Orbotech Announces Fourth Quarter and Full Year Results for 2013

  Orbotech Announces Fourth Quarter and Full Year Results for 2013    *2013 fourth quarter:         *Revenues: increased to $122.2 million        *Gross margin: 44.4%        *GAAP net income: $0.30 per share (diluted)        *Non-GAAP net income: $0.34 per share (diluted)        *Operating cash flow: $12.0 million    *2013 full year results:         *Revenues: increased to $440.0 million        *Gross margin: improved to 43.5%        *GAAP net income: $0.92 per share (diluted)        *Non-GAAP net income: $1.10 per share (diluted)        *Operating cash flow: $46.0 million    *Q1, 2014 guidance:         *Revenues for Q1, 2014: approximately $105 million  Business Wire  YAVNE, Israel -- February 18, 2014  ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the fourth quarter and year ended December 31, 2013.  Revenues for the fourth quarter of 2013 totaled $122.2 million, compared to $113.4 million in the third quarter of 2013 and $97.1 million in the fourth quarter of 2012. GAAP net income for the fourth quarter of 2013 was $12.6 million, or $0.30 per share (diluted), compared to GAAP net income of $11.9 million, or $0.28 per share (diluted), in the third quarter of 2013 and a GAAP net loss of $0.7 million, or $0.02 per share, in the fourth quarter of 2012.  Commenting on the results, Asher Levy, Chief Executive Officer, said: “We are pleased to report a strong 2013 in which we posted robust revenues and much improved gross, operating and net margins. These reflected improving business conditions as well as the operational efficiency measures that we adopted at the end of 2012, and we were able to capitalize on opportunities in PCB and electronic components manufacturing. Our FPD business picked up strongly during the year and we expect this trend to continue in 2014 as our customers solidify their future investment plans, particularly in China. We remain optimistic regarding the outlook for 2014, when we expect to further grow our business and strengthen our position as the leading provider of production solutions to the electronics industry."  Revenues for the year ended December 31, 2013 totaled $440.0 million, compared to $387.0 million in 2012. GAAP net income for the year ended December 31, 2013 was $40.0 million, or $0.92 per share (diluted), compared to a GAAP net loss of $45.6 million, or $1.05 per share (diluted), in 2012.  Non-GAAP net income from continuing operations for the fourth quarter of 2013 was $14.6 million, or $0.34 per share (diluted), compared to non-GAAP net income from continuing operations of $4.0 million, or $0.09 per share (diluted), in the fourth quarter of 2012.  Non-GAAP net income from continuing operations for the year ended December 31, 2013 was $47.5 million, or $1.10 per share (diluted), compared to non-GAAP net income from continuing operations of $2.3 million, or $0.05 per share, for the year ended December 31, 2012. A reconciliation of each of the Company’s non-GAAP measures to the comparable GAAP measure is included at the end of this press release.  In the Company’s Production Solutions for Electronics Industry segment, sales of equipment to the printed circuit board (“PCB”) industry were $45.3 million in the fourth quarter of 2013, compared to $45.5 million in the third quarter of 2013, and $40.6 million in the fourth quarter of 2012. Sales of equipment to the flat panel display (“FPD”) industry were $37.2 million in the fourth quarter of 2013, compared to $26.5 million in the third quarter of 2013, and $17.7 million in the fourth quarter of last year. In the Company’s Recognition Software segment, sales were $1.7 million in the fourth quarter of 2013, compared to $2.3 million in the third quarter of 2013, and $2.4 million in the fourth quarter of 2012. In addition, service revenue for the fourth quarter of 2013 was $38.0 million, compared to $39.1 million in the third quarter of 2013, and $36.4 million in the fourth quarter of 2012.  The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of $218.2 million. The Company generated cash of $12 million from continuing operations in the fourth quarter of 2013 and $46 million in the year ending December 31, 2013.  Under the share repurchase program approved in November 2012 and which terminated on December 31, 2013, the Company repurchased approximately 2.45 million of its Ordinary Shares, at a total cost of approximately $27.7 million.  The Company expects that revenues for the first quarter of 2014, which it anticipates will be the lowest quarter for the year, will be approximately $105 million.  As previously disclosed, in December 2013 the Company’s Korean subsidiary and five of its Korean employees were acquitted by the Seoul Central District Court of the Republic of Korea court on all charges in the criminal proceeding against them, and one Korean employee was found guilty of certain legal violations and received a criminal fine of approximately $10,000. Following such acquittal, the prosecutor filed a notice of appeal with respect to all aspects of the decision issued by the court. The prosecutor is appealing the court’s decision with respect to all the defendants on the grounds that the court’s decision contains errors of fact, errors of law and an unjust sentence. The employee of Orbotech Ltd.’s Korean subsidiary who was found guilty of certain legal violations and who received a criminal fine has also filed a notice of appeal of the court’s decision issued in respect of him.  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 fourth quarter 2013 results is scheduled for Tuesday, February 18, 2014, 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 402-220-3075 until March 4, 2014. 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. 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 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, 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, and subsequent SEC filings. The Company assumes no obligation to update the information in this press release to reflect new information, future events or otherwise, except as required by law.  