CLRK Color Kinetics Incorporated (MM)

Fourth quarter revenues rise 25% year over year to a record $18.2 million, Full-year revenues increase 24% to a record $65.4 million BOSTON, Feb. 8 /PRNewswire-FirstCall/ -- Color Kinetics Incorporated (NASDAQ:CLRK), a leading innovator of intelligent LED lighting systems and technologies, today announced its results of operations for the fourth quarter of 2006. Revenues were $18.2 million, an increase of 25% from the $14.5 million reported in the fourth quarter of 2005. GAAP net income was $1.6 million or $0.07 per fully diluted share. Non-GAAP net income was $2.2 million or $0.10 per fully diluted share prior to non-cash charges of $639,000 associated with the FAS 123R accounting standard. Revenues for the full year ended December 31, 2006 were $65.4 million, an increase of 24% from the $52.9 million reported in 2005. GAAP net income was $3.2 million or $0.16 per fully diluted share. Non-GAAP net income prior to the stock-based compensation charges was $5.6 million or $0.28 per fully diluted share. "We believe there's little doubt among industry leaders that LEDs will play an integral role in the future of lighting," said Bill Sims, President and CEO, Color Kinetics. "Our strong financial results reflect the exciting growth and adoption we're witnessing across multiple sectors -- including newly expanded markets for our lighting systems, and the accelerating traction of our licensing program. We have held firm to an investment strategy that continues to deliver returns, whether through product line expansion, new engineering resources or on-going patent prosecution -- all intended to help drive continued top- and bottom-line success in the longer term." "Today there is heightened awareness of the potential for energy-efficient lighting to help conserve resources and spare the environment. We believe such increased attention to the matter, along with continued research, development and government funding, will help set the stage for an eventual transition to LED technology as the right long-term solution," said Sims. "As the market opportunities for LED lighting continue to grow, Color Kinetics is preparing in parallel to lead the transformation forward through important new technologies, systems and strategic partnerships." Additional 2006 achievements included: - The completion of a successful follow-on public stock offering - The unveiling of new landmark installations such as LAX Gateway at Los Angeles International Airport, the London Eye, and feature film Deck the Halls - Product line expansions in both color and white light - Accelerating strength in licensing, including agreements with Osram Sylvania for Gotham Architectural Downlighting, Neo-Neon, Martin Professional, Robe Show Lighting and Dialight - The issuance of 14 new patents - A court victory and conclusion of all litigation with Super Vision - The award of a $1.7 million grant by the Department of Energy - Inclusion among Forbes' top 25 technology growth companies For the first quarter of 2007, the company currently targets revenues within the range of $18.4 million to $19.4 million, with non-GAAP net income of $0.09 to $0.11 per fully diluted share prior to stock-based compensation expense. Net income on a GAAP basis, reflecting FAS 123R stock compensation, is expected to be between $0.06 and $0.08 per fully diluted share. Color Kinetics will host a conference call to review its fourth quarter and full-year results after the close of market today. The conference call may be accessed by dial-in number or via the Internet as follows: Time: 4:30 pm ET Domestic dial-in number: 866-700-5192 International dial-in number: 617-213-8833 Passcode: 70499419 Webcast: http://phx.corporate-ir.net/phoenix.zhtml?c=178448&p=irol-irhome A dial-in replay of the conference call will be available from 6:30 pm ET on February 8 through February 15 at 888-286-8010 (domestic), 617-801-6888 (international), passcode: 15264449. The webcast will be archived and available for one year via the Investor Relations section of Color Kinetics' website. About Color Kinetics Color Kinetics Incorporated (NASDAQ:CLRK) transforms environments through new, dynamic uses of light. Its award-winning lighting systems and technologies apply the benefits of LEDs as a highly efficient, long lasting, environmentally friendly, and inherently digital source of illumination -- reinventing light itself as a highly controllable medium. Color Kinetics also enables widespread adoption of LED lighting through OEM and licensing partnerships in diverse markets. The company is headquartered in Boston, MA with offices in the UK and China. More information is available at http://www.colorkinetics.com/. Color Kinetics is a registered trademark and the Color Kinetics logo is a trademark of Color Kinetics Incorporated. All other trademarks mentioned are the property of their respective owners. