ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its
consolidated financial results for the third quarter and nine
months ended September 30, 2012.
Revenues for the third quarter of 2012 totaled $98.9 million,
compared to $101.3 million in the second quarter of 2012 and $144.4
million recorded in the third quarter of 2011. GAAP net loss for
the third quarter of 2012 was $45.7 million, or $1.05 per share,
compared to GAAP net loss of $0.8 million, or $0.02 per share in
the second quarter of 2012 and GAAP net income of $14.7 million, or
$0.34 per share (diluted), in the third quarter of 2011.
GAAP net loss for the third quarter of 2012 reflects: (a) a
non-cash impairment charge of $30.0 million, or $0.69 per share,
relating to intangible assets allocated to the Company’s flat panel
display (“FPD”) business, following the assessment and
testing of the value of those assets in light of the changed FPD
industry and business conditions; (b) a write-down of inventories
and a provision for open commitments in the amount of $14.3
million, or $0.33 per share, relating primarily to components for
the Company’s FPD products, which takes into consideration the
Company’s current inventory levels and its assessment as to
anticipated future demand for its FPD products; and (c) $1.7
million of costs in connection with the ongoing Korean litigation,
which are recorded in general and administrative expenses.
Revenues for the first nine months of 2012 totaled $300.4
million, compared to $432.0 million recorded in the first nine
months of 2011. GAAP net loss for the first nine months of 2012 was
$44.8 million, or $1.03 per share, compared to GAAP net income of
$44.8 million, or $1.13 per share (diluted), in the first nine
months of 2011.
Non-GAAP net loss for the third quarter of 2012 was $12.3
million, or $0.28 per share, compared to non-GAAP net income of
$18.6 million, or $0.42 per share (diluted), in the third quarter
of 2011. Non-GAAP net loss for the first nine months of 2012 was
$1.7 million, or $0.04 per share, compared to non-GAAP net income
of $55.7 million, or $1.40 per share (diluted), in the first nine
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 printed circuit board
(“PCB”) industry were $42.0 million in the third quarter of
2012, compared to $48.6 million in the second quarter of 2012 and
$56.6 million in the third quarter of 2011; and sales of equipment
to the FPD industry were $15.3 million in the third quarter of
2012, compared to $12.3 million in the second quarter of 2012 and
$49.6 million in the third quarter of 2011. In the Company’s
Recognition Software segment, sales were $2.0 million in the third
quarter of 2012, compared to $1.7 million in the second quarter of
2012 and $1.8 million in the third quarter of 2011. In addition,
service revenue for the third quarter of 2012 reached a quarterly
record $39.6 million, compared to $38.7 million in the second
quarter of 2012 and $36.4 million in the third quarter of 2011.
The Company completed the quarter with cash, cash equivalents,
short-term bank deposits and marketable securities of $276.2
million and debt of $72 million, compared with cash, cash
equivalents, short-term bank deposits and marketable securities of
$279.1 million and debt of $80 million at the end of the second
quarter of 2012. The Company generated cash of $7.9 million from
continuing operations in the third quarter of 2012.
As previously announced, the Company is adopting certain
measures designed to realign its infrastructure with current
revenue levels and business conditions. These include a reduction
in the Company’s worldwide workforce in the fourth quarter of 2012,
consolidation of certain Company facilities and other cost-cutting
measures, that will result in a restructuring charge of
approximately $4.0 million, which will be recorded in the fourth
quarter of 2012. The Company expects these measures to result in a
reduction of approximately $10 - 12 million of annual operating
expenses during 2013. Orbotech is continuing to invest in research
and development programs to foster future growth, improve its
technological leadership and enhance its worldwide customer service
and support infrastructure.
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. On October 26, 2012, the Korean court
released on bail the three Korean employees who had previously been
arrested. These legal proceedings are ongoing and the Company’s
Korean subsidiary continues to co-operate with the Korean
authorities in this matter.
The Company is also separately announcing today that, pursuant
to approval granted by its Board of Directors, it proposes to
allocate $30 million to undertake the purchase of its Ordinary
Shares. Such purchases will be subject, among other things, to the
share price and market conditions and will be made in accordance
with all applicable laws and regulations.
Commenting on the quarter, Rani Cohen, President and Chief
Executive Officer, said: “The lower than expected revenue levels
recorded for the third, and anticipated for the fourth, quarters of
2012 reflect the challenging business environment and associated
high degree of uncertainty currently prevailing in our industries
and throughout the global economy. These factors have impacted
commercial and consumer spending, causing a number of PCB
manufacturers to defer capital expenditure decisions. At the same
time, while FPD manufacturers are beginning to experience higher
utilization rates, which we believe will in the future translate
into new orders for the Company, they remain very cautious at this
time about placing new orders. We expect this overall business
environment to continue through the first half of 2013, and are
therefore taking action to realign our worldwide organization and
workforce, while still investing in key product development
capabilities. This will enhance our ability to maintain - and even
improve - our leadership position within the industries that we
serve and will allow us to capitalize on opportunities arising once
business conditions begin to improve.”
