Orbotech Announces Third Quarter 2012 Results
Orbotech Announces Third Quarter 2012 Results
YAVNE, Israel--(BUSINESS WIRE)-- 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.
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|AT SEPTEMBER 30, 2012|
|September 30||December 31|
U.S. dollars in thousands
A s s e t s
|Cash and cash equivalents||231,617||151,237|
|Short-term bank deposits||29,708||145,292|
|Deferred income taxes||7,600||6,580|
|T o t a l current assets||578,203||630,613|
INVESTMENTS AND NON-CURRENT ASSETS:
|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|
PROPERTY, PLANT AND EQUIPMENT, net
OTHER INTANGIBLE ASSETS, net
Liabilities and equity
|Current maturities of long-term bank loan||32,000||32,000|
|Accounts payable and accruals:|
|T o t a l current liabilities||133,754||147,857|
|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|
|Additional paid-in capital||274,071||270,966|
|Accumulated other comprehensive income (loss)||(112||)||(1,460||)|
|Less treasury shares, at cost||(57,192||)||(57,192||)|
|T o t a l Orbotech Ltd. shareholders' equity||448,171||488,554|
|T o t a l equity||448,736||490,132|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME|
|FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2012|
9 months ended
3 months ended
|U.S. dollars in thousands (except per share data)|
COST OF REVENUES
WRITE-DOWN OF INVENTORIES
RESEARCH AND DEVELOPMENT COSTS- net
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
AMORTIZATION OF INTANGIBLE ASSETS
IMPAIRMENT OF INTANGIBLE ASSETS
OPERATING INCOME (LOSS)
FINANCIAL EXPENSES- net
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
TAXES ON INCOME (TAX BENEFIT)
SHARE IN LOSSES OF ASSOCIATED COMPANY
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
NET INCOME (LOSS)
NET INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
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