ORBK Orbotech Ltd. - Ordinary Shares

ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the first quarter ended March 31, 2013.

Revenues for the first quarter of 2013 totaled $95.5 million, compared to $97.1 million in the fourth quarter, and $96.5 million in the first quarter, of 2012. GAAP net income for the first quarter of 2013 was $5.0 million, or $0.11 per share (diluted), compared to GAAP net loss of $0.7 million, or $0.02 per share, in the fourth quarter of 2012 and GAAP net income of $1.6 million, or $0.04 per share (diluted), in the first quarter of 2012.

Commenting on the results, Asher Levy, Chief Executive Officer, said: “We are pleased to report a good opening to the new year and expect to post still better results in the second quarter, when we anticipate revenues of approximately $105 million. We are benefiting from the steps we took last year to reduce our expense structure and improve our balance sheet, as well as from improved industry conditions. We remain focused on key areas, such as introducing new products, providing highest quality service to our customers and improving our operating leverage, which is clearly reflected in our results. Orbotech remains committed to seeking opportunities to utilize existing technologies for the development of new products, and for uses in new industries, in order to generate incremental growth and to continue to provide our customers with innovative solutions.”

Non-GAAP net income for the first quarter of 2013 was $6.8 million, or $0.16 per share (diluted), compared to non-GAAP net income of $7.6 million, or $0.17 per share (diluted), in the first quarter of 2012. 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 $47.4 million in the first quarter of 2013, compared to $40.6 million in the fourth quarter, and $46.4 million in the first quarter, of 2012; and sales of equipment to the flat panel display industry were $13.2 million in the first quarter of 2013, compared to $17.7 million in the fourth quarter, and $11.8 million in the first quarter, of 2012. In the Company’s Recognition Software segment, sales were $1.8 million in the first quarter of 2013, compared to $2.4 million in the fourth quarter, and $2.0 million in the first quarter, of 2012.

In addition, service revenue for the first quarter of 2013 was $33.1 million, compared to $36.4 million in the fourth quarter, and $36.3 million in the first quarter, of 2012.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $222.5 million; and debt of $24.0 million. In February 2013, the Company prepaid $32.0 million of its loan from Israel Discount Bank Ltd., which it estimates will result in a reduction of approximately $1.8 million in its financial expenses for 2013. The remaining amount of $24.0 million due under this loan is repayable by December 21, 2013 and, accordingly, the loan has been classified as a current liability.

To date, the Company has repurchased 529,297 of its Ordinary Shares, at a total cost of approximately $4.74 million, under the share repurchase program approved in November 2012. Pursuant to approval granted by its Board of Directors, the Company will continue to repurchase shares, up to the originally approved total of $30.0 million. 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.

Legal proceedings with respect to the charges filed in the Seoul Central District Court of the Republic of Korea against the Korean subsidiary of Orbotech Ltd. and six employees thereof remain ongoing, as does the investigation by the prosecutor into the actions of employees of the Company outside of Korea. The Company’s Korean subsidiary continues to co-operate with the Korean authorities in connection with the investigation. The fiscal effect of this matter on the Company in the first quarter of 2013 was not material; however, the Company expects to continue to incur fees and expenses in connection therewith in future periods.

Due to the elimination of the proportionate method of consolidation for joint ventures under applicable Israeli GAAP, which became effective on January 1, 2013, commencing from the first quarter of 2013 Orbotech Ltd. began to account for its 50% interest in the Frontline P.C.B. Solutions Limited Partnership (“Frontline”), the joint venture owned equally by Orbotech Ltd. and Mentor Graphics Development Services (Israel) Ltd.) with respect to computer-aided manufacturing and engineering solutions for PCB production, using the equity method. As a result, the Company now reports its investment in Frontline as a one line item within investments and other non-current assets in the Company’s consolidated balance sheets; and its share of earnings on one line in its consolidated statement of operations. This presentation has been applied in the Company’s financial statements for all prior periods for consistency. The Company’s share in the earnings of Frontline was presented under operating income since Frontline is integrated into the operations of the Company.

An earnings conference call for the Company’s first quarter 2013 results is scheduled for Monday, May 6, 2013, at 9:00 a.m. EDT. The dial-in number for the conference call is 517-308-9494, and a replay will be available on telephone number 203-369-0269 until May 20 2013. 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, 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 (the “SEC”) 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 its 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, 2012. 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 certain 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.

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, 2012.

    ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2013                   March 31 December 31 2 0 13 2 0 1 2* U. S. dollars in thousands

A s s e t s

 

CURRENT ASSETS:

Cash and cash equivalents 193,343 256,663 Short-term bank deposits 14,000 3,014 Marketable securities 6,947 2,238 Accounts receivable: Trade 179,965 164,482 Other 30,975 29,836 Deferred income taxes 7,750 7,862 Inventories 87,413 93,854     T o t a l current assets 520,393   557,949    

INVESTMENTS AND NON-CURRENT ASSETS:

Marketable securities 8,252 12,788 Funds in respect of employee rights upon retirement 10,461 10,598 Deferred income taxes 13,799 13,634 Other long-term investments 6,695   7,592   39,207   44,612    

PROPERTY, PLANT AND EQUIPMENT, net

25,573   24,559    

GOODWILL

12,444   12,444    

OTHER INTANGIBLE ASSETS, net

13,432   14,442       611,049   654,006      

Liabilities and equity

 

CURRENT LIABILITIES:

Current maturities of long-term bank loan 24,000 64,000 Accounts payable and accruals: Trade 23,414 27,472 Other 51,628 53,698 Deferred income 17,752 17,388     T o t a l current liabilities 116,794 162,558  

LONG-TERM LIABILITIES:

