SHMR Shamir Optical Industry Ltd. (MM)

Revenues of $20.2 Million KIBBUTZ SHAMIR, Israel, Aug. 15 /PRNewswire-FirstCall/ -- Shamir Optical Industry Ltd (NASDAQ:SHMR), a leading provider of innovative products and technology to the progressive ophthalmic lens market, today announced unaudited financial results for the second quarter ended June 30, 2005. For the second quarter of 2005, revenues were $20.2 million, an increase of 11.2% compared to revenues of $18.2 million for the second quarter of 2004. Gross profit for the quarter was $11.2 million, or 55.2% of revenues, an increase of 10.9% from gross profit of $10.1 million, or 55.4% of revenues in the same period last year. Operating income was $3.1 million, or 15.5% of revenues for the second quarter of 2005, representing a decrease of 14.9% from operating income of $3.7 million, or 20.3% of revenues in the same period last year. Net income for the quarter was $2.1 million or $0.13 per diluted share compared to pro forma net income of $2.1 million for the comparable period in 2004. Excluding the effects of non-cash stock-based compensation expenses, for the second quarter of 2005, operating income was $3.4 million, or 16.9% of revenues. This was a decrease of 7.6% from operating income of $3.7 million, in the same period last year. Excluding the effects of non-cash stock-based compensation expenses, net income for the quarter was $2.3 million, compared to pro forma net income of $2.1 million for the comparable period in 2004. The reconciliation of GAAP net income to adjusted net income is set forth below in this release. As of June 30, 2005, the Company had cash and cash equivalents of approxiametly $44 million. Commenting on the second quarter results, Giora Ben-Zeev, Chief Executive Officer of Shamir Optical, said, "During the second quarter, Shamir Optical made significant progress but also experienced certain challenges. We continued to expand our sales efforts in the United States through Shamir Insight ("SII"), our U.S. distribution center for lenses, in which we recently increased our holdings to 90% (100% of the voting rights). We are pleased with SII's continued growth. In Europe, our business remained strong and, as part of our global growth strategy, we established new operations called Altra-Turkey." Mr. Ben-Zeev continued, "While our results for the quarter improved year-over-year, during the quarter Altra U.K (previously Cambridge) experienced certain integration issues which caused lower than expected sales penetration and operational loses. We have addressed these issues, including the hiring of new sales people. In the United States, some of our customers, third-party manufacturers, purchased less Shamir products than we expected. We believe this development is a short-term situation." "Notwithstanding these short-term challenges, we remain confident about the long-term opportunity for Shamir. The market potential for progressive lenses remains strong and Shamir Optical maintains a significant position in the industry. We are focused on expanding our distribution and marketing channels, which we believe, together with our technological leadership and the trends in the progressive lens market, will enable us to maintain our growth in the future. We also expect Altra-Turkey to positively contribute to our results in the second half of 2005." Mr. Ben-Zeev concluded, "While in the past we have only provided an expected range of growth for the full year 2005, given the developments this quarter, we now expect that our revenues for the year will be approximately $82 - $84 million and that the non-GAAP net income will be approximately $9 - $9.5 million." FY 2005 Guidance: Revenues $82 million - $84 million GAAP Earnings $8 - $8.5 million Non-GAAP Earnings $9 - $9.5 million Conference Call: Shamir Optical has scheduled a conference call for 9:00 a.m. EDT today, August 15, to discuss second quarter results. To participate in the call, please dial 800-247-9979 (U.S. and Canada), or 973-409-9254 (International). For those unable to participate there will be replay available from 12:00 p.m. EDT on August 15, 2005 through 11:59 p.m. EDT, August 22, 2005. To listen to the replay, please call: 877-519-4471 (U.S. and Canada), 973-341-3080 (International). The ID code for the replay is 6324933. The call will be available as a live, listen-only webcast at http://www.kcsa.com/. An archive of the webcast will be available approximately 2 hours after the conclusion of the live call. To listen to the live call, please go to the KCSA Web site at least 15 minutes prior to the scheduled start time to register, download and install any necessary audio software. About non-GAAP financial measures This press release includes a financial measure defined as a non-GAAP financial measure by the Securities and Exchange Commission: adjusted operating income and adjusted net income. This measure may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management of Shamir Optical Industry Ltd. believes that adjusted operating income and adjusted net income provides meaningful supplemental information that these numbers exlude the non-cash, one-time charge related to tax effects from when we changed the structure of our company from an A.C.S. into an Israeli limited liability company, and the effect of non-cash stock-based compensation expenses. About Shamir Shamir is a leading provider of innovative products and technology to the progressive spectacle lens market. Utilizing its proprietary technology, the company develops, designs, manufactures, and markets progressive lenses to sell to the ophthalmic market. In addition, Shamir utilizes its technology to provide design services to optical lens manufacturers under service and royalty agreements. Progressive lenses are used to treat presbyopia, a vision condition where the eye loses its ability to focus on close objects. Progressive