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DALSA Reports Fourth Quarter 2008 Financial Results

Posted 1/29/2009

Waterloo, Ontario January 29, 2009 - DALSA Corporation (TSX:DSA), an international leader in high performance digital imaging and semiconductors, today reported revenues from continuing operations of $46.2 million for the quarter ended December 31, 2008, and net income from continuing operations of $4.3 million or $0.23 per share, diluted. For the full year 2008, the Company achieved record revenues of $206.0 million from continuing operations and record earnings from continuing operations of $21.9 million. The following two tables summarize the key results for the fourth quarter of 2008 and for the full year 2008 and compare them to the fourth quarter of 2007 and the full year 2007, respectively. 

Quarterly Comparisons
(In millions of dollars, except per share amounts)
Q4, 2008
Q4, 2007
Increase/
(Decrease)
Revenues
$46.2
$46.9
(1.5%)
Earnings from continuing operations
$4.3
$4.1
5.4%
Earnings per share from continuing operations
$0.23
$0.22
4.5%
Loss from discontinued operations
($10.1)
($1.8)
(455.4%)
Loss per share from discontinued operations
($0.54)
($0.10)
(440.0%)
Standard product gross margin percentage
41.6%
45.9%
(4.3p.p.*)
Order backlog at December 31
$80.2
$79.9
0.4%
Cash flow from operations
$6.5
$4.5
43.8%

 

Year to Date Comparisons
(In millions of dollars, except per share amounts)
Twelve months ended December 31
 
2008
2007
Increase
Revenues
$206.0
$177.8
15.8%
Earnings from continuing operations
$21.9
$9.2
137.3%
Earnings per share from continuing operations
$1.17
$0.49
138.8%
Loss from discontinued operations
($40.5)
($7.5)
(440.8%)
Loss per share from discontinued operations
($2.17)
($0.40)
(442.5%)
Standard product gross margin percentage
45.2%
38.9%
 
6.3 p.p.*
Cash flow from operations
 $24.1
$9.5
152.8%

* percentage points
 
“Entering 2008, we set a goal of returning our core businesses to their traditional levels of profitability. I am pleased to report that we were able to achieve record revenues and earnings in 2008 and deliver 10+% return on sales,” commented Brian Doody, Chief Executive Officer of DALSA Corporation. “At the same time, we took action to stem further losses in our Digital Cinema initiative which will now allow us to focus our attention more fully on our core Digital Imaging and Semiconductor businesses. I believe both these initiatives have put us on a solid footing moving forward.”
 
“However, the weak world-wide economic situation creates a less positive outlook for 2009. We are taking the following steps to address this challenging environment. First, we are focusing on revenue opportunities through increased market share in new markets, rather than relying on stability in traditional markets. The result has been a lessening of the impact of retracting markets in Digital Imaging, and continued opportunity for net revenue growth within Semiconductor. Second, we are targeting markets with less sensitivity to the economic downturn such as life sciences, defense and security, aerospace, and intelligent traffic systems. Third, we are redeploying resources in Digital Imaging to Application Specific Contracts to help replace lost standard products revenue. And finally, we are actively reducing our costs and expenditures. The decisions and actions we took in late 2007 and in 2008 to become more efficient have put us in a favourable position to face the challenges ahead. We have highly differentiated products, motivated and qualified employees, and an excellent distribution network. We expect that we can come out of this period of turmoil prepared for growth in the future.”
 
In the Digital Imaging business, revenues were $24.5 million and net income was $2.6 million in the fourth quarter, compared to revenues of $26.8 million and net income of $2.6 million in the fourth quarter last year. The revenue decrease resulted primarily from lower product shipments into the Asia/Pacific region, as OEMs delayed their investments in capital equipment in reaction to the current world-wide economic slowdown. At the same time, earnings benefitted from a foreign exchange gain resulting from a decline in the value of the Canadian dollar to foreign currencies. Standard product gross margins in the Digital Imaging business for the fourth quarter were 48.5%, down 5.0 percentage points from the fourth quarter last year. The decrease is due largely to lower sales and weaker product mix. The division ended the year with a backlog of $33.6 million, an increase of $4.6 million from the third quarter of 2008. A $1.3 million decrease in the standard products backlog, caused by a slowing of orders in the latter part of the fourth quarter, was more than offset by a near doubling of the ASC backlog, as a result of landing several significant contracts in the fourth quarter. Although these contracts are generally longer term in nature, several of the contracts will begin earning revenue in the first quarter of 2009 and throughout the year.
 
