• Revenues: $113.2 million• Gross
margin: 43.0%• Non-GAAP net income: $0.25 per share
(diluted)• GAAP net income: $0.20 per share (diluted)•
Operating cash flow: $11.6 million• Service revenues:
record $39.9 million
• Orbotech stand-alone: approximately $260
million in the second half of 2014; of which $118 - 123 million is
expected in the third quarter 2014• SPTS: approximately $100
million in the second half of 2014 on a stand-alone basis under
U.K. GAAP
ORBOTECH LTD. (NASDAQ:ORBK) today announced its consolidated
financial results for the second quarter and six months ended June
30, 2014.
Revenues for the second quarter of 2014 totaled $113.2 million,
compared to $104.8 million in the first quarter of 2014 and $108.8
million in the second quarter of 2013. GAAP net income for the
second quarter of 2014 was $8.6 million, or $0.20 per share
(diluted), compared to GAAP net income of $6.3 million, or $0.15
per share (diluted) for the first quarter of 2014 and GAAP net
income of $10.5 million, or $0.24 per share (diluted), in the
second quarter of 2013.
Commenting on the results, Asher Levy, Chief Executive Officer,
said: “We are pleased to report strong results for the second
quarter. Our PCB business picked up as expected and our FPD
business enjoyed another quarter of solid orders as we recorded a
cumulative total of $130 million in bookings for the first half of
2014. Our service revenues continue to strengthen.” Mr. Levy
continued: “Across the Company, we continue to benefit from our
industry leadership, with customers increasingly appreciating our
commitment to address their needs as they prepare to build capacity
for the expected next generation of smart devices and for the next
wave of investment in production facilities for small to mid, ultra
high definition displays.”
Commenting on the previously-announced agreement to acquire SPTS
Technologies Group Limited (“SPTS”), Mr. Levy said: “The
acquisition of SPTS is part of our strategy to expand into Advanced
Packaging. This significant acquisition represents a natural and
strategic extension of our business into an adjacent high growth
industry. We expect, through this acquisition, to combine the
extensive know-how and core assets of both companies and to enhance
Orbotech’s portfolio and industry leadership.”
Revenues for the first six months of 2014 totaled $218.0
million, compared to $204.3 million recorded in the first six
months of 2013. GAAP net income for the first six months of 2014
was $14.9 million, or $0.35 per share (diluted), compared to GAAP
net income of $15.5 million, or $0.36 per share (diluted), in the
first six months of 2013.
Non-GAAP net income for the second quarter of 2014 was $10.5
million, or $0.25 per share (diluted), compared to non-GAAP net
income of $12.4 million, or $0.29 per share (diluted), in the
second quarter of 2013. Non-GAAP net income for the first six
months of 2014 was $18.7 million, or $0.44 per share (diluted),
compared to non-GAAP net income of $19.3 million, or $0.44 per
share (diluted), in the first six months of 2013. 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 $48.5 million
in the second quarter of 2014, compared to $41.5 million in the
first quarter of 2014 and $51.1 million in the second quarter of
2013; and sales of equipment to the FPD industry were $18.4 million
in the second quarter of 2014, compared to $23.1 million in the
first quarter of 2014 and $20.2 million in the second quarter of
2013. In the Solar Energy segment, sales were $5.2 million in the
second quarter of 2014, compared to $1.8 million in the first
quarter of 2014 and $0 in the second quarter of 2013. In the
Company’s Recognition Software segment, sales were $1.2 million in
the second quarter of 2014, compared to $1.4 million in the first
quarter of 2014 and $1.7 million in the second quarter of 2013. In
addition, service revenue for the second quarter of 2014 was a
record $39.9 million, compared to $37.0 million in the first
quarter of 2014, and $35.8 million in the second quarter, of
2013.
The Company completed the quarter with cash, cash equivalents,
short-term bank deposits and marketable securities of approximately
$213.6 million. The Company generated cash of $11.6 million from
operations in the second quarter of 2014.
