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) February 21, 2019
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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) 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. ☐
| Item 2.02 |
Results of Operation and Financial Condition
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On February 21, 2019, the Corporation issued a press release reporting first quarter fiscal 2019 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 21, 2019, 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 27, 2019 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 21, 2019.
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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 2019 Financial Results Conference Call February 21, 2019 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: February 21, 2019
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Exhibit 99.1
Press Release
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For Further Information:
R. Troy Dewar, CFA
Vice President, Investor Relations
(203) 740-5610
tdewar@photronics.com
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Photronics Reports First Quarter Fiscal 2019 Results
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First quarter 2019 revenue was $124.7 million, up 1% year-over-year and down 14% sequentially
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Net income attributable to Photronics, Inc. shareholders was $5.3 million, or $0.08 per diluted share
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| • |
Cash balance was $232 million, with capital expenditures of $107 million as China investments peaked
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| • |
Repurchased 1.1 million shares for $10.7 million; cumulative repurchase of 3.7 million shares for $33.8 million since July 20181
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Second quarter 2019 guidance: revenue between $125 and $135 million with diluted EPS between $0.03 and $0.10
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BROOKFIELD, Conn. February 21, 2019 (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 2019 first quarter ended January 27, 2019.
First quarter revenue was $124.7 million, 1% better than the same quarter last year and 14% lower than the previous quarter. Integrated circuit (IC)
revenue was $94.9 million, down 1% compared with last year and 14% sequentially. Flat panel display (FPD) revenue was $29.8 million, up 7% compared with last year and down 12% sequentially.
Net income attributable to Photronics, Inc. shareholders was $5.3 million ($0.08 per diluted share), compared with $5.9 million ($0.09 per diluted share)
for the first quarter of 2018 and $12.5 million ($0.18 per diluted share) for the fourth quarter of 2018.
"First quarter revenue met our expectations as strong results in AMOLED displays in China were somewhat offset by anticipated impact of seasonal
softness, macroeconomic headwinds, and six fewer days than the fourth quarter of 2018,” said Peter Kirlin, chief executive officer. “We saw weaker demand in IC, for both high-end and mainstream, due to semiconductor industry macro headwinds and
seasonal softness. For FPD, AMOLED demand was solid once again as new product development and introduction continues. Pressure from lower revenue and startup expenses in China resulted in overall gross and operating margin of 20.9% and 6.5%,
respectively. Cash balance at the end of the quarter was $232 million as we invested $107 million in capital expenditures, primarily for China. Work on our new China facilities is progressing and we anticipate production to begin in Hefei during
the second quarter.”
Second Quarter 2019 Guidance
For the second quarter of 2019, Photronics expects revenue to be between $125 million and $135 million, and net income attributable to Photronics, Inc.
shareholders to be between $0.03 and $0.10 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Thursday, February 21, 2019. 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.
| 1. |
The October 2018 share repurchase program of $25 million has concluded.
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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.
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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January 27,
2019
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October 31,
2018
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January 28,
2018
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Revenue
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$
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124,712
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$
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144,660
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$
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123,446
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Cost of goods sold
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98,610
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109,236
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95,784
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Gross profit
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26,102
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35,424
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27,662
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Operating Expenses:
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Selling, general and administrative
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13,792
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13,504
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11,750
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Research and development
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4,263
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3,906
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4,104
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Total Operating Expenses
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18,055
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17,410
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15,854
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Operating income
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8,047
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18,014
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11,808
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Other income (expense), net
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1,108
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2,307
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(4,105
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)
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Income before income taxes
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9,155
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20,321
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7,703
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Income tax (provision) benefit
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(1,387
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)
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(3,552
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)
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1,778
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Net income
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7,768
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16,769
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9,481
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Net income attributable to noncontrolling interests
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2,501
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4,282
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3,583
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Net income attributable to Photronics, Inc. shareholders
