Orbotech Announces First Quarter 2008 Results

YAVNE, Israel - (Business Wire) ORBOTECH LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the first quarter ended March 31, 2008.

Revenues for the first quarter of 2008 totaled $100.5 million, compared to $103.6 million recorded in the fourth quarter of 2007 and the $86.1 million recorded in the first quarter a year ago. Net income for the first quarter of 2008 was $3.7 million, or $0.11 per share (diluted), compared to a net loss of $1.1 million, or $0.03 per share (diluted), in the fourth quarter of 2007, and net income of $5.6 million, or $0.17 per share (diluted), in the first quarter of 2007.

Sales of equipment to the printed circuit board (“PCB”) industry relating to bare PCBs were $36.5 million in the first quarter of 2008, compared to $50.0 million in the fourth quarter, and $35.5 million in the first quarter, of 2007. Sales of flat panel display (“FPD”) inspection equipment were $20.4 million, compared to $10.6 million in the fourth quarter, and $19.1 million in the first quarter, of last year. Sales of equipment to the PCB industry relating to assembled PCBs were $8.1 million, compared to $8.3 million in the fourth quarter, and $6.8 million in the first quarter, of last year. Sales of automatic check reading products were $2.0 million, compared to $3.6 million in the fourth quarter, and $2.4 million in the first quarter, of 2007. Sales of medical imaging equipment in the first quarter of 2008 were $7.3 million, compared to $6.1 million in the fourth quarter of 2007 (the Company acquired this business in August 2007). In addition, service revenue for the first quarter of 2008 was $25.5 million, compared to $25.0 million in the fourth quarter, and $22.2 million in the first quarter, of 2007.

The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $202 million, compared with approximately $206 million at the end of 2007. Non-operating disbursements totaled approximately $2.7 million, comprised mainly of capital expenditures. The Company’s marketable securities currently include approximately $33 million of auction rate securities which are tied to student loans and which have experienced a lack of liquidity during the last three months. However, $5.5 million of these securities were recently tendered at par and will be redeemed later this month. The Company believes that there is no credit risk as to the remaining $27.5 million.

The weakness in the United States dollar vis-à-vis the Sheqel adversely impacted net income during the first quarter of 2008 by approximately four cents per share compared with the fourth quarter of 2007. If the Sheqel-Dollar exchange rate remains at current levels, it is expected to result in a similar adverse impact on net income in the second quarter of 2008.

The Company believes that the decline in revenues from its PCB business during the first quarter resulted from the currently prevailing global economic uncertainty, particularly in North America, and this may continue to impact PCB revenues in the near term. Nevertheless, the long-term success of Orbotech’s Discovery PCB-AOI system has reinforced the Company’s overall leadership position in the PCB industry.

The increase in revenues from sales of FPD products reflects an initial increase in capital investments by LCD manufacturers, resulting from a strengthening demand for panels, a trend which is expected to continue throughout 2008 and into 2009. The Company had another strong quarter in bookings and finished the quarter with a record backlog.

Commenting on the results, Rani Cohen, Chief Executive Officer, said: “Our financial results for the quarter, particularly in our PCB business, reflect the challenging global economic environment. On the other hand, we continue to benefit from the strength in the LCD industry, which has led to large orders from LCD manufacturers. Given the ongoing weakness of the dollar, we are continuing to monitor our expenses very closely in order to maintain and improve margins. We remain optimistic as to the long-term demand for our principal products, and are confident that our consistent emphasis on research and development, together with our recent acquisitions, continue to lay a sound foundation for the Company’s future growth.”

An earnings conference call is scheduled for Monday, May 12, 2008, at 9:00 a.m. EDT. The dial-in number for the conference call is 210-234-0003, and a replay will be available on telephone number 203-369-0531 until May 26, 2008. The pass code is Q1. A live web cast of the conference call and a replay can also be heard by accessing the investor relations section on the Company’s website at www.orbotech.com.

About Orbotech Ltd.

