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, 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 April 30, 1996
Common Stock, $.01 par value 11,752,397 Shares
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at April 30
1996 (unaudited) and October 31, 1995 3-4
Condensed Consolidated Statement of Earnings
for the three and six months ended April 30,
1996 and 1995 (unaudited) 5
Condensed Consolidated Statement of Cash Flows
for the six months ended April 30,
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 4. Submission of Matters to a Vote
of Security Holders 11
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
April 30, October 31,
1996 1995
----------- -----------
(Unaudited)
Current assets:
Cash, cash equivalents and
short-term investments $ 32,885 $ 51,865
Accounts receivable (less allowance
for doubtful accounts of $195 in
1996 and 1995) 23,443 17,857
Inventories 7,715 6,357
Other current assets 5,089 3,380
-------- --------
Total current assets 69,132 79,459
Property, plant and equipment (less
accumulated depreciation of $46,370
in 1996 and $40,917 in 1995) 93,332 72,063
Intangible assets (less accumulated
amortization of $2,684 in 1996
and $2,156 in 1995) 9,789 10,289
Investments and other assets 16,681 12,407
-------- --------
$188,934 $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
April 30, October 31,
1996 1995
----------- -----------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 37 $ 36
Accounts payable 17,073 17,850
Accrued liabilities 10,544 11,920
-------- --------
Total current liabilities 27,654 29,806
Long-term debt 1,790 1,809
Deferred income taxes and other liabilities 12,087 8,558
-------- --------
Total liabilities 41,531 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,
11,888,897 shares issued in 1996
and 11,758,292 shares issued in 1995 119 118
Additional paid-in capital 76,340 75,083
Retained earnings 62,888 52,970
Unrealized gains on investments 8,871 6,471
Other (815) (597)
-------- ---------
Total shareholders' equity 147,403 134,045
-------- --------
$188,934 $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 Six Months Ended
April 30, April 30,
------------------ ----------------
1996 1995 1996 1995
-------- -------- ------- -------
Net sales $40,514 $30,037 $75,182 $56,213
Costs and expenses:
Cost of sales 24,811 18,422 46,063 34,839
Selling, general and administrative 5,447 4,104 10,032 7,647
Research and development 2,123 1,595 3,948 2,943
------- ------- ------- -------
Operating income 8,133 5,916 15,139 10,784
Interest and other income, net 334 179 879 513
------- ------- ------- -------
Income before income taxes 8,467 6,095 16,018 11,297
Provision for income taxes 3,200 2,275 6,100 4,210
------- ------- ------- -------
Net income $ 5,267 $ 3,820 $ 9,918 $ 7,087
======= ======= ======= =======
Net income per common share $0.44 $0.36 $0.82 $0.68
===== ===== ===== =====
Weighted average number of
common shares outstanding 12,048 10,513 12,053 10,385
====== ====== ====== ======
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,
--------------------
1996 1995
------- -------
Cash flows from operating activities:
Net income $ 9,918 $ 7,087
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,981 4,630
Other 999 (168)
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable (5,586) (5,852)
Inventories (977) (104)
Other current assets (2,439) 47
Accounts payable and accrued liabilities (2,154) 6,203
------- -------
Net cash provided by operating activities 5,742 11,843
------- -------
Cash flows from investing activities:
Acquisition of assets of photomask operations (8,482) (7,400)
Deposits on and purchases of property,
plant and equipment (18,621) (10,137)
Net change in short-term investments 12,196 (5,498)
Other 1,143 240
------- -------
Net cash used in investing activities (13,764) (22,795)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (19) (451)
Net proceeds from issuance of common stock 1,257 25,908
------- -------
Net cash provided by financing activities 1,238 25,457
------- -------
Net increase (decrease) in cash and
cash equivalents (6,784) 14,505
Cash and cash equivalents at beginning of period 35,644 25,092
------- -------
Cash and cash equivalents at end of period $28,860 $39,597
======= =======
Cash paid during the period for:
Interest $16 $21
Income taxes $6,299 $4,490
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three and Six Months Ended April 30, 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 and six-month periods ended April 30, 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
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 acquired operations were not material to the Company for the
periods presented.
