VTEK Vodavi Technology

Vodavi Technology Inc. (Nasdaq: VTEK), a provider of business telecommunications solutions, today announced results for its third quarter ended Sept. 30, 2005. For the third quarter of 2005, the company reported revenue of $12.3 million compared with revenue of $11.7 million in the third quarter of 2004. Net income totaled $666,000, or $0.16 per share, in the most recent quarter compared with net income of $657,000, or $0.16 per share, in the comparable period of 2004. The company reported revenue of $32.7 million for each of the nine-month periods ended Sept. 30, 2005 and 2004. Net income for the first nine months of 2005 totaled $1.2 million, or $0.30 per share, compared with $1.3 million, or $0.32 per share, in the comparable period of 2004. Gregory K. Roeper, chief executive officer, stated, "We are pleased with the increase in revenue generated during the quarter. Several of our dealers had outstanding quarters and our distributors maintained or slightly increased inventory levels. In addition, sales of VoIP-related products increased 64% over the same quarter in 2004. "During the quarter, the company did incur some expenses related to the investigation of a strategic M&A transaction which did not materialize. While this did have a negative impact on reported earnings for the quarter, management is committed to exploring strategic opportunities to enhance the value of our company while at the same time committed to continue our efforts to improve our operating results. "We also continued with our planned investments into our sales force. While these investments also negatively impacted our reported earnings in the third quarter, we remain optimistic that these investments will pay off." For a more detailed discussion of the company's financial results, please refer to the company's Form 10-Q for the quarterly period ended Sept. 30, 2005, filed with the Securities and Exchange Commission. Teleconference Information The company has scheduled a teleconference to discuss its results on Tuesday, Oct. 25, 2005, at 5 p.m. Eastern time. To participate in the teleconference, please dial 800-834-7251 at least 10 minutes prior to the start of the call. International participants should dial 706-645-9262. Please refer to Conference ID: 1746534. A replay of the teleconference will be available beginning Oct. 25, 2005, at approximately 7 p.m. Eastern time through Nov. 25, 2005. To listen to the replay by phone, dial 800-642-1687. If calling internationally, please call 706-645-9291. About Vodavi Vodavi Technology Inc. is an advanced telephony solutions provider delivering innovative business communications solutions that help small to large enterprises increase productivity and reduce costs. Vodavi's full range of telephony solutions include traditional telephone systems, Voice over IP (VoIP) technology and converged telephony solutions that allow enterprises to deploy traditional digital or VoIP communications simultaneously, providing a flexible and cost-effective migration path to new technology. The company is headquartered in Phoenix. For more information on Vodavi, visit www.vodavi.com. This press release contains forward-looking statements, including statements regarding the company's business strategies, the company's business, and the industry in which the company operates as well as expectations regarding revenue and income levels, and the market acceptance of new product introductions. These forward-looking statements are based primarily on the company's current expectations and are subject to a number of risks and uncertainties, some of which are out of the company's control. Actual results could differ materially from the forward-looking statements as a result of numerous factors, including those set forth in the company's Form 10-K filed with the Securities and Exchange Commission. -0- *T VODAVI TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS In thousands except per share amounts Three Months Ended Six Months Ended Sept. 30, Sept. 30, ------------------- ------------------ 2005 2004 2005 2004 -------- -------- -------- -------- REVENUE, net $12,256 $11,690 $32,721 $32,717 COST OF GOODS SOLD 7,729 7,529 20,856 21,232 -------- -------- -------- -------- GROSS MARGIN 4,527 4,161 11,865 11,485 -------- -------- -------- -------- OPERATING EXPENSES: Engineering and product development 485 447 1,503 1,460 Selling, general and administrative 2,998 2,649 8,440 7,860 -------- -------- -------- -------- 3,483 3,096 9,943 9,320 -------- -------- -------- -------- OPERATING INCOME 1,044 1,065 1,922 2,165 INTEREST (INCOME) EXPENSE (30) (3) (64) 11 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 1,074 1,068 1,986 2,154 INCOME TAX PROVISION 408 411 753 828 -------- -------- -------- -------- NET INCOME $ 666 $ 657 $ 1,233 $ 1,326 ======== ======== ======== ======== EARNINGS PER COMMON SHARE: Diluted $ 0.16 $ 0.16 $ 0.30 $ 0.32 ======== ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING: Diluted 4,071 4,087 4,101 4,106 ======== ======== ======== ======== VODAVI TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS In thousands Sept. 30, Dec. 31, 2005 2004 ----------- ----------- CURRENT ASSETS: Cash $ 5,561 $ 4,000 Accounts receivable, net 7,251 7,145 Inventory 3,262 4,569 Deferred income taxes 454 454 Prepaids and other current assets 664 519 ----------- ----------- Total current assets 17,192 16,687 PROPERTY AND EQUIPMENT, net 1,327 1,363 GOODWILL 725 725 OTHER LONG-TERM ASSETS 45 50 ----------- ----------- $ 19,289 $ 18,825 =========== =========== CURRENT LIABILITIES: Trade accounts payable $ 610 $ 497 Accrued liabilities 1,379 1,352 Accrued rebates 522 641 Trade accounts payable to stockholder 3,324 3,990 ----------- ----------- Total current liabilities 5,835 6,480 DEFERRED INCOME TAXES 24 24 STOCKHOLDERS' EQUITY 13,430 12,321 ----------- ----------- $ 19,289 $ 18,825 =========== =========== *T