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$
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5,267
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$
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12,487
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$
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5,898
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Earnings per share:
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Basic
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$
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0.08
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$
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0.18
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$
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0.09
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Diluted
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$
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0.08
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$
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0.18
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$
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0.09
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||||||
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Weighted-average number of common shares outstanding:
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Basic
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66,583
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67,894
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68,755
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Diluted
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67,047
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73,921
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69,372
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Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
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January 27,
2019
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October 31,
2018
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Assets
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Current assets:
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Cash and cash equivalents
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$
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232,448
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$
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329,277
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Accounts receivable
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131,066
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120,515
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Inventories
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27,874
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29,180
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Other current assets
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61,618
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23,759
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Total current assets
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453,006
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502,731
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Property, plant and equipment, net
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656,873
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571,781
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Intangible assets, net
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11,272
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12,368
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Other assets
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24,743
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23,129
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Total assets
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$
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1,145,894
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$
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1,110,009
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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 debt
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$
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61,647
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$
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57,453
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Accounts payable and accrued liabilities
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132,880
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133,623
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Total current liabilities
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194,527
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191,076
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Long-term debt
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24,484
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-
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Other liabilities
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13,713
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14,364
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Photronics, Inc. shareholders' equity
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761,088
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759,671
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Noncontrolling interests
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152,082
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144,898
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Total equity
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913,170
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904,569
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Total liabilities and equity
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$
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1,145,894
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$
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1,110,009
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Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
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Three Months Ended
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||||||||
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January 27,
2019
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January 28,
2018
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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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7,768
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$
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9,481
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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
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18,781
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22,363
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||||||
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Changes in operating assets, liabilities and other
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(45,835
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)
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(982
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)
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||||
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Net cash (used in) provided by operating activities
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(19,286
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)
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30,862
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|||||
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Cash flows from investing activities:
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||||||||
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Purchases of property, plant and equipment
