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 ....January 31, 1996....
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)
...(407) 747-4163...
(Registrant's telephone number, including area code)
..............................
(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 January 31, 1996
Common Stock, $.01 par value 11,631,604 Shares
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
at January 31, 1996 (unaudited) and
October 31, 1995 3-4
Condensed Consolidated Statement of
Earnings for the Three Months Ended
January 31, 1996 and 1995 (unaudited) 5
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
January 31, 1996 and 1995 (unaudited) 6
Notes to Condensed Consolidated
Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands)
ASSETS
January 31, October 31,
1996 1995
----------- -----------
(Unaudited)
Current assets:
Cash, cash equivalents and
short-term investments $ 44,041 $ 51,865
Accounts receivable (less allowance
for doubtful accounts of $195 in
1996 and 1995) 17,566 17,857
Inventories 6,446 6,357
Other current assets 3,704 3,380
-------- --------
Total current assets 71,757 79,459
Property, plant and equipment
(less accumulated depreciation of
$43,524 in 1996 and $40,917 in 1995) 83,797 72,063
Intangible assets (less accumulated
amortization of $2,422 in 1996
and $2,156 in 1995) 10,023 10,289
Investments and other assets 13,863 12,407
-------- --------
$179,440 $174,218
======== ========
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
January 31, October 31,
1996 1995
----------- -----------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 36 $ 36
Accounts payable 18,732 17,850
Accrued salaries and wages 3,667 5,810
Other accrued liabilities 4,391 6,110
Income taxes payable 1,278 -
-------- --------
Total current liabilities 28,104 29,806
Long-term debt 1,800 1,809
Deferred income taxes and other liabilities 9,198 8,558
-------- --------
Total liabilities 39,102 40,173
-------- --------
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,
20,000,000 shares authorized,
11,768,104 shares issued in 1996
and 11,758,292 shares in 1995 118 118
Additional paid-in capital 75,869 75,083
Retained earnings 57,621 52,970
Unrealized gains on investments 7,239 6,471
Treasury stock, 136,500 shares at cost (245) (245)
Deferred compensation on restricted stock (264) (352)
-------- --------
Total shareholders' equity 140,338 134,045
-------- --------
$179,440 $174,218
======== ========
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
January 31,
-----------------------
1996 1995
------- -------
Net sales $34,668 $26,176
Costs and expenses:
Cost of sales 21,252 16,417
Selling, general and administrative 4,585 3,543
Research and development 1,825 1,348
------- -------
Operating income 7,006 4,868
Interest and other income, net 545 334
------- -------
Income before income taxes 7,551 5,202
Provision for income taxes 2,900 1,935
------- -------
Net income $ 4,651 $ 3,267
======= =======
Net income per common share $0.39 $0.32
===== =====
Weighted average number of
common shares outstanding 12,058 10,256
====== ======
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
January 31,
--------------------
1996 1995
------- -------
Cash flows from operating activities:
Net income $ 4,651 $ 3,267
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,835 2,303
Other 133 (184)
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable 291 (5,071)
Inventories 34 (156)
Other current assets (318) (141)
Accounts payable and accrued liabilities (2,980) 1,882
Income taxes payable 1,278 1,371
------- -------
Net cash provided by operating activities 5,924 3,271
------- -------
Cash flows from investing activities:
Acquisition of assets of photomask operations (4,900) (7,400)
Deposits on and purchases of property,
plant and equipment (9,629) (1,964)
Net change in short-term investments 11,026 (1,713)
Proceeds from sale of investments - 410
Other 4 (7)
------- -------
Net cash used in investing activities (3,499) (10,674)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (9) (442)
Proceeds from and tax effects of
exercise of stock options 786 114
------- -------
Net cash provided by (used in) financing activities 777 (328)
------- -------
Net decrease in cash and cash equivalents 3,202 (7,731)
Cash and cash equivalents at beginning of period 35,644 25,092
------- -------
Cash and cash equivalents at end of period $38,846 $17,361
======= =======
Cash paid during the period for:
Interest $ 8 $ 13
Income taxes $665 $567
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended January 31, 1996
(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-month periods ended January 31, 1996 and 1995. 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, 1995, which give a complete discussion of these matters.
