Orbotech Announces Second Quarter 2012 Results

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the second quarter and six months ended June 30, 2012.

Revenues for the second quarter of 2012 totaled $101.3 million, compared to $100.2 million in the first quarter of 2012 and $153.4 million in the second quarter of 2011. GAAP net loss for the second quarter of 2012 was $0.8 million, or $0.02 per share, compared to GAAP net income of $1.6 million, or $0.04 per share (diluted) for the first quarter of 2012 and GAAP net income of $18.9 million, or $0.48 per share (diluted), in the second quarter of 2011.

Revenues for the first six months of 2012 totaled $201.6 million, compared to $287.6 million recorded in the first six months of 2011. GAAP net income for the first six months of 2012 was $0.8 million, or $0.02 per share (diluted), compared to a GAAP net income of $30.1 million, or $0.80 per share (diluted), in the first six months of 2011.

Non-GAAP net income for the second quarter of 2012 was $3.1 million, or $0.07 per share (diluted), compared to non-GAAP net income of $21.8 million, or $0.56 per share (diluted), in the second quarter of 2011. Non-GAAP net income for the first six months of 2012 was $10.6 million, or $0.24 per share (diluted), compared to non-GAAP net income of $37.0 million, or $0.98 per share (diluted), in the first six months 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 $48.6 million in the second quarter of 2012, compared to $48.5 million in the first quarter of 2012 and $58.7 million in the second quarter of 2011; and sales of equipment to the FPD industry were $12.3 million in the second quarter of 2012, compared to $11.8 million in the first quarter of 2012 and $56.7 million in the second quarter of 2011. In the Company’s Recognition Software segment, sales were $1.7 million in the second quarter of 2012, compared to $2.0 million in the first quarter of 2012 and $1.6 million in the second quarter of 2011. In addition, service revenue for the second quarter of 2012 reached a quarterly record $38.7 million, compared to $37.9 million in the first quarter of 2012 and $36.4 million in the second quarter of 2011.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $279.1 million; and debt of $80 million, compared with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $267.5 million; and debt of $88 million at the end of the first quarter of 2012. The Company generated cash of $21.7 million from continuing operations in the second quarter of 2012.

Commenting on the quarter, Rani Cohen, President and Chief Executive Officer, said: “After a somewhat slow start to the year, in recent weeks we are seeing increased order activity related to our PCB equipment, in particular related to direct imaging systems for touch screen manufacturers, after the end of the quarter. In addition, FPD manufacturers are beginning to report higher levels of planned capital expenditures, which we believe will translate into new orders for the Company in the next few months. We are pleased with our cash generation and the posting of a third successive quarter of record revenues from our customer support operations, which we look on as a vote of confidence from our expanding customer base. We continue the close monitoring of our operating expenses which - net of the Korean matter - decreased as compared with the first quarter of 2012.” Mr. Cohen added: “Although we recently reduced our revenue guidance for the second half of 2012, we believe that global consumer demand for advanced mobile devices will create strong business conditions for Orbotech in the latter part of 2012 and in 2013. As in the past, we expect that our exceptional product portfolio will position 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.”

As previously reported, the Company’s Korean subsidiary and six local employees have been indicted in Korea and the investigation into the actions of employees of the Company and its subsidiaries outside Korea is ongoing. The Company’s Korean subsidiary continues to co-operate with the Korean authorities in this matter. The Company incurred $2.3 million of expenses related to this matter during the second quarter of 2012, which are recorded in general and administrative expenses. The Company expects to continue to incur expenses associated with this matter for at least the remainder of 2012, but due to the uncertain nature and timing of such proceedings cannot predict the timing or amount of these expenses. The Company believes there are meritorious defenses to the prosecutor’s allegations and its Korean subsidiary intends to continue defending itself and its employees vigorously. Despite the ongoing legal matters in Korea, the Company has continued pursuing business activity in Korea, including orders for FPD and PCB equipment from customers located there and, in recent weeks, shipping products for delivery to customers in Korea. The Company remains committed to its business in Korea, including supporting its extensive customer base there through its local Korean subsidiary and worldwide support and research and development organization.

Given the cyclicality and other uncertainties prevalent within the industries which Orbotech serves, as well as the fluctuations in product mix, the Company will not be providing earnings per share guidance. As already disclosed, the Company has withdrawn all of its previously announced 2012 earnings per share guidance; however, at this time it is reiterating its 2012 revenue guidance of approximately $430-$450 million, and providing gross margin guidance of approximately 43-44% for 2012. The Company anticipates that its operating expenses - excluding those in connection with the Korean matter discussed above - will be consistent with second quarter levels for each of the third and fourth quarters of 2012.

An earnings conference call for the Company’s second quarter 2012 results is scheduled for Monday, August 6, 2012, at 9:00 a.m. EDT. The dial-in number for the conference call is 773-756-4789, and a replay will be available on telephone number 203-369-0229 until August 20, 2012. 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, 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.