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(106,925
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)
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(10,995
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)
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||||
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Government incentive
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5,029
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-
|
||||||
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Other
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19
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(145
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)
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|||||
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Net cash used in investing activities
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(101,877
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)
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(11,140
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)
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||||
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Cash flows from financing activities:
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||||||||
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Contribution from noncontrolling interest
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29,394
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11,998
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||||||
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Proceeds from long-term debt
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28,180
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-
|
||||||
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Repayments of long-term debt
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-
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(1,381
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)
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|||||
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Dividends paid to noncontrolling interests
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(26,102
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)
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-
|
|||||
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Purchase of treasury stock
|
(10,696
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)
|
-
|
|||||
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Proceeds from share-based arrangements
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650
|
798
|
||||||
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Other
|
(45
|
)
|
(261
|
)
|
||||
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Net cash provided by financing activities
|
21,381
|
11,154
|
||||||
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Effect of exchange rate changes on cash, cash equivalents, and restricted cash
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2,961
|
9,767
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||||||
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Net (decrease) increase in cash, cash equivalents, and restrcited cash
|
(96,821
|
)
|
40,643
|
|||||
|
Cash, cash equivalents, and restricted cash, beginning of period
|
331,989
|
310,936
|
||||||
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Cash, cash equivalents, and restricted cash, end of period
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$
|
235,168
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$
|
351,579
|
||||
Exhibit 99.5
Photronics, Inc. Q1 2019 Financial Results Conference CallFebruary 21, 2019
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.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 up 1% Y/Y; down 14% Q/Q on seasonal trend, macro headwinds, and fewer days in quarterIC down on
softness from Asia customersFPD high-end improved Y/Y on mobile AMOLED demandNet income attributable to Photronics, Inc. shareholders of $5.3M ($0.08/share)Repurchased 1.1M shares for $10.7M in Q119; cumulative repurchases of 3.7 million
shares for $33.8 million*Capex of $107M to support China investmentsChina plants nearly production readyHefei on schedule to begin production first half of 2019One-quarter delay in Xiamen to align with market conditions Q1 2019
Summary 3 Successfully repositioned the business; China investments driving long-term, profitable growth *The October 2018 share repurchase program of $25 million expired February 1, 2019
$M (except EPS) Q119 Q418 Q/Q Q118 Y/Y Revenue $ 124.7 $ 144.7 (14%) $ 123.4 1% Gross
Profit $ 26.1 $ 35.4 (26%) $ 27.7 (6%) Gross Margin 20.9% 24.5% (360 bps) 22.4% (150 bps) Operating Income $ 8.0 $ 18.0 (55%) $ 11.8 (32%) Operating Margin 6.5% 12.5% (600 bps) 9.6% (310 bps) Other income (expense) $
1.1 $ 2.3 ($ 1.2) ($ 4.1) $5.2 Income tax (benefit) $ 1.4 $ 3.6 $ 2.2 ($ 1.8) ($ 3.2) Minority interest $ 2.5 $ 4.3 ($ 1.8) $ 3.6 ($ 1.1) Net Income* $ 5.3 $ 12.5 (58%) $ 5.9 (11%) Diluted EPS* $ 0.08 $ 0.18 ($
0.10) $ 0.09 ($ 0.01) Days in quarter 88 94 (6) 91 (3) Gross profit includes $3.6M in expenses due to China startup activityOperating expense increased due to China startup activity ($1M), along with increased qualification activity
and higher compensationQ118 results were improved by $4.2 million ($0.06/share) favorable tax benefits attributable to tax reform act Income Statement Summary 4 *Net income attributable to Photronics, Inc. shareholders
Market softness impacting high-end and mainstreamHigh-end memory down on customer order timingHigh-end
logic up Y/Y, down Q/Q on industry softnessChina IC revenue up 136% Y/Y; represents 16% of Q119 IC revenueExpect stable to improving high-end market demand (memory up; logic flat), with potential for macro
headwinds $M Q119 Q418 Q/Q Q118 Y/Y High-End* $ 34.6 $ 39.4 (12%) $ 33.4 4% Mainstream $ 60.3 $ 71.4 (16%) $ 62.3 (3%) Total $ 94.9 $ 110.9 (14%) $ 95.7 (1%) IC Photomask Revenue 5 *28nm and smaller Total may
differ due to rounding
High-end up Y/Y on growing AMOLED demand for mobile displaysMainstream down due to lower LTPS and
G8.5China revenue up 11% Y/YRepresents 43% of Q119 FPD revenueG10.5+ production to begin Q219AMOLED technology remains in high demand; expect to remain at or near capacity $M Q119 Q418 Q/Q Q118 Y/Y High-End* $ 21.5 $ 22.0 (2%) $
18.8 14% Mainstream $ 8.4 $ 11.8 (29%) $ 9.0 (7%) Total $ 29.8 $ 33.8 (12%) $ 27.8 7% FPD Photomask Revenue 6 *≥G8 and AMOLED Total may differ due to rounding
$M Q119 Q418 Q118 Cash $ 232 $ 329 $ 349 Debt $ 86 $ 57 $ 61 Net Cash* $ 146 $ 272 $
288 Operating Cash Flow ($ 19) $ 44 $ 31 Capital Expenditures $ 107 $ 28 $ 11 Share repurchase $ 11 $ 16 - LTM EBITDA $ 156 $ 158 $ 122 Cash balance reduced to fund China investments and cash used in operations (receivables
timing and VAT payment)Some capex for Xiamen shifted into Q219; 2019 capex ~ $210MRepurchased 1.1M shares during Q119 for $10.7M; 3.7M shares repurchased to date for $33.8MBalance sheet able to fund planned investments and strategic M&A
opportunities Select Financial Data 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Revenue ($M) $125 - $135 Taxes ($M) $1 - $2 EPS $0.03 - $0.10 Diluted Shares (M) ~67 Anticipate
sequential growth in Q2High-end IC markets stable to improvingFPD expected to remain at capacitySeasonal recovery; 3 more daysPotential macro headwindExpect margin headwinds from China startupAnticipate EPS impact of $0.03 - $0.06 per
quarterPlan to be profitable in China by end of 2019 Q219 Guidance 8
Thank you for your interest! For Additional Information:R. Troy Dewar, CFAVice President, Investor
Relations203.740.5610tdewar@photronics.com
Appendix
IC Photomask Revenue 11 Mainstream$253.7M61% High-End$161.5M39% High-End: 28nm and smaller; total
may differ due to rounding Mainstream$255.7M61% High-End$160.3M39%
FPD Photomask Revenue 12 Mainstream$42.5M35% High-End$78.8M65% High-End: ≥G8 and AMOLED; total may
differ due to rounding Mainstream$43.1M36% High-End$76.1M64%
Non-GAAP Reconciliation
14