Lifecore Biomedical Reports Record Results for Second Quarter Ended De

    Business Editors

    CHASKA, Minn.--(BUSINESS WIRE)--Jan. 12, 2005--LIFECORE BIOMEDICAL, INC. (Nasdaq:LCBM) today reported record net sales of $14.1 million in the second quarter ended December 31, 2004, an increase of 22% over net sales of $11.6 million in the second quarter of fiscal year 2004. Before the effect of favorable foreign currency comparisons, second quarter sales increased by 24%.
    Record quarterly net income of $2,380,000, or $.18 per share, was posted for the quarter compared to net income of $597,000, or $.05 per share, in the quarter ended December 31, 2003.
    Sales for the first six months of fiscal year 2005 were $26.3 million, an increase of 22% over the $21.5 million reported for the first six months of fiscal year 2004. Before the effect of favorable foreign currency comparisons, sales for the first six months increased by 24%.
    Record net income of $3,659,000, or $.28 per share, was reported for the six months ended December 31, 2004 compared to a net loss of $246,000, or $.02 per share, for the six months ended December 31, 2003.
    "With another record quarter in both sales and profits, we are obviously pleased with our progress to drive profitable growth," said Dennis J. Allingham, President and CEO. "This marks the third successive quarter of double digit sales growth with improved profitability."
    The Company reported positive cash flow of $3.0 million for the six months ended December 31, 2004, resulting in a cash balance of $11.6 million.

    Hyaluronan Division

    Net sales from the Hyaluronan Division for the second quarter were $4.5 million, an increase of 27% from the $3.5 million reported in the same quarter last year. Net sales for the first six months in fiscal year 2005 were $9.1 million compared to $7.1 million in the comparable period last year; an increase of $2.0 million or 29%. Sales to ophthalmic and orthopedic customers increased in both the quarter and six month period.
    The Division reported operating income of $853,000 for the second quarter compared to an operating loss of $62,000 in the second quarter of fiscal year 2004. Operating income of $2,172,000 was reported for the six month period compared to an operating loss of $636,000 in the same period last year. "The turnaround in operating performance in the current fiscal year reflects managements' focus on profitability and sales growth," said Mr. Allingham.

    Oral Restorative Division

    Net sales from the Oral Restorative Division for the second quarter were a record $9.6 million; an increase of 20% from the $8.0 million recorded in the second quarter last year. Before the effect of favorable foreign currency comparisons, second quarter sales increased by 23%. Net sales for the first six months in fiscal year 2005 were $17.1 million compared to $14.4 million in the comparable period last year; an increase of 19% attributed to higher international and domestic sales. Before the effect of favorable foreign currency comparisons, sales for the first six months increased by 22%.
    The Division reported operating income of $1,323,000 for the second quarter compared to operating income of $521,000 in the second quarter of fiscal year 2004. Operating income of $1,683,000 was reported for the six month period compared to operating income of $280,000 in the same period last year.

    Other Income

    Currency transaction gains of $113,000 were reported for the second quarter compared to $274,000 in the second quarter a year ago. Currency transactions gains of $198,000 and $398,000 were reported for the six month periods of fiscal 2005 and 2004, respectively.
    A one-time pretax gain of $250,000 was recorded as other income in conjunction with the Company securing worldwide marketing rights to its anti-adhesion product.

    Outlook

    With another quarter of double-digit sales gains and continued improvement in operating income, the Company has again raised its guidance for the fiscal year. Fiscal year 2005 sales are now expected to increase 12 to 15 percent over fiscal year 2004; an increase from the previous guidance of 11 to 13 percent. Earnings per share are now expected to be $.52 to $.57 compared to the previously issued guidance of $.43 to $.49.
    The Company expects sales of $13.3 to $13.8 million in the third quarter of fiscal year 2005 with earnings per share of $.12 to $.14.

