- 2013 third
quarter:
- Revenues: increased to $113.4
million
- Gross margin: improved to
44.6%
- GAAP net income: $0.28 per share
(diluted)
- Non-GAAP net income: $0.32 per share
(diluted)
- Operating cash flow: $22.7
million
- 2013
guidance:
- Revenues for 2013: approximately
$440 million
ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today
announced its consolidated financial results for the third quarter
and nine months ended September 30, 2013.
Commenting on the results, Asher Levy, Chief
Executive Officer, said: “We are pleased to report a strong third
quarter, in which we posted increased revenues and improved gross
margins and operating income. While revenues from our traditional
PCB business were slightly lower than in the second quarter, we
posted record quarterly revenues of more than $10 million in our
electronics component manufacturing business. In the FPD industry,
we are seeing increased activity as manufacturers solidify their
investment plans, particularly in China. Our service organization
continues to provide highest quality service to our customers, as
is clearly reflected in our results for the quarter which included
record service revenues. As we previously announced, Orbotech has
recently established two new corporate units: ‘Strategy and
Business Development’ and ‘Global Product Organization’. We believe
that these new business units better position the Company in
pursuing selective strategic business transactions, including
acquisitions of related businesses, as part of its corporate
strategy, and in continuing to provide our customers with
innovative solutions.”
Revenues for the third quarter of 2013 totaled
$113.4 million, compared to $108.8 million in the second quarter of
2013 and $95.6 million in the third quarter of 2012. GAAP net
income for the third quarter of 2013 was $11.9 million, or $0.28
per share (diluted), compared to GAAP net income of $10.5 million,
or $0.24 per share (diluted) in the second quarter of 2013 and GAAP
net loss of $45.7 million, or $1.05 per share, in the third quarter
of 2012.
GAAP net loss for the third quarter of 2012
reflected: (a) a non-cash impairment charge of $30.0 million
relating to intangible assets allocated to the Company’s flat panel
display (“FPD”) business; (b) a write-down of inventories
and a provision for open commitments in the amount of $14.3
million; and (c) $1.7 million of costs in connection with the
Korean litigation, which were recorded in general and
administrative expenses.
Non-GAAP net income for the third quarter of
2013 was $13.6 million, or $0.32 per share (diluted), compared to
non-GAAP net loss of $12.3 million, or $0.28 per share, in the
third quarter of 2012.
Revenues for the first nine months of 2013
totaled $317.8 million, compared to $289.9 million recorded in the
first nine months of 2012. GAAP net income for the first nine
months of 2013 was $27.4 million, or $0.63 per share (diluted),
compared to GAAP net loss of $44.8 million, or $1.03 per share, in
the first nine months of 2012.
Non-GAAP net income for the first nine months
of 2013 was $32.9 million, or $0.76 per share (diluted), compared
to non-GAAP net loss of $1.7 million, or $0.04 per share, in the
first nine 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 printed
circuit board (“PCB”) industry were $45.5 million in the
third quarter of 2013, compared to $51.1 million in the second
quarter of 2013 and $40.3 million in the third quarter of 2012; and
sales of equipment to the FPD industry were $26.5 million in the
third quarter of 2013, compared to $20.2 million in the second
quarter of 2013 and $15.2 million in the third quarter of 2012. In
the Company’s Recognition Software segment, sales were $2.3 million
in the third quarter of 2013, compared to $1.7 million in the
second quarter of 2013 and $2.0 million in the third quarter of
2012. Service revenue for the third quarter of 2013 reached a
quarterly record $39.1 million, compared to $35.8 million in the
second quarter of 2013 and $38.1 million in the third quarter of
2012.
The Company completed the quarter with cash,
cash equivalents, short-term bank deposits and marketable
securities of $221.1 million and debt of $8 million. The Company
generated cash of $22.7 million from continuing operations in the
third quarter of 2013.
