Sono-Tek Announces Sales Grew 14% to $11.0 million in Fiscal 2018 and Forecasts Continued Revenue Growth

  • Annual gross margin improved by 280 basis points to 48.1%
  • Generated $1.8 million in cash from operations, up 75% in fiscal 2018
  • Achieved net income of $0.4 million, or $0.02 per basic and diluted share
  • Expects continued growth in first quarter and full fiscal year 2019

MILTON, N.Y.--()--Sono-Tek Corporation (OTCQX:SOTK) the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fourth quarter and fiscal year ended February 28, 2018 (“fiscal 2018”).

We had excellent growth trends through the year. Strong market conditions combined with the expansion of our sales effort drove sales up 14% to $11.0 million,” commented Dr. Christopher L. Coccio, Chairman and CEO. “Additionally, the strong operating leverage inherent in our business was evident in our measurable margin expansion.”

Dr. Coccio added, “We believe our continued implementation of LEAN manufacturing practices this past year were apparent in our strong cash generation. Our productivity focus has resulted in a significant reduction in inventory requirements and is also increasingly contributing to improved operating efficiencies and cycle time reduction.”

Cash and cash equivalents increased $1.5 million to $6.4 million, even as we continued to invest in engineering as well as product and market development.”

Dr. Coccio concluded, “Based on our current backlog, shipments, and proposals, we expect stronger sales in the first quarter of fiscal 2019 compared with last year’s first quarter. In fact, we anticipate solid growth in revenue for fiscal year 2019 from our new products and applications, supported by the strong global economy and fiscal improvements in the U.S.”

Fiscal 2018 Review ($’s in thousands, except per share data)

      Fiscal Year Ended            
February 28,     Change
2018     2017     $     %
Net Sales $11,008     $9,635 $1,373     14%
Gross Profit $5,296 $4,363 $933 21%
Gross Margin 48.1% 45.3%
Operating Income (Loss) $382 ($179) $560 -
Operating Margin 3.5% (1.9%)
Net Income (Loss) $368 $96 $273 284.7%
Net Margin 3.3% 1.0%
Basic Earnings Per Share $0.02 $0.01
Diluted Earnings Per Share $0.02 $0.01
Weighted Average Shares -Basic 14,968,450 14,961,076
Weighted Average Shares - Diluted 15,095,123 15,018,282
 

The increase in net sales reflects higher volume in Multi-Axis Systems and Integrated Coating Systems due in large part to growth in the medical and alternative energy markets, the latter being led by fuel cell development programs in China. Higher sales to the medical industry was the result of specialized application expertise for polymer and other active nanomaterial coatings on implantable devices.

In fiscal 2018, approximately 56% of sales originated outside of the United States and Canada. This compares with 60% in fiscal 2017. The geographic shift was mostly because of higher sales to the U.S. medical market.

Gross margin was up 280 basis points primarily due to product mix, as a greater portion of the sales growth was from higher margin Multi-Axis Systems and Integrated Coating Systems. In addition, fixed overhead costs were marginally down during the fiscal year.

The Company continued to invest in new product development and sales and marketing as it addressed market expansion opportunities. However, with strong sales growth, as a percentage of net sales, operating expenses were down 250 basis points to 44.6%. As a result, operating margin improved to 3.5%.

Sono-Tek achieved net income of $0.4 million, or $0.02 per basic and diluted share, up $0.01 from the prior year.

Fourth Quarter Fiscal 2018 Review ($’s in thousands except per share data)

      Three Months Ended            
February 28,     Change
2018     2017     $     %
       
Net Sales $2,894 $2,558 $336 13%
Gross Profit $1,350 $1,179 $171 15%
Gross Margin 46.7% 46.1%
Operating Income (Loss) $94 $29 $65 224%
Operating Margin 3.3% 1.1%
Net Income (Loss) $103 $67 $36 54%
Net Margin 3.6% 2.6%
Basic Earnings Per Share $0.01 $0.00
Diluted Earnings Per Share $0.01 $0.00
Weighted Average Shares - Basic 14,981,902 14,961,076
Weighted Average Shares - Diluted 15,181,331 15,058,366
 

Balance Sheet and Cash Flow Overview

Net cash provided by operating activities was $1.8 million, up $0.8 million, or 75%. Capital expenditures were $0.2 million for fiscal 2018, consistent with the prior-year period, primarily for the purchase or manufacture of equipment, furnishings and leasehold improvements. The Company anticipates total capital expenditures to be approximately $0.4 million to $0.6 million in fiscal 2019.

At February 28, 2018, the Company had total debt of $1.0 million, down $150 thousand since fiscal 2017 year-end. Sono-Tek has a revolving credit line of $750 thousand and a $250 thousand equipment purchase facility, both of which had no outstanding borrowings at year-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; 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.

