Orbotech Announces Fourth Quarter And Full Year Results For 2011 And Preliminary 2012 Guidance

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the fourth quarter and year ended December 31, 2011; and is providing preliminary guidance for 2012.

Commenting on the results, Rani Cohen, President and Chief Executive Officer, said: “With the posting of our fourth quarter results we are pleased to report record annual revenues for Orbotech in 2011, as well as strong cash flow and net income. During the year we saw healthy growth in the global demand for sophisticated devices such as smartphones, tablets and other mobile connected devices. This trend helped us achieve 30% year over year growth in our PCB business, including touch screen and other electronics component manufacturing which has added considerably to our total available market, confirming our industry leadership. Orbotech enters 2012 with an outstanding product portfolio and we believe we are well positioned to capitalize on the continuing upswing in these industries, where our equipment is becoming increasingly critical to manufacturers. At the same time, capital expenditure in the FPD industry is in the midst of a significant downturn; however, we expect that it will improve in the latter part of 2012 and have taken steps to align our infrastructure accordingly, which will result in a charge of approximately $2 million in the first quarter of 2012. Overall, we look forward to a gradual recovery in the FPD industry during 2012 and to continued improvement in our PCB and electronics component manufacturing business.”

Revenues for the fourth quarter of 2011 totaled $133.3 million, compared to $144.4 million in the third quarter of 2011 and $128.4 million in the fourth quarter of 2010. GAAP net income for the fourth quarter of 2011 was $2.5 million, or $0.06 per share (diluted), compared to GAAP net income of $14.7 million, or $0.34 per share (diluted), for the third quarter of 2011 and GAAP net income of $4.0 million, or $0.11 per share (diluted), in the fourth quarter of 2010. Net income for the fourth quarter of 2011 includes a write-down of $6.7 million of inventories relating primarily to excess inventories of components for certain of our FPD products in connection with the current cyclical downturn in the FPD industry.

Revenues for the year ended December 31, 2011 totaled $565.3 million, compared to $529.4 million in 2010. GAAP net income for the year ended December 31, 2011 was $47.3 million, or $1.16 per share (diluted), compared to a GAAP net income of $34.1 million, or $0.95 per share (diluted), in 2010. Net income for the year ended December 31, 2011 includes a write-down of $6.7 million.

Non-GAAP net income from continuing operations for the fourth quarter of 2011 was $6.5 million, or $0.15 per share (diluted), compared to non-GAAP net income from continuing operations of $10.7 million, or $0.30 per share (diluted), in the fourth quarter of 2010.

Non-GAAP net income from continuing operations for the year ended December 31, 2011 was $62.2 million, or $1.52 per share (diluted), compared to non-GAAP net income from continuing operations of $61.8 million, or $1.73 per share (diluted), for the year ended December 31, 2010. Non-GAAP net income for the year ended December 31, 2011 includes a write-down of $6.7 million, as noted above. 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.

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 December 31, 2011, the number of Ordinary Shares outstanding was approximately 43.3 million. The average number of Ordinary Shares for 2011 for purposes of the Company’s 2011 earning per share calculation is 40.8 million compared to average number of Ordinary Shares for 2010 of 35.8 million.

Sales of equipment to the PCB industry were $52.6 million in the fourth quarter of 2011, compared to $56.6 million in the third quarter of 2011, and $50.1 million in the fourth quarter of 2010. Sales of equipment to the FPD industry were $42.6 million in the fourth quarter of 2011, compared to $49.6 million in the third quarter of 2011, and $42.7 million in the fourth quarter of last year. Sales of character recognition products were $2.1 million in the fourth quarter of 2011, compared to $1.8 million in the third quarter of 2011, and $2.5 million recorded in the fourth quarter of 2010.

In addition, service revenue for the fourth quarter of 2011 was $36.0 million, compared to $36.4 million in the third quarter of 2011, and $33.1 million in the fourth quarter of 2010.

The Company completed the quarter with cash, cash equivalents and short-term bank deposits of approximately $296.5 million; and debt of $96.0 million, compared with cash, cash equivalents and short-term bank deposits of approximately $288.8 million; and debt of $104.0 million at the end of the third quarter of 2011.

An earnings conference call for the Company’s fourth quarter 2011 results is scheduled for Monday, February 13, 2012, at 9:00 a.m. EST. The dial-in number for the conference call is 630-395-0298, and a replay will be available on telephone number 203-369-0806 until February 27, 2012. The pass code is Q4. 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, flat panel displays and other electronic components; 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 please see the Company’s filings with the U.S. Securities and Exchange Commission at www.sec.gov. and visit the Company’s corporate website at www.orbotech.com. The corporate website is not incorporated herein by reference and is included as an inactive textual reference only.

