Orbotech Reports Third Quarter 2016 Results

Orbotech Ltd. (NASDAQ: ORBK) is a global innovator of enabling technologies used to manufacture the world's most sophisticated consumer and industrial electronic products.  Orbotech is a leading provider of yield enhancement and production solutions for electronics reading, writing and connecting, used by manufacturers of printed circuit boards, flat panel displays, advanced packaging, micro-electro-mechanical systems (MEMS), RF devices, power semiconductors, and other electronic components.  Orbotech's solutions include automated optical inspection and shaping, direct imaging, laser drilling, Inkjet printing, array test and repair, yield management, and etch and deposition wafer process solutions.  Today, virtually every electronic device in the world is produced using Orbotech systems.  For more information, visit http://www.orbotech.com/ and www.spts.com

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 Orbotech's 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, cyclicality in the industries in which the Company operates, the Company's production capacity, timing and occurrence of product acceptance (the Company defines 'bookings' and 'backlog' as purchase arrangements with customers that are based on mutually agreed terms, which, in some cases for bookings and backlog, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty), fluctuations in product mix, within and among divisions, 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, including as a result of the so-called 'Brexit' process, 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 as well as automobiles, the Company's global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, the Company's ability to achieve strategic initiatives, including related to its acquisition strategy, the Company's debt and corporate financing activities; the final timing and outcome (each expected during the first half of 2017), and impact of the 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, ongoing or increased hostilities in Israel and the surrounding areas, 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, 2015, 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 margin, non-GAAP net income 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 of intangibles and acquisition costs; (iii) certain items associated with sale or disposition of businesses; (iv) tax impact; and/or (v) share in losses of equity method investee and amounts associated with non-controlling interests company; and/or (vi) charges associated with the financing activities related to the retirement of the above mentioned 2014 Credit Agreement.

The Company uses the non-GAAP measures indicated in the Reconciliation to supplement the Company's financial results presented on a GAAP basis.  These non-GAAP measures exclude equity based compensation expenses, amortization of intangible assets, share in losses/profits of associated companies, as well as certain financial and other expenses and items that are believed to be helpful in understanding and comparing past operating and financial performance with current results.  Management uses all of the 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.  In addition, these non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.  However, the non-GAAP measures presented are subject to limitations as an analytical tool because they exclude certain recurring items (such as, equity compensation, financial expense and amortization of intangible assets) as described below and in the Reconciliation.  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.  For a quantification of the adjustments made to comparable GAAP measures, please see the Reconciliation.

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 and dispositions.  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 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.

The effects of a sale or disposition of a business have also been excluded from the non-GAAP measures.  This item is inconsistent in amount and frequency.  By excluding the item from the non-GAAP measures, management is better able to evaluate the Company's ability to utilize its existing businesses and estimate the long-term value that remaining businesses will generate for the Company.  Furthermore, the Company believes that this adjustment correlates more closely with the sustainability of the Company's operating performance.

Adjusted EBITDA is also a non-GAAP financial measure. The Company defines adjusted EBITDA as net income attributable to Orbotech Ltd., further adjusted, in addition to the items described above, to exclude taxes on income, financial expenses (income) – net and depreciation.  The Company presents adjusted EBITDA because it considers it to be an important supplemental measure and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in Orbotech's industry.  Adjusted EBITDA margin is a measurement of Orbotech's adjusted EBITDA as a percentage of its revenues.  Although the Company believes its presentation of adjusted EBITDA is useful, its adjusted EBITDA measure may not be comparable to similarly named measures presented by other companies.

For more information about all of the foregoing items, see the Reconciliation, the Company's Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2015, and its other SEC filings.

 

 

ORBOTECH LTD.


CONDENSED CONSOLIDATED BALANCE SHEETS


U. S. dollars  in  thousands


 (Unaudited)



September 30


December 31



2016


2015


ASSETS










CURRENT ASSETS:





    Cash and cash equivalents 

$     197,320


$      162,102


    Restricted cash 

9,445


13,617


    Marketable securities



409


    Short-term bank deposits

3,836


9,550


    Accounts receivable:





      Trade

319,507


284,192


      Other

43,176


55,906


    Inventories

137,821


133,250


              T o t a l  current assets

711,105


659,026







INVESTMENTS AND NON-CURRENT ASSETS:





    Marketable securities

7,187


5,637


    Funds in respect of employee rights upon retirement

8,484


8,130


    Deferred income taxes 

20,494


20,147


    Equity method investee and other receivables

9,547


10,144



45,712


44,058







PROPERTY, PLANT AND EQUIPMENT, net

59,560


58,982







OTHER INTANGIBLE ASSETS, net

88,885


109,635







GOODWILL

170,177


170,177







T o t a l assets

$ 1,075,439


$ 1,041,878












LIABILITIES AND EQUITY










CURRENT LIABILITIES:





   Current maturities of long-term loan

$       20,000


$        13,937


    Accounts payable and accruals:





      Trade

62,303


65,037


      Other

106,463


94,930


    Deferred income

27,492


29,282


              T o t a l  current liabilities

216,258


203,186







LONG-TERM LIABILITIES:





    Long-term loan, net

88,156


218,372


    Liability for employee rights upon retirement

23,614


21,535


    Deferred income taxes

14,557


16,984


    Other tax liabilities

8,800


14,045


              T o t a l  long-term liabilities

135,127


270,936







              T o t a l  liabilities

351,385


474,122







EQUITY: 





    Share capital 

2,369


2,209


    Additional paid-in capital

415,833


306,612


    Retained earnings

414,528


360,721


    Accumulated other comprehensive loss

(8,103)


(1,506)



824,627


668,036


    Less treasury shares, at cost

(99,539)


(99,539)


               T o t a l  Orbotech Ltd. shareholders' equity

725,088


568,497


    Non-controlling interest

(1,034)


(741)


               T o t a l  equity

724,054


567,756







              T o t a l  liabilities and equity

$  1,075,439


$   1,041,878













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