Press Release

BROOKFIELD, CT -- (Marketwired) -- 11/29/17 --

• Fourth quarter fiscal 2017 revenue was $121.0 million, up 8% sequentially and 13% year-over-year
• Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share)
• Capital expenditures of $53 million led to cash of $308 million at year end; balance sheet remains strong while funding strategic growth initiatives
• First quarter fiscal 2018 guidance: revenue between $110 and $118 million with diluted EPS between $0.02 and $0.09

Photronics, Inc. (NASDAQ: PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for its fiscal 2017 fourth quarter ended October 29, 2017.

Fourth quarter revenue was $121.0 million, increases of 8% sequentially and 13% compared with last year. Integrated circuit (IC) revenue was $96.1 million, up 13% sequentially and 17% compared with last year. Flat panel display (FPD) revenue was $24.9 million, decreases of 6% sequentially and 1% compared with last year.

Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share), compared with $4.0 million ($0.06 per diluted share) for the third quarter of 2017 and $5.3 million ($0.08 per diluted share) for the fourth quarter of 2016. The results for fourth quarter 2016 included a non-recurring tax benefit of $1.8 million ($0.03 per diluted share).

"Revenue improved this quarter on the strength of high-end mask sales, particularly in IC where high-end memory continued the positive trend of the last four quarters, and high-end logic advanced on growing Asia foundry 28 nm demand," said Peter Kirlin, chief executive officer. "High-end FPD also improved due in part to continued growth in demand for AMOLED in China. Operating margin improved to 10.3% due to our operating leverage and effective cost control. Continued strong cash generation supports our ability to fund planned investments, including the two China projects. The capex forecast of approximately $250 million in 2018 will be the most the Company has spent in one year. We believe the China investments, when complete and fully operational, will provide attractive returns and will make significant contributions to revenue and profit growth."

Full Year Results

Full year revenue in fiscal 2017 was $450.7 million, 7% less than fiscal 2016 full-year revenue. Revenue from IC photomasks of $350.3 million was 4% less than prior year, and FPD revenue was $100.4 million, 16% less than prior year FPD revenue.

Full year net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $46.2 million ($0.64 per diluted share) in 2016. Non-GAAP net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $32.6 million ($0.47 per diluted share) in fiscal 2016.

First Quarter 2018 Guidance

Kirlin continued, "For fiscal 2018 first quarter, underlying high-end IC demand drivers still appear healthy, potentially tempered by anticipated seasonal softness. We expect high-end FPD demand to remain flat. Our cash balance will likely decrease during the quarter as we ramp up investments for the China expansion. For the first quarter of fiscal 2018, Photronics expects revenues to be between $110 million and $118 million, and net income attributable to Photronics, Inc. shareholders to be between $0.02 and $0.09 per diluted share."

Conference Call

A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, November 29, 2017. The call can be accessed by logging onto Photronics' web site at www.photronics.com. The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada. The call will be archived on Photronics' web site for instant replay access.

Non-GAAP Financial Measures

Non-GAAP net income attributable to Photronics, Inc. shareholders, non-GAAP earnings per share, and non-GAAP EBITDA 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. The attached financial supplement reconciles Photronics, Inc.'s financial results under GAAP to non-GAAP financial information. Photronics, Inc. believes these non-GAAP financial measures 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 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 condensed consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance. Non-GAAP financial information is adjusted for the following items:

• Non-recurring tax benefit in fiscal 2016 related to the recognition of certain tax benefits in Taiwan that were determined to be realizable in filings for future tax periods
• Non-recurring net gain on sale of investment in fiscal 2016
• Interest expense, income tax expense/(benefit), depreciation and amortization, and other items are added to GAAP net income to derive non-GAAP EBITDA

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 display 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.

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
			Three Months Ended												Year Ended
			October 29,				July 30,				October 30,				October 29,				October 30,
			2017				2017				2016				2017				2016
Revenue			$	120,971			$	111,579			$	107,368			$	450,678			$	483,456
Cost of goods sold				(94,529	)			(89,862	)			(86,835	)			(359,363	)			(364,750	)
		Gross profit		26,442				21,717				20,533				91,315				118,706
Operating Expenses:
	Selling, general and administrative			(10,182	)			(11,639	)			(10,191	)			(43,585	)			(44,577	)
	Research and development			(3,838	)			(4,812	)			(5,041	)			(15,862	)			(21,654	)
Total Operating Expenses				(14,020	)			(16,451	)			(15,232	)			(59,447	)			(66,231	)
		Operating income		12,422				5,266				5,301				31,868				52,475
Gain on sale of investment				-				-				-				-				8,940
Other income (expense), net				536				(134	)			(69	)			(5,303	)			(941	)
		Income before income taxes		12,958				5,132				5,232				26,565				60,474
Income tax (provision) benefit				(2,462	)			(333	)			1,337				(5,276	)			(4,798	)
		Net income		10,496				4,799				6,569				21,289				55,676
Net income attributable to noncontrolling interests				(5,110	)			(798	)			(1,313	)			(8,159	)			(9,476	)
Net income attributable to Photronics, Inc. shareholders			$	5,386			$	4,001			$	5,256			$	13,130			$	46,200
Earnings per share:
		Basic	$	0.08			$	0.06			$	0.08			$	0.19			$	0.68
		Diluted	$	0.08			$	0.06			$	0.08			$	0.19			$	0.64
Weighted-average number of common shares outstanding:
		Basic		68,615				68,525				68,025				68,436				67,539
		Diluted		69,218				69,380				68,906				69,288				76,354