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 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. The reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures are set forth below. For a detailed explanation of the adjustments made to comparable GAAP 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 exclude recurring items (such as equity compensation and amortization of intangible assets) 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 SHEETS
AT DECEMBER 31, 2011
   
December 31 December 31

2011

2010
U. S. dollars in thousands

Assets
 

CURRENT ASSETS:
Cash and cash equivalents 151,237 179,503
Short-term bank deposits 145,292 2,780
Accounts receivable:
Trade 196,232 153,518
Other 26,163 29,919
Deferred income taxes 6,580 5,913
Inventories 105,109 112,812
Assets of discontinued operations   12,351  

Total current assets
630,613   496,796  
 

INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities 2,549
Funds in respect of employee rights upon retirement 11,846 13,017
Deferred income taxes 8,999 12,679
Other long-term investments 2,426   29  
23,271   28,274  
 

PROPERTY, PLANT AND EQUIPMENT, net
26,664   24,842  
 

GOODWILL
12,444   12,034  
 

OTHER INTANGIBLE ASSETS, net
54,491   66,395  
   
747,483   628,341  
 
 

Liabilities and equity
 

CURRENT LIABILITIES:
Current maturities of long-term bank loan 32,000 32,000
Accounts payable and accruals:
Trade 32,357 26,535
Other 57,590 55,290
Deferred income 25,910 24,421
Liabilities of discontinued operations   2,172  

Total current liabilities
147,857 140,418
 

LONG-TERM LIABILITIES:
Long-term bank loan 64,000 96,000
Liability for employee rights upon retirement 26,797 27,501
Deferred income taxes 1,759 2,188
Other tax liabilities 16,938   12,679  

Total long-term liabilities
109,494 138,368
   

Total liabilities
257,351   278,786  
 

EQUITY:
Share capital 2,092 1,758
Additional paid-in capital 270,966 174,940
Retained earnings 274,148 226,809

Accumulated other comprehensive income (loss)
(1,460 ) 1,454  
545,746 404,961
Less treasury shares, at cost (57,192 ) (57,192 )

Total Orbotech Ltd. shareholders' equity
488,554 347,769
Non-controlling interest 1,578   1,786  

Total equity
490,132   349,555  
   
747,483   628,341  
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
       

12 months ended

3 months ended

December 31

December 31

2011
 

2010

2011
 

2010
U.S. dollars in thousands (except per share data)
 

REVENUES
565,313 529,355 133,333 128,376
 

COST OF REVENUES
329,442 312,901 78,037 80,646
 

WRITE- DOWN OF INVENTORIES
6,743 6,743
       

GROSS PROFIT
229,128 216,454 48,553 47,730
 

RESEARCH AND DEVELOPMENT COSTS - net
84,180 78,327 21,598 21,081
 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
72,583 66,264 18,894 16,339
 

AMORTIZATION OF INTANGIBLE ASSETS
12,304 14,176 3,091 3,544
       

OPERATING INCOME
60,061 57,687 4,970 6,766
 

FINANCIAL EXPENSES - net
6,551 7,284 845 1,295
       

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
53,510 50,403 4,125 5,471
 

TAXES ON INCOME
7,677 7,397 1,855 (630 )
       
45,833 43,006 2,270 6,101
 

SHARE IN LOSSES OF ASSOCIATED COMPANY
179 70
       

NET INCOME FROM CONTINUING OPERATIONS
45,654 43,006 2,200 6,101
 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 (8,717 ) (1,989 )
       

NET INCOME
47,017 34,289 2,200 4,112
 

NET INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
(322 ) 144 (347 ) 126
       

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
  47,339     34,145     2,547     3,986  
 

AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:

INCOME FROM CONTINUING OPERATIONS
45,976 42,862 2,547 5,975
 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 (8,717 ) 0 (1,989 )
       

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
  47,339     34,145     2,547     3,986  
 
 

EARNINGS PER SHARE:

INCOME FROM CONTINUING OPERATIONS:

BASIC
$ 1.15   $ 1.23   $ 0.06   $ 0.17  
 

DILUTED
$ 1.13   $ 1.20   $ 0.06   $ 0.17  
 

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC
$ 1.19   $ 0.98   $ 0.06   $ 0.11  
 

DILUTED
$ 1.16   $ 0.95   $ 0.06   $ 0.11  
 
 

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION OF EARNINGS PER SHARE - IN THOUSANDS:

