Kulicke & Soffa Reports Results for its First Fiscal Quarter 2009

Kulicke & Soffa Industries, Inc. (NASDAQ:KLIC) ("K&S”) today announced results for the quarter ended December 27, 2008. The Company reported net revenue from continuing operations of $37.4 million, and a loss from continuing operations of $18.2 million, or $0.30 per share. This press release contains both GAAP and non-GAAP information.

On a non-GAAP^* basis, the Company reported first quarter net revenue from continuing operations of $37.4 million, and a loss from continuing operation of $22.2 million, or $0.37 per share.

During the quarter, the Company completed the divestiture of its Wire business and accordingly all operating results associated with this business are reported as discontinued operations. The Company also completed the acquisition of Orthodyne Electronics Corporation ("Orthodyne”) during the quarter.

^*Non-GAAP measures exclude: equity-based compensation, contractual commitments for former Test facilities, amortization of intangibles, severance plan, and related tax effects from expenses; debt extinguishment; and settlement of Israel tax assessment from income tax expense (see reconciliations of GAAP results to Non-GAAP measures in the following financial schedules).

Commenting on the results, Scott Kulicke, Chairman and Chief Executive Officer, said, "The rapid deterioration of the global economy last year had a dramatic effect on our first quarter 2009 results. Demand fell across the entire semiconductor industry during the quarter as customers reduced capital equipment purchases to what we believe are below maintenance levels. Visibility into the timing and extent of any upturn remains extremely poor and challenging conditions are expected to persist at least through calendar 2009. We currently expect net revenue for our second fiscal quarter of 2009 to be approximately $30 million, although we believe there is a larger than normal range of possible results because of unusually low visibility.”

"In response to the industry’s present weakness, we have taken aggressive action. In November, we announced a headcount reduction of 240 positions and the cancellation of annual salary increases. In January, we initiated reductions in weekly hours for our direct labor force and significant wage cuts for all other employees. We also announced to our employees that further workforce reductions were forthcoming. The goal of these steps is to preserve the Company’s liquidity position so that we will be able to scale the business when the global economy recovers.”

"We believe the severity of the global economic downturn, and the rapidity with which it emerged, validates the strategic decisions we made over the last several quarters. The divestiture of our Wire business added $149.5 million in cash to our balance sheet before the inclusion of Orthodyne and the repayment of our 0.5% notes due in November, and reduced our working capital requirements. Our cash position permitted us to repurchase $3.0 million of our 1.0% Convertible Subordinated Notes due 2010 at a discount during the first quarter and to tender for the remaining $62 million of these bonds.”

"Although the business environment remains extremely difficult, we continue to make important progress in our technology portfolio. IConn^PS, our new high-performance ball bonder for high-pin count applications, continues to achieve the technical and price performance we anticipated. First units of ConnX^PS, our ball bonder for LED, discrete and low pin-count applications, were sold during the quarter, and the product continues to generate positive feedback from customers. Discovery development is proceeding on schedule. Orthodyne, our recently acquired wedge bonding business unit, concluded an important qualification of its PowerRibbon^TM interconnect solution with a major European automotive supplier of high current power modules. Our product portfolio is strong and this strength will become apparent once the industry recovers.”

Significant Events

A number of significant events occurred during the quarter that impacted our financial statements

• The sale of the Wire business, which resulted in $22.7 million of income (net of tax) from discontinued operations
• The settlement of the Company’s Israel tax audit, which resulted in a $12.2 million tax benefit to net income
• The completion of the acquisition of Orthodyne
• Actions in response to the current economic weakness
  • The reduction of 240 positions in November, resulting in $7.6 million in annualized savings and $2.6 million of severance expense
  • Deferred annual salary increases, which will result in $4.7 million of cost avoidance
  • An equity compensation expense reversal of $1.6 million due to a decrease of estimated percentage attainment for fiscal 2007 and 2008 performance-based restricted stock awards
  • An expense of $2.6 million related to contractual commitments for former Test facilities

Other Financial Details

• Total cash and investments of $175 million
• Subsequent to quarter end, the Company announced a reduction of hours for its direct labor force, cut wages for all salaried employees between 5% -20%, and took other actions, which are expected to generate annual savings of $8.1 million
• Subsequent to quarter end, the Company announced a tender offer for the outstanding portion of its 1.0% Convertible Subordinated Notes due in 2010

Key Product Highlights

• IConn^PS exceeding technical performance parameters
• First sales of ConnX^PS ball bonders
• Over 200 customers attended private demonstration of Discovery at SEMICON Korea; Discovery is on schedule for formal launch at SEMI China, March 2009
• Orthodyne concluded a 2-year joint development project with a major European automotive supplier for the qualification and implementation of its PowerRibbon^TM interconnect solution into high current automotive power modules

Outlook for Second Fiscal Quarter 2009

• Net revenue is expected to be approximately $30 million, although with a larger than normal range of possible results because of unusually low visibility.

