SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ......April 30, 1995......
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from................. to ................
Commission file number...0-15451...
...PHOTRONICS, INC....
(Exact name of registrant as specified in its charter)
...Connecticut... ...06-0854886...
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
......1061 East Indiantown Road, Jupiter, FL...... ..33477..
(Address of principal executive offices) (Zip Code)
...(203) 775-9000...
(Registrant's telephone number, including area code)
......P.O. Box 5226, 15 Secor Road, Brookfield, CT 06804......
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ..X.. No .....
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
Common Stock, $.01 par value 11,206,416 Shares
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at April 30
1995 (unaudited) and October 31, 1994 3-4
Condensed Consolidated Statement of Earnings
for the three and six months ended April 30,
1995 and 1994 (unaudited) 5
Condensed Consolidated Statement of Cash Flows
for the six months ended April 30,
1995 and 1994 (unaudited) 6
Notes to Condensed Consolidated Financial
Statements (unaudited) 7-8
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9-11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands)
ASSETS
April 30, October 31,
1995 1994
----------- -----------
(Unaudited)
Current assets:
Cash, cash equivalents and
short-term investments $ 47,591 $27,627
Accounts receivable (less allowance
for doubtful accounts of $185 in
1995 and $135 in 1994) 16,070 10,218
Inventories 3,453 2,469
Other current assets 2,107 2,140
-------- -------
Total current assets 69,221 42,454
Property, plant and equipment 50,462 39,205
Intangible assets (less accumulated
amortization of $1,617 in 1995
and $1,117 in 1994) 10,760 5,523
Investments and other assets 21,725 11,164
-------- -------
$152,168 $98,346
======== =======
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands, except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31,
1995 1994
----------- -----------
(Unaudited)
Current liabilities:
Short-term debt and current
portion of long-term debt $ 3,034 $ 467
Accounts payable 9,091 5,053
Accrued salaries and wages 2,989 2,615
Other accrued liabilities 3,781 1,990
-------- -------
Total current liabilities 18,895 10,125
Long-term debt 1,827 495
Deferred income taxes and other liabilities 11,834 7,324
-------- -------
Total liabilities 32,556 17,944
-------- -------
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, $0.01 par value,
2,000,000 shares authorized,
none issued and outstanding - -
Common stock, $0.01 par value,
10,000,000 shares authorized in 1994
and 20,000,000 shares authorized in 1995,
11,342,916 shares issued in 1995
and 6,659,929 shares in 1994 113 67
Additional paid-in capital 67,200 41,338
Retained earnings 41,425 34,338
Unrealized gains on investments 11,647 5,608
Treasury stock, 136,500 shares in 1995
and 91,000 shares in 1994, at cost (245) (245)
Deferred compensation on restricted stock (528) (704)
-------- --------
Total shareholders' equity 119,612 80,402
-------- -------
$152,168 $98,346
======== =======
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
------------------ ----------------
1995 1994 1995 1994
-------- -------- ------- -------
Net sales $30,037 $18,642 $56,213 $37,499
Costs and expenses:
Cost of sales 18,422 12,177 34,839 24,702
Selling, general and administrative 4,104 2,260 7,647 4,533
Research and development 1,595 1,105 2,943 2,242
------- ------- ------- -------
Operating income 5,916 3,100 10,784 6,022
Interest and other income, net 179 95 513 170
------- ------- ------- -------
Income before income taxes and
cumulative effect of change
in accounting for income taxes 6,095 3,195 11,297 6,192
Provision for income taxes 2,275 1,084 4,210 2,044
------- ------- ------- -------
Income before cumulative
effect of change in
accounting for income taxes 3,820 2,111 7,087 4,148
Cumulative effect of change in
accounting for income taxes - - - 237
------- ------- ------- -------
Net income $ 3,820 $ 2,111 $ 7,087 $ 4,385
======= ======= ======= =======
Net income per common share:
Income before cumulative effect
of change in accounting for
income taxes $0.36 $0.21 $0.68 $0.42
Cumulative effect of change in
accounting for income taxes - - - 0.02
----- ----- ----- -----
Net income $0.36 $0.21 $0.68 $0.44
===== ===== ===== =====
Weighted average number of
common shares outstanding 10,513 10,034 10,385 9,986
====== ====== ====== =====
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
April 30,
--------------------
1995 1994
------- -------
Cash flows from operating activities:
Net income $ 7,087 $ 4,385
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property,
