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) December 12,
2018
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) 775-9000
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(Former name
or former address, if changed since last report)
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:
| ☐ |
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. ☐
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Item 2.02
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Results of Operation and Financial Condition
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On December 12, 2018, the Corporation issued a press release reporting fourth 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 December 12, 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 October 31, 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.
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Item 7.01
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Regulation FD Disclosure
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The US District Court in Northern California filed an indictment against Fujian Jinhua Integrated Circuit Company, United Microelectronics Corporation, and three former United Microelectronics Corporation executives alleging theft of trade secrets from Micron
Technology, Inc. At this time, the Company has not seen a material impact as a result of this litigation. The Company will continue to monitor this situation and report any updates as necessary.
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Item 9.01
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Financial Statements and Exhibits
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(d) Exhibits
| 99.1 |
Press Release dated December 12, 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, Inc. Q4 2018 Financial Results Conference Call December 12, 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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||
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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: December 12, 2018
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Exhibit 99.1
Press Release
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For Further Information:
R. Troy Dewar, CFA
Director, Investor Relations
(203) 740-5610
tdewar@photronics.com
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Photronics Reports Fourth Quarter Fiscal 2018 Results
| · |
Fourth quarter 2018 revenue was a record $144.7 million, up 20% year-over-year and 6% sequentially
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| · |
Record FPD revenue of $33.8 million on strong high-end AMOLED demand
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| · |
Full-year 2018 revenue was a record $535.3 million, up 19% over the previous year
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| · |
Net income attributable to Photronics, Inc. shareholders was $12.5 million, or $0.18 per diluted share
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| · |
Cash balance was $329 million, with strong operating cash flow of $43.6 million and capex of $28.2 million
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| · |
Returned $16.3 million to shareholders through share repurchase program
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| · |
First quarter 2019 guidance: revenue between $120 and $130 million with diluted EPS between $0.01 and $0.07
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BROOKFIELD, Conn. December 12, 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 fourth quarter ended October 31, 2018.
Fourth quarter revenue was a record $144.7 million, improving 20% compared with the same quarter last year and 6% compared with the previous quarter.
Integrated circuit (IC) revenue was $110.9 million, up 15% compared with last year and 3% sequentially. Flat panel display (FPD) revenue was a record $33.8 million, up 36% compared with last year and 16% sequentially.
Net income attributable to Photronics, Inc. shareholders was $12.5 million ($0.18 per diluted share), compared with $5.4 million ($0.08 per diluted
share) for the fourth quarter of 2017 and $13.0 million ($0.18 per diluted share) for the third quarter of 2018. Results for the third quarter of 2018 included a $2 million one-time tax benefit ($0.01 per diluted share).
"We achieved record revenue during the fourth quarter, with growth in both IC and FPD, as mask demand remained strong and we continued to benefit from
our successful repositioning of the business,” said Peter Kirlin, chief executive officer. “Record revenue in FPD was accomplished through growth in high-end AMOLED, strong demand in Korea and solid demand in China. Within IC, high-end memory
increased sequentially while high-end logic decreased as our customers experienced softening demand in their end markets. While revenue increased, margins were slightly down due to tool relocation expenses, startup costs in China, and shifts in
product mix. We believe all of these are temporary and margins should improve as high-end IC strengthens and our China startup is complete. Despite lower margins, we generated strong cash from operations and were able to defer some capex payments
into the first quarter, maintaining a high cash balance. We are well positioned heading into 2019 to ramp our China factories and continue with the next phase of profitable growth.”
First Quarter 2019 Guidance
For the first quarter of 2019, Photronics expects revenue to be between $120 million and $130 million, and net income attributable to Photronics, Inc.
shareholders to be between $0.01 and $0.07 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, December 12, 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, political, 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.