To date, the Company has repurchased
approximately 2.3 million of its Ordinary Shares, at a total cost
of approximately $26.0 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 initial trial in 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 by the end of November, subject to change
depending on the court’s schedule. 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
third 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
third quarter 2013 results is scheduled for Thursday, October 31,
2013, at 9:00 a.m. EST. The dial-in number for the conference call
is 517-308-9494, and a replay will be available on telephone number
203-369-1354 until November 15, 2013. 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. 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 SEPTEMBER 30, 2013
September 30 December 31 2013 2 0 1 2* U. S. dollars
in thousands
A s s e t
s
CURRENT
ASSETS:
Cash and cash equivalents 162,816 256,663 Short-term bank deposits
43,013 3,014 Marketable securities 7,756 2,238 Accounts receivable:
Trade 184,272 164,482 Other 32,553 29,836 Deferred income taxes
6,977 7,862 Inventories 92,936 93,854 T o t a l
current assets 530,323 557,949
INVESTMENTS AND
NON-CURRENT ASSETS:
Marketable securities 7,474 12,788 Funds in respect of employee
rights upon retirement 10,742 10,598 Deferred income taxes 16,250
13,634 Other long-term investments 8,703 7,592 43,169
44,612
PROPERTY, PLANT AND
EQUIPMENT, net
27,445 24,559
GOODWILL
12,444 12,444
OTHER INTANGIBLE
ASSETS, net
11,412 14,442 624,793 654,006
Liabilities and
equity
CURRENT
LIABILITIES:
Current maturities of long-term bank loan 8,000 64,000 Accounts
payable and accruals: Trade 32,413 27,472 Other 58,946 53,698
Deferred income 21,870 17,388 T o t a l current
liabilities 121,229 162,558
LONG-TERM
LIABILITIES:
Liability for employee rights upon retirement 25,781 25,221
Deferred income taxes 2,238 2,236 Other tax liabilities 17,909
16,478 T o t a l long-term liabilities 45,928 43,935
T o t a l liabilities 167,157 206,493
EQUITY:
Share capital 2,115 2,102 Additional paid-in capital 279,215
274,856 Retained earnings 255,955 228,569 Accumulated other
comprehensive income 358 628 537,643 506,155 Less
treasury shares, at cost (79,981 ) (59,151 ) T o t a l Orbotech
Ltd. shareholders' equity 457,662 447,004 Non-controlling interest
(26 ) 509 T o t a l equity 457,636 447,513
624,793 654,006 *
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 NINE AND THREE MONTH PERIODS ENDED SEPTEMBER
30, 2013
9 months endedSeptember 30
3 months endedSeptember 30
12 monthsendedDecember 31
2013 2012* 2013 2012* 2012* U.S. dollars in thousands
(except per share data)
REVENUES
317,760 289,883 113,435 95,569 387,008
COST OF
REVENUES
180,507 172,956 62,893 59,151 233,447
WRITE- DOWN OF
INVENTORIES
14,255 14,255 14,255
GROSS
PROFIT
137,253 102,672 50,542 22,163 139,306
RESEARCH AND
DEVELOPMENT COSTS - net
50,973 51,734 17,640 17,174 68,703
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES
53,776 55,583 18,992 18,709 73,051
EQUITY IN EARNINGS
OF FRONTLINE
(3,969 ) (5,352 ) (1,622 ) (1,632 ) (6,764 )
AMORTIZATION OF
INTANGIBLE ASSETS
3,030 8,916 1,010 2,852 9,907
RESTRUCTURING
CHARGES
1,918 5,063
IMPAIRMENT OF
INTANGIBLE ASSETS
29,980 29,980 30,142
OPERATING INCOME
(LOSS)
33,443 (40,107 ) 14,522 (44,920 ) (40,796 )
FINANCIAL
EXPENSES - net
1,052 5,247 504 1,808 5,120
INCOME (LOSS) FROM
OPERATIONS BEFORE TAXES ON INCOME
32,391 (45,354 ) 14,018 (46,728 ) (45,916 )
TAXES ON INCOME (TAX
BENEFIT)
5,434 222 2,299 (742 ) 456
26,957 (45,576 ) 11,719 (45,986 ) (46,372 )
SHARE IN LOSSES OF
ASSOCIATED COMPANY
183 115 69 50 165
NET INCOME
(LOSS)
26,774 (45,691 ) 11,650 (46,036 ) (46,537 )
NET LOSS
ATTRIBUTABLE TO
THE NON-CONTROLLING
INTEREST
(612 ) (846 ) (225 ) (342 ) (958 )
NET INCOME (LOSS)
ATTRIBUTABLE TO ORBOTECH LTD.