On April 1, 1996, the Company, through its majority-owned subsidiary,
acquired the photomask manufacturing operations and assets of the Litomask
Division ("Litomask") of Centre Suisse d'Electronique et de Microtechnique
S.A. ("CSEM") located in Neuchatel, Switzerland for $3.4 million in cash.
CSEM holds the remaining interest in this subsidiary and the Company has an
option to acquire CSEM's interest within a two-year period. In connection
with the transaction, the Company leased the facilities and retained certain
services from CSEM previously utilized by Litomask. 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 acquired operations were not material to the Company for the
periods presented.
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, 1996 versus April 30, 1995
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,
1996, as compared to the same periods in the prior fiscal year are
attributable to recent acquisitions. On January 24, 1996, the Company
acquired the photomask manufacturing operations and assets of Plessey
Semiconductors Limited ("Plessey") located in Oldham, United Kingdom. On
April 1, 1996, the Company acquired the Litomask Division of Centre Suisse
d'Electronique et de Microtechnique S.A. ("Litomask") located in Neuchatel,
Switzerland. See Note 2 to the Condensed Consolidated Financial Statements.
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.
Net sales for the three and six months ended April 30, 1996, increased
34.9% to $40.5 million and 33.7% to $75.2 million, respectively, compared to
$30.0 million and $56.2 million for the same periods in the prior fiscal
year. The majority of the growth was from increased shipments to customers
from existing facilities due to greater manufacturing capacity as the Company
executed its capacity expansion program, and increased sales from the
Company's wholly-owned subsidiary, Beta Squared, Inc. ("Beta Squared"). In
addition, a portion of the increase in each period is attributable to the
European and Colorado acquisitions and, for the six-month period, the
inclusion of a full six months of sales for the Company's Sunnyvale facility.
Cost of sales for the three and six months ended April 30, 1996,
increased 34.7% to $24.8 million and 32.2% to $46.1 million, respectively,
compared to $18.4 million and $34.8 million for the same periods in the prior
fiscal year. These increases resulted principally from increases in sales
volume, including those from the Company's recent acquisitions. To meet the
increased production demands, the Company has increased its staffing levels
and manufacturing capacity, which increased, among other things, labor and
benefits costs and depreciation expense. As a percentage of net sales, cost
of sales decreased slightly to 61.2% and 61.3% for the three and six months
ended April 30, 1996, as compared with 61.3% and 62.0% in the corresponding
periods last year. Improvements from higher capacity utilization of the
Company's installed equipment base and greater operating efficiencies
afforded by sales volume increases were largely offset by the absorption of
costs of new manufacturing capacity and lower margins generally at recently
acquired operations. Demand for more complex photomasks continues to
increase, yielding 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 32.7% to $5.4
million and 31.2% to $10.0 million for the three and six months ended April
30, 1996, compared to $4.1 million and $7.6 million for the same periods in
the prior fiscal year. These increases were due largely to the addition of
the Company's foreign operations and its Colorado facility and, for the six-
month period, the inclusion of a full six months of expenses for the
Company's Sunnyvale facility. In addition, staffing levels and costs
associated with the Company's growth increased to accommodate the Company's
business expansion. As a percentage of net sales, selling, general and
administrative expenses decreased slightly to 13.4% and 13.3% for the three
and six months ended April 30, 1996, compared with 13.7% and 13.6% for the
same periods last year.
Research and development expenses for the three and six months ended
April 30, 1996, increased 33.1% to $2.1 million and 34.2% to $3.9 million,
respectively, compared to $1.6 million and $2.9 million for the same periods
in the prior fiscal year. These increases reflect the expansion of the
Company's research and development organization and an increase in its
development efforts which have focused on new high-end, more complex
photomasks utilizing phase shift, optical proximity correction and deep
ultra-violet technologies. As a percentage of net sales, research and
development expenses decreased slightly to 5.2% for the three months ended
April 30, 1996, compared with 5.3% in the prior fiscal year period and
remained flat for the corresponding six-month periods.
Interest and other income, net, for the three and six months ended April
30, 1996, increased to $334,000 and $879,000, respectively, compared to
$179,000 and $513,000 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.
For the three and six months ended April 30, 1996, the Company provided
Federal and state income taxes at an estimated combined effective annual tax
rate of 37.8% and 38.1%, respectively, as compared with 37.3% 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 slight decrease in
estimated tax-exempt investment income for the current fiscal year.
