Metrologic Announces Financial Results for the First Quarter 2006

Updates Guidance for Full Year 2006



BLACKWOOD, N.J., May 9  /PRNewswire-FirstCall/ -- Metrologic Instruments, Inc. (NASDAQ:MTLG) today announced financial results for the quarter ended March 31, 2006 with total revenue of approximately $60.2 million and net income of $4.4 million or $0.19 per fully diluted share. Excluding the effects of the adoption of SFAS No. 123(R), Share-Based Payments, which for the first quarter 2006 totaled $1.0 million net of income taxes or $0.04 per fully diluted share, net income was $5.3 million or $0.23 per fully diluted share.

  Financial Results and First Quarter Highlights

   - Revenue for the first quarter of 2006 increased by 28.6% to $60.2
     million as compared to $46.9 million in the first quarter of 2005.
     This is the second-highest revenue quarter and the highest revenue
     first quarter in the Company's history.

   - For the quarter, gross margin was 39.6% versus 42.9% for the first
     quarter 2005. Gross margin for the first quarter 2006 was primarily
     impacted by increased royalty expense associated with certain products
     in the Data Capture and Collection business segment as well as product
     mix due to the continued growth in shipments to Tier 1 retailers,
     especially for newer products and an increase in warranty reserves and
     raw material obsolescence resulting from product redesign initiatives.

   - Operating expense as a percentage of revenue was 28.7% for the first
     quarter 2006 as compared to 28.5% in the first quarter 2005. This is
     primarily due to an increase in selling, general and administrative
     (SG&A) expenses as a result of increased legal spending related to
     ongoing litigation. It is anticipated that an elevated level of legal
     expense will continue for the remainder of 2006.

   - Net income for the first quarter 2006 was $4.4 million, or $0.19 per
     fully diluted share, an increase of 11.8% as compared to $3.9 million
     or $0.17 per fully diluted share in the first quarter 2005.

   - Beginning January 1, 2006, the Company was required to adopt SFAS No.
     123(R), Share-Based Payments, which requires the expensing of share-
     based compensation cost. If the Company had not been required to adopt
     SFAS No. 123(R), normalized gross margin would have been 40.1%, an
     increase of 0.5%. Operating expense would have been $16.1 million
     versus $17.3 million, a decrease of $1.2 million or 7.5%.  Net income
     would have been approximately $5.3 million or $0.23 per fully diluted
     share, an increase of $1.0 million or $0.04 per fully diluted share on
     a normalized basis. Comparable results for the first quarter 2005 do
     not reflect the effects of adopting SFAS No. 123(R), which was not yet
     in effect. Please refer to the reconciliation of GAAP results to non-
     GAAP results included with the financial statements in this release.
     The non-GAAP data is intended to provide investors with a more complete
     understanding of our financial results but must be used in conjunction
     with our GAAP results and not on a stand-alone basis.

   - The Data Capture and Collection business segment posted robust revenue
     growth of 37.6% in the first quarter 2006, with revenue of $50.3
     million as compared to $36.5 million in the first quarter 2005,
     reflecting continued strong demand from both Tier 1 retailers and
     Channel partners. Revenue from the Industrial Automation/Optical
     Systems business segment decreased slightly by 3.5% for the first
     quarter 2006 to $10.0 million, versus $10.3 million in the comparable
     quarter of 2005.

   - On a geographic basis, The Americas posted a 23.6% revenue increase to
     $27.9 million for the first quarter 2006 as compared to $22.6 million
     in the first quarter 2005, primarily as a result of robust Channel
     sales growth. Continued strong demand from Tier 1 retailers coupled
     with new product traction in the Europe/Middle East/Africa (EMEA)
     region resulted in a 43.7% revenue increase to $27.1 million for the
     quarter, as compared to $18.9 million in the first quarter 2005. Sales
     for the first quarter in the Asia/Pac region were $5.2 million, a
     decrease of 3.5% compared to $5.4 million in the first quarter 2005.

   - Our growth strategy includes developing a strong presence in the RFID
     (Radio Frequency Identification) market. On May 8, the Company
     announced the acquisition of all of the assets of Visible-RF, LLC, a
     privately held start-up company located in Needham, MA, whose advanced
     technology combines Radio Frequency communications with bi-stable
     display materials. Metrologic also announced a strategic partnership
     with MaxID, which has resulted in two recently introduced RFID readers
     for the North American market.