An earnings conference call for the Company’s third quarter 2012
results is scheduled for Monday, November 5, 2012, at 9:00 a.m.
EST. The dial-in number for the conference call is 773-756-4789,
and a replay will be available on telephone number 203-369-3180
until November 19, 2012. The pass code is Q3. 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. The corporate website is not
incorporated herein by reference and is included as an inactive
textual reference only.
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 (v) 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, share in losses/profits of associated
companies 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 SEPTEMBER 30, 2012 September 30
December 31
2012
2011
U.S. dollars in thousands
A s s e t
s
CURRENT
ASSETS:
Cash and cash equivalents 231,617 151,237 Short-term bank deposits
29,708 145,292 Marketable securities 3,810 Accounts receivable:
Trade 179,434 196,232 Other 28,098 26,163 Deferred income taxes
7,600 6,580 Inventories 97,936 105,109 T o t a l
current assets 578,203 630,613
INVESTMENTS AND
NON-CURRENT ASSETS:
Marketable securities 11,106 Funds in respect of employee rights
upon retirement 11,758 11,846 Deferred income taxes 11,598 8,999
Other long-term investments 2,221 2,426 36,683
23,271
PROPERTY, PLANT AND
EQUIPMENT, net
25,729 26,664
GOODWILL
12,444 12,444
OTHER INTANGIBLE
ASSETS, net
15,595 54,491 668,654 747,483
Liabilities and
equity
CURRENT
LIABILITIES:
Current maturities of long-term bank loan 32,000 32,000 Accounts
payable and accruals: Trade 34,733 32,357 Other 47,654 57,590
Deferred income 19,367 25,910 T o t a l current
liabilities 133,754 147,857
LONG-TERM
LIABILITIES:
Long-term bank loan 40,000 64,000 Liability for employee rights
upon retirement 27,240 26,797 Deferred income taxes 1,708 1,759
Other tax liabilities 17,216 16,938 T o t a l
long-term liabilities 86,164 109,494 T o t a l
liabilities 219,918 257,351
EQUITY:
Share capital 2,101 2,092 Additional paid-in capital 274,071
270,966 Retained earnings 229,303 274,148 Accumulated other
comprehensive income (loss) (112 ) (1,460 ) 505,363 545,746 Less
treasury shares, at cost (57,192 ) (57,192 ) T o t a l Orbotech
Ltd. shareholders' equity 448,171 488,554 Non-controlling interest
565 1,578 T o t a l equity 448,736 490,132
668,654 747,483
ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER
30, 2012 12 months
9 months ended
3 months ended
ended
September 30
September 30
December 31
2012
2011
2012
2011
2011
U.S. dollars in thousands (except per share data)
REVENUES
300,430 431,980 98,876 144,364 565,313
COST OF
REVENUES
174,246 251,405 59,568 83,675 329,442
WRITE-DOWN OF
INVENTORIES
14,255 14,255 6,743
GROSS
PROFIT
111,929 180,575 25,053 60,689 229,128
RESEARCH AND
DEVELOPMENT COSTS - net
54,062 62,582 17,938 21,332 84,180
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
57,160 53,689 19,203 17,993 72,583
AMORTIZATION OF
INTANGIBLE ASSETS
8,916 9,213 2,852 3,071 12,304
RESTRUCTURING
CHARGES
1,918
IMPAIRMENT OF
INTANGIBLE ASSETS
29,980 29,980
OPERATING INCOME
(LOSS)
(40,107 ) 55,091 (44,920 ) 18,293 60,061
FINANCIAL
EXPENSES - net
5,247 5,706 1,808 1,810 6,551
INCOME (LOSS) FROM
CONTINUING OPERATIONS BEFORE TAXES ON INCOME
(45,354 ) 49,385 (46,728 ) 16,483 53,510
TAXES ON INCOME (TAX
BENEFIT)
222 5,822 (742 ) 1,703 7,677
(45,576 ) 43,563 (45,986 ) 14,780 45,833
SHARE IN LOSSES OF
ASSOCIATED COMPANY
115 109 50 49 179
NET INCOME (LOSS)
FROM CONTINUING OPERATIONS
(45,691 ) 43,454 (46,036 ) 14,731 45,654
INCOME FROM
DISCONTINUED OPERATIONS, NET OF TAX
1,363 1,363
NET INCOME
(LOSS)
(45,691 ) 44,817 (46,036 ) 14,731 47,017
NET INCOME (LOSS)
ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
(846 ) 25 (342 ) 25 (322 )
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.
(44,845 ) 44,792 (45,694 ) 14,706 47,339
AMOUNTS ATTRIBUTABLE
TO ORBOTECH LTD.:
INCOME (LOSS) FROM
CONTINUING OPERATIONS
(44,845 ) 43,429 (45,694 ) 14,706 45,976
INCOME FROM
DISCONTINUED OPERATIONS, NET OF TAX
1,363 1,363
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.
