ORBK Orbotech Ltd. - Ordinary Shares

ORBOTECH LTD. (NASDAQ/NM SYMBOL: ORBK) today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2007. Revenues for the fourth quarter of 2007 were $103.6 million, compared to $82.3 million recorded in the third quarter of 2007 and $103.3 million in the fourth quarter of 2006. Net loss for the fourth quarter of 2007 was $1.1 million, or $0.03 per share (diluted), compared to net income of $0.4 million, or $0.01 per share (diluted), in the third quarter of 2007, and net income of $9.4 million, or $0.28 per share (diluted), in the fourth quarter of 2006. Net loss for the fourth quarter of 2007 reflects: (a) $1.9 million of amortization of intangible assets arising principally from the acquisitions of 3 D - Danish Diagnostic Development A/S (�DDD�) and New System Srl during 2007 (compared to amortization of $2.3 million in the third quarter of 2007 and $0.1 million in the fourth quarter of 2006); (b) $0.9 million of share-based compensation expenses in the fourth quarter of 2007 without reduction in income taxes (compared to $1.4 million in the third quarter of 2007 and $0.8 million in the fourth quarter of 2006 - both without reduction in income taxes); (c) an impairment charge of $4.7 million relating to a write-down of the goodwill and intellectual property of Orbotech Medical Solutions Ltd; and (d) a follow-on restructuring charge of $0.5 million in connection with the Company�s 2006 program to centralize its assembled PCB research and development activities at corporate headquarters in Israel (compared to the original restructuring charge of $3.3 million in the fourth quarter of 2006). Revenues for the year ended December 31, 2007 totaled $360.7 million, compared to $416.5 million recorded in 2006. Net income for the year ended 2007 was $1.5 million, or $0.04 per share (diluted), compared to net income of $55.0 million, or $1.65 per share (diluted), for the year ended December 31, 2006. Sales of equipment to the printed circuit board (�PCB�) industry relating to bare PCBs in the fourth quarter of 2007 were $50.0 million, compared to $37.2 million in the third quarter of 2007 and $40.8 million in the fourth quarter of 2006. Sales of flat panel display (�FPD�) inspection equipment in the fourth quarter of 2007 were $10.6 million, compared to $8.8 million in the third quarter of 2007 and $27.8 million in the fourth quarter of 2006. Sales of equipment to the PCB industry relating to assembled PCBs in the fourth quarter of 2007 were $8.3 million, compared to $5.7 million in the third quarter of 2007 and $8.5 million in the fourth quarter of 2006. Sales of automatic check reading products in the fourth quarter of 2007 were $3.6 million, compared to $2.9 million in the third quarter of 2007 and $3.2 million in the fourth quarter of 2006. Sales of medical imaging equipment in the fourth quarter of 2007 were $6.1 million, compared to $3.4 million in the period from the date of acquisition of DDD (August 6, 2007) to the end of the third quarter of 2007. In addition, service revenue for the fourth quarter increased to $25.0 million from $24.3 million recorded in the third quarter of 2007 and $22.9 million in the fourth quarter of 2006. The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $206 million, compared to approximately $198 million at the end of the third quarter. The Company had a positive operating cash flow for the quarter of approximately $10.5 million. Non-operating disbursements totaled approximately $3.2 million, comprised of investments in fixed assets. The Company�s marketable securities currently include approximately $33 million of Auction Rate Securities which are tied to student loans. These securities have experienced a lack of liquidity during the last week. The Company believes that there is no credit risk attached to these funds, and that the Company�s other available cash and cash equivalents are sufficient to meet its cash needs for the next twelve months. Revenues from bare and assembled PCB-related products increased significantly in the fourth quarter, reflecting strong customer demand in these areas of the Company�s business. A record of 26 Paragon