plant and equipment 4,130 4,018
Amortization of intangible assets 500 322
Gain on disposition of investments (388) -
Deferred income taxes (107) (26)
Cumulative effect of change in
accounting for income taxes - (237)
Other 327 (6)
Changes in assets and liabilities, net of
effects of acquisition in 1995:
Accounts receivable (5,852) (958)
Inventories (104) 218
Other current assets 47 (897)
Accounts payable and accrued liabilities 6,744 (287)
Income taxes payable (541) 740
------- -------
Net cash provided by operating activities 11,843 7,272
------- -------
Cash flows from investing activities:
Acquisition of photomask operations (7,400) -
Deposits on and purchases of property,
plant and equipment (10,137) (2,747)
Net change in short-term investments (5,498) 988
Proceeds from sale of investments 410 -
Other (170) (42)
------- -------
Net cash used in investing activities (22,795) (1,801)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (451) (323)
Net proceeds from issuance of common stock 25,908 918
------- -------
Net cash provided by financing activities 25,457 595
------- -------
Net increase in cash and cash equivalents 14,505 6,066
Cash and cash equivalents at beginning of period 25,092 8,225
------- -------
Cash and cash equivalents at end of period $39,597 $14,291
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $21 $40
Income taxes $4,490 $977
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three and Six Months Ended April 30, 1995
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of the Company included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of management, reflect
all adjustments which are necessary to present fairly the results for the
three and six-month periods ended April 30, 1995 and 1994. Interim financial
data presented herein are unaudited. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations; however, management believes that the
disclosures are adequate to make the information presented not misleading.
This report should be read in conjunction with the consolidated financial
statements and footnotes as of October 31, 1994, which give a complete
discussion of these matters.
NOTE 2 - ACQUISITION OF PHOTOMASK OPERATIONS
OF HOYA MICRO MASK, INC.
On December 1, 1994, the Company acquired certain assets held by Hoya Micro
Mask, Inc. ("Micro Mask"), an independent photomask manufacturer with
manufacturing operations located in Sunnyvale, California. The transaction
included the purchase of land, buildings, inventory and certain assets other
than cash and receivables. In addition, significant manufacturing systems
owned by Micro Mask were leased by the Company from Micro Mask. The
acquisition was financed through available cash reserves and involved the
payment of approximately $7.2 million in cash at closing and the obligation
to pay $3.0 million and $1.8 million, without interest, six months and four
years after the closing, respectively. In addition, the Company incurred
approximately $0.2 million of costs in connection with the acquisition. The
operating lease of the significant manufacturing systems has a term ranging
from 44 to 62 months and includes the right to purchase the systems at fair
market value at the end of the lease.
The acquisition was accounted for as a purchase and, accordingly, the
acquisition price was allocated to property, plant and equipment as well as
certain intangible assets based on relative fair value. Intangible assets
include goodwill of approximately $5.2 million which will be amortized over
twenty (20) years. The consolidated statement of earnings includes the
results of Micro Mask's operations from December 1, 1994, the effective date
of the acquisition.
The consolidated results of the Company's operations on a proforma basis for
the three and six months ended April 30, 1994, as though the purchase had
been made as of the beginning of that period, would have reflected sales of
approximately $24.7 million and $49.3 million and net income of $2.4 million,
or $0.23 per share, and $4.4 million, or $0.44 per share before the change in
accounting for income taxes. The proforma results of operations are not
necessarily indicative of the actual operating results that would have
occurred had the transaction been consummated at the beginning of the period,
or of the future operating results of the combined companies.
NOTE 3 - SHAREHOLDERS' EQUITY
In January 1995, the Company's Board of Directors approved a three-for two
stock split which became effective on March 20, 1995. On March 16, 1995, the
shareholders approved an amendment to the Company's Certificate of
Incorporation increasing the number of common shares which the Company is
authorized to issue from 10,000,000 shares to 20,000,000 shares.
