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
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