15-18
Exhibit 99.2
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
|
Three Months Ended
|
Year Ended
|
|||||||||||||||||||
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October 31,
2018
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July 29,
2018
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October 29,
2017
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October 31,
2018
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October 29,
2017
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||||||||||||||||
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Revenue
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$
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144,660
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$
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136,391
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$
|
120,971
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$
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535,276
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$
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450,678
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||||||||||
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Cost of goods sold
|
(109,236
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)
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(100,794
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)
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(94,529
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)
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(403,773
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)
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(359,363
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)
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||||||||||
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Gross profit
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35,424
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35,597
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26,442
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131,503
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91,315
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|||||||||||||||
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Operating Expenses:
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||||||||||||||||||||
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Selling, general and administrative
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(13,504
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)
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(12,504
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)
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(10,182
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)
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(51,395
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)
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(43,585
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)
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||||||||||
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Research and development
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(3,906
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)
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(2,653
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)
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(3,838
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)
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(14,481
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)
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(15,862
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)
|
||||||||||
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Total Operating Expenses
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(17,410
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)
|
(15,157
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)
|
(14,020
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)
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(65,876
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)
|
(59,447
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)
|
||||||||||
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Operating income
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18,014
|
20,440
|
12,422
|
65,627
|
31,868
|
|||||||||||||||
|
Other income (expense), net
|
2,307
|
1,411
|
536
|
2,944
|
(5,303
|
)
|
||||||||||||||
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Income before income taxes
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20,321
|
21,851
|
12,958
|
68,571
|
26,565
|
|||||||||||||||
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Income tax provision
|
(3,552
|
)
|
(2,054
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)
|
(2,462
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)
|
(7,335
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)
|
(5,276
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)
|
||||||||||