Orbotech is principally engaged in the design, development, manufacture, marketing and service of yield-enhancing and production solutions for specialized applications in the supply chain of the electronics industry. The Company’s products include automated optical inspection (“AOI”) and process control systems for bare and assembled printed circuit boards (“PCB”s) and for flat panel displays (“FPD”s), and imaging solutions for PCB production. The Company also markets computer-aided manufacturing and engineering (“CAM”) solutions for PCB production. In addition, through its subsidiary, Orbograph Ltd., the Company develops and markets automatic check reading solutions to banks and other financial institutions, and has developed a proprietary technology for web-based, location-independent data entry for check processing and forms processing; and, through its subsidiaries, 3 - D Danish Diagnostic Development A/S and Orbotech Medical Solutions Ltd., is engaged in the research and development, manufacture and sale of specialized products for application in medical nuclear imaging. Of Orbotech’s employees, more than one quarter are scientists and engineers, who integrate their multi-disciplinary knowledge, talents and skills to develop and provide sophisticated solutions and technologies designed to meet customers’ long-term needs. Orbotech maintains its headquarters and its primary research, development and manufacturing facilities in Israel, and more than 30 offices worldwide. The Company’s extensive network of marketing, sales and customer support teams throughout North America, Europe, the Pacific Rim, China and Japan deliver its knowledge and expertise directly to customers the world over. For more information visit www.orbotech.com.

Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties which could cause the actual results to differ materially from those projected, including industry trends, the timing and strength of product and service offerings, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis and other risks detailed from time to time in the Company’s SEC reports. The Company assumes no obligation to update the information in this press release.

ORBOTECH LTD. CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 2008
		March 31			December 31
		2 0 0 8			2 0 0 7
		U. S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents		135,762			120,913
Marketable securities		46,610			52,713
Accounts receivable:
Trade		159,637			151,173
Other		23,909			22,964
Deferred income taxes		4,657			4,317
Inventories		86,351			77,570
Total current assets		456,926			429,650
INVESTMENTS AND NON-CURRENT ASSETS:
Marketable securities		19,888			32,410
Other long-term Investment		530			780
Non-current trade receivables		234			231
Severance pay fund		15,045			14,099
Deferred income taxes		647			843
		36,344			48,363
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and amortization		28,654			28,142
GOODWILL AND OTHER INTANGIBLE ASSETS, net of accumulated amortization		68,822			67,016
		590,746			573,171
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade		41,670			34,405
Deferred income		14,767			15,445
Other		37,308			37,194
Total current liabilities		93,745			87,044
ACCRUED SEVERANCE PAY		30,160			28,610
DEFERRED TAX LIABILITY		17,006			16,565
Total liabilities		140,911			132,219
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY		1,368			1,330
SHAREHOLDERS' EQUITY:
Share capital		1,703			1,699
Additional paid-in capital		147,724			144,991
Retained earnings		350,113			346,447
Accumulated other comprehensive income		6,119			3,677
		505,659			496,814
Less treasury stock, at cost		(57,192	)		(57,192	)
Total shareholders' equity		448,467			439,622
		590,746			573,171

ORBOTECH LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008
						12 months
		3 months ended				ended
		March 31				December 31
		2008		2007		2007
		U.S. dollars in thousands (except per share data)
REVENUES		100,484		86,105		360,662
COST OF REVENUES:
COST		59,621		49,883		210,616
WRITE DOWN OF INVENTORY						4,821
GROSS PROFIT		40,863		36,222		145,225
RESEARCH AND DEVELOPMENT COSTS - net		19,154		15,575		67,923
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		17,868		16,395		66,989
AMORTIZATION OF OTHER INTANGIBLE ASSETS		1,139		145		4,728
RESTRUCTURING CHARGES						510
IMPAIRMENT OF GOODWILL AND INTELLECTUAL PROPERTY						4,739
OPERATING INCOME		2,702		4,107		336
FINANCIAL INCOME - net		1,574		2,691		9,110
WRITE-DOWN OF LONG-TERM INVESTMENTS						(5,000)
INCOME BEFORE TAXES ON INCOME		4,276		6,798		4,446
TAXES ON INCOME		571		963		2,280
INCOME FROM OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES AND JOINT VENTURE		3,705		5,835		2,166
MINORITY INTEREST IN PROFITS OF CONSOLIDATED SUBSIDIARY		(39)		(42)		(416)
SHARE IN LOSSES OF AN ASSOCIATED COMPANY				(223)		(266)
NET INCOME		3,666		5,570		1,484
EARNINGS PER SHARE:
BASIC		$0.11		$0.17		$0.04
DILUTED		$0.11		$0.17		$0.04
WEIGHTED AVERAGE NUMBER OF SHARES (IN THOUSANDS)
USED IN COMPUTATION OF EARNINGS PER SHARE:
BASIC		33,256		33,171		33,091
DILUTED		33,256		33,331		33,190

Orbotech Ltd.
Adrian Auman, +972-8-942-3560
Corporate Vice President of Finance and
Investor Relations
or
Orbotech, Inc.
Michelle Harnish, +1-978-901-5120
Marketing Communications Manager