ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its
consolidated financial results for the fourth quarter and full year
ended December 31, 2009.
Revenues for the fourth quarter of 2009 totaled $99.4 million,
compared to $92.3 million recorded in the third quarter of 2009 and
$129.2 million in the fourth quarter a year ago. GAAP (U. S.
generally accepted accounting principles) net loss for the fourth
quarter of 2009 was $5.4 million, or $0.15 per share, compared to
GAAP net loss of $5.5 million, or $0.16 per share for the third
quarter of 2009 and GAAP net loss of $101.2 million, or $2.98 per
share, in the fourth quarter of 2008.
Revenues for the year ended December 31, 2009 totaled $377.6
million, compared to the $429.5 million recorded in 2008. GAAP net
loss for the year ended December 31, 2009 was $19.9 million, or
$0.58 per share, compared to GAAP net loss of $135.3 million, or
$4.04 per share, for the year ended December 31, 2008.
Non-GAAP net income for the fourth quarter of 2009 was $1.2
million, or $0.03 per share (diluted), compared to non-GAAP net
income of $4.8 million, or $0.14 per share (diluted), in the fourth
quarter of 2008. Non-GAAP net income for the year ended December
31, 2009 was $3.4 million, or $0.10 per share (diluted), compared
to non-GAAP net income of $19.1 million, or $0.55 per share
(diluted), for the year ended December 31, 2008.
The Company’s GAAP results for the fourth quarter of 2008 included:
(a) an impairment charge of $87.8 million related to goodwill
associated with the Company’s flat panel display (“FPD”) business,
which was triggered primarily by the decrease in the Company’s
market capitalization and was recorded in compliance with
applicable accounting guidelines; (b) $5.1 million in amortization
of intangible assets arising principally from the acquisition of
Photon Dynamics, Inc. (“PDI”); and a write-off of $6.5 million
relating to in-process research and development in connection with
that transaction; (c) a charge of $5.1 million in connection with
the scaling down of the Company’s assembled printed circuit board
(“PCB”) operations, including the write-down of $3.3 million of raw
material inventories relating to this business; and (d) a
restructuring charge of $3.4 million relating to the second phase
of the Company’s previously announced 2008 cost reduction program.
The foregoing and other items are explained in the detailed
description of the non-GAAP adjustments in the accompanying
reconciliation of GAAP to non-GAAP results (the “Reconciliation”).
Commenting on the results, Rani Cohen, President and Chief
Executive Officer, said: “We are pleased with our performance
during the year. Although 2009 was extremely challenging, we
nevertheless took steps to build upon our strong technological
position by maintaining our program of investment in research and
development and customer support. At the same time, we were able to
generate operating cash flow of approximately $55 million and to
realign our operating infrastructure with a view to leveraging our
results as business conditions improve. Entering 2010, we believe
that our strong portfolio of products and enabling technologies, as
well as our continued development of new and additional products
and solutions, will make it possible for our customers to meet the
vital challenge of achieving significant increases in their
productivity. We remain positive as to the short and long-term
demand for our products.”
Sales of equipment to the printed circuit board (“PCB”) industry
in the fourth quarter of 2009 were $26.0 million, compared to $20.3
million in the third quarter of 2009 and $17.3 million in the
fourth quarter of 2008. Sales of equipment to the FPD industry in
the fourth quarter of 2009 were $40.5 million compared to $37.6
million in the third quarter of 2009 and $76.4 million in the
fourth quarter of 2008. Sales of character recognition products
were $2.0 million in the fourth quarter of 2009, compared to $2.4
million in the third quarter of 2009, and $3.0 million recorded in
the fourth quarter of 2008. Sales of medical imaging equipment were
$2.1 million in the fourth quarter of 2009, compared to $4.1
million in the third quarter of 2009, and $3.7 million in the
fourth quarter of 2008. In addition, service revenue for the fourth
quarter of 2009 was $28.8 million, compared to $27.9 million in the
third quarter of 2009, and $28.8 million in the fourth quarter of
2008. The impact of currency rates in the fourth quarter of 2009
was similar to that in the previous quarters of 2009.
