Exhibit
99.1
NEWS
RELEASE
CONTACT:
Edward
B.
Kornfeld
Chief
Executive Officer
Chief
Financial Officer
Porta
Systems Corp.
(516)
364-9300
FOR
IMMEDIATE RELEASE
PORTA
SYSTEMS CORP. REPORTS RESULTS FOR THE QUARTER
AND
YEAR ENDED DECEMBER 31, 2006
Syosset,
NY - March 30, 2007, - Porta Systems Corp. (OTC.BB:PYTM) today reported
operating income from continuing operations for the quarter ended December
31,
2006 of $621,000 compared to an operating loss from continuing operations of
$894,000 for the quarter ended December 31, 2005. The Company recorded net
income from continuing operations of $256,000, $0.03 per share (basic and
diluted), versus a net loss from continuing operations of $1,045,000, ($0.11)
per share (basic and diluted), for the quarters ended December 31, 2006 and
2005, respectively. Net income for the quarter ended December 31, 2006,
including a loss from discontinued operations of $84,000, was $172,000, $0.02
per share (basic and diluted), compared to net loss of $1,387,000, including
a
loss from discontinued operations of $342,000, ($0.13) per share (basic and
diluted), for the quarter ended December 31, 2005.
The
Company reported operating income from continuing operations for the year ended
December 31, 2006 of $3,814,000 compared to operating income from continuing
operations of $3,066,000 for year ended December 31, 2005, an increase of 24%.
The Company recorded net income from continuing operations of $2,511,000, $0.25
per share (basic and diluted) versus net income from continuing operations
of
$1,855,000, $0.18 per share (basic and diluted) for the year ended December
31,
2006 and 2005, respectively. Net income for the year ended December 31, 2006,
after a loss from discontinued operations of $329,000, was $2,182,000, $0.22
per
share (basic and diluted), compared to net income of $810,000, after a loss
from
discontinued operations of $1,045,000, $0.08 per share (basic and
diluted).
-more-
Porta
Systems Corp. Press Release
|
Page
2
|
March
30,
2007
Sales
from continuing operations were $7,779,000 for the quarter ended December 31,
2006 versus $5,315,000 for the quarter ended December 31, 2005, an increase
of
approximately $2,464,000 (46%). Copper Connection/Protection sales were
$6,217,000 for the quarter ended December 31, 2006 versus $4,122,000 for the
quarter ended December 31, 2005, an increase of $2,095,000 (51%). The increase
for the quarter reflects continuing increased sales volume to British
Telecommunications as a result of its continuing rollout of DSL lines, and
its
implementation of the local loop unbundling program, to enable third party
providers of telephone service to gain access to British Telecommunications’
systems. Signal Processing sales for the quarter ended December 31, 2006 were
$1,561,000 versus $1,193,000 for the quarter ended December 31, 2005, an
increase of $368,000 (31%), the result of increased military business in the
second half of 2006.
Sales
from continuing operations were $32,818,000 for the year ended December 31,
2006
versus $27,819,000 for the year ended December 31, 2005, an increase of
approximately $5,000,000 (18%). Copper Connection/Protection sales for the
year
ended December 31, 2006 were $27,526,000 versus $22,109,000 for the year ended
December 31, 2005, an increase of $5,417,000 (25%). This increase in sales
for
the year is the result of increased sales volume to British Telecommunications
as a result of its continuing rollout of DSL lines, and its implementation
of
the local loop unbundling program, demanded by regulators in the United Kingdom
to enable third party providers of telephone service to gain access to British
Telecommunications’ systems. Signal Processing sales for the year ended December
31, 2006 were $5,292,000 versus $5,710,000 for the year ended December 31,
2006,
a decrease of $418,000 (7%). This decrease in Signal Processing sales for the
year resulted primarily from sluggish order rates from the military sector
during the first six months of 2006. In addition, Signal Processing revenue
for
the year ended December 31, 2005 was positively impacted by shipments to
customers from 2004 backlog that were not shipped in 2004 due to cash
constraints which then existed.
The
overall gross margin from continuing operations was 31% for the quarter ended
December 31, 2006, compared to 29% for the quarter ended December 31, 2005.
Gross margin for the year ended December 31, 2006 was 33% compared to 37% for
the year ended December 31, 2005. This decrease for the year was attributable
to
a change in products sold to British Telecommunications (from the higher gross
margin DSL products to the lower margin local loop unbundling products),
short-term manufacturing inefficiencies at our assembly facility in Mexico
during the second quarter, and additional freight costs associated with on-time
deliveries to customers.
