Press Release

Photronics Reports Fourth Quarter and Fiscal Year 2011 Results

December 6, 2011 at 4:30 PM EST
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  • Quarterly sales of $122.2 million; exceeds revised guidance of $120 - $122 million
  • Quarterly EPS of $0.14; within initial guidance of $0.14 - $0.18 per diluted share
  • Quarterly net income increases 14% YOY to $9.3 million
  • Full year sales increase 20% to record $512 million
  • 2011 Non-GAAP net income increases 146% to $52.1 million, or 10% of revenue
  • 2011 Non-GAAP diluted EPS grows to $0.80 from $0.38 in 2010
  • Working capital increases $123 million in 2011 to $209 million
  • Net cash increases by $23 million to $32 million in 2011

BROOKFIELD, Conn.--(BUSINESS WIRE)-- Photronics, Inc. (NASDAQ: PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for the fourth quarter and fiscal year ended October 30, 2011.

"2011 was an excellent year for Photronics as we achieved record sales in both semiconductor and flat panel photomasks," commented Constantine ("Deno") Macricostas, Photronics' Chairman and CEO. "Our 20% year-over-year sales growth demonstrates that our high-end strategy and strong customer collaborations are yielding solid market share gains. We also delivered non-GAAP earnings of $0.80 per share as a result of the strong leverage in our business model. For the fourth quarter, earnings of $0.14 per diluted share were in line with our initial guidance due to strong cost management. We achieved this even though sales were softer than expected across all segments as a result of overall industry trends."

"To continue our strong bottom-line performance we are vigilant in maintaining our lean cost structure," continued Macricostas. "Yesterday, we announced the streamlining of our operating infrastructure in Asia by consolidating the manufacture of semiconductor photomasks in Singapore into other Photronics facilities including Korea and Taiwan. We will continue to implement operating infrastructure efficiencies that benefit both our customers and our margins."

"Our leading-edge capabilities are now driving the business forward," added Macricostas. "Though weakness in the global semiconductor and flat panel markets may continue in the short term, we believe that demand at the leading edge is in our favor for future growth and share gains."

Sales for the fourth quarter were $122.2 million, an increase of 11% compared with $110.0 million for the fourth quarter of fiscal year 2010. Sales of semiconductor photomasks were $96.5 million, or 79% of revenues, during the fourth quarter of fiscal 2011, and sales of flat panel display (FPD) photomasks were $25.7 million, or 21% of revenues. GAAP net income attributable to Photronics, Inc. for the fourth quarter of fiscal 2011 was $9.3 million, or $0.14 earnings per diluted share, compared with GAAP net income attributable to Photronics, Inc. of $8.1 million, or $0.14 earnings per diluted share, for the fourth quarter of fiscal 2010.

Sales for the 2011 fiscal year increased 20% to $512.0 million compared with $425.6 million for the 2010 fiscal year. Sales of semiconductor photomasks were $391.2 million, or 76% of revenues for the 2011 fiscal year, and sales of FPD photomasks were $120.8 million, or 24% of revenues. GAAP net income attributable to Photronics, Inc. for the 2011 fiscal year was $16.2 million, or $0.28 earnings per diluted share, which includes an extinguishment of debt loss of $35.3 million, compared with the prior year net income of $23.9 million, or $0.43 earnings per diluted share. Non-GAAP net income attributable to Photronics, Inc. for the 2011 fiscal year, excluding the extinguishment debt loss and the impact of warrants, was $52.1 million, or $0.80 earnings per diluted share, compared with non-GAAP net income attributable to Photronics, Inc. for the 2010 fiscal year of $21.2 million, or $0.38 earnings per diluted share.

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. 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. 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. 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:

  • Loss on extinguishment of debt is excluded because it is not a part of ongoing operations.
  • Consolidation and restructuring credits in fiscal 2010 are excluded because they are not a part of ongoing operations.
  • Impact of warrants is excluded because it does not affect cash earnings.
  • Deferred financing fees written-off in fiscal 2010 are excluded because they are not a 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, December 7, 2011. 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 2012 first quarter results.

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. 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.

PHOTRONICS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands, except per share data)
(Unaudited)
                                                       
          Three Months Ended         Year Ended
          October 30,         October 31,         October 30,         October 31,
          2011         2010         2011         2010
                                                       

Reconciliation of GAAP to Non-GAAP Net Income

                                                      

Attributable to Photronics, Inc.

                                                      
                                                       
GAAP net income attributable to Photronics, Inc.         $ 9,291           $ 8,144           $ 16,229         $ 23,922  
                                                       
(a) Debt extinguishment loss and net interest impact,                                                      
net of tax           -             -             35,486           -  
                                                       
(b) Consolidation and restructuring credits, net of tax           -             (168 )           -           (4,979 )
                                                       
© Impact of warrants, net of tax           (175 )           554             424           1,246  
                                                       
(d) Deferred financing fees write off, net of tax           -             -             -           1,011  
                                                       
Non-GAAP net income attributable to Photronics, Inc.         $ 9,116           $ 8,530           $ 52,139         $ 21,200  
                                                       

Reconciliation of GAAP to Non-GAAP Net Income

                                                      

Applicable to Common Shareholders

                                                      
                                                       
Weighted average number of diluted shares outstanding                                                      
                                                       
GAAP           76,259             66,145             58,458           65,803  
                                                       
Non-GAAP           76,082             66,145             71,940           65,803  
                                                       
Net income per diluted share                                                      
                                                       
GAAP         $ 0.14           $ 0.14           $ 0.28         $ 0.43  
                                                       
Non-GAAP         $ 0.14           $ 0.14           $ 0.80         $ 0.38  
(a) Represents extinguishment charges during the year ended October 30, 2011 related to the repurchase
of $35.4 million of our 5.50% convertible senior notes due in October 2014, and net interest impact
on convertible transactions.  
   