(44,845 ) 44,792 (45,694 ) 14,706 47,339
EARNINGS PER
SHARE:
INCOME (LOSS) FROM
CONTINUING OPERATIONS:
BASIC
($1.03 ) $1.12 ($1.05 ) $0.34 $1.15
DILUTED
($1.03 ) $1.09 ($1.05 ) $0.34 $1.13
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.:
BASIC
($1.03 ) $1.15 ($1.05 ) $0.34 $1.19
DILUTED
($1.03 ) $1.13 ($1.05 ) $0.34 $1.16
WEIGHTED AVERAGE
NUMBER OF SHARES USED IN COMPUTATION OF EARNINGS PER SHARE - IN
THOUSANDS:
BASIC
43,482 38,785 43,537 43,177 39,909
DILUTED
43,482 39,759 43,537 43,872 40,816
ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2012 12 months
9 months ended
3 months ended
ended
September 30
September 30
December 31
2012
2011
2012
2011
2011
U.S. dollars in thousands
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) (45,691 ) 44,817 (46,036 ) 14,731 47,017
Adjustment to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations (1,363 ) (1,363 ) Depreciation
and amortization 14,724 15,073 4,791 5,095 19,958 Impairment of
Intangible assets 29,980 29,980
Compensation relating to equity awards
granted to employees and others - net
2,286 2,915 480 778 3,728 Increase (decrease) in liability for
employee rights upon retirement 720 (54 ) 626 (516 ) (704 )
Non-cash expenses in respect of restructuring 601 Deferred income
taxes (3,670 ) 2,335 (2,471 ) 1,038 2,584 Loss from sales and write
down of marketable securities 395 395 Others 1,142 1,069 847 1,023
1,224 Decrease (increase) in accounts receivable: Trade 16,798
(43,485 ) 2,889 (12,703 ) (42,714 ) Other (1,860 ) 1,121 (462 )
1,524 2,698 Increase (decrease) in accounts payable and accruals:
Trade 2,376 13,271 5,008 (12,841 ) 5,822 Deferred income and other
(15,161 ) 5,753 739 3,508 6,105 Decrease (increase) in inventories
7,574 (8,116 ) 11,504 1,805 6,870 Net
cash provided by operating activities - continuing operations 9,819
33,731 7,895 3,442 51,620 Net cash used in operating activities -
discontinued operations (740 ) 0 (787 )
Net
cash provided by operating activities 9,819
32,991 7,895 3,442
50,833
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (6,561 ) (5,188 )
(3,102 ) (2,803 ) (7,554 ) Withdraw (placement) of bank deposits
115,584 (127,300 ) 50,010 (67,300 ) (142,325 ) Realization
(purchase) of marketable securities (14,935 ) 1,967 1,967 Other
investment (2,310 ) (810 ) (2,810 ) Proceeds from disposal of
property, plant and equipment 35 35
Decrease (increase) in funds in respect of
employee rights upon retirement
(189 ) (13 ) 41 200 331 Net cash provided by
(used in) investing activities - continuing operations 93,899
(132,809 ) 46,949 (70,713 ) (150,356 ) Net cash provided by
investing activities - discontinued operations 9,155
9,155
Net cash provided by (used in)
investing activities 93,899 (123,654
) 46,949 (70,713 )
(141,201 )
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term bank loan (24,000 ) (24,000 ) (8,000
) (8,000 ) (32,000 ) Employee stock options exercised 662 1,649 51
219 2,063 Proceeds from issuance of shares, net 90,683
90,683
Net cash provided by (used
in) financing activities (23,338 ) 68,332
(7,949 ) (7,781 ) 60,746
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS 80,380
(22,331 ) 46,895 (75,052 )
(29,622 ) CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 151,237 180,859 184,722 233,580 180,859
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
231,617
158,528 231,617 158,528
151,237 ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING
OPERATIONS FOR THE NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2012 12
months
9 months ended
3 months ended
ended
September 30
September 30
December 31
2012
2011
2012
2011
2011
U.S. dollars in thousands (except per share data)
Reported operating
income (loss) on GAAP basis
(40,107 ) 55,091 (44,920 ) 18,293 60,061
Equity based compensation expenses 2,230 2,915 480 778 3,728
Restructuring charges 1,918 Impairment of Intangible assets 29,980
29,980 Amortization of intangible assets 8,916 9,213
2,852 3,071 12,304 Non-GAAP operating income 2,937
67,219 (11,608 ) 22,142 76,093
Reported net income
(loss) attributable to Orbotech Ltd. on GAAP basis
(44,845 ) 44,792 (45,694 ) 14,706 47,339
Equity based compensation expenses 2,230 2,915 480 778 3,728
Amortization of intangible assets 8,916 9,213 2,852 3,071 12,304
Income from discontinued operations (1,363 ) (1,363 ) Restructuring
charges 1,918 Impairment of Intangible assets 29,980 29,980 Share
in losses of associated company 115 109 50 49 179
Non-GAAP net income
(loss) from continuing operations
(1,686 ) 55,666 (12,332 ) 18,604 62,187
Non-GAAP earnings per diluted share ($0.04 ) $1.40 ($0.28 )
$0.42 $1.52 Shares used in earnings per diluted share
calculation-in thousands 43,482 39,759 43,537
43,872 40,816
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