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)
|
May 22, 2019
|
PHOTRONICS,
INC.
(Exact name of registrant as specified in its charter)
|
Connecticut
|
0-15451
|
06-0854886
|
|
(State or Other Jurisdiction of
Incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
|
15 Secor Road, Brookfield, CT
|
|
06804
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
Registrant's Telephone Number, including area code
|
(203) 775-9000
|
|
(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)
|
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange on which registered
|
|
COMMON
|
PLAB
|
NASDAQ Global Select Market
|
|
Item 2.02
|
Results of Operation and Financial
Condition
|
On May 22, 2019, the Corporation issued a press release reporting second 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 May 22, 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 April 28, 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
|
|
(d)
|
Exhibits
|
|
Press Release dated May 22, 2019.
|
||
|
Condensed Consolidated Statements of Income.
|
||
|
Condensed Consolidated Balance Sheets.
|
||
|
Condensed Consolidated Statements of Cash Flows.
|
||
|
Photronics Q2 2019 Financial Results Conference Call May 22, 2019 slides.
|
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.
|
PHOTRONICS, INC.
|
||
|
(Registrant)
|
||
| By: |
/s/ Richelle E. Burr
|
|
|
Name: Richelle E. Burr
|
||
|
Title: Vice President, General Counsel and Secretary
|
||
|
|
||
|
Date: May 22, 2019
|
|
|
Exhibit 99.1
 |
For Further Information:
R. Troy Dewar, CFA
Vice President, Investor Relations
(203) 740-5610
tdewar@photronics.com
|
| Press Release |
Photronics Reports Second Quarter Fiscal 2019 Results
| • |
Second quarter 2019 revenue was $131.6 million, up 6% sequentially and 1% year-over-year
|
| • |
Net income attributable to Photronics, Inc. shareholders was $8.5 million, or $0.13 per diluted share
|
| • |
Cash balance was $167.1 million, with capital expenditures of $33.5 million primarily to fund China investments
|
| • |
Repaid $57.5 million convertible security, reducing total debt and eliminating 5.5 million potentially dilutive shares
|
| • |
Celebrated grand opening of new Xiamen and Hefei facilities in China
|
| • |
Shipped first G10.5+ photomask, marking entry into new, growing market
|
| • |
Third quarter 2019 guidance: revenue between $132 and $142 million with diluted EPS between $0.05 and $0.14
|
BROOKFIELD, Conn. May 22, 2019 (GLOBE NEWSWIRE) — Photronics,
Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2019 second quarter ended April 28, 2019.
Second quarter revenue was $131.6 million, 6% better than the previous quarter and 1% better than the same quarter last year. Integrated
circuit (IC) revenue was $98.6 million, up 4% sequentially and down 4% compared with the second quarter of last year. Flat panel display (FPD) revenue was $33.0 million, up 11% compared with last quarter and 16% compared with the same period last
year.
Net income attributable to Photronics, Inc. shareholders was $8.5 million ($0.13 per diluted share), compared with $5.3 million ($0.08 per
diluted share) for the first quarter of 2019 and $10.7 million ($0.15 per diluted share) for the second quarter of 2018.
"We performed well in the second quarter despite a challenging industry environment, delivering sequential growth in IC and strong sequential
and year-over-year growth in FPD,” said Peter Kirlin, chief executive officer. “The double-digit FPD growth resulted from a strong market for masks for mobile displays, including AMOLED and LTPS LCD, with a contribution from our first shipment of a
G10.5+ photomask. In IC, we achieved sequential growth with the anticipated recovery in high-end memory. Startup activity in China impacted operating profit, resulting in operating margin of 7.0%. Cash at the end of the quarter was $167.1 million
after repayment of $57.5 million in convertible debt, which eliminated 5.5 million potentially dilutive shares, and $33.5 million in capital expenditures, primarily in China. Besides solid financial results, we celebrated the grand opening of our
new Xiamen and Hefei facilities in China. We are excited to serve our customers in mainland China with locally produced reticles. With these milestones, we are on track to meet our 2020 targets of $630 million revenue and $0.80 earnings per share.”
