DALSA posts strong annual revenues, profits driven by digital imaging

FEBRUARY 6--DALSA Corporation (Waterloo, ON, Canada; www.dalsa.com) has reported revenue of $43.3 million in fourth-quarter 2006 and net income of $1.7 million or $0.09 per share, diluted.

Feb 6th, 2007

FEBRUARY 6--DALSA Corporation (Waterloo, ON, Canada; www.dalsa.com), an international digital imaging and semiconductor company, has reported revenue of $43.3 million in fourth-quarter 2006 and net income of $1.7 million or $0.09 per share, diluted. For the year ended December 31, 2006, total revenue was $186.3 million, with net income of $11.6 million or $0.62 per share, diluted.

The company ended 2006 with record revenues and strong profits in its digital imaging business and generated significant cash from operations, which has allowed it to further decrease net debt and put it on an even stronger financial footing. Said Savvas Chamberlain, CEO of DALSA, "Despite some softness in revenues in the fourth quarter in our semiconductor business, I am pleased to see, for the first time, that our MEMS revenues were the largest contributor to overall revenues in our wafer-processing facility. This is a significant milestone.

"Operationally, we are in a solid position to capitalize on opportunities in 2007," he continued. "In digital imaging, for example, we have a strong suite of new products that is being supported by a fully integrated and international sales channel. We will be focusing on building business in fast-growing markets for imaging products in Asia-Pacific, as well as targeting attractive market segments in life sciences, photogrammetry, smart cameras, and security/surveillance, all of which are growing at more than 15% per year. In our semiconductor business, we are steadily moving our new MEMS customers into production and successfully diversifying our customer base, both in wafer processing and IC products. Furthermore, we see 2007 as a breakthrough year for digital cinema, and are looking forward to further establishing our technology leadership position and ultimately gaining revenue traction for the Origin 4K camera."

In the fourth quarter, digital imaging revenues were $28.1 million, up 7.9% from the fourth quarter of 2005. The increase in sales was largely driven by an increase in sales into the semiconductor inspection market, specifically for flat-panel-display (FPD) inspection. For the full year, sales of product into the FPD market increased by 27% over 2005. Digital imaging net income was $3.7 million, or approximately 13% of revenue, compared to $3.8 million in the fourth quarter last year. During the quarter, net income in digital imaging was reduced by $0.5 million due to an impairment loss on the company's investment in the common shares of Dipix Technology.

Semiconductor business revenues decreased by $0.5 million or 3.3% in the fourth quarter of 2006 compared to the same quarter in 2005. The decrease was mainly the result of delays in orders from customers in the foundry CMOS business and in the IC products business (which includes image sensors). Revenue from MEMS devices grew by $0.3 million compared to the same quarter in 2005, and for the first time revenues from the MEMS end market were the largest contributors to total revenue for the semiconductor wafer-processing facility. Gross margins increased by 11 percentage points during the fourth quarter compared to the same quarter last year, three percentage points of which are due to the recognition of prior years' tax credits for development work included in cost of sales in the semiconductor wafer processing facility.

Digital cinema business revenues were $0.4 million, approximately the same level as the fourth quarter last year. In the quarter the division incurred a loss of $1.4 million, an increase of $0.4 million over the same period in 2005 and a reduction of $0.3 million compared to the previous quarter. Changes in management with the appointment of Rob Hummel as President, a revised operational focus in Los Angeles, and the expansion of camera testing with several production companies are establishing the infrastructure to respond to anticipated demand for the Origin camera.

For further details, refer to www.dalsa.com/investor/2006/DSA_2006Q4_release.pdf.

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