LCRD Lasercard Corp (MM)

LaserCard Corporation (NASDAQ:LCRD), a leading provider of secure ID solutions, today announced the financial results for its fiscal 2011 second quarter ended October 1, 2010.

Revenues for the second quarter of fiscal 2011 were $12.7 million, compared with $11.6 million in the prior quarter and $15.7 million in the same quarter a year ago. GAAP net income for the second quarter of fiscal 2011 was $0.8 million, or $0.07 per diluted share, compared with GAAP net income of $0.4 million, or $0.04 per diluted share, in the prior quarter, and GAAP net income of $1.8 million, or $0.15 per diluted share, in the same quarter a year ago.

LaserCard® optical security media card revenues for the quarter were $9.0 million compared with $11.9 million in the second quarter of fiscal 2010. Revenues from specialty cards and printers totaled $3.7 million compared with $3.8 million from the same quarter a year ago. Optical security media card backlog at October 1, 2010 was $9.6 million.

LaserCard Corporation’s cash, cash equivalents, and investments were $36.2 million at October 1, 2010. Debt at October 1, 2010 totaled $0.1 million.

Non-GAAP Results

Non-GAAP net income for the second quarter of fiscal 2011 was $1.3 million, or $0.10 per diluted share, compared to non-GAAP net income of $0.9 million, or $0.07 per diluted share, in the prior quarter, and a non-GAAP net income of $1.9 million, or $0.15 per diluted share, in the same quarter a year ago.

Non-GAAP net income and net income per diluted share exclude expenses related to ASC 718 (formerly SFAS123R) stock-based compensation, the unrealized income relating to the fair value adjustment of auction rate securities and our UBS put option agreement, and exclude the gain related to the termination of a contract.

“We have achieved profitability over the past seven quarters due to the ongoing contributions from our core customer programs and the previously implemented refinements to our cost model,” said Robert DeVincenzi, President and CEO of LaserCard. “As is typical in our business and industry, our program revenue and financial results will continue to be subject to fluctuations on a quarterly basis.”

Earnings Results Conference Call

LaserCard will hold a conference call to discuss its fiscal 2011 second quarter results today, October 28, 2010, at approximately 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time. For access to the conference call, please call 773-799-3302 by 1:50 p.m. Pacific Time. A taped replay of the call will be available for one week. To access the replay, please call 203-369-1160. You will need to reference the passcode “LaserCard” and the conference leader “Robert DeVincenzi.” To listen to the call via the Internet, please log on to: www.lasercard.com or www.investorcalendar.com. The Internet Webcast will be archived for one year. A copy of this press release will be furnished to the Securities and Exchange Commission on a Form 8-K and be posted to our web site prior to the conference call.

About LaserCard Corporation

LaserCard Corporation, together with its subsidiaries, is a leading provider of secure ID solutions to governments and commercial clients worldwide. It develops, manufactures, and integrates LaserCard® optical security media cards, multi-technology cards, encoders, peripherals, smart and specialty cards, biometrics, and modular software. The Company’s cards and systems are used in various applications, including citizen identification, border security, government service delivery, and facility access.

For more information, please go to www.lasercard.com.

Forward Looking Statement Disclaimer

All statements contained in this press release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are not historical facts or guarantees of future performance or events. Rather, they are based on current expectations, estimates, beliefs, assumptions, goals and objectives and are subject to uncertainties that are difficult to predict. As a result, our actual results may differ materially from the statements made. Often such statements can be identified by the use of words such as “may,” “will,” “intends,” “plans,” “believes,” “anticipates,” “visualizes,” “expects,” and “estimates.” Examples of forward-looking statements in this release include our belief that quarterly results will fluctuate. This and other forward-looking statements in this press release are based upon our assumptions about and assessment of the future, which may or may not prove true, and involve a number of risks and uncertainties including, but not limited to whether projected orders or scheduled delivery dates are rescheduled or canceled in whole or in part, that the complex nature of the secure ID business will continue to subject our results to fluctuations on a quarterly basis, and whether our other customers continue orders as currently expected as well as the other risk factors detailed in our Forms 10-K and 10-Q filings with the Securities and Exchange Commission under the caption “Risk Factors” and elsewhere in such reports. Due to these and other risks, future actual results could differ materially from our expectations. These forward-looking statements speak only as to the date of this release, and, except as required by law, we undertake no obligation to publicly release updates or revisions to these statements whether as a result of new information, future events, or otherwise.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP net income and non-GAAP EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" included at the end of this release.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results," meaning our operating performance excluding not only non-cash charges, such as stock-based compensation, but also discrete cash charges or gains that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance as well as comparisons to our competitors' results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. These non-GAAP financial measures may be different than those used by other companies, including our competitors.

