Press Release

Photronics Reports Second Quarter Financial Results

May 18, 2010 at 4:30 PM EDT

BROOKFIELD, Conn., May 18, 2010 (BUSINESS WIRE) -- Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported fiscal 2010 second quarter results for the period ended May 2, 2010.

Sales for the second quarter were $105.1 million, an increase of 26% compared to $83.2 million for the second quarter of fiscal year 2009. Sales of semiconductor photomasks were $84.0 million, or 80.0% of revenues, during the second quarter of fiscal 2010, and sales of flat panel display (FPD) photomasks were $21.1 million, or 20.0% of revenues. GAAP net income attributable to Photronics, Inc. for the second quarter of fiscal year 2010 was $7.9 million, or $0.14 earnings per diluted share, compared to net loss attributable to Photronics, Inc. of $10.1 million, or $0.24 loss per share, for the second quarter of fiscal 2009.

Non-GAAP net income attributable to Photronics, Inc. for the second quarter of 2010 was $4.7 million, or $0.09 per diluted share, as compared to non-GAAP net loss attributable to Photronics, Inc. of $8.7 million, or $0.21 loss per share, for the second quarter of 2009. The section below entitled "Non-GAAP Financial Measures" provides a definition and information about the use of non-GAAP financial measures in this press release, and the attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.'s financial results under GAAP.

Sales for the first six months of 2010 were $203.3 million, an increase of 19% compared to $171.3 million for the first half of fiscal 2009. Sales of semiconductor photomasks were $158.5 million, or 78% of revenues for the first six months of 2010, and sales of FPD photomasks were $44.8 million, or 22% of revenues. GAAP net income attributable to Photronics, Inc. for the first six months of fiscal 2010 was $8.1 million, or $0.15 earnings per diluted share, compared to the prior year's first six months net loss of $20.3 million, or $0.49 loss per share. Non-GAAP net income attributable to Photronics, Inc. for the first six months of fiscal 2010 was $5.3 million, or $0.10 earnings per diluted share, as compared to non-GAAP net loss attributable to Photronics, Inc. for the first six months of fiscal 2009 of $17.6 million, or $0.42 loss per share.

In the second quarter of fiscal 2010, Photronics completed the sale of its former integrated circuit manufacturing facility in Shanghai, China for net proceeds of $12.9 million, and realized a net consolidation and restructuring gain of $5.0 million during the quarter. The Company had previously announced the closure of the facility in July 2009.

Constantine ("Deno") Macricostas, Photronics' chairman and chief executive officer, commented, "We exceeded our guidance range for both sales and non-GAAP net income for the second quarter of fiscal 2010. Second quarter sales improved 7% from the sequential first quarter of fiscal 2010 as a result of increased demand for integrated circuit photomasks for both high-end and mainstream products. Our high-end IC growth of 161% in the second quarter of fiscal 2010 compared to the second quarter last year, and 32% sequentially, further validates our strategy to focus on this segment of the market. Improved volume leverage coupled with our disciplined cost management resulted in a significant sequential increase in non-GAAP net income from $0.6 million to $4.7 million. We are also pleased that as a result of our continued focus on cash management, the proceeds from the sale of the Shanghai, China facility and improved operations, our net debt decreased by $18 million during the second quarter."

Non-GAAP Financial Measures

Non-GAAP net income (loss) attributable to Photronics, Inc. and non-GAAP earnings (loss) per share are "non-GAAP financial measures," as such term is defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. Photronics, Inc. believes that non-GAAP net income (loss) attributable to Photronics, Inc. and non-GAAP earnings (loss) per share that exclude certain non-cash or non-recurring income or expense items are useful for analysts and investors to evaluate Photronics, Inc.'s future on-going performance because they enable a more meaningful comparison of Photronics, Inc.'s projected earnings and performance with its historical results from prior periods. These non-GAAP metrics, in particular non-GAAP net income (loss) attributable to Photronics, Inc. and non-GAAP earnings (loss) per share, are not intended to represent funds available for Photronics, Inc.'s discretionary use and are not intended to represent or be used as a substitute for operating income (loss), net income (loss) or cash flows from operations data as measured under GAAP. The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance. Non-GAAP financial information is adjusted for the following items:

  • Consolidation and restructuring charges (credit) and impairment of long-lived assets are excluded because they are not a part of ongoing operations.
  • Deferred financing fees write-off is excluded because it is not a part of ongoing operations and was not anticipated when establishing forecast guidance for Q2-10.
  • Impact of financing expenses related to warrants are excluded because they do not affect cash earnings.

The presentation of this financial information should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States. The attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.'s financial results under GAAP.

A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 19, 2010. The live dial-in number is 913-312-1450. The call can also be accessed by logging onto Photronics' web site at www.photronics.com.

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 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 as discussed in filings with the U. S. Securities and Exchange Commission (SEC). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements.

11-2010

PLAB - E

PHOTRONICS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Information

(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
May 2, May 3, May 2, May 3,
2010 2009 2010 2009

Reconciliation of GAAP to Non-GAAP Net Income (Loss)

Attributable to Photronics, Inc.

