Net income in the quarter was positively impacted by $1.1 million or $0.06 per share as a result of Province of Ontario funding relating to certain eligible R&D activities, as described below.

The following table summarizes the key results for the second quarter of 2010 and compares them to the second quarter of 2009.

“In the second quarter, we were pleased to see continued strong demand in our Digital Imaging business in all geographic regions, contributing to record revenue in the division and solid earnings company-wide,” commented Brian Doody, CEO of DALSA Corporation. “Although the recovery in our Semiconductor business has been slower to materialize than in our Digital Imaging business, we are encouraged by the continued progress we are seeing in our MEMS business. MEMS shipments improved quarter over quarter and our MEMS backlog rose to a record level at the end of June, reflecting an increase in both demand and diversity of customers.”


“In addition to our strong financial results this quarter, I am pleased to share some additional good news. On June 18, 2010, Canada’s Governor General, Michaëlle Jean, inducted DALSA Chairman and founder, Savvas Chamberlain, as a Member of the Order of Canada at a ceremony in Rideau Hall in Ottawa. Savvas was recognized for his contributions to Canada’s reputation as a global leader in high performance imaging and semiconductors. Even more recently, these same contributions led to Savvas’s induction as a Fellow in the Royal Society of Canada, the national academy of distinquished scholars, artists, and scientists. Along with all DALSA staff, I wish to extend my sincere congratulations to Savvas on these two extraordinary accomplishments.”


In the second quarter of 2010, the Digital Imaging business generated revenue of $36.7 million, up over 70% from the second quarter of last year and up over 10% from the first quarter of 2010. Year-over-year sales increased significantly in all geographic regions, led by the Asia/Pacific region where revenue was more than twice the level of the second quarter last year. Net income in Digital Imaging was $6.4 million in the second quarter, up from a loss of $0.1 million in the second quarter last year. Net income was positively impacted by a combination of higher sales and a before tax gain of $1.5 million relating to the Province of Ontario funding that was announced in the second quarter. Excluding the funding, net income for Digital Imaging in the quarter was $5.3 million, or 14.4% return on sales. Backlog for Digital Imaging at the end of the quarter was a record $38.3 million, up $4.0 million from the end of the first quarter, with the majority of the orders for delivery in the next six months.


The Semiconductor Business had revenue of $15.6 million in the second quarter and a net loss of $0.9 million, compared to revenue of $19.5 million and net income of $0.2 million in the second quarter last year. Lower year-over-year MEMS and image sensor revenue was partially offset by higher High Voltage CMOS and non-image sensor IC revenue. Earnings in the Semiconductor Business were lower than last year’s comparable quarter due to decreased revenue as well as foreign exchange losses. We saw our quarter-over-quarter MEMS revenue increase to $6.3 million in second quarter from $5.8 million in the first quarter and our MEMS order backlog increased at the end of June. The Semiconductor business’s overall backlog increased from $40.7 million at the end of the first quarter to $43.7 million, led largely by the MEMS demand and new Application Specific Contracts.


Cash provided by operating activities was $8.7 million, compared to cash provided by operating activities of $1.8 million in the same quarter last year. The improvement is due to higher profitability in the quarter. The Company’s cash position at the end of the first quarter was $15.3 million, up $3.2 million from the end of March 2010.


Province of Ontario Funding for Research and Development

During the second quarter of 2010, we announced an agreement with the Province of Ontario to invest in product innovations and related job creation at DALSA’s Waterloo facility. Under the agreement, the Ontario government will contribute a maximum grant of up to $24.3 million to support DALSA’s new research and development (R&D) efforts in digital imaging technology. The grant is to be paid over a period of five years, and is subject to customary conditions. As a result of this funding, certain R&D expenditures incurred since September 2009 are eligible for reimbursement, as per the following table.


Sept – Dec 2009

Three months ended

March 31, 2010

Three months ended

June 30, 2010

The pretax effect of this funding was a net reduction in R&D expenditures in the second quarter in the Digital Imaging business of $1.5 million. This positively impacted our total net income by $1.1 million or $0.06 per share. We are currently working with the Province of Ontario to schedule an announcement in which we will provide more details on the project.