ORBK Orbotech Ltd. - Ordinary Shares

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the first quarter ended March 31, 2011.

Commenting on the strong quarter, Rani Cohen, President and Chief Executive Officer, said: “Our solid performance in the first quarter of 2011 reflects our position as a leading supplier of enabling and essential tools for the production of advanced and sophisticated electronic devices. During the quarter, we achieved several important new product milestones. We received acceptances of our new Generation 8 EVision FPD-AOI system. We also made initial deliveries of our Emerald-100 UV laser drilling solution for high-end PCBs and IC substrates, a system which is capable of achieving significantly higher drill speeds and superior accuracy than other currently available solutions. Additionally, we received the first order for our newly-developed product for the deposition of anti-reflective coating on crystalline silicon photovoltaic wafers for solar energy panels, and we expect to recognize revenue from this product early in 2012. We believe that this quarter is indicative of what we expect to be a successful year for the Company.”

Revenues for the first quarter of 2011 totaled $134.2 million, compared to $128.4 million in the fourth quarter, and $100.0 million in the first quarter, of 2010. GAAP net income for the first quarter of 2011 was $11.2 million, or $0.31 per share (diluted), compared to GAAP net income of $4.0 million, or $0.11 per share (diluted) for the fourth quarter of 2010 and GAAP net income of $1.6 million, or $0.05 per share (diluted), in the first quarter of 2010. GAAP net income from continuing operations for the first quarter of 2011 was $11.1 million, or $0.30 per share (diluted), compared to GAAP net income from continuing operations of $6.0 million, or $0.17 per share (diluted) for the fourth quarter of 2010 and GAAP net income from continuing operations of $3.6 million, or $0.10 per share (diluted), in the first quarter of 2010.

Non-GAAP net income from continuing operations for the first quarter of 2011 was $15.2 million, or $0.42 per share (diluted), compared to non-GAAP net income from continuing operations of $8.5 million, or $0.24 per share (diluted), in the first quarter of 2010. 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.

The strong trend in demand for tablets, smartphones and other electronic devices continued into the first quarter of 2011, leading to strong demand for the Company’s printed circuit board (“PCB”) inspection and production solutions, in particular its laser direct imaging tools. The Company believes that direct imaging systems will continue to be one of the main growth drivers in 2011, and expects to sell in excess of 170 such systems during the year, compared with the 107 systems sold in 2010.

Turning to the flat panel display (“FPD”) industry, while some manufacturers are considering the timing of their investments in new fabrication plants, others continue to pursue the build-up of new manufacturing plants in China. Elsewhere, FPD manufacturers are continuing their investments in facilities for small-to-mid size panels and in new technologies. The recent acceptances of the Company’s new Generation 8 EVision FPD-AOI system, together with its latest array checker and array saver systems, have positioned the Company to continue to provide best-in-class and optimum solutions for manufacturers of FPDs of all dimensions and technologies.

Sales of equipment to the PCB industry were $57.0 million in the first quarter of 2011, compared to $50.1 million in the fourth quarter of 2010, and $38.3 million in the first quarter of 2010. Sales of equipment to the FPD industry were $43.2 million, compared to $42.7 million in the fourth quarter of 2010, and $33.9 million in the first quarter of last year. Sales of character recognition products were $1.4 million in the first quarter of 2011, compared to $2.5 million in the fourth quarter of 2010, and $1.5 million recorded in the first quarter of 2010. In addition, service revenue for the first quarter of 2011 was $32.6 million, compared to $33.1 million in the fourth quarter of 2010, and $26.2 million in the first quarter of 2010.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $195.1 million and debt of $120 million, compared with cash, cash equivalents and marketable securities of approximately $184.8 million and debt of $128 million at the end of the fourth quarter of 2010. The Company generated cash of $7.9 million from continuing operations in the first quarter of 2011.

In April 2011, the Company entered into a conditional agreement for a management buyout of Orbotech Medical Denmark A/S. As a result of the Company’s earlier commitment to divest this entity by the end of 2011, which culminated in this agreement, and of the previously announced agreement for the sale of the assets of Orbotech Medical Solutions Ltd., both of these companies had been classified as discontinued operations. This is reflected in the financial data for the first quarter of 2011, as well as in certain financial data for previous fiscal years provided in the Company’s 2010 Annual Report and Financial Statements, which were re-cast accordingly. These transactions are not expected to impact the Company’s cash flow from operating activities in any material respect.

