YOKNEAM, Israel, Nov. 8 /PRNewswire-FirstCall/ -- Lumenis Ltd. (LUME.PK), a global developer, manufacturer and seller of laser and light-based devices for medical, aesthetic, ophthalmic, dental and veterinary applications, today announced preliminary and unaudited financial results for the third quarter and nine months ended September 30, 2005.
The results reported herein and in the attached financial statements do not reflect any adjustments relating to the results of the Audit Committee investigation which were previously reported, as well as certain additional items that are currently under review by the Company or which may come under review prior to completion of the audit. In addition, the financial statements for the years ended December 31, 2003 and December 31, 2004, the quarterly periods ending in 2004, the quarter ended September 30, 2003 and the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 have not been reviewed or audited by independent external auditors and, as such, these results, as well as Lumenis' historical statements, are subject to change to reflect the results of any such review or audit. There can be no assurance that any such changes and adjustments will not be material.
Third Quarter Results
Revenues in the third quarter rose to $72.8 million compared with $71.6 million in the prior quarter and $63.2 million in the third quarter last year.
Gross profit in the third quarter increased to $33.2 million, or 46% of revenues, compared with $32.0 million, or 45% of revenues, in the second quarter of 2005 and $31.0 million, or 49% of revenues, in the third quarter of 2004.
Operating expenses in the third quarter were $30.1 million, or 41% of revenues, compared with $29.4 million, or 41% of revenues, in the second quarter of 2005 and $28.5 million, or 45% of revenues, in the third quarter of 2004.
Operating income in the third quarter was $3.1 million compared with $2.6 million in the second quarter of 2005 and $2.5 million in the third quarter of 2004. Net loss in the third quarter narrowed to $1.8 million, or $0.05 per share, compared with a net loss of $3.1 million, or $0.08 per share, in the second quarter of 2005 and a net loss of $2.0 million, or $0.05 per share, in the third quarter of 2004.
Commenting on the results, Avner Raz, Lumenis' President and Chief Executive Officer said, "This is the second consecutive quarter of year-over- year revenue growth. What is particularly encouraging is the sequential growth in revenues as traditionally our business has been seasonally weaker in the third quarter. Our strategic focus on delivering superior technology and innovative products should enable us to continue to drive revenue growth and market share gains.
"Our Q3 results demonstrate execution on all of our 2005 objectives and offer additional evidence that we have moved squarely into a growth phase in each of our major markets worldwide. While we still have a lot of hard work ahead of us operationally, I am encouraged by the progress made and by the commitment of our dedicated employees towards meeting these challenges. As we move towards 2006, the new, leading edge products that we have just introduced and the excitement they have generated in the marketplace combined with the steady progress we are making in improving our business model, give us confidence that we are on the right track to delivering sustainable and profitable growth."
Revenue Breakdown Third quarter sales by geographic region were as follows ($ in millions): Q3/05 Q3/04 Americas $34.8 $30.7 Europe $14.9 $12.5 Asia and Japan $23.1 $20.1 Third quarter sales by product line were as follows ($ in millions): Q3/05 Q3/04 Aesthetic $25.0 $19.2 Surgical $16.1 $13.6 Ophthalmic $16.0 $13.2 Dental $ 1.5 $ 1.1 Service/Other $14.2 $16.1
Net cash flow from operating activities was $681 thousand in the third quarter of 2005 compared with a negative $208 thousand in the second quarter of 2005 and a net positive cash flow from operating activities of $3.3 million in the third quarter of 2004. At September 30, 2005, the Company had $14.4 million of cash and cash equivalents and unused borrowing capacity under its committed lines of credit of an additional $17.9 million. Total bank debt at quarter-end was $192 million compared with $190 million at June 30, 2005. Based on the preliminary and unaudited results for the period, the Company is in compliance with its covenants under its bank agreements.
Nine Months Results
Revenues for the first nine months of 2005 were $209.1 million compared with $199.9 million in the same period last year.
Gross profit for the first nine months of 2005 was $92.0 million compared with $98.7 million for the first nine months of 2004.
Operating income for the first nine months of 2005 was $3.8 million compared with $8.5 million for the same period last year.
Net loss for the first nine months of 2005 was $10.7 million, or $0.29 per share, compared with a net loss of $5.7 million, or $0.15 per share, for the same period in 2004.
Net cash flow from operating activities for the first nine months of 2005 was negative $4.8 million compared with a positive net cash flow from operating activities of $12.7 million for the same period last year.
