Photronics Reports Third Quarter Fiscal 2014 Results

  • Quarterly sales of $124.9 million; at high-end of guidance of $120 - $125 million
  • GAAP and non-GAAP diluted EPS of $0.07; at high-end of guidance of $0.02 - $0.07
  • High end IC sales of $36.6 million, a new quarterly high
  • Gross margin increases 170 bps sequentially
  • Operating margin improves sequentially to 8.9%
  • EBITDA of $34 million, up $9 million sequentially

BROOKFIELD, Conn.--()--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 third quarter ended August 3, 2014.

Constantine ("Deno") Macricostas, Photronics' chairman and chief executive officer, commented: "This quarter represents the first full quarter including our PDMC joint venture and the results reflect the strength in that business. In addition, during the quarter we completed our 14nm qualification with a key foundry customer in Asia and are now benefitting from high-end business ramps across our leading edge customer base. High-end semiconductor revenues of $36.6 million set a new record for the company and we expect continued growth as our customers begin to ramp new designs. Higher sales volumes led to solid bottom line returns with operating margin improving to 8.9% and non-GAAP earnings per share of $0.07 at the high end of our guidance. Overall, our business is strong and we are optimistic about the balance of the fiscal year as our investments in high-end capability are being utilized more robustly by our customers.”

Sales for the third quarter of fiscal 2014 were $124.9 million, an increase of 13.9% compared with $109.7 million for the third quarter of fiscal 2013. Sales of semiconductor photomasks were $100.6 million, or 81% of revenues, during the third quarter of fiscal 2014, and sales of flat panel display photomasks were $24.3 million, or 19% of revenues. GAAP net income attributable to Photronics, Inc. shareholders for the third quarter of fiscal 2014 was $4.2 million, or $0.07 per diluted share, compared with $5.9 million, or $0.10 per diluted share in the third quarter of fiscal 2013.

Sales for the first nine months of fiscal 2014 increased 4.8% to $331.3 million, compared with $316.2 million for the first nine months of fiscal 2013. For the first nine months of fiscal 2014, sales of semiconductor photomasks were $253.4 million, or 76% of revenues, and sales of FPD photomasks were $77.9 million, or 24% of revenues. GAAP net income attributable to Photronics, Inc. shareholders for the first nine months of fiscal 2014 was $21.7 million, or $0.34 per diluted share, and non-GAAP net income attributable to Photronics, Inc. shareholders for the first nine months of fiscal 2014 was $7.8 million, or $0.13 per diluted share, compared with the first nine months of fiscal 2013 GAAP and non-GAAP net income attributable to Photronics, Inc. shareholders of $13.1 million, or $0.21 per diluted share. Non-GAAP net income attributable to Photronics, Inc. shareholders for the first nine 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 Wednesday, August 20, 2014. The live dial-in number is (408) 774-4601. The call can also be accessed by logging onto Photronics' web site at www.photronics.com. The call will be archived for instant replay access until the Company reports its fiscal 2014 fourth 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”, “could”, “estimate”, “intend”, “may”, “will” 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.

09-2014

PLAB – E

                 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended
August 3, July 28, August 3, July 28,
  2014     2013     2014     2013  
 
Net sales $ 124,852 $ 109,652 $ 331,276 $ 316,171
 
Costs and expenses:
 
Cost of sales (96,202 ) (82,574 ) (257,554 ) (243,206 )
 
Selling, general and administrative (12,394 ) (12,068 ) (38,092 ) (35,286 )
 
Research and development   (5,199 )   (4,985 )   (16,111 )   (14,380 )
 
Operating income 11,057 10,025 19,519 23,299
 
Gain on acquisition - - 16,372 -
 
Other expense, net   (1,168 )   (972 )   (3,264 )   (2,479 )
 
Income before income taxes 9,889 9,053 32,627 20,820
 
Income tax provision   (2,545 )   (2,689 )   (7,291 )   (6,155 )
 
Net income 7,344 6,364 25,336 14,665
 
Net income attributable to noncontrolling interests   (3,158 )   (424 )   (3,617 )   (1,539 )
 