Earnings Conference Call Details

A conference call and simultaneous audio webcast will be held today, January 30, 2009 beginning at 9:00 am (ET). Interested parties may call (877) 407-8037 or (201) 689-8037, or they may log on to http://www.kns.com/investors/events for listen-only mode. A replay will be available approximately one hour after the completion of the call by calling toll-free (877) 660-6853 or internationally (201) 612-7415 and using the following replay access codes: 5521 (account number) and 310017 (replay ID number). A replay will also be available on the K&S website at http://www.kns.com/investors/events. The replay will be available via phone and website for a limited period.

Discussion of Non-GAAP Measures

This press release contains non-GAAP financial measures as a supplement to the consolidated financial results presented in accordance with GAAP. The Company believes certain non-GAAP measures provide investors with an additional, useful perspective on the Company’s performance as seen through the eyes of management. Management uses non-GAAP financial measures along with GAAP financial results for: analyzing the performance of the Company’s businesses; strategic and tactical decision making; and determining compensation. The Company does not consider non-GAAP financial measures to be a substitute for, or superior to, financial results presented in accordance with GAAP. All of the non-GAAP financial measures included herein are reconciled to the most directly comparable GAAP results in the following financial statements. These non-GAAP measures may be calculated differently from non-GAAP measures used by other companies. In addition, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and some of the adjustments reflect the exclusion of items that are recurring and will be reflected in the Company’s GAAP financial results for the foreseeable future.

Exclusions from GAAP Results

The Company excludes the following from its GAAP results in presenting non-GAAP financial measures:

- Equity-based compensation expenses. In accordance with Statement of Financial Accounting Standards ("SFAS”) No. 123R, Share Based Payments, the Company recognizes the fair value of its equity-based compensation in expenses. Equity-based compensation consists of common stock, stock options and restricted stock granted under the Company’s equity compensation plans. Equity-based compensation is a non-cash expense that can vary significantly in amount from period to period.

- Other. The exclusion of certain other non-GAAP amounts allows for improved comparisons of the Company’s results to both prior periods and other companies. The Company excludes the following other items from non-GAAP measures as these items are not reflective of the performance of the Company’s ongoing businesses:

• Settlement of Israel tax assessment
• Contractual commitments for former Test facilities
• Severance plan
• Debt extinguishment
• Amortization of intangibles

- Tax Adjustment. Non-GAAP measures are tax adjusted using the GAAP tax rate associated with each quarterly period. The tax rate is calculated by dividing each quarter’s GAAP tax expense by the GAAP net income for that quarter. Non-GAAP year-to-date measures are calculated by summing the associated quarterly non-GAAP measures, without further tax adjustments.

Non-GAAP Measures

The specific non-GAAP measures included herein are gross profit, gross margin, net income, net margin, and EPS. The Company calculates these measures as follows:

- Gross Profit. K&S non-GAAP gross profit excludes the effects of equity-based compensation expense recorded within cost of sales.

- Gross Margin. K&S non-GAAP gross margin excludes the impact of equity-based compensation expense recorded within cost of sales.

- Net Income (loss) and Earnings per Share. K&S non-GAAP net income (loss) and EPS exclude equity-based compensation, contractual commitments for former Test facilities, amortization of intangibles, severance plan and related tax effects from expenses; debt extinguishment; and settlement of Israel tax assessment from income tax expense.

- Net Margin. Non-GAAP net margin reflects the Company’s net margin equity-based compensation, contractual commitments for former Test facilities, amortization of intangibles, severance plan and related tax effects from expenses; debt extinguishment, and settlement of Israel tax assessment from income tax expense.

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ:KLIC) is a global leader in the design and manufacture of semiconductor assembly equipment. As one of the pioneers of the industry, K&S has provided customers with market leading packaging solutions for decades. In recent years K&S has expanded its product offerings through strategic acquisitions, adding die bonding, wedge bonding and a broader range of expendable tools to its core wire bonding products. Combined with its extensive expertise in process technology, K&S is well positioned to help customers meet the challenges of assembling the next-generation semiconductor devices. (www.kns.com)

Caution Concerning Forward Looking Statements

In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are "forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, and include, but are not limited to, statements that relate to global economic conditions, future demand for our products, visibility regarding future demand for our products, future costs and savings associated with headcount and other reductions, our future revenue, liquidity position, sales, profitability, financial results, and product development. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: deteriorating global economic conditions, resulting in, among other things, sharply lower consumer demand for products containing semiconductors and for the Company’s products, and disruption of capital and credit markets;, the risk of failure to successfully manage our operations; the risk of failure to successfully integrate Orthodyne; the risk that anticipated customer orders may not materialize or that orders received may be postponed or canceled, generally without charges; the volatility in the demand for semiconductors and our products and services; the risk that we may not be able to develop and manufacture new products and product enhancements on a timely and cost effective basis; acts of terrorism and violence; risks, such as changes in trade regulations, currency fluctuations, political instability and war, associated with a substantial foreign customer and supplier base and substantial foreign manufacturing operations; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2008 Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Kulicke & Soffa Industries is under no obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.