Orbotech Announces First Quarter 2014 Results

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, 2013.

 
ORBOTECH LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2014
 
March 31   December 31
2014 2013
U. S. dollars in thousands

A s s e t s

 

CURRENT ASSETS:

Cash and cash equivalents 151,642 161,155
Short-term bank deposits 42,174 38,650
Marketable securities 5,133 5,265
Accounts receivable:
Trade 190,026 198,203
Other 30,888 31,546
Deferred income taxes 8,253 8,094
Inventories 100,993 93,938
   

T o t a l current assets

529,109 536,851
 

INVESTMENTS AND NON-CURRENT ASSETS:

Marketable securities 12,637 13,106
Funds in respect of employee rights upon retirement 11,042 11,024
Deferred income taxes 14,714 15,130
Equity method investee and other recievable 9,845 9,911
48,238 49,171
 

PROPERTY, PLANT AND EQUIPMENT, net

28,633 27,715
 

GOODWILL

 

12,444 12,444
 

OTHER INTANGIBLE ASSETS, net

9,392 10,401
   
627,816 636,582
 
 
Liabilities and equity
 

CURRENT LIABILITIES:

 
Accounts payable and accruals:
Trade 40,511 43,663
Other 50,629 55,482
Deferred income 21,366 24,854
   
T o t a l current liabilities 112,506 123,999
 

LONG-TERM LIABILITIES:

Liability for employee rights upon retirement 24,955 25,845
Deferred income taxes 2,406 2,406
Other tax liabilities 14,610 17,178
T o t a l long-term liabilities 41,971 45,429
   
T o t a l liabilities 154,477 169,428
 

EQUITY:

Share capital 2,141 2,124
Additional paid-in capital 285,467 281,159
Retained earnings 274,857 268,570
Accumulated other comprehensive income 77 409
562,542 552,262
Less treasury shares, at cost -89,120 -84,946
T o t a l Orbotech Ltd. shareholders' equity 473,422 467,316
Non-controlling interest -83 -162
T o t a l equity 473,339 467,154
   
627,816 636,582
 
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2014
 
 
 

3 m o n t h s e n d e d

  12 months ended
March 3 1 December 31
2014   2013 2013
         
 

REVENUES

104,793 95,477 439,995
 

COST OF REVENUES

59,136 55,347 248,455
 

WRITE- DOWN OF INVENTORIES

   

 

GROSS PROFIT

45,657 40,130 191,540
 

RESEARCH AND DEVELOPMENT COSTS - net

18,461 16,314 69,573
 

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES 19,592 17,262 75,948
 

EQUITY IN EARNINGS OF FRONTLINE

(1,504 ) (1,183 ) (5,553 )
 

AMORTIZATION OF INTANGIBLE ASSETS

1,010 1,010 4,041
 

RESTRUCTURING CHARGES

 

IMPAIRMENT OF INTANGIBLE ASSETS

       

OPERATING INCOME

8,098 6,727 47,531
 

FINANCIAL EXPENSES - net

327 678 1,191
     

INCOME FROM OPERATIONS BEFORE TAXES ON INCOME

7,771 6,049 46,340
 

TAXES ON INCOME

1,350 1,164 6,927
     
6,421 4,885 39,413
 

SHARE IN LOSSES OF ASSOCIATED COMPANY

69 45 252
     

NET INCOME

6,352 4,840 39,161
 
 

NET INCOME (LOSS) ATTRIBUTABLE TO

THE NON-CONTROLLING INTEREST 65 (171 ) (840 )
     

NET INCOME ATTRIBUTABLE TO ORBOTECH LTD.

  6,287     5,011     40,001  
 
 
 

EARNINGS PER SHARE:

INCOME FROM OPERATIONS:
BASIC $ 0.15   $ 0.12   $ 0.94  
 
DILUTED $ 0.15   $ 0.11   $ 0.92  
 
 
 

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION

OF EARNINGS PER SHARE - IN THOUSANDS:
BASIC   41,842     43,321     42,571  

 

DILUTED   42,835     43,739     43,253  
 
 
ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2014
 
 
 
  3 m o n t h s e n d e d   12 months ended
March 3 1   December 31
2014   2013 2013
         

CASH FLOWS FROM OPERATING ACTIVITIES:

 
Net income 6,352 4,840 39,161
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,471 2,812 13,261
Impairment of Intangible assets
Compensation relating to equity awards granted to
employees and others - net 816 773 3,182
Increase (decrease) in liability for employee rights upon retirement (890) (640) 624
Deferred income taxes 257 (53) (1,558)
Non-cash expenses in respect of restructuring
Amortization of premium and accretion of discount on marketable
Securities, net 157 91 554
Equity in earnings of Frontline, net of dividend received (195) 902 446
Other 207 246 268
Decrease (increase) in accounts receivable:
Trade 8,177 (15,483) (33,721)
Other 606 (1,031) (2,954)
Increase (decrease) in accounts payable and accruals:
Trade (3,152) (4,058) 11,377
Deferred income and other (10,718) (1,361) 15,511
Decrease (increase) in inventories (7,055) 6,251 (190)
Net cash provided by (used in) operating activities (1,967) (6,711) 45,961
 

CASH FLOWS FROM INVESTING ACTIVITIES:

 
Purchase of property, plant and equipment (3,574) (3,361) (12,978)
Withdraw (placement) of bank deposits (3,524) (10,986) (35,636)
Purchase of marketable securities (2,490) (570) (9,936)
Redemption of marketable securities 2,755 306 6,037
Investment in equity method investee (2,250)
Proceeds from disposal of property, plant and equipment 9 39
Increase in funds in respect of employee
rights upon retirement (71) (63) (262)
Net cash used in investing activities (6,895) (14,674) (54,986)
 

CASH FLOWS FROM FINANCING ACTIVITIES:

 
Repayment of long-term bank loan (40,000) (64,000)
Employee stock options exercised 3,523 273 3,312
Acquisition of treasury shares (4,174) (2,208) (25,795)
Net cash used in financing activities (651) (41,935) (86,483)
     
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,513) (63,320) (95,508)
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 161,155 256,663 256,663
     
CASH AND CASH EQUIVALENTS AT END OF PERIOD 151,642 193,343 161,155
 
 
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS FROM CONTINUING OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2014
 
 
 
  3 m o n t h s e n d e d   12 months ended
March 3 1 December 31
2014   2013 2013
U.S. dollars in thousands (except per share data)
 
 

Reported operating income on GAAP basis

8,098 6,727 47,531
 
Equity based compensation expenses 816 773 3,182
Amortization of intangible assets 1,010 1,010 4,041
Non-GAAP operating income 9,924 8,510 54,754
 

Reported net income attributable to Orbotech Ltd. on GAAP basis

6,287 5,011 40,001
 
Equity based compensation expenses 816 773 3,182
Amortization of intangible assets 1,010 1,010 4,041
Share in losses of associated company 69 45 252
     

Non-GAAP net income from operations

8,182 6,839 47,476
 
Non-GAAP earnings per diluted share $0.19 $0.16 $1.10
 
Shares used in earnings per diluted share calculation-in thousands 42,835 43,739 43,253
 

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