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, the timing, terms and success of any strategic transaction, the outcome and impact of the pending criminal matter and ongoing investigation in Korea, including any impact on existing or future business opportunities in Korea and elsewhere, any civil actions related to the Korean matter brought by third parties, including the Company’s customers, which may result in monetary judgments or settlements. expenses associated with the Korean matter, cyclicality in the industries in which the Company operates, the Company’s production capacity, timing and occurrence of product acceptance, fluctuations in product mix, 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; (iv) restructuring charges; and/or share in losses of associated company. 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 JUNE 30, 2012
 

 June 30 
December 31

2012

2011

U.S. dollars in thousands

A s s e t s
 

CURRENT ASSETS:
Cash and cash equivalents 184,722 151,237
Short-term bank deposits 79,718 145,292
Marketable securities 2,204
Accounts receivable:
Trade 182,323 196,232
Other 27,617 26,163
Deferred income taxes 7,929 6,580
Inventories 109,200 105,109
   
T o t a l current assets 593,713   630,613  
 

INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities 12,450
Funds in respect of employee rights upon retirement 11,799 11,846
Deferred income taxes 8,795 8,999
Other long-term investments 2,361   2,426  
35,405   23,271  
 

PROPERTY, PLANT AND EQUIPMENT, net
24,844   26,664  
 

GOODWILL
12,444   12,444  
 

OTHER INTANGIBLE ASSETS, net
48,427   54,491  
   
714,833   747,483  
 
 

Liabilities and equity
 

CURRENT LIABILITIES:
Current maturities of long-term bank loan 32,000 32,000
Accounts payable and accruals:
Trade 29,725 32,357
Other

45,783
57,590
Deferred income 21,799 25,910
   
T o t a l current liabilities

129,307
147,857
 

LONG-TERM LIABILITIES:
Long-term bank loan 48,000 64,000
Liability for employee rights upon retirement 26,614 26,797
Deferred income taxes 1,705 1,759
Other tax liabilities 16,725   16,938  
T o t a l long-term liabilities 93,044 109,494
   
T o t a l liabilities

222,351
  257,351  
 

EQUITY:
Share capital 2,100 2,092
Additional paid-in capital 273,569 270,966
Retained earnings

274,997
274,148
Accumulated other comprehensive income (loss) (1,871 ) (1,460 )

548,795
545,746
Less treasury shares, at cost (57,192 ) (57,192 )
T o t a l Orbotech Ltd. shareholders' equity

491,603
488,554
Non-controlling interest 879   1,578  
T o t a l equity

492,482
  490,132  
   
714,833   747,483  
 
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2012
         
12 months

6 months ended

3 months ended
ended

June 30

June 30
December 31

2012
 

2011

2012
 

2011

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

REVENUES
201,554 287,616 101,332 153,405 565,313
 

COST OF REVENUES
114,678 167,730 59,301 89,214 329,442
 

WRITE-DOWN OF INVENTORIES
6,743
         

GROSS PROFIT
86,876 119,886 42,031 64,191 229,128
 

RESEARCH AND DEVELOPMENT COSTS - net
36,124 41,250 18,048 21,021 84,180
 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
37,957 35,756 19,316 18,402 72,583
 

AMORTIZATION OF INTANGIBLE ASSETS
6,064 6,142 2,973 3,071 12,304
 

RESTRUCTURING CHARGES
1,918
         

OPERATING INCOME
4,813 36,738 1,694 21,697 60,061
 

FINANCIAL EXPENSES - net
3,439 3,896 2,334 1,773 6,551
         

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
1,374 32,842 (640 ) 19,924 53,510
 

TAXES ON INCOME
964 4,119 422 2,289 7,677
         
410 28,723 (1,062 ) 17,635 45,833
 

SHARE IN LOSSES OF ASSOCIATED COMPANY
65 20 179
         

NET INCOME (LOSS) FROM CONTINUING OPERATIONS
345 28,723 (1,082 ) 17,635 45,654
 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 1,255 1,363
         

NET INCOME (LOSS)
345 30,086 (1,082 ) 18,890 47,017
 

NET LOSS ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
(504 ) (292 ) (322 )
         

NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.
849   30,086 (790 ) 18,890 47,339  
 

AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:

INCOME (LOSS) FROM CONTINUING OPERATIONS
849 28,723 (790 ) 17,635 45,976
 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
1,363 1,255 1,363
         

NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.
849   30,086 (790 ) 18,890 47,339  
 
 

EARNINGS PER SHARE:

INCOME (LOSS) FROM CONTINUING OPERATIONS:

BASIC
$0.02   $0.78 ($0.02 ) $0.46 $1.15  
 

DILUTED
$0.02   $0.76 ($0.02 ) $0.45 $1.13  
 

NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC
$0.02   $0.82 ($0.02 ) $0.50 $1.19  
 