Non-GAAP Financial Measures  Non-GAAP net income, non-GAAP net income from continuing operations and non-GAAP net income from continuing operations per share detailed in the Reconciliation exclude charges, income or losses, as applicable, related to one or more of the following: (i) equity-based compensation expenses; (ii) certain items associated with acquisitions, including amortization and impairment of intangibles; (iii) discontinued operations; (iv) restructuring charges; and/or (v) share in losses of associated company. Management uses these non-GAAP measures to evaluate the Company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Orbotech believes that these measures enhance investors’ ability to review the Company’s business from the same perspective as the Company’s management and facilitate comparisons with results for prior periods. The presentation of this additional non-GAAP information should not be considered in isolation or as a substitute for net income; net income attributable to Orbotech Ltd. or earnings per share prepared in accordance with GAAP, and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. The reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures are set forth below. For a detailed explanation of the adjustments made to comparable GAAP measures, please see the Reconciliation.  To supplement the Company’s financial results presented on a GAAP basis, the Company uses the non-GAAP measures indicated in the Reconciliation, which exclude equity based compensation expenses, amortization of intangible assets, in-process research and development charges, share in losses/profits of associated companies and impairment and restructuring charges, as well as certain financial expenses and non-recurring income items that are believed to be helpful in understanding and comparing past operating and financial performance with current results. However, the non-GAAP measures presented are subject to limitations as an analytical tool because they exclude certain recurring items (such as equity compensation and amortization of intangible assets) as described below and because they do not reflect certain cash expenditures that are required to operate the Company’s business, such as interest expense and taxes. Accordingly, these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. Management regularly utilizes supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company’s business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.  The effect of equity-based compensation expenses has been excluded from the non-GAAP measures. Although equity-based compensation is a key incentive offered to employees, and the Company believes such compensation contributed to the revenues earned during the periods presented and also believes it will contribute to the generation of future period revenues, the Company continues to evaluate its business performance excluding equity based compensation expenses. Equity-based compensation expenses will recur in future periods.  The effects of amortization of intangible assets have also been excluded from the measures. This item is inconsistent in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well. Amortization of intangible assets will recur in future periods and the Company may be required to record additional impairment charges in the future. The Company believes that it is useful for investors to understand the effects of these items on total operating expenses. For more information about these items, see the Reconciliation and the Company’s Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2012.   ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2013                                                                                                                     December 31     December 31                                                    2013            2 0 1 2*                                                    U. S. dollars in thousands A s s e t s                                                                     CURRENT ASSETS: Cash and cash equivalents                          161,155         256,663 Short-term bank deposits                           38,650          3,014 Marketable securities                              5,265           2,238 Accounts receivable: Trade                                              198,203         164,482 Other                                              31,546          29,836 Deferred income taxes                              8,094           7,862 Inventories                                        93,938         93,854    T o t a l current assets                           536,851        557,949                                                                       INVESTMENTS AND NON-CURRENT ASSETS: Marketable securities                              13,106          12,788 Funds in respect of employee rights upon           11,024          10,598 retirement Deferred income taxes                              15,130          13,634 Equity method investees and other receivables      9,911          7,592                                                        49,171         44,612                                                                        PROPERTY, PLANT AND EQUIPMENT, net                 27,715         24,559                                                                        GOODWILL                                           12,444         12,444                                                                        OTHER INTANGIBLE ASSETS, net                       10,401         14,442                                                       636,582        654,006                                                                                                                                           Liabilities and equity                                                                     CURRENT LIABILITIES: Current maturities of long-term bank loan                          64,000 Accounts payable and accruals: Trade                                              43,663          32,286 Other                                              55,482          48,884 Deferred income                                    24,854         17,388    T o t a l current liabilities                      123,999         162,558                                                                     