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Net income
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16,769
|
19,797
|
10,496
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61,236
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21,289
|
|||||||||||||||
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Net income attributable to noncontrolling interests
|
(4,282
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)
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(6,792
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)
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(5,110
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)
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(19,181
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)
|
(8,159
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)
|
||||||||||
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Net income attributable to Photronics, Inc. shareholders
|
$
|
12,487
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$
|
13,005
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$
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5,386
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$
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42,055
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$
|
13,130
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||||||||||
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Earnings per share:
|
||||||||||||||||||||
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Basic
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$
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0.18
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$
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0.19
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$
|
0.08
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$
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0.61
|
$
|
0.19
|
||||||||||
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Diluted
|
$
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0.18
|
$
|
0.18
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$
|
0.08
|
$
|
0.59
|
$
|
0.19
|
||||||||||
|
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
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Basic
|
67,894
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69,374
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68,615
|
68,829
|
68,436
|
|||||||||||||||
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Diluted
|
73,921
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75,258
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69,218
|
74,821
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69,288
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|||||||||||||||
Exhibit 99.3
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
|
October 31,
2018
|
October 29,
2017
|
|||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
329,277
|
$
|
308,021
|
||||
|
Accounts receivable
|
120,515
|
105,320
|
||||||
|
Inventories
|
29,180
|
23,703
|
||||||
|
Other current assets
|
23,759
|
12,080
|
||||||
|
Total current assets
|
502,731
|
449,124
|
||||||
|
Property, plant and equipment, net
|
571,781
|
535,197
|
||||||
|
Intangible assets, net
|
12,368
|
17,122
|
||||||
|
Other assets
|
23,129
|
19,351
|
||||||
|
Total assets
|
$
|
1,110,009
|
$
|
1,020,794
|
||||
|
Liabilities and Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Current portion of long-term debt
|
$
|
57,453
|
$
|
4,639
|
||||
|
Accounts payable and accrued liabilities
|
133,623
|
77,137
|
||||||
|
Total current liabilities
|
191,076
|
81,776
|
||||||
|
Long-term debt
|
-
|
57,337
|
||||||
|
Other liabilities
|
14,364
|
16,386
|
||||||
|
Photronics, Inc. shareholders' equity
|
759,671
|
744,564
|
||||||
|
Noncontrolling interests
|
144,898
|
120,731
|
||||||
|
Total equity
|
904,569
|
865,295
|
||||||
|
Total liabilities and equity
|
$
|
1,110,009
|
$
|
1,020,794
|
||||
Exhibit 99.4
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
Year Ended
|
||||||||
|
October 31,
2018
|
October 29,
2017
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
61,236
|
$
|
21,289
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
84,333
|
86,573
|
||||||
|
Changes in operating assets, liabilities and other
|
(15,002
|
)
|
(11,029
|
)
|
||||
|
Net cash provided by operating activities
|
130,567
|
96,833
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property, plant and equipment
|
(92,585
|
)
|
(91,965
|
)
|
||||
|
Acquisition of business
|
-
|
(5,400
|
)
|
|||||
|
Proceeds from sale of investments
|
-
|
167
|
||||||
|
Other
|
1,856
|
(868
|
)
|
|||||
|
Net cash used in investing activities
|
(90,729
|
)
|
(98,066
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Repayments of long-term debt
|
(4,639
|
)
|
(5,428
|
)
|
||||
|
Dividends paid to noncontrolling interests
|
(8,166
|
)
|
(8,298
|
)
|
||||
|
Purchase of treasury stock
|
(23,111
|
)
|
-
|
|||||
|
Contribution from noncontrolling interest
|
17,996
|
-
|
||||||
|
Proceeds from share-based arrangements
|
4,634
|
2,830
|
||||||
|
Other
|
(519
|
)
|
(32
|
)
|
||||
|
Net cash used in financing activities
