Data I/O Announces Results for Fourth Quarter and Year 2012

Data I/O Announces Results for Fourth Quarter and Year 2012 
REDMOND, WA -- (Marketwire) -- 02/28/13 --  Data I/O Corporation
(NASDAQ: DAIO), the leading global provider of advanced programming
and IP management solutions for flash, flash-memory based intelligent
devices and microcontrollers, today announced financial results for
the fourth quarter and year ending December 31, 2012. 
Financial Results
 Revenues for the fourth quarter of 2012 were $3.7
million, down 35% compared with $5.7 million in the fourth quarter of
2011 and $4.3 million in the third quarter of 2012. On a product
basis, the percentage revenue decrease was primarily in Data I/O's
automated PS and FLX families, as well as the manual FlashPAK family
compared to the fourth quarter of 2011. On a regional basis, revenue
declined in Asia 52% and Europe 42%, with the Americas revenue
increasing 4% compared to the fourth quarter of 2011.  
The Company believes the decline in revenue relates primarily to a
continuing trend of reduced capital spending and excess equipment
capacity, resulting from a downturn in Asia-based electronics
manufacturing and economic uncertainty related to the European
sovereign debt situation, as well as the emergence of very low cost
competitive automated handlers and other programmi
ng solutions in
Asia. Orders for the fourth quarter of 2012 were $3.5 million
resulting in an ending backlog of $0.9 million, compared to $1.0
million at the start of the quarter and $0.8 million on December 31,
2011.  
Net loss in the fourth quarter of 2012, including an Azido software
technology impairment charge of $2.4 million, was $3.4 million, or
($0.43) per share, compared with net income of $3,000 or $0.00 per
diluted share, in the fourth quarter of 2011.  
During the fourth quarter, changes in Azido projects and projected
cash flows, which decreased or eliminated our expected future cash
flows related to Azido technology's use or disposition, resulted in
the impairment charge of $2.4 million, and a write down to a carrying
value of $35,000 at year end. The impairment charge is a non-cash
item. Going forward, we expect to save $200,000 per year in direct
costs and $436,000 per year in amortization related to Azido. 
Due to the continuing weak market conditions and in order to lower
the breakeven revenue point for the Company, we implemented a
restructuring plan primarily reducing headcount in September 2012.
These restructuring actions were substantially completed during the
fourth quarter and combined with other cost control measures resulted
in achieving targeted savings in the fourth quarter operating costs.  
"Q4 was a difficult quarter with performance in all regions below
plan," said Anthony Ambrose, President and Chief Executive Officer.
"We delivered on our spending savings coming out of the September
2012 restructuring actions. The RoadRunner3 combined with Factory
Integration Software (FIS) was a bright spot in 2012, growing
revenues versus 2011. We also won two new automotive customers and
new customers for the FLXHD and FLX500 in Q4."  
"I have personally met with customers, distributors and sales reps
that do business on 4 continents," said Ambrose. "The feedback I
received from them was quite clear. They all have tremendous respect
for our products, service, support, and see us as the clear leader,
the 'gold standard' if you will, in device programming. Both of our
primary markets: Automotive and Wireless/Consumer Electronics are
showing long term growth in the electronics content, and number of
systems produced. These secular trends are favorable for our
business. To capture these exciting opportunities, Data I/O will
focus on developing products and services to target the unique needs
of each market, at the right unit cost, and with the right sales,
support and marketing to compete effectively worldwide and gain
market share. We are focused on a few prioritized development
programs and cost controls everywhere."  
"2013 will be a transition year," said Ambrose. "We have modeled the
second half as stronger than the first half, primarily due to
macro-economic conditions. Our business is highly cyclical, even
within the quarter, with almost 50% of the quarterly revenue shipping
in the last calendar month of the quarter. Through 8 weeks of the
quarter, Q1 2013 is off to a better start for bookings than Q4 2012
and Q1 2012." 
Additional Financial Results 
 Gross margin as a percentage of sales
in the fourth quarter of 2012 was 49.0%, compared with 54.5% in the
fourth quarter of 2011. The gross margin percentage decrease compared
to the fourth quarter of 2011 was primarily due to the impact of
decreased sales volume relative to fixed manufacturing costs.
Partially offsetting the gross margin percentage decrease were lower
cost of direct materials, lower personnel costs resulting from
restructuring actions, lower freight and lower physical inventory
adjustments than in the fourth quarter of 2011. 
Operating expenses decreased by $311,000 in the fourth quarter of
2012 compared to the same period in 2011, excluding restructuring and
impairment charges. Research and