Third Quarter 2019 Guidance
For the third quarter of 2019, Photronics expects revenue to be between $132 million and $142 million, and net income attributable to
Photronics, Inc. shareholders to be between $0.05 and $0.14 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 22, 2019. The call can be accessed by
logging onto Photronics' website 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’ website for instant replay access.
About Photronics
Photronics is a leading worldwide
manufacturer of integrated circuit (IC) and flat panel display (FPD) photomasks. High precision quartz plates that contain microscopic images of
electronic circuits, photomasks are a key element in the IC and FPD manufacturing process. Founded in 1969, Photronics has been a trusted photomask supplier for 50 years. As of October 31, 2018, the company had 1,575 employees across 11
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 the
company and its subsidiaries. The forward-looking statements contained in this press release 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. There is no assurance that the company’s expectations will be realized. For additional
information please see the company’s quarterly and annual reports filed with the Securities and Exchange Commission. 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)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||
|
April 28,
2019 |
January 27,
2019 |
April 29,
2018 |
April 28,
2019 |
April 29,
2018 |
||||||||||||||||
|
Revenue
|
$
|
131,580
|
$
|
124,712
|
$
|
130,779
|
$
|
256,291
|
$
|
254,225
|
||||||||||
|
Cost of goods sold
|
105,570
|
98,610
|
97,960
|
204,179
|
193,744
|
|||||||||||||||
|
Gross profit
|
26,010
|
26,102
|
32,819
|
52,112
|
60,481
|
|||||||||||||||
|
Operating Expenses:
|
||||||||||||||||||||
|
Selling, general and administrative
|
13,269
|
13,792
|
13,637
|
27,061
|
25,387
|
|||||||||||||||
|
Research and development
|
3,542
|
4,263
|
3,817
|
7,805
|
7,921
|
|||||||||||||||
|
Total Operating Expenses
|
16,811
|
18,055
|
17,454
|
34,866
|
33,308
|
|||||||||||||||
|
Operating income
|
9,199
|
8,047
|
15,365
|
17,246
|
27,173
|
|||||||||||||||
|
Other income (expense), net
|
3,931
|
1,108
|
3,332
|
5,039
|
(774
|
)
|
||||||||||||||
|
Income before income taxes
|
13,130
|
9,155
|
18,697
|
22,285
|
26,399
|
|||||||||||||||
|
Income tax provision
|
3,278
|
1,387
|
3,508
|
4,665
|
1,729
|
|||||||||||||||
|
Net income
|
9,852
|
7,768
|
15,189
|
17,620
|
24,670
|
|||||||||||||||
|
Net income attributable to noncontrolling interests
|
1,373
|
2,501
|
4,524
|
3,874
|
8,107
|
|||||||||||||||
|
Net income attributable to Photronics, Inc. shareholders
|
$
|
8,479
|
$
|
5,267
|
$
|
10,665
|
$
|
13,746
|
$
|
16,563
|
||||||||||
|
Earnings per share:
|
||||||||||||||||||||
|
Basic
|
$
|
0.13
|
$
|
0.08
|
$
|
0.15
|
$
|
0.21
|
$
|
0.24
|
||||||||||
|
|
||||||||||||||||||||
|
Diluted
|
$
|
0.13
|
$
|
0.08
|
$
|
0.15
|
$
|
0.20
|
$
|
0.23
|
||||||||||
|
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
66,261
|
66,583
|
69,293
|
66,422
|
69,024
|
|||||||||||||||
|
|
||||||||||||||||||||
|
Diluted
|
70,597
|
67,047
|
75,190
|
71,593
|
75,052
|
|||||||||||||||
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated
Balance Sheets
(in thousands)
(Unaudited)
|
April 28,
2019 |
October 31,
2018 |
|||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
167,066
|
$
|
329,277
|
||||
|
Accounts receivable
|
123,371
|
120,515
|
||||||
|
