[PARAGON LOGO] NEWS
------------------------------------------------------------------
FOR: PARAGON TECHNOLOGIES, INC.
CONTACTS: Joel Hoffner, President and CEO
610-252-3205
610-252-3102 (Fax)
www.ptgamex.com
PARAGON TECHNOLOGIES REPORTS PROFITABLE 2005
FOURTH QUARTER AND YEAR-END RESULTS
- - - - -
EASTON, PA -- March 14, 2006 -- Paragon Technologies, Inc. (AMEX:PTG), a leading
supplier of "smart" material handling systems and "software-driven" warehouse
and distribution center solutions, announced today results for the fourth
quarter and year ended December 31, 2005.
Sales for the fourth quarter of 2005 rose 57% to approximately $5.0 million when
compared to sales of approximately $3.2 million in the fourth quarter of 2004.
During the fourth quarter of 2005, the Company's continuing operations received
orders totaling approximately $2.2 million, and finished the year with a backlog
of orders of approximately $6.9 million, a 25% increase over the $5.5 million
backlog of orders at the end of 2004.
For the year ended December 31, 2005, the Company's continuing operations booked
orders totaling approximately $18.1 million, a 37% increase when compared to the
$13.2 million of orders received during the year ended December 31, 2004. Sales
for the year ended December 31, 2005 rose 43% to $16.7 million when compared to
sales of $11.7 million for the year ended December 31, 2004.
On August 5, 2005 the Company completed the sale of substantially all of the
assets and liabilities of Ermanco and received cash consideration of
$21,508,000, net of transaction costs and the working capital and the accounts
receivable adjustments in connection with the sale of the assets and liabilities
of Ermanco, thereby resulting in a pre-tax loss on the sale of approximately
$964,000 as recorded in Income (Loss) from Discontinued Operations for the year
ended December 31, 2005. Net income for the year ended December 31, 2005
includes the impact of Ermanco from January 1, 2005 through the August 5, 2005
closing date of the sale of Ermanco, while net income for the year ended
December 31, 2004 includes the impact of Ermanco for the entire year.
Net income for the fourth quarter of 2005 was $154,000 or $.04 basic earnings
per share, compared to net income of $538,000 or $.13 basic earnings per share
in the fourth quarter of 2004. Net income for the fourth quarter of 2004 was
favorably impacted by $632,000 from Ermanco.
[MORE]
We Build Productivity [SI SYSTEMS LOGO]
- --------------------------------------------------------------------------------
PARAGON TECHNOLOGIES, INC. o 600 Kuebler Road o Easton, PA 18040-9201
o 610.252.3205 o Fax 610.252.3102
www.ptgamex.com
---------------
[PARAGON LOGO] Page 2
- --------------------------------------------------------------------------------
Income from continuing operations for the fourth quarter of 2005 was $193,000 or
$.05 basic earnings per share, compared to a loss from continuing operations of
$94,000 or $.02 basic loss per share in the fourth quarter of 2004. The increase
in income from continuing operations for the fourth quarter of 2005 was
primarily due to an increase during the fourth quarter of 2005 in sales and
gross profit of $1,798,000 and $379,000, respectively, and an increase of
$134,000 in interest income attributable to the higher level of funds available
for investment as a result of the cash proceeds from the sale of substantially
all of the assets and liabilities of Ermanco. The increase in sales was
associated with a larger backlog of orders entering the fourth quarter of 2005
when compared to the backlog of orders entering the fourth quarter of 2004 along
with progress made on contracts received prior to the start of the fourth
quarter of 2005 in accordance with contract completion requirements. Earnings
before interest expense, income taxes, depreciation and amortization expense
("EBITDA") from continuing operations for the fourth quarter of 2005 was
$301,000 compared to a loss of $127,000 for the fourth quarter of 2004.
Net income for the year ended December 31, 2005 was $1,198,000 or $.29 basic
earnings per share, compared to net income of $1,473,000 or $.34 basic earnings
per share for the year ended December 31, 2004. Unfavorably impacting net income
for the year ended December 31, 2005 by $617,000 was the after-tax loss on the
sale of substantially all of the assets and liabilities of Ermanco which
primarily represented transaction costs associated with professional fees.