     

SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS

 
February 28,
  2018         2017  
ASSETS    
Current Assets:
Cash and cash equivalents $ 2,016,464 $ 2,557,223
Marketable securities 4,405,900 2,342,184
Accounts receivable (less allowance of $46,000) 774,778 1,150,801
Inventories, net 1,354,083 1,340,684
Prepaid expenses and other current assets   139,406     127,276  
Total current assets   8,690,631     7,518,168  
 
Land 250,000 250,000
Buildings, net 1,807,339 1,875,074
Equipment, furnishings and leasehold improvements, net 498,401 624,197
Intangible assets, net 136,576 153,326
Deferred tax asset   396,387     315,171  
 
TOTAL ASSETS $ 11,779,334   $ 10,735,936  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current Liabilities:
Accounts payable $ 652,863 $ 336,561
Accrued expenses 893,192 868,755
Customer deposits 344,098 78,902
Current maturities of long term debt 156,119 149,698
Income taxes payable   84,621     14,619  
 
Total current liabilities   2,130,893     1,448,535  
 
Deferred tax liability 385,384 337,726
Long term debt, less current maturities   870,532     1,026,650  
 
Total Liabilities   3,386,809     2,812,911  
 
Commitments and Contingencies - -
 
Stockholders’ Equity
Common stock, $.01 par value; 25,000,000 shares authorized, 14,986,367 and 14,961,076 issued and outstanding, respectively 149,864 149,611
Additional paid-in capital 8,901,171 8,859,486
Accumulated deficit (760,115 ) (1,128,322 )
Accumulated other comprehensive income   101,605     42,250  
 
Total stockholders’ equity   8,392,525     7,923,025  
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 11,779,334   $ 10,735,936  
 
   

SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 
Fiscal Year Ended
February 28,
  2018         2017  
   
Net Sales $ 11,008,444 $ 9,634,956
Cost of Goods Sold   5,711,951     5,272,050  
Gross Profit   5,296,493     4,362,906  
 
Operating Expenses
Research and product development 1,280,308 1,275,902
Marketing and selling 2,516,461 2,217,218
General and administrative   1,118,107     1,048,407  
Total Operating Expenses   4,914,876     4,541,527  
 
Operating Income (Loss) 381,617 (178,621 )
 
Other Income (Expense):
Interest Expense (46,117 ) (52,294 )
Interest and Dividend Income 91,459 70,797
Other Income   33,104     236,450  
Income before Income Taxes 460,063 76,332
 
Income Tax (Benefit) Expense   91,856     (19,374 )
 
Net Income $ 368,207   $ 95,706  
Other Comprehensive Income
Net unrealized gain on marketable securities   59,355     112,390  
 
Comprehensive Income $ 427,562   $ 208,096  
 
 
Basic Earnings Per Share $ .02   $ .01  
 
Diluted Earnings Per Share $ .02   $ .01  
 
Weighted Average Shares – Basic   14,968,450     14,961,076  
 
Weighted Average Shares – Diluted   15,095,123     15,018,282  
 
     

SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Fiscal Year Ended
February 28,
  2018         2017  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 368,207 $ 95,706
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 399,526 440,223
Stock based compensation expense 41,728 47,319
Inventory reserve 104,601 80,006
Deferred tax expense (33,558 ) 5,750
 
(Increase) Decrease in:
Accounts receivable 376,023 63,912
Inventories (118,000 ) 524,693
Prepaid expenses and other assets (12,130 ) (17,322 )
 
(Decrease) Increase in:
Accounts payable and accrued expenses 340,739 (16,017 )
Customer deposits 265,196 (122,576 )
Income taxes payable   70,002     (73,041 )
Net Cash Provided by Operating Activities   1,802,334     1,028,653  
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furnishings and leasehold improvements (189,245 ) (182,837 )
(Purchase) of marketable securities   (2,004,360 )   (533,559 )
Net Cash (Used In) Investing Activities   (2,193,605 )   (716,396 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options 210 -
Repayment of long term debt   (149,698 )   (143,389 )
Net Cash (Used In) Financing Activities   (149,488 )   (143,389 )
 
 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (540,759 ) 168,868
 
CASH AND CASH EQUIVALENTS:
Beginning of year   2,557,223     2,388,355  
End of year $ 2,016,464   $ 2,557,223  
 
 
Supplemental Cash Flow Disclosure:
 
Interest Paid $ 46,117   $ 52,294  
Income Taxes Paid $ 59,494   $ 56,502  

Contacts

For more information:
Sono-Tek Corporation
Stephen J. Bagley
Chief Financial Officer
info@sono-tek.com
or
Deborah K. Pawlowski, 716-843-3908
Investor Relations
dpawlowski@keiadvisors.com

Release Summary

Sono-Tek Corporation (OTCQX: SOTK) reports the financial results for its fourth quarter and fiscal year ended February 28, 2018 (“fiscal 2018”).

Contacts

For more information:
Sono-Tek Corporation
Stephen J. Bagley
Chief Financial Officer
info@sono-tek.com
or
Deborah K. Pawlowski, 716-843-3908
Investor Relations
dpawlowski@keiadvisors.com