    Conference Call

    As previously announced, the Company will host a conference call today at 3:45 p.m. Central Time to discuss second quarter results. A live web cast of the call is available through the Company's website at www.lifecore.com. After selecting the Investor Info tab, select CALENDAR OF EVENTS from the INVESTOR INFO & RESEARCH menu at the right side of the page and follow the instructions for participation. A replay of the web cast will be available shortly after completion of the call. To select the archived replay, select AUDIO ARCHIVES from the INVESTOR INFO & RESEARCH tools menu at the right side of the screen. The conference call will also be available at www.streetfusion.com.
    The conference call may include forward-looking statements. See the cautionary information about such statements in the "Safe-Harbor Statement" section below.

    Safe-Harbor Statement

    Certain statements in this release regarding Lifecore's anticipated future sales and financial results are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Numerous risks and uncertainties may affect whether such results are actually achieved. These include the likelihood and timing of the return of the Company's adhesion prevention product to the market, the timing of orders from customers, continued market acceptance of the Company's products, timing of regulatory approvals, success of new product development efforts, and other factors. These risks and uncertainties are more fully described in the Company's Annual Report on Form 10-K, including Exhibit 99.1, for the fiscal year ending June 30, 2004, and other, more recent filings. Actual results may differ materially from anticipated results.

    About Lifecore Biomedical

    Lifecore Biomedical develops, manufactures, and markets biomaterials and medical devices for use in various surgical markets.
    News and general information are available through the Company's website at www.lifecore.com or by telephone at 952-368-4300.

Lifecore Biomedical, Inc. Condensed Consolidated Balance Sheets (Unaudited)

December 31, June 30, 2004 2004 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $11,557,000 $ 8,553,000 Accounts receivable 9,022,000 8,626,000 Inventories 10,330,000 9,491,000 Prepaid expense 1,013,000 705,000 ------------ ------------ Total current assets 31,922,000 27,375,000

PROPERTY, PLANT AND EQUIPMENT, NET 22,969,000 23,198,000

LONG-TERM INVENTORY 3,035,000 3,891,000 OTHER ASSETS 5,110,000 5,854,000 ------------ ------------ $63,036,000 $60,318,000 ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 4,947,000 $ 5,683,000 Long-term obligations 5,236,000 5,809,000 Shareholders' equity 52,853,000 48,826,000 ------------ ------------ $63,036,000 $60,318,000 ============ ============

Lifecore Biomedical, Inc. Consolidated Statements of Operations (Unaudited)

Three Months Ended Six Months Ended December 31, December 31, ------------------------- ------------------------- 2004 2003 2004 2003 ------------ ------------ ------------ ------------

Net sales $14,093,000 $11,558,000 $26,288,000 $21,505,000 Cost of goods sold 5,330,000 4,863,000 10,316,000 9,632,000 ------------ ------------ ------------ ------------ Gross profit 8,763,000 6,695,000 15,972,000 11,873,000

Operating expenses Research and development 1,171,000 1,245,000 2,019,000 2,504,000 Marketing and sales 3,837,000 3,301,000 7,052,000 6,474,000 General and administrative 1,579,000 1,690,000 3,046,000 3,251,000 ------------ ------------ ------------ ------------ 6,587,000 6,236,000 12,117,000 12,229,000 ------------ ------------ ------------ ------------

Operating income (loss) 2,176,000 459,000 3,855,000 (356,000)

Other income (expense) Interest, net (23,000) (148,000) (126,000) (297,000) Bond retirement expense - - (290,000) - Currency transaction gains 113,000 274,000 198,000 398,000 Other 250,000 12,000 252,000 9,000 ------------ ------------ ------------ ------------ 340,000 138,000 34,000 110,000 ------------ ------------ ------------ ------------

Income (loss) before income taxes 2,516,000 597,000 3,889,000 (246,000)

Provision for income taxes 136,000 - 230,000 - ------------ ------------ ------------ ------------

Net Income (loss) $ 2,380,000 $ 597,000 $ 3,659,000 $ (246,000) ============ ============ ============ ============