 Development decreased by $45,000 in
the fourth quarter of 2012 compared to the same period in 2011
primarily due to lower personnel costs related to restructuring
actions and fewer project contractors and lower professional fees,
offset in part by more R&D material costs. Selling, General and
Administrative expenses costs declined $266,000 primarily
attributable to lower personnel costs related to restructuring
actions, cost control measures, and lower sales commissions related
to sales volume.  
For the year ended December 31, 2012, revenue decreased 36% to $17.1
million, from $26.7 million in 2011. International revenues were 83%
of total revenue. For the year 2012, the net loss was ($6.4) million,
or ($0.80) per diluted share, compared to net income of $1.1 million,
or $0.11 per diluted share, in 2011. The RoadRunner family revenue
was up 15% and all other product families declined for the year 2012
compared with 2011.  
For the year 2012, gross margin as a percentage of sales was 50.6%,
compared with 57.1% in 2011. The change in gross margin percentage
was primarily due to the impact of decreased sales volume relative to
fixed manufacturing costs. Partially offsetting the gross margin
percentage decrease were lower factory variances and lower labor
costs due to restructuring actions and less engineering costs
associated with software development contracts compared to 2011.  
Operating expenses in 2012 were $760,000 less than in 2011 excluding
restructuring and impairment charges. The primary reductions included
$336,000 lower personnel costs primarily related to restructuring
actions, $734,000 lower costs associated with outside contractors and
consultants, lower sales commissions of $222,000 due to the lower
sales volume, and $232,000 of lower incentive compensation due to the
financial results. Partially offsetting these reductions were CEO
separation and recruiting costs of $475,000, more R&D project
materials, and a full year of Azido amortization and Azido personnel
costs versus eight months in 2011. 
The Company's cash position at December 31, 2012 was $10.5 million,
down from $11.2 million at the start of the quarter, with $2.3
million in the USA and the balance in foreign subsidiaries. The
Company remains debt free and has 7.7 million shares outstanding at
December 31, 2012. 
During the quarter, Anthony Ambrose was named President and CEO,
replacing the retiring Fred Hume. In January, two new board members,
Alan Howe and Mark Gallenberger, were named to the board, replacing
the retiring Steve Quist and William Walker. We would like to thank
Fred, Steve and Bill for their years of service to the Company.  
Conference Call Information 
 A conference call discussing the fourth
quarter and 2012 financial results will follow this release today at
2 p.m. Pacific time/5 p.m. Eastern Time. To listen to the conference
call, please dial (612) 288-0329 passcode: DAIO. A taped replay will
be made available approximately one hour after the conclusion of the
call and will remain available for one week. To access the replay,
please dial (320) 365-3844, access code: 283320. The conference call
will also be simultaneously web cast over the Internet; visit the
News and Events section of the Data I/O Corporation website at
http://www.dataio.com to access the call from the site. This web cast
will be recorded and available for replay on the Data I/O Corporation
website approximately two hours after the conclusion of the
conference call.  
About Data I/O Corporation
 Celebrating 40 years of expertise in
delivering intellectual property to programmable devices, Data I/O
offers complete, integrated manufacturing solutions in wireless,
automotive, programming center, semiconductor, and industrial control
market segments for OEM, ODM, EMS and semiconductor companies. Data
I/O is the leader in programming and provides hardware and software
solutions for turn-key programming and device testing services, as
well as in-system (on-board), in-line (right before use at the SMT
line), or in-socket (off-line) programming. These solutions are
scalable for small, medium and large volume applications with
different device mixes. Data I/O Corporation has headquarters in
Redmond, Wash., with sales and services worldwide. For further
information, visit the company's website at http://www.dataio.com. 
Forward Looking Statement
 Statements in this news release concerning
future results from operations, financial position, economic
conditions, product releases and any other statement that may be
construed as a prediction of future performance or events are
forward-looking statements which involve known and unknown risks,
uncertainties and other factors which may cause actual results to
differ materially from those expressed or
 implied by such statements.
These factors include uncertainties as to levels of orders, ability
to record revenues, market acceptance of new products, changes in
economic conditions and market demand, pricing and other activities
by competitors, and other risks including those described from time
to time in the Company's filings on Forms 10K and 10Q with the
Securities and Exchange Commission (SEC), press releases and other
communications.  


