Orbotech Announces Second Quarter 2011 Results And Updates Earnings Per Share Guidance

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the second quarter and sixth months ended June 30, 2011.

Commenting on the second quarter, Rani Cohen, President and Chief Executive Officer, said: “We recorded a strong quarter, with revenue results on track and improved margins. Demand in the primary industries that we serve remains healthy; and we are pursuing significant additional opportunities within the electronic component manufacturing and other adjacent industries. We have already begun to deploy some of these solutions to touch screen manufacturers. Overall, we are encouraged by the current positive business environment in the electronics industry and believe that we will post a strong second half of 2011.”

The Company’s printed circuit board (“ PCB”) business continues to benefit from strong consumer demand for complex and sophisticated mobile electronic devices such as smart phones, tablets and ultra-thin laptop computers. The growing intricacy of these devices and their embedded components has led to increased demand for Orbotech’s sophisticated manufacturing solutions, especially its laser direct imaging tool. In early July, the Company received acceptance for its new Emerald UV laser drilling system and will recognize initial revenues from this product in the third quarter of 2011.

During the second quarter, the Company delivered its leading flat panel display (“ FPD”) solutions to several major manufacturers in China and received new orders for applications for mobile devices, as well as preliminary indications of new mobile-related investments. The Company is also seeing the emergence of a growing opportunity for sales based on its existing installed base, as manufacturers upgrade existing plants that have older applications with newer, more demanding applications, such as those required for mobile devices.

Revenues for the second quarter of 2011 totaled $153.4 million, compared to $134.2 million in the first quarter of 2011 and $144.9 million in the second quarter of 2010. GAAP net income for the second quarter of 2011 was $18.9 million, or $0.48 per share (diluted), compared to GAAP net income of $11.2 million, or $0.31 per share (diluted) for the first quarter of 2011 and GAAP net income of $12.4 million, or $0.35 per share (diluted), in the second quarter of 2010. GAAP net income from continuing operations for the second quarter of 2011 was $17.6 million, or $0.45 per share (diluted), compared to GAAP net income from continuing operations of $11.1 million, or $0.30 per share (diluted) for the first quarter of 2011 and GAAP net income from continuing operations of $14.1 million, or $0.39 per share (diluted), in the second quarter of 2010.

Revenues for the first six months of 2011 totaled $287.6 million, compared to $244.9 million recorded in the first six months of 2010. GAAP net income for the first six months of 2011 was $30.1 million, or $0.80 per share (diluted), compared to a GAAP net income of $14.0 million, or $0.39 per share (diluted), in the first six months of 2010. GAAP net income from continuing operations for the first six months of 2011 was $28.7 million, or $0.76 per share (diluted), compared to GAAP net income from continuing operations of $17.6 million, or $0.49 per share (diluted) for the first six months of 2010.

Non-GAAP net income from continuing operations for the second quarter of 2011 was $21.8 million, or $0.56 per share (diluted), compared to non-GAAP net income from continuing operations of $18.8 million, or $0.52 per share (diluted), in the second quarter of 2010. Non-GAAP net income for the first six months of 2011 was $37.0 million, or $0.98 per share (diluted), compared to non-GAAP net income of $27.3 million, or $0.76 per share (diluted), in the first six months of 2010. A reconciliation of each of the Company’s non-GAAP measures to the comparable GAAP measure is included at the end of this press release.