GAAP net income (loss) attributable to Photronics, Inc. $ 7,873 $ (10,072 ) $ 8,086 $ (20,305 )
(a) Consolidation and restructuring charges (credit),
and impairment of long-lived assets, net of tax (5,029 ) 1,342 (4,836 ) 2,677
(b) Impact of warrants, net of tax 860 - 1,080 -
(c) Deferred financing fees write off, net of tax 1,011 - 1,011 -
Non-GAAP net income (loss) attributable to Photronics, Inc. $ 4,715 $ (8,730 ) $ 5,341 $ (17,628 )
Weighted average number of diluted shares outstanding:
GAAP 65,780 41,775 54,291 41,749
Non-GAAP 54,469 41,775 54,291 41,749
Earnings (loss) per diluted share:
GAAP $ 0.14 $ (0.24 ) $ 0.15 $ (0.49 )
Non-GAAP $ 0.09 $ (0.21 ) $ 0.10 $ (0.42 )
(a) Includes charges (credit) related to restructurings in China and United Kingdom and impairment of long-lived assets in the United Kingdom.
(b) Represents financing expenses related to warrants, which are recorded in other income (expense).
(c) As a result of an amendment to the revolving credit facility, represents write-off of deferred financing fees recorded in interest expense.

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
May 2, May 3, May 2, May 3,
2010 2009 2010 2009
Net sales $ 105,070 $ 83,232 $ 203,267 $ 171,275
Costs and expenses:
Cost of sales (82,980 ) (71,792 ) (163,000 ) (149,275 )
Selling, general and administrative (10,870 ) (10,630 ) (21,018 ) (21,032 )
Research and development (3,601 ) (4,177 ) (7,556 ) (7,801 )
Consolidation, restructuring and related (charges) credit 5,029 (406 ) 4,836 (2,086 )
Impairment of long-lived assets - (1,458 ) - (1,458 )
Operating income (loss) 12,648 (5,231 ) 16,529 (10,377 )
Other expense, net (2,183 ) (5,001 ) (4,636 ) (8,625 )
Income (loss) before income taxes 10,465 (10,232 ) 11,893 (19,002 )
Income tax (provision) benefit (1,860 ) 76 (2,880 ) (1,122 )
Net income (loss) 8,605 (10,156 ) 9,013 (20,124 )
Net (income) loss attributable to noncontrolling interests (732 ) 84 (927 ) (181 )
Net income (loss) attributable to Photronics, Inc. $ 7,873 $ (10,072 ) $ 8,086 $ (20,305 )
Earnings (loss) per share:
Basic $ 0.15 $ (0.24 ) $ 0.15 $ (0.49 )
Diluted $ 0.14 $ (0.24 ) $ 0.15 $ (0.49 )
Weighted average number of common shares
outstanding:
Basic 53,405 41,775 53,253 41,749
Diluted 65,780 41,775 54,291 41,749

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)
(Unaudited)
May 2, November 1,
2010 2009

Assets

Current assets:
Cash and cash equivalents $ 91,410 $ 88,539
Accounts receivable 81,247 66,920
Inventories 15,861 14,826
Other current assets 9,912 9,712
Total current assets 198,430 179,997
Property, plant and equipment, net 360,108 347,889
Investment in joint venture 60,901 60,945
Intangible assets, net 50,794 55,054
Other assets 19,175 19,771
$ 689,408 $ 663,656

Liabilities and Equity

Current liabilities:
Current portion of long-term borrowings $ 11,364 $ 10,301
Accounts payable and accrued liabilities 94,017 80,154
Total current liabilities 105,381 90,455
Long-term borrowings 96,897 112,137
Deferred income taxes and other liabilities 10,961 11,368
Equity 476,169 449,696
$ 689,408 $ 663,656

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)
(Unaudited)
Six Months Ended

May 2,

May 3,
2010 2009
Cash flows from operating activities:
Net income (loss) $ 9,013 $ (20,124 )
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 45,863 42,027
Consolidation, restructuring, and related charges (credit) and impairment of long-lived assets (5,059 ) 3,544
Changes in assets and liabilities and other (16,054 ) 902
Net cash provided by operating activities 33,763 26,349
Cash flows from investing activities:
Purchases of property, plant and equipment (31,003 ) (20,375 )
Proceeds from sale of facility 12,880 -
Increase in restricted cash (1,250 ) -
Distribution from joint venture - 5,000
Proceeds from sales of investments and other 255 941
Net cash used in investing activities (19,118 ) (14,434 )
Cash flows from financing activities:
Repayments of long-term borrowings (40,302 ) (10,889 )
Proceeds from long-term borrowings 26,622 -
Payments of deferred financing fees (1,056 ) (2,249 )
Other 71 -
Net cash used in financing activities (14,665 ) (13,138 )
Effect of exchange rate changes on cash 2,891 (1,052 )
Net increase (decrease) in cash and cash equivalents 2,871 (2,275 )
Cash and cash equivalents, beginning of period 88,539 83,763
Cash and cash equivalents, end of period $ 91,410 $ 81,488
Supplemental disclosure of cash flow information:
Change in accrual for purchases of property, plant and equipment $ 19,521 $ (14,542 )

SOURCE: Photronics, Inc. 

Photronics, Inc.
Sean T. Smith, 203-775-9000
Senior Vice President
Chief Financial Officer
ssmith@photronics.com

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