“In the second quarter we saw some stabilization in our business as well as several indications of a recovery in our markets beginning in the fourth quarter this year,” commented Brian Doody, Chief Executive Officer of DALSA Corporation. “In our Digital Imaging business, in particular, we noted an improvement in sentiment among OEMs in the key Asia/Pacific region, which was reflected not only in increased customer inquiries and ordering for later in the year, but also in a significant improvement in shipments to the region relative to the first quarter’s historically low sales.”

 

“Through this recent period of weaker product demand, we have continued to deliver on key initiatives that will place DALSA in an even stronger competitive position once the global economic situation improves,” Mr. Doody continued. “In our Semiconductor business, for example, we were able to achieve 30%+ growth in MEMS revenues in the first half of this year compared to the first six months of 2008. Our investment in new 200mm MEMS capability will allow us to capture new opportunities and further expand our MEMS foundry leadership position. In the Digital Imaging business, our key new products, particularly those targeting the higher volume industrial markets, are winning market share and showing strong quarter over quarter sales growth. Our new product pipeline is also strong, with new product introductions planned later this year and into 2010. In the meantime, we are successfully increasing our custom contracts business company-wide in an effort to offset short term declines in standard product sales. Revenues from Application Specific Contracts in both divisions were at record levels in the second quarter. Finally, I am also pleased with the state of our overall order backlog, which at the end of the second quarter stood at almost $100 million. These contracts, many of which are medium term in nature, are a strong indication of our excellent prospects in 2010 and beyond.”

 

In the Digital Imaging business, revenues in the second quarter were $20.7 million, with a net loss of $0.1 million, compared to revenues of $31.1 million and net income of $3.4 million in the second quarter last year. Despite the sharp year over year decrease in revenue that affected all geographic regions, revenues in Digital Imaging improved almost 7% from the first quarter due to quarter over quarter increases in shipments into the Asia/Pacific region. In the second quarter we once again saw strong increases in new Digital Imaging products targeting the higher volume industrial market. During the quarter, Application Specific Contracts revenues were at a record $3.1 million, a result of an increase in orders received over the past nine months. Digital Imaging gross margins were 45.1% in the second quarter, down 8.7 percentage points from the second quarter of last year. The decrease is due largely to lower revenues and weaker product mix in Digital Imaging during the quarter. Earnings in the quarter were depressed due to lower revenues in addition to losses due to foreign exchange. The Digital Imaging backlog improved on a US dollar basis for both standard product and contract bookings, but was down slightly from the prior quarter to $32.9 million on a Canadian dollar basis. This small decline was a result of the increase in the value of the Canadian dollar during the quarter.

 

In the Semiconductor Business, we reported revenues of $19.6 million in the quarter and earnings of $0.2 million, compared to revenues of $21.9 million and net income of $2.5 million in the second quarter last year. Shipments of MEMS wafers and image sensor chips showed growth year over year; however, they were not able to make up for a decline in CMOS wafer processing. The decline in CMOS business was largely anticipated but was exacerbated by the economic downturn. During the quarter, the Semiconductor business reported record Application Specific Contracts revenues of $3.2 million, consistent with our results in Digital Imaging and reflecting our strategy to focus key R&D resources on revenue generating projects. Gross margins within Semiconductor decreased 21.6 percentage points to 18.9%. Both margins and earnings were negatively impacted by lower sales levels, which resulted in poor coverage of fixed costs, in addition to continued shipments of lower margin last time buys on our 100mm fabrication line. As we close our 100mm line during Q4 the related fixed costs will abate and an improvement in gross margins is expected. Cost reduction efforts in the Semiconductor business, which include our 100mm line closure as an example, are expected to eliminate any operating losses due to these gross margin pressures during this period of depressed sales due the worldwide recession. In addition, our previous yield challenges with new products in the Semiconductor business have been largely overcome and are now providing a positive contribution to earnings. The division exited the quarter with a record backlog of $66.8 million, fuelled by several significant orders received by our Professional Imaging group within the Semiconductor business in the quarter.

 

The Company’s net cash position in the second quarter decreased $1.6 million to $9.9 million from the first quarter of 2009. In the quarter, cash provided by operating activities improved as compared to the first quarter, at $1.8 million, although was down compared to $9.3 million provided by operating activities in the same quarter last year. The year over year decrease is largely due to reduced earnings. Management believes that cash on hand, existing bank facilities and cash flow from operating activities will be sufficient to fund currently anticipated working capital, planned capital spending, new business initiatives and debt service requirements for the next twelve months, allowing us to manage the Company through the current period of world-wide economic downturn.

 

The Company’s Board of Directors has declared a quarterly dividend of $0.05 per common share to all shareholders of record on August 14, 2009. The dividend is payable on August 28, 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 second quarter 2009 Financial Statements, accompanying notes, and Management’s Discussion and Analysis on the DALSA website. The address is http://www.dalsa.com/public/corp/investor/2009/DSA_2009Q2_release.pdf

 

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/072909/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: 416-340-2218

Toll-Free Access: 866-226-1793

 

Instant Replay Access information:

Local Access: 416-695-5800

Toll-Free Access: 800-408-3053

Passcode: 6357774

Expiry Date: August 12, 2009

 

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.

 

Patrick Myles

Vice President, Corporate Communications

DALSA Corporation

Tel: (519) 886-6001 Ext. 2177

Fax: (519) 886-3972

E-mail: [email protected]

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 2008 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.