LONG-TERM LIABILITIES: Liability for employee rights upon retirement      25,845          25,221 Deferred income taxes                              2,406           2,236 Other tax liabilities                              17,178         16,478    T o t a l long-term liabilities                    45,429          43,935                                                                    T o t a l liabilities                              169,428        206,493                                                                       EQUITY: Share capital                                      2,124           2,102 Additional paid-in capital                         281,159         274,856 Retained earnings                                  268,570         228,569 Accumulated other comprehensive income             409            628                                                          552,262         506,155 Less treasury shares, at cost                      (84,946  )      (59,151  ) T o t a l Orbotech Ltd. shareholders' equity       467,316         447,004 Non-controlling interest                           (162     )      509       T o t a l equity                                   467,154        447,513                                                      636,582        654,006                                                                        * Applying Equity Based Method to 50% interest in the Frontline P.C.B. Solutions Limited Partnership                                                                           ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR AND THREE MONTH PERIODSENDED DECEMBER 31, 2013                                                                                                                                                                         12 m o n t h s e n d e d   3 m o n t h s e n d e d                           December 3 1               December 3 1                                      2013         2012*        2013          2012*                             U.S. dollars in thousands (except per share data)                                                                                REVENUES              439,995      387,008       122,235       97,125                                                                                          COST OF               248,455      233,447       67,948        60,491            REVENUES WRITE- DOWN OF                    14,255                     INVENTORIES GROSS PROFIT          191,540      139,306       54,287        36,634                                                                                           RESEARCH AND DEVELOPMENT           69,573       68,703        18,601        16,967            COSTS  - net SELLING, GENERAL AND ADMINISTRATIVE EXPENSES              75,948       73,051        22,172        17,467                                                                                           EQUITY IN EARNINGS OF           (5,553  )    (6,764  )     (1,584  )     (1,408 )           FRONTLINE                                                                                AMORTIZATION OF INTANGIBLE            4,041        9,907         1,011         991               ASSETS                                                                                RESTRUCTURING                      5,063                       3,145 CHARGES                                                                                IMPAIRMENT OF INTANGIBLE                         30,142                      162 ASSETS                                                              OPERATING             47,531       (40,796 )     14,087        (690   )          INCOME (LOSS)                                                                                FINANCIAL EXPENSES              1,191        5,120         139           (128   )          (INCOME)- net                                                              INCOME (LOSS) FROM OPERATIONS       46,340       (45,916 )     13,948        (562   )          BEFORE TAXES ON INCOME                                                                                TAXES ON INCOME       6,927        456           1,493         234                                     39,413       (46,372 )     12,455        (796   )          SHARE IN LOSSES OF EQUITY             252          165           69            50                METHOD INVESTEE NET INCOME            39,161       (46,537 )     12,386        (846   )          (LOSS) NET LOSS ATTRIBUTABLE TO THE NON-CONTROLLING       (840    )    (958    )     (228    )     (112   )           INTEREST NET INCOME (LOSS)               40,001      (45,579 )    12,614       (734   )          ATTRIBUTABLE TO ORBOTECH LTD. EARNINGS PER SHARE: INCOME (LOSS) FROM OPERATIONS: BASIC               $ 0.94        ($1.05  )   $ 0.30         ($0.02 )         DILUTED             $ 0.92        ($1.05  )   $ 0.30         ($0.02 )         WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION OF EARNINGS PER SHARE - IN THOUSANDS: BASIC                42,571      43,501      41,858       43,537           DILUTED              43,253      43,501      42,692       43,537            * Applying Equity Based Method to 50% interest in the Frontline P.C.B. Solutions Limited Partnership  ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR AND THREE MONTH PERIODS ENDED DECEMBER 31, 2013                                                                                                                                                             12 m o n t h s e n d e d     3 m o n t h s e n d e d                           December 3 1                 December 3 1                           2013           2012*         2013          2012*                           U.S. dollars in thousands CASH FLOWS FROM OPERATING ACTIVITIES:                                                                       Net income (loss)         39,161         (46,537 )     12,386        (846    ) Adjustment to reconcile net income to net cash   provided by operating   activities:   Depreciation and        13,261         17,919        3,546         3,229   amortization   Impairment of                          30,142                      162   Intangible assets   