solid state laser direct imaging systems were sold during the quarter, bringing Paragon sales for 2007 to an annual record of 97 systems. During the quarter, the Company also sold six Maxiprint legend ink jet printer systems, which were developed by the Company�s recently acquired Italian subsidiary, New System Srl. The Company recorded annual FPD revenues for 2007 of $49.7 million, which was in line with expectations. As a result of strong demand for panels and the stabilization of panel prices during the fourth quarter, LCD customers have reportedly finalized their plans for new fabrication facilities to be constructed during 2008 and 2009. This is reflected in the Company�s record bookings during the quarter, which included primarily large orders from first-tier LCD manufacturers. Research and development expenses increased by approximately $3 million during the quarter, as the Company invested significantly in new products and solutions for both the PCB and FPD industries, which continue to constitute the core of the Company�s business and to hold substantial opportunity. The Company also incurred a fourth quarter impairment charge of $4.7 million relating to the goodwill and intellectual property associated with its CZT development and production business acquired in March 2005, following a determination that the carrying value of that goodwill and intellectual property exceeded its fair value. Commenting on the results, Rani Cohen, Chief Executive Officer, said: �Our financial results for 2007 as a whole reflect the challenging environment experienced during the year by the industries in which we operate, particularly in the case of flat panel display manufacturers. During the year we increased our investments in the research and development of new products, including inspection and production solutions for both PCB and FPD manufacturers, and the Company has new product releases scheduled for 2008. Looking forward, PCB manufacturers are planning expansion programs, although these could be impacted by the uncertain global economic environment. FPD manufacturers are accelerating their investment plans, due partly to an anticipated shortage in display panels, and also in reflection of the underlying strength of this industry. Orbotech is entering 2008 with an outstanding product portfolio in all areas of its business, and we believe that this, together with our continued close monitoring of operating expenses, should enable us to maintain our position as the leading provider of yield-enhancing, production support solutions for the industries we serve, and improve our profitability.� An earnings conference call is scheduled for Tuesday, February 19, 2008, at 9:00 a.m. EST. The dial-in number for the conference call is 210-234-0003, and a replay will be available at 203-369-3227, until March 4, 2008. The pass code is Q4. A live web cast of the conference call can also be heard by accessing the investor relations section on the Company's website at www.orbotech.com. About Orbotech Ltd. Orbotech is a world leader in providing yield-enhancing, production support solutions for specialized applications in the supply chain of the electronics industry, principally for printed circuit boards (PCBs) and flat panel displays (FPDs). The Company designs, develops, manufactures, markets and services automated optical inspection (AOI) systems for bare and assembled PCBs and for FPDs, and imaging solutions for PCB production. The Company�s innovative AOI, imaging and computer-aided manufacturing (CAM) technologies enable customers to achieve the increased yields and throughput essential to remaining at the forefront of electronics production. Through its subsidiary, Orbograph Ltd., the Company also develops and markets automatic check reading software to banks and other financial institutions. In addition, the Company is engaged in the development and manufacture of specialized application products for the nuclear medical imaging industry. Of Orbotech�s employees, more than one quarter are scientists and engineers, who integrate their multi-disciplinary knowledge, talents and skills to develop and provide sophisticated solutions and technologies designed to meet customers� long-term needs. Orbotech maintains its headquarters and its primary research, development and manufacturing facilities in Israel, and more than 30 offices worldwide. The Company�s extensive network of marketing, sales and customer support teams throughout North America, Europe, the Pacific Rim, China and Japan deliver its knowledge and expertise directly to customers the world over. For more information visit www.orbotech.com. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties which could cause the actual results to differ materially from those projected, including industry trends, the timing and strength of product and service offerings, 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 and other risks detailed from time to time in the Company�s SEC reports. The Company assumes no obligation to update the information in this press release. ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2007 � � December 31 December 31 2 0 0 7 � 2 0 0 6 � U. S. dollars in thousands A s s e t s � CURRENT ASSETS: Cash and cash equivalents 120,913 187,187 Marketable securities 52,713 41,373 Accounts receivable: Trade 151,173 142,444 Other 22,964 21,572 Deferred income taxes 4,317 3,369 Inventories 77,570 � 78,349 � T o t a l current assets 429,650 � 474,294 � � INVESTMENTS AND NON-CURRENT ASSETS: Marketable securities 32,410 41,100 Other long-term Investments 780 7,106 Non-current trade receivables 231 738 Severance pay fund 14,099 15,617 Deferred income taxes 843 1,684 � � 48,363 � 66,245 � � PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and amortization 28,142 � 20,124 � � GOODWILL AND OTHER INTANGIBLE ASSETS, net of accumulated amortization 67,016 � 14,350 � � � 573,171 � 575,013 � � Liabilities and shareholders' equity � CURRENT LIABILITIES: Accounts payable and accruals: Trade 34,405 33,448 Deferred income 15,445 19,967 Other 37,194 � 49,420 � T o t a l current liabilities 87,044 102,835 � ACCRUED SEVERANCE PAY 28,610 29,762 DEFERRED TAX LIABILITY 16,565 � � T o t a l liabilities 132,219 � 132,597 � � MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 1,330 � 914 � � SHAREHOLDERS' EQUITY: Share capital 1,699 1,680 Additional paid-in capital 144,991 132,578 Retained earnings 346,447 345,859 Accumulated other comprehensive income 3,677 � 7 � 496,814 480,124 Less treasury stock, at cost (57,192 ) (38,622 ) T o t a l shareholders' equity 439,622 � 441,502 � � � 573,171 � 575,013 � ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE TWELVE MONTH AND THREE MONTH PERIODS ENDED DECEMBER 31, 2007 � � � � � � 12 months ended 3 months ended December 31 December 31 � 2 0 0 7 � � 2 0 0 6 � 2 0 0 7 � � 2 0 0 6 � U.S. dollars in thousands (except per share data) � REVENUES 360,662 416,469 103,621 103,303 � COST OF REVENUES: COST 210,616 226,908 61,124 57,176 WRITE DOWN OF INVENTORY 4,821 � � � � GROSS PROFIT 145,225 189,561 42,497 46,127 � RESEARCH AND DEVELOPMENT COSTS - net 67,923 60,473 19,454 16,769 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 66,989 68,942 18,022 17,335 � AMORTIZATION OF OTHER INTANGIBLE ASSETS 4,728 580 1,947 145 � RESTRUCTURING CHARGES 510 3,332 510 3,332 � IMPAIRMENT OF GOODWILL AND INTELLECTUAL PROPERTY 4,739 4,739 � � � � OPERATING INCOME (LOSS) 336 56,234 (2,175 ) 8,546 � FINANCIAL INCOME - net 9,110 7,404 1,629 2,478 � WRITE-DOWN OF LONG-TERM INVESTMENTS (5,000 ) (205 ) � � � � INCOME (LOSS) BEFORE TAXES ON INCOME 4,446 63,433 (546 ) 11,024 � TAXES ON INCOME 2,280 7,893 455 1,310 � INCOME (LOSS) FROM OPERATIONS OF THE COMPANY AND � � � � ITS SUBSIDIARIES AND JOINT VENTURE 2,166 55,540 (1,001 ) 9,714 � MINORITY INTEREST IN PROFITS OF CONSOLIDATED SUBSIDIARY (416 ) (255 ) (242 ) (202 ) � SHARE IN PROFITS (LOSSES) OF AN ASSOCIATED COMPANY (266 ) (315 ) 109 (128 ) � � � � NET INCOME (LOSS) � 1,484 � � 54,970 � (1,134 ) � 9,384 � � EARNINGS (LOSS) PER SHARE: BASIC $ 0.04 � $ 1.66 � ($0.03 ) $ 0.28 � � DILUTED $ 0.04 � $ 1.65 � ($0.03 ) $ 0.28 � � � WEIGHTED AVERAGE NUMBER OF SHARES (IN THOUSANDS) USED IN COMPUTATION OF EARNINGS PER SHARE: BASIC � 33,091 � � 33,105 � 33,177 � � 33,366 � � DILUTED � 33,190 � � 33,399 � 33,177 � � 33,748 