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
			October 29,			October 30,
			2017			2016
Assets
Current assets:
	Cash and cash equivalents		$	308,021		$	314,074
	Accounts receivable			105,320			92,636
	Inventories			23,703			22,081
	Other current assets			12,080			12,795
		Total current assets		449,124			441,586
Property, plant and equipment, net				535,197			506,434
Intangible assets, net				17,122			19,854
Other assets				19,351			20,114
Total assets			$	1,020,794		$	987,988
Liabilities and Equity
Current liabilities:
	Current portion of long-term borrowings		$	4,639		$	5,428
	Accounts payable and accrued liabilities			77,137			75,889
		Total current liabilities		81,776			81,317
Long-term borrowings				57,337			61,860
Other liabilities				16,386			19,337
Photronics, Inc. shareholders' equity				744,564			710,363
Noncontrolling interests				120,731			115,111
		Total equity		865,295			825,474
Total liabilities and equity			$	1,020,794		$	987,988

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
				Year Ended
				October 29,				October 30,
				2017				2016
Cash flows from operating activities:
	Net income			$	21,289			$	55,676
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			86,573				82,406
		Gain on sale of investment			-				(8,940	)
		Changes in assets, liabilities and other			(11,029	)			(7,005	)
Net cash provided by operating activities					96,833				122,137
Cash flows from investing activities:
		Purchases of property, plant and equipment			(91,965	)			(50,147	)
		Acquisition of Business			(5,400	)			-
		Proceeds from sale of investments			167				101,853
		Other			(868	)			584
Net cash (used in) provided by investing activities					(98,066	)			52,290
Cash flows from financing activities:
		Repayments of long-term borrowings			(5,428	)			(57,609	)
		Payments to noncontrolling interests			(8,298	)			(12,856	)
		Proceeds from share-based arrangements			2,830				3,463
		Other			(32	)			(20	)
Net cash used in financing activities					(10,928	)			(67,022	)
Effect of exchange rate changes on cash					6,108				802
Net (decrease) increase in cash and cash equivalents					(6,053	)			108,207
Cash and cash equivalents, beginning of period					314,074				205,867
Cash and cash equivalents, end of period				$	308,021			$	314,074

PHOTRONICS, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands, except per share data)
(Unaudited)
		Three Months Ended										Year Ended
		October 29,			July 30,			October 30,				October 29,			October 30,
		2017			2017			2016				2017			2016
Reconciliation of GAAP to Non-GAAP Net Income
Attributable to Photronics, Inc. Shareholders and EPS data
GAAP net income attributable to Photronics, Inc. shareholders		$	5,386		$	4,001		$	5,256			$	13,130		$	46,200
	Income tax benefit (a)		-			-			(1,834	)			-			(4,838	)
	Gain on sale of investment, net of tax (b)		-			-			-				-			(8,753	)
Non-GAAP net income attributable to Photronics, Inc. shareholders		$	5,386		$	4,001		$	3,422			$	13,130		$	32,609
Weighted average number of diluted shares outstanding
	GAAP		69,218			69,380			68,906				69,288			76,354
	Non-GAAP		69,218			69,380			68,906				69,288			76,354
Net income per diluted share
	GAAP	$	0.08		$	0.06		$	0.08			$	0.19		$	0.64
	Non-GAAP	$	0.08		$	0.06		$	0.05			$	0.19		$	0.47
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
GAAP Net Income (c)		$	10,496		$	4,799		$	6,569			$	21,289		$	55,676
	Interest expense		578			550			616				2,235			3,366
	Income tax expense		2,462			333			(1,337	)			5,276			4,798
	Depreciation and amortization		22,492			21,840			22,304				86,573			82,406
	Other items (d)		785			984			980				3,627			3,828
Non-GAAP EBITDA		$	36,813		$	28,506		$	29,132			$	119,000		$	150,074

Notes:
(a)	Represents tax benefit primarily related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary in Taiwan
(b)	Represents gain on sale of investment in a foreign entity
(c)	Includes net income attributable to noncontrolling interests, and in 2016 includes gain on sale of investment in a foreign entity
(d)	Consists of stock compensation expense

For Further Information:
R. Troy Dewar, CFA
Director, Investor Relations
(203) 740-5610
tdewar@photronics.com

Source: Photronics, Inc.

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