Orbotech Announces Fourth Quarter and Full Year Results for 2012
YAVNE, Israel--(BUSINESS WIRE)--
ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated
financial results for the fourth quarter and year ended December 31,
2012.
Revenues for the fourth quarter of 2012 totaled $100.3 million, compared
to $98.9 million in the third quarter of 2012 and $133.3 million in the
fourth quarter of 2011. GAAP net loss for the fourth quarter of 2012 was
$0.7 million, or $0.02 per share, compared to GAAP net loss of $45.7
million, or $1.05 per share, in the third quarter of 2012 and a GAAP net
income of $2.5 million, or $0.06 per share (diluted), in the fourth
quarter of 2011. Net loss for the fourth quarter of 2012 includes a
restructuring charge of $3.2 million relating to certain measures taken
to realign the Company’s infrastructure with current revenue levels and
business conditions, including a reduction in worldwide workforce,
consolidation of certain Company facilities and other cost-cutting
measures.
Commenting on the results, Asher Levy, Chief Executive Officer, said:
“2012 was an extremely challenging year for the Company, primarily due
to lower capital expenditures by LCD manufacturers and the deferral of
capital expenditures by PCB manufacturers in response to highly
uncertain global economic conditions. During the fourth quarter, we took
steps to reduce our expense structure, which will better position us to
benefit from the improvement we are already beginning to see in the FPD
industry and from the expected growth in the PCB industry. In 2013,
these measures should result in savings of approximately $10 million in
operating expenses and will afford us significant operating leverage.
However, they will not impact our service business nor diminish our
ability to continue to develop the best solutions to meet our customers’
needs.”
Revenues for the year ended December 31, 2012 totaled $400.7 million,
compared to $565.3 million in 2011. GAAP net loss for the year ended
December 31, 2012 was $45.6 million, or $1.05 per share, compared to a
GAAP net income of $47.3 million, or $1.16 per share (diluted), in 2011.
GAAP net loss for the year reflects: (a) an impairment charge of $30.1
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 non-cancelable 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; (c) $4.0 million of net costs
associated with the previously-disclosed charges filed in Korea against
the Korean subsidiary of Orbotech Ltd. and six employees thereof (the “Korean
Matter”); and (d) $5.1 million in restructuring charges related to
the Company’s cost reduction programs.
Non-GAAP net income from continuing operations for the fourth quarter of
2012 was $3.9 million, or $0.09 per share (diluted), compared to
non-GAAP net income from continuing operations of $6.5 million, or $0.15
per share (diluted), in the fourth quarter of 2011.
Non-GAAP net income from continuing operations for the year ended
December 31, 2012 was $2.3 million, or $0.05 per share (diluted),
compared to non-GAAP net income from continuing operations of $62.2
million, or $1.52 per share (diluted), for the year ended December 31,
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 $42.2 million in the fourth quarter of 2012, compared to $42.0
million in the third quarter of 2012, and $52.6 million in the fourth
quarter of 2011. Sales of equipment to the FPD industry were $17.6
million in the fourth quarter of 2012, compared to $15.3 million in the
third quarter of 2012, and $42.5 million in the fourth quarter of last
year. In the Company’s Recognition Software segment, sales were $2.5
million in the fourth quarter of 2012, compared to $2.0 million in the
third quarter of 2012, and $2.1 million in the fourth quarter of 2011.
In addition, service revenue for the fourth quarter of 2012 was $38.0
million, compared to $39.6 million in the third quarter of 2012, and
$36.0 million in the fourth quarter of 2011.
The Company completed the quarter with cash, cash equivalents,
short-term bank deposits and marketable securities of approximately
$278.8 million; and debt of $64.0 million, compared with cash, cash
equivalents and short-term bank deposits of approximately $276.2
million; and debt of $72.0 million at the end of the third quarter of
2012. The Company generated cash of $12.7 million from continuing
operations in the fourth quarter of 2012. Additionally, during February
2013, the Company prepaid $32.0 million of its loan from the Israel
Discount Bank Ltd. and estimates that this will result in a reduction of
approximately $1.8 million in its financial expenses for 2013. The
remaining $32.0 million loan from Israel Discount Bank Ltd. is due by
December 21, 2013 and, accordingly has been classified as a current
liability.
To date, the Company has repurchased 429,812 of its Ordinary Shares, at
a total cost of approximately $3.74 million, under the share repurchase
program approved and announced 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 $30.0 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.
Hearings on the Korean Matter remain ongoing, as does the investigation
by the prosecutor into the actions of employees of the Company outside
of Korea, in connection with which the Company’s Korean subsidiary
continues to co-operate with the Korean authorities. The Company
recorded $4.0 million in net costs in 2012 in connection with the Korean
Matter, and expects to continue to incur fees and expenses associated
therewith.
