CyberOptics Reports Strong Third Quarter Sales and Earnings

Business Wire, Oct 27, 2004

MINNEAPOLIS -- CyberOptics Corporation (Nasdaq:CYBE) today reported consolidated revenues of $19,385,000 for the third quarter of 2004 ended September 30, an increase of 84% from $10,514,000 in the third quarter of 2003 and also up 32% from $14,734,000 in this year's second quarter. Net income, after a $1,890,000 provision for income taxes, came to $3,624,000 or $0.40 per diluted share, compared to $3,522,000 or $0.39 per diluted share in this year's second quarter, which did not include an income tax provision on U.S.-based operations. In the third quarter of 2003, CyberOptics reported a net loss of $793,000 or $0.10 per diluted share, which included restructuring and other charges of $1,095,000.

Kathleen P. Iverson, president and chief executive officer, commented: "Our strong third quarter revenue growth was generated, in part, by sales of $3.0 million related to orders in prior quarters for SE 300 solder paste and KS automated optical inspection (AOI) systems to two manufacturers of semiconductor memory modules. As we stated in our second quarter earnings release, we anticipated third quarter revenue recognition of the SE 300 order, but revenues from the AOI orders were not expected, since we were then uncertain of the duration of the customer acceptance process. Customer acceptance was received faster than anticipated, and we recognized the majority of these AOI revenues in the third quarter. Reflecting the size of these sales, we believe the semiconductor memory module market represents a strong opportunity for CyberOptics, and we are actively pursuing other opportunities with new and existing customers in this area. We also recorded stronger than forecasted demand from other inspection systems customers and for our new-generation electronic assembly sensors, reflecting above-plan orders from a major Japanese customer that added new capacity in the third quarter."

Iverson continued: "Orders from our OEM sensor and end-user inspection system customers started moderating during the latter stages of the third quarter. As a result, we entered the fourth quarter with a lower backlog in comparison to the beginning of the third quarter. Moreover, our third quarter-ending backlog does not include the two, previously discussed large orders for inspection systems for memory module customers. Reflecting these factors, we are currently forecasting fourth quarter after-tax earnings of $0.02 to $0.12 per diluted share on revenues of $10,000,000 to $12,000,000."

Third quarter 2004 results include an income tax provision of $1,890,000 to adjust the tax provision on earnings for the year to the annual expected tax rate. The level of income earned in 2004 will result in the Company utilizing available tax loss carryforwards and paying income tax for the year. Since we have continued to maintain a valuation allowance on deferred tax assets and given our level of profitability, we were required to record a third quarter tax provision that adjusted our full-year provision to the annual expected tax rate. CyberOptics' fourth quarter guidance also reflects income tax expense at the expected annual rate.

Steven K. Case, Ph.D., chairman and founder, commented: "Although our order rates, like those of other capital equipment suppliers to the electronics and semiconductor industries, have slowed in recent periods, our end-user customers are continuing to forecast increased production of electronics products during the coming year. Semiconductor capacity is still running at an estimated 90% to 95% rate, and new 300mm fabrication plants continue to be built. The economies of China, eastern Europe, India and Brazil are continuing to generate robust demand for electronic products and components. Moreover, the market cycle over the past year has not been characterized by the type of "bubble" environment that occurred in the late 1990s, when electronics demand was driven to extreme heights by Internet expansion and Y2K fears. It also should be emphasized that CyberOptics is prepared to operate efficiently in a slower-growth environment due to the significantly reduced cost structure that we have implemented over the past few years."

Recent Business Developments

--CyberOptics recently entered into an agreement to provide fiducial camera sensors to a leading manufacturer of solder paste screen printers. Mounted inside the printer, these sensors will ensure that bare circuit boards are registered and aligned properly before the application of solder paste. Initial revenues from this product are anticipated in the first half of 2005.

--The company recently introduced the WaferSense(TM) auto leveling sensor, a wireless, wafer-like device that enables quick and accurate leveling of semiconductor wafer processing and automation equipment. WaferSense, which functions with 150mm, 200mm and 300mm wafer processing tools, significantly reduces the amount of time required for making leveling and coplanarity adjustments, enabling semiconductor fabrication equipment to get online faster.