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Frequency Electronics, Inc. Announces Second Quarter Fiscal Year 2007 Results
Frequency Electronics, Inc. Announces Second Quarter Fiscal Year 2007 Results

MITCHEL FIELD, N.Y., Dec. 13, 2006 (PRIME NEWSWIRE) -- Frequency Electronics, Inc. (Nasdaq:FEIM) reported revenues of $14.3 million for the second quarter of fiscal year 2007, which ended 31 October 2006, compared to $11.5 million for the same period of fiscal 2006. For the six month period ended 31 October 2006, revenues were $28.6 million compared to $22.6 million in the same period of the previous fiscal year.

As previously announced, quarterly profits were reduced by increased engineering costs principally applied to internally funded development for satellite payload projects. Operating income for the second quarter was $19,000 compared to $56,000 in the same quarter of fiscal 2006, and $691,000 in the preceding quarter. For the first six months of fiscal 2007, operating income was $710,000, compared to $167,000 for the first six months in the preceding year. Net income for the second quarter was $187,000, or $0.02 per diluted share. For the same period last year, net income was $1.3 million, or $0.15 per diluted share, which included pre-tax gains of $1.8 million on the sale of real property and marketable securities. For the first six months of fiscal 2007, net income was $1.1 million, or $0.12 per diluted share, compared to $2.5 million, or $0.29 per diluted share, which included pre-tax gains of $2.8 million from the sale of real property and marketable securities in the first six months of fiscal 2006.

Chairman of the Board General Joseph Franklin made the following comment: "With the second half of the year still to go, we see fiscal 2007 shaping up to be an outstanding year for Frequency Electronics. The most recent R&D investments in our space business add substantially to our production capacity. These added capabilities will be reflected in projects already underway and in contracts presently being negotiated. Overall, for the balance of this year we will be focusing on generating significant growth in revenues."

In the Company's major business areas, (Satellite Payloads, U.S. Government/DOD non-satellite Programs and Telecommunications Infrastructure), during this quarter:



 -- Revenues from space-related programs continued to rise, and are
    expected to represent approximately 30% of the Company's sales
    in fiscal 2007. Based on bookings and results to date this will be
    the fastest-growing area of the company's business this fiscal
    year. Looking ahead to the many large opportunities coming over
    the next several years, the Company has increased its capacity
    to produce state-of-the-art RF microwave systems for satellite
    payloads.

 -- U.S. Government/DOD program sales continued relatively flat.
    Increases in this major future business area depend on production
    releases from the many programs currently under development.
    U.S. Government/DOD programs are expected to account for
    approximately 20% of Company revenues in fiscal 2007.

 -- As reported in the previous quarter, telecommunications
    infrastructure sales continued the year-to-year uptrend which
    began late in fiscal 2006. FEI substantially increased its market
    share with wireless infrastructure customers, whose forecasts
    indicate a healthy rise in demand for the year as a whole. This
    business area is expected to represent approximately 40% of the
    Company's sales in fiscal 2007.

For the Company's reporting segments, including inter-segment sales of $760,000 for the first six months of fiscal 2007 and $1.2 million for the same period in fiscal 2006:



 -- Revenues for the FEI-NY segment were $9.5 million for the second
    quarter, and $20.2 for the first half of fiscal 2007, which
    compares to $14.5 million for the first six months of the prior
    year. The FEI-NY segment is a combination of the former commercial
    communications and U.S. Government segments, and includes revenues
    from all major business areas.

 -- The Gillam-FEI segment recorded revenues of $2.4 million for the
    second quarter and $4.5 million for the first six months of fiscal
    2007, compared to $4.1 million for the first six months of fiscal
    2006. The Gillam-FEI segment includes revenues primarily from
    wireline telecommunications infrastructure and from other network
    management products.

 -- Revenues for the FEI-Zyfer segment were $2.8 million for the
    second quarter and $4.7 million for the first six months of fiscal
    2007, compared to $5.1 million for the first six months of the
    prior year. Substantially all of FEI-Zyfer's products are used in
    telecommunications infrastructure. Approximately 60% of
    FEI-Zyfer's revenues are derived from U.S. Government/DOD
    programs.

Chief Financial Officer Alan Miller added the following comment: "During the second quarter R&D expenses increased by $1.3 million over the first quarter. This investment enables the Company to increase its production capacity on a cost-effective basis. Even with this additional investment, the Company generated positive operating cash flow for the second quarter and for the first half of the year."

Investor Conference Call

As previously announced, the Company will hold a conference call to discuss these results on Wednesday, December 13, 2006, at 11:30 a.m. Eastern Time. Investors and analysts may access the call by dialing 1-877-704-5379. International callers may dial 1-913-312-1293. Ask for the Frequency Electronics conference call.