Income from continuing operations for the year ended December 31, 2005 was
$208,000 or $.05 basic earnings per share, compared to a loss from continuing
operations of $165,000 or $.04 basic loss per share for the year ended December
31, 2004. The increase in income from continuing operations for the year ended
December 31, 2005 was primarily due to an increase during 2005 in sales and
gross profit of $4,974,000 and $649,000, respectively, and an increase of
$248,000 in interest income attributable to the higher level of funds available
for investment as a result of the cash proceeds from the sale of substantially
all of the assets and liabilities of Ermanco. The increase in sales was
associated with a larger backlog of orders entering fiscal 2005 when compared to
the backlog of orders entering fiscal 2004 along with progress made on contracts
received prior to the start of the year and during 2005 in accordance with
contract completion requirements. Partially offsetting the favorable impact of
the aforementioned increase in sales and gross profit on sales and interest
income was an increase of $486,000 in selling, general and administrative
expenses, primarily attributable to the addition of resources aimed at expanding
the customer base and an increase in salaries and fringe benefits, an increase
in expenses related to the Company's enhanced revenue performance, and expenses
associated with professional fees and consulting expenses. Earnings before
interest expense, income taxes, depreciation and amortization expense ("EBITDA")
from continuing operations for the year ended December 31, 2005 was $392,000
compared to a loss of $163,000 for the year ended December 31, 2004.
The Company ended the year with a strong balance sheet. As of December 31, 2005,
the current ratio remains strong at 4.15, while working capital approximates
$16.8 million.
Cash expenditures for stock repurchases during the three and twelve months ended
December 31, 2005 were approximately $4.1 million and $8.1 million,
respectively. As of December 31, 2005, approximately $1.6 million remained
available for repurchases under the stock repurchase program.
[PARAGON LOGO] Page 3
- --------------------------------------------------------------------------------
Joel Hoffner, Paragon's President and Chief Executive Officer, commented, "The
results for the fourth quarter of 2005 mark the eighth consecutive quarter of
profitability for Paragon. We are extremely proud to be reporting an increase in
sales and income from continuing operations as well as a strong Balance Sheet.
Our quoting activity remains brisk with quite a few new potential customers
showing interest in our products and services. We continue to make investments
in sales, sales support, and marketing as we target integrated systems for
active sectors of the material handling industry particularly health and beauty
aids, entertainment products, and vehicle, appliance and munitions assembly
applications. We have increased our client base in both quantity and diversity
of industries. As previously announced, we have made key personnel additions to
jump-start our growth strategy that builds upon our experience, process
knowledge, software products, and systems integration capability. The result is
a highly focused, dedicated, and energized sales organization, supported by an
experienced team of project execution professionals."
The Company is currently exploring various business strategies designed to
enhance the value of the Company's assets for its stockholders. The Company is
continuing to evaluate and actively explore a range of possible options,
including transactions intended to maximize stockholder value, and consideration
of the acquisition of complementary assets and/or businesses.
The Company will host a conference call to discuss these results on Tuesday,
March 14, 2006 at 11:00 a.m. ET. To participate in the call, please dial
800-895-1713 and ask for the Paragon Technologies teleconference. Simultaneous
with the conference call, an audio webcast of the call will be available via a
link on the Paragon website, www.ptgamex.com.
---------------
Paragon's SI Systems' Order Fulfillment and Production & Assembly technologies
drive productivity at Fortune 1000 companies and the United States Government.
About Paragon Technologies
Paragon Technologies is a leader in integrating material handling systems and
creating automated solutions for material flow applications. SI Systems'
Production & Assembly and Order Fulfillment branded technologies and material
handling solutions address unit assembly in manufacturing operations and order
fulfillment applications in warehouse and distribution centers. One of the top
material handling systems suppliers worldwide, SI Systems leading clients have
included the United States Postal Service, BMG, Honda, CVS Pharmacy, Maybelline,
and Walgreens.
