ANNUAL REPORT 2001 ABOUT THE COMPANY Orbotech is a world leader in providing advanced technology solutions used by electronics manufacturers to facilitate the highest quality production of both bare and assembled printed circuit boards (PCBs), flat panel displays (FPDs) and integrated circuits. The Company's Revenues Operating Income Earnings per Share innovative automated optical inspection (in thousands of dollars) (in thousands of dollars) Ongoing Operations - fully diluted (in dollars) (AOI), imaging and computer-aided manufacturing (CAM) technologies enable 400,000 90,000 2.5 customers to achieve the increased yields 2 300,000 and throughput essential to remaining at 60,000 1.5 the forefront of electronics production. Of 200,000 Orbotech's employees, more than one 1 30,000 quarter are scientists and engineers, who 100,000 0.5 integrate their multi-disciplinary knowledge, talents and skills to develop 19992000 2001 19992000 2001 1999 2000 2001 and provide hi-tech solutions and technologies designed to meet customers' long-term needs. Orbotech maintains its 2001 2000 1999 headquarters and its primary research, Income Statement development and manufacturing facilities (in thousands of dollars, except earnings per share data) in Israel, and more than 50 offices Revenues 301,904 372,341 278,426 worldwide. The Company's extensive Operating income – ongoing operations 24,896 82,720 56,016 Net income – ongoing operations 26,852 79,073 53,140 network of marketing, sales and customer Net Income – as reported 1,862 79,073 53,140 Earnings per share – ongoing operations – fully diluted 0.82 2.40 1.66 support teams throughout the Pacific, Earnings per share – as reported - fully diluted 0.06 2.40 1.66 Japan, North America and Europe, deliver Financial Position its knowledge and expertise directly to (in thousands of dollars) customers the world over. Working capital 255,654 248,866 187,921 Total debt 14,173 723 1,797 Total stockholders equity 308,596 300,021 231,695 For more information visit Number of employees at year end 1,642 1,747 1,396 www.orbotech.com. To Our Shareholders and Friends: 2001 was a particularly difficult and challenging year, not only for Orbotech but also for electronics component and production equipment manufacturers generally, as the global electronics industry continued to contend with the effects of depressed economic activity, resulting in further uncertainty and unsettled business confidence worldwide. For the Company, this translated into sharply reduced revenues and gross margins, as well as an operating loss, for the year. Our revenues for the fiscal year ended December 31, 2001 totaled $301.9 million compared with $372.3 million in 2000—a decrease of 19%. Net income for 2001, excluding certain special charges totaling $25.0 million, net of taxes, was $26.9 million, or $0.82 per share (diluted) under U.S. GAAP, compared with net income of $79.1 million, or $2.40 per share (diluted), for 2000. Including special charges, net income for 2001 was $1.9 million, or $0.06 per share (diluted). Faced with this testing economic reality in 2001 that has extended into the second quarter of 2002, the Company has implemented a number of expense containment measures designed to align its cost structure to the lower level of demand for its products. These have included a reduction in the Company’s worldwide workforce, from a peak of about 1,900 employees in August 2001 to approximately 1,500 employees at the end of April 2002, the freezing of management salaries at their 2000 levels in March 2001, followed by two subsequent management salary reductions of 10% each, in August 2001 and February 2002, a Company-wide reduction in employee salaries in February 2002, the rationalization of certain manufacturing and operational activities and generally lower discretionary spending. As always, the Company continues to monitor its inventory levels very closely. At present, the Company is continuing to experience reduced revenues and profit margins from sales of its PCB-AOI equipment. This is due primarily to the product mix, the current trend of which is toward less expensive, lower-end and lower profit margin systems, rather than the Company’s more sophisticated, high-end, more expensive products. The Company is also adversely affected by the general decline felt by our customers in their own businesses and profitability, which is characterized by capacity underutilization, excess inventories and the accompanying difficulty which they are experiencing in predicting the levels of future orders for their products. This is reflected in the Company’s own significantly reduced “visibility” in receipt of orders. On a more positive note, revenues from the sale and service of FPD equipment in 2001 increased to $69.4 million from $65.1 million in 2000, reflecting a limited increase in capital expenditures, mainly by FPD manufacturers investing in new technologies such as Low Temperature Polysilicon and so-called “fifth generation” glass sizes. These additional capital investments served, in part, to offset reduced demand for some of the Company’s other FPD-AOI products caused by excess FPD production as a result of the extensive investments made by manufacturers during 2000, especially in FPDs for desktop monitor applications. Revenues from the sale and service of AOI systems for assembled PCBs rose to $24.5 million from $23.4 million in 2000. Though relatively modest, this increase reflects a still growing recognition of the importance of AOI in the assembled board manufacturing process, tempered by some hesitancy on the part of manufacturers in making additional capital investments under prevailing economic conditions. Furthermore, during 2001 the Company’s direct imaging manufacturing equipment continued to gain wider acceptance throughout the PCB industry, demonstrating the significant benefits which this enabling technology offers to the PCB manufacturing process. Geographically, the Company experienced relative stability in Europe and Japan, but a significant reduction in revenues from North America and Taiwan. During 2001, as part of Orbotech’s systematic approach to long-term diversification and growth, the Company established a corporate venture fund, Orbotech Technology Ventures Limited Partnership, to develop and expand opportunities for growth and further strengthen the Company’s overall position within the electronics industry. The fund will provide financing to companies that have technologies or products complementary to ours and which may, therefore, provide benefits to the Company’s long-term business strategy, and has already made several investments. Although overall demand for the Company’s PCB-AOI equipment has slowed significantly in the last year, reflecting economic conditions prevailing during 2001 and the first part of 2002, certain of the Company’s customers are expressing a cautious optimism in respect of the second half of 2002 and slightly more confidence in respect of 2003, particularly concerning the FPD industry. Nevertheless, the large number of underutilized systems held by bare PCB manufacturers, combined with the Company’s position as a producer of support solutions for the supply chain of the electronics industry, can be expected to mean that even when overall business and economic conditions do improve there will still be some delay before the effects of such improvement begin to be felt in parts of the Company’s business. Electronics component manufacturers have always been keenly aware of the need for yield-improving manufacturing process efficiencies, and have for many years relied strongly upon our sophisticated technologies and comprehensive customer support services. We believe that as these manufacturers strive to meet the considerable challenges posed in an increasingly demanding, and economically difficult, business environment, our strengths will be more germane than ever. We remain confident that Orbotech’s products and services will continue to be of significant value to these industries and, above all, that our core technologies, our ongoing emphasis on research and development, our worldwide customer support network and our strong financial condition will stand us in good stead during this difficult period and enable us to emerge from it in an even stronger position. Amidst challenging economic and other conditions affecting Orbotech and the environments in which it operates, we are especially grateful this year to our employees, their families, our colleagues and our shareholders for their ongoing support. Dr. Shlomo Barak Chairman of the Board Mr. Yochai Richter President and Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ‘ REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR È ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 2-92065 ORBOTECH LTD. (Exact name of Registrant as specified in its charter and translation of Registrant’s name into English) ISRAEL (Jurisdiction of incorporation or organization) SANHEDRIN BOULEVARD, NORTH INDUSTRIAL ZONE, YAVNE 81102, ISRAEL (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act: NONE Securities registered or to be registered pursuant to Section 12(g) of the Act: ORDINARY SHARES, NIS 0.14 NOMINAL (PAR) VALUE (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE As of December 31, 2001, the Registrant had outstanding 31,751,560 Ordinary Shares(1), NIS 0.14 Nominal (par) Value(2) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.