Net income (loss) per share Basic $ 0.18 $ 0.05 $ 0.28 $ (0.02) ============ ============ ============ ============ Diluted $ 0.18 $ 0.05 $ 0.28 $ (0.02) ============ ============ ============ ============

Weighted average shares outstanding Basic 12,945,903 12,891,083 12,939,254 12,890,098 ============ ============ ============ ============ Diluted 13,270,519 12,938,352 13,115,195 12,890,098 ============ ============ ============ ============

Lifecore Biomedical, Inc. Divisional Statements of Operations Three Months Ended December 31, (Unaudited)

Hyaluronan Division Oral Restorative Division ----------------------- -------------------------

2004 2003 2004 2003 ----------- ----------- ------------ ------------

Net sales $4,510,000 $3,545,000 $ 9,583,000 $ 8,013,000 Cost of goods sold 2,091,000 1,903,000 3,239,000 2,960,000 ----------- ----------- ------------ ------------ Gross profit 2,419,000 1,642,000 6,344,000 5,053,000

Operating expenses Research and development 895,000 975,000 276,000 270,000 Marketing and sales 150,000 136,000 3,687,000 3,165,000 General and administrative 521,000 593,000 1,058,000 1,097,000 ----------- ----------- ------------ ------------ 1,566,000 1,704,000 5,021,000 4,532,000 ----------- ----------- ------------ ------------

Operating income (loss) $ 853,000 $ (62,000) $ 1,323,000 $ 521,000 =========== =========== ============ ============

Consolidated ---------------------------

2004 2003 ------------ ------------

Net sales $14,093,000 $11,558,000 Cost of goods sold 5,330,000 4,863,000 ------------ ------------ Gross profit 8,763,000 6,695,000

Operating expenses Research and development 1,171,000 1,245,000 Marketing and sales 3,837,000 3,301,000 General and administrative 1,579,000 1,690,000 ------------ ------------ 6,587,000 6,236,000 ------------ ------------

Operating income (loss) $ 2,176,000 $ 459,000 ============ ============

Lifecore Biomedical, Inc. Divisional Statements of Operations Six Months Ended December 31, (Unaudited)

Hyaluronan Division Oral Restorative Division ----------------------- -------------------------

2004 2003 2004 2003 ----------- ----------- ------------ ------------

Net sales $9,147,000 $7,103,000 $17,141,000 $14,402,000 Cost of goods sold 4,177,000 4,272,000 6,139,000 5,360,000 ----------- ----------- ------------ ------------ Gross profit 4,970,000 2,831,000 11,002,000 9,042,000

Operating expenses Research and development 1,499,000 1,994,000 520,000 510,000 Marketing and sales 242,000 263,000 6,810,000 6,211,000 General and administrative 1,057,000 1,210,000 1,989,000 2,041,000 ----------- ----------- ------------ ------------ 2,798,000 3,467,000 9,319,000 8,762,000 ----------- ----------- ------------ ------------

Operating income (loss) $2,172,000 $ (636,000) $ 1,683,000 $ 280,000 =========== =========== ============ ============

Consolidated ---------------------------

2004 2003 ------------ ------------

Net sales $26,288,000 $21,505,000 Cost of goods sold 10,316,000 9,632,000 ------------ ------------ Gross profit 15,972,000 11,873,000

Operating expenses Research and development 2,019,000 2,504,000 Marketing and sales 7,052,000 6,474,000 General and administrative 3,046,000 3,251,000 ------------ ------------ 12,117,000 12,229,000 ------------ ------------

Operating income (loss) $ 3,855,000 $ (356,000) ============ ============

--30--HB/ms*

CONTACT: Lifecore Biomedical, Chaska Dennis J. Allingham, 952-368-4300 or David M. Noel, 952-368-6207

KEYWORD: MINNESOTA INDUSTRY KEYWORD: MEDICAL DEVICES BIOTECHNOLOGY EARNINGS CONFERENCE CALLS SOURCE: Lifecore Biomedical

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