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| 8-K - SONO TEK CORP | eps8049.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Sono-Tek Sales Grew 8% to $2.7 million
in First Quarter Fiscal 2019
| · | First quarter gross margin was 47.1% |
| · | Operating income increased 53% to $32,000; operating margin expanded 40 basis points to 1.2% |
| · | Achieved net income of $21,000, up 31% |
| · | Company expects continued profitable growth for full fiscal year 2019 |
MILTON, N.Y., July 16, 2018 – Sono-Tek Corporation (OTCQX: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fiscal 2019 first quarter ended May 31, 2018.
“Our new products and applications continue to be well received in our served markets. We are also benefitting from strong market conditions that supported the 8% increase in net sales to $2.7 million,” commented Dr. Christopher L. Coccio, Chairman and CEO. “Importantly, our investments in research and product development as well as expansion of our marketing and sales effort continue to drive future market opportunities.”
Dr. Coccio added, “With a healthy backlog and robust business pipeline, we expect to achieve stronger sales in the second quarter compared with last year’s second quarter, as well as solid growth in revenue for fiscal year 2019. We also expect with continued growth that we will begin to demonstrate operating leverage and improved margins.”
First Quarter Fiscal 2019 Review
| Three Months Ended May 31, | Change | |||||||||||||||
| 2018 | 2017 | $ | % | |||||||||||||
| Net Sales | $ | 2,701,000 | $ | 2,501,000 | 200,000 | 8% | ||||||||||
| Gross Profit | 1,271,000 | 1,181,000 | 90,000 | 8% | ||||||||||||
| Gross Margin | 47.1% | 47.2% | ||||||||||||||
| Operating Income | $ | 32,000 | $ | 21,000 | 11,000 | 53% | ||||||||||
| Operating Margin | 1.2% | 0.8% | ||||||||||||||
| Net Income | $ | 21,000 | $ | 16,000 | 5,000 | 31% | ||||||||||
| Net Margin | 0.8% | 0.6% | ||||||||||||||
| Basic Earnings Per Share | $ | 0.00 | $ | 0.00 | ||||||||||||
| Diluted Earnings Per Share | $ | 0.00 | $ | 0.00 | ||||||||||||
| Weighted Average Shares -Basic | 14,988,000 | 14,961,000 | ||||||||||||||
| Weighted Average Shares - Diluted | 15,089,000 | 15,057,000 | ||||||||||||||
The Company’s net sales growth was driven primarily by demand from the Electronics/Microelectronics and Medical industries, which were up 50% to $1.3 million and 46% to $889,000, respectively. The Company’s strategy of providing paid coating services, in addition to its coating equipment, is showing success, and resulted in several shipments during the first quarter to the Medical and Electronic markets.
Sales in the Alternative Energy market decreased 66% to $173,000 due to customer delivery schedules. However, based upon the Company’s current backlog and forecast, it believes this market will show a significant increase for the remainder of the fiscal year.
From a product sales perspective, OEM Systems were up 40%, or $175,000, to $607,000 in the quarter as the Company continued to successfully provide subsystems and components, including the custom-designed Align system, to OEMs. Sales of Fluxing Systems increased $134,000 to $734,000 due to the success of the introduction of a newly developed camera recognition system, InSight, which automatically identifies different PCBs and changes the process recipes. These increases more than offset the decline in sales of Integrated Coating Systems, which reflected the fluctuation of demand in Alternative Energy, primarily in fuel cells.
See the accompanying tables at the end of this release for a breakout of sales by Market and Product.
In the first quarter of fiscal 2019, approximately 63% of sales originated outside of the United States and Canada compared with 67% in the prior-year period. As expected, the geographic shift reflects higher sales to the U.S. medical market, supported by strong economic growth in the U.S.
The change in product mix and higher direct labor and service department costs partially offset the benefit of higher volume resulting in a relatively consistent gross margin.
Operating income and margin increased as higher gross profit more than offset the 7% increase in operating expenses.
Higher interest and dividend income and realized gains on marketable securities aided net income growth to $21,000.
Balance Sheet and Cash Flow Overview
Cash and cash equivalents and short-term investments at quarter-end were $5.9 million, down from $6.4 million at the end of fiscal 2018. The decline was the result of the timing of working capital requirements primarily due to an increase in receivables and a decrease in accounts payable and accrued expenses.
The Company initiated the first phase of its CNC machining upgrade with capital expenditures increasing to $102,000 from $40,000 in the prior-year period. Sono-Tek anticipates total capital expenditures to be approximately $0.4 million to $0.6 million in fiscal 2019.
At May 31, 2018, the Company had total debt of $988,000, down $39,000 since fiscal 2018 year-end. Sono-Tek has a revolving credit line of $750,000 and a $250,000 equipment purchase facility, both of which had no outstanding borrowings at quarter-end.
