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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August 20, 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)
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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. ☐
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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COMMON
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PLAB
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NASDAQ Global Select Market
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Item 2.02
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Results of Operation and Financial Condition
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On August 20, 2019, the Corporation issued a press release reporting third 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 August 20, 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 July 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
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| (d) |
Exhibits
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| 99.1 |
Press Release dated August 20, 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 Q3 2019 Financial Results Conference Call August 20, 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: August 20, 2019
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Exhibit 99.1
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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 Third Quarter Fiscal 2019 Results
| • |
Third quarter 2019 revenue was $138.1 million, up 5% sequentially and 1% year-over-year
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| • |
Net income attributable to Photronics, Inc. shareholders was $6.3 million, or $0.10 per diluted share
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| • |
Strong cash generation increased cash to $197 million, even as investments in China expansion continue
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| • |
Fourth quarter 2019 guidance: revenue between $143 and $151 million with diluted EPS between $0.11 and $0.17
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BROOKFIELD, Conn. August 20, 2019 (GLOBE NEWSWIRE) — Photronics, Inc.
(NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2019 third quarter ended July 28, 2019.
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Financial Results Summary
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||||||||||||||||||||
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$ Millions, except per share data
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Q319
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Q219
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Q318
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Q/Q
|
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Y/Y
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|
|||||||||||||
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Revenue
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138.1
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131.6
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136.4
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5
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%
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1
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%
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|||||||||||||
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Integrated circuit (IC) revenue
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100.2
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98.6
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107.2
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2
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%
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(7
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%)
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|||||||||||||
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Flat panel display (FPD) revenue
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37.9
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33.0
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29.1
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15
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%
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30
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%
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|||||||||||||
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Net income attributable to Photronics, Inc. shareholders
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6.3
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8.5
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13.0
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(25
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%)
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(51
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%)
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|||||||||||||
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Diluted earnings per share
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0.10
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0.13
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0.18
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(0.03
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)
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(0.08
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)
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|||||||||||||
"We performed well during the third quarter of 2019, achieving record FPD revenue and delivering our eighth consecutive quarter of year-over-year revenue growth,” said
Peter Kirlin, chief executive officer. “FPD revenue growth was driven by continued strength in AMOLED display for mobile applications and ramping shipments from our new China facility. IC revenue grew sequentially due to improved demand from Asian
foundries for mainstream nodes. Gross and operating margins improved sequentially as we were able to control costs despite China startup activity. Our cash balance grew during the quarter, demonstrating our ability to generate cash as we continue
to invest in China. We are on pace to have an outstanding year in 2019 and positioned to perform even better in 2020 and beyond.”
Fourth Quarter 2019 Guidance
For the fourth quarter of 2019, Photronics expects revenue to be between $143 million and $151 million, and net income attributable to Photronics, Inc. shareholders to
be between $0.11 and $0.17 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Tuesday, August 20, 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)
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Three Months Ended
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Nine Months Ended
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|||||||||||||||||||
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July 28,
2019
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April 28,
2019
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July 29,
2018
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July 28,
2019
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July 29,
2018
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||||||||||||||||
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Revenue
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$
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138,112
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$
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131,580
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$
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136,391
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$
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394,404
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$
