ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its
consolidated financial results for the second quarter and six
months ended June 30, 2013.
Revenues for the second quarter of 2013 totaled $108.8 million,
compared to $95.5 million in the first quarter of 2013 and $97.8
million in the second quarter of 2012. GAAP net income for the
second quarter of 2013 was $10.5 million, or $0.24 per share
(diluted), compared to GAAP net income of $5.0 million, or $0.11
per share (diluted) for the first quarter of 2013 and GAAP net loss
of $0.8 million, or $0.02 per share, in the second quarter of
2012.
Commenting on the results, Asher Levy, Chief Executive Officer,
said: “We are pleased to report a strong second quarter, in which
we posted revenues which exceeded our guidance and recorded net
income approximately double that of the first quarter. These
reflected improved business conditions as well as the operational
efficiency measures that we adopted at the end of last year. Solid
consumer demand for sophisticated electronic devices continues to
give us grounds for a certain amount of cautious optimism. In the
FPD industry we are seeing increased activity as our customers
solidify their future investment plans, particularly in China. We
believe that in all areas our product development roadmap is
successfully addressing the increasingly demanding requirements of
our customers, by consistently providing them with innovative and
state-of-the-art solutions. At the same time, we are continuing to
pursue additional opportunities within the electronic component
manufacturing and other adjacent industries.”
Revenues for the first six months of 2013 totaled $204.3
million, compared to $194.3 million recorded in the first six
months of 2012. GAAP net income for the first six months of 2013
was $15.5 million, or $0.36 per share (diluted), compared to GAAP
net income of $0.8 million, or $0.02 per share (diluted), in the
first six months of 2012.
Non-GAAP net income for the second quarter of 2013 was $12.4
million, or $0.29 per share (diluted), compared to non-GAAP net
income of $3.1 million, or $0.07 per share (diluted), in the second
quarter of 2012. Non-GAAP net income for the first six months of
2013 was $19.3 million, or $0.44 per share (diluted), compared to
non-GAAP net income of $10.7 million, or $0.24 per share (diluted),
in the first six months 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 PCB industry were $51.1 million
in the second quarter of 2013, compared to $47.4 million in the
first quarter of 2013 and $46.7 million in the second quarter of
2012; and sales of equipment to the FPD industry were $20.2 million
in the second quarter of 2013, compared to $13.2 million in the
first quarter of 2013 and $12.3 million in the second quarter of
2012. In the Company’s Recognition Software segment, sales were
$1.7 million in the second quarter of 2013, compared to $1.8
million in the first quarter of 2013 and $1.7 million in the second
quarter of 2012. In addition, service revenue for the second
quarter of 2013 was $35.8 million, compared to $33.1 million in the
first quarter of 2013, and $37.2 million in the second quarter, of
2012.
The Company completed the quarter with cash, cash equivalents,
short-term bank deposits and marketable securities of approximately
$220.2 million; and debt of $16 million. The Company generated cash
of $18.1 million from operations in the second quarter of 2013.
To date, the Company has repurchased 1.55 million of its
Ordinary Shares, at a total cost of approximately $17.0 million,
under the share repurchase program originally 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 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.
The criminal proceeding against the Company’s Korean subsidiary
and certain of its employees is in its final stage. The district
court decision is currently expected in the Fall, subject to change
depending on the court’s schedule and judicial developments.
Orbotech continues to have faith in the judicial process and
believes that it has safeguarded customers’ information from
inappropriate disclosure in all circumstances. While the Company
continues to incur fees and expenses in connection with this
matter, the fiscal effect in the second quarter of 2013 was not
material.