* * *
- -------------------------
Cautionary Statement. Certain statements contained herein are not based on
historical fact and are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and the Securities and Exchange
Commission rules, regulations and releases. Paragon intends that such
forward-looking statements be subject to the safe harbors created hereby. Among
other things, the forward-looking statements regard Paragon's earnings,
liquidity, financial condition, review of strategic alternatives, and other
matters. Words or phrases denoting the anticipated results of future events,
such as "anticipate," "does not anticipate," "should help to," "believe,"
"estimate," "is positioned," "expects," "may," "will," "is expected," "should,"
"continue," and similar expressions that denote uncertainty, are intended to
identify such forward-looking statements. Paragon's actual results, performance,
or achievements could differ materially from the results expressed in, or
implied by, such "forward-looking statements:" (1) as a result of factors over
which Paragon has no control, including the strength of domestic and foreign
economies, sales growth, competition, and certain cost increases; and (2) if the
factors on which Paragon's conclusions are based do not conform to its
expectations. Furthermore, achievement of the objectives of the Company
following the sale of Ermanco is subject to risks associated with business
disruption resulting from the announcement of the sale and other risks outlined
in Paragon's filings with the Securities and Exchange Commission, including its
annual report on Form 10-K for the year ended December 31, 2004 and the most
recent quarterly report on Form 10-Q for the quarter ended September 30, 2005.
This press release and prior releases are available at www.ptgamex.com.
---------------
[PARAGON LOGO] Page 4
- --------------------------------------------------------------------------------
Paragon Technologies, Inc.
Consolidated Balance Sheets
Selected Financial Data
(In Thousands, Except Ratio Information)
- -----------------------------------------------------------------------------------------------------------
December 31, 2005 December 31, 2004
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents.................. $ 687 1,702
Short-term investments..................... 16,710 1,900
------------------------ ---------------------
Total cash and cash equivalents
and short-term investments............ $ 17,397 3,602
------------------------ ---------------------
Trade receivables.......................... $ 2,029 1,636
Inventories................................ $ 344 352
Current assets............................. $ 22,134 14,249
Current liabilities........................ 5,337 7,355
------------------------ ---------------------
Working capital......................... $ 16,797 6,894
------------------------ ---------------------
Current ratio.............................. 4.15 1.94
Total assets............................... $ 22,596 33,424
Total stockholders' equity................. $ 17,066 23,308
- -----------------------------------------------------------------------------------------------------------
Paragon Technologies, Inc.
Consolidated Statements of Operations
Selected Financial Data
(In Thousands, Except Per Share Information)
Fourth Quarter Ended Year Ended
- -----------------------------------------------------------------------------------------------------------
December 31, December 31,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Net sales........................... $ 4,980 3,182 16,676 11,702
============= ============= ============= =============
Income (loss) from continuing
operations before income taxes...... $ 277 (155) 301 (271)
Income tax expense (benefit)........ 84 (61) 93 (106)
------------- ------------- ------------- -------------
Income (loss) from
continuing operations............... 193 (94) 208 (165)
Income (loss) from discontinued
operations, net of income taxes..... (39) 632 990 1,638
------------- ------------- ------------- -------------
Net income.......................... $ 154 538 1,198 1,473
============= ============= ============= =============
Basic earnings (loss) per share:
Income (loss) from
continuing operations............... $ .05 (.02) .05 (.04)
Income (loss) from
discontinued operations............. (.01) .15 .24 .38
------------- ------------- ------------- -------------
Net income.......................... $ .04 .13 .29 .34
============= ============= ============= =============
Diluted earnings (loss) per
share:
Income (loss) from
continuing operations............... $ .05 (.02) .05 (.04)
Income (loss) from
discontinued operations............. (.01) .14 .24 .38
------------- ------------- ------------- -------------
Net income.......................... $ .04 .12 .29 .34
============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------
[PARAGON LOGO] Page 5
- --------------------------------------------------------------------------------
Paragon Technologies, Inc.
Supplemental Financial Information
Reconciliation of Income (Loss) From Continuing Operations to
EBITDA From Continuing Operations
(In Thousands)
- -----------------------------------------------------------------------------------------------------------
Fourth Quarter Ended Year Ended,
December 31, December 31,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Income (loss) from continuing
operations........................... $ 193 (94) 208 (165)
Add: Income tax expense
(benefit)............................ 84 (61) 93 (106)
------------- ------------- ------------- -------------
Income (loss) from continuing
operations before income taxes....... 277 (155) 301 (271)
Add: Interest expense.............. - 4 1 4
Add: Depreciation and
amortization expense.......... 24 24 90 104
------------- ------------- ------------- -------------
EBITDA from continuing
operations........................... $ 301 (127) 392 (163)
============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------