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Tel-Instrument Electronics Corp. Reports Net Income of $410,000 or $0.13 per Share for the First Quarter of Fiscal 2017

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Tel-Instrument Electronics Corp. Reports Net Income of $410,000 or $0.13 per Share for the First Quarter of Fiscal 2017



East Rutherford, NJ August 18, 2016 Tel-Instrument Electronics Corp. ( Tel , Tel-Instrument or the Company ) (NYSE MKT: TIK), a leading designer and manufacturer of avionics test and measurement solutions, today reported its financial results for the first quarter ended June 30, 2016.

Highlights for First Quarter of Fiscal Year 2017



Revenues decreased 8.6% to $5.34 million from $5.85 million in the first quarter of FY 2017.

Gross margin percentage improved to 35.1% versus 31.1% for the same quarter last year.

Gross margin increased to $1.88 million, a $61k improvement over the first quarter of 2016.

Operating income decreased to $380k as compared to $457k in the first quarter of FY 2016.


Non-GAAP Adjusted EBITDA was $423k as compared to $506k in the first quarter last year.

Settled BCA warrants for $720k, realized a $217k benefit compared to March 31, 2016.

Pre-tax income in the first quarter of $578k versus $494k in the year-ago period.

Net Income for the first quarter was $410k or $0.13 per share as compared to $279k or $0.09 per share in the first quarter of FY 2016.

Tax accrual of $168k for the first quarter is a non-cash item due to the Company s large NOL.


Revenues for the three months ended June 30, 2016 decreased 8.6% to $5,342,369 from $5,845,919 for the three months ended June 30, 2015.The decrease in revenues is mostly attributed to the decrease in shipment of the TS-4530A KITS, as that contract has now been completed, and lower sales of the T-760/T-76 test sets partially offset by increased shipments of the TS-4530A SETS.

Gross margin increased $61,358 or 3.4% to $1,876,653 for the three months ended June 30, 2016 as compared to $1,815,295 for the three months ended June 30, 2015. This increase is mostly attributed to increased prices on CRAFT units offset partially by lower sales volume. Gross margin percentage for the three months ended June 30, 2016 was 35.1%, as compared to 31.1% for the three months ended June 30, 2015.



Selling, general and administrative expenses increased by $46,056 (5.3%) to $911,744 for the three months ended June 30, 2016, as compared to $865,688 for the three months ended June 30, 2015. This increase was primarily attributable to a $73,000 increase in legal expenses associated with the Aeroflex Wichita, Inc. ( Aeroflex ) litigation compared to the year-ago quarter. Total litigation costs for the quarter were $143,000 as the Company incurred higher costs in preparation for the summary judgment hearing that is scheduled to be heard on August 25, 2016.



Engineering, research and development expenses increased $92,745 (18.8%) to $584,877 for the three months ended June 30, 2016, as compared to $492,132 for the three months ended June 30, 2015. This increase is almost completely related to the new hand-held avionics and radio test set now under development.

Mr. Jeffrey O Hara, President and CEO of Tel, stated, We reported solid revenues and improved profitability for the first quarter of fiscal year 2017. Revenues decreased as a result of the successful completion of the TS-4530A KITS production program. The Navy portion of the ITATS program was also substantially completed in the first quarter. Both of these programs were won on competitive bids and generated very low gross margins.

We are focused on capturing the lion s share of the international Mode 5 market. The international Mode 5 test equipment markets have also been picking up with recent activity in both the Far East and European markets, and we believe our current product offerings, plus the new T-47M5, will be very competitive. We believe that Tel is well positioned for this business as our CRAFT and TS-4530A flight-line test sets have been endorsed by the U.S. military and we have already delivered test sets into 18 international markets. The new T-47M5 product is also being offered as a retro-fit kit for our large base of installed Mode 4 IFF test sets. We are also seeing increased market interest in our other military and commercial test sets including the ITATS TACAN bench test set and our new TR-36 Nav/Com product. These sales should be at attractive margins as we look to return to our traditional 50% gross margin levels starting next fiscal year.

We continue to work on our next generation multi-purpose hand-held test set with the initial product currently scheduled to be introduced in the fourth quarter of the current fiscal year. This product will be the hardware platform that will have the capabilities that address both our current avionic test set market as well as the much larger radio test set market. We believe that this new product family will be extremely competitive and will help drive the long term growth of our business.

The BCA warrants have been a drag on Tel s profitability for the last several years, and we believe that their exercise will result in a cleaner balance sheet and more predictable financial reporting going forward. We expect to pay off the entire $720,000 negotiated amount this quarter.

We are excited and optimistic about our near and long-term prospects, Mr. O Hara concluded.

The Company encourages investors to read its full results of operations as contained in our Quarterly Report on Form 10-Q filed on August 18, 2016 at www.sec.gov.

Conference Call

The Companywill host a conference call and webcast today, Thursday, August 18, 2016 at 9:00 a.m. Eastern Time to discuss the Company s fiscal first quarter 2017 results.

To access the live webcast, log onto Tel-Instrument s website at:

https://www.telinstrument.com/learn-about-telinstrument/investor-relations.html.

To participate in the call by phone, dial (877) 407-8035 approximately five minutes prior to the scheduled start time. International callers please dial (201) 689-8035.