To date, the Company has repurchased approximately 950,000 of
its Ordinary Shares, at a cost of approximately $14.3 million,
under the share repurchase program approved by the Board of
Directors and announced and commenced in the first quarter of 2014.
To date, under the current repurchase program and the repurchase
program approved in November 2012, the Company has repurchased an
aggregate amount of approximately 3.4 million of its Ordinary
Shares, at a total cost of approximately $42.0 million. In
anticipation of the upcoming closing the SPTS acquisition, for
which the Company expects to borrow $300 million under a term loan
B credit facility, and the planned announcement of the Company’s
capital allocation policy later this month, the Board of Directors
will terminate the current share repurchase program effective as at
the end of trading on Tuesday, August 5, 2014.
The Company expects revenues for Orbotech on a stand-alone basis
in the second half of 2014 to be approximately $260 million, with
the third quarter expected to be in the range of $118 - $123
million. SPTS is expected, on a stand-alone basis under U.K. GAAP,
to generate revenues of approximately $100 million in the second
half of 2014.
An earnings conference call for the Company’s second quarter
2014 results is scheduled for Monday, August 4, 2014, at 9:00 a.m.
EDT. The dial-in number for the conference call is 210-234-0066,
and a replay will be available on telephone number 203-369-3779
until August 17, 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 and Other 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 SPTS and are subject to uncertainties and factors
relating to Orbotech’s and SPTS’s 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 completion, timing, terms and
anticipated benefits of the acquisition of SPTS and the related
financing transactions; the timing and impact of conversion of
SPTS’s financial statements from U.K. GAAP to U.S. GAAP and the
Company’s ability to switch SPTS to a U.S. GAAP reporting regime;
Orbotech’s ability to effectively integrate and operate SPTS’s
business following the acquisition, the timing, terms and success
of any other strategic or other transaction, cyclicality in the
industries in which the Company or SPTS operates, the Company’s and
SPTS’s production capacity, timing and occurrence of product
acceptance (the Company defines ‘bookings’ as purchase arrangements
with customers that are based on mutually agreed terms which, in
some cases, may still be subject to completion of written
documentation and may be changed or cancelled by the customer,
often without penalty), fluctuations in product mix, worldwide
economic conditions generally, especially in the industries in
which the Company or SPTS operate, the timing and strength of
product and service offerings by the Company, SPTS and each of
their 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, the final
outcome and impact of the 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, ongoing or increased
hostilities in Israel 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, 2013, and subsequent SEC filings. The
failure to complete the acquisition of SPTS could have a materially
adverse effect on Orbotech’s financial condition and results and
could negatively impact the Company’s share price. 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.
The financial information in this press release related to SPTS,
including forward-looking estimates, is based on SPTS’s financial
statements prepared in accordance with U.K. GAAP. U.K. GAAP differs
in certain important respects from U.S. GAAP, the basis for
Orbotech’s financial reporting. Neither SPTS nor Orbotech has begun
a reconciliation of SPTS’s financial statements from U.K. to U.S.
GAAP and therefore cannot quantify the differences, which may be
material. In addition, none of the Orbotech financial information
in this press release gives effect to the acquisition of SPTS.
Orbotech will account for the acquisition of SPTS under the
purchase method of accounting, which will result in a new valuation
for the assets and liabilities of SPTS. The new basis of accounting
will be based on the estimated value of the assets and liabilities
on the closing date of the acquisition. Orbotech will not be
preparing any pro forma information for the acquisition and
financing until the reconciliation and valuation estimates have
been prepared.
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, 2013.