Inventories
|
34,696
|
29,180
|
||||||
|
Other current assets
|
76,555
|
23,759
|
||||||
|
Total current assets
|
401,688
|
502,731
|
||||||
|
Property, plant and equipment, net
|
654,357
|
571,781
|
||||||
|
Intangible assets, net
|
10,182
|
12,368
|
||||||
|
Other assets
|
19,011
|
23,129
|
||||||
|
Total assets
|
$
|
1,085,238
|
$
|
1,110,009
|
||||
|
Liabilities and Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Current portion of long-term debt
|
$
|
505
|
$
|
57,453
|
||||
|
Accounts payable and accrued liabilities
|
138,779
|
133,623
|
||||||
|
Total current liabilities
|
139,284
|
191,076
|
||||||
|
Long-term debt
|
35,921
|
-
|
||||||
|
Other liabilities
|
11,705
|
14,364
|
||||||
|
Photronics, Inc. shareholders' equity
|
763,568
|
759,671
|
||||||
|
Noncontrolling interests
|
134,760
|
144,898
|
||||||
|
Total equity
|
898,328
|
904,569
|
||||||
|
Total liabilities and equity
|
$
|
1,085,238
|
$
|
1,110,009
|
||||
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
|
Six Months Ended
|
||||||||
|
April 28,
|
April 29,
|
|||||||
|
2019
|
2018
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
17,620
|
$
|
24,670
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
38,515
|
44,429
|
||||||
|
Changes in operating assets, liabilities and other
|
(58,422
|
)
|
(31,191
|
)
|
||||
|
Net cash (used in) provided by operating activities
|
(2,287
|
)
|
37,908
|
|||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property, plant and equipment
|
(140,436
|
)
|
(44,129
|
)
|
||||
|
Government incentive
|
5,698
|
-
|
||||||
|
Other
|
(23
|
)
|
296
|
*
|
||||
|
Net cash used in investing activities
|
(134,761
|
)
|
(43,833
|
)*
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from debt
|
39,633
|
-
|
||||||
|
Contribution from noncontrolling interest
|
29,394
|
11,998
|
||||||
|
Repayments of debt
|
(61,220
|
)
|
(2,771
|
)
|
||||
|
Dividends paid to noncontrolling interests
|
(26,102
|
)
|
-
|
|||||
|
Purchase of treasury stock
|
(10,696
|
)
|
-
|
|||||
|
Proceeds from share-based arrangements
|
1,033
|
3,776
|
||||||
|
Other
|
(45
|
)
|
(267
|
)
|
||||
|
Net cash (used in) provided by financing activities
|
(28,003
|
)
|
12,736
|
|||||
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
2,843
|
6,330
|
*
|
|||||
|
Net (decrease) increase in cash, cash equivalents, and restrcited cash
|
(162,208
|
)
|
13,141
|
*
|
||||
|
Cash, cash equivalents, and restricted cash, beginning of period
|
331,989
|
*
|
310,936
|
*
|
||||
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
169,781
|
$
|
324,077
|
*
|
|||
* Amount has been modified to reflect the adoption of ASU 2016-18
Exhibit 99.5
Photronics, Inc. Q2 2019 Financial Results Conference CallMay 22, 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”, “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 6% Q/Q and 1% Y/YSequential IC growth on high-end memory recoveryFPD growth driven by mobile
display (AMOLED and LTPS LCD)Record revenue to China, representing 26% of total revenueNet income attributable to Photronics, Inc. shareholders of $8.5M ($0.13/share)Capex of $34M ($140M YTD) to support China investmentsRepaid $57.5M
convertible debt; eliminated 5.5M potentially dilutive sharesChina grand opening ceremonies were held week of April 22Hefei shipped first G10.5+ mask in Q2; working to quickly complete customer qualificationsCompleting tool fine-tuning in