BASIC
  39,909     34,911     43,261     35,023  
 

DILUTED
  40,816     35,778     43,966     35,754  
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2011
       

12 months ended

3 months ended

December 31

December 31

2011

2010

2011

2010
U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
 
Net income 47,017 34,289 2,200 4,112

Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Loss (income) from discontinued operations (1,363 ) 8,717 1,989
Depreciation and amortization 19,958 23,665 4,885 5,880

Compensation relating to equity awards granted to employees and others - net
3,728 4,725 813 1,150
Increase (decrease) in liability for employee rights upon retirement (704 ) 2,589 (650 ) 57
Deferred income taxes 2,584 (3,866 ) 249 (4,315 )
Loss from sales and write down of marketable securities 395 1,252 332
Other, including capital loss (gain) 1,224 (1,147 ) 155 (817 )
Decrease (increase) in accounts receivable:
Trade (42,714 ) (5,755 ) 771 28,210
Other 2,698 (4,673 ) 1,577 1,490
Increase (decrease) in accounts payable and accruals:
Trade 5,822 1,434 (7,449 ) (21,429 )
Deferred income and other 6,105 15,870 352 3,037
Decrease (increase) in inventories 6,870   (19,018 ) 14,986   2,440  
Net cash provided by operating activities - continuing operations 51,620 58,082 17,889 22,136
Net cash used in operating activities - discontinued operations (787 ) (8,972 ) (47 ) (1,913 )
Net cash provided by operating activities 50,833   49,110   17,842   20,223  
 

CASH FLOWS FROM INVESTING ACTIVITIES:
 
Purchase of property, plant and equipment (7,554 ) (6,752 ) (2,366 ) (3,246 )
Placement of bank deposits (142,325 ) (2,780 ) (15,025 ) (2,780 )
Sales of marketable securities 1,967 6,742 0 0
Other investment (2,810 ) (500 )
Proceeds from disposal of property, plant and equipment 35 20 0 (1 )
Decrease (increase) in funds in respect of employee 0
rights upon retirement 331   (617 ) 344   7  
Net cash used in investing activities - continuing operations (150,356 ) (3,387 ) (17,547 ) (6,020 )
Net cash provided by (used in) investing activities - discontinued operations 9,155   (268 ) 0   (162 )
Net cash used in investing activities (141,201 ) (3,655 ) (17,547 ) (6,182 )
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
Repayment of long-term bank loan (32,000 ) (32,000 ) (8,000 ) (8,000 )
Employee stock options excercised 2,063 902 414 833
Proceeds from issuance of shares, net 90,683 0
Acquisition of non-controlling interest   (511 )   0  
Net cash provided by (used in) financing activities 60,746   (31,609 ) (7,586 ) (7,167 )
       
Currency translation adjustments on cash and cash equivalents   (220 )   (73 )
       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (29,622 ) 13,626 (7,291 ) 6,801
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 180,859 167,233 158,528 173,248
       
CASH AND CASH EQUIVALENTS AT END OF PERIOD 151,237 180,859 151,237 180,049
 

LESS - CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS AT END OF PERIOD
1,356 546

 
       

CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS AT END OF PERIOD
151,237   179,503   151,237   179,503  
 
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
       

12 months ended

3 months ended

December 31

December 31

2011

2010

2011

2010
U.S. dollars in thousands (except per share data)
 
 

Reported operating income on GAAP basis
  60,061     57,687   4,970   6,766
 
Equity based compensation expenses 3,728 4,725 813 1,150
Amortization of intangible assets   12,304     14,176   3,091   3,544
Non-GAAP operating income 76,093 76,588 8,874 11,460
 

Reported net income attributable to Orbotech Ltd. on GAAP basis
  47,339     34,145   2,547   3,986
 
Equity based compensation expenses 3,728 4,725 813 1,150
Amortization of intangible assets 12,304 14,176 3,091 3,544

Loss (income) from discontinued operations*
(1,363 ) 8,717 1,989
Share in losses of associated company 179 70
       

Non-GAAP net income from continuing operations
  62,187     61,763   6,521   10,669
 
Non-GAAP earnings per diluted share $ 1.52   $ 1.73 $ 0.15 $ 0.30
 
Shares used in earnings per diluted share calculation-in thousands   40,816     35,778   43,966   35,754
 

* The loss (income) from discontinued operations, net of tax, was attributable to the re-classification during 2010 of Orbotech Medical Solutions Ltd. and Orbotech Medical Denmark A/S as discontinued operations.

Copyright Business Wire 2010

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