Non-GAAP net income and EPS. We define non-GAAP net income as net income plus stock-based compensation, and unrealized fair-value adjustments less the related tax effects of such items plus other nonrecurring gains or losses. We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be a useful metric for management and investors. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with stock-based compensation and the impairment charges. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. There are a number of limitations related to the use of non-GAAP net income versus net income calculated in accordance with GAAP. First, non-GAAP net income excludes some recurring costs, namely stock-based compensation. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in our business. Second, stock-based compensation is an important part of our employees' compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

  LASERCARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share amounts)     Three Months Ended     Six Months Ended October 1,   October 2, October 1,   October 2, 2010 2009 2010 2009   Revenues $ 12,743 $ 15,716 $ 24,344 $ 32,024 Cost of sales   7,233     8,927   14,303   18,632 Gross profit   5,510     6,789   10,041

 

  13,392   Operating expenses: Selling, general, and administrative expenses 4,039 4,278 7,740 8,352 Research and development expenses   319     296   605   667 Total operating expenses   4,358     4,574   8,345   9,019 Operating income 1,152 2,215 1,696 4,373   Other income (expense), net   (7 )   518   6   700   Income before income taxes 1,145 2,733 1,702 5,073   Provision for income tax   301     886   426   1,283   Net income $ 844   $ 1,847 $ 1,276 $ 3,790   Net income per share: Basic $ 0.07   $ 0.15 $ 0.10 $ 0.31 Diluted $ 0.07   $ 0.15 $ 0.10 $ 0.31  

Weighted-average shares of common stock

used in computing net income per share: Basic   12,281     12,172   12,263   12,143 Diluted   12,358     12,318   12,354   12,207   LASERCARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands)     October 1,   April 2, 2010 2010* ASSETS Current assets: Cash and cash equivalents $ 25,171 $ 33,180 Short-term investments 11,038 11,907 Accounts receivable, net of allowance of $31 at October 1, 2010

 

 

and $37 at April 2, 2010

3,944

4,157

Inventories, net of reserves of $917 at October 1, 2010

 

 

and $2,143 at April 2, 2010

10,607

11,326

Deferred contract costs 275 213 Prepaid and other current assets   980     1,280   Total current assets   52,015     62,063     Property, plant and equipment, net of accumulated depreciation of $25,134 at October 1, 2010 8,770 9,409 and $23,904 at April 2, 2010 Equipment held for resale 7,155 7,155 Restricted cash 142 - Patents and other intangibles, net 263 307 Notes receivable 232 230 Deferred contract costs 79 79 Other non-current assets   48     48   Total assets $ 68,704   $ 79,291     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,544 $ 1,236 Accrued liabilities 4,314 4,539 Deferred income tax liability 189 191 Advance payments from customers 2,028 6,525 Short-term debt - 7,865 Deferred revenue 675 533 Deferred rent 286 270 Capital lease obligation   83     76  

Total current liabilities

  9,119     21,235     Capital lease obligation, net of current portion 23 77 Advance payments from customers, net of current portion 24,505 24,505 Deferred revenue, net of current portion 3,306 3,306 Deferred rent, net of current portion 810 954 Income tax payable   -     308   Total liabilities   37,763     50,385     Stockholders' equity: Preferred stock, $0.01 par value: Authorized - 2,000,000 shares Issued - none

