UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
Date of report (Date of earliest event reported) February 14, 2018
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PHOTRONICS, INC.
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(Exact name of registrant as specified in its charter)
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Connecticut
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0-15451
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06-0854886
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification Number)
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15 Secor Road, Brookfield, CT
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06804
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's Telephone Number, including area code (203) 775-9000
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2)
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 |
Results of Operation and Financial Condition
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On February 14, 2018, the Corporation issued a press release reporting first quarter fiscal 2018 results.
A copy of the press release is furnished as Exhibit 99.1 to this report. The information contained in this Item 2.02 and the attached Exhibits 99.1, 99.2, 99.3, 99.4, and 99.5, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth by specific reference in such filing.
On February 14, 2018, the Company will conduct a conference call during which certain unaudited, non-GAAP financial information related to the Company’s operations for the three months ended January 28, 2018 may be disclosed. This information is set forth in Exhibit 99.5.
EBITDA is a non-GAAP financial measure that the Company defines pursuant to its credit agreement. The Company believes that EBITDA is generally accepted as providing useful information regarding the operational strength and performance of its business, including the ability of the Company to pay interest, service debt and fund capital expenditures. The Company’s method for calculating EBITDA may not be comparable to methods used by other companies but is the same method the Company uses for calculating EBITDA under its credit facility. The Company has included in the press release certain reconciliation information for EBITDA to its most directly comparable financial measure of net income calculated and reported in accordance with GAAP.
| Item 9.01. |
Financial Statements and Exhibits
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| (d) |
Exhibits
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| 99.1 |
Press Release dated February 14, 2018.
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| 99.2 |
Condensed Consolidated Statements of Income
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| 99.3 |
Condensed Consolidated Balance Sheets
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| 99.4 |
Condensed Consolidated Statements of Cash Flows
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| 99.5 |
Photronics Q1 2018 Financial Results Conference Call February 14, 2018 slides
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PHOTRONICS, INC.
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(Registrant)
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DATE: February 14, 2018
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BY
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/s/ Richelle E. Burr
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Richelle E. Burr
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Vice President, General Counsel
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PHOTRONICS, INC.
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Exhibit 99.1
 Press Release
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For Further Information:
R. Troy Dewar, CFADirector, Investor Relations
(203) 740-5610
tdewar@photronics.com
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Photronics Reports First Quarter Fiscal 2018 Results
BROOKFIELD, CT — (Marketwired – February 14, 2018) —
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First quarter 2018 revenue was $123.4 million, up 2% sequentially and 12% year-over-year
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Net income attributable to Photronics, Inc. shareholders was $5.9 million ($0.09 per diluted share)
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Balance sheet strengthened as cash balance increased $40.5 million to $348.6 million
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Second quarter 2018 guidance: revenue between $120 and $128 million with diluted EPS between $0.04 and $0.09
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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 2018 first quarter ended January 28, 2018.
First quarter revenue was $123.4 million, increases of 2% sequentially and 12% compared with same quarter prior year. Integrated circuit (IC) revenue was $95.7 million, essentially flat sequentially and up 11% compared with last year. Flat panel display (FPD) revenue was $27.8 million, up 11% sequentially and 19% compared with last year.
Net income attributable to Photronics, Inc. shareholders was $5.9 million ($0.09 per diluted share), compared with $5.4 million ($0.08 per diluted share) for the fourth quarter of 2017 and $1.9 million ($0.03 per diluted share) for the first quarter of 2017.
“We achieved another quarter of solid revenue growth, despite seasonal headwinds, due to continued strength in high-end IC demand, and overall improvement in FPD,” said Peter Kirlin, chief executive officer. “High-end IC improved primarily due to logic demand from Asia foundry customers, where tape-out activity remains robust. FPD demand for new LCD panels was strong as customers released new designs to improve factory utilization. Operating expenses were slightly higher sequentially as adjustments recognized in the previous quarter did not recur; operating margin was 9.6% compared with 10.3% in the previous quarter. Below the operating income line, a foreign exchange loss of $2.7 million, net of tax and non-controlling interest, and tax benefits of $4.2 million resulted in net income of $5.9 million. Our balance sheet strengthened during the quarter, with cash balance growing to $348.6 million on strong operating cash flow and the initial contribution from our partner for the PDMCX joint venture in China.”
Second Quarter 2018 Guidance
Kirlin continued, “For the second quarter of 2018, we expect revenue to be between $120 million and $128 million, and net income attributable to Photronics, Inc. shareholders to be between $0.04 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, February 14, 2018. 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.
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.
