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SMT & Inspection | August 04, 2008

Orbotech swing to profit in Q2

Revenues for the second quarter of 2008 totaled $105.1 million, compared to $100.5 million recorded in the first quarter of 2008 and $88.6 million in the second quarter a year ago.
Net income for the second quarter of 2008 was $5.3 million, compared to net income of $3.7 million, in the first quarter of 2008, and a net loss of $3.4 million, in the second quarter of 2007.

Revenues for the first six months of 2008 totaled $205.6 million, compared to $174.7 million recorded in the first half of 2007. Net income for the first six months of 2008 was $9.0 million, compared to net income of $2.2 million, in the first six months of 2007.

Sales of equipment to the printed circuit board (“PCB”) industry relating to bare PCBs were $34.5 million in the second quarter of 2008, compared to $36.5 million in the first quarter of 2008, and $44.4 million in the second quarter of 2007. Sales of flat panel display (“FPD”) inspection equipment were $29.8 million, compared to $20.4 million in the first quarter of 2008, and $11.2 million in the second quarter of last year. Sales of equipment to the PCB industry relating to assembled PCBs were $7.5 million, compared to $8.1 million in the first quarter this year, and $7.5 million in the second quarter of 2007. Sales of automatic check reading products were $2.7 million in the second quarter of 2008, compared to $2.0 million in the first quarter of 2008, and $2.8 million recorded in the second quarter of 2007. Sales of medical imaging equipment were $4.4 million in the second quarter of 2008, compared to $7.3 million in the first quarter of 2008 (the Company acquired this business in August 2007). In addition, service revenue for the second quarter of 2008 increased to $26.2 million from $25.5 million in the first quarter of 2008, and $22.5 million in the second quarter of 2007.

The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $196.0 million, compared to $202.3 million at the end of the first quarter of 2008. Non-operating disbursements totaled approximately $2.4 million, comprised mainly of capital expenditures. The Company’s marketable securities currently include approximately $27.6 million of auction rate securities (ARS) which are tied to student loans. While the Company believes that there is no credit risk attached to its ARS portfolio, due to a lack of liquidity which these securities have experienced during the last few months the Company recorded a temporary write-down of approximately $1.1 million against these ARS and reclassified them as long-term marketable securities.

The continued weakness in the United States dollar vis-à-vis the Sheqel adversely impacted net income during the second quarter of 2008 by approximately three cents per share compared with the first quarter of 2008. If the Sheqel-Dollar exchange rate remains at current levels, a similar adverse impact on net income would be expected to result in the third quarter of 2008.

The decrease in revenues from the Company’s bare PCB business reflects the continuing global economic uncertainty, which is impacting bare PCB customers’ capital investment plans. Nevertheless, the Company is maintaining and strengthening its leadership in this industry, through its broad portfolio of product offerings, including production, as well as yield-enhancing, solutions and ongoing investments in its worldwide customer support infrastructure.

By contrast, the growth in sales of FPD-AOI equipment, driven by the greater worldwide demand for panels, is a function of the increased capital investments by LCD manufacturers. During the quarter the Company announced an agreement to acquire Photon Dynamics, Inc., a leading provider of test and repair systems for the LCD flat panel display industry. Orbotech will pay $15.60 per share in cash for all of the issued and outstanding shares of Photon Dynamics’ common stock, making an aggregate consideration of approximately $290 million. This acquisition, the largest ever by Orbotech, is a key part of the Company’s strategy for growth in its flat panel display business and is expected to close during the second half of 2008.

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