EF Johnson Technologies, Inc. Announces 2008 Financial Results and Restatement of 2007

IRVING, Texas, March 31 /PRNewswire-FirstCall/ -- EF Johnson Technologies, Inc. (Nasdaq: EFJI) today announced its results for the fourth quarter and year ended December 31, 2008.

Fourth quarter revenues increased $0.6 million, or 2.4%, to $25.3 million from $24.7 million for the same period of 2007. The operating loss for the fourth quarter of 2008 was $21.1 million compared to an operating loss of $16.2 million for the same period of 2007. The fourth quarter operating loss for 2008 and 2007 included non-cash charges for an impairment of goodwill of $14.9 million and $5.5 million, respectively, as well as non-cash charges for impairment to other 3eTI intangibles of $3.5 million and $0.3 million, respectively. These impairments were related to changes in our long-term strategic outlook and projections for our 3eTI reporting unit and our more narrowed focus on government solutions going forward into 2009.

The net loss for the fourth quarter of 2008 was $20.8 million, or $0.79 per share, compared to a net loss of $37.7 million, or $1.44 per share, for the same period in the prior year. The 2007 fourth quarter net loss included a non-cash tax expense of $21.4 million due to the need to fully reserve our deferred tax assets.

"In spite of a disappointing fourth quarter, primarily the result of federal orders pushed into 2009, we were still able to accomplish a number of our goals for 2008," said Michael Jalbert, president and chief executive officer of EF Johnson Technologies, Inc. "We made substantial progress in the integration of our business operations, reducing our operating and capital costs in 2008, and improving our gross margins," Jalbert added.

The Company also announced that it is restating financial results for the quarters ended September 30, 2007 and March 31, June 30 and September 30, 2008, respectively, and for the fourth quarter and year ended December 31, 2007, in the Form 10-K, which is being filed today. The previously filed annual report on Form 10-K for 2007 and quarterly reports on Form 10-Q affected by the restatements have not been amended and should not be relied upon.

The restatement is related to a change in accounting treatment for a non-trade receivable from a vendor that resulted from a determination that an agreement between the parties in the third quarter of 2007 to resolve a receivables dispute effectively changed the nature of the non-trade receivable such that it should have no longer have been considered an outstanding receivable. As a result, the company wrote off this "Other Receivable" as of the third quarter of 2007, thereby requiring the restatement of the quarter ended September 30, 2007 and subsequent quarters. The cumulative effect of the restatement in 2007 was an increase in cost of sales by $3.4 million and an increased net loss in 2007 from $37.7 million to $41.1 million. The cumulative effect of the restatement in 2008 was a decrease in cost of sales by $0.8 million and a decreased net loss in 2008 from $21.7 million to $20.9 million. The Company's cumulative loss for the period covered by the restatements increased by $2.7 million and reduced shareholder equity as of December 31, 2008 by $2.7 million. Cash and cash equivalents available to the Company were not affected by the accounting adjustments.

We anticipate that approximately $2.7 million of credits remaining at December 31, 2008 will be received over the next two to three years pursuant to this agreement and will have a positive impact on our gross margin and operating income on a going forward basis.

For 2008, revenues decreased $28.3 million, or 18%, to $126.3 million versus $154.6 million for 2007. The decline in revenues was attributable to large deliveries against Department of Defense contracts in 2007 not replicated in 2008. Partially offsetting this decline in revenue were increases in revenues associated with the FCC rebanding effort and large deliveries against state and local orders. The operating loss for 2008 was $20.5 million compared to an operating loss of $19.6 million for 2007. Additionally, the operating loss for 2008 and 2007 included non-cash charges for an impairment of goodwill of $14.9 million and $5.5 million, respectively, as well as non-cash charges for impairment to other 3eTI intangibles of $3.5 million and $0.3 million, respectively.

The net loss for the full year of 2008 was $20.9 million versus a net loss of $41.1 million for the previous year. The loss per share for 2008 was $0.79 compared to a loss of $1.58 per share for 2007. The 2007 net loss included non-cash tax expense of $21.5 million associated with reserves for our deferred tax assets.

GAAP to non-GAAP Reconciliation

The Company's management evaluates and makes operating decisions using various operating measures. These measures are generally based on the Company's revenues and certain costs of operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is adjusted operating income/loss, which is a non-GAAP financial measure. This measure consists of GAAP Income (loss) from operations excluding depreciation of fixed assets, amortization of acquired intangible assets, and goodwill and intangible impairment charges.

Management believes that non-GAAP adjusted Income (loss) from operations provides useful supplemental information to management and investors regarding the performance of the company's business operations and facilitates comparisons to our historical operating results. Management also uses this information internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.

The following table reconciles the specific items excluded from GAAP in the calculation of non-GAAP adjusted Income (loss) from operations for the periods shown below:

                                                       2007
    ($000's)                                 2008    Restated     2006

    Revenue                                 126.3     154.6       96.7
    Gross Profit                             42.7      41.0       35.4
    Gross Margin                             33.8%     26.5%      36.6%

    Operating Expenses                       63.2      60.6       44.0
    Income (loss) from operations (EBIT)    (20.5)    (19.6)      (8.6)

    Plus:  Goodwill and Intangible
     Impairment                              18.4       5.8          0
    Plus:  Depreciation and
     Amortization                             4.5       4.4        3.1

    Adjusted earnings before interest,
     taxes, depreciation & amortization,
     and impairments                          2.4      (9.4)      (5.5)

In addition to the improved operational performance as noted above as "Adjusted earnings before interest, taxes, depreciation & amortization, and impairments," other Key Accomplishments for 2008 included:

• Strategic orders received
  • Navy $48 million, multi-year contract for VPMS, $19 million first year funding;
  • Government of Canada Yukon System Contract $10 million;
• Improved Gross Margin from 26.5% to 33.8 %;
• Completed the integration of our business reducing our operating cost;
• Began delivery of our new "ES" portable and mobile radio platforms and related accessories including:
  • Project 25 trunked and conventional modes, Enhanced Project 25 Vocoder, SMARTNET(R)/SmartZone(R) trunking protocols, and mobile Lighting Control Head;
• Launched company-wide Performance Excellence program;
• Celebrated 85 years in business.

