SYS-CON MEDIA Authors: Elizabeth White, Peter Silva, Liz McMillan, Yeshim Deniz, Pat Romanski

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Photronics Reports Second Quarter Fiscal 2014 Results

Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for the fiscal 2014 second quarter ended May 4, 2014.

Constantine (“Deno”) Macricostas, Photronics' chairman and chief executive officer commented, “During the quarter we closed on our new PDMC joint venture in Taiwan, and we expect this initiative to generate solid growth in the coming quarters. Customers are positive about the formation of PDMC, and we are off to a great start in integrating our operations to enable efficient photomask delivery in the region. We remain confident in our prospects for profitable growth across the company due to our global infrastructure, advanced technology and efficient operating model.”

Sales for the second quarter of fiscal 2014 were $104.9 million, a sequential increase of 3% compared with $101.5 million for the first quarter of fiscal 2014. Sales for the second quarter of 2013 were $106.7 million. Sales of semiconductor photomasks were $76.6 million, or 73% of revenues, during the second quarter of fiscal 2014, and sales of flat panel display (FPD) photomasks were $28.3 million, or 27% of revenues. GAAP net income attributable to Photronics, Inc. shareholders for the second quarter of fiscal 2014 was $15.5 million, or $0.22 per diluted share, and non-GAAP net income attributable to Photronics, Inc. shareholders for the second quarter of fiscal 2014 was $1.2 million, or $0.02 per diluted share, compared with the second quarter of fiscal 2013 GAAP net income and non-GAAP net income attributable to Photronics, Inc. shareholders of $4.9 million, or $0.08 per diluted share. Non-GAAP net income attributable to Photronics, Inc. shareholders for the second quarter of fiscal 2014 excluded the non-cash gain on acquisition of $16.4 million and transaction expenses of $2.0 million related to the joint venture, PDMC, in Taiwan.

Sales for the first six months of fiscal 2014 were $206.4 million, compared with $206.5 million for the first six months of fiscal 2013. For the first six months of fiscal 2014, sales of semiconductor photomasks were $152.8 million, or 74% of revenues, and sales of FPD photomasks were $53.6 million, or 26% of revenues. GAAP net income attributable to Photronics, Inc. shareholders for the first six months of fiscal 2014 was $17.5 million, or $0.27 per diluted share, and non-GAAP net income attributable to Photronics, Inc. shareholders for the first six months of fiscal 2014 was $3.6 million, or $0.06 per diluted share, compared with the first six months of fiscal 2013 GAAP and Non-GAAP net income attributable to Photronics, Inc. shareholders of $7.2 million, or $0.12 per diluted share. Non-GAAP net income attributable to Photronics, Inc. shareholders for the first six months of fiscal 2014 excludes the acquisition gain and expenses related to the joint venture.

The section below entitled "Non-GAAP Financial Measures" provides a definition and information about the use of non-GAAP financial measures in this press release, and the attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.'s financial results under GAAP.

Non-GAAP Financial Measures

Non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share are "non-GAAP financial measures," as such term is defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. Photronics, Inc. believes that non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share that exclude certain non-cash or non-recurring income or expense items are useful for analysts and investors to evaluate Photronics, Inc.'s future on-going performance because they enable a more meaningful comparison of Photronics, Inc.'s projected earnings and performance with its historical results of prior periods. These non-GAAP metrics, in particular non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share are not intended to represent funds available for Photronics, Inc.'s discretionary use and are not intended to represent, or be used as a substitute for, operating income, net income or cash flows from operations data as measured under GAAP. The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of the consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance. Non-GAAP financial information is adjusted for the following items:

  • Non-cash acquisition gain and transaction expenses related to the joint venture, PDMC, in Taiwan are excluded because they are not part of ongoing operations.

The presentation of this financial information should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States. The attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.'s financial results under GAAP.

A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern time on Tuesday, May 20, 2014. The call can be accessed by logging onto Photronics' web site at www.photronics.com. The live dial-in number is 408-774-4601. The call will be archived for instant replay access until the Company reports its fiscal 2014 third quarter results.

About Photronics

Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components. They are produced in accordance with product designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed at www.photronics.com

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of Photronics, Inc. and its subsidiaries (the Company). The forward-looking statements contained in this press release and other parts of Photronics’ web site involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices, and other factors. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors as well as decisions we may make in the future regarding our business, capital structure and other matters. These forward-looking statements generally can be identified by phrases such as “believes”, “expects”, “anticipates”, “plans”, “projects”, and similar expressions. Accordingly, there is no assurance that the Company’s expectations will be realized. For a fuller discussion of the factors that may affect the Company's operations, see "Forward Looking Statements" in the Company's Quarterly and Annual Reports to the Securities and Exchange Commission on Forms 10-Q and 10-K. The Company assumes no obligation to provide revisions to any forward-looking statements.

