DALSA Reports Third Quarter 2008 Financial Results

October 31, 2008

Source: Dalsa Digital Cinema

DALSA Corporation, an international leader in high performance digital imaging and semiconductors, today reported revenues of $52.6 million for the quarter ended September 30, 2008, and net income from continuing operations of $6.0 million or $0.32 per share, diluted. The following two tables summarize the key results for the third quarter of 2008 and for the year to date and compare them to the third quarter of 2007 and the first three quarters of 2007, respectively.

As previously announced, DALSA is committed to eliminating the ongoing losses in the Digital Cinema division by the end of 2008.

The Company has recently entered into a non-binding letter of intent ("LOI"), which includes a 30-day period of exclusive negotiations, with Arnold & Richter Cine Technik GmbH ("ARRI"), one of the world's leading manufacturers of cinematography cameras. Under the terms of the LOI, ARRI would acquire certain existing assets of the DALSA Digital Cinema division. Concurrently, DALSA and ARRI would enter into a technology partnership agreement whereby DALSA will develop for ARRI custom high performance CCD image sensors and related products. Furthermore, DALSA would supply the developed products to ARRI for digital cinematography applications through DALSA's core businesses. Related to the transaction contemplated by the LOI, DALSA will endeavour to find a buyer for its Los Angeles based camera rental operations.

DALSA will eliminate the ongoing losses from the Digital Cinema business prior to year end; however, there is no assurance that any transactions will be completed.

The results of operations and financial position of DALSA's Digital Cinema business unit have been segregated and presented separately as discontinued operations in the Company's unaudited consolidated interim financial statements for the third quarter. The Company has taken a $24.9 million after tax charge comprised of a non-cash charge of $21.7 million and a cash charge of $3.2 million. For further information, refer to note 11 of the accompanying notes to the Company's unaudited consolidated interim financial statements for Q3 2008.

"The actions we undertook in the third quarter to stem further losses in our Digital Cinema initiative will now allow us to focus our attention more fully on our core Digital Imaging and Semiconductor businesses, and to further build on their success moving forward," commented Brian Doody, Chief Executive Officer of DALSA Corporation. "The financial results in our core businesses this quarter and this year underscore DALSA's strong international technology and product leadership position as well as the strong fundamentals of our business. We look forward to meeting with investors and analysts to share more about our Digital Imaging and Semiconductor businesses at our upcoming Analyst Day taking place in Toronto on November 18(th), 2008." For more information on the Investor Day please refer to the information contained at the bottom of this press release.

In the Digital Imaging business, revenues were $31.1 million and net income was $4.5 million in the third quarter, compared to revenues of $22.6 million and net income of $5.3 million in the third quarter last year. As noted in our accompanying Management's Discussion and Analysis, Digital Imaging net income in the third quarter last year included a net after tax gain of $6.2 million resulting from the sale of land in Waterloo. Standard product gross margins in the Digital Imaging business for the third quarter this year were 53.2%, up 9.1 percentage points from the third quarter last year. Strong product demand this year in the flat panel display inspection segment and in the machine vision/industrial market contributed significantly to the sharp increase in financial performance compared to the same quarter last year. As in previous quarters, newly introduced products such as our Ethernet addressable Genie camera are continuing to contribute to our sales growth year over year. At the end of September, the Digital Imaging backlog was $29.0 million, a slight decline from the end of the second quarter, largely due to a reduction in bookings from flat panel display inspection equipment OEMs. Compared to the end of September 2007, the backlog in Digital Imaging is up $4.6 million.

In the Semiconductor Business, we saw strong product demand for MEMS wafers and CCD image sensor chips, achieving revenues of $21.6 million, up from $16.7 million in the third quarter last year. Standard product gross margins in the quarter increased significantly from the same quarter last year to 32.7% . Within our Professional Imaging Group, we have significantly extended our leadership position in the strategic professional digital still camera marketplace this year. Our image sensor chips, which are based on our most advanced CCD technology, are being designed into new products from the leading digital camera back manufacturers, two of whom displayed their new cameras at the Photokina show in Germany in September. Net income in the Semiconductor division was $1.5 million, up from a loss of $4.0 million in the third quarter of 2007. At the end of September our Semiconductor backlog was $43.3 million, a decline of $5.7 million from the end of June, as we made shipments against some unusually long term purchase orders we received late in 2007 with deliveries spanning much of 2008. Our booking patterns in the Semiconductor Business are now returning to more typical levels for the quarterly revenues we are currently reporting, and do not include significant long term bookings. Compared to the end of September 2007, the backlog is up $4.2 million.

Our net cash position decreased by $6.8 million from the end of June to $12.2 million, as we bought back 308,411 shares in August under our Normal Course Issuer Bid, paid out our first quarterly dividend, and decreased our long term debt, among other planned operating cash outlays. Cash provided from continuing operations was $5.0 million, an increase of $1.0 million from the same quarter last year, resulting from higher earnings from continuing operations.

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