Shareholders of record on March 20, 1995, received three shares of common
stock for each two they owned on that date. A total of 3.3 million shares
were issued in connection with the stock split which was effected in the form
of a dividend. All applicable share and per share data reflected in the
financial statements have been adjusted to reflect the stock split.
On April 18, 1995, the Company issued 1,290,000 new shares of common stock at
a price of $21.00 per share ($19.85 per share for underwriting discounts),
40,000 shares of common stock due to the exercise of stock options at prices
ranging from $1.83 to $3.17 per share and 7,500 additional shares of common
stock resulting from the exercise of a warrant at $5.24 per share. The gross
proceeds and costs of the issue were $25.7 million and approximately
$250,000, respectively. Issuance costs were recorded as a reduction of
additional paid-in capital. The net proceeds will be used to fund current
expansion plans. On May 16, 1995, the underwriters exercised the 210,000
share over-allotment option at a price of $19.85 per share.
NOTE 4 - REVOLVING CREDIT AGREEMENT
In March 1995, the Company entered into a new unsecured revolving credit
facility that provides for borrowings of up to $10 million per year in each
of the next three years, subject to a carryover in the second and third year
of up to $3 million. Such borrowings are convertible into term loans,
payable in equal quarterly installments over five years. The new facility
provides for essentially the same terms and conditions as the Company's
previous revolving credit agreement, including compliance with and
maintenance of certain financial covenants and ratios.
NOTE 5 - SUBSEQUENT EVENT
In May 1995, the Company announced that it would acquire the manufacturing
operations of Microphase Laboratories, Inc. (Microphase) in Colorado Springs,
Colorado. The purchase price will approximate one times annual sales and
will be payable in newly issued common stock of the Company. Microphase had
sales in excess of $2 million during 1994 and employs 28 people. Microphase
focuses on the large area mask market, as well as supporting traditional
integrated circuit mask customers. It is expected that the acquisition will
have a minimal near-term effect on sales and earnings.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Material Changes in Results of Operations
Three and Six Months Ended April 30, 1995 versus April 30, 1994
A significant portion of the material changes in each category of the
Company's results of operations for the three and six months ended April 30,
1995, as compared to the same periods in the prior fiscal year are
attributable to the acquisition, on December 1, 1994, of the photomask
manufacturing operations and assets of Hoya Micro Mask, Inc. ("Micro Mask"),
an independent photomask manufacturer with manufacturing operations located
in Sunnyvale, California. The operations acquired represent a full-service,
state-of-the-art photomask manufacturing facility.
Net sales for the three and six months ended April 30, 1995, increased
61.1% to $30.0 million and 49.9% to $56.2 million, respectively, compared
with $18.6 million and $37.5 million in the same periods in the prior fiscal
year. The increases are attributable to the inclusion of sales, commencing
December 1, 1994, by the Company's new Sunnyvale facility and increased
shipments to customers from existing facilities as a result of stronger
demand generally.
Cost of sales for the three and six months ended April 30, 1995,
increased 51.3% to $18.4 million and 41.0% to $34.8 million, respectively,
compared to $12.2 million and $24.7 million for the same periods in the prior
fiscal year. These increases principally are the result of increased sales,
coupled with higher employee incentive compensation expenses resulting from
the Company's performance. Additionally, during these periods, employee
benefit costs increased as the majority of the employees at the Texas
facility became eligible for benefits on April 1, 1994. As a percentage of
net sales, cost of sales decreased to 61.3% and 62.0% for the three and six
months ended April 30, 1995 as compared with 65.3% and 65.9% in the
corresponding periods last year. The improvement primarily was due to the
higher capacity utilization and greater operating efficiencies afforded by
sales volume increases and a more favorable mix of more complex photomasks.
The Company anticipates that its fixed operating costs will increase in
connection with its planned expansion of capacity. However, the Company
expects to match these higher costs with continued increases in sales levels,
together with a focus on improving capacity utilization and operating
efficiencies.
Selling, general and administrative expenses increased 81.6% to $4.1
million and 68.7% to $7.6 million for the three and six months ended April
30, 1995, respectively, compared with $2.3 million and $4.5 million for the
same periods in the prior fiscal year. The increases were due largely to the
inclusion of expenses of the Company's Sunnyvale facility and higher employee
incentive compensation expense provisions as a result of performance.
