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
 
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