ORBK Orbotech Ltd. - Ordinary Shares

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the first quarter ended March 31, 2010.

Revenues for the first quarter of 2010 totaled $103.1 million, compared to $99.4 million recorded in the fourth quarter of 2009 and the $91.9 million recorded in the first quarter a year ago. GAAP (generally accepted accounting principles) net income for the first quarter of 2010 was $1.6 million, or $0.05 per share (diluted), compared to GAAP net loss of $5.4 million, or $0.15 per share, for the fourth quarter of 2009 and GAAP net loss of $7.9 million, or $0.23 per share, in the first quarter of 2009.

Non-GAAP net income for the first quarter of 2010 was $6.6 million, or $0.18 per share (diluted), compared to non-GAAP net loss of $1.4 million, or $0.04 per share, in the first quarter of 2009. Detailed non-GAAP adjustments are explained in the accompanying reconciliation of GAAP to non-GAAP results (the “Reconciliation”).

During the last few months consumer demand for electronic devices, such as flat panel display television sets, mobile phones and personal computers, has been stronger than expected. As a result, the Company has recently been experiencing high demand for its PCB and FPD inspection and production solutions. In the Company’s FPD business, this demand translated into increased bookings for flat panel display equipment, mostly from large Korean manufacturers. In addition, the Paragon Xpress direct imaging system is increasingly becoming a critical tool for high density interconnect (HDI) PCB mass production. As a result of these recent trends, the Company announced on April 13, 2010 that it expects to record 2010 revenues in the range of $460 - 470 million.

Commenting on the results, Rani Cohen, President and Chief Executive Officer, said: “Our financial results for the quarter exceeded our original expectations. The improved business environment has led to increased demand for Orbotech’s PCB and FPD solutions. The growth in revenues, as well as our stronger operating efficiencies, has led to improved profitability. These results reflect our continuing commitment - even during periods of pronounced economic downturn - to high levels of investment in research, development and operating infrastructure. These investments enable us to meet the increasing demand for our products and to continue to provide our customers with new and innovative solutions and first class support.”

Sales of equipment to the printed circuit board (“PCB”) industry were $38.3 million in the first quarter of 2010, compared to $26.0 million in the fourth quarter, and $11.2 million in the first quarter, of 2009. Sales of equipment to the flat panel display (“FPD”) industry were $33.9 million, compared to $40.5 million in the fourth quarter, and $50.0 million in the first quarter, of last year. Sales of character recognition products were $1.5 million, compared to $2.0 million in the fourth quarter, and $1.4 million in the first quarter, of 2009. Sales of medical imaging equipment in the first quarter of 2010 were $2.5 million, compared to $2.1 million in the fourth quarter, and $3.7 million in the first quarter, of last year. In addition, service revenue for the first quarter of 2010 was $26.9 million, compared to $28.8 million in the fourth quarter, and $25.5 million in the first quarter, of 2009.

The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $169 million, compared with approximately $177 million at the end of 2009; and $152 million in debt. The Company’s portfolio of marketable securities at quarter end included approximately $9.6 million of auction rate securities primarily tied to student loans.

Investors are reminded that the Company will be hosting an Investor and Analyst Day on Tuesday, June 8, 2010, from 9:00 a.m. until 4:00 p.m. PDT, at its offices in San Jose, CA, U.S.A. The event will feature an in-depth look at Orbotech, including presentations by senior management, as well as live demonstrations of the Company’s PCB and FPD systems.

An earnings conference call is scheduled for Monday, May 10, 2010, at 9:00 a.m. EDT. The dial-in number for the conference call is 210-795-2680, and a replay will be available on telephone number 203-369-1036 until May 24, 2010. 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 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 , among other things, in check 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, 2009. 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; and/or (iii) 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. 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 have also been excluded from the non-GAAP net income measure. 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 Company’s Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2009.

ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2010       March 31 December 31

2010

 

2009

 

U. S. dollars in thousands

Assets

 

CURRENT ASSETS:

Cash and cash equivalents 159,430 167,233 Accounts receivable: Trade 158,724 149,817 Other 27,622 27,661 Deferred income taxes 4,125 4,384 Inventories 104,602   101,599  

Total current assets

454,503   450,694    

INVESTMENTS AND NON-CURRENT ASSETS:

Marketable securities 9,790 9,969 Funds in respect of employee rights upon retirement 11,743 11,285 Deferred income taxes 8,899 10,164 Other long-term investment 29   29   30,461   31,447  

 

PROPERTY, PLANT AND EQUIPMENT, net

27,360   29,331    

GOODWILL

12,724   12,774    

OTHER INTANGIBLE ASSETS, net

77,850   81,516       602,898   605,762      

Liabilities and equity

 

CURRENT LIABILITIES:

Current maturities of long-term bank loan 32,000 32,000 Accounts payable and accruals: Trade 33,027 27,119 Other 47,265 51,675 Deferred income 19,463   17,336  

Total current liabilities

131,755 128,130  

LONG-TERM LIABILITIES:

Long-term bank loan 120,000 128,000 Liability for employee rights upon retirement 25,614 25,030 Deferred income tax 2,010 2,010 Other tax liabilities 9,312   10,079  

Total long-term liabilities

156,936 165,119    

Total liabilities

288,691   293,249    

EQUITY:

Share capital 1,750 1,746 Additional paid-in capital 171,120 169,748 Retained earnings 194,275 192,664 Accumulated other comprehensive income 2,541   3,817   369,686 367,975 Less treasury stock, at cost (57,192 ) (57,192 )

Total Orbotech Ltd. shareholders' equity

312,494 310,783 Non-controlling interest 1,713   1,730  

Total equity

314,207   312,513       602,898   605,762       ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2010             12 months

3 months ended

ended

March 31

December 31

2010

 

2009

 

2009

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

REVENUES

103,069 91,862 377,600  

COST OF REVENUES

61,232 57,863 235,608      

GROSS PROFIT

41,837 33,999 141,992  

RESEARCH AND DEVELOPMENT COSTS - net

18,134 16,679 67,872  

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES

14,890 15,926 65,193  

AMORTIZATION OF OTHER INTANGIBLE

ASSETS

3,603 5,041 20,187  

IMPAIRMENT (ADJUSTMENT OF IMPAIRMENT) OF GOODWILL

627 (2,070 )      

OPERATING INCOME (LOSS)

4,583 (3,647 ) (9,190 )  

FINANCIAL EXPENSES - net

(2,225 ) (5,031 ) (10,977 )      

INCOME (LOSS) BEFORE TAXES ON INCOME

2,358 (8,678 ) (20,167 )  

INCOME TAX EXPENSE (BENEFIT)

764 (769 ) (411 )      

NET INCOME (LOSS)

1,594 (7,909 ) (19,756 )  

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST

(17 ) (23 ) 168      

NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.

1,611   (7,886 ) (19,924 )    

EARNINGS (LOSS) PER SHARE:

BASIC

$0.05   ($0.23 ) ($0.58 )  

DILUTED

$0.05   ($0.23 ) ($0.58 )

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION

OF EARNINGS (LOSS) PER SHARE - IN THOUSANDS:

 

BASIC

34,819   34,206   34,501    

DILUTED

35,641   34,206   34,501       ORBOTECH LTD. RECONCILIATION OF GAAP TO NON-GAAP RESULTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2010             12 months

3 months ended

ended

March 31

December 31

2010

 

2009

 

2009

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

Reported net income (loss) attributable to Orbotech Ltd. on GAAP basis

1,611   (7,886 ) (19,924 )   Non-operating income (expenses): Financial expenses - net (2,225 ) (5,031 ) (10,977 ) Income tax benefit (expense) (764 ) 769 411 Net loss (income) attributable to the non-controlling interest 17   23   (168 ) (2,972 ) (4,239 ) (10,734 )         Reported operating income (loss) on GAAP basis 4,583 (3,647 ) (9,190 )   Equity based compensation expenses 1,376 1,489 6,445 Amortization of intangibles assets 3,603 5,041 20,187 Adjustment of impairment of goodwill (*)     (3,300 ) Non-GAAP operating income 9,562 2,883 14,142   Non-operating expenses (2,972 ) (4,239 ) (10,734 )      

Non-GAAP net income (loss)

6,590   (1,356 ) 3,408     Non-GAAP earnings (loss) per diluted share $0.18   ($0.04 ) $0.10     Shares used in earnings (loss) per diluted share calculation-in thousands 35,641   34,206   35,076       (*)  

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.