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DALSA Reports First Quarter 2005 Financial Results

DALSA Corporation (TSX:DSA), an international high performance semiconductor and electronics company, today reported first quarter revenues of $36.9 million and net income of $2.7 million, or $0.16 earnings per share, diluted. The following table summarizes the key results for the first quarter of 2005 and compares them to the same quarter last year:


(In millions of dollars, except per share amounts)

Q1, 2005

Q1, 2004


Total Revenues




Total Net Income




Earnings Per Share (diluted)




Gross Margin



(4.1) p.p.*

Order Backlog at March 31st




Cash Flow From Operations




"Although the first quarter is historically a slower one for the Company, we were pleased to see continued robust Digital Imaging sales into the semiconductor inspection and professional photography/broadcast segments, as well as strong MEMS shipments in our Semiconductor Business," commented Savvas Chamberlain, CEO of DALSA Corporation. "Bookings were strong in our Digital Imaging Business in the quarter and our backlog increased. In our Semiconductor Business we saw a noticeable up-tick in order activity later in the quarter, which may indicate that the worst of the industry-wide inventory correction is behind us."

"We continue to be upbeat about the year, particularly due to the anticipated growth opportunities we foresee in the second half," Dr. Chamberlain added. "As we move through 2005, we expect revenue to increase in our Semiconductor Business resulting from our MEMS expansion. In our Digital Imaging Business we anticipate continued growth in the professional photography and semiconductor/flat panel inspection segments as well as a steady increase in Digital Cinema revenues. Furthermore, I am looking forward to the integration of Coreco into our operations. Keith Reuben and his team have a proven track record for growing their business profitably and generating cash. They will also add significantly to DALSA's pool of technology, which will benefit the Company moving forward."

In the first quarter, the Digital Imaging Business posted revenues of $24.1 million, up 0.9% from the first quarter of 2004. Net income was $1.8 million in the first quarter, down $0.8 million compared to the same period last year. Net income for Digital Imaging was impacted by a $0.9 million or five cent per share loss from the Company's Digital Cinema initiative, which is expected to be breakeven for the full year with income improving as revenue levels increase. Beginning January 1, 2005, the company began expensing R&D costs in Digital Cinema, instead of deferring these costs, as had been done previously. In the quarter, sales continued to be strong in the semiconductor inspection segment, largely due to follow-on sales resulting from Application Specific Contracts (ASC), and in the professional digital photography/broadcast market. The overall outlook for Digital Imaging remains positive, with the backlog increasing $4.4 million to $42.6 million quarter over quarter due to increased order activity.

The Semiconductor Business posted revenue of $12.8 million in the first quarter, a 1.1% decrease from the same period last year. Net income was $0.9 million, down $0.4 million from the same quarter in 2004. Net income was lower due to an incremental $1 million spent on research and development associated with the launch of the new proprietary MEMS processes. Management believes that the first quarter was the low point of the industry wide-inventory correction that started in the second half of 2004. In the latter part of the first quarter, the division started to see increased order activity with the book-to-bill ratio also increasing through the quarter. The order backlog was $12.4 million, down from $12.8 million at the end of 2004. Semiconductor sales are expected to increase in the second quarter of 2005. Management continues to expect overall sales growth in 2005, as the new MEMS volume production comes online in the second half of the year and as customers return to their traditional ordering patterns.

Overall, gross margins in the quarter were 40.2%, down 4.1 percentage points from the first quarter of 2004. Margins were lower in the Digital Imaging Business due to product mix and lower margins in Digital Cinema. Margins in the Semiconductor Business were lower due to lower capacity utilization. Management expects overall margins to remain within its target range of 40-45% throughout 2005.

Cash provided from operating activities was $4.8 million in the quarter compared to $5.9 million in the same period of 2004. Capital expenditures in the quarter, which were mainly related to MEMS facility expansion in Bromont and the purchase of rental inventory in Digital Cinema, were $8.8 million. The investment in property and equipment resulted in a decrease in the net cash position of the Company during the quarter of $3.9 million.

Digital Cinema Update
The Company continues to progress in its plans to commercialize the Origin camera and to establish the DALSA Digital Cinema Center in Woodland Hills as the premier "all digital" camera rental facility in Hollywood. The 12,000 square foot facility is the first of its kind to allow cinematographers to test cameras, have that test footage post-produced on-site, then view the material in a state-of-the-art digital screening room, all in one location.

On April 12, the Company hosted its official Open House at the facility. The event was attended by over 150 members of the cinematography community, the press, and the financial community. The Open House featured exclusive footage captured by the DALSA Origin camera, and allowed visitors a close up look at the Origin camera and an opportunity to gain a better understanding of the digital workflow. Over the next few months, the Company will begin to deploy Origin cameras in small productions, before taking on larger projects in the second half of this year.

Coreco Acquisition
As reported earlier this week, DALSA has acquired all of the issued and outstanding securities of Coreco Inc. (TSX: CRC) pursuant to the previously announced Plan of Arrangement. The Company will now begin integrating the new business unit into its operations. Management expects the acquisition to be accretive to earnings in the current year.

Financial Goals
The Company's financial goals remain unchanged from those originally communicated on January 27, 2005. The Company's financial goals for 2005 are $192 to $208 million in revenue with net income in the range of $21.0 to $22.5 million, or $1.22 to $1.31 per share, diluted. Management expects revenues in the second quarter of 2005 to be in the range of $40 to $43 million. These goals do not include any contribution or impact from the DALSA Coreco business.

On July 28th, 2005 the Company will issue updated financial goals incorporating the addition of the DALSA Coreco business.
For further detail, please refer to the First Quarter 2005 Financial Statements, accompanying notes, and Management's Discussion and Analysis at the DALSA website. The address is http://www.dalsa.com/investor/2005/DSA_2005Q1_release.pdf.

Investor Conference Call
A conference call to discuss the results will be held today, Thursday, April 28, at 5:00pm ET. 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/042805/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: 416-695-5261
Toll-Free Access: 1-888-789-0089
Instant Replay Access information:
Local Access: 416-695-5275
Toll-Free Access: 1-888-509-0082
Expiry Date: May 12, 2005

About DALSA Corporation
DALSA is an international high performance semiconductor and electronics company that 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; 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". The Company has its corporate offices in Waterloo, ON and over 1000 employees world-wide.
This press release contains forward looking statements based on assumptions, uncertainties and management's best estimates of future events. 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. 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.

For more information, please contact:
Patrick Myles
Director, Corporate Communications
DALSA Corporation
Tel: (519) 886-6001 Ext. 2177
Fax: (519) 886-3972
E-mail: Investor@dalsa.com
Internet: www.dalsa.com

Published 2005-04-28

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