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
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Date of report (Date of earliest event reported)
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May 22, 2018
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PHOTRONICS, INC.
(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 No.)
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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
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(203) 755-900
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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 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 May 22, 2018, the Corporation issued a press release reporting second 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 May 22, 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 April 29, 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 May 22, 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 Q2 2018 Financial Results Conference Call May 22, 2018 slides.
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SIGNATURE
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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By:
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/s/ Richelle E. Burr
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Name: Richelle E. Burr
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Title: Vice President, General Counsel and Secretary
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Date: May 22, 2018
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Exhibit 99.1
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For Further Information:
R. Troy Dewar, CFA
Director, Investor Relations
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(203) 740-5610
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Press Release
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tdewar@photronics.com
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Photronics Reports Second Quarter Fiscal 2018 Results
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Second quarter 2018 revenue was $130.8 million, up 6% sequentially and 21% year-over-year
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| • |
High-end IC revenue surged 83% year-over-year on strong demand from Asia foundries
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| • |
Net income attributable to Photronics, Inc. shareholders was $10.7 million ($0.15 per diluted share)
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| • |
Third quarter 2018 guidance: revenue between $128 and $136 million with diluted EPS between $0.12 and $0.18
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BROOKFIELD, Conn. May 22, 2018 (Globe Newswire) — 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 second quarter ended April 29, 2018.
Second quarter revenue was $130.8 million, increases of 6% sequentially and 21% compared with the same quarter prior year. Integrated circuit (IC) revenue was $102.3 million, up 7% sequentially and 24% compared with last year. Flat panel display (FPD) revenue was $28.5 million, up 3% sequentially and 11% compared with last year.
Net income attributable to Photronics, Inc. shareholders was $10.7 million ($0.15 per diluted share), compared with $5.9 million ($0.09 per diluted share) for the first quarter of 2018 and $1.8 million ($0.03 per diluted share) for the second quarter of 2017.
"Performance strengthened again in the second quarter, continuing the sequential revenue growth of the past four quarters,” said Peter Kirlin, chief executive officer. “High-end IC was especially strong year-over-year, up 83%. Sequentially, IC continued to improve in both logic and memory, as customers, particularly Asia foundries, released new designs. High-end FPD was down slightly on soft AMOLED demand, but mainstream improved due to growth in LTPS LCD displays. Operating margin improved with the growth in revenue, although tempered slightly by higher operating expenses. Minority interest increased due to strong earnings from our Taiwan JV, and a foreign exchange gain contributed to the bottom line, resulting in net income of $10.7 million. We ended the quarter with a cash balance of $321 million, which will be very important as we anticipate a ramp of capital expenditures later this year for our new facilities in China.”
Third Quarter 2018 Guidance
For the third quarter of 2018, Photronics expects revenue to be between $128 million and $136 million, and net income attributable to Photronics, Inc. shareholders to be between $0.12 and $0.18 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Tuesday, May 22, 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.
Exhibit 99.2
PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
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Three Months Ended
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Six Months Ended
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|||||||||||||||||||
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April 29,
2018 |
January 28,
2018 |
April 30,
2017 |
April 29,
2018 |
April 30,
2017 |
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Revenue
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$
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130,779
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$
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123,446
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$
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108,297
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$
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254,225
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$
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218,128
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||||||||||
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Cost of goods sold
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(97,960
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)
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(95,784
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)
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(88,140
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)
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(193,744
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)
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(174,972
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)
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Gross profit
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32,819
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27,662
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20,157
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60,481
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43,156
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Operating Expenses:
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Selling, general and administrative
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(13,637
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)
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(11,750
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)
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(10,894
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)
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(25,387
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)
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(21,765
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)
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Research and development
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(3,817
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)
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(4,104
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)
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(3,726
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)
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(7,921
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)
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(7,211
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)
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Total Operating Expenses
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(17,454
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)
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(15,854
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)
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(14,620
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)
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(33,308
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)
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(28,976
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)
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Operating income
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15,365
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11,808
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5,537
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27,173
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14,180
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Other income (expense), net
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3,332
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(4,105
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)
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(3,622
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)
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(774
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)
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(5,705
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)
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Income before income taxes
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18,697
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7,703
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1,915
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26,399
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8,475
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Income tax (provision) benefit
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(3,508
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)
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1,778
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(431
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)