"Like many other companies in our current economic environment, we anticipate that 2009 will be a difficult year to predict and we plan to be focused on cash management in this uncertain environment," Jalbert stated. "We intend to aggressively pursue funded state, local and federal opportunities in the markets that we serve with our solid P25 and broadband products, accessories and features."

The Company's management plans to discuss its financial results and provide an operational progress report on its investor call Wednesday, April 1, 2009 at 4:00p.m. (EDT). The investor conference call will be available via live webcast on the EF Johnson Technologies, Inc. website at www.efjohnsontechnologies.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 30 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 names. For more information, visit http://www.EFJohnsonTechnologies.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, reliance on contract manufacturers, the timely procurement of necessary manufacturing components, software feature development and the 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, 2008 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 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.

Adjusted EBITDA (as defined above) is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. We present Adjusted EBITDA because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of EFJI nor is it intended to be predictive of potential future results.

                  EF JOHNSON TECHNOLOGIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 2008 and 2007
                (in thousands, except share and per share data)

                                               2008        2007
                                                       (as restated)

     Current assets:
       Cash and cash equivalents             $11,267      $15,636
       Accounts receivable, net of
        allowance for returns and
        doubtful accounts of $1,969
        and $1,636, respectively              19,515       21,345
       Receivables - other                       849        3,498
       Cost in excess of billings
        on uncompleted contracts               5,116        3,275
       Inventories, net                       37,322       33,871
       Prepaid expenses                        1,632        1,109
         Total current assets                 75,701       78,734

     Property, plant and equipment,
      net                                      5,996        7,096
     Restricted cash                           2,021            -
     Goodwill                                  5,126       20,040
     Other intangible assets, net of
      accumulated amortization                 8,770       13,821
     Other assets                                 73          352
       TOTAL ASSETS                          $97,687     $120,043



               LIABILITIES AND STOCKHOLDERS' EQUITY

     Current liabilities:
       Current portion of long-term
        debt obligations                          $9           $8
       Accounts payable                       11,728       13,411
       Accrued expenses                       10,786       11,232
       Billings in excess of cost
        on uncompleted contracts                 217          221
       Deferred revenues                       1,235        1,010

         Total current liabilities            23,975       25,882
     Long-term debt obligations, net
      of current portion                      15,006       15,015
     Deferred income taxes                       631        1,489
     Other liabilities                         1,106          737
       TOTAL LIABILITIES                      40,718       43,123

     Commitments and contingencies                 -            -

     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, 26,336,735 and
        26,210,232 issued and
        outstanding as of
        December 31, 2008 and
        December 31, 2007,
        respectively)                            262          262
       Additional paid-in capital            154,688      153,356
       Accumulated other comprehensive
        loss                                  (1,088)        (710)
       Accumulated deficit                   (96,861)     (75,988)
       Less: Treasury stock(18,083
        shares at cost at
        December 31, 2008)                       (32)           -
       TOTAL STOCKHOLDERS' EQUITY             56,969       76,920
       TOTAL LIABILITIES AND
        STOCKHOLDERS' EQUITY                 $97,687     $120,043



                 See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                  EF JOHNSON TECHNOLOGIES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF OPERATIONS
                    Years Ended December 31, 2008, 2007, 2006
                  (in thousands, except share and per share data)


                                            Year ended December 31,
                                        2008          2007         2006
                                                 (as restated)

    Revenues                         $126,286      $154,610      $96,721
    Cost of sales                      83,560       113,606       61,291

        Gross profit                   42,726        41,004       35,430

    Operating expenses:
      Research and development         10,099        15,677       12,276
      Sales and marketing              12,218        13,640       10,470
      General and administrative       24,435        24,193       18,928
      Amortization of intangibles       1,526         1,613          727
      Impairment of goodwill           14,914         5,475            -
      Write-off of in-process R&D           -             -        1,600

        Total operating expenses       63,192        60,598       44,001

        Loss from operations          (20,466)      (19,594)      (8,571)
    Interest income                       197         1,074        1,551
    Interest expense                   (1,177)       (1,108)        (506)
    Other expense, net                     (1)           (1)           -
        Loss before income taxes      (21,447)      (19,629)      (7,526)
    Income tax benefit (expense)          574       (21,470)         745

        Net loss                     $(20,873)     $(41,099)     $(6,781)

    Net loss per share-Basic           $(0.79)       $(1.58)      $(0.26)

    Net loss per share-Diluted         $(0.79)       $(1.58)      $(0.26)

    Weighted average common
     shares-Basic                  26,261,062    26,039,246   25,844,956

    Weighted average common
     shares-Diluted                26,690,487    26,404,221   26,207,242


                  See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

SOURCE EF Johnson Technologies, Inc.