   - As the Company continues to search for a replacement Chief Executive
     Officer (CEO), C. Harry Knowles, Metrologic's Chairman of the Board,
     has been appointed CEO on an interim basis, effective May 15. The Board
     of Directors is aggressively searching for a replacement and is
     evaluating both internal and external candidates.

  2006 Full Year Outlook


Metrologic also updated its guidance for the full year 2006. Revenue is expected within a range of $245.0 million to $255.0 million. The Company expects gross margin to be in the range of 40.0% to 42.0% for the year, with the expectation that wide variances may occur quarter to quarter due to product mix, business segment contribution and other factors. Net income for 2006 will be impacted by discretionary spending associated with our previously announced strategic initiatives and is expected to be $19.0 million to $21.0 million, or $0.82 to $0.91 per fully diluted share, including the estimated annual compensation expense for options issued and outstanding as of March 31, 2006 in accordance with SFAS No. 123(R).  Excluding the effects of SFAS No. 123(R), net income is expected to be $22.0 million to $24.0 million, or $0.95 to $1.03 per fully diluted share. SFAS No. 123(R) became effective for Metrologic as of January 1, 2006. Other factors to consider include an assumed rate for the Euro of $1.20 to $1.25 to the US Dollar and an effective annual tax rate of 36%. These statements do not consider the effect of any acquisitions, dispositions, the results of litigation or other significant Company events that may take place during the year.

Conference Call Information

The Company will host a conference call for investors on Wednesday, May 10 at 8:30 AM ET. The dial-in numbers for the teleconference are: [phone] (Domestic/Canada) or [phone] (International). Those interested in participating in the conference call should dial in at least 10 minutes prior to commencement of the call. The audio for the conference call will also be available as an audio web cast that can be accessed through the Metrologic web site at http://www.metrologic.com/ by clicking on the banner and following the instructions. Also available through our web site will be a graphical presentation that will be referred to throughout the conference call. The graphical presentation will be available for download and printing approximately 30 minutes before the start of the conference call.

About Metrologic

Metrologic Instruments, Inc. ("Metrologic" or the "Company") is a global supplier of choice for data capture and collection hardware, optical solutions, and image processing software.  Metrologic has been delivering innovative, quality products that are cost effective, reliable and supported by a superior level of personal service for nearly 40 years.  Metrologic products are sold worldwide through Metrologic's sales, service and distribution offices located in The Americas, EMEA and Asia/Pacific. Metrologic provides its customers not only with a great deal, but a great deal more.  For more information please call 1-800-667-8400 or visit http://www.metrologic.com/.

Forward-Looking Statements

Forward-looking statements contained in this release are highly dependent upon a variety of important factors which could cause actual results to differ materially from those reflected in such forward-looking statements. Specifically, the factors that could cause actual results to differ from expectations include: the timing, introduction and market acceptance of Metrologic's new products; foreign currency fluctuations with the US dollar; pricing pressures; competitive factors; sales cycles of Metrologic's products; Metrologic's ability to control manufacturing and operating costs as well as product and revenue mix which affect future profitability; the effect of current and pending legislation on the Company's effective annual tax rate; technological changes in the data capture industry, including the adoption of imaging-based and RFID technologies; availability of patent protection for Metrologic's vision-based technologies, and other products; the results of litigation; general economic conditions; and the potential impact of terrorism, international hostilities and natural disasters.  When used in this release and documents referenced, the words "believes," "expects," "may," "should," "seeks," or "anticipates," and similar expressions as they relate to Metrologic or its management are intended to identify such forward-looking statements. We undertake no obligation to correct or update any forward- looking statements, whether as a result of new information, future events or otherwise. For additional factors, please see Metrologic's reports filed with the Securities and Exchange Commission.