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390,616
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||||||||||
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Cost of goods sold
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107,542
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105,570
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100,794
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311,721
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294,538
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|||||||||||||||
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Gross profit
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30,570
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26,010
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35,597
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82,683
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96,078
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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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13,124
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13,269
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12,504
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40,186
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37,891
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|||||||||||||||
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Research and development
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4,046
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3,542
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2,653
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11,852
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10,574
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|||||||||||||||
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Total Operating Expenses
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17,170
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16,811
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15,157
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52,038
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48,465
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|||||||||||||||
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Operating income
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13,400
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9,199
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20,440
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30,645
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47,613
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|||||||||||||||
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Other income (expense), net
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(348
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)
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3,931
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1,411
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4,692
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637
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||||||||||||||
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Income before income taxes
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13,052
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13,130
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21,851
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35,337
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48,250
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|||||||||||||||
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Income tax provision
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3,218
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3,278
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2,054
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7,883
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3,783
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|||||||||||||||
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Net income
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9,834
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9,852
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19,797
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27,454
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44,467
|
|||||||||||||||
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Net income attributable to noncontrolling interests
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3,487
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1,373
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6,792
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7,361
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14,899
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|||||||||||||||
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Net income attributable to Photronics, Inc. shareholders
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$
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6,347
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$
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8,479
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$
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13,005
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$
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20,093
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$
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29,568
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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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0.10
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$
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0.13
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$
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0.19
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$
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0.30
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$
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0.43
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||||||||||
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|
||||||||||||||||||||
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Diluted
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$
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0.10
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$
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0.13
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$
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0.18
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$
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0.30
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$
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0.41
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||||||||||
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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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66,313
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66,261
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69,374
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66,386
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69,141
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|||||||||||||||
|
|
||||||||||||||||||||
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Diluted
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66,570
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70,597
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75,258
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69,919
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75,121