The Company completed the quarter and the year with cash, cash
equivalents and marketable securities of approximately $177.2
million, compared with approximately $170.2 million at the end of
the third quarter of 2009; and $160 million in debt. The Company’s
portfolio of marketable securities at year end included
approximately $9.8 million of auction-rate securities primarily
tied to student loans.
During the fourth quarter of 2009, the Company’s PCB
manufacturing customers continued to report high plant utilization
rates driven mainly by new product introductions incorporating
advanced functionalities and technologies. This, in turn, led to
increased demand for the Company’s PCB equipment, in particular its
highly sophisticated Direct Imaging systems which, given the
improved industry fundamentals, are expected to experience
continued strong demand into 2010.
In the fourth quarter of 2009, the Company signed a significant
frame agreement with a leading PCB manufacturing customer for the
sale of twenty-five Orbotech Paragon™ Laser Direct Imaging (LDI)
systems and other PCB production equipment to be utilized in the
customer’s printed circuit board and integrated circuit carrier
production facilities. Although there are no minimum purchase
requirements under this frame agreement, delivery of most of these
systems is expected to be completed by the end of 2010.
In light of the anticipated FPD industry growth driven by higher
demand from China and other emerging economies, many LCD
manufacturers have begun to solidify their capital expenditure
plans for the next phase of investment. During the fourth quarter
of 2009, the Company received a significant order for its new
Generation 8 FPD equipment, most of which is expected to be
delivered in the first half of 2010. These revenues are expected to
be recorded during the second or third quarters of 2010. Additional
investments in FPD fabrication plants are expected to begin in the
latter part of 2010 and continue into 2011.
An earnings conference call is scheduled for Monday, February
22, 2010, at 9:00 a.m. EST. The dial-in number for the conference
call is 210-795-2680, and a replay will be available at
203-369-1451 until March 8, 2010. 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 principally engaged in the design, development,
manufacture, marketing and service of yield-enhancing and
production solutions for specialized applications in the supply
chain of the electronics industry. Orbotech’s products include
automated optical inspection (AOI), production and process control
systems for printed circuit boards (PCBs) and AOI, test and repair
systems for flat panel displays (FPDs). The Company also markets
computer-aided manufacturing (CAM) and engineering solutions for
PCB production. In addition, through its subsidiary, Orbograph
Ltd., the Company develops and markets character recognition
solutions to banks and other financial institutions, and has
developed a proprietary technology for web-based,
location-independent data entry for check processing and forms
processing; and, through its subsidiaries, Orbotech Medical Denmark
A/S and Orbotech Medical Solutions Ltd., is engaged in the research
and development, manufacture and sale of specialized products for
application in medical nuclear imaging. 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. Orbotech’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 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 cyclicality in the industries in which
the Company operates, a sustained continuation or worsening of the
worldwide economic slowdown, 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 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, 2008. 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 and non-GAAP earnings per share detailed in
the Reconciliation exclude charges or income, as applicable,
related to one or more of the following: (i) equity-based
compensation expenses; (ii) certain items associated with
acquisitions, including amortization of intangibles; (iii)
restructuring and asset impairments; (iv) a gain representing
additional consideration from the sale of Salvador Imaging, Inc.
which was owned by PDI at the time of the PDI acquisition in 2008;
and/or (v) tax credits relating to the above items, in each case as
described in more detail in the Reconciliation. Management uses
non-GAAP net income and non-GAAP earnings per share 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 (loss) or earnings (loss) 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 net income measure. 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, in-process
research and development charges and impairment charges have also
been excluded from the non-GAAP net income measure. These items are
inconsistent in amount and frequency and are significantly affected
by the timing and size of acquisitions. These items were
significantly higher in the fourth quarter of 2008 and throughout
2009 primarily as a result of the Company’s acquisitions, including
the PDI acquisition in October 2008. 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. Although these expenses are not recurring
with respect to past acquisitions, these types of expenses will
generally be incurred in connection with any future acquisitions.
