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SMT & Inspection | November 05, 2007

Orbotech Q3 profit falls

Revenues for the third quarter of 2007 were $82.3 million, compared to $88.6 million recorded in the second quarter of 2007 and $106.9 million in the third quarter a year ago
Net income for the third quarter of 2007 was $0.4 million, compared to a net loss of $3.4 million, in the second quarter of 2007, and net income of $16.2 million, in the third quarter of 2006.

Net income for the third quarter of 2007 reflects: (a) $2.3 million of amortization of intangible assets arising principally from the acquisitions of 3 D - Danish Diagnostic Development A/S (“DDD”) and New System Srl earlier this year (compared to amortization of $0.3 million in the second quarter of this year and $0.1 million in the third quarter of 2006); and (b) $1.4 million of share-based compensation expenses in the third quarter of 2007 without reduction in income taxes (compared to $1.1 million in the second quarter of this year and $1.6 million in the third quarter of 2006).

Revenues for the first nine months of 2007 totaled $257.0 million, compared to $313.2 million recorded during the corresponding period in 2006. Net income for the first nine months of 2007 was $2.6 million, or $0.08 per share (diluted), compared to net income of $45.6 million, or $1.38 per share (diluted), for the corresponding period last year.

Sales of equipment to the printed circuit board (“PCB”) industry relating to bare PCBs were $37.2 million in the third quarter of 2007, compared to $44.3 million in the second quarter of 2007, and $44.0 million in the third quarter of 2006. Sales of flat panel display (“FPD”) inspection equipment were $8.8 million, compared to $11.2 million in the second quarter of 2007, and $30.5 million in the third quarter of last year. Sales of equipment to the PCB industry relating to assembled PCBs were $5.7 million, compared to $7.5 million in the second quarter this year, and $9.3 million in the third quarter of 2006. Sales of automatic check reading products were $2.9 million in the third quarter of 2007, compared to $2.8 million in the second quarter of 2007, and $1.5 million recorded in the third quarter of 2006. Sales of medical imaging equipment for the period from the date of acquisition of DDD (August 6, 2007) to the end of the third quarter were $3.4 million. In addition, service revenue for the third quarter increased to $24.3 million from $22.6 million in the second quarter of 2007, and $21.3 million recorded in the third quarter of 2006.

The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $198 million, compared to approximately $234 million at the end of the second quarter. The Company had a positive operating cash flow for the quarter of approximately $4.4 million. Non-operating disbursements totaled approximately $43.6 million, comprised mainly of $39.5 million paid in connection with the previously-announced acquisition of DDD, a Danish company that develops and manufactures gamma cameras for nuclear medicine, and approximately $2.0 million for the repurchase of 93,630 ordinary shares of the Company pursuant to the Company’s repurchase program.

Revenues from the PCB industry were lower than expected for the quarter, but the Company believes that the overall business environment remains strong. Based on customers’ expansion plans, the Company expects a stronger fourth quarter in this area of its business. Sales of the Company’s Paragon solid state laser direct imaging systems are still expected to reach the goal of 100 systems for fiscal 2007.

The Company believes that the current FPD industry downturn has now reached its low point. Based on FPD manufacturers’ intentions respecting new fabrication facilities to be constructed during 2008 and 2009, the Company expects strong bookings for FPD equipment in the fourth quarter, leading, in turn, to a corresponding rebound in FPD revenues in the second half of 2008.

Commenting on the results, Rani Cohen, Chief Executive Officer, said: "Our financial results for the quarter reflect the challenging environment currently prevailing in the industries we serve, particularly among FPD manufacturers. In light of the anticipated rebound in 2008, we are continuing to invest significantly in the research and development of new products and solutions for both the PCB and FPD industries. As always, we are monitoring our operating expenses very closely in order to maintain and improve our operating margins. During the quarter we completed our acquisition of DDD, which represents an important step in our strategy for diversification into the medical imaging industry."

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