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 the Company
will account for its interest in Frontline P.C.B. Solutions Limited
Partnership (“Frontline”) using the equity method and, as a
result, will report its investment as a one line item within investments
and other non-current assets in the consolidated balance sheets; and its
share of earnings on one line in the Company’s consolidated statement of
operations. This presentation will be applied in the Company’s financial
statements for all prior periods for consistency. Accordingly, the
Company’s reported financial statements for prior periods, including the
financial statements in this press release, will change in future
periods. The Company’s share in the earnings of Frontline will be
presented under operating income since Frontline is integrated into the
operations of the Company.
The Company expects that revenues for the first quarter of 2013, which
it anticipates will be the lowest quarter for the year, will be
approximately $93 - $94 million, or about $90 million under the new
accounting treatment in connection with Frontline, as discussed above.
An earnings conference call for the Company’s fourth quarter 2012
results is scheduled for Tuesday, February 19, 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 402-220-9088 until March 5, 2013.
The pass code is Q4. 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.
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; and its reports on Form 6-K filed with the
SEC on May 16, June 11, June 28, August 6, August 7 and November 6,
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 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.
ORBOTECH LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 2012
December 31
December 31
2012
2011
U.S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents
260,761
151,237
Short-term bank deposits
3,014
145,292
Marketable securities
2,238
Accounts receivable:
Trade
164,498
196,232
Other
29,908
26,163
Deferred income taxes
7,862
6,580
Inventories
93,854
105,109
Total current assets
562,135
630,613
INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities
12,788
Funds in respect of employee rights upon retirement
11,280
11,846
Deferred income taxes
13,634
8,999
Other long-term investments
1,880
2,426
39,582
23,271
PROPERTY, PLANT AND EQUIPMENT, net
24,715
26,664
GOODWILL
12,444
12,444
OTHER INTANGIBLE ASSETS, net
14,442
54,491
653,318
747,483
Liabilities and equity
CURRENT LIABILITIES:
Current maturities of long-term bank loan
64,000
32,000
Accounts payable and accruals:
Trade
27,587
32,357
Other
51,895
57,590
Deferred income
17,388
25,910
Total current liabilities
160,870
147,857
LONG-TERM LIABILITIES:
Long-term bank loan
64,000
Liability for employee rights upon retirement
26,221
26,797
Deferred income taxes
2,236
1,759
Other tax liabilities
16,478
16,938
Total long-term liabilities
44,935
109,494
Total liabilities
205,805
257,351
EQUITY:
Share capital
2,102
2,092
Additional paid-in capital
274,856
270,966
Retained earnings
228,569
274,148
Accumulated other comprehensive income (loss)
628
(1,460
)
506,155
545,746
Less treasury shares, at cost
(59,151
)
(57,192
)
Total Orbotech Ltd. shareholders' equity
447,004
488,554
Non-controlling interest
509
1,578
Total equity
447,513
490,132
653,318
747,483
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR AND THREE MONTHS ENDED DECEMBER 31, 2012
12 months ended
3 months ended
December 3 1
December 3 1
2 0 1 2
2 0 1 1
2 0 1 2
2 0 1 1
U.S. dollars in thousands (except per share data)
REVENUES
400,731
565,313
100,301
133,333
COST OF REVENUES
235,223
329,442
60,977
78,037
WRITE- DOWN OF INVENTORIES
14,255
6,743
6,743
GROSS PROFIT
151,253
229,128
39,324
48,553
RESEARCH AND DEVELOPMENT COSTS-
net
71,815
84,180
17,752
21,598
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
75,142
72,583
17,982
18,894
AMORTIZATION OF INTANGIBLE ASSETS
9,907
12,304
991
3,091
RESTRUCTURING CHARGES
5,063
3,145
IMPAIRMENT OF INTANGIBLE ASSETS
30,142
162
OPERATING INCOME (LOSS)
(40,816
)
60,061
(708
)
4,970
FINANCIAL EXPENSES (INCOME)- net
5,100
6,551
(146
)
845
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE TAXES ON INCOME
(45,916
)
53,510
(562
)
4,125
TAXES ON INCOME
456
7,677
234
1,855
(46,372
)
45,833
(796
)
2,270
SHARE IN LOSSES OF ASSOCIATED COMPANY
165
179
50
70
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
(46,537
)
45,654
(846
)
2,200
INCOME FROM DISCONTINUED OPERATIONS, NET OF
TAX
1,363
NET INCOME (LOSS)
(46,537
)
47,017
(846
)
2,200
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING
INTERESTS
(958
)
(322
)
(112
)
(347
)
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH
LTD.