NOTE 2 - ACQUISITION OF PHOTOMASK OPERATIONS OF
PLESSEY SEMICONDUCTOR LIMITED
On January 24, 1996, the Company acquired the photomask manufacturing
operations and assets of Plessey Semiconductors Limited ("Plessey"),
located in Oldham, United Kingdom, for $4.9 million in cash. In
connection with the transaction, the Company leased the facilities from
Plessey previously utilized by them for the manufacture of photomasks.
It is the Company's intention to relocate the operation to an independent
facility in the Manchester, UK, area in approximately one year. The
acquisition was accounted for as a purchase and, accordingly, the
acquisition price was allocated to property and equipment based on
relative fair value. The results of the Plessey operations are not
material to the Company.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Material Changes in Results of Operations
Three Months ended January 31, 1996 versus January 31, 1995
A significant portion of the material changes in the Company's
results of operations for the three months ended January 31, 1996, as
compared to the same period last year is attributable to its recent
acquisitions. The Company acquired the photomask manufacturing
operations and assets of Hoya Micro Mask, Inc. in Sunnyvale, California,
and Microphase Laboratories, Inc. ("Microphase") in Colorado Springs,
Colorado, on December 1, 1994 and on June 20, 1995, respectively.
Further, on January 24, 1996, the Company acquired the photomask
manufacturing operations and assets of Plessey Semiconductors Limited
("Plessey") located in Oldham, United Kingdom. The financial results of
the new United Kingdom facility did not have a material effect on the
Company's first quarter results of operations or financial position.
Net sales for the three months ended January 31, 1996, increased
32.4% to $34.7 million compared with $26.2 million in the same period in
the prior fiscal year. A portion of this increase is attributable to the
inclusion of a full quarter's sales by the Company's new Sunnyvale and
Colorado facilities. However, the majority of the growth resulted from
increased shipments to customers from existing facilities due to greater
manufacturing capacity, resulting from the implementation of the
Company's capacity expansion program, as well as stronger demand
generally.
Cost of sales for the three months ended January 31, 1996, increased
29.5% to $21.3 million compared with $16.4 million for the same period in
the prior fiscal year. This increase resulted principally from increases
in sales volume, including those resulting from the Company's recent
acquisitions. To meet the increased production demands, the Company has
increased its staffing levels and manufacturing capacity, resulting in
increased labor and benefits costs and equipment-related costs, including
depreciation and rental expense. These increases were offset slightly by
a decrease in employee incentive compensation expense. As a percentage
of net sales, cost of sales decreased to 61.3% for the three months ended
January 31, 1996, as compared with 62.7% in the corresponding period last
year. The improvement primarily was due to the higher capacity
utilization and greater operating efficiencies afforded by sales volume
increases. Demand for more complex photomasks continues to increase,
resulting in a more favorable product mix during the current period. The
Company anticipates that its fixed operating costs will increase in
connection with its continuing capacity expansion. However, the Company
expects to match these higher costs with continued increases in revenues.
Selling, general and administrative expenses increased 29.4% to $4.6
million for the three months ended January 31, 1996, compared with $3.5
million for the same period in the prior fiscal year. The increase was
due largely to the inclusion of a full quarter of expenses for the
Company's recently acquired Sunnyvale and Colorado operations and
existing facility expansions. In addition, staffing levels were
increased to accommodate the Company's business expansion, resulting in
increased wages and associated benefits costs. These increases were
partially offset by a decrease in employee incentive compensation
expense. As a percentage of net sales, selling, general and
administrative expenses decreased to 13.2% for the three months ended
January 31, 1996, compared with 13.5% for the same period last year.
Research and development expenses for the three months ended January
31, 1996, increased 35.4% to $1.8 million compared with $1.3 million for
the same period in the prior fiscal year. This increase reflects the
expansion of the Company's research and development organization and an
increase in its development efforts that have focused on new high-end,
more complex photomasks such as phase shift, optical proximity correction
and deep ultra-violet technologies. As a percentage of net sales,
research and development expenses increased slightly to 5.3% for the
three months ended January 31, 1996, compared with 5.1% in the
corresponding prior fiscal year period.
Interest and other income, net, for the three months ended January
31, 1996, increased to $545,000 compared with $334,000 for the same
period in the prior fiscal year principally due to increases in interest
income resulting from higher levels of funds available for investment.
There was a net decrease in other income of $112,000 compared with the
same period in the prior year primarily due to net gains on the
disposition of investments during the three months ended January 31,
1995.