About Sono-Tek
Sono-Tek Corporation is the leading developer and manufacturer of ultrasonic coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive.
The Company’s solutions are environmentally-friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions.
Sono-Tek’s growth strategy is focused on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop microscopic coating technologies that enable better outcomes for its customers’ products and processes.
For further information, visit www.sono-tek.com.
Safe Harbor Statement
This news release contains forward looking statements regarding future events and the future performance of Sono-Tek Corporation
that involve risks and uncertainties that could cause actual results to differ materially. These factors include, among other considerations,
general economic and business conditions; political, regulatory, tax, competitive and technological developments affecting our
operations or the demand for our products; timely development and market acceptance of new products and paid coating services;
adequacy of financing; capacity additions; the ability to enforce patents; maintenance of operating leverage; continued reduction
in inventory requirements; maintenance of order backlog; consummation of order proposals; continued sales growth in the medical
and alternative energy markets; and the ability to achieve increased sales volume at projected levels and continued profitability.
We refer you to documents that the company files with the Securities and Exchange Commission, which includes Form 10-K and Form
10-Qs containing additional important information.
For more information, contact:
| Stephen J. Bagley | Deborah K. Pawlowski |
| Chief Financial Officer | Investor Relations |
| Sono-Tek Corporation | (716) 843-3908 |
| info@sono-tek.com | dpawlowski@keiadvisors.com |
FINANCIAL TABLES FOLLOW
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended May 31, | ||||||||
| 2018 | 2017 | |||||||
| Net Sales | $ | 2,700,860 | $ | 2,500,734 | ||||
| Cost of Goods Sold | 1,429,663 | 1,320,217 | ||||||
| Gross Profit | 1,271,197 | 1,180,517 | ||||||
| Operating Expenses | ||||||||
| Research and product development costs | 333,866 | 309,251 | ||||||
| Marketing and selling expenses | 629,788 | 587,798 | ||||||
| General and administrative costs | 275,392 | 262,389 | ||||||
| Total Operating Expenses | 1,239,046 | 1,159,438 | ||||||
| Operating Income | 32,151 | 21,079 | ||||||
| Interest Expense | (10,614 | ) | (12,213 | ) | ||||
| Interest and Dividend Income | 34,606 | 17,143 | ||||||
| Realized gain on sale of marketable securities | 29,392 | — | ||||||
| Net unrealized loss on marketable securities | (49,061 | ) | — | |||||
| Other (expense) income | 2,520 | (1,658 | ) | |||||
| Income Before Income Taxes | 38,994 | 24,351 | ||||||
| Income Tax Expense | 17,564 | 8,482 | ||||||
| Net Income | $ | 21,430 | $ | 15,869 | ||||
| Other Comprehensive income | ||||||||
| Net unrealized gain on marketable securities | — | 27,035 | ||||||
| Comprehensive Income | — | $ | 42,904 | |||||
| Basic Earnings Per Share | $ | 0.00 | $ | 0.00 | ||||
| Diluted Earnings Per Share | $ | 0.00 | $ | 0.00 | ||||
| Weighted Average Shares - Basic | 14,987,613 | 14,961,076 | ||||||
| Weighted Average Shares - Diluted | 15,088,512 | 15,057,495 | ||||||
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| May 31, 2018 | February 28, | |||||||
| (Unaudited) | 2018 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 1,541,752 | $ | 2,016,464 | ||||
| Marketable securities | 4,316,746 | 4,405,900 | ||||||
| Accounts receivable (less allowance of $46,000) | 973,282 | 774,778 | ||||||
| Inventories, net | 1,425,455 | 1,354,083 | ||||||
| Prepaid expenses and other current assets | 134,633 | 139,406 | ||||||
| Total current assets | 8,391,868 | 8,690,631 | ||||||
| Land | 250,000 | 250,000 | ||||||
| Buildings, net | 1,788,921 | 1,807,339 | ||||||
| Equipment, furnishings and building improvements, net | 543,345 | 498,401 | ||||||
| Intangible assets, net | 130,791 | 136,576 | ||||||
| Deferred tax asset | 396,387 | 396,387 | ||||||