04-2018
Exhibit 99.2
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
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Three Months Ended
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January 28,
2018
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October 29,
2017
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January 29,
2017
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Revenue
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$
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123,446
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$
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120,971
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$
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109,831
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Cost of goods sold
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(95,784
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)
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(94,529
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)
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(86,832
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)
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Gross profit
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27,662
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26,442
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22,999
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Operating Expenses:
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Selling, general and administrative
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(11,750
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)
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(10,182
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)
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(10,871
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)
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Research and development
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(4,104
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)
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(3,838
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)
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(3,485
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)
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Total Operating Expenses
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(15,854
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)
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(14,020
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)
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(14,356
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)
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Operating income
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11,808
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12,422
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8,643
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Other (expense) income, net
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(4,105
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)
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536
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(2,083
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)
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Income before income taxes
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7,703
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12,958
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6,560
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Income tax benefit (provision)
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1,778
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(2,462
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)
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(2,050
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)
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Net income
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9,481
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10,496
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4,510
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Net income attributable to noncontrolling interests
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(3,583
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)
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(5,110
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)
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(2,564
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)
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Net income attributable to Photronics, Inc. shareholders
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$
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5,898
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$
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5,386
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$
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1,946
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Earnings per share:
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Basic
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$
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0.09
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$
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0.08
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$
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0.03
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Diluted
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$
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0.09
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$
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0.08
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$
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0.03
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||||||
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Weighted-average number of common shares outstanding:
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Basic
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68,755
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68,615
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68,176
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Diluted
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69,372
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69,218
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69,169
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|||||||||
Exhibit 99.3
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
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January 28,
2018
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October 29,
2017
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|||||||
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Assets
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||||||||
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Current assets:
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Cash and cash equivalents
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$
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348,560
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$
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308,021
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Accounts receivable
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104,638
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105,320
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Inventories
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26,997
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23,703
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Other current assets
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12,162
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12,080
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Total current assets
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492,357
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449,124
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Property, plant and equipment, net
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548,307
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535,197
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Intangible assets, net
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16,224
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17,122
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Other assets
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24,568
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19,351
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Total assets
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$
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1,081,456
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$
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1,020,794
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Liabilities and Equity
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||||||||
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Current liabilities:
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Current portion of long-term borrowings
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$
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3,259
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$
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4,639
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||||
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Accounts payable and accrued liabilities
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84,814
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77,137
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||||||