07-2014

PLAB – E

               

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Six Months Ended
May 4, April 28, May 4, April 28,
  2014     2013     2014     2013  
 
Net sales $ 104,882 $ 106,680 $ 206,424 $ 206,519
 
Costs and expenses:
 
Cost of sales (82,692 ) (81,891 ) (161,352 ) (160,632 )
 
Selling, general and administrative (13,419 ) (12,151 ) (25,697 ) (23,218 )
 
Research and development   (5,939 )   (4,556 )   (10,913 )   (9,395 )
 
Operating income 2,832 8,082 8,462 13,274
 
Gain on acquisition 16,372 - 16,372 -
 
Other expense, net   (1,222 )   (916 )   (2,095 )   (1,507 )
 
Income before income taxes 17,982 7,166 22,739 11,767
 
Income tax provision   (2,032 )   (1,724 )   (4,747 )   (3,466 )
 
Net income 15,950 5,442 17,992 8,301
 
Net income attributable to noncontrolling interests   (410 )   (579 )   (459 )   (1,114 )
 
Net income attributable to Photronics, Inc. shareholders $ 15,540   $ 4,863   $ 17,533   $ 7,187  
 
Earnings per share:
Basic $ 0.25   $ 0.08   $ 0.29   $ 0.12  
 
Diluted $ 0.22   $ 0.08   $ 0.27   $ 0.12  
 
Weighted-average number of common shares outstanding:
Basic   61,372     60,493     61,286     60,385  
 
Diluted   77,705     61,501     77,632     61,298  
 
 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)
(Unaudited)
       
May 4, November 3,
2014 2013
 

Assets

 
Current assets:
Cash and cash equivalents $ 191,828 $ 215,615
Accounts receivable 97,654 73,357
Inventories 21,923 18,849
Other current assets   29,406   10,645
 
Total current assets 340,811 318,466
 
Property, plant and equipment, net 534,065 422,740
Investment in joint venture 93,085 93,124
Intangible assets, net 32,767 34,080
Other assets   20,282   17,519
 
$ 1,021,010 $ 885,929
 
 

Liabilities and Equity

 
Current liabilities:
Current portion of long-term borrowings $ 10,231 $ 11,818
Accounts payable and accrued liabilities   121,174   92,769
 
Total current liabilities 131,405 104,587
 
Long-term borrowings 158,691 182,203
Other liabilities 21,175 11,308
 
Photronics, Inc. shareholders' equity 603,121 585,314
Noncontrolling interests   106,618   2,517
Total equity   709,739   587,831
 
$ 1,021,010 $ 885,929
 
 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)
(Unaudited)
       
Six Months Ended
May 4, April 28,
  2014     2013  
 
Cash flows from operating activities:
Net income $ 17,992 $ 8,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on acquisition (16,372 ) -
Depreciation and amortization 36,782 37,490
Changes in assets and liabilities and other   1,497     (9,857 )
 
Net cash provided by operating activities   39,899     35,934  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (42,385 ) (31,866 )
Cash from acquisition 4,508 -
Other   (910 )   (2,822 )
 
Net cash used in investing activities   (38,787 )   (34,688 )
 
Cash flows from financing activities:
Repayments of long-term borrowings (25,100 ) (3,319 )
Repurchase of common stock of subsidiary - (4,190 )
Payment of deferred financing fees (309 ) (40 )
Proceeds from share-based arrangements 888 588
Other   (543 )   -  
 
Net cash used in financing activities   (25,064 )   (6,961 )
 
Effect of exchange rate changes on cash   165     (1,776 )
 
Net decrease in cash and cash equivalents (23,787 ) (7,491 )
Cash and cash equivalents, beginning of period   215,615     218,043  
 
Cash and cash equivalents, end of period $ 191,828   $ 210,552  
 
 
Noncash net assets from acquisition $ 110,213 $ -
 
               

PHOTRONICS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Information

(in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Six Months Ended
May 4, April 28, May 4, April 28,
  2014   2013   2014   2013
 

Reconciliation of GAAP to Non-GAAP Net Income

Attributable to Photronics, Inc. Shareholders

 
GAAP net income attributable to Photronics, Inc. shareholders $ 15,540 $ 4,863 $ 17,533 $ 7,187
 
(a) Gain on acquisition, net of tax (16,372 ) - (16,372 ) -
 
(b) Acquisition transaction expenses, net of tax 2,018 - 2,455 -
       
 
Non-GAAP net income attributable to Photronics, Inc. shareholders $ 1,186   $ 4,863 $ 3,616   $ 7,187
 

Reconciliation of GAAP to Non-GAAP Net Income

Applicable to Common Shareholders

 
Weighted average number of diluted shares outstanding
 
GAAP   77,705     61,501   77,632     61,298
 
Non-GAAP   62,282     61,501   62,209     61,298
 
Net income per diluted share
 
GAAP $ 0.22   $ 0.08 $ 0.27   $ 0.12
 
Non-GAAP $ 0.02   $ 0.08 $ 0.06   $ 0.12
 

(a)

 

Represents gain on acquisition of DNP Photomask Technology Taiwan Co., Ltd (DPTT), a wholly-owned subsidiary of Dai Nippon Printing Co., Ltd.

 

(b)

Represents transaction expenses in connection with the acquisition of DPTT

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