(45,579
)
47,339
(734
)
2,547
AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:
INCOME (LOSS) FROM CONTINUING OPERATIONS
(45,579
)
45,976
(734
)
2,547
INCOME FROM DISCONTINUED OPERATIONS, NET OF
TAX
1,363
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH
LTD.
(45,579
)
47,339
(734
)
2,547
EARNINGS PER SHARE:
INCOME (LOSS) FROM CONTINUING OPERATIONS:
BASIC
($1.05
)
$
1.15
($0.02
)
$
0.06
DILUTED
($1.05
)
$
1.13
($0.02
)
$
0.06
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH
LTD.:
BASIC
($1.05
)
$
1.19
($0.02
)
$
0.06
DILUTED
($1.05
)
$
1.16
($0.02
)
$
0.06
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATION OF EARNINGS PER SHARE - IN THOUSANDS:
BASIC
43,501
39,909
43,537
43,261
DILUTED
43,501
40,816
43,537
43,966
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR AND THREE MONTHS ENDED DECEMBER 31, 2012
12 months ended
3 months ended
December 31
December 31
2 0 1 2
2 0 1 1
2 0 1 2
2 0 1 1
U.S. dollars in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
(46,537
)
47,017
(846
)
2,200
Adjustment to reconcile net income to net cash provided by
operating activities:
Income from discontinued operations
(1,363
)
Depreciation and amortization
17,964
19,958
3,240
4,885
Impairment of Intangible assets
30,142
162
Compensation relating to equity awards granted to employees
and others
3,070
3,728
784
813
Decrease in liability for employee rights upon retirement
(576
)
(704
)
(1,296
)
(650
)
Deferred income taxes
(5,440
)
2,584
(1,770
)
249
Non-cash expenses in respect of restructuring
601
Loss from sales and write down of marketable securities
395
Amortization of premium and accretion of discount on marketable Securities,
net
588
151
Other, including capital loss (gain)
1,455
1,224
315
155
Decrease (increase) in accounts receivable:
Trade
31,734
(42,714
)
14,936
771
Other
(2,743
)
2,698
(883
)
1,577
Increase (decrease) in accounts payable and accruals:
Trade
(4,770
)
5,822
(7,147
)
(7,449
)
Deferred income and other
(14,484
)
6,105
676
352
Decrease in inventories
11,925
6,870
4,351
14,986
Net cash provided by operating activities - continuing operations
22,929
51,620
12,673
17,889
Net cash used in operating activities - discontinued operations
(787
)
(47
)
Net cash provided by operating activities
22,929
50,833
12,673
17,842
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(9,611
)
(7,554
)
(3,053
)
(2,366
)
Withdraw (placement) of bank deposits
142,278
(142,325
)
26,694
(15,025
)
Redemption (purchase) of marketable securities
(15,614
)
1,967
(242
)
Other investment
(2,810
)
(500
)
Proceeds from disposal of property, plant and equipment
3,036
35
3,038
Decrease (increase) in funds in respect of employee rights
upon retirement
(254
)
331
(64
)
344
Net cash provided by (used in) investing activities - continuing
operations
119,835
(150,356
)
26,373
(17,547
)
Net cash provided by investing activities - discontinued operations
9,155
Net cash provided by (used in) investing activities
119,835
(141,201
)
26,373
(17,547
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term bank loan
(32,000
)
(32,000
)
(8,000
)
(8,000
)
Employee stock options exercised
719
2,063
57
414
Issuance of shares, net
90,683
Acquisition of treasury shares
(1,959
)
(1,959
)
Net cash provided by (used in) financing activities
(33,240
)
60,746
(9,902
)
(7,586
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
109,524
(29,622
)
29,144
(7,291
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
151,237
180,859
231,617
158,528
CASH AND CASH EQUIVALENTS AT END OF PERIOD
260,761
151,237
260,761
151,237
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING
OPERATIONS
FOR THE YEAR AND THREE MONTHS ENDED DECEMBER 31, 2012
12 months ended
3 months ended
December 3 1
December 3 1
2 0 1 2
2 0 1 1
2 0 1 2
2 0 1 1
U.S. dollars in thousands (except per share data)
Reported operating income (loss) on GAAP
basis
(40,816
)
60,061
(708
)
4,970
Equity based compensation expenses
3,070
3,728
784
813
Restructuring charges, net of tax credit
4,593
2,675
Impairment of Intangible assets
30,142
162
Amortization of intangible assets
9,907
12,304
991
3,091
Non-GAAP operating income
6,896
76,093
3,904
8,874
Reported net income (loss) attributable to
Orbotech Ltd. on GAAP basis
(45,579
)
47,339
(734
)
2,547
Equity based compensation expenses
3,070
3,728
784
813
Amortization of intangible assets
9,907
12,304
991
3,091
Income from discontinued operations
(1,363
)
Restructuring charges, net of tax credit
4,593
2,675
Impairment of Intangible assets
30,142
162
Share in losses of associated company
165
179
50
70
Non-GAAP net income from continuing
operations
2,298
62,187
3,928
6,521
Non-GAAP earnings per diluted share
$
0.05
$
1.52
$
0.09
$
0.15
Shares used in earnings per diluted share calculation-in thousands
44,071
40,816
44,107
43,966
Orbotech Ltd. Adrian Auman, +972-8-942-3560 Corporate Vice
President Investor Relations and Special Projects or Orbotech,
Inc. Michelle Harnish, +1-603-289-7937 Marketing
Communications Manager
Press Release $ORBK Orbotech Ltd.