Restructuring expenses relate to realignment initiatives announced
in 2008. The Company did not undertake any similar restructuring
initiatives in 2009, but its results reflect the benefits of the
2008 initiatives. For more information about these items, see the
Company’s Annual Report on Form 20-F filed with the SEC for the
year ended December 31, 2008.
ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 2009 December 31 December 31
2009
2008
U. S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents 167,233 105,127 Marketable securities 320
Accounts receivable: Trade 149,817 180,701 Other 27,661 27,106
Deferred income taxes 4,384 5,222 Inventories 101,599
122,152
Total current assets
450,694 440,628
INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities 9,969 19,241 Funds in respect of employee
rights upon retirement 11,285 12,521 Deferred income taxes 10,164
8,795 Other 29 29 31,447 40,586
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation and amortization 29,331 39,325
GOODWILL
12,774 12,747
OTHER INTANGIBLE ASSETS, net of
accumulated amortization 81,516 101,575
605,762 634,861
Liabilities and equity
CURRENT LIABILITIES:
Short-term bank loan 160,000 Current maturities of long-term bank
loan 32,000 Accounts payable and accruals: Trade 27,119 36,377
Other 51,675 56,428 Deferred income 17,336 22,473
Total current liabilities
128,130 275,278
LONG-TERM LIABILITIES:
Long-term bank loan 128,000 Liability for employee rights upon
retirement 25,030 27,678 Deferred income tax 2,010 2,010 Other tax
liabilities 10,079 14,198 Other long-term liability 2,667
Total long-term liabilities
165,119 46,553
Total liabilities
293,249 321,831
EQUITY:
Share capital 1,746 1,727 Additional paid-in capital 169,748
161,914 Retained earnings 192,664 211,142 Accumulated other
comprehensive income (loss) 3,817 (6,123 ) 367,975 368,660
Less treasury stock, at cost (57,192 ) (57,192 )
Total Orbotech Ltd. shareholders'
equity
310,783 311,468 Non-controlling interest 1,730 1,562
Total equity
312,513 313,030 605,762 634,861
ORBOTECH LTD. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FOR THE TWELVE MONTH AND THREE MONTH
PERIODS ENDED DECEMBER 31, 2009
12 months ended
3 months ended
December 31
December 31
2009
2008
2009
2008
U.S. dollars in thousands (except
per share data)
REVENUES
377,600 429,546 99,375 129,213
COST OF REVENUES:
COST
235,608 260,639 61,537 80,536
WRITE DOWN OF INVENTORIES
3,348 3,348
GROSS PROFIT
141,992 165,559 37,838 45,329
RESEARCH AND DEVELOPMENT COSTS - net
67,872 76,602 17,861 20,742
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
65,193 73,346 17,675 19,551
AMORTIZATION OF OTHER INTANGIBLE
ASSETS
20,187 8,099 5,052 5,053
IN-PROCESS RESEARCH AND DEVELOPMENT
CHARGES
6,537 6,537
RESTRUCTURING CHARGES
8,800 5,124
IMPAIRMENT (ADJUSTMENT OF IMPAIRMENT) OF
GOODWILL
(2,070 ) 110,403 210 87,819
IMPAIRMENT OF OTHER INTANGIBLE ASSETS
21,260
OPERATING LOSS
(9,190 ) (139,488 ) (2,960 ) (99,497 )
FINANCIAL EXPENSES - net
(10,977 ) (1,324 ) (518 ) (2,760 )
LOSS BEFORE TAXES ON INCOME
(20,167 ) (140,812 ) (3,478 ) (102,257 )
INCOME TAX EXPENSE (BENEFIT)
(411 ) (5,739 ) 1,817 (1,152 )
NET
LOSS
(19,756 ) (135,073 ) (5,295 ) (101,105 )
LESS: NET INCOME ATTRIBUTABLE TO
THE
NON-CONTROLLING INTEREST
168 232 55 75
NET
LOSS ATTRIBUTABLE TO ORBOTECH LTD.
