Press Release

BROOKFIELD, CT -- (Marketwired) -- 08/14/17 --

• Third quarter sales were $111.6 million, up 3% sequentially with moderate growth in both IC and FPD
• Net income attributable to Photronics, Inc. shareholders was $4.0 million ($0.06 per diluted share)
• Increased capital expenditures to fund strategic growth brought net cash¹ down slightly during the third quarter to $277 million; balance sheet retains financial strength and flexibility to fund growth
• Fourth quarter 2017 guidance: sales between $108 and $116 million; diluted EPS between $0.03 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 fiscal 2017 third quarter ended July 30, 2017.

Third quarter sales were $111.6 million, up 3% sequentially and down 9% compared with last year. Sales of integrated circuits (IC) photomasks were $85.1 million, up 3% sequentially and down 7% compared with last year, while sales of flat panel display (FPD) photomasks were $26.5 million, up 3% sequentially and down 16% compared with last year.

Net income attributable to Photronics, Inc. shareholders was $4.0 million ($0.06 per diluted share), compared with $1.8 million ($0.03 per diluted share), for the second quarter of 2017; and $8.1 million ($0.12 per diluted share) for the third quarter of 2016.

"Third quarter sales improved sequentially as we were able to achieve moderate growth in both IC and FPD," said Peter Kirlin, chief executive officer. "IC sales were generally in line with our expectations, as high-end memory grew and high-end logic remained flat. FPD sales were also higher, although slightly below our expectations due to unfavorable product mix. Operating income was modestly lower as an increase in gross profit was offset mostly by higher R&D, as qualification activity remained robust. As we ramped up capex during the quarter, primarily to complete our FPD investment, our cash balance declined slightly. However, we still have tremendous financial strength and flexibility to fund strategic growth initiatives."

Fourth Quarter 2017 Guidance

Kirlin continued, "Our outlook for the fourth quarter calls for performance similar to the third quarter. High-end memory should continue to grow steadily as we've seen every quarter year-to-date. The anticipated recovery in high-end logic has been delayed until 2018. High-end FPD capacity will expand during the quarter, with actual sales growth dependent on the mix of high-end business, which may remain tepid for the quarter. Shifting focus to our balance sheet, our cash balance will likely decrease during the fourth quarter as we ramp up investments for our China expansion." For the fourth quarter of 2017, Photronics expects revenues to be between $108 million and $116 million and net income attributable to Photronics, Inc. shareholders to be between $0.03 and $0.09 per diluted share.

Conference Call

A conference call to discuss these results is scheduled for 4:30 p.m. Eastern time on Monday, August 14, 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

Note:

1. Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP.

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.

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
				Three Months Ended												Nine Months Ended
				July 30,				April 30,				July 31,				July 30,				July 31,
				2017				2017				2016				2017				2016
Net sales			$	111,579			$	108,297			$	123,209			$	329,707			$	376,088
Costs and expenses:
	Cost of sales			(89,862	)			(88,140	)			(91,759	)			(264,835	)			(277,915	)
		Gross profit		21,717				20,157				31,450				64,872				98,173
	Selling, general and administrative			(11,639	)			(10,894	)			(11,163	)			(33,403	)			(34,386	)
	Research and development			(4,812	)			(3,726	)			(5,466	)			(12,023	)			(16,613	)
		Operating income		5,266				5,537				14,821				19,446				47,174
Gain on sale of investment				-				-				157				-				8,940
Other income (expense), net				(134	)			(3,622	)			1,237				(5,839	)			(872	)
	Income before income taxes			5,132				1,915				16,215				13,607				55,242
Income tax provision				(333	)			(431	)			(4,762	)			(2,814	)			(6,136	)
	Net income			4,799				1,484				11,453				10,793				49,106
Net loss (income) attributable to noncontrolling interests				(798	)			313				(3,365	)			(3,048	)			(8,162	)
Net income attributable to Photronics, Inc. shareholders			$	4,001			$	1,797			$	8,088			$	7,745			$	40,944
Earnings per share:
	Basic		$	0.06			$	0.03			$	0.12			$	0.11			$	0.61
	Diluted		$	0.06			$	0.03			$	0.12			$	0.11			$	0.56
Weighted-average number of common shares outstanding:
	Basic			68,525				68,426				67,953				68,376				67,377
	Diluted			69,380				69,385				74,317				69,311				76,990

