LaserCard Corporation Reports Financial Results for FY10 Second Quarter

http://www.businesswire.com/news/home/20091029006392/en

Revenues Up 17% Year Over Year

MOUNTAIN VIEW, Calif.--(Business Wire)--
LaserCard Corporation (NASDAQ:LCRD), a leading provider of secure ID solutions,
today announced the financial results for its fiscal 2010 second quarter ended
September 30, 2009.

Revenues for the second quarter of fiscal 2010 were $15.7 million, compared with
$16.3 million in the prior quarter and $13.5 million in the same quarter a year
ago. Net income for the second quarter of fiscal 2010 was $1.8 million, or $0.15
per diluted share, compared with net income of $1.9 million, or $0.16 per
diluted share, in the prior quarter, and net income of $0.2 million, or $0.02
per diluted share, in the same quarter a year ago.

LaserCard optical memory card revenues for the quarter were $11.9 million
compared with $8.6 million in the second quarter of fiscal 2009. Revenues from
specialty cards and printers totaled $3.7 million compared with $3.9 million
from the same quarter a year ago. Drives, systems and services segment revenue
for the quarter was $0.1 million, compared with $0.9 million in the second
quarter of the prior year.

Cash

LaserCard Corporation`s cash, cash equivalents, and investments were $40.7
million at September 30, 2009 compared with $29.3 million at March 31, 2009.
Debt at September 30, 2009 totaled $9.3 million compared with $8.9 million at
March 31, 2009.

Non-GAAP Results

The non-GAAP net income for the second quarter of fiscal 2010 was $1.9 million,
or $0.15 per diluted share, compared to non-GAAP net income of $2.2 million, or
$0.18 per diluted share, in the prior quarter, and a non-GAAP net income of
approximately $0.8 million, or $0.07 per diluted share, in the same quarter a
year ago.

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

"We are pleased to have achieved such strong operating results over the past
three quarters," said Robert DeVincenzi, President and CEO of LaserCard. "Our
performance in the first half of our current fiscal year represents the result
of reductions in our overall expense levels combined with the benefit of
unusually high demand in a couple of our key programs. Our program revenue and
financial results will continue to be subject to fluctuations on a quarterly
basis."

From a program standpoint, we have successfully made the transition from
planning to implementation in the Angola National ID program with our initial
shipments of credentials in the quarter. We are on track for delivery of the
$8.8 million initial card order scheduled to be completed this fiscal year."

Earnings Results Conference Call

LaserCard will hold a conference call to discuss its fiscal 2010 second quarter
results today, October 29, 2009, 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 203-369-2029. 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 memory 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 the Company's
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 the Company`s
expectations. These forward-looking statements speak only as to the date of this
release, and, except as required by law, the Company undertakes 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
September 30, September 30,
2009 2008 2009 2008

Revenues $ 15,716 $ 13,467 $ 32,024 $ 24,189
Cost of sales 8,927 8,902 18,632 16,157
Gross profit 6,789 4,565 13,392 8,032

Operating expenses:
Selling, general, and administrative expenses 4,278 3,587 8,352 7,487
Research and development expenses 296 828 667 1,688
Total operating expenses 4,574 4,415 9,019 9,175
Operating income (loss) 2,215 150 4,373 (1,143 )

Other income, net 518 79 700 125

Income (loss) before income taxes 2,733 229 5,073 (1,018 )

Provision (benefit) for income tax 886 (10 ) 1,283 17

Net income (loss) $ 1,847 $ 239 $ 3,790 $ (1,035 )

Net income (loss) per share:
Basic $ 0.15 $ 0.02 $ 0.31 $ (0.09 )
Diluted $ 0.15 $ 0.02 $ 0.31 $ (0.09 )

Weighted-average shares of common stock used
in computing net income (loss) per share:
Basic 12,172 12,027 12,143 12,009
Diluted 12,318 12,029 12,207 12,009

LASERCARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)

September 30, March 31,
2009 2009*
ASSETS
Current assets:
Cash and cash equivalents $ 27,231 $ 15,912
Short-term investments 13,450 174
Accounts receivable, net of allowance of $111 at 6,971 10,217
September 30, 2009 and $59 at March 31, 2009

Inventories, net of reserves of $1,821 at September 30, 2009 12,020 14,232
and $863 at March 31, 2009

Deferred contract costs 216 345
Prepaid and other current assets 1,116 934
Total current assets 61,004 41,814

Property and equipment, net of accumulated depreciation of 10,185 10,872
$22,804 at September 30, 2009 and $21,555 at March 31, 2009

Equipment held for resale 7,151 7,062
Long-term investments - 13,239
Patents and other intangibles, net 358 400
Notes receivable 248 227
Deferred contract costs 79 568
Other non-current assets 48 108
Total assets $ 79,073 $ 74,290

