Financial expenses for the fourth quarter of 2016 were $5.7 million which included a currency translation and hedging loss of $4.8 million, mainly due to the strengthening of the U.S. dollar against other currencies during the quarter. GAAP and non-GAAP earnings per share include this negative $4.8 million impact. During the fourth quarter, the Company prepaid $20 million of its long-term debt.
Non-GAAP net income and non-GAAP net income margin for the fourth quarter of 2016 were $33.7 million and 15.7%, respectively, compared with $23.4 million and 12.4%, respectively, for the fourth quarter of 2015. Non-GAAP net income and non-GAAP net income margin for the full year of 2016 were $116.9 and 14.5%, respectively, compared with $90.8 million and 12.1%, respectively, for the full year of 2015.
Non-GAAP earnings per share (diluted) for the fourth quarter of 2016 were $0.70, compared with $0.54 per share, for the fourth quarter of 2015. Non-GAAP earnings per share (diluted) for the full year of 2016 were $2.52, compared with $2.09 for the full year of 2015.
A reconciliation of each of the Company's non-GAAP measures to the comparable GAAP measure (the "Reconciliation") is included at the end of this press release.
As of December 31, 2016, the Company had cash, cash equivalents (including restricted cash), short term bank deposits and marketable securities of $236.6 million, and debt of $88.4 million. During the fourth quarter of 2016, the Company generated cash from operations of $49.2 million. As of December 31, 2016, the actual number of ordinary shares outstanding was approximately 47.8 million.
Applied Microstructures acquisition
During the fourth quarter of 2016, the Company acquired the assets of Applied Microstructures, Inc. ("AMST") for $6.4 million in cash and earn-out payments of up to $10.5 million over 15 months. The Company estimates that the earn-out will total $1.5 million and be payable in the first quarter of 2018. AMST is part of the SD division, offering an adjacent process in MEMS, with potential expansion in encapsulation. The Company estimates that annual revenue contribution from this purchase will be in the range of $6 million to $8 million with such annual revenues contributing higher gross margins than the average products' gross margin.
First Quarter 2017 Guidance
The Company expects revenues for the first quarter of 2017 to be in the range of $180 million to $190 million, and gross margin to be in the range of 45.5% - 46.0%.
Conference Call
An earnings conference call for the Company's fourth quarter and full year 2016 results is scheduled for today, February 8, 2017, at 9:00 a.m. EDT. The dial-in number for the conference call is +1-646-254-3367 or (US toll-free) 877-280-1254 and a replay will be available on telephone number +1-347-366-9565 or (US toll-free) 866-932-5017 until February 22, 2017. The pass code is 6525115 or Orbotech Q4. A live webcast of the conference call can also be heard by accessing the Company's website at: http://edge.media-server.com/m/p/bp4qjpdv. The webcast will remain available for 12 months at: http://investors.orbotech.com/phoenix.zhtml?c=71865&p=irol-audioarchives.
About Orbotech Ltd.
Orbotech Ltd. (NASDAQ: ORBK) is a global innovator of enabling technologies used to manufacture the world's most sophisticated consumer and industrial electronic products. Orbotech is a leading provider of yield enhancement and production solutions for electronics reading, writing and connecting, used by manufacturers of PCBs, FPDs, micro-electro-mechanical systems (MEMS), RF devices, power semiconductors and other electronic components. Orbotech's solutions include automated optical inspection and shaping, direct imaging, laser drilling, inkjet printing, array test and repair, yield management, and etch and deposition wafer process solutions. Today, virtually every electronic device in the world is produced using Orbotech systems. For more information, visit http://www.orbotech.com/ and www.spts.com
Cautionary Statement Regarding Forward-Looking Statements
Except for historical information, the matters discussed in this press release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future prospects, developments and business strategies and involve certain risks and uncertainties. The words "anticipate," "believe," "could," "will," "plan," "expect" and "would" and similar terms and phrases, including references to assumptions, have been used in this press release to identify forward-looking statements. These forward-looking statements are made based on management's expectations and beliefs concerning future events affecting Orbotech and are subject to uncertainties and factors relating to Orbotech's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Many factors could cause the actual results to differ materially from those projected including, without limitation, cyclicality in the industries in which the Company operates, the Company's production capacity, timing and occurrence of product acceptance (the Company defines 'bookings' and 'backlog' as purchase arrangements with customers that are based on mutually agreed terms, which, in some cases for bookings and backlog, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty), fluctuations in product mix, within and among divisions, worldwide economic conditions generally, especially in the industries in which the Company operates, the timing and strength of product and service offerings by the Company and its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate, including as a result of the Brexit process and administration change in the United States, or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis, the level of consumer demand for sophisticated devices such as smartphones, tablets and other electronic devices as well as automobiles, the Company's global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, the timing and outcome of tax audits, including the ongoing audit in Israel (the amount of taxable income is subject to ongoing audit by the Israel tax authority and such audits often result in proposed assessments and any estimation of the potential outcome of an uncertain tax issue is a matter for judgment, which can be subjective and highly complex; however, the Company believes that it has provided adequately for any reasonably foreseeable outcomes related to the tax audit, but future results may include favorable or unfavorable material adjustments to estimated tax liabilities in the periods when the assessments are made or resolved or the audit is closed), the Company's ability to achieve strategic initiatives, including related to its acquisition strategy, the Company's debt and corporate financing activities; the final timing and outcome, and the impact, of the criminal matter and ongoing investigation in Korea, including any impact on existing or future business opportunities in Korea and elsewhere, any civil actions related to the Korean matter brought by third parties, including the Company's customers, which may result in monetary judgments or settlements, expenses associated with the Korean matter, ongoing or increased hostilities in Israel and the surrounding areas, and other risks detailed in the Company's SEC reports, including the Company's Annual Report on Form 20-F for the year ended December 31, 2015, and subsequent SEC filings. The Company assumes no obligation to update the information in this press release to reflect new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
Non-GAAP net income, non-GAAP net income margin, non-GAAP net income per share detailed in the Reconciliation exclude charges, income or losses, as applicable, related to one or more of the following: (i) equity-based compensation expenses; (ii) certain items associated with acquisitions, including amortization of intangibles and acquisition costs; (iii) certain items associated with sale or disposition of businesses; (iv) tax impact; and/or (v) share in losses of equity method investee and amounts associated with non-controlling interests company; and/or (vi) charges associated with the financing activities related to the retirement of the Company's 2014 credit agreement with JPMorgan.