Liability for employee rights upon retirement 24,581 25,221 Deferred income taxes 2,238 2,236 Other tax liabilities 16,378   16,478   T o t a l long-term liabilities 43,197 43,935     T o t a l liabilities 159,991   206,493    

EQUITY:

Share capital 2,105 2,102 Additional paid-in capital 275,874 274,856 Retained earnings 233,580 228,569 Accumulated other comprehensive income 494   628   512,053 506,155 Less treasury shares, at cost (61,359 ) (59,151 ) T o t a l Orbotech Ltd. shareholders' equity 450,694 447,004 Non-controlling interest 364   509   T o t a l equity 451,058   447,513       611,049   654,006                                 ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2013   12 months

3 months ended

ended March 3 1 December 31 2 0 1 3       2 0 1 2* 2 0 1 2* U.S. dollars in thousands (except per share data)  

REVENUES

95,477 96,480 387,008  

COST OF REVENUES

55,347 54,906 233,447  

WRITE- DOWN OF INVENTORIES

14,255            

GROSS PROFIT

40,130 41,574 139,306  

RESEARCH AND DEVELOPMENT COSTS - net

16,314 17,213 68,703  

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES

17,262 18,071 73,051  

EQUITY IN EARNINGS OF FRONTLINE

(1,183 ) (1,829 ) (6,764 )  

AMORTIZATION OF INTANGIBLE ASSETS

1,010 3,091 9,907  

RESTRUCTURING CHARGES

1,918 5,063  

IMPAIRMENT OF INTANGIBLE ASSETS

30,142            

OPERATING INCOME (LOSS)

6,727 3,110 (40,796 )  

FINANCIAL EXPENSES- net

678 1,096 5,120            

INCOME (LOSS) BEFORE TAXES ON INCOME

6,049 2,014 (45,916 )  

TAXES ON INCOME

1,164 542 456             4,885 1,472 (46,372 )  

SHARE IN LOSSES OF ASSOCIATED COMPANY

45 45 165            

NET INCOME (LOSS)

4,840 1,427 (46,537 )  

NET LOSS ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST

(171 ) (212 ) (958 )            

NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.

  5,011     1,639   (45,579 )      

EARNINGS PER SHARE:

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.:

BASIC

$ 0.12   $ 0.04   ($1.05 )  

DILUTED

$ 0.11   $ 0.04   ($1.05 )    

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION

OF EARNINGS PER SHARE - IN THOUSANDS:

BASIC

  43,321     43,402   43,501    

DILUTED

  43,739     43,944   43,501                                 ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2013       12 months

3 months ended

ended March 3 1 December 31 2 0 13 2 0 1 2* 2 0 1 2* U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income (loss) 4,840 1,427 (46,537 ) Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,812 5,073 17,919 Impairment of Intangible assets 30,142 Compensation relating to equity awards granted to employees and others - net 773 910 3,070 Increase (decrease) in liability for employee rights upon retirement (640 ) 114 (640 ) Deferred income taxes (53 ) (1,186 ) (5,440 ) Non-cash expenses in respect of restructuring 601 601 Amortization of premium and accretion of discount on marketable Securities, net 91 588 Equity in earnings of Frontline, net of dividend received 902 (936 ) (1,232 ) Other, including capital loss (gain) 246 67 1,498 Decrease (increase) in accounts receivable: Trade (15,483 ) (2,202 ) 31,725 Other (1,031 ) (2,213 ) (2,708 ) Decrease in accounts payable and accruals: Trade (4,058 ) (7,005 ) (4,789 ) Deferred income and other (1,361 ) (12,283 ) (14,679 ) Decrease (increase) in inventories 6,251   (2,844 ) 11,925   Net cash provided by (used in) operating activities (6,711 ) (20,477 ) 21,443    

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property, plant and equipment (3,361 ) (1,530 ) (9,484 ) Withdraw (placement) of bank deposits (10,986 ) 51,880 142,278 Purchase of marketable securities (264 ) (14,935 ) (15,614 ) Proceeds from disposal of property, plant and equipment 3,034 Increase in funds in respect of employee rights upon retirement (63 ) (164 ) (254 ) Net cash provided by (used in) investing activities (14,674 ) 35,251   119,960    

CASH FLOWS FROM FINANCING ACTIVITIES:

  Repayment of long-term bank loan (40,000 ) (8,000 ) (32,000 ) Employee stock options excercised 273 470 719 Acquisition of treasury shares (2,208 )   (1,959 ) Net cash used in financing activities (41,935 ) (7,530 ) (33,240 )       NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (63,320 ) 7,244 108,163   CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 256,663 148,500 148,500       CASH AND CASH EQUIVALENTS AT END OF PERIOD 193,343   155,744   256,663                                 ORBOTECH LTD. RECONCILIATION OF GAAP TO NON-GAAP RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2013     12 months

3 months ended

ended March 31 December 31 2 0 1 3 2 0 12* 2 0 1 2* U.S. dollars in thousands (except per share data)    

Reported operating income (loss) on GAAP basis

  6,727   3,110   (40,796 )   Equity based compensation expenses 773 910 3,070 Restructuring charges 1,918 5,063 Impairment of Intangible assets 30,142 Amortization of intangible assets   1,010   3,091   9,907   Non-GAAP operating income 8,510 9,029 7,386  

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

  5,011   1,639   (45,579 )   Equity based compensation expenses 773 910 3,070 Amortization of intangible assets 1,010 3,091 9,907 Restructuring charges, net of tax credit 1,918 4,593 Impairment of Intangible assets 30,142 Share in losses of associated company 45 45 165      

Non-GAAP net income

  6,839   7,603   2,298     Non-GAAP earnings per diluted share $ 0.16 $ 0.17 $ 0.05     Shares used in earnings per diluted share calculation-in thousands   43,739   43,944   44,071