lenses combine several optical strengths into a single lens to provide a gradual and seamless transition from near to intermediate, to distant vision. Shamir differentiates its products from its competitors' primarily through lens design. Shamir's leading lenses are marketed under a variety of trade names, including Shamir Genesis(TM), Shamir Piccolo(TM), Shamir Office(TM), and Shamir Autograph(TM). Shamir believes that it has one of the world's preeminent research and development teams for progressive lenses, molds, and complementary technologies and tools. Shamir developed software dedicated to the design of progressive lenses. This software is based on Shamir's proprietary mathematical algorithms that optimize designs of progressive lenses for a variety of activities and environments. Shamir also has created software tools specifically designed for research and development and production requirements, including Eye Point Technology software, which simulates human vision. Safe Harbor Statement This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, any securities described herein in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Statements concerning Shamir's business outlook or future economic performance; product introductions and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements" as that term is defined under U.S. federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in Shamir's industry and target markets in particular; shifts in supply and demand; market acceptance of new products and continuing products' demand; the impact of competitive products and pricing on Shamir's and its customers' products and markets; timely product and technology development/upgrades and the ability to manage changes in market conditions as needed; possible business disruptions from acquisitions; and other factors detailed in Shamir's filings with the Securities and Exchange Commission. Shamir assumes no obligation to update the information in this release. SHAMIR OPTICAL INDUSTRY LTD Consolidated Statements of Income (US dollars in thousands, except per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2004 2005 2004 2005 Revenues, net $ 18,169 $ 20,197 $ 33,706 $ 40,851 Cost of revenues 8,110 9,046 15,878 18,759 Gross profit 10,059 11,151 17,828 22,092 Operating Expenses: Research and development costs 613 412 1,002 846 Selling and marketing expenses 4,756 5,847 8,715 10,977 General and adminis- trative expenses 1,004 1,487 1,683 3,037 Stock based compensation - 270 - 342 Total operating expenses 6,373 8,016 11,400 15,202 Operating income 3,686 3,135 6,428 6,890 Financial expenses (income) and other, net 391 (40) 485 (94) Income before taxes on income 3,295 3,175 5,943 6,984 Taxes on income 585 951 1,063 2,612 Income after taxes on income 2,710 2,224 4,880 4,372 Equity in losses of affiliates, net 18 - 41 - Minority interest in earnings of subsidiaries 180 82 384 350 Net income $ 2,512 $ 2,142 $ 4,455 $ 4,022 Pro forma -- additional taxes on income 439 - 809 - Pro forma net income $ 2,073 $ 2,142 $ 3,646 $ 4,022 Non-GAAP adjustment: Non-cash tax expenses related to change of tax status - - - (414) Stock based compensation, net - (188) - (260) Non-GAAP net income $ 2,073 $ 2,330 $ 3,646 $ 4,696 Net earnings per share: Basic (*) $ 0.13 (*) $ 0.27 Diluted (*) $ 0.13 (*) $ 0.26 Non-GAAP net earnings per share : Basic (*) $ 0.14 (*) $ 0.32 Diluted (*) $ 0.14 (*) $ 0.31 Number of shares: Basic (*) 16,111 (*) 14,702 Dilutive (*) 16,675 (*) 15,204 (*) The company did not present EPS data for the three months and six months ended June 30, 2004 in its Form F-1. SHAMIR OPTICAL INDUSTRY LTD Consolidated Balance Sheets (US dollars in thousands, except share and per share data) As of December 31, As of June 30, 2004 2005 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 6,235 $ 43,937 Short-term investment - 299 Trade receivables (1) 15,394 16,396 Other receivables and prepaid expenses 3,099 4,284 Inventory 16,296 15,385 TOTAL CURRENT ASSETS 41,024 80,301 LONG-TERM INVESTMENTS: Severance pay fund 1,765 1,771 Long-term loan to a related party - 214 Investments in affiliates 666 680 TOTAL LONG-TERM INVESTMENTS 2,431 2,665 PROPERTY, PLANT AND EQUIPMENT, NET 15,609 17,167 OTHER ASSETS 2,294 3,384 GOODWILL 3,986 3,856 TOTAL ASSETS $ 65,344 $ 107,373 CURRENT LIABILITIES: Short-term bank credit and loans $ 10,986 $ 8,767 Current maturities of long-term loans 3,857 1,728 Trade payables 4,624 5,173 Dividend payable 5,201 2,815 Accrued expenses and other liabilities 8,531 9,236 TOTAL CURRENT LIABILITIES 33,199 27,719 LONG-TERM LIABILITIES: Long-term loans 4,664 4,418 Accrued severance pay 2,049 2,132 Deferred income taxes 432 390 TOTAL LONG-TERM LIABILITIES 7,145 6,940 MINORITY INTERESTS 7,370 7,868 TEMPORARY EQUITY Issued and outstanding: 502,400 shares at December 31, 2004 and no shares at June 30, 2005 3,000 - SHAREHOLDERS' EQUITY: Share capital Common shares of NIS 0.01 par value Authorized: 12,711,332 shares at December 31, 2004 and 100,000,000 shares at June 30, 2005; Issued and outstanding: 12,208,932 shares at December 31, 2004 and 16,111,332 shares at June 30, 2005 29 37 Additional paid-in capital 10,053 62,477 Deferred Stock compensation (844) (925) Foreign currency translation adjustments 1,236 591 Retained earnings 4,156 2,666 TOTAL SHAREHOLDERS' EQUITY 14,630 64,846 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 65,344 $ 107,373 (1) Net of allowance for doubtful accounts of $ 533 and $ 477 as of December 31, 2004 and June 30, 2005, respectively DATASOURCE: Shamir Optical Industry Ltd CONTACT: Investor Relations, Jeff Corbin, +1-212-896-1214, , or Jeffrey Goldberger, +1-212-896-1249, , both of KCSA Worldwide; or Roni Gavrielov of KM, ; or Asaf Porat of KCSA Investor Relations, , both at +972-3-516-7620 for Shamir Web site: http://www.kcsa.com/

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