VTEK Vodavi Technology

Vodavi Technology Inc. (Nasdaq: VTEK), a provider of business telecommunications solutions, today announced results for its second quarter ended June 30, 2006. For the second quarter of 2006, the company reported an increase in revenue of 3.9 percent to $11.0 million compared with revenue of $10.6 million in the second quarter of 2005. Net income totaled $401,000, or $0.10 per diluted share, in the most recent quarter compared with net income of $369,000, or $0.09 per diluted share, in the comparable period of 2005. For the first half of 2006, the company reported an increase in revenue of 2.7 percent to $21.0 million compared with $20.5 million during the first half of 2005. Net income totaled $605,000, or $0.15 per diluted share, during the most recent six months compared with net income of $563,000, or $0.14 per diluted share, during the same period of 2005. Gregory K. Roeper, chief executive officer, stated, "We are starting to see positive results from the business alliances we announced earlier in the year related to the hosted IP services market. Sales of our IP terminals have accelerated and we continue to expect increases in this product line in the future. We are pleased that even with our increased investments into these programs, that we were still able to leverage the increased revenues into increased earnings very quickly." 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 June 30, 2006, filed with the Securities and Exchange Commission. Teleconference Information The company has scheduled a teleconference to discuss its results on Wednesday August 2, 2006, 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 706-645-9291. Please refer to Conference ID: 3898824. A replay of the teleconference will be available beginning August 2, 2006, at approximately 7 p.m. Eastern time through August 30, 2006. To listen to the replay by phone, dial 800-642-1687. If calling internationally, please call 706-645-9291. Please refer to Conference ID: 3898824. 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 June 30, June 30, ------------------ ----------------- 2006 2005 2006 2005 --------- -------- -------- -------- REVENUE, net $11,008 $10,598 $21,013 $20,464 COST OF GOODS SOLD 6,995 6,737 13,548 13,129 --------- -------- -------- -------- GROSS MARGIN 4,013 3,861 7,465 7,335 --------- -------- -------- -------- OPERATING EXPENSES: Engineering and product development 543 500 1,021 1,018 Selling, general and administrative 2,886 2,787 5,585 5,442 --------- -------- -------- -------- 3,429 3,287 6,606 6,460 --------- -------- -------- -------- OPERATING INCOME 584 574 859 875 INTEREST INCOME 63 21 117 33 --------- -------- -------- -------- INCOME BEFORE INCOME TAXES 647 595 976 908 INCOME TAX PROVISION 246 226 371 345 --------- -------- -------- -------- NET INCOME $401 $369 $605 $563 ========= ======== ======== ======== EARNINGS PER COMMON SHARE: Diluted $0.10 $0.09 $0.15 $0.14 ========= ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING: Diluted 4,104 4,092 4,110 4,118 ========= ======== ======== ======== *T -0- *T VODAVI TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS In thousands except share amounts June 30, Dec. 31, 2006 2005 --------- --------- CURRENT ASSETS: Cash $6,788 $6,538 Accounts receivable, net 6,486 7,126 Inventory 3,437 3,543 Deferred income taxes 446 446 Prepaids and other current assets 1,103 508 --------- --------- Total current assets 18,260 18,161 PROPERTY AND EQUIPMENT, net 1,146 1,228 DEFERRED INCOME TAXES 168 168 OTHER LONG-TERM ASSETS 58 45 --------- --------- $19,632 $19,602 ========= ========= CURRENT LIABILITIES: Trade accounts payable $702 $451 Accrued liabilities 953 944 Accrued rebates 471 453 Trade accounts payable to stockholder 3,326 4,097 --------- --------- Total current liabilities 5,452 5,945 STOCKHOLDERS' EQUITY Preferred Stock - - Common Stock, $.001 par value; 3,860,849 and 3,850,974 shares issued, respectively 4 4 Additional paid-in capital 11,851 11,814 Retained Earnings 2,832 2,227 Treasury stock, 97,499 and 76,741 shares at cost, respectively (507) (388) --------- --------- 14,180 13,657 --------- --------- $19,632 $19,602 ========= ========= *T