Sales of equipment to the PCB industry were $58.8 million in the second quarter of 2011, compared to $57.1 million in the first quarter of 2011, and $41.5 million in the second quarter of 2010. Sales of equipment to the FPD industry were $56.6 million in the second quarter of 2011, compared to $43.2 million in the first quarter of 2011, and $72.5 million in the second quarter of last year. Sales of character recognition products were $1.6 million in the second quarter of 2011, compared to $1.4 million in the first quarter of 2011, and $1.6 million recorded in the second quarter of 2010. In addition, service revenue for the second quarter of 2011 reached a record $36.4 million, compared to $32.5 million in the first quarter of 2011, and $29.4 million in the second quarter of 2010.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $296.5 million; and debt of $112.0 million, compared with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $195.1 million; and debt of $120.0 million at the end of the first quarter of 2011. The Company generated cash of $22.4 million from continuing operations in the second quarter of 2011; as well as approximately $90.7 million net from the issuance and sale of 7,705,000 Ordinary Shares in the public offering which was launched on May 18, and consummated on May 31, 2011. The weighted average number of Ordinary Shares used in the computation of the Company’s earnings per share for each period is included in the financial statements included as part of this press release. As at June 30, 2011, the number of Ordinary Shares outstanding was approximately 43.1 million. The estimated average number of Ordinary Shares anticipated for 2011 for purposes of the Company’s 2011 per share guidance is 41.2 million after taking into account the public offering completed during the second quarter. With the completion of this public offering, the Company has accomplished its capital raising goals for the foreseeable future.

The Company has completed the disposal of its discontinued operations and does not anticipate future material income or other adjustments related to such business.

An earnings conference call for the Company’s second quarter 2011 results is scheduled for Monday, August 1, 2011, at 9:00 a.m. EDT. The dial-in number for the conference call is 212-287-1850, and a replay will be available on telephone number 203-369-3959 until August 14, 2011. The pass code is Q2. A live web cast of the conference call and a replay can also be heard by accessing the investor relations section on the Company’s website at www.orbotech.com.

About Orbotech Ltd.

Orbotech Ltd. (NASDAQ/GSM: ORBK) has been at the cutting edge of the electronics industry supply chain, as an innovator of enabling technologies used in the manufacture of the world’s most sophisticated consumer and industrial products, for over 30 years. The Company is a leading provider of yield-enhancing and production solutions, primarily for manufacturers of printed circuit boards and flat panel displays; and today, virtually every electronic device is produced using Orbotech technology. The Company also applies its core expertise and resources in other advanced technology areas, including character recognition for check and forms processing and solar photovoltaic manufacturing. Headquartered in Israel and operating from multiple locations internationally, Orbotech’s highly talented and inter-disciplinary professionals design, manufacture, sell and service the Company’s end-to-end portfolio of solutions for the benefit of customers the world over. For more information visit www.orbotech.com.

Cautionary Statement Regarding Forward-Looking Statements and Non-GAAP Financial Measures

Except for historical information, the matters discussed in this press release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future prospects, developments and business strategies and involve certain risks and uncertainties. The words “anticipate,” “believe,” “could,” “will,” “plan,” “expect” and “would” and similar terms and phrases, including references to assumptions, have been used in this press release to identify forward-looking statements. These forward-looking statements are made based on management’s expectations and beliefs concerning future events affecting Orbotech and are subject to uncertainties and factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s control. Many factors could cause the actual results to differ materially from those projected including, without limitation, cyclicality in the industries in which the Company operates, the Company’s production capacity, timing and occurrence of product acceptance, worldwide economic conditions generally, especially in the industries in which the Company operates, the timing and strength of product and service offerings by the Company and its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis, the level of consumer demand for sophisticated devices such as smartphones, tablets and other electronic devices, the impact of the recent events in Japan and other risks detailed in the Company’s SEC reports, including the Company’s Annual Report on Form 20-F for the year ended December 31, 2010. The Company assumes no obligation to update the information in this press release to reflect new information, future events or otherwise, except as required by law.

Non-GAAP net income, non-GAAP net income from continuing operations and non-GAAP net income from continuing operations per share detailed in the Reconciliation exclude charges, income or losses, as applicable, related to one or more of the following: (i) equity-based compensation expenses; (ii) certain items associated with acquisitions, including amortization and impairment of intangibles; and/or (iii) our discontinued operations. Management uses these non-GAAP measures to evaluate the Company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Orbotech believes that these measures enhance investors’ ability to review the Company’s business from the same perspective as the Company’s management and facilitate comparisons with results for prior periods. The presentation of this additional non-GAAP information should not be considered in isolation or as a substitute for net income , net income attributable to Orbotech Ltd. or earnings per share prepared in accordance with GAAP, and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures please see the Reconciliation.

