Data I/O announces third quarter financial results.

REDMOND, Wash.--(BUSINESS WIRE)--Oct. 23, 1995--Data I/O Corporation (NASDAQ: DAIO) today announced financial results for the third quarter ended September 28, 1995.

Net income, excluding a non-recurring, acquisition-related charge, increased by 13% to $904,000 compared with net income of $797,000 in the same period of 1994. Earnings per share, prior to the non-recurring charge, remained unchanged from the prior year at $0.11 per share, as weighted average shares outstanding have increased by approximately 8% since the end of the third quarter of 1994.

Net income and earnings per share were negatively affected in the third quarter of 1995 by $660,000, net of tax, for the write-off of in-process research and development costs associated with the previously announced Reel-Tech acquisition. Including this charge, net income for the quarter was $244,000, or $0.03 per share.

For the first nine months of 1995, net income prior to the non-recurring charge increased to $3.2 million or $0.41 per share compared with net income of $1.2 million or $0.16 per share in 1994. Results for 1995 were favorably affected by certain tax benefits which improved net income, excluding the non-recurring charge, by approximately $154,000 or $0.02 per share, in the third quarter and $566,000, or $0.07 per share, for the first nine months.

Revenues of $15.6 million for the third quarter of 1995 were approximately equal to those in the third quarter of 1994, however, orders increased by 10% over the same period. Revenues in 1995 were positively affected by the weaker dollar in relation to the German Mark compared with 1994. Revenues from non-automated programmer product lines declined by approximately 7% in the third quarter of 1995 compared with those in the same period of 1994.

Increased revenues for the Company's lower-priced, non-automated programmer offerings partially offset declines from its higher-priced, non-automated programmer lines. "We are successfully penetrating the entry-level programmer market in both the non-automated, engineering and manufacturing environments. Introduced this month, the 2700 programmer is our new offering for the engineering segment and the PSX400 was introduced in October of 1994 for the low-cost manufacturing segment of our business," stated Bill Erxleben, President and CEO.

Revenue declines in the non-automated programmer market were offset by increased revenues for Data I/O's ProMaster automated programming and handling system product line designed for higher throughput manufacturing applications. In the third quarter, revenues for such systems were up by 17% over the year-earlier period while orders increased by approximately 51%.

In the third quarter of 1995, ProMaster automated programming and handling systems accounted for approximately 30 percent of total revenues, compared with 25 percent in the third quarter of 1994. "During the quarter, we experienced continued demand for automated programming and handling systems," said Erxleben.

"We believe that the investments we have made in this market over the past four years are being validated as this product line continues to be an increasingly important contributor to Data I/O's growth and profitability," he continued.

As previously announced, the Company shipped its first ProMaster 9500 automated programming and handling system in the first quarter of 1995. These top-of-the-line systems sell for approximately $500,000 per unit. The ProMaster 9500 is designed to program, test, handle, and mark extremely delicate "fine-pitch" integrated circuits (ICs) in high-volume manufacturing environments.

During the third quarter, the Company shipped two ProMaster 9500 units. In addition, the Company received orders for three more units during the quarter, bringing the total backlog for ProMaster 9500s to five units or approximately $2.5 million. However, due to the complexity of designing and manufacturing this new product, the timing of shipment of these units is uncertain. Due to the high, per-unit, selling price of the 9500, compared with the Company's other products, the timing of shipments of these units will have a meaningful impact on quarterly revenue and net income.

Revenues for design software increased by approximately 5% in the third quarter of 1995 compared with the same period of 1994. This is due to the continuing year-over-year increase in revenues for the Company's Synario product line which grew by 82% compared with the prior year. The growth of Synario was substantially offset by reductions in revenues for the Company's older software product offerings including FutureNet, which the Company discontinued selling in 1995, and ABEL. Revenues for the Synario product line now compromise approximately 50% of the total design software revenues compared with approximately 25% in the third quarter of 1994.

Gross margin as a percent of sales declined 2.7 percentage points from the levels recorded in 1994 due to lower product margins which offset improvements caused by the positive currency effects of a weaker dollar. The shift in mix of product revenues from higher-priced and higher-margin, non-automated programmers to lower-priced alternatives has lowered overall product gross margins.

In addition, the gross margin on the ProMaster 9500 was below that of traditional handlers due to high material and labor costs. The Company expects these costs to decline in future periods due to the acquisition of Reel-Tech, Inc. and anticipated improvements in the proficiency of manufacturing and service personnel in building and servicing this system. Operating expenses in the third quarter, excluding the non-recurring, acquisition-related charge, were down by approximately 2% due to declines in research and development costs which offset increases in selling, general and administrative expenditures.

Founded in 1972, Data I/O Corporation is the world leading provider of programming and handling equipment for design through manufacturing of programmable integrated circuits (ICs). The Company is also a leader in Windows EDA (electronic design automation) software, providing superior broadline design solutions based on tightly integrated best-of-class point tools. In addition, in 1995 Data I/O created its Indianapolis Semiconductor Division after acquiring Reel-Tech, Inc., a technology leader in the semiconductor component transportation and marketing arena. The company, which is publicly traded (NASDAQ: DAIO), is headquartered in Redmond, Wash., and has sales and service offices worldwide. -0-

                           DATA I/O CORPORATION
                    COMPARATIVE STATEMENTS OF EARNINGS
                   (in thousands except per share data)

                            Third Quarter          Nine Months Ended
                                        Percent                Percent
                       9/28/95  9/29/94  Change 9/28/95 9/29/94 Change

Net sales              $15,648 $15,620   0.2%  $47,982 $46,154   4.0%
Gross margin             7,985   8,381  -4.7%   25,625  24,169   6.0%
Gross margin as
 % of sales              51.0%   53.7%  -2.7%    53.4%   52.4%   1.0%

Operating expenses:

 Research & development  2,019   2,437 -17.2%    6,749   6,885  -2.0%
 Selling, general and
  administrative         4,870   4,583   6.3%   14,942  15,011  -0.5%
 In-process research &
  development              825       0     --      825       0     --
Operating income           271   1,361  -80.1%   3,109   2,273  36.8%
Non-operating (income)expense:
 Interest, net            (47)       9     --    (116)     114     --
 Foreign currency exchange   6    (12)     --        7     (5)     --
Income before taxes        312   1,364  -77.1%   3,218   2,164  48.7%
Income tax expense          68     567  -88.0%     644     979 -34.2%

Net income                $244    $797  -69.4%  $2,574  $1,185 117.2%

Earnings per share:
 Net income              $0.03   $0.11      --   $0.32   $0.16    --
 Weighted average common
   shares outstanding    8,045   7,422      --   7,947   7,374    --

                           CONDENSED BALANCE SHEET
                               (in thousands)

                                        Sept. 28        Dec. 29
                                          1995            1994

Cash and cash equivalents             $   8,488       $   7,279
Accounts receivable, net                 11,861          10,145
Inventories                               8,462           6,937
Current deferred tax asset and other
 assets                                   1,648           2,489
Land, building and equipment             10,194          10,737
Land held for resale                      2,074           2,006
Other long-term assets                    4,836           3,894
           Total assets               $  47,563       $  43,487

Current liabilities, excluding
 current portion of funded debt       $  16,525       $  16,372
Total funded debt                         1,921           1,940
Long-term deferred income tax               219             471
Other long-term payables                  1,105             361
Shareholders' equity                     27,793          24,343
   Total liabilities and shareholders'
     equity                           $  47,563       $  43,487

CONTACT: Data I/O

Steven M. Gordon, 206/881-6444 Ext. 2224