CyberOptics Sales, Profits Fall Drastically on Weak Demand

Sales plunged 57.9 percent in the fourth quarter of 2012, and the company reported a net loss of $6.5 million for the period; CEO Kitty Iverson, who said she was “disappointed with our weak performance,” expects a challenging first quarter but gradual improvement later in the year.

Less than three months after announcing that it had cut about 10 percent of its global work force, CyberOptics Corporation reported significant losses during the fourth quarter and full 2012 due to to weak demand for its products.
 
Late Monday, the Golden Valley-based company—which makes sensors and inspection systems used in printed circuit board assembly—reported sales totaling $5.8 million for the fourth quarter of 2012, down 57.9 percent from the same period the prior year. The company posted a net loss of $6.5 million, or $0.93 per share, down significantly from earnings of $547,000 or $0.08 per share, during the fourth quarter of 2011.
 
Fourth-quarter revenues are consistent with expectations that the company revealed in conjunction with its work force reduction announcement in December; it said at the time that sales for the period would likely total between $5.5 million and $6 million.
 
The company said that the net loss for the quarter included a $5.7 million non-cash charge to record a valuation allowance against its deferred tax assets due to weak operating results and its soft near-term business outlook; accounting rules require companies to record valuation allowances against such assets when it looks as though they'll go unused—for example, if operating losses and/or piles of bad debt make it unlikely that a company will earn enough to take advantage of various credits. The net loss also included a restructuring charge of $523,000 related to the work force reduction announced in December.
 
“Although our fourth-quarter results were consistent with our forecast for this period, we are disappointed with our weak performance,” CyberOptics CEO and Chair Kathleen Iverson said in a statement. “The most recent cyclical downturn of the semiconductor and electronic assembly markets has caused customers for our sensors and inspection systems to delay plans for expanding their manufacturing capacity, which is the main driver of our business.”
 
Iverson said that weak demand for the company’s products has been particularly pronounced in China, where many of its customers derive a “significant” portion of their revenue.
 
Meanwhile, for the full 2012, CyberOptics reported sales of $41.6 million, down 31.8 percent from 2011. Its net loss for the period was $6.7 million, or $0.97 per share, compared to net income of $4.4 million, or $0.63 per share, the prior year. (The net loss included the non-cash charge for the valuation allowance and restructuring charges totaling $740,000.)
 
Iverson said that although she expects the company’s performance to improve in the long-term, due to “ongoing weakness in the global electronics industry,” revenue for the first quarter of 2013 will likely mirror that of the fourth quarter of 2012.
 
“At this time, activity levels appear to be picking up in China and the Americas, making us believe sales should gradually ramp up as we progress through 2013,” Iverson said, although she didn’t offer specific sales projections. She added that the company has “successfully weathered many market downturns throughout our history. . .” and said it has the resources to pursue new growth opportunities that will dampen the impact of future cycles in the electronics market.
 
CyberOptics plans to introduce three new products during the first half of 2013—all of which are systems designed to inspect the smallest circuit board components used in smartphones and tablets.
 
CyberOptics is among Minnesota’s smaller public companies based on revenue. It employed about 190 until it cut roughly 20 jobs late last year, and the reductions were split about evenly between its Minnesota headquarters and its Singapore operations; no particular job function was singled out for the cuts, according to Chief Financial Officer Jeffrey Bertelsen.
 
No securities analysts are currently assigned to closely monitor CyberOptics. Some industry analysts, however, reportedly said last year that the computer chip market was expected to suffer.

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