CyberOptics Reports Higher Second Quarter Sales and Earnings

Business Wire, July 27, 2004

MINNEAPOLIS -- Continued Growth Expected in Third Quarter Due to Expansion into Semiconductor Memory Market

CyberOptics Corporation (Nasdaq:CYBE) today reported consolidated revenues of $14,734,000 for the second quarter of 2004 ended June 30, an increase of 96% from $7,508,000 in the year-earlier period and also up 16% from $12,690,000 in this year's first quarter. Net income for the current quarter came to $3,522,000 or $0.39 per diluted share, up from earnings of $2,686,000 or $0.31 in this year's first quarter and the net loss of $1,258,000 or $0.15 per diluted share in the second quarter of 2003.

For the first six months of 2004, consolidated revenues came to $27,424,000, up 97% from $13,933,000 in the same period of 2003. First half net income totaled $6,208,000 or $0.70 per diluted share, compared to the net loss of $2,740,000 or $0.34 per share in the year-earlier period.

Kathleen P. Iverson, president and chief executive officer, commented: "Demand for our new-generation electronic assembly sensors and inspection systems remained strong in this year's second quarter, which drove our sales and earnings above planned levels. Our Japanese and European OEM customers for electronic assembly sensors have maintained order rates at high levels, while shipments of inspection systems, primarily to Asian outsourcing manufacturers, have continued to grow. The streamlined cost structure that we established over the past few years is enabling us to optimize our strong top line performance."

Iverson continued: "Earnings for the third quarter of 2004 ending September 30 are forecasted in the range of $0.39 to $0.44 per diluted share on revenues of $15.5 to $16.5 million. In addition to the positive outlook for our business in the SMT electronics market, CyberOptics' third quarter operating results will benefit from the expansion of our inspection system technology into the semiconductor memory market. During the third quarter, we expect to recognize revenues of approximately $1.8 million related to shipments in prior quarters of SE 300 solder paste inspection systems to a manufacturer of memory modules. Revenue recognition on these shipments was subject to customer acceptance. In addition, during this year's second half, we expect to recognize revenues related to a significant order for KS automated optical inspection systems from another memory module manufacturer. We believe the semiconductor memory inspection market, which is one of today's fastest growing semiconductor applications, represents a long-term opportunity that has the potential to significantly expand the market for our inspection systems."

Steven K. Case, Ph.D., chairman and founder, commented: "Based on the current extent of order visibility, we cannot discern any evidence of a slowdown in our markets at this time. Order rates remain strong, and we are pursuing a significant number of opportunities with new customers. In addition, the process of integrating our Embedded Process Verification (EPV(TM)) inspection technology into the new-generation robotic assembly platform of Universal Instruments Corporation is proceeding on schedule. Universal continues to expect to introduce its EPV-equipped component placement machines in late 2004."

Financial Review

--Results for the first quarters of 2004 and 2003 reflect the absence of any income tax provision on U.S.-based operations (either a benefit on losses or tax expense on earnings). CyberOptics will not record an income tax provision on its U.S.-based operating results until the valuation allowance on deferred taxes is eliminated, which will be based on the level of future earnings and the ability to remain consistently profitable. CyberOptics believes it could begin recording an income tax provision in late 2004 or early 2005.

--Sales of SMT component placement sensors to OEMs of robotic pick-and-place equipment rose 143% in the second quarter of 2004 from the year-earlier level and by 20% from this year's first quarter. This growth reflects robust market conditions and acceptance of the new multi-sensor robotic assembly platforms of our Japanese and European OEM customers.

--Sales of SMT inspection systems grew 65% in the second quarter on a year-over-year basis and by 18% from the first quarter level. A substantial portion of the SE 300 systems shipped in second quarter was installed at many of the largest manufacturing outsourcing companies in Asia, particularly in China. Sales of KS automated inspection systems continued at planned levels during the second quarter.

--Sales of semiconductor products, including wafer-mapping sensors for OEMs of wafer-handling equipment and frame grabber products, rose 34% in the second quarter from the year-earlier level and were flat compared to this year's first quarter.

--R&D and SG&A expenses increased 9% in the second quarter of 2004 from the year-earlier level and by 13% from this years first quarter. This increase resulted from higher R&D spending on a greater number of new projects and the decision to accelerate completion of R&D initiatives already in the development stage. This increase also reflected growth of such variable costs as sales commissions and company-wide incentive programs associated with higher revenue levels. Reflecting CyberOptics' ongoing commitment to aggressive management of fixed costs, growing customer demand is continuing to be met through greater use of temporary employees and subcontractors.