| TOTAL ASSETS | $ | 11,501,312 | $ | 11,779,334 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 582,982 | $ | 652,863 | ||||
| Accrued expenses | 672,940 | 893,192 | ||||||
| Customer deposits | 346,993 | 344,098 | ||||||
| Current portion of long term debt | 157,726 | 156,119 | ||||||
| Income taxes payable | 102,185 | 84,621 | ||||||
| Total current liabilities | 1,862,826 | 2,130,893 | ||||||
| Deferred tax liability | 385,384 | 385,384 | ||||||
| Long term debt, less current maturities | 830,247 | 870,532 | ||||||
| Total liabilities | 3,078,457 | 3,386,809 | ||||||
| Stockholders’ Equity | ||||||||
| Common stock, $.01 par value; 25,000,000 shares authorized, 14,989,003 and 14,986,367 shares issued and outstanding, respectively | 149,890 | 149,864 | ||||||
| Additional paid-in capital | 8,910,045 | 8,901,171 | ||||||
| Accumulated deficit | (637,080 | ) | (760,115 | ) | ||||
| Accumulated other comprehensive income | — | 101,605 | ||||||
| Total stockholders’ equity | 8,422,855 | 8,392,525 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 11,501,312 | $ | 11,779,334 | ||||
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended May 31, | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 21,430 | $ | 15,869 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 80,893 | 101,808 | ||||||
| Stock based compensation expense | 8,900 | 10,469 | ||||||
| Inventory reserve | 18,000 | 27,000 | ||||||
| Unrealized loss on marketable securities | 49,061 | — | ||||||
| Decrease (Increase) in: | ||||||||
| Accounts receivable | (198,504 | ) | (136,070 | ) | ||||
| Inventories | (89,372 | ) | 63 | |||||
| Prepaid expenses and other current assets | 4,773 | 36,720 | ||||||
| (Decrease) Increase in: | ||||||||
| Accounts payable and accrued expenses | (290,133 | ) | 21,486 | |||||
| Customer Deposits | 2,895 | 268,176 | ||||||
| Income taxes payable | 17,564 | 12,563 | ||||||
| Net Cash (Used In) Provided by Operating Activities | (374,493 | ) | 358,084 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment and furnishings | (101,634 | ) | (39,704 | ) | ||||
| Sale (Purchase) of marketable securities | 40,093 | (537,265 | ) | |||||
| Net Cash (Used In) Investing Activities | (61,541 | ) | (576,969 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayments of notes payable and loans | (38,678 | ) | (37,135 | ) | ||||
| Net Cash (Used In) Financing Activities | (38,678 | ) | (37,135 | ) | ||||
| NET (DECREASE) IN CASH AND CASH EQUIVALENTS | (474,712 | ) | (256,020 | ) | ||||
| CASH AND CASH EQUIVALENTS | ||||||||
| Beginning of period | 2,016,464 | 2,557,223 | ||||||
| End of period | $ | 1,541,752 | $ | 2,301,203 | ||||
| SUPPLEMENTAL CASH FLOW DISCLOSURE: | ||||||||
| Interest paid | $ | 10,614 | $ | 12,213 | ||||
| Taxes Paid | $ | — | $ | — | ||||
SONO-TEK CORPORATION
ADDITIONAL INFORMATION – MARKET AND PRODUCT SALES
(Unaudited)
Market Sales:
| Three Months Ended May 31, | Change | |||||||||||||||||
| 2018 | % of total | 2017 | % of total | $ | % | |||||||||||||
| Electronics/Microelectronics | $ | 1,328,000 | 49% | $ | 884,000 | 35% | 444,000 | 50% | ||||||||||
| Medical | 889,000 | 33% | 608,000 | 24% | 281,000 | 46% | ||||||||||||
| Alternative Energy | 173,000 | 6% | 507,000 | 20% | (334,000 | ) | (66%) | |||||||||||
| Emerging R&D and Other | 192,000 | 7% | 180,000 | 7% | 12,000 | 7% | ||||||||||||
| Industrial | 119,000 | 4% | 322,000 | 13% | (203,000 | ) | (63%) | |||||||||||
| TOTAL | $ | 2,701,000 | $ | 2,501,000 | $ | 200,000 | 8% | |||||||||||
Product Sales:
| Three Months Ended May 31, | Change | |||||||||||||||||
| 2018 | % of total | 2017 | % of total | $ | % | |||||||||||||
| Fluxing Systems | $ | 734,000 | 27% | $ | 600,000 | 24% | 134,000 | 22% | ||||||||||
| Integrated Coating Systems | 337,000 | 12% | 583,000 | 23% | (246,000 | ) | (42%) | |||||||||||
| Multi-Axis Coating Systems | 857,000 | 32% | 755,000 | 30% | 102,000 | 14% | ||||||||||||
| OEM Systems | 607,000 | 22% | 432,000 | 17% | 175,000 | 40% | ||||||||||||
| Other | 166,000 | 6% | 131,000 | 5% | 35,000 | 27% | ||||||||||||
| TOTAL | $ | 2,701,000 | $ | 2,501,000 | $ | 200,000 | 8% | |||||||||||