ORBOTECH LTD. CONDENSED CONSOLIDATED
BALANCE SHEETS AT JUNE 30, 2014
June 30 December
31 2014 2013 U. S. dollars in thousands
Assets
CURRENT
ASSETS:
Cash and cash equivalents 164,002 161,155 Short-term bank deposits
26,576 38,650 Marketable securities 17,901 5,265 Accounts
receivable: Trade 191,174 198,203 Other 33,728 31,546 Deferred
income taxes 8,117 8,094 Inventories 101,620 93,938
Total current assets
543,118 536,851
INVESTMENTS AND
NON-CURRENT ASSETS:
Marketable securities 5,094 13,106 Funds in respect of employee
rights upon retirement 10,931 11,024 Deferred income taxes 12,837
15,130
Equity method investee and other
receivable
10,223 9,911 39,085 49,171
PROPERTY, PLANT AND
EQUIPMENT, net
28,696 27,715
GOODWILL
12,444 12,444
OTHER INTANGIBLE
ASSETS, net
8,381 10,401
631,724 636,582
Liabilities and equity
CURRENT
LIABILITIES:
Accounts payable and accruals: Trade 42,723 43,663 Other
51,710 55,482 Deferred income 20,865 24,854
Total current liabilities
115,298 123,999
LONG-TERM
LIABILITIES:
Liability for employee rights upon retirement 24,581 25,845
Deferred income taxes 2,406 2,406 Other tax liabilities
13,664 17,178
Total long-term liabilities
40,651 45,429
Total liabilities
155,949 169,428
EQUITY:
Share capital 2,148 2,124 Additional paid-in capital 288,404
281,159 Retained earnings 283,449 268,570 Accumulated other
comprehensive income (loss) -266 409 573,735 552,262
Less treasury shares, at cost -97,939 -84,946
Total Orbotech Ltd. shareholders'
equity
475,796 467,316 Non-controlling interest -21 -162
Total equity
475,775 467,154
631,724 636,582
ORBOTECH
LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR
THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2014
6 months ended
3 months ended
12 months ended
June 30
June 30
December 31 2014 2013 2014 2013 2013 U.S. dollars in
thousands (except per share data)
REVENUES
217,978 204,325 113,185 108,848 439,995
COST OF
REVENUES
123,649 117,614 64,513 62,267 248,455
GROSS
PROFIT
94,329 86,711 48,672 46,581 191,540
RESEARCH AND
DEVELOPMENT COSTS - net
37,571 33,333 19,110 17,019 69,573
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 40,166 34,784 20,574 17,522 75,948
EQUITY IN EARNINGS
OF FRONTLINE
(3,558) (2,347) (2,054) (1,164) (5,553)
AMORTIZATION OF
INTANGIBLE ASSETS
2,020 2,020 1,010 1,010 4,041
OPERATING
INCOME
18,130 18,921 10,032 12,194 47,531
FINANCIAL EXPENSES
(INCOME) - net
(64) 548 (391) (130) 1,191
INCOME FROM
OPERATIONS BEFORE TAXES ON INCOME
18,194 18,373 10,423 12,324 46,340
TAXES ON
INCOME
2,991 3,135 1,641 1,971 6,927
15,203 15,238 8,782 10,353 39,413
SHARE IN LOSSES OF
ASSOCIATED COMPANY
213 114 144 69 252
NET
INCOME
14,990 15,124 8,638 10,284 39,161
NET INCOME (LOSS)
ATTRIBUTABLE TO
THE NON-CONTROLLING INTEREST 111 (387) 46 (216) (840)
NET INCOME
ATTRIBUTABLE TO ORBOTECH LTD.