The call will also be available at the Investor Relations section of the Company's website at www.frequencyelectronics.com or at Thomson/CCBN's individual investor center at www.earnings.com or by visiting any of the investor sites in Thomson/CCBN's Individual Investor Network such as America Online's Personal Finance Channel, Fidelity Investments® (Fidelity.com) and others.

The call will be archived on the Company's website through January 12, 2007. The archived call may also be retrieved at 1-888-203-1112 (domestic) or 1-719-457-0820 (international) using Passcode ID 9402283

About Frequency Electronics

Frequency Electronics, Inc. is a world leader in the design, development and manufacture of high precision timing, frequency control and synchronization products for space and terrestrial applications. The Company's products are used in commercial, government and military systems, including satellite payloads, missiles, UAVs, piloted aircraft, GPS, secure radios, SCADA, energy exploration and wireline and wireless communication networks. The Company has received over 60 awards of excellence for achievements in providing high performance electronic assemblies for over 120 space programs. The Company invests significant resources in research and development and strategic acquisitions world-wide to expand its capabilities and markets. The Company's Belgium-based Gillam-FEI subsidiary provides the Company with expertise in wireline network synchronization, management and SCADA. FEI-Zyfer in Anaheim, Calif., provides GPS and secure timing ("SAASM") capabilities for critical military and commercial applications. The Company has an affiliate in St. Petersburg, Russia which supplies high-quality, cost-effective quartz oscillators and components. Additionally, the Company operates a new, modern manufacturing facility in Tianjin, China through its wholly owned subsidiary, FEI-Asia. Additional information is available on FEI's website: www.frequencyelectronics.com

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The Statements in this press release regarding the future constitute "forward-looking" statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, inability to integrate operations and personnel, actions by significant customers or competitors, general domestic and international economic conditions, consumer spending trends, reliance on key customers, continued acceptance of the Company's products in the marketplace, competitive factors, new products and technological changes, product prices and raw material costs, dependence upon third-party vendors, competitive developments, changes in manufacturing and transportation costs, the availability of capital, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.



              Frequency Electronics, Inc. and Subsidiaries
              Consolidated Condensed Summary of Operations

                           Quarter Ended         Six Months Ended
                             October 31,            October 31,
                           2006        2005        2006        2005
                           ----        ----        ----        ----
                              (unaudited)             (unaudited)
                             (in thousands except per share data)

 Net Sales                $14,320     $11,499     $28,634     $22,556
 Cost of Sales              8,980       7,401      18,441      14,361
                        ---------   ---------    --------    --------
  Gross Margin              5,340       4,098      10,193       8,195

 Selling and
   Administrative           2,674       2,533       5,455       5,077
 Research and
   Development              2,647       1,509       4,028       2,951
                        ---------   ---------    --------    --------
  Operating Profit             19          56         710         167
 Interest and Other,
  Net                         349       2,093         896       3,603
                        ---------   ---------    --------    --------
 Income before Income
  Taxes                       368       2,149       1,606       3,770
 Income Tax Provision         181         817         521       1,296
                        ---------   ---------    --------    --------
  Net Income            $     187    $  1,332    $  1,085    $  2,474
                        =========    ========    ========    ========
 Net Income per Share:
  Basic                    $ 0.02      $ 0.16      $ 0.13      $ 0.29
                        =========    ========    ========    ========
  Diluted                  $ 0.02      $ 0.15      $ 0.12      $ 0.29
                        =========    ========    ========    ========
 Average Shares
  Outstanding
  Basic                 8,592,113   8,531,238   8,584,409   8,525,629
                        =========    ========    ========    ========
  Diluted               8,744,852   8,674,280   8,732,393   8,665,810
                        =========    ========    ========    ========


                  Frequency Electronics, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets



                                    October 31,         April 30,
                                       2006               2006
                                       ----               ----
                                          (in thousands)
 ASSETS
 Cash & Marketable Securities        $ 23,843            $ 24,475
 Accounts Receivable                   13,754              15,868
 Inventories                           26,476              22,971
 Other Current Assets                   3,424               3,449
 Property, Plant & Equipment            6,899               6,663
 Other Assets                          13,607              13,315
                                     --------            --------
                                     $ 88,003            $ 86,741
                                     ========            ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities                 $  6,963            $  6,988
 Long-term Obligations and Other        9,199               9,120
 Stockholders' Equity                  71,841              70,633
                                     --------            --------
                                     $ 88,003            $ 86,741
                                     ========            ========
CONTACT: Frequency Electronics, Inc.
         Alan Miller, CFO
         General Joseph P. Franklin, Chairman
         (516) 794-4500
         www.frequencyelectronics.com