The Company is also pleased to announce the appointment of Mr. Doron Abramovitch to the position of Corporate Vice President and Chief Financial Officer, effective as of May 1, 2011. Commenting on this appointment, Rani Cohen said: “Doron brings to Orbotech extensive experience in both finance and operations and will be a very strong addition to the Company’s management team.”

To date, there has not been any impact on the Company’s business as a result of the recent events in Japan, although there may be in the future, and the Company will continue to monitor this closely.

An earnings conference call for the Company’s first quarter 2011 results is scheduled for Thursday, May 12, 2011, at 9:00 a.m. EST. The dial-in number for the conference call is 212-287-1850, and a replay will be available on telephone number 203-369-1832 until May 27 2011. 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 and flat panel displays; 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 visit www.orbotech.com.

Cautionary Statement Regarding Forward-Looking Statements and Non-GAAP Financial Measures

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, the impact of the recent events in Japan 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, 2010. 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, 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; and/or (iii) our discontinued operations. 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. 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 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, 2010.

ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2011     March 31 December 31 2 0 1 1 2 0 1 0 U. S. dollars in thousands

A s s e t s

 

CURRENT ASSETS:

Cash and cash equivalents 191,232 179,503 Short-term bank deposits 2,780 2,780 Accounts receivable: Trade 165,312 153,518 Other 30,964 29,919 Deferred income taxes 6,252 5,913 Inventories 114,188 112,812 Assets of discontinued operations 2,774   12,351   T o t a l current assets 513,502   496,796    

INVESTMENTS AND NON-CURRENT ASSETS:

Marketable securities 1,052 2,549 Funds in respect of employee rights upon retirement 12,950 13,017 Deferred income taxes 11,060 12,679 Other 29   29   25,091   28,274    

PROPERTY, PLANT AND EQUIPMENT, net

24,072   24,842    

GOODWILL

12,034   12,034    

OTHER INTANGIBLE ASSETS, net

63,324   66,395       638,023   628,341      

Liabilities and equity

 

CURRENT LIABILITIES:

Current maturities of long-term bank loan 32,000 32,000 Accounts payable and accruals: Trade 32,262 26,535 Other 52,003 55,290 Deferred income 25,848 24,421 Liabilities of discontinued operations 3,115   2,172   T o t a l current liabilities 145,228 140,418  

LONG-TERM LIABILITIES:

Long-term bank loan 88,000 96,000 Liability for employee rights upon retirement 27,138 27,501 Deferred income taxes 2,188 2,188 Other tax liabilities 12,572   12,679   T o t a l long-term liabilities 129,898 138,368     T o t a l liabilities 275,126   278,786    

EQUITY:

Share capital 1,768 1,758 Additional paid-in capital 177,054 174,940 Retained earnings 238,005 226,809 Accumulated other comprehensive income 1,476   1,454   418,303 404,961 Less treasury shares, at cost (57,192 ) (57,192 ) T o t a l Orbotech Ltd. shareholders' equity 361,111 347,769 Non-controlling interest 1,786   1,786   T o t a l equity 362,897   349,555       638,023   628,341   ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2011       12 months

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December 31 2 0 1 1 2 0 1 0   2 0 1 0 U.S. dollars in thousands (except per share data)  

REVENUES

134,211 99,987 529,355  

COST OF REVENUES

78,516 57,901 312,901      

GROSS PROFIT

55,695 42,086 216,454  

RESEARCH AND DEVELOPMENT COSTS - net

20,229 17,110 78,327  

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES

17,354 14,509 66,264

 

AMORTIZATION OF INTANGIBLE ASSETS

3,071 3,544 14,176      

OPERATING INCOME

15,041 6,923 57,687

 

FINANCIAL EXPENSES- net

2,123 2,391 7,284

 

     

INCOME FROM CONTINUING OPERATIONS

BEFORE TAXES ON INCOME

12,918 4,532 50,403  

TAXES ON INCOME

1,830 998 7,397      

NET INCOME FROM CONTINUING OPERATIONS

11,088 3,534 43,006  

INCOME (LOSS) FROM DISCONTINUED

OPERATIONS, NET OF TAX

108 (1,940 ) (8,717 )      

NET INCOME

11,196 1,594 34,289  

NET INCOME (LOSS) ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST

- (17 ) 144      

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.

  11,196   1,611     34,145    

AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:

INCOME FROM CONTINUING OPERATIONS

11,088 3,551 42,862  

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX

108 (1,940 ) (8,717 )      

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.