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Color Kinetics Incorporated's business that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that these statements involve risks and uncertainties, are only predictions and may differ materially from actual future events and results. For a discussion of such risks and uncertainties, see "Risk Factors" in the Company's Annual Report on Form 10-K for the Twelve Months Ended December 31, 2005, File Number 000-50798, and most recent 10-Q, each as filed with the Securities and Exchange Commission. Color Kinetics Incorporated and Subsidiaries Consolidated Balance Sheets (In thousands, except per share data) December 31, 2006 2005 ASSETS CURRENT ASSETS: Cash and equivalents $60,997 $43,032 Investments 38,985 14,137 Restricted cash 500 100 Accounts receivable, net of allowance for doubtful accounts of approximately $430 and $461 in 2006 and 2005, respectively 11,480 7,813 Accounts receivable from related party 82 249 Inventory 6,805 7,159 Prepaid expenses and other current assets 3,159 1,436 Total current assets 122,008 73,926 PROPERTY AND EQUIPMENT-net 2,199 1,026 INTANGIBLE ASSETS-net 282 - INVESTMENT IN JOINT VENTURE - 887 RESTRICTED CASH-Non-current portion - 900 TOTAL ASSETS $ 124,489 $76,739 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $3,690 $1,019 Accounts payable to related party - 63 Accrued expenses 2,238 2,169 Accrued compensation 3,073 2,251 Accrued restructuring 243 385 Accrued warranty 1,007 876 Deferred revenue 195 231 Total current liabilities 10,446 6,994 ACCRUED RESTRUCTURING-Non-current portion - 243 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $0.001 par value 21 18 Additional paid-in capital 140,498 99,210 Accumulated other comprehensive loss (112) (120) Accumulated deficit (26,364) (29,606) Total stockholders' equity 114,043 69,502 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 124,489 $76,739 Color Kinetics Incorporated and Subsidiaries Consolidated Statements of Income (In thousands, except per share data) Three Months Ended December 31, 2006 2005 GAAP SFAS 123R Non-GAAP REVENUES: Lighting systems $15,908 $15,908 $12,484 OEM and licensing 2,254 2,254 1,995 Total revenues 18,162 18,162 14,479 COST OF REVENUES: Lighting systems 7,354 $(22) 7,332 5,860 OEM and licensing 636 - 636 791 Total cost of revenues 7,990 (22) 7,968 6,651 GROSS PROFIT 10,172 22 10,194 7,828 OPERATING EXPENSES: Selling and marketing 4,084 (135) 3,949 3,262 Research and development 1,916 (110) 1,806 1,238 General and administrative 3,578 (372) 3,206 2,557 Total operating expenses 9,578 (617) 8,961 7,057 INCOME FROM OPERATIONS 594 639 1,233 771 INTEREST INCOME 994 - 994 477 EQUITY IN EARNINGS (LOSS) OF JOINT VENTURE (35) - (35) 113 NET INCOME $1,553 $639 $2,192 $1,361 EARNINGS PER SHARE: Basic $0.08 $0.03 $0.11 $0.07 Diluted $0.07 $0.03 $0.10 $0.07 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 19,969 19,969 19,969 18,368 Diluted 21,180 21,180 21,180 19,840 Color Kinetics Incorporated and Subsidiaries Consolidated Statements of Income (In thousands, except per share data) Twelve Months Ended December 31, 2006 2005 GAAP SFAS 123R Non-GAAP REVENUES: Lighting systems $58,300 $58,300 $44,156 OEM and licensing 7,124 7,124 8,751 Total revenues 65,424 65,424 52,907 COST OF REVENUES: Lighting systems 26,297 $(75) 26,222 21,006 OEM and licensing 2,507 - 2,507 3,894 Total cost of revenues 28,804 (75) 28,729 24,900 GROSS PROFIT 36,620 75 36,695 28,007 OPERATING EXPENSES: Selling and marketing 16,242 (497) 15,745 11,519 Research and development 7,134 (442) 6,692 4,607 General and administrative 12,845 (1,386) 11,459 9,396 Total operating expenses 36,221 (2,325) 33,896 25,522 INCOME FROM OPERATIONS 399 2,400 2,799 2,485 INTEREST INCOME 2,892 - 2,892 1,624 EQUITY IN EARNINGS (LOSS) OF JOINT VENTURE (49) - (49) 223 NET INCOME $3,242 $2,400 $5,642 $4,332 EARNINGS PER SHARE: Basic $0.17 $0.13 $0.30 $0.24 Diluted $0.16 $0.12 $0.28 $0.22 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 18,871 18,871 18,871 18,177 Diluted 20,276 20,276 20,276 19,630 Color Kinetics Incorporated and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Twelve Months Ended December 31, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,242 $ 4,332 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization 1,274 1,124 Stock-based compensation 2,429 31 Loss on disposal of property and equipment 35 4 Equity in (earnings) loss of joint venture 49 (223) Common stock issued for services 101 51 Changes in assets and liabilities: Accounts receivable (3,500) (2,685) Inventory 354 (2,429) Prepaid expenses and other current assets (1,723) 640 Accounts payable 2,608 (530) Accrued expenses 922 1,130 Deferred revenue (36) (148) Accrued restructuring (385) (405) Cash flows from operating activities 5,370 892 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments (50,818) (48,082) Maturities of investments 26,042 62,906 Purchases of property and equipment (2,464) (1,007) Purchase of patent (300) - Restricted cash 500 100 Proceeds from dissolution of joint venture 887 - Cash flows from investing activities (26,153) 13,917 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of stock options 2,037 1,792 Proceeds from the exercise of stock warrants 1,117 - Proceeds from issuance of common stock - net of issuance costs 35,607 277 Cash flows from financing activities 38,761 2,069 EFFECT OF EXCHANGE RATE CHANGES ON CASH (13) (44) INCREASE IN CASH AND EQUIVALENTS 17,965 16,834 CASH AND EQUIVALENTS-Beginning of period 43,032 26,198 CASH AND EQUIVALENTS-End of period $60,997 $43,032 DATASOURCE: Color Kinetics Incorporated CONTACT: Felicia Spagnoli, Media Relations, +1-617-701-2292, or , or Justine Alonzo, Investor Relations, +1-617-701-2272, or , both of Color Kinetics Incorporated Web site: http://www.colorkinetics.com/

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