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Total current liabilities
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88,073
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81,776
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||||||
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Long-term borrowings
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57,366
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57,337
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||||||
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Other liabilities
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17,570
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16,386
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||||||
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Photronics, Inc. shareholders' equity
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777,433
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744,564
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Noncontrolling interests
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141,014
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120,731
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||||||
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Total equity
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918,447
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865,295
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||||||
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Total liabilities and equity
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$
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1,081,456
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$
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1,020,794
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||||
Exhibit 99.4
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
Three Months Ended
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||||||||
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January 28,
2018
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January 29,
2017
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|||||||
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Cash flows from operating activities:
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||||||||
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Net income
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$
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9,481
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$
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4,510
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||||
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Adjustments to reconcile net income to net cash provided by operating activities:
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||||||||
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Depreciation and amortization
|
22,363
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20,896
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||||||
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Changes in operating assets, liabilities and other
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(982
|
)
|
6,133
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|||||
|
Net cash provided by operating activities
|
30,862
|
31,539
|
||||||
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Cash flows from investing activities:
|
||||||||
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Purchases of property, plant and equipment
|
(10,995
|
)
|
(9,600
|
)
|
||||
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Acquisition of business
|
-
|
(5,400
|
)
|
|||||
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Other
|
(134
|
)
|
(396
|
)
|
||||
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Net cash used in investing activities
|
(11,129
|
)
|
(15,396
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Repayments of long-term borrowings
|
(1,381
|
)
|
(1,343
|
)
|
||||
|
Contribution from noncontrolling interest
|
11,998
|
-
|
||||||
|
Proceeds from share-based arrangements
|
798
|
1,113
|
||||||
|
Other
|
(261
|
)
|
(16
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
11,154
|
(246
|
)
|
|||||
|
Effect of exchange rate changes on cash
|
9,652
|
(275
|
)
|
|||||
|
Net increase in cash and cash equivalents
|
40,539
|
15,622
|
||||||
|
Cash and cash equivalents, beginning of period
|
308,021
|
314,074
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
348,560
|
$
|
329,696
|
||||
Exhibit 99.5
Photronics, Inc. Q1 2018 Financial Results Conference CallFebruary 14, 2018
Safe Harbor Statement This presentation and some of our comments may contain projections or other forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. Actual events or results may differ materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “should” or the negative thereto. We cannot guarantee the accuracy of any forecasts or estimates, and we are not obligated to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to time with the Securities and Exchange Commission, specifically our most recent Form 10K and Form 10Q.Non-GAAP Financial MeasuresThis presentation and some of our comments may reference non-GAAP financial measures. These non-GAAP financial measures exclude certain income or expense items, and are consistent with another way management internally analyzes our results of operations. Non-GAAP information should be considered to be a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Please see the “Reconciliation of GAAP to Non-GAAP Financial Information” in this presentation. 2
Revenue grew 2% Q/Q and 12% Y/Y; high-end growth achieved in both IC and FPDSequential drop in operating margin due to less than expected gross margin leverage and higher operating expensesNet income attributable to Photronics, Inc. shareholders of $5.9M ($0.09/share)Cash balance grew to $349M on operating cash flow generation and DNP contribution to PDMCX JVClosed China JV with DNP; working together to win merchant IC business Q1 2018 Summary Investing in long-term, profitable growth to increase shareholder value 3
Income Statement Summary $M (except EPS) Q1 2018 Q4 2017 Q/Q Q1 2017 Y/Y Revenue $ 123.4 $ 121.0 2% $ 109.8 12% Gross Margin 22.4% 21.9% 50 bps 20.9% 150 bps Operating Margin 9.6% 10.3% (70 bps) 7.9% 170 bps Net Income* $ 5.9 $ 5.4 10% $ 1.9 203% Diluted EPS* $ 0.09 $ 0.08 $ 0.01 $ 0.03 $ 0.06 Revenue up on FPD improvement and high-end IC growthGross margin leverage limited by unfavorable FPD product mixOpex increased sequentially as Q417 one-time favorable adjustments did not repeatQ118 tax expense includes $4.2M ($0.06/share) benefits, primarily for recognition of accumulated AMT credits resulting from the tax reform actNet income includes foreign exchange loss, net of tax and non-controlling interest, of $2.7M ($0.04/share) in Q118 and $1.4M ($0.02/share) in Q117 4 *Net income attributable to Photronics, Inc. shareholders
IC Photomask Revenue *NOTE: new high-end definition; now 28nm and smaller; total may differ due to rounding Strong high-end growth partially offset by seasonally-soft mainstreamHigh-end growth driven by logic demand, primarily in AsiaRecord revenue from PDMC (Taiwan JV)Memory down sequentiallyRevenue expectations mixed in Q2High-end memory up; logic mixed with high-end pauseIncrease in China revenue expected with PDMCX JV now establishedExpect to maintain or increase market share $M Q1 2018 Q4 2017 Q/Q Q1 2017 Y/Y High-End* $ 33.4 $ 30.5 10% $ 22.2 51% Mainstream $ 62.3 $ 65.6 (5%) $ 64.2 (3%) Total $ 95.7 $ 96.1 (0%) $ 86.4 11% 5
FPD Photomask Revenue *≥G8 and AMOLED; total may differ due to rounding Customers ramping new designs to improve fab utilization; expect trend to continue in Q2Plan to begin installing P-800 in Korea end of Q2 to drive technology leadership in rapidly growing AMOLED market $M Q1 2018 Q4 2017 Q/Q Q1 2017 Y/Y High-End* $ 18.8 $ 17.1 10% $ 17.2 9% Mainstream $ 9.0 $ 7.8 15% $ 6.2 45% Total $ 27.8 $ 24.9 11% $ 23.4 19% 6
Select Financial Data $M Q1 2018 Q4 2017 Q1 2017 Cash $ 349 $ 308 $ 330 Debt $ 61 $ 62 $ 66 Net Cash* $ 288 $ 246 $ 264 Operating Cash Flow $ 31 $ 23 $ 32 Capital Expenditures $ 11 $ 53 $ 10 LTM EBITDA $ 122 $ 119 $ 129 Cash balance grew on strong operating cash generation and $12M initial contribution from JV partner in China2018 capex expected to be ~$250M, primarily for China IC & FPD investmentsBalance sheet is able to fund planned investments and strategic M&A opportunities 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Q2 2018 Guidance Revenue ($M) $120 - $128 Taxes ($M) $3 - $4 EPS $0.04 - $0.09 Diluted Shares (M) ~69 High-end demand expectations mixed in Q218More AMOLED display capacity coming online; mask demand improves as customers release new designs to maintain utilization ratesHigh-end memory up; logic likely downExpect margin headwinds in H218 as China operations begin to ramp ahead of production in early 2019 8
Thank you for your interest! For Additional Information:R. Troy Dewar, CFADirector, Investor Relations203.740.5610tdewar@photronics.com
Appendix
IC FPD Announced August 2016 August 2017 Location Xiamen Hefei Investment ($M) $160M $160M Structure Majority-owned JV Wholly-owned Investment time period 5 years 5 years Technology High-end, mainstream, logic, memory Up to G10.5+, AMOLED Production start Early 2019 Spring 2019 Projected sales $150M (total for both operations) Investing in China Operations 11 PLAB well positioned for these investmentsGlobal merchant market and technology leaderStrong footprint in AsiaBalance sheet to support investment
IC Photomask Revenue 12 Mainstream$249.3M69% High-End$110.2M31% High-End: 28nm and smaller; total may differ due to rounding
FPD Photomask Revenue 13 Mainstream$35.3M34% High-End$69.4M66% High-End: ≥G8 and AMOLED; total may differ due to rounding Mainstream$32.5M32% High-End$67.9M68%
14