To supplement the Company’s financial results presented on a GAAP basis, the Company uses the non-GAAP measures indicated in the Reconciliation, which exclude equity based compensation expenses, amortization of intangible assets, in-process research and development charges and impairment and restructuring charges, as well as certain financial expenses and non-recurring income items that are believed to be helpful in understanding and comparing past operating and financial performance with current results. However, the non-GAAP measures presented are subject to limitations as an analytical tool because they do not include certain recurring items as described below and because they do not reflect certain cash expenditures that are required to operate the Company’s business, such as interest expense and taxes. Accordingly, these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. Management regularly utilizes supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company’s business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects.

The effect of equity-based compensation expenses has been excluded from the non-GAAP measures. Although equity-based compensation is a key incentive offered to employees, and the Company believes such compensation contributed to the revenues earned during the periods presented and also believes it will contribute to the generation of future period revenues, the Company continues to evaluate its business performance excluding equity based compensation expenses. Equity-based compensation expenses will recur in future periods.

The effects of amortization of intangible assets have also been excluded from the measures. This item is inconsistent in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well. Amortization of intangible assets will recur in future periods and the Company may be required to record additional impairment charges in the future. The Company believes that it is useful for investors to understand the effects of these items on total operating expenses. For more information about these items, see the Reconciliation and the Company’s Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2010.
 
ORBOTECH LTD.CONDENSED CONSOLIDATED BALANCE SHEETSAT JUNE 30, 2011
      June 302 0 1 1   December 312 0 1 0
U. S. dollars in thousands

A s s e t s
 

CURRENT ASSETS:
Cash and cash equivalents 233,522 179,503
Short-term bank deposits 62,967 2,780
Accounts receivable:
Trade 184,300 153,518
Other 30,269 29,919
Deferred income taxes 5,900 5,913
Inventories 122,733 112,812
Assets of discontinued operations 120 12,351

T o t a l  current assets
639,811 496,796
 

INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities 2,549
Funds in respect of employee rights upon retirement 13,230 13,017
Deferred income taxes 11,116 12,679
Other long-term investments 1,469 29
25,815 28,274
 

PROPERTY, PLANT AND EQUIPMENT, net
23,370 24,842
 

GOODWILL
12,034 12,034
 

OTHER INTANGIBLE ASSETS, net
60,253 66,395
   
761,283 628,341
 
 

Liabilities and equity
 
CURRENT LIABILITIES:
Current maturities of long-term bank loan 32,000 32,000
Accounts payable and accruals:
Trade 52,647 26,535
Other 51,366 55,290
Deferred income 28,032 24,421
Liabilities of discontinued operations 44 2,172

T o t a l  current liabilities
164,089 140,418
 

LONG-TERM LIABILITIES:
Long-term bank loan 80,000 96,000
Liability for employee rights upon retirement 27,963 27,501
Deferred income taxes 1,909 2,188
Other tax liabilities 15,157 12,679

T o t a l  long-term liabilities
125,029 138,368
   

T o t a l  liabilities
289,118 278,786

 

EQUITY:
Share capital 2,086 1,758
Additional paid-in capital 268,812 174,940
Retained earnings 256,895 226,809
Accumulated other comprehensive income (272) 1,454
527,521 404,961

Less treasury shares, at cost
(57,192) (57,192)

T o t a l  Orbotech Ltd. shareholders' equity
470,329 347,769
Non-controlling interest 1,836 1,786

T o t a l  equity
472,165 349,555
   
761,283 628,341
 
 
ORBOTECH LTD.CONDENSED CONSOLIDATED STATEMENTS OF INCOMEFOR THE SIX MONTH PERIOD ENDED JUNE 30, 2011
 
     