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(1,729
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)
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(2,481
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)
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|||||||||||
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Net income
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15,189
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9,481
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1,484
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24,670
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5,994
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|||||||||||||||
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Net income attributable to noncontrolling interests
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(4,524
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)
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(3,583
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)
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313
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(8,107
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)
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(2,251
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)
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|||||||||||
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Net income attributable to Photronics, Inc. shareholders
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$
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10,665
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$
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5,898
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$
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1,797
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$
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16,563
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$
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3,743
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||||||||||
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Earnings per share:
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||||||||||||||||||||
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Basic
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$
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0.15
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$
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0.09
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$
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0.03
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$
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0.24
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$
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0.05
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||||||||||
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Diluted
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$
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0.15
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$
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0.09
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$
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0.03
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$
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0.23
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$
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0.05
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||||||||||
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Weighted-average number of common shares outstanding:
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||||||||||||||||||||
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Basic
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69,293
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68,755
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68,426
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69,024
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68,301
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|||||||||||||||
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Diluted
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75,190
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69,372
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69,385
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75,052
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69,277
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|||||||||||||||
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
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April 29,
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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||||||||
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Cash and cash equivalents
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$
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321,246
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$
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308,021
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||||
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Accounts receivable
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124,331
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105,320
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||||||
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Inventories
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31,936
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23,703
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||||||
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Other current assets
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22,786
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12,080
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||||||
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Total current assets
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500,299
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449,124
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||||||
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Property, plant and equipment, net
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563,313
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535,197
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||||||
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Intangible assets, net
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14,708
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17,122
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||||||
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Other assets
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23,961
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19,351
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||||||
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Total assets
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$
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1,102,281
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$
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1,020,794
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||||
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Liabilities and Equity
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||||||||
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Current liabilities:
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||||||||
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Current portion of long-term borrowings
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$
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59,263
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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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107,245
|
77,137
|
||||||
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Total current liabilities
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166,508
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81,776
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||||||
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Long-term borrowings
|
-
|
57,337
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||||||
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Other liabilities
|
17,707
|
16,386
|
||||||
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Photronics, Inc. shareholders' equity
|
783,380
|
744,564
|
||||||
|
Noncontrolling interests
|
134,686
|
120,731
|
||||||
|
Total equity
|
918,066
|
865,295
|
||||||
|
Total liabilities and equity
|
$
|
1,102,281
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$
|
1,020,794
|
||||
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
Six Months Ended
|
||||||||
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April 29,
2018 |
April 30,
2017 |
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
24,670
|
$
|
5,994
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
44,429
|
42,241
|
||||||
|
Changes in operating assets, liabilities and other
|
(31,191
|
)
|
(1,328
|
)
|
||||
|
Net cash provided by operating activities
|
37,908
|
46,907
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property, plant and equipment
|
(44,129
|
)
|
(14,152
|
)
|
||||
|
Acquisition of business
|
-
|
(5,400
|
)
|
|||||
|
Proceeds from sale of investments
|
-
|
167
|
||||||
|
Other
|
436
|
(462
|
)
|
|||||
|
Net cash used in investing activities
|
(43,693
|
)
|
(19,847
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Repayments of long-term borrowings
|
(2,771
|
)
|
(2,695
|
)
|
||||
|
Contribution from noncontrolling interest
|
11,998
|
-
|
||||||
|
Proceeds from share-based arrangements
|
3,776
|
2,311
|
||||||
|
Other
|
(267
|
)
|
(23
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
12,736
|
(407
|
)
|
|||||
|
Effect of exchange rate changes on cash
|
6,274
|
4,997
|
||||||
|
Net increase in cash and cash equivalents
|
13,225
|
31,650
|
||||||
|
Cash and cash equivalents, beginning of period
|
308,021
|
314,074
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
321,246
|
$
|
345,724
|
||||
Exhibit 99.5
Photronics, Inc. Q2 2018 Financial Results Conference CallMay 22, 2018
Safe Harbor Statement 2 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”, “plan”, “project” 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.