Xiamen; qualifications to begin soonOn track for 2020 targets: $630M revenue & $0.80 EPS Q2 2019 Summary 3 Successfully repositioned the business; China investments driving long-term, profitable growth
$M (except EPS) Q219 Q119 Q/Q Q218 Y/Y Revenue $ 131.6 $ 124.7 6% $ 130.8 1% Gross Profit $
26.0 $ 26.1 ─ $ 32.8 (21%) Gross Margin 19.8% 20.9% (110 bps) 25.1% (530 bps) Operating Income $ 9.2 $ 8.0 14% $ 15.4 (40%) Operating Margin 7.0% 6.5% 50 bps 11.7% (470 bps) Other income $ 3.9 $ 1.1 $ 2.8 $ 3.3 $
0.6 Income tax $ 3.3 $ 1.4 $ 1.9 $ 3.5 ($ 0.2) Minority interest $ 1.4 $ 2.5 ($ 1.1) $ 4.5 ($ 3.2) Net Income* $ 8.5 $ 5.3 61% $ 10.7 (20%) Diluted EPS* $ 0.13 $ 0.08 $ 0.05 $ 0.15 ($ 0.02) Days in
quarter 91 88 3 91 - Gross margin lower on China startupOperating expense down due primarily to completion of certain IC qualification activityChina startup activity was $4.1M negative impact to operating incomeOther income primarily
attributable to FX gainMinority interest reflects Taiwan gain partially offset by China loss Income Statement Summary 4 *Net income attributable to Photronics, Inc. shareholders
Revenue grew Q/Q on high-end memory recoveryChina revenue +21% Q/Q; +68% Y/YRepresents 18% of Q219 IC
revenueNew long-term purchase agreement increases sustainability of China businessOutlookExpect stable to improving high-end demandInitial shipments planned from Xiamen $M Q219 Q119 Q/Q Q218 Y/Y High-End* $ 38.4 $ 34.6 11% $
41.5 (7%) Mainstream $ 60.2 $ 60.3 ─ $ 60.8 (1%) Total $ 98.6 $ 94.9 4% $ 102.3 (4%) IC Photomask Revenue 5 *28nm and smaller Total may differ due to rounding
High-end driven by growth in AMOLED for mobile displaysDemand for mobile LTPS LCD displays remains
strong; drives Q/Q mainstream growthChina revenue +20% Q/Q; +58% Y/YRepresents 47% of Q219 FPD revenueShipped first G10.5+ plate from HefeiOutlookAMOLED technology remains in high demandPlan to increase Hefei
shipments $M Q219 Q119 Q/Q Q218 Y/Y High-End* $ 23.0 $ 21.5 7% $ 18.2 26% Mainstream $ 10.0 $ 8.4 20% $ 10.3 (2%) Total $ 33.0 $ 29.8 11% $ 28.5 16% FPD Photomask Revenue 6 *≥G8 and AMOLED Total may differ due to
rounding
$M Q219 Q119 Q218 Cash $ 167 $ 232 $ 321 Debt $ 36 $ 86 $ 59 Net Cash* $ 131 $ 146 $
262 Operating Cash Flow $ 17 ($ 19) $ 7 Capital Expenditures $ 34 $ 107 $ 33 Share repurchase - $ 11 - LTM EBITDA $ 148 $ 156 $ 138 Deploying cash balance to fund China investmentsYTD capex $140M; still anticipate FY capex ~
$210MReduced debt and dilutive share count with repayment of $57.5M convertible; remaining debt is local China borrowingBalance sheet able to fund planned investments, strategic M&A opportunities, and potential share repurchases Select
Financial Data 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Revenue ($M) $132 - $142 Taxes ($M) $2 - $3 EPS $0.05 - $0.14 Diluted Shares (M) ~66 Anticipate
sequential growth in Q3High-end IC markets stable to improvingLegacy FPD expected to remain at capacity with Hefei ramping productionPotential macro headwind & impact from trade policyExpect margin headwinds from China startupAnticipate
Q319 EPS impact of $0.03 - $0.06Plan to be profitable in China by end of 2019 Q319 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$253.1M61% High-End$158.5M39% High-End: 28nm and smaller; total may
differ due to rounding Mainstream$255.7M61% High-End$160.3M39%
FPD Photomask Revenue 12 Mainstream$42.3M34% High-End$83.5M66% High-End: ≥G8 and AMOLED; total may
differ due to rounding Mainstream$43.1M36% High-End$76.1M64%
Non-GAAP Reconciliation
14