Net income attributable to Photronics, Inc. shareholders $ 4,186   $ 5,940   $ 21,719   $ 13,126  
 
Earnings per share:
Basic $ 0.07   $ 0.10   $ 0.35   $ 0.22  
 
Diluted $ 0.07   $ 0.10   $ 0.34   $ 0.21  
 
Weighted-average number of common shares outstanding:
Basic 61,436 60,746 61,336 60,505
 
Diluted 62,432 66,177 77,706 61,478
 
 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)
(Unaudited)
     
August 3, November 3,
2014 2013
 

Assets

 
Current assets:
Cash and cash equivalents $ 196,338 $ 215,615
Accounts receivable 102,899 73,357
Inventories 23,661 18,849
Other current assets   30,939   10,645
 
Total current assets 353,837 318,466
 
Property, plant and equipment, net 547,377 422,740
Investment in joint venture 93,141 93,124
Intangible assets, net 31,277 34,080
Other assets   19,794   17,519
 
$ 1,045,426 $ 885,929
 
 
 

Liabilities and Equity

 
Current liabilities:
Current portion of long-term borrowings $ 10,306 $ 11,818
Accounts payable and accrued liabilities   138,695   92,769
 
Total current liabilities 149,001 104,587
 
Long-term borrowings 156,283 182,203
Other liabilities 19,881 11,308
 
Photronics, Inc. shareholders' equity 609,938 585,314
Noncontrolling interests   110,323   2,517
Total equity   720,261   587,831
 
$ 1,045,426 $ 885,929
 
 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)
(Unaudited)
         
Nine Months Ended
August 3, July 28,
2014 2013
 
Cash flows from operating activities:
Net income $ 25,336 $ 14,665
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on acquisition (16,372 ) -
Depreciation and amortization 58,412 55,081
Changes in assets and liabilities and other   (5,538 )   (2,192 )
 
Net cash provided by operating activities   61,838     67,554  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (58,278 ) (47,281 )
Cash from acquisition 4,508 -
Other   (759 )   (2,630 )
 
Net cash used in investing activities   (54,529 )   (49,911 )
 
Cash flows from financing activities:
Repayments of long-term borrowings (27,432 ) (4,990 )
Payment of deferred financing fees (336 ) (40 )
Purchase of common stock of subsidiary - (31,627 )
Proceeds from share-based arrangements 1,043 715
Other   (597 )   -  
 
Net cash used in financing activities   (27,322 )   (35,942 )
 
Effect of exchange rate changes on cash   736     (2,473 )
 
Net decrease in cash and cash equivalents (19,277 ) (20,772 )
Cash and cash equivalents, beginning of period   215,615     218,043  
 
Cash and cash equivalents, end of period $ 196,338   $ 197,271  
 
 
Noncash net assets from acquisition $ 110,211 $ -
 
 

PHOTRONICS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Information

(in thousands, except per share data)
(Unaudited)
           
 
Three Months Ended Nine Months Ended
August 3, July 28, August 3, July 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 $ 4,186 $ 5,940 $ 21,719 $ 13,126
 
(a) Gain on acquisition, net of tax - - (16,372 ) -
 
(b) Acquisition transaction expenses, net of tax - - 2,455 -
       
 
Non-GAAP net income attributable to Photronics, Inc. shareholders $ 4,186 $ 5,940 $ 7,802   $ 13,126
 

Reconciliation of GAAP to Non-GAAP Net Income

Applicable to Common Shareholders

 
Weighted average number of diluted shares outstanding
 
GAAP   62,432   66,177   77,706     61,478
 
Non-GAAP   62,432   66,177   62,283     61,478
 
Net income per diluted share
 
GAAP $ 0.07 $ 0.10 $ 0.34   $ 0.21
 
Non-GAAP $ 0.07 $ 0.10 $ 0.13   $ 0.21
(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
 

Contacts

Photronics, Inc.
Pete Broadbent, 203-775-9000
Vice President, Investor Relations & Marketing
pbroadbent@photronics.com

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Contacts

Photronics, Inc.
Pete Broadbent, 203-775-9000
Vice President, Investor Relations & Marketing
pbroadbent@photronics.com