Lipman Electronic Engineering Ltd (LPMA) (LPMA)

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Lipman Electronic Engineering Ltd. Reports Fourth Quarter and Full Year 2005 Financial Results

Tuesday February 7, 4:15 pm ET
Record Revenues of $235.4 Million for Full Year 2005

ROSH HAAYIN, Israel--(BUSINESS WIRE)--Feb. 7, 2006--Lipman Electronic Engineering Ltd.:
Full year Non-GAAP Net Income of $35.9 Million, or $1.31 Per Diluted Share
Fourth Quarter Non-GAAP Net Income of $11.5 Million, or $0.42 Per Diluted Share
Lipman Electronic Engineering Ltd. (Nasdaq, TASE: LPMA), a leading provider of electronic transaction systems and solutions, today announced financial results for the fourth quarter and full year ended December 31, 2005.

For the fourth quarter of 2005, revenues were $68.8 million, an increase of 4.7% over revenues of $65.7 million for the fourth quarter of 2004, and an increase of 27.0% over revenues of $54.1 million for the third quarter 2005.

Net loss for the quarter was $(360,000), or $(0.01) per diluted share, which includes a non-cash goodwill impairment charge of $10.5 million related to the Company's Dione subsidiary. Lipman determined the impairment charge in accordance with SFAS 142 based on current projections of future cash flows. Net income for the comparable period in 2004 was $9.7 million, or $0.35 per diluted share.

Non-GAAP net income for the three months ended December 31, 2005, which excludes the non-cash impairment charge of $10.5 million and $1.4 million of non-cash stock-based compensation expenses, was $11.5 million, or 0.42 per diluted share, compared to $10.3 million, or 0.38 per diluted share, for the comparable period of 2004. Non-cash stock-based compensation expenses for the three months ended December 31, 2004 totaled $636,000.

Gross profit for the quarter was $27.9 million, or 40.6% of revenues, compared to $26.6 million, or 40.6% of revenues, for the fourth quarter of 2004.

Cash flow from operating activities for the three months ended December 31, 2005 was $9.4 million compared to $15.5 million for the comparable period in 2004.

As of December 31, 2005, the Company had cash and cash equivalents of $124.4 million compared to $117.4 million as of December 31, 2004 and $118.1 million as of September 30, 2005.

During the fourth quarter of 2005, the Company purchased its ordinary shares for an aggregate amount of $1.5 million in accordance with its previously announced share buyback program.

For the twelve months ended December 31, 2005, revenues increased 30.4% to $235.4 million, from $180.6 million during 2004. Net income for the year was $20.0 million, or $0.73 per diluted share, compared to $30.7 million, or $1.15 per diluted share in 2004.

Operating expenses for 2005 include the non cash impairment charge of $10.5 million, as well as non-cash stock-based compensation expenses totaling $5.3 million, compared to $4.8 million of non-cash stock-based compensation expenses in 2004. Excluding the effect of non-cash stock-based compensation and the non-cash impairment charge, non-GAAP net income for 2005 was $35.9 million, or $1.31 per diluted share, compared to $35.5 million, or $1.33 per diluted share, for 2004.

Gross profit for the year was $100.5 million, or 42.7% of revenues, compared to $81.5 million, or 45.2% of revenues, for 2004.

Key highlights for the quarter included:

Follow-on orders totaling $6 million from leading banks in India for the NURIT 8320 landline POS terminal.
Initial order valued at $2.2 million for Lipman's Dione Secura(TM) PIN Entry Device from one of Mexico's largest banks.
Initial order valued at $3 million for Lipman's Dione Secura PIN Pads and Xpress card readers from retailers in Germany.
Participation in the launch of the EMV initiative of ICBC, one of China's leading banks, and the subsequent $7 million contract with ICBC to supply our new WiFi-capable terminals for a large-scale POS deployment in petrol stations around China.
The launch of Lipman's NURIT 8210, our newest secure, multi-application integrated POS terminal, developed jointly with Yapi Kredi Bank in Turkey, which placed an order for 35,000 terminals.
Commenting on the results, Isaac Angel, President and CEO of Lipman, said, "Our results for the fourth quarter and full-year reflect the positive momentum in our core business. We continued to execute well on our strategy to advance our leadership position in the point-of-sale market in 2005 and we are enthusiastic about new growth opportunities that we see in 2006."

"During the year, we saw strength in a number of key regions, including the United States, China, India and South America. Our U.S. subsidiary showed a substantial increase in performance compared to 2004, underscoring the talent of our sales and management team, the value of our products and the overall strength of our business. In China, India and South America, our growth was driven by significant orders from leading organizations in each region. We view our growth and accomplishments in these markets as evidence of the continuing development of the infrastructure in emerging countries and the greater emphasis these nations are placing on card-based transactions."

He continued, "During the quarter we continued to address the issues in our Dione subsidiary. We rationalized Dione's cost structure in order to bring it in line with Dione's goals for the coming year. We secured contracts for the sale of Dione products to customers in Mexico and Germany, countries in which Lipman did not have a presence."

"We also realized a number of technological achievements in 2005. Throughout the year, our products received certifications from leading regional and international organizations. These certifications further broaden the reach of Lipman's products, enabling us to sell to new customers in new markets. In addition to enhancing our existing product family, we launched the NURIT 8210, our newest integrated terminal, at the CARTES 2005 Exhibition. This continued innovation underscores Lipman's commitment to providing its customers with the most advanced, most robust solutions available."

Mr. Angel concluded, "As we have previously indicated, it is Lipman's plan to grow by expanding into new markets, enhancing our suite of offerings through the introduction of new products and accessing new vertical markets. Lipman has a solid groundwork from which to build continued success. We have forged strong customer relationships and further developed our technology, all of which we expect will positively impact our business as we continue to execute on our strategic growth plan. Lipman is on target to expand its position in the point-of-sale market and we remain excited about the Company's future."

About Lipman

Lipman is a leading worldwide provider of electronic transaction systems and solutions. Lipman develops, manufactures and markets a variety of handheld, wireless and landline POS terminals, electronic cash registers, retail ATM units, PIN pads and smart card readers, as well as integrated PIN and smart card ("Chip & PIN") solutions. In addition, Lipman develops technologically advanced software platforms that offer comprehensive and customized transaction processing solutions for its customers, as well as managed professional services such as on-site and call-center support with remote terminal management.

Lipman's corporate headquarters and R&D facilities are located in Israel. Lipman also maintains offices in the US, United Kingdom, Turkey, China, Spain, Finland, Russia, Italy, Canada, Brazil, Argentina, Mexico, Australia and India. For more information visit www.lipman.biz

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