Orbotech Announces First Quarter 2012 Results

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the first quarter ended March 31, 2012.

Commenting on the quarter, Rani Cohen, President and Chief Executive Officer, said: “We are satisfied with our first quarter financial results. We are particularly pleased with the improvement in our gross margins, reflecting our operating efficiencies and favorable product mix, and the record revenues from our customer support operations, a reflection of our continued success in securing service contracts. After a somewhat slow start to the year, in recent weeks we are seeing significantly improved sales of our PCB equipment. Although capital spending in the FPD industry remains slow, we continue to believe that capital expenditure in this industry will return to higher levels as the year progresses and the current FPD cyclical downturn begins to abate. Even with some uncertainty in the FPD industry, we are leaving our previously-announced guidance unchanged and continue to expect first half 2012 revenues of approximately $200 million and full year 2012 revenues of approximately $500 million.” Mr. Cohen added: “As in the past, our exceptional product portfolio positions us well to take advantage of existing strong consumer demand for sophisticated devices such as smartphones, tablets and other electronic devices, and anticipated demand for advanced panel devices once the FPD industry begins to recover.”

Revenues for the first quarter of 2012 totaled $100.2 million, compared to $133.3 million in the fourth quarter, and $134.2 million in the first quarter, of 2011. GAAP net income for the first quarter of 2012 was $1.6 million, or $0.04 per share (diluted), compared to GAAP net income of $2.5 million, or $0.06 per share (diluted), for the fourth quarter of 2011 and GAAP net income of $11.2 million, or $0.31 per share (diluted), in the first quarter of 2011. GAAP net income for the first quarter of 2012 includes a $1.9 million restructuring charge relating to the Company’s cost reduction program. GAAP 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 the Company’s FPD products in connection with the current cyclical downturn in the FPD industry.

Non-GAAP net income for the first quarter of 2012 was $7.6 million, or $0.17 per share (diluted), compared to non-GAAP net income of $15.2 million, or $0.42 per share (diluted), in the first quarter of 2011. 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.

In the Company’s Production Solutions for Electronics Industry segment, sales of equipment to the PCB industry were $48.5 million in the first quarter of 2012, compared to $52.7 million in the fourth quarter, and $57.1 million in the first quarter, of 2011; and sales of equipment to the FPD industry were $11.8 million in the first quarter of 2012, compared to $42.5 million in the fourth quarter, and $43.2 million in the first quarter, of 2011. In the Company’s Recognition Software segment, sales were $2.0 million in the first quarter of 2012, compared to $2.1 million in the fourth quarter, and $1.4 million in the first quarter, of 2011.

In addition, service revenue for the first quarter of 2012 reached a record $37.9 million, compared to $36.0 million in the fourth quarter, and $32.5 million in the first quarter, of 2011.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $267.5 million; and debt of $88 million, compared with cash, cash equivalents and short-term bank deposits of approximately $296.5 million; and debt of $96 million at the end of 2011. The decrease in the Company’s cash position at the end of the first quarter reflected, in part, lower than expected collections, as well as payment of the Company’s annual incentive compensation, during the quarter.

An earnings conference call for the Company’s first quarter 2012 results is scheduled for Monday, May 7, 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 203-369-3520 until May 21 2012. The pass code is Q1. 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

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, 2011. 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 Financial Measures

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; (iii) discontinued operations; and/or (iv) restructuring charges. 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, 2011.
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2012
   

March 312012

December 312011

U.S. dollars in thousands

A s s e t s
 

CURRENT ASSETS:
Cash and cash equivalents 159,202 151,237
Short-term bank deposits 93,412 145,292
Marketable securities 2,110
Accounts receivable:
Trade 198,430 196,232
Other 29,371 26,163
Deferred income taxes 7,822 6,580
Inventories 107,764 105,109
   
T o t a l current assets 598,111   630,613  
 

INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities 12,803
Funds in respect of employee rights upon retirement 12,232 11,846
Deferred income taxes 8,983 8,999
Other long-term investments 2,381   2,426  
36,399   23,271  
 

PROPERTY, PLANT AND EQUIPMENT, net
25,205   26,664  
 

GOODWILL
12,444   12,444  
 

OTHER INTANGIBLE ASSETS, net
51,400   54,491  
   
723,559   747,483  
 
 

Liabilities and equity
 

CURRENT LIABILITIES:
Current maturities of long-term bank loan 32,000 32,000
Accounts payable and accruals:
Trade 25,336 32,357
Other 45,583 57,590
Deferred income 24,170 25,910
   
T o t a l current liabilities 127,089 147,857
 

LONG-TERM LIABILITIES:
Long-term bank loan 56,000 64,000
Liability for employee rights upon retirement 27,143 26,797
Deferred income taxes 1,799 1,759
Other tax liabilities 17,030   16,938  
T o t a l long-term liabilities 101,972 109,494
   
T o t a l liabilities 229,061   257,351  
 

EQUITY:
Share capital 2,099 2,092
Additional paid-in capital 272,310 270,966
Retained earnings 275,787 274,148
Accumulated other comprehensive income (loss) 99   (1,460 )
550,295 545,746
Less treasury shares, at cost (57,192 ) (57,192 )
T o t a l Orbotech Ltd. shareholders' equity 493,103 488,554
Non-controlling interest 1,395   1,578  
T o t a l equity 494,498   490,132  
   
723,559   747,483  
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED MARCH 31, 2012
       

