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Net sales for the three months ended June 30, 2009 were $6,494,000 compared to $9,876,000 for the comparable prior year period, a decrease of $3,382,000 or 34.2%. Net sales for the six months ended June 30, 2009 were $12,243,000 compared to $18,727,000 for the comparable prior year period, a decrease of $6,484,000 or 34.6%. The decrease for both periods was due to the downturn in economic activity which has negatively impacted the markets for our products.
Operating income for the three months ended June 30, 2009 was $81,000 compared to $673,000 in the comparable prior year period, a decrease of $592,000. The decrease is primarily attributable to a $1,281,000 decrease in gross profit as a result of the decrease in sales, partially offset by a $689,000 reduction in operating expenses. Operating loss for the six months ended June 30, 2009 was $114,000 compared to operating income of $896,000 in the comparable prior year period, a decrease of $1,010,000. The decrease is primarily attributable to a $2,436,000 decrease in gross profit as a result of the decrease in sales, partially offset by a $1,426,000 reduction in operating expenses. The reduction in operating expenses in the 2009 periods from the 2008 periods was due to a number of cost reductions, the two largest being a decrease in salary and related benefits resulting from decreases in headcount and a decrease in professional and consulting fees.
Net income for the three months ended June 30, 2009 was $47,000, a nominal amount per share, compared to $369,000, or $0.03 per diluted share, for the same prior year period, a decrease of $322,000. The current quarter results include a tax provision of $36,000 compared to $309,000 in the same prior year period. Net loss for the six months ended June 30, 2009 was $185,000, or $0.01 per share, compared to net income of $519,000, or $0.04 per diluted share, for the same prior year period, a decrease of $704,000. The results for the six months ended June 30, 2009 include a tax provision of $75,000 compared to $399,000 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 current year 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, "While the effect of the economic recession continued to impact our sales levels in the second quarter of 2009 when compared to the similar quarter in 2008, we were profitable for the quarter. By managing our operating expenses we were able to generate reductions of $1.4 million from the prior year six-month period. Additionally, we are beginning to see an improvement in the markets for our products as evidenced by a 13% increase in sales levels in the second quarter of 2009 over the first quarter of 2009. Our balance sheet remains strong, with cash increasing from January 1, 2009 by $2.5 million to $10.8 million at June 30, 2009.
We are cautiously optimistic that the recent improvement in the overall market for our products will continue."
About Tii Network Technologies, Inc.
Tii Network Technologies, Inc. (Nasdaq: TIII | Quote | Chart | News | PowerRating) 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. Among those factors are:
-- general economic and business conditions, especially as they pertain to
the Telco 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 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 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;
-- 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.
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
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $6,494 $9,876 $12,243 $18,727
Cost of sales 4,252 6,353 7,874 11,922
----- ----- ----- -----
Gross profit 2,242 3,523 4,369 6,805
----- ----- ----- -----
Operating expenses:
Selling, general and
administrative 1,765 2,349 3,649 4,786
Research and development 396 501 834 1,123
----- ----- ----- -----
Total operating expenses 2,161 2,850 4,483 5,909
----- ----- ----- -----
Operating income (loss) 81 673 (114) 896
Interest expense (2) (4) (2) (4)
Interest income 4 9 6 26
----- ----- ----- -----
Income (loss) before income
taxes 83 678 (110) 918
Income tax provision 36 309 75 399
----- ----- ----- -----
Net income (loss) $47 $369 $(185) $519
===== ===== ===== =====
Net income (loss) per common
share:
Basic and Diluted $0.00 $0.03 $(0.01) $0.04
===== ===== ===== =====
Weighted average common
shares outstanding:
Basic 13,575 13,546 13,568 13,520
Diluted 13,738 14,063 13,568 14,011
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30, December 31,
2009 2008
(unaudited)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $10,780 $8,282
Accounts receivable, net of
allowance of $67 and $88 at
June 30, 2009 and December 31,
2008, respectively 3,017 3,906
Inventories, net 7,695 9,031
Deferred tax assets, net 611 697
Other current assets 432 175
------ ------
Total current assets 22,535 22,091
Property, plant and equipment, net 8,308 8,877
Deferred tax assets, net 8,617 8,599
Other assets, net 184 154
------- -------
Total assets $39,644 $39,721
======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $1,676 $2,090
Accrued liabilities 618 652
Short term debt 171 -
----- -----
Total current liabilities and
total liabilities 2,465 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; 14,015,853 shares
issued and 13,998,216 shares
outstanding as of June 30, 2009,
and 13,787,429 shares issued and
13,769,792 shares outstanding as
of December 31, 2008 140 138
Additional paid-in capital 42,645 42,262
Accumulated deficit (5,325) (5,140)
------ ------
37,460 37,260
Less: Treasury shares, at cost,
17,637 common shares at June 30,
2009 and December 31, 2008 (281) (281)
---- ----
Total stockholders' equity 37,179 36,979
------ ------
Total liabilities and
stockholders' equity $39,644 $39,721
======= =======
SOURCE Tii Network Technologies, Inc.
www.tiinettech.com
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