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-

Common stock, $0.01 par value Authorized - 30,000,000 shares Issued and outstanding - 12,348,904 shares at October 1, 2010 and 12,234,882 shares at April 2, 2010 123 122 Additional paid-in capital 70,192 69,492 Accumulated deficit (39,538 ) (40,815 ) Accumulated other comprehensive income   164     107   Total stockholders' equity   30,941     28,906     Total liabilities and stockholders’ equity $ 68,704   $ 79,291     *Amounts derived from audited consolidated financial statements   LASERCARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)           Six Months Ended October 1,   October 2, 2010 2009 Cash flows from operating activities: Net income $ 1,276 $ 3,790 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,296 1,331 Fixed asset disposal - 20 Provision (recovery) for doubtful accounts receivable (19 ) 47 Provision for excess and obsolete inventory 13 951 Provision for warranty reserve (51 ) (13 ) Stock-based compensation 787 1,131 Put option, loss on fair value - (68 ) Mark to market, trading - (193 ) Changes in operating assets and liabilities: Decrease in accounts receivable 246 3,326 Decrease in inventories 722 1,435 Decrease (increase) in deferred contract costs (62 ) 635 Decrease in other current assets 335 200 Increase in equipment held for resale - (89 ) Decrease in other non-current assets - 60 Increase (decrease) in accounts payable and accrued liabilities (187 ) 2,451 Decrease in deferred income tax (4 ) (61 ) Increase (decrease) in deferred revenue 142 (603 ) Decrease in deferred rent (128 ) (111 ) Decrease in advance payments from customers   (4,507 )   (3,575 ) Net cash provided by (used in) operating activities   (141 )   10,664   Cash flows from investing activities: Purchases of property and equipment (640 ) (605 ) Acquisition of patents (5 ) (13 ) Maturities of marketable securities 12,907 - Purchases of marketable securities (12,038 ) - Changes in restricted cash balance   (142 )   -   Net cash provided by (used in) investing activities   82     (618 ) Cash flows from financing activities: Proceeds from sale of common stock through stock plans - 228 Tax benefit on carryforward of gain from exercise of common stock options - 858 Employee's taxes withheld and paid for restricted stock (86 ) (98 ) Borrowing (repayment) on revolving credit agreement (7,865 ) 373 Principal payments on capital lease obligation   (48 )   (39 ) Net cash provided by (used in) financing activities   (7,999 )   1,322   Effect of exchange rate changes on cash and cash equivalents   49     (49 ) Net increase (decrease) in cash and cash equivalents (8,009 ) 11,319 Cash and cash equivalents: Beginning of period $ 33,180   $ 15,912   End of period $ 25,171   $ 27,231     Supplemental disclosures - cash payments for: Income taxes $ 40   $ 60   Interest expense $ 35   $ 92     Supplemental schedule of non-cash investing activities: Unrealized gain in fair value of investments in earnings $ -   $ (261 )   LASERCARD CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE FINANCIAL MEASURES (UNAUDITED) (In thousands, except per share amounts)     Three Months Ended     Six Months Ended October 1,   October 2, October 1,   October 2, 2010 2009 2010 2009

 

Non-GAAP net income:

GAAP net income $ 844 $ 1,847 $ 1,276 $ 3,790 Stock-based compensation 373 560 786 1,131 Gain on fair value of investment - 41 - (193 ) Loss related to the Put-Right option - (83 ) - (68 ) Contract termination - (495 ) - (495 ) Income tax effect of non-GAAP adjustments   44   (7 )   76   (95 )

Non-GAAP net income

$ 1,261 $ 1,863   $ 2,138 $ 4,070    

Non-GAAP EPS:

Net income per share: Basic $ 0.10 $ 0.15   $ 0.17 $ 0.34   Diluted $ 0.10 $ 0.15   $ 0.17 $ 0.33     Weighted-average shares of common stock used in computing net income per share: Basic   12,281   12,172     12,263   12,143   Diluted   12,358   12,318     12,354   12,207    

As reported GAAP:

Net income per share: Basic $ 0.07 $ 0.15   $ 0.10 $ 0.31   Diluted $ 0.07 $ 0.15   $ 0.10 $ 0.31     Weighted-average shares of common stock used in computing net income per share: Basic   12,281   12,172     12,263   12,143   Diluted   12,358   12,318     12,354   12,207