As reported in the first quarter earnings release, upon review of the Company's prior practices concerning the recognition of royalty income, it was determined that the income statement classification of royalty and certain other income should more appropriately be as components of operating income or loss, rather than other income. The financial statements for the quarterly and nine month periods ended September 30, 2005 and September 30, 2004 contained in this release reflect this classification. Additionally, as previously reported, with respect to royalty income, the review indicated that certain royalty income previously reflected in the results for the quarter ended March 31, 2004 which was paid at the time of the settlement of certain claims should, more appropriately, be recognized over a longer period of time. The financial statements for the quarter and nine month period ended September 30, 2004 contained herein have been appropriately adjusted.
In addition, Lumenis was served with a claim in the UK with regard to the purchase in 2003 by GSI, a UK company, of all of the assets of Spectron, a wholly owned UK subsidiary of Lumenis. GSI are claiming several million pounds in damages for breach of contract and misrepresentations and for indemnification of claims brought against GSI by third parties. The Company has engaged UK counsel and will vigorously defend against this claim.
As previously reported, a report prepared for the Audit Committee with respect to the Company's internal investigation had concluded, with respect to certain identified transactions in 2001, 2002 and 2003, that the Company's revenue recognition actions were inappropriate. The aggregate effect of the Company's accounting for the transactions identified in the report, as set forth in the Company's press release of May 3, 2004, was to cause revenues in 2001 and 2002 to be overstated, and revenues in 2003 to be understated. As indicated earlier, the financial statements contained in this release do not reflect any adjustments relating to the results of the Audit Committee investigation which were previously reported.
In addition, Lumenis received a notice from the Israel tax authority assessing income taxes for the years 2000 and 2001. The assessment is primarily based on an attempt to disallow the exemption available for the Company's Approved Enterprise, which would then subject its income to the full tax rate, and, in addition, tax on an alleged deemed dividend from earnings under its Approved Enterprise program. The Company has received indications that the tax authority would agree to settle the matter for less than 25 million New Israeli Shekels. Lumenis believes the entire assessment to be in error and that no tax is due and will vigorously defend itself in the Israeli courts and under applicable tax treaties as necessary.
In addition, as previously reported, the Audit Committee anticipates that a restatement of previously reported financial results may be appropriate, but intends to defer making a final decision pending completion of the audit by the Company's independent accountants, BDO Ziv Haft. A restatement, which reflects the results of the investigation as well as any other adjustments identified during the restatement, audit or review processes, may affect the information reported in this release.
Conference Call
Please note that Lumenis management will host a teleconference today at 9:30 (ET) 16:30 Israel time to discuss third quarter results and outlook.
Please call the following dial-in numbers to participate: US toll-free 1-866-527-8676; International ++972-3-918-0609; Israel 03-918-0609. The call will be broadcasted live on http://www.lumenis.com . An online replay will also be available approximately one hour after the call. A telephone replay will be available for up to 72 hours after the call. The replay information: US toll-free: 1-866-500-4966; International: ++ 972-3-925-5927; Israel: 03-925-5927.
Investors: Lauri Hanover 1-866-232-6803 972-4-959-9122 About Lumenis
Lumenis is a global developer, manufacturer and seller of laser and light- based devices for medical, aesthetic, ophthalmic, dental and veterinary applications. The Company offers a wide range of products along with extensive product support systems including training, education and service. Lumenis invests heavily in research and development to maintain and enhance its leading industry position. The Company holds numerous patents worldwide on its technologies. For more information about Lumenis and its products, log onto http://www.lumenis.com .
The statements in this press release that are not historical facts are forward-looking statements which are subject to risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward looking statements based on a variety of factors, including, among others: uncertainties with respect to market acceptance of the Company's products, the implementation and outcome of our Turnaround Plan, obtaining regulatory approvals for new products or for the sale of existing products in new markets and enforcement of intellectual property rights; risks associated with competition and competitive pricing pressures, economic conditions generally, the Company's international operations and the Company's ability to integrate its operations with those of acquired businesses; the outcome of the Securities and Exchange Commission investigation (including the Wells Notice recently received in which the staff indicated its intention to recommend that a civil proceeding be brought seeking, among other things, injunctive relief and civil monetary penalties) and several securities class action lawsuits to which the Company is subject and the outcome of the investigation conducted by the Audit Committee; uncertainties relating to the Company's continuing liquidity; and other risks detailed from time to time in the reports filed by Lumenis with the SEC, including its annual report on Form 10-K and quarterly reports on Form 10-Q.