Revenue grew 21% Y/Y and 6% Q/QHigh-end IC biggest growth factor (+83% Y/Y)China revenue doubled Y/Y; up 18% Q/QGross and operating margins expanded on higher revenue and operating leverageNet income attributable to Photronics, Inc. shareholders of $10.7M ($0.15/share)Cash balance of $321M; capex increased to $33M as we invest in growthChina investments on trackConstruction to be completed later this yearProduction to begin first half of 2019 Q2 2018 Summary 3 Investing in long-term, profitable growth to increase shareholder value
$M (except EPS) Q218 Q118 Q/Q Q217 Y/Y Revenue $ 130.8 $ 123.4 6% $ 108.3 21% Gross Profit $ 32.8 $ 27.7 19% $ 20.2 63% Gross Margin 25.1% 22.4% 270 bps 18.6% 650 bps Operating Income $ 15.4 $ 11.8 30% $ 5.5 178% Operating Margin 11.7% 9.6% 210 bps 5.1% 660 bps Net Income* $ 10.7 $ 5.9 80% $ 1.8 493% Diluted EPS* $ 0.15 $ 0.09 $ 0.06 $ 0.03 $ 0.12 Higher revenue as we achieved growth in both IC & FPDGross margin improved due to effect of revenue increaseOperating margin increased as higher gross margin and lower R&D offset impact of higher SG&A due to compensationNet income includes foreign exchange gain, net of tax and non-controlling interest, of $1.5M ($0.02/share) in Q218; and a loss of $2.7M ($0.04/share) in Q118Q118 tax expense includes $4.2M ($0.06/share) benefits, primarily for recognition of accumulated AMT credits resulting from the tax reform act Income Statement Summary 4 *Net income attributable to Photronics, Inc. shareholders
Strong high-end growthHigh-end logic growth driven by Asia foundriesMemory demand from Asia continues to be strongChina revenue more that doubled Y/Y; represents 11% of Q218 IC revenueExpect demand trends to continue in Q3High-end logic improvingHigh-end memory flat to upMainstream stable $M Q218 Q118 Q/Q Q217 Y/Y High-End* $ 41.5 $ 33.4 24% $ 22.7 83% Mainstream $ 60.8 $ 62.3 (2%) $ 59.9 1% Total $ 102.3 $ 95.7 7% $ 82.6 24% IC Photomask Revenue 5 *28nm and smaller Total may differ due to rounding
High-end down Q/Q primarily due to lower AMOLED demandMainstream strengthened as demand for LTPS LCD displays increasedChina represents 36% of Q218 FPD revenueExpect customers to ramp new AMOLED designs to improve fab utilizationQualifying P-800 in Korea to maintain AMOLED technology leadership $M Q218 Q118 Q/Q Q217 Y/Y High-End* $ 18.2 $ 18.8 (3%) $ 16.8 9% Mainstream $ 10.3 $ 9.0 14% $ 8.9 16% Total $ 28.5 $ 27.8 3% $ 25.7 11% FPD Photomask Revenue 6 *≥G8 and AMOLED Total may differ due to rounding
$M Q218 Q118 Q217 Cash $ 321 $ 349 $ 346 Debt $ 59 $ 61 $ 65 Net Cash* $ 262 $ 288 $ 281 Operating Cash Flow $ 7 $ 31 $ 15 Capital Expenditures $ 33 $ 11 $ 5 LTM EBITDA $ 138 $ 122 $ 120 Cash balance lower on higher capex and lower operating cash flowOperating cash flow lower due to increase in net working capital and other current assets, driven by revenue growth2018 capex expected to be ~$250M, primarily for China IC & FPD investmentsBalance sheet able to fund planned investments and strategic M&A opportunities Select Financial Data 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Revenue ($M) $128 - $136 Taxes ($M) $2 - $3 EPS $0.12 - $0.18 Diluted Shares (M) ~75 High-end demand expectations are positiveHigh-end IC logic up on Asia foundry demandHigh-end IC memory stable to improvingHigh-end FPD mask demand should improve as customers release new designs to maintain utilizationSome high-end litho tools schedule for PM in Q3, limiting revenue growthExpect margin headwinds in H218 as China operations begin to ramp ahead of production in first half of 2019 Q318 Guidance 8
Thank you for your interest! For Additional Information:R. Troy Dewar, CFADirector, Investor Relations203.740.5610tdewar@photronics.com
Appendix
IC Photomask Revenue 11 Mainstream$250.2M66% High-End$129.0M34% High-End: 28nm and smaller; total may differ due to rounding
FPD Photomask Revenue 12 Mainstream$36.7M34% High-End$70.9M66% High-End: ≥G8 and AMOLED; total may differ due to rounding Mainstream$32.5M32% High-End$67.9M68%
Non-GAAP Reconciliation
14