For the three months ended January 31, 1996, the Company provided
Federal and state income taxes at an estimated combined effective annual
tax rate of 38.4% as compared with 37.2% in the same period 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 decrease in estimated tax-
exempt investment income for the current fiscal year.
Net income for the three months ended January 31, 1996, increased
42.4% to $4.7 million, or $0.39 per share, compared with $3.3 million,
or $0.32 per share, for the corresponding prior year period. The
weighted average number of common shares outstanding increased to 12.1
million for the three months ended January 31, 1996, from 10.3 million
for the same period last year principally as a result of the public
offering of 1.5 million shares in April and May 1995 and the issuance of
approximately 100,000 shares in connection with the Microphase
acquisition in June 1995. All share and earnings per share amounts have
been adjusted for a three-for-two stock split effected in March 1995.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments
decreased $7.8 million during the three months ended January 31, 1996,
largely as a result of funding $9.6 million of capital expenditures for
equipment and construction in progress in connection with the Company's
expansion of manufacturing capacity and $4.9 million for the acquisition
of the photomask manufacturing operations and assets of Plessey.
Offsetting these decreases were cash provided by operating activities
totaling $5.9 million, and sales of stock under employee stock option
plans provided additional cash of $786,000.
Accounts receivable and inventory balances at January 31, 1996, did
not significantly change, fluctuating less than 2% from October 31, 1995.
Other current assets increased to $3.7 million at January 31, 1996, from
$3.4 million at October 31, 1995, primarily due to annual insurance and
other prepayments made during the three months ended January 31, 1996.
Property, plant and equipment increased to $83.8 million at January
31, 1996, from $72.1 million at October 31, 1995, as a result of deposits
on and purchases of equipment and construction in progress on the new
Allen, Texas, and Singapore plants totaling $9.6 million, together with
$4.7 million of fixed assets acquired in connection with the Plessey
acquisition. These increases were offset by normal depreciation expense
totaling $2.6 million. Intangible assets decreased to $10.0 million at
January 31, 1996, from $10.3 million at October 31, 1995, due to normal
amortization expense.
Investments and other assets increased to $13.9 million at January
31, 1996, from $12.4 million at October 31, 1995, principally due to
additional unrealized gains recorded as a result of the net increase in
the fair values of the Company's investments during the period.
Accounts payable increased to $18.7 million at January 31, 1996,
from $17.9 million at October 31, 1995, principally due to increased
payables related to recent major equipment purchases. Accrued salaries
and wages decreased to $3.7 million at January 31, 1996, from $5.8
million at October 31, 1995, largely as a result of payments of fiscal
1995 incentive compensation during the current period. Other accrued
liabilities decreased to $4.4 million at January 31, 1996, from $6.1
million at October 31, 1995. This decrease was primarily due to the
payment, in fiscal 1996, of certain fiscal 1995 annual expenses and a
lower sales and use tax liability, resulting from timing differences in
settlement of the scheduled quarterly payments.
There was no significant change in long-term debt balances during
the period. Deferred income taxes increased to $8.9 million at January
31, 1996, from $8.3 million at October 31, 1995, principally due to
amounts provided on 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.
At January 31, 1996, the Company had commitments outstanding for capital
expenditures of approximately $61.5 million. Included in such
commitments were $4.5 million related to the construction in progress of
the Company's new facility in Allen, Texas, and $8.5 million for
equipment and clean room construction at the Company's new Singapore
operations. Additional commitments for these new facilities and other
operating locations are expected to be incurred in fiscal 1996.
The Company will use its working capital, bank credit lines and
leasing arrangements to finance its capital expenditures. The Company
believes that its currently available resources, together with its
capacity for substantial growth and its accessibility to other debt and
equity financing sources, are sufficient to satisfy its cash requirements
for the foreseeable future.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report is filed, no reports on Form 8-K
were filed by the Company.
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: March 12, 1996
FORMS\10Q196/p
5
1,000
3-MOS
OCT-31-1996
NOV-01-1995
JAN-31-1996
38,846
5,195
17,721
155
6,446
71,757
127,321
43,524
179,440
28,104
1,800
0
0
118
140,220
179,440
34,668
34,668
21,252
21,252
0
0
36
7,551
2,900
4,651
0
0
0
4,651
0.39
0