LUMENIS LTD. CONSOLIDATED BALANCE SHEETS (In thousands) September 30, December 31, 2005 2004 Unaudited Unaudited CURRENT ASSETS Cash and cash equivalents $ 14,377 $ 18,064 Marketable securities 99 -- Trade receivables, net 55,266 59,030 Prepaid expenses and other receivables 12,372 13,620 Inventories 48,645 49,034 130,759 139,748 FINISHED GOODS USED IN OPERATIONS 4,754 5,755 LONG-TERM INVESTMENTS Investments in equity securities -- 285 Long term trade receivables 178 278 FIXED ASSETS, NET 12,002 12,541 GOODWILL, NET 88,039 88,039 OTHER PURCHASED INTANGIBLE ASSETS, NET 6,890 9,618 OTHER ASSETS, NET 15,370 17,850 Total assets $ 257,992 $ 274,114 CURRENT LIABILITIES Short-term bank debt $ 32,122 $ 29,092 Current maturities of long term debt 15,000 -- Trade payables 30,637 33,166 Other accounts payables and accrued expenses 68,522 76,680 146,281 138,938 LONG-TERM LIABILITIES Long term debt 144,792 159,043 Accrued severance pay, net 1,736 1,934 Other long-term liabilities 1,983 1,306 148,511 162,283 Total liabilities 294,792 301,221 SHAREHOLDERS' EQUITY Ordinary shares 806 806 Additional paid-in capital 355,538 354,495 Accumulated deficit (393,041) (382,305) Treasury stock (103) (103) Total shareholders' equity (36,800) (27,107) Total liabilities and shareholders' equity $ 257,992 $ 274,114 * Prior period presentation has been adjusted to conform to current presentation. LUMENIS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) For the three For the nine months ended months ended September 30, September 30, 2005 2004 2005 2004 Unaudited Unaudited NET REVENUES $72,784 $63,249 $209,106 $199,889 COST OF REVENUES 39,590 32,205 117,098 101,189 Gross profit 33,194 31,044 92,008 98,700 OPERATING EXPENSES Research and development, net 4,342 3,592 11,352 10,425 Selling, marketing expenses 16,910 15,065 51,763 48,252 General, admistrative expenses 8,905 9,723 24,785 31,624 Restructuring expenses (20) 145 158 1,655 Asset purchase consideration and gain on termination of distribution agreement -- -- 101 (1,793) Total operating expenses 30,137 28,525 88,159 90,163 Operating income 3,057 2,519 3,849 8,537 Other income (loss), net (20) -- 45 -- Financing expenses 4,368 3,421 13,162 10,824 Loss before income taxes (1,331) (902) (9,268) (2,287) Income tax expense 517 1,132 1,468 3,426 NET LOSS ($ 1,848)($ 2,034)($ 10,736)($ 5,713) BASIC LOSS PER SHARE Net loss per share ($ 0.05)($ 0.05)($ 0.29)($ 0.15) WEIGHTED AVERAGE NUMBER OF SHARES Basic 37,326 37,283 37,323 37,282 LUMENIS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the three For the nine months ended months ended September 30, September 30, 2005 2004 2005 2004 Unaudited Unaudited CASH FLOWS -- OPERATING ACTIVITIES Net loss for the period ($ 1,848)($ 2,034) ($10,736)($ 5,713) Income and expenses not affecting operating cash-flows: Depreciation and amortization 2,589 2,927 8,062 9,422 Amortization of stock-based compensation 294 332 1,040 775 Amortization of other long-term assets 975 1,038 2,944 3,157 Loss ( Gain ) from sale of equity security 20 -- (45) -- Other 101 (288) 60 (792) Gain from termination of distribution agreement -- -- -- (1,793) Changes in operating assets and liabilities: Decrease ( Increase ) in trade receivables (605) 5,816 3,864 16,161 Decrease (increase) in prepaid expenses and other receivables (78) (2,015) 1,248 (4,847) Decrease (increase) in inventories 3,759 (5,147) (1,238) (2,879) Increase (decrease) in accounts payable, accrued expenses and other long-term liabilities (4,526) 2,696 (9,993) (774) Net-cash -- operating activities 681 3,325 (4,794) 12,717 CASH FLOWS -- INVESTING ACTIVITIES Purchase of fixed assets, net (660) (463) (2,156) (1,138) Proceeds from sale of distribution rights -- -- -- 1,745 Proceeds from sale of an investment in Equity security 12 -- 231 -- Net-cash -- investing activities (648) (463) (1,925) 607 CASH FLOWS -- FINANCING ACTIVITIES Proceeds from exercise of options -- -- 3 6 Increase (decrease) in long-term loans, net -- -- -- (51,604) Increase (decrease) in short term bank debt 1,620 (547) 3,029 39,123 Net-cash -- financing activities 1,620 (547) 3,032 (12,475) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,653 2,315 (3,687) 849 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 12,724 16,735 18,064 18,201 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $14,377 $19,050 $14,377 $19,050
Lumenis Ltd.CONTACT: Investors: Lauri Hanover, 1-866-232-6803, or +972-4-959-9122, forLumenis Ltd.
Web site: http://www.lumenis.com/