A replay of the teleconference will be available until September 18, 2016 and may be accessed by dialing (877) 660-6853. International callers may dial (201) 612-7415. Callers should use conference ID: 13643708.


About Tel-Instrument Electronics Corp

Tel-Instrument is a leading designer and manufacturer of avionics test and measurement solutions for the global commercial air transport, general aviation, and government/military aerospace and defense markets. Tel-Instrument provides instruments to test, measure, calibrate, and repair a wide range of airborne navigation and communication equipment. For further information please visit our website at www.telinstrument.com.

# # #



This press release includes statements that are not historical in nature and may be characterized as forward-looking statements, including those related to future financial and operating results, benefits, and synergies of the combined companies, statements concerning the Company s outlook, pricing trends, and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies, and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. All predictions as to future results contain a measure of uncertainty and, accordingly, actual results could differ materially. Among the factors which could cause a difference are: changes in the general economy; changes in demand for the Company s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. A number of these factors are discussed in the Company s previous filings with the U.S. Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 (the Act ) protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.





Contact: Joseph P. Macaluso John Nesbett or Jennifer Belodeau

Tel-Instrument Electronics Corp. Institutional Marketing Services (IMS)

(201) 933-1600 (203) 972-9200

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TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS







June 30,

2016





March 31,

2016







(unaudited)









ASSETS



























Current assets:













Cash and cash equivalents



$

412,570





$

972,633



Accounts receivable, net





2,265,966







1,454,361



Inventories, net





4,048,284







4,679,032



Prepaid expenses and other current assets





763,851







128,071



Deferred income tax asset





578,507







578,507



Total current assets





8,069,178







7,812,604





















Equipment and leasehold improvements, net





183,815







193,518



Deferred income tax asset non-current





1,897,382







2,065,126



Other long-term assets





35,515







36,871



Total assets





10,185,890







10,108,119





















LIABILITIES & STOCKHOLDERS EQUITY



































Current liabilities:

















Current portion of long-term debt





424,710







418,255



Warrant liability - current





720,000







-



Capital lease obligations current portion





5,844







10,232



Accounts payable and accrued liabilities





2,066,056







2,401,500



Federal and state taxes payable





-







53,623



Deferred revenues current portion





498,926







48,766



Accrued payroll, vacation pay and payroll taxes





760,691







836,589



Total current liabilities





4,476,227







3,768,965





















Subordinated notes payable - related parties





-







25,000



Capital lease obligations long-term





18,514







20,524



Long-term debt





195,977







304,560



Deferred revenues long-term





203,820







172,703



Warrant liability long-term





199,000







1,136,203



Other long-term liabilities





1,500







7,800



Total liabilities





5,095,038







5,435,755





















Commitments



































Stockholders' equity:

















Common stock, 4,000,000 shares authorized, par value $0.10 per share,

3,255,887 shares issued and outstanding, respectively





325,586







325,586



Additional paid-in capital





8,082,834







8,074,655



Accumulated deficit





(3,317,568

)





(3,727,877

)

Total stockholders' equity





5,090,852







4,672,364



Total liabilities and stockholders' equity



$

10,185,890





$

10,108,119












TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)







Three Months Ended







June 30, 2016





June 30, 2015

















Net sales



$

5,342,369





$

5,845,919



Cost of sales





3,465,716







4,030,624





















Gross margin





1,876,653







1,815,295





















Operating expenses:

















Selling, general and administrative





911,744







865,688



Engineering, research and development





584,877







492,132



Total operating expenses





1,496,621







1,357,820





















Income from operations





380,032







457,475





















Other income (expense):

















Amortization of deferred financing costs





(1,356

)





(1,357

)

Change in fair value of common stock warrants





217,203







67,760



Interest expense





(17,826

)





(29,634

)

Total other income (expense)





198,021







36,769





















Income before income taxes





578,053







494,244





















Income tax provision





167,744







215,178





















Net income



$

410,309





$

279,066





















Net income per share:

















Basic income per common share



$

0.13





$

0.09



Diluted income per common share



$

0.10





$

0.02





















Weighted average shares outstanding:

















Basic





3,255,887







3,256,887



Diluted





3,274,829







3,320,442










TEL-INSTRUMENT ELECTRONICS CORP.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(Unaudited)



Three Months

Three Months



Ended

Ended



June 30,

June 30,



2016

2015







Net income

$ 410,309

$ 276,066







Income tax provision

167,744

215,178







Depreciation and amortization

35,010

42,413

Amortization of deferred financing costs

1,356

1,357

Change on fair value of common stock warrants

(217,203)

(67,760)

Interest, net

17,826

29,,634

Non-cash stock-based compensation

8,179

6,466







Non-GAAP Adjusted EBITDA





$ 423,221

$ 506,354










The term EBITDA consists of net income (loss) plus interest, taxes, depreciation and amortization, amortization of debt discount and deferred financing charges, change in fair value of warrants, and non-cash stock-based compensation. EBITDA is not a measure of financial performance under generally accepted accounting principles, and should not be considered in isolation from, or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles, or as a measure of profitability or liquidity. Additionally, EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding our ability to service debt, and to fund capital expenditures, and provides investors a helpful measure for analyzing its operating performance. The table above sets forth a reconciliation of EBITDA to net income (loss), which is the most directly comparable measure of financial performance, calculated under generally accepted accounting principles.

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