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 second quarter
2013 results is scheduled for Thursday, August 1, 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
203-369-1653 until August 15, 2013. 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. 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 JUNE 30, 2013 June 30
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 151,574 256,663 Short-term bank deposits
53,513 3,014 Marketable securities 7,471 2,238 Accounts receivable:
Trade 185,285 164,482 Other 31,851 29,836 Deferred income taxes
7,799 7,862 Inventories 92,120 93,854 T o t a l
current assets 529,613 557,949
INVESTMENTS AND
NON-CURRENT ASSETS:
Marketable securities 7,664 12,788 Funds in respect of employee
rights upon retirement 10,589 10,598 Deferred income taxes 15,010
13,634 Other long-term investments 6,388 7,592 39,651
44,612
PROPERTY, PLANT AND
EQUIPMENT, net
25,527 24,559
GOODWILL
12,444 12,444
OTHER INTANGIBLE
ASSETS, net
12,422 14,442 619,657 654,006
Liabilities and
equity
CURRENT
LIABILITIES:
Current maturities of long-term bank loan 16,000 64,000 Accounts
payable and accruals: Trade 33,844 27,472 Other 54,202 53,698
Deferred income 17,684 17,388 T o t a l current
liabilities 121,730 162,558
LONG-TERM
LIABILITIES:
Liability for employee rights upon retirement 24,587 25,221
Deferred income taxes 2,238 2,236 Other tax liabilities 17,586
16,478 T o t a l long-term liabilities 44,411 43,935
T o t a l liabilities 166,141 206,493
EQUITY:
Share capital 2,109 2,102 Additional paid-in capital 277,346
274,856 Retained earnings 244,080 228,569 Accumulated other
comprehensive income 651 628 524,186 506,155 Less
treasury shares, at cost (70,844 ) (59,151 ) T o t a l Orbotech
Ltd. shareholders' equity 453,342 447,004 Non-controlling interest
174 509 T o t a l equity 453,516 447,513
619,657 654,006 *
Applying Equity Based Method to 50% interest in the Frontline
P.C.B. Solutions Limited Partnership
ORBOTECH
LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR
THE SIX AND THREE MONTHS ENDED JUNE 30, 2013
12 months
6 months ended
3 months ended
ended
June 30
June 30
December 31 2 0 1 3 2 0 1 2* 2 0 1 3 2 0 1 2* 2 0 1 2* U.S. dollars
in thousands (except per share data)
REVENUES
204,325 194,314 108,848 97,833 387,008
COST OF
REVENUES
117,614 113,805 62,267 58,899 233,447
WRITE- DOWN OF
INVENTORIES
14,255
GROSS
PROFIT
86,711 80,509 46,581 38,934 139,306
RESEARCH AND
DEVELOPMENT COSTS - net
33,333 34,560 17,019 17,347 68,703
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES
34,784 36,876 17,522 18,805 73,051
EQUITY IN EARNINGS
OF FRONTLINE
(2,347 ) (3,735 ) (1,164 ) (1,907 ) (6,764 )
AMORTIZATION OF
INTANGIBLE ASSETS
2,020 6,064 1,010 2,973 9,907
RESTRUCTURING
CHARGES
1,918 5,063
IMPAIRMENT OF
INTANGIBLE ASSETS
30,142
OPERATING INCOME
(LOSS)
18,921 4,826 12,194 1,716 (40,796 )
FINANCIAL EXPENSES
(INCOME)- net
548 3,452 (130 ) 2,356 5,120
INCOME (LOSS) FROM
OPERATIONS BEFORE TAXES ON INCOME
18,373 1,374 12,324 (640 ) (45,916 )
TAXES ON
INCOME
3,135 964 1,971 422 456 15,238
410 10,353 (1,062 ) (46,372 )
SHARE IN LOSSES OF
ASSOCIATED COMPANY
114 65 69 20 165
NET INCOME
(LOSS)
15,124 345 10,284 (1,082 ) (46,537 )
NET LOSS
ATTRIBUTABLE TO
THE NON-CONTROLLING
INTEREST
(387 ) (504 ) (216 ) (292 ) (958 )
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.