Compensation relating   to equity awards   granted to       employees and       3,182          3,070         869           784       others - net   Increase (decrease)   in liability for        624            (640    )     64            (1,370  )   employee rights upon   retirement   Deferred income taxes   (1,558   )     (5,440  )     171           (1,770  )   Non-cash expenses in   respect of                             601   restructuring   Amortization of   premium and accretion   of discount on   marketable       Securities, net     554            588           242           588   Equity in earnings of   Frontline, net of       446            (1,232  )     (285    )     178   dividend received   Other                   268            1,498         (137    )     390   Decrease (increase)   in accounts   receivable:       Trade               (33,721  )     31,725        (13,931 )     14,945       Other               (2,954   )     (2,708  )     65            (845    )   Increase (decrease)   in accounts payable   and accruals:       Trade               11,377         (4,780  )     6,436         (7,135  )       Deferred income     15,511         (14,688 )     3,531         483       and other   Decrease (increase)     (190     )     11,925       (1,001  )     4,351      in inventories Net cash provided by      45,961        21,443       11,956       13,144   operating activities                                                                       CASH FLOWS FROM INVESTING ACTIVITIES:                                                                       Purchase of property,     (12,978  )     (9,484  )     (2,772  )     (3,009  ) plant and equipment Withdraw (placement) of   (35,636  )     142,278       4,363         26,694 bank deposits Purchase of marketable    (9,936   )     (18,167 )     (7,760  )     (1,520  ) securities Redemption of             6,037          2,553         4,377         841 marketable securities Investment in equity      (2,250   ) method investee Proceeds from disposal of property, plant and    39             3,034         39            3,034 equipment Increase in funds in respect of employee   rights upon             (262     )     (254    )     (76     )     (65     )   retirement Net cash provided by (used in) investing       (54,986  )     119,960      (1,829  )     25,975   activities                                                                       CASH FLOWS FROM FINANCING ACTIVITIES:                                                                       Repayment of long-term    (64,000  )     (32,000 )     (8,000  )     (8,000  ) bank loan Employee stock options    3,312          719           1,176         57 exercised Acquisition of treasury   (25,795  )     (1,959  )     (4,965  )     (1,959  ) shares Net cash used in          (86,483  )     (33,240 )     (11,789 )     (9,902  ) financing activities                                                                    NET INCREASE (DECREASE) IN CASH AND CASH          (95,508  )     108,163       (1,662  )     29,217 EQUIVALENTS                                                                       CASH AND CASH EQUIVALENTS AT            256,663        148,500       162,816       227,446 BEGINNING OF PERIOD                                                                    CASH AND CASH EQUIVALENTS AT END OF     161,155       256,663      161,154      256,663  PERIOD                                                                        * Applying Equity Based Method to 50% interest in the Frontline P.C.B. Solutions Limited Partnership  ORBOTECH LTD. RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS FOR THE YEAR AND THREE MONTH PERIODS ENDED DECEMBER 31, 2013                                                                                                                                                                12 m o n t h s e n d e d   3 m o n t h s e n d e d                             December 3 1               December 3 1                             2013         2012*         2013         2012*                             U.S. dollars in thousands (except per share data)                                                                                                                                           Reported operating income    47,531      (40,796 )    14,087      (690   ) (loss) on GAAP basis                                                                      Equity based compensation     3,182        3,070         873          840 expenses Restructuring charges                      5,063                      3,145 Impairment of Intangible                   30,142                     162 assets Amortization of              4,041       9,907       1,011       991     intangible assets Non-GAAP operating income    54,754      7,386       15,971      4,448                                                                        Reported net income (loss) attributable to       40,001      (45,579 )    12,614      (734   ) Orbotech Ltd. on GAAP basis                                                                      Equity based compensation     3,182        3,070         873          840 expenses Amortization of               4,041        9,907         1,011        991 intangible assets Restructuring charges,                     4,593                      2,675 net of tax credit Impairment of Intangible                   30,142                     162 assets Share in losses of equity     252          165           69           50 method investee                                                                   Non-GAAP net income from     47,476      2,298       14,567      3,984   operations                                                                      Non-GAAP earnings per       $ 1.10       $ 0.05       $ 0.34       $ 0.09    diluted share                                                                      Shares used in earnings per diluted share            43,253      44,071      42,692      44,107  calculation-in thousands                                                                       * Applying Equity Based Method to 50% interest in the Frontline P.C.B. Solutions Limited Partnership  Contact:  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