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SMT & Inspection | May 08, 2006

Sales up at Orbotech

Orbotech Ltd. today announced its consolidated financial results for the first quarter ended March 31, 2006. Revenues for the first quarter of 2006 totaled $101.4 million, compared to the $100.5 million recorded in the first quarter a year ago.
Net income for the first quarter of 2006 was $14.1 million, or $0.43 per share (diluted), compared with net income for the first quarter of 2005 of $10.6 million, or $0.32 per share (diluted). These results reflect the adoption, on January 1, 2006, of revised Financial Accounting Standard No.123, “Share Based Payment”, which resulted in increased compensation expenses totaling approximately $1.5 million in the first quarter without any reduction in income taxes (comprised of $0.1 million in costs of revenues, $0.4 million in research and development expenses and $1.0 million in selling, general and administrative expenses), and a corresponding decrease in diluted earnings per share of $0.04.

Sales of equipment to the printed circuit board (“PCB”) industry relating to bare PCBs were $41.0 million in the first quarter of 2006, compared to $38.4 million in the fourth quarter, and $30.1 million in the first quarter, of 2005. Sales of flat panel display (“FPD”) inspection equipment were $30.0 million, compared to $28.1 million in the fourth quarter, and $43.2 million in the first quarter, of last year. FPD revenues in the first quarter of 2005 included $17.5 million from the recognition of initial revenues relating to the Company's 7th generation in-line FPD-AOI systems, delivered to Samsung Electronics Co. Ltd. in the second half of 2004. Sales of equipment to the PCB industry relating to assembled PCBs were $9.2 million, compared to $8.4 million in the fourth quarter, and $6.2 million in the first quarter, of last year. Sales of automatic check reading products were $2.3 million, compared to $2.1 million in the fourth quarter, and $2.3 million in the first quarter, of 2005. In addition, service revenue for the first quarter of 2006 was $18.9 million compared to $19.3 million in the fourth quarter of 2005, and $18.7 million in the first quarter of that year.

The Company completed the quarter with cash equivalents and marketable securities of $207.9 million, compared with $211.4 million at the end of 2005. This decrease primarily reflected the longer payment terms traditionally associated with sales in Japan, which geographically has accounted for a growing proportion of the Company's revenues over the last two quarters. Non-operating disbursements totaled approximately $1.7 million, comprised mainly of capital expenditures.

The Company's results for the first quarter reflect the continued, positive business environment in the electronics industry, as well as the Company's ability to capitalize on the resulting opportunities. These have led, in turn, to strong gross, operating and net margins, with gross margins in the first quarter exceeding 45%.

The Company continues to benefit from high levels of demand for its major bare and assembled PCB products, and during the quarter it delivered, and recognized revenues from, a record quarterly number of AOI and direct imaging systems. Recently, the Company received, from a customer in the Far East, its largest order ever from a single electronics manufacturer for multiple PCB-AOI systems, totaling in excess of $15 million and scheduled for delivery throughout the last three quarters of 2006.

Demand for the Company's FPD products continues to be driven by expanding investments being made by FPD manufacturers, designed to enable them to increase capacity to meet the current and future demand for LCD televisions. LCD manufacturers are reportedly expanding their investment plans over the next two years to accommodate the increased capacity needs of the industry. As previously announced, during the first quarter of 2006, the Company delivered, installed and recognized revenues from its FPD-AOI systems for the first 8th generation fabrication plants, for use in the inspection of large panels for production of LCD televisions.

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