DILUTED
$0.02   $0.80 ($0.02 ) $0.48 $1.16  
 
 

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

 

BASIC
43,462   36,618 43,507   37,969 39,909  
 

DILUTED
44,044   37,731 43,507   38,967 40,816  
 
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2012
         
 
12 months

6 months ended

3 months ended
ended

June 30

June 30
December 31

2012

2011

2012

2011

2011
U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
 
Net income (loss) 345 30,086 (1,082 ) 18,890 47,017

 

Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Income from discontinued operations (1,363 ) (1,255 ) (1,363 )
Depreciation and amortization 9,934 9,978 4,858 4,888 19,958

Compensation relating to equity awards granted to employees and others - net
1,806 2,137 896 1,080 3,728
Increase (decrease) in liability for employee rights upon retirement 94 462 (30 ) 825 (704 )
Non-cash expenses in respect of restructuring

601

 

 
Deferred income taxes (1,199 ) 1,297 (13 ) 17 2,584
Loss from sales and write down of marketable securities 395 238 395
Others

295
46

228
46 1,224
Decrease (increase) in accounts receivable:
Trade 13,909 (30,782 ) 16,107 (18,988 ) (42,714 )

Other

 
(1,398 ) (403 ) 826 681 2,698
Increase (decrease) in accounts payable and accruals:
Trade (2,632 ) 26,112 4,389 20,385 5,822
Deferred income and other (15,901 ) 2,245 (3,413 ) 4,176 6,105
Decrease (increase) in inventories (3,930 ) (9,921 ) (1,086 ) (8,545 ) 6,870  
Net cash provided by operating activities - continuing operations 1,924 30,289 21,680 22,438 51,620
Net cash used in operating activities - discontinued operations   (740 )   (1,604 ) (787 )
Net cash provided by operating activities 1,924   29,549   21,680   20,834   50,833  
 

CASH FLOWS FROM INVESTING ACTIVITIES:
 
Purchase of property, plant and equipment (3,459 ) (2,385 ) (1,929 ) (1,136 ) (7,554 )
Withdraw (placement) of bank deposits 65,574 (60,000 ) 13,694 (60,000 ) (142,325 )
Realization (purchase) of marketable securities (14,935 ) 1,967 627 1,967
Other investment (1,500 ) (1,500 ) (2,810 )
Proceeds from disposal of property, plant and equipment 35 35 35

Decrease (increase) in funds in respect of employee rights upon retirement
(230 ) (213 ) (66 ) (280 ) 331  
Net cash provided by (used in) investing activities - continuing operations 46,950 (62,096 ) 11,699 (62,254 ) (150,356 )
Net cash provided by investing activities - discontinued operations   9,155       9,155  
Net cash provided by (used in) investing activities 46,950   (52,941 ) 11,699   (62,254 ) (141,201 )
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
Repayment of long-term bank loan (16,000 ) (16,000 ) (8,000 ) (8,000 ) (32,000 )

Employee stock options exercised
611 1,430 141 363 2,063
Proceeds from issuance of shares, net   90,683     90,683   90,683  
Net cash provided by (used in) financing activities (15,389 ) 76,113   (7,859 ) 83,046   60,746  
         
Currency translation adjustments on cash and cash equivalents       (26 )  
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 33,485 52,721 25,520 41,600 (29,622 )
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 151,237 180,859 159,202 191,980 180,859
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD 184,722 233,580 184,722 233,580 151,237

 

LESS - CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS AT END OF PERIOD
58 58

 
         

CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS AT END OF PERIOD
184,722   233,522   184,722   233,522   151,237  
 
 
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS
FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2012
         
 
12 months

6 months ended

3 months ended
ended
June 30 June 30 December 31

2012

2011

2012

2011

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

Reported operating income on GAAP basis
4,813 36,738   1,694   21,697   60,061  
 
Equity based compensation expenses 1,750 2,137 869 1,080 3,728
Restructuring charges 1,918
Amortization of intangible assets 6,064 6,142   2,973   3,071   12,304  
Non-GAAP operating income 14,545 45,017   5,536   25,848   76,093  
 

Reported net income (loss) attributable to Orbotech Ltd. on GAAP basis
849 30,086   (790 ) 18,890   47,339  
 
Equity based compensation expenses 1,750 2,137 869 1,080 3,728
Amortization of intangible assets 6,064 6,142 2,973 3,071 12,304
Income from discontinued operations (1,363 ) (1,255 ) (1,363 )
Restructuring charges 1,918
Share in losses of associated company 65 20 179
         

Non-GAAP net income from continuing operations
10,646 37,002   3,072   21,786   62,187  
 
Non-GAAP earnings per diluted share $0.24 $0.98   $0.07   $0.56   $1.52  
 
Shares used in earnings per diluted share calculation-in thousands 44,044 37,731   44,131   38,967   40,816  

Copyright Business Wire 2010

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