                       Metrologic Instruments, Inc.
             Condensed Consolidated Statements of Operations
              (amounts in thousands, except per share data)

                                                   Three Months Ended
                                                        March 31,
                                                   2006         2005
                                                   ----         ----
                                                       (Unaudited)
  Sales                                           $60,235      $46,851
  Cost of sales                                    36,409       26,733
                                                  -------      -------
  Gross profit                                     23,826       20,118
  Selling, general and administrative expenses     14,787       11,395
  Research and development expenses                 2,486        1,952
                                                  -------      -------
  Operating income                                  6,553        6,771
  Net interest income (expense)                      (131)          22
  Other income (expense)                              390         (697)
                                                  -------      -------
  Income before income tax expense                  6,812        6,096
  Income tax expense                                2,452        2,195
                                                  -------      -------
  Net income                                       $4,360       $3,901
                                                  =======      =======

  Earnings per share:
    Basic                                           $0.19        $0.18
    Diluted                                         $0.19        $0.17
  Weighted average number of
   common shares outstanding:
    Basic                                          22,431       21,907
    Diluted                                        23,206       23,124



                       Metrologic Instruments, Inc.
                  Condensed Consolidated Balance Sheets
                        (all amounts in thousands)

                                                 March 31,  December 31,
                                                   2006         2005*
                                                   ----         -----
                                                (Unaudited)
  Cash and cash equivalents                       $33,956      $49,463
  Marketable securities                            26,215       24,475
  Accounts receivable, net                         52,079       48,462
  Inventories, net                                 33,712       29,364
  Other current assets                              5,470        6,400
                                                  -------      -------
    Total current assets                          151,432      158,164
  Property, plant and equipment, net               20,548       20,402
  Goodwill and other intangibles, net              42,802       43,103
  Other assets                                      1,626        4,513
                                                  -------      -------
      Total assets                               $216,408     $226,182
                                                  =======      =======

  Accounts payable and accrued expenses           $26,737      $46,709
  Current portion of debt                          16,571       18,433
  Deferred contract revenue                           782          739
                                                  -------      -------
      Total current liabilities                    44,090       65,881
  Debt                                                  0            3
  Other liabilities                                 2,502            8
  Total shareholders' equity                      169,816      160,290
                                                  -------      -------
      Total liabilities and
       shareholders' equity                      $216,408     $226,182
                                                  =======      =======

  *Certain prior period amounts have been reclassified to conform to the
   current period presentation



                         Supplemental Sales Data

                                           Three Months Ended
                                                March 31,
                                              %                    %
                                 2006       Total       2005     Growth
                                 ----       -----       ----     ------
  By Geography

  The Americas                 $27,945       46.4%    $22,617     23.6%
  EMEA                          27,112       45.0%     18,866     43.7%

  Asia/Pacific                   5,178        8.6%      5,368     (3.5%)
                                ------      ------     ------
                               $60,235      100.0%    $46,851

  By Business Segment
  Data Capture and Collection   50,270       83.5%     36,528     37.6%
  Industrial Automation/
   Optical Systems
      Industrial Automation      2,483        4.1%      4,554    (45.5%)
      Optical Systems            7,482       12.4%      5,769     29.7%
                                ------      ------     ------
                               $60,235      100.0%    $46,851



                       Metrologic Instruments, Inc.
             Condensed Consolidated Statements of Operations
                       Non-GAAP Financial Measures
              (amounts in thousands, except per share data)

                                             Three Months Ended
                                               March 31, 2006
                                   Actual
                                   Before        Effect of
                                    SFAS            SFAS       Actual as
                                   123(R)          123(R)      Reported
                                   ------          ------      --------
                                                (Unaudited)
  Sales                           $60,235              $0       $60,235
  Cost of sales                    36,088             321        36,409
                                   ------          ------        ------
  Gross profit                     24,147            (321)       23,826
  Selling, general and
   administrative expenses         13,857             930        14,787
  Research and development
   expenses                         2,194             292         2,486
                                   ------          ------        ------
  Operating income                  8,096          (1,543)        6,553
  Net interest income (expense)      (131)              0          (131)
  Other income (expense)              390               0           390
                                   ------          ------        ------
  Income before income
   tax expense                      8,355          (1,543)        6,812
  Income tax expense                3,007            (555)        2,452
                                   ------          ------        ------
  Net income                       $5,348           $(988)       $4,360
                                   ======          ======        ======

  Earnings per share:
    Basic                           $0.24          $(0.05)        $0.19
    Diluted                         $0.23          $(0.04)        $0.19
  Weighted average number of
   common shares outstanding:
    Basic                          22,431          22,431        22,431
    Diluted                        23,206          23,206        23,206


DATASOURCE: Metrologic Instruments, Inc.



CONTACT:  Ann Anthony - Director, Investor Relations of Metrologic

Instruments, Inc., [phone], or 



Web site:  http://www.metrologic.com/ 

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