Furthermore, the Company had increases in staffing levels, as well as general
increases in wages and other expenses. As a percentage of net sales,
selling, general and administrative expenses increased to 13.7% and 13.6% for
the three and six months ended April 30, 1995, respectively, compared with
12.1% for the same periods last year.
Research and development expenses for the three and six months ended
April 30, 1995, increased 44.3% to $1.6 million and 31.3% to $2.9 million,
respectively, compared to $1.1 million and $2.2 million from the same periods
for the prior fiscal year. These increases are primarily the result of
several projects dealing with advanced technology photomasks. However, as a
percentage of net sales, research and development expenses declined to 5.3%
and 5.2% for the three and six months ended April 30, 1995, respectively,
compared to 5.9% and 6.0% in the corresponding prior fiscal year periods,
reflecting increased net sales. The Company has increased its research and
development efforts and expects that these expenses as a percentage of net
sales may return to historic levels.
Interest and other income, net, for the three and six months ended April
30, 1995, increased to $179,000 and $513,000, respectively, compared to
$95,000 and $170,000 for the same periods in the prior fiscal year due
principally to increases in interest income resulting from higher levels of
funds available for investment, coupled with higher prevailing interest
rates. In addition, the Company had net gains on the disposition of
investments during the six months ended April 30, 1995.
For the three and six months ended April 30, 1995, the Company provided
Federal and state income taxes at an estimated combined effective annual tax
rate of approximately 37% as compared to approximately 34% and 33% in the
same periods for the prior fiscal year. The increase in the Company's
estimated tax rate primarily is the result of a larger portion of income
being subject to the 35% incremental Federal income tax rate and a greater
portion of the Company's income being generated in California. For the six
months ended April 30, 1994, the Company recognized the cumulative effect of
the adoption of SFAS 109, "Accounting for Income Taxes," resulting in a
benefit of $0.2 million, or $0.02 per share.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments
increased $20.0 million during the six months ended April 30, 1995, primarily
as a result of the issuance of 1,290,000 new shares of common stock in a
public equity offering completed on April 18, 1995. The proceeds of the
offering amounted to $25.7 million and were offset by cash of $7.4 million
expended to fund the acquisition of Micro Mask. Excluding the proceeds from
the stock offering and the funds utilized in the Micro Mask acquisition,
investing activities used cash totaling $15.4 million, principally for
deposits on and purchases of property, plant and equipment and for additional
short-term investments, and financing activities used an additional $0.2
million. Such expenditures were offset by $11.8 million of cash provided by
operating activities after utilizing approximately $2.0 million for initial
working capital at the Sunnyvale site.
Accounts receivable increased to $16.1 million at April 30, 1995, from
$10.2 million at October 31, 1994, primarily as a result of higher sales
levels, particularly due to the inclusion of sales from the new Sunnyvale
operations. Inventory increased to $3.5 million at April 30, 1995, from $2.5
million at October 31, 1994, as a result of the addition of the Sunnyvale
facility.
Property, plant and equipment and intangible assets at April 30, 1995,
increased from October 31, 1994, principally due to the acquisition of $5.1
million of fixed assets and $5.7 million of intangible assets in connection
with the Micro Mask acquisition and other deposits on and purchases of
property, plant and equipment totaling $10.1 million. These increases were
offset by normal depreciation and amortization expense totaling $4.6 million.
Investments increased from $11.1 million at October 31, 1994, to $21.5
million at April 30, 1995, due to additional unrealized gains recorded as a
result of the increased fair value of the Company's investments, net of
dispositions, during the period.
Accounts payable and other accrued liabilities at April 30, 1995,
increased from October 31, 1994, principally due to the addition of the
Sunnyvale operations, increased payables related to recent equipment
purchases, and business volume increases generally. These increases were
offset by the payment during the period of certain fiscal 1994 expenses.
Accrued salaries and wages increased from October 31, 1994, as a result of
the addition of the Sunnyvale operations and provisions for incentive
compensation for fiscal 1995, offset by payments during the period of fiscal
1994 and current year incentive compensation.