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,283 $ 1,698
Accrued liabilities 5,385 3,397
Deferred income tax liability 195 234
Advance payments from customers 6,180 7,958
Short-term debt 9,054 8,681
Deferred revenue 482 589
Deferred rent 257 257
Capital lease obligation 77 72
Total current liabilities 23,913 22,886

Capital lease obligation, net of current portion 125 166
Advance payments from customers, net of current portion 24,506 26,122
Deferred revenue, net of current portion 3,306 3,788
Deferred rent, net of current portion 1,091 1,203
Income tax payable 277 277
Total liabilities 53,218 54,442

Stockholders' equity:
Common stock 122 121
Additional paid-in capital 68,540 66,422
Accumulated deficit (43,017 ) (46,807 )
Accumulated other comprehensive income 210 112
Total stockholders' equity 25,855 19,848

Total liabilities and stockholders` equity $ 79,073 $ 74,290

*Amounts derived from audited consolidated financial statements

LASERCARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

Six Months Ended
September 30,
2009 2008
Cash flows from operating activities:
Net income (loss) $ 3,790 $ (1,035 )
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,331 1,444
Equipment write-off reserve 20 242
Provision for doubtful accounts receivable 47 36
Adjustment for excess and obsolete inventory 951 180
Provision (recovery) for warranty reserve (13 ) 38
Decrease in deferred income tax assets - 51
Stock-based compensation 1,131 1,113
Put option, loss on fair value (68 ) -
Mark to market, trading (193 ) -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 3,326 (313 )
Decrease (increase) in inventories 1,435 (1,267 )
Decrease in deferred contract costs 635 269
Decrease (increase) in other current assets 200 (684 )
Decrease (increase) in equipment held for resale (89 ) (347 )
Decrease (increase) in other non-current assets 60 (4 )
Increase (decrease) in accounts payable and accrued liabilities 2,451 (289 )
Decrease in deferred income tax (61 ) (51 )
Increase (decrease) in deferred revenue (603 ) 52
Increase (decrease) in deferred rent (111 ) 157
Increase (decrease) in advance payments from customers (3,575 ) 6,265
Net cash provided by operating activities 10,664 5,857
Cash flows from investing activities:
Purchases of property and equipment (605 ) (891 )
Acquisition of patents and other intangibles (13 ) (113 )
Net cash used in investing activities (618 ) (1,004 )
Cash flows from financing activities:
Proceeds from sale of common stock through stock plans 228 81
Tax benefit on carryforward of gain from exercise of common stock options 858 -
Employee's taxes withheld and paid for restricted stock (98 ) -
Net borrowing on revolving credit agreement 373 -
Principal payments on capital lease obligation (39 ) (12 )
Net cash provided by financing activities 1,322 69
Effect of exchange rate changes on cash and cash equivalents (49 ) 24
Net increase in cash and cash equivalents 11,319 4,946
Cash and cash equivalents:
Beginning of period $ 15,912 $ 5,583
End of period $ 27,231 $ 10,529

Supplemental disclosures - cash payments for:
Income taxes $ 60 $ -
Interest expense $ 92 $ 41

Supplemental schedule of non-cash investing activities:
Equipment acquired under capital lease $ - $ 198
Unrealized gain in fair value of investments $ (261 ) $ (498 ) *

*In accumulated other comprehensive loss

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
September 30, September 30,
2009 2008 2009 2008

Non-GAAP Net income:
GAAP net income (loss) $ 1,847 $ 239 $ 3,790 $ (1,035 )
Stock-based compensation 560 544 1,131 1,054
Loss (gains) on fair value of investment 41 - (193 ) -
Gains related to the Put-Right option (83 ) - (68 ) -
Contract termination (495 ) - (495 ) -
Income tax effect of non-GAAP adjustments (7 ) - (95 ) -
Non-GAAP net income $ 1,862 $ 783 $ 4,070 $ 19

Non-GAAP EPS:
Net income per share:
Basic $ 0.15 $ 0.07 $ 0.34 $ 0.00
Diluted $ 0.15 $ 0.07 $ 0.33 $ 0.00

Weighted-average shares of common stock
used in computing net loss per share:
Basic 12,172 12,027 12,143 12,009
Diluted 12,318 12,029 12,207 12,009

As reported GAAP:
Net income (loss) per share:
Basic $ 0.15 $ 0.02 $ 0.31 $ (0.09 )
Diluted $ 0.15 $ 0.02 $ 0.31 $ (0.09 )

Weighted-average shares of common stock
used in computing net loss per share:
Basic 12,172 12,027 12,143 12,009
Diluted 12,318 12,029 12,207 12,009

LaserCard Corporation
Steven G. Larson, 650-969-4428
VP-Finance

Copyright Business Wire 2009