14,879 15,511 8,592 10,500 40,001
EARNINGS PER
SHARE:
INCOME FROM OPERATIONS: BASIC $0.36 $0.36 $0.21 $0.24 $0.94
DILUTED $0.35 $0.36 $0.20 $0.24 $0.92
WEIGHTED AVERAGE
NUMBER OF SHARES USED IN COMPUTATION
OF EARNINGS PER SHARE - IN THOUSANDS: BASIC 41,781 43,106 41,721
42,891 42,571 . DILUTED 42,832 43,621 42,830 43,503 43,253
ORBOTECH LTD. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE MONTHS
PERIODS ENDED JUNE 30, 2014
6 months ended
3 months ended
12 months ended
June 30
June 30
December 31 2014 2013 2014 2013 2013 U.S. dollars in thousands
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income 14,990 15,124 8,638 10,284 39,161 Adjustment to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,842 6,134 3,371 3,322 13,261
Impairment of Intangible assets Compensation relating to equity
awards granted to employees and others - net 1,553 1,637 737 864
3,182 Increase (decrease) in liability for employee rights upon
retirement (1,264) (634) (374) 6 624 Deferred income taxes (95)
(1,311) (350) (1,260) (1,558) Non-cash expenses in respect of
restructuring Amortization of premium and accretion of discount on
marketable Securities, net 504 218 347 127 554 Equity in earnings
of Frontline, net of dividend received (458) 1,244 (263) 342 446
Other 441 247 235 2 268 Decrease (increase) in accounts receivable:
Trade 7,029 (20,803) (1,148) (5,320) (33,721) Other (2,476) (1,959)
(3,082) (928) (2,954) Increase (decrease) in accounts payable and
accruals: Trade (940) 6,372 2,212 10,431 11,377 Deferred income and
other (8,781) 2,958 1,935 4,318 15,511 Decrease (increase) in
inventories (7,682) 2,122 (627) (4,129) (190)
Net cash provided
by operating activities 9,663 11,349
11,631 18,059 45,961
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (5,932) (6,505)
(2,358) (3,144) (12,978) Withdraw (placement) of bank deposits
12,074 (50,499) 15,598 (39,513) (35,636) Purchase of marketable
securities (14,242) (1,213) (11,752) (643) (9,936) Redemption of
marketable securities 8,838 886 6,083 580 6,037 Investment in
equity method investee (250) (250) (2,250) Proceeds from disposal
of property, plant and equipment 15 (200) 6 (200) 39 Increase in
funds in respect of employee rights upon retirement (72) (124) (2)
(60) (262)
Net cash provided by (used in) investing
activities 431 (57,655) 7,325
(42,980) (54,986)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term bank loan (48,000) (8,000) (64,000)
Employee stock options exercised 5,746 910 2,223 637 3,312
Acquisition of treasury shares (12,993) (11,693) (8,819) (9,485)
(25,795)
Net cash used in financing activities
(7,247) (58,783) (6,596) (16,848)
(86,483) NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS 2,847
(105,089) 12,360 (41,769) (95,508)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
161,155 256,663 151,642 193,343 256,663
CASH AND CASH EQUIVALENTS AT END OF PERIOD
164,002 151,574 164,002 151,574
161,155 ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING
OPERATIONS FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE
30, 2014
6 months ended
3 months ended
12 months ended
June 30
June 30
December 31 2014 2013 2014 2013 2013 U.S. dollars in thousands
(except per share data)
Reported operating
income on GAAP basis
18,130 18,921 10,032
12,194 47,531 Equity based compensation
expenses 1,553 1,637 751 864 3,182 Amortization of intangible
assets 2,020 2,020 1,010
1,010 4,041 Non-GAAP operating income
21,703 22,578 11,793
14,068 54,754
Reported net income
attributable to Orbotech Ltd. on GAAP basis
14,879 15,511 8,592
10,500 40,001 Equity based compensation
expenses 1,553 1,637 751 864 3,182 Amortization of intangible
assets 2,020 2,020 1,010 1,010 4,041 Share in losses of associated
company 213 114 144 69 252
Non-GAAP net income
from operations
18,665 19,282 10,497
12,443 47,476 Non-GAAP earnings per diluted
share $0.44 $0.44 $0.25
$0.29 $1.10 Shares used in earnings per
diluted share calculation-in thousands 42,832
43,621 42,830 43,503 43,253
Orbotech Ltd.Adrian Auman, +972-8-942-3560Corporate Vice
President Investor Relations and Special ProjectsorAnn Michael,
+972-8-942-3148Senior Corporate Marketing Communications
Manager
Orbotech Ltd. - Ordinary Shares (NASDAQ:ORBK)
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