Paragon Technologies News Releases

Paragon Technologies, Inc. Income Statement
(In Thousands, Except Per Share Information)

Six Months Ended June 30

2000

1999*

Change
$

Change
%

Net Sales

$35,033

21,672

13,361

61.6%

Earnings before income taxes

$ 2,590

1,080

1,510

239.8%

Income tax expense

1,033

419

614

146.5%

Net Earnings

$ 1,557

661

896

135.5%

Basic earnings per share

$ .37

.18

.19

105.5%

Diluted earnings per share

$ .36

.17

.19

111.7%

* Information for the six months ended June 30, 1999 is pro forma data due to change in fiscal year to December 31.

Sales for the first six months of 2000 rose 61.6% to $35.03 million-a Company record- from $21.67 million in the first six months of 1999. Net earnings for the first six months of 2000 climbed to $1,557,000 or $0.37 basic earnings per share, compared with a net earnings of $661,000 or $0.18 basic earnings per share in the 1999 same period.

Sales for the second quarter of 2000 rose 39.8% to $16.7 million, from $11.9 million in the second quarter of 1999. Net earnings for the second quarter of 2000 climbed to $785,000 or $0.19 basic earnings per share, compared with a net earnings of $220,000 or $0.06 basic earnings per share in the second quarter of 1999.

These increases in sales and earnings were primarily due to the Ermanco acquisition. Equally significant to the Company's operating results are the major gains in its balance sheet during the first six months of 2000. The Company's cash and cash equivalents increased to $6,769,000 from $6,242,000 at December 31, 1999. Trade receivables rose to $8,986,000 from $6,824,000, with an average outstanding period of approximately 45 days and no material problem receivables. Inventories of raw materials, finished goods, and work-in-process dropped to $2,684,000 from $3,405,000, reflecting better management of core product technology sales and inventory utilization. Backlog of approximately $23.7 million at December 31, 1999 included a number of key conveyor technology projects. The majority of these key conveyor technology projects were completed during the first six months of 2000. The current backlog is approximately $19.6 million, comprised mainly of Lo-TowÒ, order selection, and conveyor technology projects.

Last week Paragon elected to utilize its strong cash position to prepay, without penalty, two back-end quarters of its long-term debt, a total of $1,150,000. To date, the Company has paid down over $2 million of the $14 million of term debt incurred with the Ermanco acquisition last Fall. The result of this dramatic action will result in lower interest expenses beginning this month, and be reflected in third quarter operating results and thereafter. Since the Company's interest rate consists of a LIBOR-based component, the actual savings could be even more significant if interest rates were to rise over time.

Also of significance, as part of its focus on its core business and strategy, Paragon has decided to sell unused land and the remaining assets and customer lists of its current AGV, automated guided vehicle, and ASRS, automated storage and retrieval systems, product lines. In the case of AGV products, Egemin N.V., its Belgian joint venture partner in SI-Egemin, has a more advanced technology product line that SI-Egemin will market in North America.

Bill Johnson, President and Chief Executive Officer of Paragon Technologies, commented on the mid-year results and developments, "The results of both the first half of the year and the second quarter are very gratifying and clearly represent a total team effort across the Company. Clearly, we are reaping the rewards of our restructured operating system, market-driven strategy, new business control systems on expenditures, strategic joint ventures, and the Ermanco acquisition. The vastly improved balance sheet represents the best joint efforts and abilities of our financial and operating senior management and their teams. We look forward to continuing improvement and innovation in the future periods. We will work hard to continue the earnings pattern in the third quarter."

Ron Semanick, Chief Financial Officer, added, "Our greatly focused efforts on building a truly strong balance sheet are aimed at creating an effective and efficient organization, ready to move on to the next level of performance and able to accommodate major business growth in both the near and longer term." Johnson concluded, "Simply put, Paragon is actively pursuing internal and external growth strategies that will allow it to realize its mission of being a unique source for complete "smart" solutions in the global materials handling marketplace while maximizing shareholder return."

The Company will host a conference call to discuss these results on Monday, August 7, at 10:00 A.M. EDT. To listen, please call 888-469-0566 and enter 28893#. The conference call will also be webcast live on Vcall at www.vcall.com and available thereafter for replay starting 12 PM EDT on the day of the call.

With headquarters in Easton, PA, Paragon Technologies, Inc. markets, designs, manufactures, installs and services fully automated, integrated material handling systems and Ermanco conveyer systems that improve productivity in manufacturing, provide e-commerce fulfillment solutions, and increase the speed of delivery of products in most categories by companies worldwide. One of the top materials handling systems suppliers worldwide and ISO 9001 certified, its leading clients include General Motors, IBM, BMG, Daimler Chrysler, Johnson & Johnson, Webvan, The U.S. Postal Service, Ford, Peterbilt, Harley-Davidson, McKesson, Walgreens, and Clark Equipment.

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, and certain operational 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 risks and uncertainties associated with Paragon's restructuring, including the failure to achieve anticipated operating savings, and the possibility that the restructuring charges will be greater than anticipated; (2) 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; or (3) if the factors on which Paragon's conclusions are based do not conform to its expectations.