27,386 (44,845 ) 11,875 (45,694 ) (45,579 )
EARNINGS PER
SHARE:
INCOME (LOSS) FROM
OPERATIONS:
BASIC
$0.64 ($1.03 ) $0.28 ($1.05 ) ($1.05 )
DILUTED
$0.63 ($1.03 ) $0.28 ($1.05 ) ($1.05 )
WEIGHTED AVERAGE
NUMBER OF SHARES USED IN COMPUTATION OF EARNINGS PER SHARE - IN
THOUSANDS:
BASIC
42,819 43,482 42,248 43,537 43,501
DILUTED
43,450 43,482 43,113 43,537 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 NINE AND THREE MONTH
PERIODS ENDED SEPTEMBER 30, 2013
9 months endedSeptember 30
3 months endedSeptember 30
12 monthsendedDecember 31
2013 2012* 2013 2012* 2012* U.S. dollars in thousands
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) 26,774 (45,691 ) 11,650 (46,036 ) (46,537
) Adjustment to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 9,715 14,690
3,581 4,778 17,919 Impairment of Intangible assets 29,980 29,980
30,142
Compensation relating to equity awards
granted toemployees and others - net
2,311 2,286 674 480 3,070 Increase (decrease) in liability for
employee rights upon retirement 560 730 1,194 626 (640 ) Deferred
income taxes (1,729 ) (3,670 ) (418 ) (2,471 ) (5,440 ) Non-cash
expenses in respect of restructuring 601 601 Capital gain from
disposal of equipment 24 75 Amortization of premium and accretion
of discount on marketable Securities, net 312 94 588 Equity in
earnings of Frontline, net of dividend received 731 (1,410 ) (423 )
(81 ) (1,232 ) Other 405 1,084 69 738 1,498 Decrease (increase) in
accounts receivable: Trade (19,790 ) 16,780 1,013 2,876 31,725
Other (3,019 ) (1,863 ) (1,060 ) (460 ) (2,708 ) Increase
(decrease) in accounts payable and accruals: Trade 4,941 2,354
(1,431 ) 4,975 (4,789 ) Deferred income and other 11,980 (15,170 )
9,022 664 (14,679 ) Decrease (increase) in inventories 811
7,574 (1,311 ) 11,504 11,925
Net
cash provided by operating activities 34,002
8,299 22,654 7,648
21,443
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (10,206 ) (6,475 )
(3,701 ) (3,047 ) (9,484 ) Withdraw (placement) of bank deposits
(39,999 ) 115,584 10,500 50,010 142,278
Purchase of marketable securities
(516 ) (14,935 ) (189 ) (15,614 ) Other investment (2,250 ) (2,050
) Proceeds from disposal of property, plant and equipment 3,034
Decrease (increase) in funds in respect of employee rights upon
retirement (186 ) (189 ) (63 ) 40 (254 )
Net cash
provided by (used in) investing activities (53,157
) 93,985 4,497 47,003
119,960
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term bank loan (56,000 ) (24,000 ) (8,000
) (8,000 ) (32,000 ) Employee stock options exercised 2,138 662
1,228 51 719 Acquisition of treasury shares (20,830 ) (9,137
) (1,959 )
Net cash used in financing activities
(74,692 ) (23,338 ) (15,909
) (7,949 ) (33,240 )
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (93,847 ) 78,946
11,242 46,702 108,163 CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD 256,663 148,500 151,574
180,744 148,500
CASH AND CASH
EQUIVALENTS AT END OF PERIOD 162,816
227,446 162,816 227,446
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 NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2013
9 months endedSeptember 30
3 months endedSeptember 30
12 monthsendedDecember 31
2013 2012* 2013 2012* 2012* U.S. dollars in thousands (except per
share data)
Reported operating
income (loss) on GAAP basis
33,443 (40,107 ) 14,522 (44,920 ) (40,796 ) Equity based
compensation expenses 2,311 2,230 674 480 3,070 Restructuring
charges 1,918 5,063 Impairment of Intangible assets 29,980 29,980
30,142 Amortization of intangible assets 3,030 8,916 1,010
2,852 9,907 Non-GAAP operating income 38,784 2,937
16,206 (11,608 ) 7,386
Reported net income
(loss) attributable to Orbotech Ltd. on GAAP basis
27,386 (44,845 ) 11,875 (45,694 ) (45,579 ) Equity based
compensation expenses 2,311 2,230 674 480 3,070 Amortization of
intangible assets 3,030 8,916 1,010 2,852 9,907 Restructuring
charges, net of tax credit 1,918 4,593 Impairment of Intangible
assets 29,980 0 29,980 30,142 Share in losses of associated company
183 115 69 50 165
Non-GAAP net income
(loss) from operations
32,910 (1,686 ) 13,628 (12,332 ) 2,298 Non-GAAP
earnings per diluted share $0.76 ($0.04 ) $0.32 ($0.28 ) $0.05
Shares used in earnings per diluted share
calculation-in thousands 43,450 43,482 43,113 43,537
44,071 * Applying Equity Based Method to 50%
interest in the Frontline P.C.B. Solutions Limited Partnership
Orbotech Ltd.Adrian Auman,
+972-8-942-3560Corporate Vice President Investor Relationsand
Special ProjectsorOrbotech, Inc.Michelle Harnish,
+1-603-289-7937Marketing Communications Manager
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