As a result of obligations incurred in connection with the Micro Mask
acquisition (including $3.0 million due in June 1995), net of a $0.4 million
balloon payment and normal monthly payments which were paid, short-term debt
and the current portion of long-term debt increased by $2.6 million and long-
term debt, less the current portion, increased $1.3 million (net of imputed
interest on the Micro Mask debt) during the six months ended April 30, 1995.
Deferred income taxes at April 30, 1995, increased $4.5 million from October
31, 1994, to $11.6 million largely due to amounts provided on the unrealized
gains on investments.
The Company's commitments represent investments in additional
manufacturing capacity, as well as advanced equipment for research and
development of the next generation of high-end, more complex photomasks. As
of April 30, 1995, the Company had commitments for the purchase or lease of
additional property, plant and equipment with an acquisition cost of
approximately $38.4 million, of which approximately $11.7 million had been
paid at that date. Included in commitments are $11.3 million related to the
construction of the Company's new facility in the Dallas area. Additional
commitments for relocation of the Company's current Texas operations and the
proposed Singapore operations will be incurred later in fiscal 1995.
The Company will use its working capital, bank credit lines, leasing
arrangements and the net proceeds from its recently completed stock offering
to finance its capital expenditures. In March 1995, the Company entered into
a new unsecured revolving credit facility that provides for borrowings of up
to $10 million per year in each of the next three years, subject to a
carryover in the second and third year of up to $3 million. Such borrowings
are convertible into term loans, payable in equal quarterly installments over
five years. The new facility provides for essentially the same terms and
conditions as the Company's previous revolving credit agreement, including
compliance with and maintenance of certain financial covenants and ratios.
In May 1995, the underwriters exercised the 210,000 share over-allotment
option at a price of $19.85 per share. The Company believes that its
currently available resources, together with its capacity for substantial
growth, are sufficient to satisfy its cash requirements for the foreseeable
future.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The matters set forth in this Item 4 were submitted
to a vote of security holders of the Company at an
Annual Meeting of Shareholders held on March 16, 1995.
(b) The following directors, constituting the entire Board
of Directors were elected at the Annual Meeting of
Shareholders held on March 16, 1995. Also indicated
are the affirmative, negative and authority withheld
votes for each director.
Authority
For Against Withheld
Walter M. Fiederowicz 5,536,524 0 5,002
Joseph A. Fiorita, Jr. 5,536,524 0 5,002
Constantine S. Macricostas 5,536,399 0 5,127
Masahiro Fujii 5,536,524 0 5,002
Michael J. Yomazzo 5,536,524 0 5,002
(c) The following additional matters, and the affirmative and
negative votes and abstentions and broker non-votes with
respect thereto, were approved at the Annual Meeting of
Shareholders held on March 16, 1995:
The approval of an amendment to the Company's Certificate
of Incorporation increasing the authorized Common Stock
of the Company from 10,000,000 to 20,000,000 shares.
Affirmative Votes.........5,411,690
Negative Votes......... 125,736
Abstentions/Broker Non-Votes....... 4,100
The ratification of the appointment of Deloitte and Touche
LLP as the independent certified public accountants of the
Company for the fiscal year ending October 31, 1995:
Affirmative Votes.........5,536,725
Negative Votes......... 3,661
Abstentions/Broker Non-Votes....... 1,150
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on March 24, 1995 in order to
file certain exhibits. The exhibits filed included the amendment to the
Certificate of Incorporation of the Company and a Revolving Credit and Term
Loan Agreement between the Company and Chemical Bank.
SIGNATURES
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 thereunto duly authorized.
PHOTRONICS, INC.
(Registrant)
By:______ROBERT J. BOLLO_________
Robert J. Bollo
Vice President/Finance
(Duly Authorized Officer and
Principal Financial Officer)
Date: June 13, 1995
FORMS\10Q495/p
5
1,000
6-MOS
OCT-31-1995
APR-30-1995
39,558
8,033
16,255
185
3,453
69,221
86,992
36,530
152,168
18,895
1,827
113
0
0
119,499
152,168
56,213
56,213
34,839
34,839
0
50
69
11,297
4,210
7,087
0
0
0
7,087
0.68
0