|
(13,805
|
)
|
(10,928
|
)
|
||||
|
Effect of exchange rate changes on cash
|
(4,777
|
)
|
6,108
|
|||||
|
Net increase (decrease) in cash and cash equivalents
|
21,256
|
(6,053
|
)
|
|||||
|
Cash and cash equivalents, beginning of period
|
308,021
|
314,074
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
329,277
|
$
|
308,021
|
||||
Exhibit 99.5
Photronics, Inc. Q4 2018 Financial Results Conference CallDecember 12, 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.
Record quarterly revenue; +20% Y/Y, +6% Q/QFPD achieves record revenue on strong high-end demand,
driven by AMOLEDIC improved on high-end memory and uptick in Asia mainstream; high-end logic softer Q/QChina revenue up 146% Y/Y & 6% Q/QNote: Q418 had 3 extra days than comparable quartersMargin compression due to IC GM dip, China
startup, greater qualification activityNet income attributable to Photronics, Inc. shareholders of $12.5M ($0.18/share)Cash balance of $329M on strong OCF and defer of capex payments into Q119Repurchased 1.8M shares for $16.3M in Q418 (2.6M
shares / $23.1M YTD)China investments on trackConstruction of critical systems completeTool move-in well underway; expect to be 90% complete (per plan) by end of Q119On schedule to begin production first half of 2019 Q4 2018
Summary 3 Successfully repositioned the business; China investments driving long-term, profitable growth
$M (except EPS) Q418 Q318 Q/Q Q417 Y/Y Revenue $ 144.7 $ 136.4 6% $ 121.0 20% Gross
Profit $ 35.4 $ 35.6 (1%) $ 26.4 34% Gross Margin 24.5% 26.1% (160 bps) 21.9% 260 bps Operating Income $ 18.0 $ 20.4 (12%) $ 12.4 45% Operating Margin 12.5% 15.0% (250 bps) 10.3% 220 bps Net Income* $ 12.5 $
13.0 (4%) $ 5.4 132% Diluted EPS* $ 0.18 $ 0.18 ($ 0.00) $ 0.08 $ 0.10 Record revenue with growth in both IC & FPDGross margin down Q/Q due to ICMix shiftProduction of mainstream products on high-end toolsRelocation expenses to
align manufacturing assetsOperating margin down on China startup costs and increased qualification activityOther income increased on FX gain and sale of an assetQ318 includes one-time tax benefit of $2M ($0.01/share) Income Statement
Summary 4 *Net income attributable to Photronics, Inc. shareholders
Strong Y/Y high-end growthHigh-end memory up on Asia demandHigh-end logic up Y/Y, but down Q/Q as Asia
demand shifts to mainstreamChina IC revenue up 3x Y/Y; represents 17% of Q418 IC revenueExpect mixed demand in Q1High-end memory should remain positiveHigh-end logic recovery expected, but timing uncertainMainstream flat to
down $M Q418 Q318 Q/Q Q417 Y/Y High-End* $ 39.4 $ 46.1 (14%) $ 30.5 29% Mainstream $ 71.4 $ 61.2 17% $ 65.6 9% Total $ 110.9 $ 107.2 3% $ 96.1 15% IC Photomask Revenue 5 *28nm and smaller Total may differ due to
rounding
Record FPD revenue on strong high-end demandRepositioning the business for mobile display and China
G10.5+High-end AMOLED up 50% sequentiallyY/Y mainstream driven by LTPS mobileG10.5+ production to begin H119China revenue nearly doubled Y/Y; represents 36% of Q418 FPD revenueDemonstrating technology leadership with strong AMOLED growth;
should keep operations at capacity $M Q418 Q318 Q/Q Q417 Y/Y High-End* $ 22.0 $ 17.1 29% $ 17.1 28% Mainstream $ 11.8 $ 12.1 (3%) $ 7.8 51% Total $ 33.8 $ 29.1 16% $ 24.9 36% FPD Photomask Revenue 6 *≥G8 and
AMOLED Total may differ due to rounding
$M Q418 Q318 Q417 Cash $ 329 $ 333 $ 308 Debt $ 57 $ 58 $ 62 Net Cash* $ 272 $ 275 $
246 Operating Cash Flow $ 44 $ 49 $ 23 Capital Expenditures $ 28 $ 20 $ 53 Share repurchase $ 16 $ 7 - LTM EBITDA $ 158 $ 153 $ 119 Cash balance essentially flat on strong operating cash flow offset capex and share
repurchase2018 capex $93MLower than previous guidance as some cash flows moved into Q119Capex for Q119 ~ $170MFY 2019 capex ~ $210MRepurchased $16.3M in shares during Q418 ($23.1M FY 2018)Balance sheet able to fund planned investments and
strategic M&A opportunities Select Financial Data 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Revenue ($M) $120 - $130 Taxes ($M) $1 - $2 EPS $0.01 - $0.07 Diluted Shares (M) ~70 Expecting
Q1 to be down in Q/QSeasonally soft period & 6 fewer daysUncertain timing of high-end logic recoveryHigh-end IC memory stableFPD expected to remain at capacityExpect margin headwinds from China startupAnticipate EPS impact of $0.03 -
$0.06 per quarterPlan to be profitable in China by end of 2019 Q119 Guidance 8
Beginning in fiscal year 2018, all fiscal years end 10/31 (previously closed on Sunday closest to
10/31)Other quarters (Q1, Q2, Q3) will continue to end on Sunday closest to calendar endLength of Q2 & Q3 will continue to be 13 weeks (91 days)Length of Q1 & Q4 will vary depending on yearBelow table provides details for 2018 &
2019 Change in fiscal year end 9
Thank you for your interest! For Additional Information:R. Troy Dewar, CFADirector, Investor
Relations203.740.5610tdewar@photronics.com
Appendix
IC Photomask Revenue 12 Mainstream$255.7M61% High-End$160.3M39% High-End: 28nm and smaller; total
may differ due to rounding
FPD Photomask Revenue 13 Mainstream$43.1M36% High-End$76.1M64% High-End: ≥G8 and AMOLED; total may
differ due to rounding Mainstream$32.5M32% High-End$67.9M68%
Non-GAAP Reconciliation
15