Orbotech Announces Second Quarter 2013 Results
Orbotech Announces Second Quarter 2013 Results
2013 second quarter:
Revenues: $108.8 million
Gross margin - improved to 42.8%
Non-GAAP net income: $0.29 per share (diluted)
GAAP net income: $0.24 per share (diluted)
Operating cash flow: $18.1 million
2013 third quarter:
Revenue guidance: $110 - $115 million
YAVNE, Israel--(BUSINESS WIRE)-- 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 2013
2 0 13
2 0 1 2*
U. S. dollars in thousands
A s s e t s
Cash and cash equivalents
Short-term bank deposits
Deferred income taxes
T o t a l current assets
INVESTMENTS AND NON-CURRENT ASSETS:
Funds in respect of employee rights upon retirement
Deferred income taxes
Other long-term investments
PROPERTY, PLANT AND EQUIPMENT, net
OTHER INTANGIBLE ASSETS, net
Liabilities and equity
Current maturities of long-term bank loan
Accounts payable and accruals:
T o t a l current liabilities
Liability for employee rights upon retirement
Deferred income taxes
Other tax liabilities
T o t a l long-term liabilities
T o t a l liabilities
Additional paid-in capital
Accumulated other comprehensive income
Less treasury shares, at cost
T o t a l Orbotech Ltd. shareholders' equity
T o t a l equity
* Applying Equity Based Method to 50% interest in the Frontline P.C.B. Solutions Limited Partnership
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2013
6 months ended
3 months ended
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)
COST OF REVENUES
WRITE- DOWN OF INVENTORIES
RESEARCH AND DEVELOPMENT COSTS - net
SELLING, GENERAL AND ADMINISTRATIVE
EQUITY IN EARNINGS OF FRONTLINE
AMORTIZATION OF INTANGIBLE ASSETS
IMPAIRMENT OF INTANGIBLE ASSETS
OPERATING INCOME (LOSS)
FINANCIAL EXPENSES (INCOME)- net
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES ON INCOME
TAXES ON INCOME