SMT & Inspection | February 19, 2008
Orbotech announces fourth quarter loss
Orbotech’s consolidated financial results for the fourth quarter and full year ended December 31, 2007. Revenues for the fourth quarter of 2007 were $103.6 million, compared to $82.3 million recorded in the third quarter of 2007 and $103.3 million in the fourth quarter of 2006.
Net loss for the fourth quarter of 2007 was $1.1 million, or $0.03 per share (diluted), compared to net income of $0.4 million, or $0.01 per share (diluted), in the third quarter of 2007, and net income of $9.4 million, or $0.28 per share (diluted), in the fourth quarter of 2006. Net loss for the fourth quarter of 2007 reflects: (a) $1.9 million of amortization of intangible assets arising principally from the acquisitions of 3 D - Danish Diagnostic Development A/S and New System Srl during 2007 (compared to amortization of $2.3 million in the third quarter of 2007 and $0.1 million in the fourth quarter of 2006); (b) $0.9 million of share-based compensation expenses in the fourth quarter of 2007 without reduction in income taxes (compared to $1.4 million in the third quarter of 2007 and $0.8 million in the fourth quarter of 2006 - both without reduction in income taxes); (c) an impairment charge of $4.7 million relating to a write-down of the goodwill and intellectual property of Orbotech Medical Solutions Ltd; and a follow-on restructuring charge of $0.5 million in connection with the Company’s 2006 program to centralize its assembled PCB research and development activities at corporate headquarters in Israel (compared to the original restructuring charge of $3.3 million in the fourth quarter of 2006). Revenues for the year ended December 31, 2007 totaled $360.7 million, compared to $416.5 million recorded in 2006. Net income for the year ended 2007 was $1.5 million, or $0.04 per share (diluted), compared to net income of $55.0 million, or $1.65 per share (diluted), for the year ended December 31, 2006. Sales of equipment to the printed circuit board industry relating to bare PCBs in the fourth quarter of 2007 were $50.0 million, compared to $37.2 million in the third quarter of 2007 and $40.8 million in the fourth quarter of 2006. Sales of flat panel display (“FPD”) inspection equipment in the fourth quarter of 2007 were $10.6 million, compared to $8.8 million in the third quarter of 2007 and $27.8 million in the fourth quarter of 2006. Sales of equipment to the PCB industry relating to assembled PCBs in the fourth quarter of 2007 were $8.3 million, compared to $5.7 million in the third quarter of 2007 and $8.5 million in the fourth quarter of 2006. Sales of automatic check reading products in the fourth quarter of 2007 were $3.6 million, compared to $2.9 million in the third quarter of 2007 and $3.2 million in the fourth quarter of 2006. Sales of medical imaging equipment in the fourth quarter of 2007 were $6.1 million, compared to $3.4 million in the period from the date of acquisition of DDD (August 6, 2007) to the end of the third quarter of 2007. In addition, service revenue for the fourth quarter increased to $25.0 million from $24.3 million recorded in the third quarter of 2007 and $22.9 million in the fourth quarter of 2006. The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $206 million, compared to approximately $198 million at the end of the third quarter. The Company had a positive operating cash flow for the quarter of approximately $10.5 million. Non-operating disbursements totaled approximately $3.2 million, comprised of investments in fixed assets. The Company’s marketable securities currently include approximately $33 million of Auction Rate Securities which are tied to student loans. These securities have experienced a lack of liquidity during the last week. The Company believes that there is no credit risk attached to these funds, and that the Company’s other available cash and cash equivalents are sufficient to meet its cash needs for the next twelve months. Revenues from bare and assembled PCB-related products increased significantly in the fourth quarter, reflecting strong customer demand in these areas of the Company’s business. A record of 26 Paragon solid state laser direct imaging systems were sold during the quarter, bringing Paragon sales for 2007 to an annual record of 97 systems. During the quarter, the Company also sold six Maxiprint legend ink jet printer systems, which were developed by the Company’s recently acquired Italian subsidiary, New System Srl. The Company recorded annual FPD revenues for 2007 of $49.7 million, which was in line with expectations. As a result of strong demand for panels and the stabilization of panel prices during the fourth quarter, LCD customers have reportedly finalized their plans for new fabrication facilities to be constructed during 2008 and 2009. This is reflected in the Company’s record bookings during the quarter, which included primarily large orders from first-tier LCD manufacturers. Research and development expenses increased by approximately $3 million during the quarter, as the Company invested significantly in new products and solutions for both the PCB and FPD industries, which continue to constitute the core of the Company’s business and to hold substantial opportunity. The Company also incurred a fourth quarter impairment charge of $4.7 million relating to the goodwill and intellectual property associated with its CZT development and production business acquired in March 2005, following a determination that the carrying value of that goodwill and intellectual property exceeded its fair value. Commenting on the results, Rani Cohen, Chief Executive Officer, said: “Our financial results for 2007 as a whole reflect the challenging environment experienced during the year by the industries in which we operate, particularly in the case of flat panel display manufacturers. During the year we increased our investments in the research and development of new products, including inspection and production solutions for both PCB and FPD manufacturers, and the Company has new product releases scheduled for 2008. Looking forward, PCB manufacturers are planning expansion programs, although these could be impacted by the uncertain global economic environment. FPD manufacturers are accelerating their investment plans, due partly to an anticipated shortage in display panels, and also in reflection of the underlying strength of this industry. Orbotech is entering 2008 with an outstanding product portfolio in all areas of its business, and we believe that this, together with our continued close monitoring of operating expenses, should enable us to maintain our position as the leading provider of yield-enhancing, production support solutions for the industries we serve, and improve our profitability. The image has nothing to do with this article.