SMT & Inspection | August 06, 2007
Orbotech reports loss and<br>announces acquisition
Orbotech Ltd. today announced that it has signed a definitive agreement to acquire 3 D - Danish Diagnostic Development A/S ('DDD'), a privately-held Danish company that develops and manufactures gamma cameras for nuclear medicine. Orbotech also reports its results for the second quarter and the company improved slightly in its quarterly revenues but the results were down.
DDD is the world's leading manufacturer of cardiac gamma cameras, which it markets primarily in the United States through major industry suppliers that distribute them under their own brands. Orbotech will pay approximately $39 million to the stockholders of DDD for the acquisition of all of the outstanding shares of DDD. In addition, Orbotech will pay to the stockholders of DDD an earn-out, capped at approximately $6.5 million, based on DDD's performance during the years 2007 and 2008. The acquisition will be financed from internally-generated funds. The Company believes that this transaction has the potential to generate approximately $30 million in annual revenues, based on DDD's current product offering and its short term research and development plans; and it is expected to be immediately accretive to Orbotech on a non-GAAP basis. Commenting on the announcement, Mr. Rani Cohen, Chief Executive Officer of Orbotech, said: 'This acquisition is an important step in our strategy for growth and diversification into medical imaging as an original equipment manufacturer (OEM) of highly innovative technologies. DDD is an exceptional company with highly talented employees, world-class know-how and products whose outstanding caliber is recognized by the largest players in the industry. Moreover, the acquisition presents an opportunity for Orbotech to leverage its strong operational capabilities and resources.' Mr. Cohen added: 'The medical imaging industry presents solid growth drivers that will complement and balance Orbotech's core electronics business and deliver immediate and future value to our shareholders.' The transaction is expected to close today. Following completion, DDD will form part of Orbotech's medical imaging operations. Orbotech's revenues for the second quarter of 2007 totaled $88.6 million, compared to $86.1 million recorded in the first quarter of 2007 and $104.9 million in the second quarter a year ago. Net loss for the second quarter of 2007 was $3.4 million, or $0.10 per share (diluted), compared to net income of $5.6 million, or $0.17 per share (diluted), in the first quarter of 2007, and of $15.3 million, or $0.46 per share (diluted), in the second quarter of 2006. Net loss for the second quarter of 2007 includes a $4.8 million write-off of inventory ($4.4 million net of taxes), primarily related to previous generation, high-end printed circuit board ('PCB') products, as well as a charge of $5.0 million relating to the Company's write-off of its investment in Negevtech Ltd. Excluding these items, net of taxes, net income for the second quarter of 2007 was $6.0 million, or $0.18 per share (diluted). Revenues for the first six months of 2007 totaled $174.7 million, compared to $206.3 million recorded in the first half of 2006. Net income for the first six months of 2007 was $2.2 million, or $0.07 per share (diluted), compared to net income of $29.4 million, or $0.89 per share (diluted) in the first six months of 2006. Excluding the write-offs, net of taxes, in the second quarter of 2007, net income for the first six months of 2007 was $11.6 million, or $0.35 per share (diluted). Sales of equipment to the PCB industry relating to bare PCBs were $44.4 million in the second quarter of 2007, compared to $35.5 million in the first quarter of 2007, and $44.0 million in the second quarter of 2006. Sales of flat panel display ('FPD') inspection equipment were $11.2 million, compared to $19.1 million in the first quarter of 2007, and $29.3 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 $6.8 million in the first quarter this year, and $9.4 million in the second quarter of 2006. Sales of automatic check reading products were $2.8 million in the second quarter of 2007, compared to $2.4 million in the first quarter of 2007, and $1.9 million recorded in the second quarter of 2006. In addition, service revenue for the second quarter increased marginally to $22.5 million from $22.2 million in the first quarter of 2007, and $20.1 million in the second quarter of 2006. The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $234 million, compared to $236 million at the end of the first quarter, reflecting a positive operating cash flow for the quarter of approximately $11.7 million. Non-operating disbursements totaled approximately $16.7 million, comprised mainly of $14.3 million paid in connection with the acquisition of the Italian company, New System Srl., which develops and markets inkjet printing solutions for the bare PCB industry. The increase in revenues from sales of bare PCB equipment was due partly to the introduction of the Discovery Ultra PCB-AOI system for high-end applications, which further extends the Company's Discovery PCB-AOI series; and also reflects another record quarter in sales of the Company's Paragon Direct Imaging system. As the Company announced several weeks ago, the downturn in the highly cyclical FPD industry is estimated to be deeper than previously anticipated as LCD manufacturers delay the scheduled `move in' dates for their new fabrication facilities to mid-2008. However, given the strong bookings which are anticipated in the second half of 2007, and the significant indications of a substantial upturn next year, the Company believes that there will be a strong rebound in FPD revenues in 2008. Commenting on the results, Rani Cohen, Chief Executive Officer, said: "Our financial results for the quarter are in line with our expectations, particularly given the current conditions in the FPD industry. The PCB industry remains robust, and we have further strengthened our PCB product portfolio with the acquisition of New System during the quarter. We will continue to invest in research and development in both the PCB and FPD industries and to explore possible external opportunities for expansion." Mr. Cohen added: "We are also announcing today an important step in our strategy for growth and diversification into medical imaging, with the acquisition of 3 D - Danish Diagnostic Development A/S, the Danish manufacturer of gamma cameras for nuclear medicine. In addition to presenting an important entry into the medical imaging industry, this acquisition will provide an opportunity for Orbotech to leverage its strong operational capabilities and resources and will deliver immediate and future value to our shareholders."