15,511 849 10,500 (790 )
(45,579 )
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.:
BASIC $ 0.36 $ 0.02 $ 0.24 ($0.02 )
($1.05 ) DILUTED $ 0.36 $ 0.02 $ 0.24
($0.02 ) ($1.05 )
WEIGHTED AVERAGE
NUMBER OF SHARES USED IN COMPUTATION
OF EARNINGS PER
SHARE - IN THOUSANDS:
BASIC 43,106 43,462 42,891
43,507 43,501 DILUTED 43,621
44,044 43,503 43,507
43,501 * Applying Equity Based Method to 50%
interest in the Frontline P.C.B. Solutions Limited Partnership
ORBOTECH LTD. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE MONTHS ENDED
JUNE 30, 2013
12 months
6 months ended
3 months ended
ended
June 30
June 3 0 December 31
2 0 1 3
2 0 1 2* 2 0 1 3 2 0 1 2* 2 0 1 2* U.S. dollars in thousands
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) 15,124 345 10,284 (1,082 ) (46,537 )
Adjustment to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 6,134 9,912
3,322 4,839 17,919 Impairment of Intangible assets 30,142
Compensation relating to equity awards granted to employees and
others - net 1,637 1,806 864 896 3,070 Increase (decrease) in
liability for employee rights upon retirement (634 ) 104 6 (10 )
(640 ) Deferred income taxes (1,311 ) (1,199 ) (1,260 ) (13 )
(5,440 ) Non-cash expenses in respect of restructuring 601 601
Capital gain from disposal of equipment (51 ) (51 ) Amortization of
premium and accretion of discount on marketable Securities, net 218
127 588 Equity in earnings of Frontline, net of dividend received
1,244 (1,329 ) 342 (393 ) (1,232 ) Other 247 346 2 279 1,498
Decrease (increase) in accounts receivable: Trade (20,803 ) 13,904
(5,320 ) 16,106 31,725 Other (1,959 ) (1,403 ) (928 ) 810 (2,708 )
Increase (decrease) in accounts payable and accruals: Trade 6,372
(2,621 ) 10,431 4,384 (4,789 ) Deferred income and other 2,958
(15,834 ) 4,318 (3,551 ) (14,679 ) Decrease (increase) in
inventories 2,122 (3,930 ) (4,129 ) (1,086 ) 11,925
Net cash provided by operating activities 11,349
651 18,059 21,128
21,443
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (6,505 ) (3,428 )
(3,144 ) (1,898 ) (9,484 ) Withdraw (placement) of bank deposits
(50,499 ) 65,574 (39,513 ) 13,694 142,278 Purchase of marketable
securities (327 ) (14,935 ) (63 ) 0 (15,614 ) Other investments
(200 ) (200 ) Proceeds from disposal of property, plant and
equipment 3,034 Increase in funds in respect of employee rights
upon retirement (124 ) (229 ) (60 ) (65 ) (254 )
Net cash provided by (used in) investing
activities (57,655 ) 46,982
(42,980 ) 11,731 119,960
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term bank loan (48,000 ) (16,000 ) (8,000
) (8,000 ) (32,000 )
Employee stock options exercised
910 611 637 141 719 Acquisition of treasury shares (11,693 )
(9,485 ) (1,959 )
Net cash used in financing
activities (58,783 ) (15,389 )
(16,848 ) (7,859 ) (33,240
) NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (105,089 ) 32,244
(41,769 ) 25,000 108,163 CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 256,663 148,500
193,343 155,744 148,500
CASH
AND CASH EQUIVALENTS AT END OF PERIOD 151,574
180,744 151,574 180,744
256,663 * Applying Equity Based Method to 50%
interest in the Frontline P.C.B. Solutions Limited Partnership
ORBOTECH LTD. RECONCILIATION OF GAAP TO
NON-GAAP RESULTS FROM CONTINUING OPERATIONS FOR THE SIX AND
THREE MONTH PERIODS ENDED JUNE 30, 2013
12 months
6 months ended
3 months ended
ended June 30 June 30 December 31 2013 2012* 2013 2012* 2012* U.S.
dollars in thousands (except per share data)
Reported operating
income (loss) on GAAP basis
18,921 4,826 12,194 1,716
(40,796 ) Equity based compensation expenses 1,637 1,750 864
869 3,070 Restructuring charges 1,918 5,063 Impairment of
Intangible assets 30,142 Amortization of intangible assets
2,020 6,064 1,010 2,973 9,907
Non-GAAP operating income 22,578 14,558
14,068 5,558 7,386
Reported net income
(loss) attributable to Orbotech Ltd. on GAAP basis
15,511 849 10,500 (790 ) (45,579
) Equity based compensation expenses 1,637 1,750 864 869
3,070 Amortization of intangible assets 2,020 6,064 1,010 2,973
9,907 Restructuring charges, net of tax credit 1,918 4,593
Impairment of Intangible assets 30,142 Share in losses of
associated company 114 65 69 20 165
Non-GAAP net
income
19,282 10,646 12,443 3,072
2,298 Non-GAAP earnings per diluted share $
0.44 $ 0.24 $ 0.29 $ 0.07 $ 0.05 Shares used
in earnings per diluted share calculation-in thousands
43,621 44,044 43,503 44,131
44,071 * Applying Equity Based Method to 50%
interest in the Frontline P.C.B. Solutions Limited Partnership
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