3 months endedMarch 31

12 monthsendedDecember 31

2012
 

2011

2011
U.S. dollars in thousands (except per share data)
 

REVENUES
100,222 134,211 565,313
 

COST OF REVENUES
55,377 78,516 329,442
 

WRITE- DOWN OF INVENTORIES
6,743
     

GROSS PROFIT
44,845 55,695 229,128
 

RESEARCH AND DEVELOPMENT COSTS - net
18,076 20,229 84,180
 

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES
18,641 17,354 72,583
 

AMORTIZATION OF INTANGIBLE ASSETS
3,091 3,071 12,304
 

RESTRUCTURING CHARGES
1,918
     

OPERATING INCOME
3,119 15,041 60,061
 

FINANCIAL EXPENSES - net
1,105 2,123 6,551
     

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
2,014 12,918 53,510
 

TAXES ON INCOME
542 1,830 7,677
     
1,472 11,088 45,833
 

SHARE IN LOSSES OF ASSOCIATED COMPANY
45 179
     

NET INCOME FROM CONTINUING OPERATIONS
1,427 11,088 45,654
 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
108 1,363
     

NET INCOME
1,427 11,196 47,017
 

NET LOSS ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST
(212 ) (322 )
     

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
  1,639     11,196   47,339  
 

AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:

INCOME FROM CONTINUING OPERATIONS
1,639 11,088 45,976
 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
108 1,363
     

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.
  1,639     11,196   47,339  
 
 

EARNINGS PER SHARE:

INCOME FROM CONTINUING OPERATIONS:

BASIC
$ 0.04   $ 0.31 $ 1.15  
 

DILUTED
$ 0.04   $ 0.30 $ 1.13  
 

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC
$ 0.04   $ 0.32 $ 1.19  
 

DILUTED
$ 0.04   $ 0.31 $ 1.16  
 
 

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION

OF EARNINGS PER SHARE - IN THOUSANDS:

BASIC
  43,402     35,229   39,909  
 

DILUTED
  43,944     36,458   40,816  
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2012
       
 

3 months endedMarch 31

12 monthsendedDecember 31

2012

2011

2011
U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
 
Net income 1,427 11,196 47,017
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Income from discontinued operations (108 ) (1,363 )
Depreciation and amortization 5,076 5,090 19,958
Compensation relating to equity awards granted to
employees and others - net 910 1,057 3,728
Increase (decrease) in liability for employee rights upon retirement 124 (363 ) (704 )
Non-cash expenses in respect of restructuring 601
Deferred income taxes (1,186 ) 1,280 2,584
Loss from sales and write down of marketable securities 157 395
Others 67 1,224
Decrease (increase) in accounts receivable:
Trade (2,198 ) (11,794 ) (42,714 )
Other (2,224 ) (1,084 ) 2,698
Increase (decrease) in accounts payable and accruals:
Trade (7,021 ) 5,727 5,822
Deferred income and other (12,488 ) (1,931 ) 6,105
Decrease (increase) in inventories (2,844 ) (1,376 ) 6,870  
Net cash provided by (used in) operating activities - continuing operations (19,756 ) 7,851 51,620
Net cash provided by (used in) operating activities - discontinued operations   864   (787 )
Net cash provided by (used in) operating activities (19,756 ) 8,715   50,833  
 

CASH FLOWS FROM INVESTING ACTIVITIES:
 
Purchase of property, plant and equipment (1,530 ) (1,249 ) (7,554 )
Withdraw (placement) of bank deposits 51,880 (142,325 )
Realization (purchase) of marketable securities (14,935 ) 1,340 1,967
Other investment (2,810 )
Proceeds from disposal of property, plant and equipment 35
Decrease (increase) in funds in respect of employee
rights upon retirement (164 ) 67   331  
Net cash provided by (used in) investing activities - continuing operations 35,251 158 (150,356 )
Net cash provided by investing activities - discontinued operations   9,155   9,155  
Net cash provided by (used in) investing activities 35,251   9,313   (141,201 )
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
Repayment of long-term bank loan (8,000 ) (8,000 ) (32,000 )
Employee stock options excercised 470 1,067 2,063
Proceeds from issuance of shares, net     90,683  
Net cash provided by (used in) financing activities (7,530 ) (6,933 ) 60,746  
     
Currency translation adjustments on cash and cash equivalents   26    
     
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,965 11,121 (29,622 )
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 151,237 180,859 180,859
     
CASH AND CASH EQUIVALENTS AT END OF PERIOD 159,202 191,980 151,237
 
LESS - CASH AND CASH EQUIVALENTS OF DISCONTINUED
OPERATIONS AT END OF PERIOD 748
CASH AND CASH EQUIVALENTS OF CONTINUING      
OPERATIONS AT END OF PERIOD 159,202   191,232   151,237  
 
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2012
       
 

3 months endedMarch 31

12 monthsendedDecember 31

2012

2011

2011
U.S. dollars in thousands (except per share data)
 
 

Reported operating income on GAAP basis
  3,119   15,041     60,061  
 
Equity based compensation expenses 910 1,057 3,728
Restructuring charges 1,918
Amortization of intangible assets   3,091   3,071     12,304  
Non-GAAP operating income 9,038 19,169 76,093
 

Reported net income attributable to Orbotech Ltd. on GAAP basis
  1,639   11,196     47,339  
 
Equity based compensation expenses 910 1,057 3,728
Amortization of intangible assets 3,091 3,071 12,304
Income from discontinued operations (108 ) (1,363 )
Restructuring charges 1,918
Share in losses of associated company 45 179
     

Non-GAAP net income from continuing operations
  7,603   15,216     62,187  
 
Non-GAAP earnings per diluted share $ 0.17 $ 0.42   $ 1.52  
 
Shares used in earnings per diluted share calculation-in thousands   43,944   36,458     40,816  

Copyright Business Wire 2010

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