 
                            DATA I/O CORPORATION                            
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
                  (in thousands, except per share amounts)                  
                                (UNAUDITED)                                 
                                                                            
                                  Three Months Ended    Twelve Months Ended 
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
                                                                            
Net Sales                        $   3,735  $   5,723  $  17,085  $  26,666 
Cost of goods sold                   1,906      2,604      8,447     11,431 
                                 ---------  ---------  ---------  --------- 
  Gross margin                       1,829      3,119      8,638     15,235 
Operating expenses:                                                         
  Research and development           1,316      1,361      5,564      5,470 
  Selling, general and                                                      
   administrative                    1,549      1,815      7,450      8,304 
  Impairment charge                  2,358          -      2,358          - 
  Provision for business                                                    
   restructuring                        (7)         -        207          - 
                                 ---------  ---------  ---------  --------- 
    Total operating expenses         5,216      3,176     15,579     13,774 
                                 ---------  ---------  ---------  --------- 
    Operating income (loss)         (3,387)       (57)    (6,941)     1,461 
Non-operating income (expense):                                             
    Interest income                     53         52        291         97 
    Interest expense                     -        (12)         -        (14)
    Foreign currency transaction                                            
     gain (loss)                       (38)        (3)      (106)      (248)
                                 ---------  ---------  ---------  --------- 
    Total non-operating income                                              
     (loss)                             15         37        185       (165)
                                 ---------  ---------  ---------  --------- 
Income (loss) before income                                                 
 taxes                              (3,372)       (20)    (6,756)     1,296 
Income tax (expense) benefit             6         23        327       (233)
                                 ---------  ---------  ---------  --------- 
Net income (loss)                $  (3,366) $       3  $  (6,429) $   1,063 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
Basic earnings (loss) per share  $   (0.43) $       -  $   (0.80) $    0.12 
Diluted earnings (loss) per                                                 
 share                                      $       -             $    0.11 
Weighted-average basic shares        7,742      9,246      7,995      9,181 
Weighted-average diluted shares                 9,312                 9,320 
                                                                            
                                                                            
                            DATA I/O CORPORATION                            
                         CONSOLIDATED BALANCE SHEETS                        
                      (in thousands, except share data)                     
                                                                            
                                                                            
                                                 (unaudited)                
                                                 December 31,   December 31,
                                                     2012           2011    
                                                -------------  -------------
                                                                            
ASSETS                                                                      
CURRENT ASSETS:                                                             
  Cash and cash equivalents                     $      10,528  $      18,120
  Trade accounts receivable, net of allowance                               
   for doubtful accounts of $89 and $115                2,648          4,351
  Inventories                                           4,033          3,964
  Other current assets                                    486            543
                                                -------------  -------------
    TOTAL CURRENT ASSETS                               17,695         26,978
                                                                            
Property, plant and equipment - net                     1,006          1,489
Intangible software technology-net                         35          2,793
Other assets                                               86     
        85
                                                -------------  -------------
    TOTAL ASSETS                                $      18,822  $      31,345
                                                =============  =============
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                        
  Accounts payable                              $         850  $       1,122
  Accrued compensation                                  1,183          1,255
  Deferred revenue                                      1,238          1,464
  Other accrued liabilities                               539            710
  Accrued costs of business restructuring                  25              -
  Income taxes payable                                     23             72
                                                -------------  -------------
    TOTAL CURRENT LIABILITIES                           3,858          4,623
                                                                            
Long-term other payables                                  219            253
                                                                            
COMMITMENTS                                                                 
                                                                            
STOCKHOLDERS' EQUITY                                                        
  Preferred stock -                                                         
      Authorized, 5,000,000 shares, including                               
       200,000 shares of Series A Junior                                    
       Participating Issued and outstanding,                                
       none                                                 -              -
  Common stock, at stated value -                                           
      Authorized, 30,000,000 shares                                         
      Issued and outstanding, 7,741,686 and                                 
       9,207,730 shares                                17,928         23,414
Accumulated earnings (deficit)                         (4,466)         1,963
Accumulated other comprehensive income                  1,283          1,092
                                                -------------  -------------
    TOTAL STOCKHOLDERS' EQUITY                         14,745         26,469
                                                -------------  -------------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $      18,822  $      31,345
                                                =============  =============

  
Contact:
Joel Hatlen
Vice President and Chief Financial Officer
investorrelations@dataio.com 
Data I/O Corporation
6464 185th Ave. NE, Suite 101
Redmond, WA 98052
(425) 881-6444 
 
 
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