(b) Includes credits related to restructuring in China.  
   
© Represents financing expenses related to warrants, which are recorded in other expense, net.
   
(d) Represents write-off of deferred financing fees recorded in interest expense, as a result of an
amendment to our revolving credit facility.  

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
                                                               
                Three Months Ended         Year Ended
                October 30,         October 31,         October 30,         October 31,
                2011         2010         2011         2010
                                                               
Net sales               $ 122,159           $ 110,036           $ 512,020           $ 425,554  
                                                               
Costs and expenses:                                                            
                                                               
Cost of sales                 (91,266 )           (84,760 )           (375,806 )           (333,739 )
                                                               
Selling, general and administrative           (11,245 )           (10,300 )           (45,240 )           (42,387 )
                                                               
Research and development             (4,269 )           (3,949 )           (15,507 )           (14,932 )
                                                               
Consolidation, restructuring and related credits           -             168             -             4,979  
                                                               
Operating income               15,379             11,195             75,467             39,475  
                                                               
Debt extinguishment loss             -             -             (35,259 )           -  
                                                               
Other expense, net                 (2,290 )           (1,052 )           (4,309 )           (6,922 )
                                                               
Income before income taxes             13,089             10,143             35,899             32,553  
                                                               
Income tax provision               (4,054 )           (1,682 )           (15,691 )           (7,471 )
                                                               
Net income                 9,035             8,461             20,208             25,082  
                                                               
Net (income) loss attributable to noncontrolling interests           256             (317 )           (3,979 )           (1,160 )
                                                               
Net income attributable to Photronics, Inc.         $ 9,291           $ 8,144           $ 16,229           $ 23,922  
                                                               
Earnings per share:                                                            
Basic               $ 0.16           $ 0.15           $ 0.28           $ 0.45  
                                                               
Diluted               $ 0.14           $ 0.14           $ 0.28           $ 0.43  
                                                               
Weighted-average number of common shares outstanding:                                                        
Basic                 59,629             53,710             57,030             53,433  
                                                               
Diluted                 76,259             66,145             58,458             65,803  

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(in thousands)
                                 
                  October 30,         October 31,
                  2011         2010
                                 

Assets

                                
                                 
Current assets:                              
Cash and cash equivalents             $ 189,928         $ 98,945
Accounts receivable                 85,540           82,951
Inventories                 22,100           15,502
Other current assets               7,639           8,404
                                 
Total current assets               305,207           205,802
                                 
Property, plant and equipment, net             368,680           369,814
Investment in joint venture               79,984           61,127
Intangible assets, net                 42,462           47,748
Other assets                 21,521           19,388
                                 
                  $ 817,854         $ 703,879
                                 
                                 
                                 

Liabilities and Equity

                              
                                 
Current liabilities:                              
Current portion of long-term borrowings           $ 5,583         $ 11,467
Accounts payable and accrued liabilities             90,318           107,762
                                 
Total current liabilities               95,901           119,229
                                 
Long-term borrowings               152,577           78,852
Other liabilities                 9,620           9,855
                                 
Equity                   559,756           495,943
                                 
                  $ 817,854         $ 703,879

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(in thousands)
                                   
                  Year Ended
                  October 30,       October 31,
                  2011       2010
                                   
Cash flows from operating activities:                            
Net income               $ 20,208         $ 25,082  
Adjustments to reconcile net income to net cash                          
provided by operating activities:                            
Depreciation and amortization             93,460           90,300  
Debt extinguishment loss               27,399           -  
Consolidation, restructuring, and related credits           -           (5,059 )
Changes in assets and liabilities and other           (4,514 )         (14,404 )
                                   
Net cash provided by operating activities             136,553           95,919  
                                   
Cash flows from investing activities:                            
Purchases of property, plant and equipment           (82,121 )         (71,381 )
Investments in joint venture               (18,271 )         -  
Proceeds from sale of facility             -           12,880  
Other                   (345 )         289  
                                   
Net cash used in investing activities             (100,737 )         (58,212 )
                                   
Cash flows from financing activities:                            
Proceeds from issuance of convertible debt           115,000           -  
Proceeds from long-term borrowings             17,000           41,680  
Repayments of long-term borrowings             (64,107 )         (72,932 )
Payments of deferred financing fees             (4,318 )         (1,285 )
Repurchase of common stock of subsidiary           (9,878 )         -  
Proceeds from exercise of share-based arrangements           828           81  
                                   
Net cash provided by (used in) financing activities           54,525           (32,456 )
                                   
Effect of exchange rate changes on cash             642           5,155  
                                   
Net increase in cash and cash equivalents             90,983           10,406  
Cash and cash equivalents, beginning of year           98,945           88,539  
                                   
Cash and cash equivalents, end of year           $ 189,928         $ 98,945  
                                   
Supplemental disclosure of cash flow information:                          
Capital lease obligation for purchase of equipment         $ 21,248         $ -  
Common stock issued to extinguish debt           $ 20,234         $ -  
Changes in accrual for purchases of property, plant and equipment         $ (20,836 )       $ 28,717  

 

Photronics, Inc.
Sean T. Smith, (203) 775-9000
Senior Vice President
Chief Financial Officer
ssmith@photronics.com

Source: Photronics, Inc.

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