6  m o n t h s  e n d e dJ u n e  3 0
   

3  m o n t h s  e n d e dJ u n e  3 0
    12 monthsendedDecember 31
2 0 1 1   2 0 1 0 2 0 1 1   2 0 1 0 2 0 1 0
U.S. dollars in thousands (except per share data)
 

REVENUES
287,616 244,887 153,405 144,900 529,355
 

COST OF REVENUES
167,730 142,212 89,214 84,311 312,901
         

GROSS PROFIT
119,886 102,675 64,191 60,589 216,454
 

RESEARCH AND DEVELOPMENT COSTS - net
41,250 37,010 21,021 19,900 78,327
 

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES
35,756 32,089 18,402 17,580 66,264
 

AMORTIZATION OF INTANGIBLE ASSETS
6,142 7,088 3,071 3,544 14,176
         

OPERATING INCOME
36,738 26,488 21,697 19,565 57,687
 

FINANCIAL EXPENSES- net
3,896 4,533 1,773 2,142 7,284
         

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
32,842 21,955 19,924 17,423 50,403
 

TAXES ON INCOME
4,119 4,380 2,289 3,382 7,397
         

NET INCOME FROM CONTINUING OPERATIONS
28,723 17,575 17,635 14,041 43,006
 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 (3,600) 1,255 (1,660) (8,717)
         

NET INCOME
30,086 13,975 18,890 12,381 34,289
 

NET INCOME (LOSS) ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST
(35) (18) 144
         

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
30,086 14,010 18,890 12,399 34,145
 

AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:

INCOME FROM CONTINUING OPERATIONS
28,723 17,610 17,635 14,059 42,862
 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 (3,600) 1,255 (1,660) (8,717)
         

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
30,086 14,010 18,890 12,399 34,145
 
 

EARNINGS PER SHARE:

INCOME FROM CONTINUING OPERATIONS:

BASIC
$0.78 $0.51 $0.46 $0.40 $1.23
 

DILUTED
$0.76 $0.49 $0.45 $0.39 $1.20
 

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC
$0.82 $0.40 $0.50 $0.36 $0.98
 

DILUTED
$0.80 $0.39 $0.48 $0.35 $0.95
 
 

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION

OF EARNINGS PER SHARE - IN THOUSANDS:

BASIC
36,618 34,859 37,969 34,888 34,911
 

DILUTED
37,731 35,829 38,967 35,904 35,778
 
               
ORBOTECH LTD.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTH PERIOD ENDED JUNE 30, 2011
 
 

6  m o n t h s  e n d e dJ u n e  30

3  m o n t h s  e n d e dJ u n e  30
12 monthsendedDecember 31
2 0 1 1 2 0 1 0 2 0 1 1 2 0 1 0 2 0 1 0
U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
 
Net income 30,086 13,975 18,890 12,381 34,289
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Loss (income) from discontinued operations (1,363) 3,600 (1,255) 1,660 8,717
Depreciation and amortization 9,978 12,035 4,888 6,085 23,665
Compensation relating to equity awards granted to
employees and others - net 2,137 2,564 1,080 1,188 4,725
Increase (decrease) in liability for employee rights upon retirement 462 191 825 (415) 2,589
Deferred income taxes 1,297 1,484 17 (40) (3,866)
Loss (gain) from sales and write down of marketable securities 395 (46) 238 1,252
Other, including capital loss (gain) 46 46 (5) (1,147)
Increase in accounts receivable:
Trade (30,782) (31,292) (18,988) (23,196) (5,755)
Other (403) (1,369) 681 (1,148) (4,673)
Increase (decrease) in accounts payable and accruals:
Trade 26,112 17,074 20,385 10,308 1,434
Deferred income and other 2,245 (292) 4,176 3,053 15,870
Increase in inventories (9,921) (7,656) (8,545) (3,676) (19,018)
Net cash provided by operating activities - continuing operations 30,289 10,268 22,438 6,195 58,082
Net cash used in operating activities - discontinued operations (740) (5,743) (1,604) (3,227) (8,972)
Net cash provided by operating activities 29,549 4,525 20,834 2,968 49,110
 