(19,924 ) (135,305 ) (5,350 ) (101,180 )
LOSS ATTRIBUTABLE TO ORBOTECH LTD.
ORDINARY SHAREHOLDERS PER SHARE:
BASIC AND DILUTED
($0.58 ) ($4.04 ) ($0.15 ) ($2.98 )
WEIGHTED AVERAGE NUMBER OF SHARES (IN
THOUSANDS)
USED IN COMPUTATION OF LOSS PER
SHARE:
BASIC AND DILUTED
34,501 33,512 34,755 33,936
ORBOTECH LTD. RECONCILIATION OF GAAP TO NON-GAAP
RESULTS FOR THE TWELVE MONTH AND THREE MONTH PERIODS ENDED
DECEMBER 31, 2009
12 months ended
3 months ended
December 31
December 31
2009
2008
2009
2008
U.S. dollars in thousands (except per share data)
Reported net loss attributable to Orbotech
Ltd. on GAAP basis
(19,924 ) (135,305 ) (5,350
) (101,180 ) Non-operating income
(expenses): Financial expenses (10,977 ) (1,324 ) (518 ) (2,760
) Income tax benefit (expense) 411 5,739 (1,817 ) 1,152 Net profit
attributable to the non-controlling interest (168 ) (232 ) (55 )
(75 ) (10,734 ) 4,183 (2,390 ) (1,683 )
Reported operating loss on GAAP basis
(9,190 ) (139,488 ) (2,960
) (99,497 ) Equity based compensation
expenses 6,445 5,275 1,461 1,479 Amortization of intangibles assets
20,187 8,099 5,052 5,053 In-process research and development
charges (1) 6,537 6,537 Restructuring charges (2) 8,800 5,124
Impairment of goodwill (3) 110,403 87,819 Impairment of other
intangible assets (4) 21,260 Adjustment of impairment of goodwill
(5) (3,300 )
Non-GAAP operating income
14,142 20,886 3,553 6,515
Non-operating income
(expenses) (10,734 ) 4,183 (2,390 ) (1,683 ) Income tax effect
of non-GAAP adjustment (6) (6,011 )
Non-GAAP net income
3,408 19,058 1,163 4,832
Non-GAAP net income per diluted
share
$0.10 $0.55 $0.03 $0.14
Shares used in net income per
diluted share calculation
35,076 34,743 35,662 33,936
(1)
In-process research and
development charges in 2008 were associated with the Photon
Dynamics, Inc. ("PDI") acquisition. For more information about the
PDI acquisition, see the Company’s 2008 Annual Report on Form 20-F
filed with the SEC.
(2)
The restructuring charges of $8.8
million in 2008 and the $5.1 million in the 3 month period ended
December 31, 2008, relate to reductions in the Company’s workforce
and rationalizations of certain of its research and development,
manufacturing and operating activities, in order to realign the
Company's infrastructure.
(3)
The impairment charge of $110.4
million in 2008 is comprised of: a write-off of $87.9 million
recorded in December 2008 of goodwill associated with the Company's
FPD business; a write-down of $17.1 million recorded in September
2008 of the goodwill associated with Orbotech Medical Denmark A/S
("OMD"); and a write-off of $5.4 million recorded in September 2008
of goodwill associated with the Company’s assembled PCB
business.
(4)
The impairment charge of $21.3
million in 2008 was related to a write-down of the intellectual
property of OMD. For more information about OMD and the related
impairment, see the Company’s 2008 Annual Report on Form 20-F filed
with the SEC.
(5)
The adjustment of impairment of
goodwill of $3.3 million recorded in June 2009 represents
additional consideration from the sale of Salvador Imaging which
was owned by PDI at the time of the PDI acquisition in 2008.
(6)
The income tax effect in 2008 was
related mainly to the impairment associated with OMD that occurred
in the third quarter of 2008. The adjustments in 2009 do not have a
related income tax effect.
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