YAVNE, Israel--(BUSINESS WIRE)-- ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the fourth quarter and year ended December 31, 2012.
Revenues for the fourth quarter of 2012 totaled $100.3 million, compared to $98.9 million in the third quarter of 2012 and $133.3 million in the fourth quarter of 2011. GAAP net loss for the fourth quarter of 2012 was $0.7 million, or $0.02 per share, compared to GAAP net loss of $45.7 million, or $1.05 per share, in the third quarter of 2012 and a GAAP net income of $2.5 million, or $0.06 per share (diluted), in the fourth quarter of 2011. Net loss for the fourth quarter of 2012 includes a restructuring charge of $3.2 million relating to certain measures taken to realign the Company’s infrastructure with current revenue levels and business conditions, including a reduction in worldwide workforce, consolidation of certain Company facilities and other cost-cutting measures.
Commenting on the results, Asher Levy, Chief Executive Officer, said: “2012 was an extremely challenging year for the Company, primarily due to lower capital expenditures by LCD manufacturers and the deferral of capital expenditures by PCB manufacturers in response to highly uncertain global economic conditions. During the fourth quarter, we took steps to reduce our expense structure, which will better position us to benefit from the improvement we are already beginning to see in the FPD industry and from the expected growth in the PCB industry. In 2013, these measures should result in savings of approximately $10 million in operating expenses and will afford us significant operating leverage. However, they will not impact our service business nor diminish our ability to continue to develop the best solutions to meet our customers’ needs.”
Revenues for the year ended December 31, 2012 totaled $400.7 million, compared to $565.3 million in 2011. GAAP net loss for the year ended December 31, 2012 was $45.6 million, or $1.05 per share, compared to a GAAP net income of $47.3 million, or $1.16 per share (diluted), in 2011.
GAAP net loss for the year reflects: (a) an impairment charge of $30.1 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 non-cancelable 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; (c) $4.0 million of net costs associated with the previously-disclosed charges filed in Korea against the Korean subsidiary of Orbotech Ltd. and six employees thereof (the “Korean Matter”); and (d) $5.1 million in restructuring charges related to the Company’s cost reduction programs.
Non-GAAP net income from continuing operations for the fourth quarter of 2012 was $3.9 million, or $0.09 per share (diluted), compared to non-GAAP net income from continuing operations of $6.5 million, or $0.15 per share (diluted), in the fourth quarter of 2011.
Non-GAAP net income from continuing operations for the year ended December 31, 2012 was $2.3 million, or $0.05 per share (diluted), compared to non-GAAP net income from continuing operations of $62.2 million, or $1.52 per share (diluted), for the year ended December 31, 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 $42.2 million in the fourth quarter of 2012, compared to $42.0 million in the third quarter of 2012, and $52.6 million in the fourth quarter of 2011. Sales of equipment to the FPD industry were $17.6 million in the fourth quarter of 2012, compared to $15.3 million in the third quarter of 2012, and $42.5 million in the fourth quarter of last year. In the Company’s Recognition Software segment, sales were $2.5 million in the fourth quarter of 2012, compared to $2.0 million in the third quarter of 2012, and $2.1 million in the fourth quarter of 2011. In addition, service revenue for the fourth quarter of 2012 was $38.0 million, compared to $39.6 million in the third quarter of 2012, and $36.0 million in the fourth quarter of 2011.