CASH FLOWS FROM INVESTING ACTIVITIES:
 
Purchase of property, plant and equipment (2,385) (2,229) (1,136) (1,509) (6,752)
Placement of bank deposits (60,000) (60,000) (2,780)
Sales of marketable securities 1,967 627 6,742
Other investment (1,500) (1,500)
Proceeds from disposal of property, plant and equipment 35 35 20
Decrease (increase) in funds in respect of employee
rights upon retirement (213) (10) (280) 447 (617)
Net cash used in investing activities - continuing operations (62,096) (2,239) (62,254) (1,062) (3,387)
Net cash provided by (used in) investing activities - discontinued operations 9,155 45   50 (268)
Net cash used in investing activities (52,941) (2,194) (62,254) (1,012) (3,655)
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
Repayment of long-term bank loan (16,000) (16,000) (8,000) (8,000) (32,000)
Employee stock options excercised 1,430 57 363 57 902
Proceeds from issuance of shares, net 90,683 90,683
Acquisition of non-controlling interest   (511)   (511) (511)
Net cash provided by (used in) financing activities 76,113 (16,454) 83,046 (8,454) (31,609)
         
Currency translation adjustments on cash and cash equivalents

 
(176) (26) 2 (220)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 52,721 (14,299) 41,600 (6,496) 13,626
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 180,859 167,233 191,980 159,430 167,233
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD 233,580 152,934 233,580 152,934 180,859
 
LESS - CASH AND CASH EQUIVALENTS OF DISCONTINUED
OPERATIONS AT END OF PERIOD 58 600 58 600 1,356
CASH AND CASH EQUIVALENTS OF CONTINUING          
OPERATIONS AT END OF PERIOD 233,522 152,334 233,522 152,334 179,503
 
 
ORBOTECH LTD.RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONSFOR THE SIX MONTH PERIOD ENDED JUNE 30, 2011
                 
 

6  m o n t h s  e n d e dJ u n e  3 0

3  m o n t h s  e n d e dJ u n e  3 0
12 monthsendedDecember 31
2 0 1 1 2 0 1 0 2 0 1 1 2 0 1 0 2 0 1 0
U.S. dollars in thousands (except per share data)
 
 

Reported net income attributable to Orbotech Ltd. on GAAP basis
30,086 14,010 18,890 12,399 34,145
 
Non-operating income (expenses):
Financial expenses - net (3,896) (4,533) (1,773) (2,142) (7,284)
Taxes on income (4,119) (4,380) (2,289) (3,382) (7,397)
Net loss (income) attributable to the non-controlling interest 35 18 (144)
Income (loss) from discontinued operations* 1,363 (3,600) 1,255 (1,660) (8,717)
(6,652) (12,478) (2,807) (7,166) (23,542)
         
 
Reported operating income on GAAP basis 36,738 26,488 21,697 19,565 57,687
 
Equity based compensation expenses 2,137 2,564 1,080 1,188 4,725
Amortization of intangible assets 6,142 7,088 3,071 3,544 14,176
Non-GAAP operating income 45,017 36,140 25,848 24,297 76,588
 
Non-operating expenses (6,652) (12,478) (2,807) (7,166) (23,542)
Income (loss) from discontinued operations* 1,363 (3,600) 1,255 (1,660) (8,717)
         

Non-GAAP net income from continuing operations
37,002 27,262 21,786 18,791 61,763
 
Non-GAAP earnings per diluted share $0.98 $0.76 $0.56 $0.52 $1.73
 
Shares used in earnings per diluted share calculation-in thousands 37,731 35,829 38,967 35,904 35,778
 
 
* The loss from discontinued operations, net of tax, was attributable to the re-classification during 2010 of OMS and OMD as discontinued operations.
 

Copyright Business Wire 2010

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