In the fourth quarter the Semiconductor Business achieved revenues of $21.6 million in the quarter and net income of $1.7 million, compared to revenues of $20.1 million and net income of $1.5 million in the fourth quarter last year. During the quarter the Company recorded shipments of MEMS wafers as well as a high volume of integrated circuits, largely image sensor chips. These increases offset the anticipated decline in shipments of CMOS wafers, as the division fulfilled orders against some unusually long term purchase orders the Company received late in 2007. Gross margins decreased 2.4 percentage points to 32.8% from the same quarter last year. This decrease was due in part to lower margin on our image sensor components business in the Semiconductor unit as a result of low yields of certain products as the division ramps up production. The backlog in the Semiconductor business increased quarter over quarter, by $3.3 million to $46.6 million, due largely to significant orders received from several MEMS customers late in the fourth quarter for delivery throughout 2009 and for new product developments.
 
The results of operations and financial position of DALSA’s Digital Cinema business unit have been segregated and presented separately as discontinued operations in the Company’s unaudited consolidated interim financial statements for the fourth quarter. Subsequent to the end of the fourth quarter, the Company announced that following the closure of DALSA's Woodland Hills, CA, cinema equipment rental facility and the termination or redeployment of the Digital Cinema division staff, the Company had wound down its Digital Cinema operations. The Company had failed to reach agreement with Arnold & Richter Cine Technik GmbH (“ARRI”), a leading manufacturer of cinematography cameras, as to acceptable terms on a definitive agreement. As a result, the Company set aside discussions with ARRI and said it would pursue other alternatives to maximize the value of its Digital Cinema operations, with no guarantee that any of these alternatives would ultimately lead to a successful transaction. Additional provisions of $8.8 million relating to the closure of the Digital Cinema were taken in the fourth quarter of 2008 that included severance payments, provisions for lease obligations as well as a further write down of assets held for sale. For further information, refer to note 11 of the notes to the Company’s unaudited consolidated interim financial statements for the fourth quarter of 2008.
 
The Company’s net cash position increased $0.2 million from the end of September to $12.4 million at the end of December. In the fourth quarter, cash provided from operations was $6.5 million, an increase of $2.0 million from the same quarter last year. For the year, the Company generated $24.1 million of cash from operations, compared to $9.5 million in 2007.
 
In the fourth quarter of 2008 The Company repurchased and cancelled 150,900 shares at a weighted average purchase price of $6.02 as part of our Normal Course Issuer Bid that commenced on September 11, 2008 and expires on September 10, 2009.
 
Dividend
The Company’s Board of Directors has declared a quarterly dividend of $0.05 per common share to all shareholders of record on February 13, 2009. The dividend is payable on February 27, 2009. The Company has designated the full amount of these dividends as "eligible dividends" for Canadian income tax purposes.
 
For further detail, please refer to the fourth quarter 2008 Financial Statements, accompanying notes, and Management’s Discussion and Analysis on the DALSA website. The address is http://www.dalsa.com/investor/2008/DSA_2008Q4_release.pdf
 
Investor Conference Call Information
A conference call to discuss the results will be held today at 5:00pm EDT. The conference call, followed by the question and answer period, will be broadcast live and open to anyone interested in listening at http://events.onlinebroadcasting.com/dalsa/012909/index.php. The phone numbers for those who wish to participate in the question and answer period are as follows:
 
Live Conference Access Information:
Local Access: 416-641-6136
Toll-Free Access: 866-223-7781
 
Instant Replay Access information:
Local Access: 416-695-5800
Toll-Free Access: 800-408-3053
Passcode: 3280653
Expiry Date: February 5, 2009
 
About DALSA Corporation
DALSA is an international leader in high performance digital imaging and semiconductors with approximately 1000 employees world-wide. Established in 1980, the company designs, develops, manufactures, and markets digital imaging products and solutions, in addition to providing semiconductor products and services. DALSA's core competencies are in specialized integrated circuit and electronics technology, software, and highly engineered semiconductor wafer processing. Products and services include image sensor components (CCD and CMOS); electronic digital cameras; vision processors; image processing software; and semiconductor wafer foundry services for use in MEMS, high-voltage semiconductors, image sensors and mixed-signal CMOS chips. DALSA is listed on the Toronto Stock Exchange under the symbol “DSA” and has its corporate offices in Waterloo, Ontario, Canada.
 
For more information, please contact:
Patrick Myles
Vice President, Corporate Communications
DALSA Corporation
Tel: (519) 886-6001 Ext. 2177
Fax: (519) 886-3972
E-mail: patrick.myles@dalsa.com
Internet: http://www.dalsa.com
 
Some of the statements in this press release, including those relating to the company’s strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or similar expressions, are forward-looking statements within the meaning of securities law. Actual results may differ materially from those currently anticipated. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements are detailed from time to time in DALSA’s periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Investors should read review the Business Risks and Prospects sections of the DALSA 2007 annual Management’s Discussion and Analysis (“MD&A”) to understand the assumptions, risks and uncertainties inherent in forward looking information or statements. DALSA has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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