The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $278.8 million; and debt of $64.0 million, compared with cash, cash equivalents and short-term bank deposits of approximately $276.2 million; and debt of $72.0 million at the end of the third quarter of 2012. The Company generated cash of $12.7 million from continuing operations in the fourth quarter of 2012. Additionally, during February 2013, the Company prepaid $32.0 million of its loan from the Israel Discount Bank Ltd. and estimates that this will result in a reduction of approximately $1.8 million in its financial expenses for 2013. The remaining $32.0 million loan from Israel Discount Bank Ltd. is due by December 21, 2013 and, accordingly has been classified as a current liability.
To date, the Company has repurchased 429,812 of its Ordinary Shares, at a total cost of approximately $3.74 million, under the share repurchase program approved and announced 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 $30.0 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.
Hearings on the Korean Matter remain ongoing, as does the investigation by the prosecutor into the actions of employees of the Company outside of Korea, in connection with which the Company’s Korean subsidiary continues to co-operate with the Korean authorities. The Company recorded $4.0 million in net costs in 2012 in connection with the Korean Matter, and expects to continue to incur fees and expenses associated therewith.
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 the Company will account for its interest in Frontline P.C.B. Solutions Limited Partnership (“Frontline”) using the equity method and, as a result, will report its investment as a one line item within investments and other non-current assets in the consolidated balance sheets; and its share of earnings on one line in the Company’s consolidated statement of operations. This presentation will be applied in the Company’s financial statements for all prior periods for consistency. Accordingly, the Company’s reported financial statements for prior periods, including the financial statements in this press release, will change in future periods. The Company’s share in the earnings of Frontline will be presented under operating income since Frontline is integrated into the operations of the Company.
The Company expects that revenues for the first quarter of 2013, which it anticipates will be the lowest quarter for the year, will be approximately $93 - $94 million, or about $90 million under the new accounting treatment in connection with Frontline, as discussed above.
An earnings conference call for the Company’s fourth quarter 2012 results is scheduled for Tuesday, February 19, 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 402-220-9088 until March 5, 2013. The pass code is Q4. 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; and its reports on Form 6-K filed with the SEC on May 16, June 11, June 28, August 6, August 7 and November 6, 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 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.
2012
2011
U.S. dollars in thousands
Assets
CURRENT ASSETS:
Total current assets
INVESTMENTS AND NON-CURRENT ASSETS:
PROPERTY, PLANT AND EQUIPMENT, net
GOODWILL
OTHER INTANGIBLE ASSETS, net
Liabilities and equity
CURRENT LIABILITIES:
Total current liabilities
LONG-TERM LIABILITIES:
Total long-term liabilities
Total liabilities
EQUITY:
Total Orbotech Ltd. shareholders' equity
Total equity
12 months ended
3 months ended
REVENUES
COST OF REVENUES
WRITE- DOWN OF INVENTORIES
GROSS PROFIT
RESEARCH AND DEVELOPMENT COSTS - net
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
AMORTIZATION OF INTANGIBLE ASSETS
RESTRUCTURING CHARGES
IMPAIRMENT OF INTANGIBLE ASSETS
OPERATING INCOME (LOSS)
FINANCIAL EXPENSES (INCOME)- net
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES ON INCOME
TAXES ON INCOME
SHARE IN LOSSES OF ASSOCIATED COMPANY
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
NET INCOME (LOSS)
NET LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.
AMOUNTS ATTRIBUTABLE TO ORBOTECH LTD.:
INCOME (LOSS) FROM CONTINUING OPERATIONS
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.
EARNINGS PER SHARE:
INCOME (LOSS) FROM CONTINUING OPERATIONS:
BASIC
DILUTED
NET INCOME (LOSS) ATTRIBUTABLE TO ORBOTECH LTD.:
BASIC
DILUTED
WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION
OF EARNINGS PER SHARE - IN THOUSANDS:
BASIC
DILUTED
12 months ended
3 months ended
December 31
December 31
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustment to reconcile net income to net cash
provided by operating activities:
Compensation relating to equity awards granted to
employees and others
Decrease in liability for employee rights upon retirement
Amortization of premium and accretion of discount on marketable
Securities, net
Decrease in inventories
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in funds in respect of employee
rights upon retirement
CASH FLOWS FROM FINANCING ACTIVITIES:
12 months ended
3 months ended
Reported operating income (loss) on GAAP basis
Reported net income (loss) attributable to Orbotech Ltd. on GAAP basis
Non-GAAP net income from continuing operations
Orbotech Ltd.
Adrian Auman, +972-8-942-3560
Corporate Vice President Investor Relations
and Special Projects
or
Orbotech, Inc.
Michelle Harnish, +1-603-289-7937
Marketing Communications Manager
Source: Orbotech Ltd.