-more-
Porta
Systems Corp. Press Release
|
Page
3
|
March
30,
2007
Operating
expenses for the quarter and year ended December 31, 2006 decreased by $670,000
(27%) and $336,000 (5%), respectively, when compared to the fourth quarter
of
2005 and the year ended December 31, 2005. The decrease in the fourth quarter
and the year resulted from the expending of restructuring costs of $877,000
in
the fourth quarter of 2005. These costs were for investment banking, legal
and
accounting fees resulting from a requirement of our senior debt holder that
we
restructure our business. Also, in the fourth quarter of 2005 we settled a
lease
agreement in the United Kingdom for $715,000. These decreases were partially
offset by increased spending on research and development of new products for
our
Line Connection and Protection division of approximately $146,000.
Interest
expense, net, increased for the year by $131,000 primarily due to imputed
interest on the amortization of a long term liability.
The
Company’s Copper Connection/Protection business unit had an operating profit of
$731,000 and $4,688,000 during the fourth quarter and the year ended December
31, 2006, respectively. The Signal Processing unit had an operating profit
of
$573,000 and $1,640,000 during the fourth quarter and the year ended December
31, 2006, respectively.
On
February 7, 2007, Cheyne Special Situations Fund L.P. purchased our senior
debt
of approximately $23,400,000 from SHF IX, LLC and subsequently extended the
maturity of the senior debt to October 1, 2007. We are engaged in negotiations
with respect to a restructure of our senior and subordinated debt, and we
anticipate that any such restructure will result in a very significant dilution
in the interests of the holders of our common stock and will require the
approval of our common stock holders and the holders of our subordinated debt.
If we are unable to obtain the necessary consent, we may be unable to effect
a
restructure of our debt. If the senior debt holder does not extend the maturity
date of our obligations or demands payment of all or a significant portion
of
our obligations due to the senior lender, we will not be able to continue in
business.
Porta
Systems Corp. designs, manufactures, markets and supports communication
equipment used in telecommunications, video and data networks
worldwide.
-more-
Porta
Systems Corp., Press Release
|
Page
4
|
March
30,
2007
Statements
in this press release may be “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are
based
on current expectations, estimates and projections about the Company’s business
based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may, and probably will, differ materially from what is expressed or
forecasted in such forward-looking statements due to numerous factors, including
those described above and those risks discussed from time to time in the
Company’s filings with the Securities and Exchange Commission filings, including
the Risk Factors included in the Form 10-K for the year ended December 31,
2006
and the Management’s Discussion and Analysis of Financial Conditions and Results
of Operations in the Form 10-K for the year ended December 31, 2006. In
addition, general industry and market conditions and growth rates, and general
economic conditions could affect such statements. Any forward-looking statements
speak only as of the date on which they are made, and the Company does not
undertake any obligation to update any forward-looking statements to reflect
events or circumstances after the date of this release.
-See
accompanying table-
Porta
Systems Corp. and Subsidiaries
Condensed
Consolidated Statement of Operations
Quarter
and Year ended December 31,
(in
thousands except per share amounts)
|
|
Quarter
ended December 31,
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
7,779
|
|
$
|
5,315
|
|
$
|
32,818
|
|
$
|
27,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
2,388
|
|
|
1,543
|
|
|
10,834
|
|
|
10,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,767
|
|
|
2,437
|
|
|
7,020
|
|
|
7,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
621
|
|
|
(894
|
)
|
|
3,814
|
|
|
3,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net of interest and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
|
|
|
(339
|
)
|
|
(97
|
)
|
|
(1,185
|
)
|
|
(1,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
282
|
|
|
(991
|
)
|
|
2,629
|
|
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(26
|
)
|
|
(54
|
)
|
|
(118
|
)
|
|
(160
|
)
|
Income
(loss) from continuing operations
|
|
|
256
|
|
|
(1,045
|
)
|
|
2,511
|
|
|
1,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
|
(84
|
)
|
|
(342
|
)
|
|
(329
|
)
|
|
(1,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
172
|
|
$
|
(1,387
|
)
|
$
|
2,182
|
|
$
|
810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.03
|
|
$
|
(0.11
|
)
|
$
|
0.25
|
|
$
|
0.18
|
|
Discontinued
operations
|
|
|
(
0.01
|
)
|
|
(
0.03
|
)
|
|
(0.03
|
)
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share:
|
|
$
|
0.02
|
|
$
|
(0.14
|
)
|
|
0.22
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
10,076
|
|
|
10,054
|
|
|
10,076
|
|
|
10,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.03
|
|
$
|
(0.10
|
)
|
$
|
0.25
|
|
$
|
0.18
|
|
Discontinued
operations
|
|
|
(
0.01
|
)
|
|
(
0.03
|
)
|
|
(0.03
|
)
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share:
|
|
$
|
0.02
|
|
$
|
(0.13
|
)
|
|
0.22
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
10,103
|
|
|
10,089
|
|
|
10,103
|
|
|
10,093
|
|
###