  11,196   1,611     34,145      

EARNINGS PER SHARE:

INCOME FROM CONTINUING OPERATIONS:

BASIC

$ 0.31 $ 0.10   $ 1.23    

DILUTED

$ 0.30 $ 0.10   $ 1.20    

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC

$ 0.32 $ 0.05   $ 0.98    

DILUTED

$ 0.31 $ 0.05   $ 0.95      

 

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

BASIC

  35,229   34,819     34,911    

DILUTED

  36,458   35,641     35,778   ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2011             12 months

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CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income 11,196 1,594 34,289 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Loss (income) from discontinued operations (108 ) 1,940 8,717 Depreciation and amortization 5,090 4,437 23,665 Compensation relating to equity awards granted to employees and others - net 1,057 1,376 4,725 Increase (decrease) in liability for employee rights upon retirement (363 ) 606 2,589 Deferred income taxes 1,280 1,524 (3,866 ) Loss (gain) from sales and write down of marketable securities 157 (46 ) 1,252 Other, including capital loss (gain) 5 (1,147 ) Increase in accounts receivable: Trade (11,794 ) (8,096 ) (5,755 ) Other (1,084 ) (221 ) (4,673 ) Increase (decrease) in accounts payable and accruals: Trade 5,727 6,766 1,434 Deferred income and other (1,931 ) (3,345 ) 15,870 Increase in inventories (1,376 ) (3,981 ) (19,018 ) Net cash provided by operating activities - continuing operations 7,851 2,559 58,082 Net cash provided by (used in) operating activities - discontinued operations 864   (1,002 ) (8,972 ) Net cash provided by operating activities 8,715   1,557   49,110    

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property, plant and equipment (1,249 ) (720 ) (6,752 ) Placement of bank deposits (2,780 ) Sales of marketable securities 1,340 6,742 Proceeds from disposal of property, plant and equipment 20 Decrease (increase) in funds in respect of employee rights upon retirement 67   (457 ) (617 ) Net cash provided by (used in) investing activities - continuing operations 158 (1,177 ) (3,387 ) Net cash provided by (used in) investing activities - discontinued operations 9,155   (5 ) (268 ) Net cash provided by (used in) investing activities 9,313   (1,182 ) (3,655 )  

CASH FLOWS FROM FINANCING ACTIVITIES:

  Repayment of long-term bank loan (8,000 ) (8,000 ) (32,000 ) Employee stock options excercised 1,067 902 Acquisition of non-contolling interest     (511 ) Net cash used in financing activities (6,933 ) (8,000 ) (31,609 )       Currency translation adjustments on cash and cash equivalents 26   (178 ) (220 )       NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,121 (7,803 ) 13,626   CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 180,859 167,233 167,233       CASH AND CASH EQUIVALENTS AT END OF PERIOD 191,980 159,430 180,859   LESS - CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS AT END OF PERIOD 748 727 1,356 CASH AND CASH EQUIVALENTS OF CONTINUING       OPERATIONS AT END OF PERIOD 191,232   158,703   179,503   ORBOTECH LTD. RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2011         12 months

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December 31 2 0 1 1 2 0 1 0 2 0 1 0 U.S. dollars in thousands (except per share data)    

Reported net income attributable to Orbotech Ltd. on GAAP basis

  11,196     1,611     34,145     Non-operating income (expenses): Financial expenses - net (2,123 ) (2,391 ) (7,284 ) Taxes on income (1,830 ) (998 ) (7,397 ) Net loss (income) attributable to the non-controlling interest - 17 (144 ) Income (loss) from discontinued operations*   108     (1,940 )   (8,717 )   (3,845 )   (5,312 )   (23,542 )         Reported operating income on GAAP basis 15,041 6,923 57,687   Equity based compensation expenses 1,057 1,376 4,725 Amortization of intangible assets   3,071     3,544     14,176   Non-GAAP operating income 19,169 11,843 76,588   Non-operating expenses (3,845 ) (5,312 ) (23,542 ) Income (loss) from discontinued operations* 108 (1,940 ) (8,717 )      

Non-GAAP net income from continuing operations

  15,216     8,471     61,763     Non-GAAP earnings per diluted share $ 0.42   $ 0.24   $ 1.73     Shares used in earnings per diluted share calculation-in thousands   36,458     35,641     35,778       * The loss from discontinued operations, net of tax, was attributable to the re-classification during 2010 of OMS and OMD as discontinued operations.