities 675 737 TOTAL LIABILITIES 41,399 43,123 Stockholders' equity: Preferred stock ($0.01 par value; 3,000,000 shares authorized; none issued) -- -- Common stock ($0.01 par value; 50,000,000 voting shares authorized, 26,273,240 and 26,210,232 issued and outstanding as of September 30, 2008 and December 31, 2007, respectively) 262 262 Additional paid-in capital 155,162 153,356 Accumulated other comprehensive loss (657) (710) Accumulated deficit (73,220) (72,542) TOTAL STOCKHOLDERS' EQUITY 81,547 80,366 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $122,946 $123,489

SOURCE EF Johnson Technologies, Inc.

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