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
				July 30,			October 30,
				2017			2016
Assets
	Current assets:
	Cash and cash equivalents		$	340,572		$	314,074
	Accounts receivable			91,812			92,636
	Inventories			25,668			22,081
	Other current assets			10,558			12,795
		Total current assets		468,610			441,586
Property, plant and equipment, net				501,720			506,434
Intangible assets, net				18,320			19,854
Other assets				19,948			20,114
Total assets			$	1,008,598		$	987,988
Liabilities and Equity
Current liabilities:
	Current portion of long-term borrowings		$	5,541		$	5,428
	Accounts payable and accrued liabilities			73,769			75,889
		Total current liabilities		79,310			81,317
Long-term borrowings				57,776			61,860
Other liabilities				16,384			19,337
Photronics, Inc. shareholders' equity				739,282			710,363
Noncontrolling interests				115,846			115,111
		Total equity		855,128			825,474
Total liabilities and equity			$	1,008,598		$	987,988

PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
				Nine Months Ended
				July 30,				July 31,
				2017				2016
Cash flows from operating activities:
	Net income		$	10,793			$	49,106
	Adjustments to reconcile net income to net cash
	provided by operating activities:
		Depreciation and amortization		64,081				60,102
		Gain on sale of investment		-				(8,940	)
		Changes in assets, liabilities and other		(1,085	)			(8,881	)
Net cash provided by operating activities				73,789				91,387
Cash flows from investing activities:
	Purchases of property, plant and equipment			(38,759	)			(44,828	)
	Acquisition of Business			(5,400	)			-
	Proceeds from sale of investments			167				101,853
	Other			(458	)			584
Net cash provided by (used in) investing activities				(44,450	)			57,609
Cash flows from financing activities:
	Repayments of long-term borrowings			(4,057	)			(56,276	)
	Proceeds from share-based arrangements			2,529				3,172
	Dividends paid to noncontrolling interests			(8,298	)			(11,890	)
	Other			(33	)			(19	)
Net cash used in financing activities				(9,859	)			(65,013	)
Effect of exchange rate changes on cash				7,018				1,819
Net increase in cash and cash equivalents				26,498				85,802
Cash and cash equivalents, beginning of period				314,074				205,867
Cash and cash equivalents, end of period			$	340,572			$	291,669

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									Nine Months Ended
			July 30,			April 30,			July 31,			July 30,			July 31,
			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		$	4,001		$	1,797		$	8,088		$	7,745		$	40,944
	Income tax benefit (a)		-			-			-			-			(3,004	)
	Gain on sale of investment, net of tax (b)		-			-			-			-			(8,753	)
Non-GAAP net income attributable to Photronics, Inc. shareholders		$	4,001		$	1,797		$	8,088		$	7,745		$	29,187
Weighted average number of diluted shares outstanding
	GAAP		69,380			69,385			74,317			69,311			76,990
	Non-GAAP		69,380			69,385			74,317			69,311			76,990
Net income per diluted share
	GAAP	$	0.06		$	0.03		$	0.12		$	0.11		$	0.56
	Non-GAAP	$	0.06		$	0.03		$	0.12		$	0.11		$	0.41
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
GAAP Net Income (c)		$	4,799		$	1,484		$	11,453		$	10,793		$	49,106
	Interest expense		550			550			612			1,658			2,750
	Income tax expense		333			431			4,762			2,814			6,136
	Depreciation and amortization		21,840			21,345			19,572			64,081			60,102
	Other items (d)		984			921			975			2,842			2,848
Non-GAAP EBITDA		$	28,506		$	24,731		$	37,374		$	82,188		$	120,942

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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