PARAGON TECHNOLOGIES REPORTS FOURTH QUARTER AND YEAR-END RESULTS TOGETHER WITH IMPROVED BALANCE SHEET AND STRONGER BACKLOG OF ORDERS

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EASTON, PA — March 17, 2004 -- Paragon Technologies, Inc. (AMEX:PTG), a leading supplier of “smart” material handling solutions, including systems, technologies, products and services, today announced results for the fourth quarter and year ended December 31, 2003.

Fourth Quarter Results

Sales for the fourth quarter of 2003 were approximately $9.0 million compared to sales of approximately $8.6 million in the fourth quarter of 2002.  Net loss for the fourth quarter of 2003 was $(256,000) or $(.06) basic loss per share, compared to net earnings of $599,000 or $.14 basic earnings per share in the fourth quarter of 2002.  Primarily excluding settlement and legal costs and severance charges, net of the restructuring credit, the Company posted net earnings of $196,000 or $.05 basic earnings per share.  Primarily excluding the restructuring credit from the settlement of pension obligations, the fourth quarter 2002 net loss was $(36,000) or $(.01) basic loss per share.  Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the fourth quarter of 2003 were approximately $(319,000) compared to $1.2 million for the fourth quarter of 2002. 

Contributing to the pre-tax loss for the fourth quarter of 2003 were severance charges of $293,000, net of a $94,000 restructuring credit, and settlement and legal costs of $355,000 associated with an action against the Company by a competitor relating to the Company’s intellectual property.  Contributing to pre-tax earnings for the fourth quarter of 2002 was a restructuring credit of $859,000 pertaining to the partial settlement of pension obligations associated with the Company’s terminated pension plan.

Full Year Results

Sales for fiscal 2003 were $37.3 million compared to $38.2 million for fiscal 2002.  Net earnings for fiscal 2003 were $3,785,000 or $.89 basic earnings per share, compared to net earnings of $663,000 or $.16 basic earnings per share for fiscal 2002.  Excluding the gain on the sale of SI/BAKER, the gain on the sale of the Easton, PA facility, settlement and legal costs, and severance charges, net of restructuring credits, the Company posted net earnings for 2003 of $880,000 or $.21 basic earnings per share.  Excluding the restructuring credit from the settlement of pension obligations, severance charges, and short-term rental income, 2002 net loss was $(53,000) or $(.01) basic loss per share.  EBITDA for fiscal 2003 was $7.4 million compared to $2.6 million for fiscal 2002.

Contributing to pre-tax earnings for fiscal 2003 was income of $4,901,000 from the sale of the Company’s ownership interest in the SI/BAKER joint venture for $5,600,000, income of $1,363,000 from the sale of the Company’s Easton, Pennsylvania facility for $2,925,000 and leaseback of 25,000 square feet of office space, and restructuring credits of $264,000 pertaining to the final settlement of remaining pension obligations associated with the Company’s terminated pension plan and the reversal of a previously established severance accrual that was no longer required. Partially offsetting the favorable impact of the aforementioned items were severance charges of $387,000, and settlement and legal costs of $1,375,000 associated with an action against the Company by a competitor relating to the Company’s intellectual property.  Contributing to pre-tax earnings for fiscal 2002 was a restructuring credit of $859,000 pertaining to the partial settlement of pension obligations associated with the Company’s terminated pension plan, and other income of $300,000 from the short-term rental of certain real property.  Partially offsetting the favorable impact of the aforementioned items were severance charges of $154,000.

During fiscal 2003, the Company received orders totaling approximately $40.9 million, and finished the year ended December 31, 2003 with a backlog of orders of approximately $10.5 million, versus a $6.9 million backlog of orders at the end of the fourth quarter of 2002. 

The Company ended the year with a much stronger Balance Sheet.  During fiscal 2003, the Company repaid $5.7 million of its bank debt and $3.0 million of its subordinated debt, thereby eliminating the Company’s outstanding long-term debt.  The current ratio remains strong at 1.52 while working capital approximates $5.0 million. 

Len Yurkovic, Paragon’s President and Chief Executive Officer, commented, “The results for fiscal 2003 are very gratifying.  We are pleased with our strong, debt-free balance sheet.  The swift conclusion of the Company’s intellectual property litigation removes the uncertainty of litigation outcome and its possible adverse effects on future performance, and it also eliminates the time, inconvenience, and distraction of protracted litigation.  We are also pleased with the increase in the level of orders at $40.9 million received during fiscal 2003 as compared to $31.8 million of orders received during fiscal 2002.  We continue to target active sectors of the marketplace.  Our quoting activity remains strong and maintaining an aggressive selling focus is a prime objective.  Aggressive internal development and close monitoring of technology changes in our industry are in place as is the exploration of all strategic alternatives available to the Company, with a primary objective of enhancement of shareholder value.” 

In other news, Gilman Hallenbeck resigned as a Director of the Company.  Len Yurkovic expressed the Company’s appreciation for his contributions to the Company.

The Company will host a conference call to discuss these results on Wednesday, March 17, 2004 at 11:00 a.m. ET.  To participate in the call, please dial 800-894-5910 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.paragontechnologiesinc.com.

 

About Paragon Technologies

Paragon Technologies is a leader in integrating material handling systems and creating automated solutions for material flow applications.  Ermanco’s branded conveyor technologies and material handling solutions address the needs of the distribution, assembly, and manufacturing marketplace.  SI Systems’ branded technologies and material handling solutions address unit assembly handling and order fulfillment applications.  One of the top material handling systems suppliers worldwide, Paragon’s leading clients have included the United States Postal Service, General Motors, IBM, BMG, DaimlerChrysler, Ford, Peterbilt, Harley-Davidson, Walgreens, and Clark Equipment.

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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.

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