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|||||||||||||||
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
|
July 28,
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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$
|
197,243
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$
|
329,277
|
||||
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Accounts receivable
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134,369
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120,515
|
||||||
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Inventories
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39,982
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29,180
|
||||||
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Other current assets
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48,873
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23,759
|
||||||
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Total current assets
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420,467
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502,731
|
||||||
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Property, plant and equipment, net
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636,743
|
571,781
|
||||||
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Intangible assets, net
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9,013
|
12,368
|
||||||
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Other assets
|
47,972
|
23,129
|
||||||
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Total assets
|
$
|
1,114,195
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$
|
1,110,009
|
||||
|
Liabilities and Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Debt
|
$
|
6,100
|
$
|
57,453
|
||||
|
Accounts payable and accrued liabilities
|
153,174
|
133,623
|
||||||
|
Total current liabilities
|
159,274
|
191,076
|
||||||
|
Long-term debt
|
43,015
|
-
|
||||||
|
Other liabilities
|
11,568
|
14,364
|
||||||
|
|
||||||||
|
Photronics, Inc. shareholders' equity
|
763,394
|
759,671
|
||||||
|
Noncontrolling interests
|
136,944
|
144,898
|
||||||
|
Total equity
|
900,338
|
904,569
|
||||||
|
Total liabilities and equity
|
$
|
1,114,195
|
$
|
1,110,009
|
||||
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
Nine Months Ended
|
||||||||
|
July 28,
2019
|
July 29,
2018
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
27,454
|
$
|
44,467
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
60,387
|
64,485
|
||||||
|
Changes in operating assets, liabilities and other
|
(64,337
|
)
|
(21,995
|
)
|
||||
|
Net cash provided by operating activities
|
23,504
|
86,957
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property, plant and equipment
|
(160,149
|
)
|
(64,372
|
)
|
||||
|
Government incentive
|
17,694
|
-
|
||||||
|
Other
|
(24
|
)
|
313
|
* | ||||
|
Net cash used in investing activities
|
(142,479
|
)
|
(64,059
|
)*
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from debt
|
53,227
|
-
|
||||||
|
Contribution from noncontrolling interest
|
29,394
|
17,997
|
||||||
|
Repayments of debt
|
(61,319
|
)
|
(4,170
|
)
|
||||
|
Dividends paid to noncontrolling interests
|
(26,102
|
)
|
(8,166
|
)
|
||||
|
Purchase of treasury stock
|
(10,696
|
)
|
(6,787
|
)
|
||||
|
Proceeds from share-based arrangements
|
1,314
|
4,028
|
||||||
|
Other
|
(92
|
)
|
(274
|
)
|
||||
|
Net cash (used in) provided by financing activities
|
(14,274
|
)
|
2,628
|
|||||
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
1,206
|
(975
|
)*
|
|||||
|
Net (decrease) increase in cash, cash equivalents, and restrcited cash
|
(132,043
|
)
|
24,551
|
* | ||||
|
Cash, cash equivalents, and restricted cash, beginning of period
|
331,989
|
*
|
310,936
|
* | ||||
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
199,946
|
$
|
335,487
|
* | |||
* Amount has been modified to reflect the adoption of ASU 2016-18
Exhibit 99.5
Photronics, Inc. Q3 2019 Financial Results Conference CallAugust 20, 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 5% Q/Q and 1% Y/YRecord FPD revenue driven by mobile AMOLED displays and increasing
production from new Hefei, China facilitySequential IC growth on Asia foundry demand for mainstream nodesRecord revenue of products shipped to China, representing 25% of total revenueNet income attributable to Photronics, Inc. shareholders of
$6.3M ($0.10/share)Cash balance grew to $197M, strengthening the balance sheet as investments in China expansion continuesProduction ramping at both China facilities; total China production contributed ~$6M to revenueOn track for 2020
targets: $630M revenue & $0.80 EPS Q3 2019 Summary 3 Successfully repositioned the business; China investments driving long-term, profitable growth
$M (except EPS) Q319 Q219 Q/Q Q318 Y/Y Revenue $ 138.1 $ 131.6 5% $ 136.4 1% Gross
Profit $ 30.6 $ 26.0 18% $ 35.6 (14%) Gross Margin 22.1% 19.8% 230 bps 26.1% (400 bps) Operating Income $ 13.4 $ 9.2 46% $ 20.4 (34%) Operating Margin 9.7% 7.0% 270 bps 15.0% (530 bps) Other income (expense) ($
0.3) $ 3.9 ($ 4.3) $ 1.4 ($ 1.8) Income tax provision $ 3.2 $ 3.3 ($ 0.1) $ 2.1 $ 1.2 Minority interest $ 3.5 $ 1.4 $ 2.1 $ 6.8 ($ 3.3) Net Income* $ 6.3 $ 8.5 (25%) $ 13.0 (51%) Diluted EPS* $ 0.10 $ 0.13 ($
0.03) $ 0.18 ($ 0.08) Days in quarter 91 91 - 91 - Gross and operating margin improved Q/Q on favorable mix and cost controls, despite China startup activityChina operations were $6.0M negative impact to operating incomeOther income
primarily attributable to FX gain (Q219, Q318)Minority interest reflects Taiwan JV gain partially offset by China JV lossQ318 income tax includes $2M ($0.01/share) one-time tax benefit Income Statement Summary 4 *Net income attributable to
Photronics, Inc. shareholders
Revenue grew Q/Q on Asian foundry demand for mainstream nodesChina revenue softened on macro
concerns-19% Q/Q; -14% Y/YRepresents 15% of Q319 IC revenueOutlookExpect stable to improving high-end demandProduction ramping in XiamenPotential impact from US-China trade discussions $M Q319 Q219 Q/Q Q318 Y/Y High-End* $ 38.5 $
38.4 0% $ 46.1 (17%) Mainstream $ 61.7 $ 60.2 3% $ 61.2 1% Total $ 100.2 $ 98.6 2% $ 107.2 (7%) IC Photomask Revenue 5 *28nm and smaller Total may differ due to rounding
Record FPD revenue driven by mobile AMOLED displays and China production ramp, including G10.5+China
revenue +31% Q/Q; +61% Y/YRepresents 53% of Q319 FPD revenueOutlookAMOLED technology expected to remain in high demandHefei shipments should continue to ramp $M Q319 Q219 Q/Q Q318 Y/Y High-End* $ 25.9 $ 23.0 13% $
17.1 52% Mainstream $ 12.0 $ 10.0 19% $ 12.1 (1%) Total $ 37.9 $ 33.0 15% $ 29.1 30% FPD Photomask Revenue 6 *≥G8 and AMOLED Total may differ due to rounding
$M Q319 Q219 Q318 Cash $ 197 $ 167 $ 333 Debt $ 49 $ 36 $ 58 Net Cash* $ 148 $ 131 $
275 Operating Cash Flow $ 26 $ 17 $ 49 Capital Expenditures $ 20 $ 34 $ 20 Share repurchase - - $ 7 LTM EBITDA $141 $ 148 $ 153 Deploying cash balance to fund China investmentsDebt is local China borrowing to finance fixed
assetsYTD capex $160M; anticipate FY capex ~ $185MBalance sheet able to fund planned investments, strategic M&A opportunities, and potential share repurchases Select Financial Data 7 *Net cash defined as cash and cash equivalents less
long-term borrowings (including current portion), as reported in accordance with GAAP
Revenue ($M) $143 - $151 Taxes ($M) $2 - $3.5 EPS $0.11 - $0.17 Diluted Shares
(M) ~67 Anticipate sequential growth in Q4High-end IC markets stable to improvingFPD demand growing (AMOLED, G10.5+)Ramping China production (IC & FPD)Potential macro headwind & impact from trade policy Q419 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$253.6M63% High-End$150.9M37% High-End: 28nm and smaller; total
may differ due to rounding Mainstream$255.7M61% High-End$160.3M39%
FPD Photomask Revenue 12 Mainstream$42.2M31% High-End$92.4M69% High-End: ≥G8 and AMOLED; total may
differ due to rounding Mainstream$43.1M36% High-End$76.1M64%
Non-GAAP Reconciliation
14