Net income for the three and six months ended April 30, 1996, increased
37.9% to $5.3 million, or $0.44 per share, and 39.9% to $9.9 million, or
$0.82 per share, compared with $3.8 million, or $0.36 per share, and $7.1
million, or $0.68 per share, for the corresponding prior year periods. The
weighted average number of common shares outstanding increased to 12.0
million and 12.1 million, respectively, for the three and six months ended
April 30, 1996, from 10.5 million and 10.4 million for the same periods 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.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments
decreased $19.0 million during the six months ended April 30, 1996, largely
as a result of funding $18.6 million of capital expenditures for equipment
and construction in connection with the Company's expansion of manufacturing
capacity and $8.5 million for the acquisition of the photomask manufacturing
operations and assets of Plessey and Litomask. Offsetting these decreases
were cash provided by operating activities totaling $5.7 million, $1.3
million of advances in connection with financial assistance for the Company's
new Manchester operation and $1.3 million from sales of stock under employee
stock option plans.
Accounts receivable increased to $23.4 million at April 30, 1996, from
$17.9 million at October 31, 1995, primarily as a result of higher sales
levels, including sales by the new European operations. Inventory increased
to $7.7 million at April 30, 1996, from $6.4 million at October 31, 1995,
primarily due to higher equipment levels at Beta Squared, general increases
to accommodate the escalating sales volume and the addition of the European
facilities. Other current assets increased to $5.1 million at April 30,
1996, from $3.4 million at October 31, 1995, primarily due to an increase in
prepaid income taxes.
Property, plant and equipment increased to $93.3 million at April 30,
1996, from $72.1 million at October 31, 1995. Deposits on and purchases of
equipment and construction in progress on the new Allen, Texas, and Singapore
plants totaled $18.6 million and fixed assets of $8.1 million were acquired
in connection with the Plessey and Litomask acquisitions. These increases
were offset by normal depreciation expense totaling $5.5 million. Intangible
assets decreased to $9.8 million at April 30, 1996, from $10.3 million at
October 31, 1995, due to normal amortization expense.
Investments and other assets increased to $16.7 million at April 30,
1996, from $12.4 million at October 31, 1995, principally due to additional
unrealized gains from the net increase in the fair values of the Company's
investments during the period.
Accounts payable decreased to $17.1 million at April 30, 1996, from
$17.9 million at October 31, 1995, principally due to a significant decrease
in payables related to recent major equipment purchases, offset by increases
from the addition of the European operations and higher level of raw
materials purchases based on growing production needs. Accrued liabilities
decreased to $10.5 million at April 30, 1996 from $11.9 million at October
31, 1995. This decrease is largely attributable to fiscal 1996 payments of
fiscal 1995 incentive compensation, payment of employee withholding taxes
from stock option exercises as of October 31, 1995, and a lower sales and use
tax liability because of timing differences in settlement of the scheduled
payments, offset by provisions for incentive compensation for fiscal 1996.
There was no significant change in long-term debt balances during the
period. Deferred income taxes and other liabilities increased to $12.1
million at April 30, 1996, from $8.6 million at October 31, 1995, principally
due to amounts provided on unrealized gains on investments and advances
received in connection with financial assistance for the Company's new
Manchester operations.
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
April 30, 1996, the Company had commitments outstanding for capital
expenditures of approximately $65.1 million, including commitments for new
facilities in Texas and Singapore. Additional commitments for these and
other manufacturing 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 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 20, 1996.
(b) The following directors, constituting the entire Board
of Directors were elected at the Annual Meeting of
Shareholders held on March 20, 1996. Also indicated
are the affirmative, negative and authority withheld
votes for each director.
Authority
For Against Withheld
Walter M. Fiederowicz 10,713,430 0 200,494
Joseph A. Fiorita, Jr. 10,713,267 0 200,657
Constantine S. Macricostas 10,713,617 0 200,307
Masahiro Fujii 10,713,267 0 200,657
Michael J. Yomazzo 10,713,617 0 200,307
(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 20, 1996:
The approval of the 1996 Stock Option Plan of the Company.
Affirmative Votes.........7,099,008
Negative Votes......... 914,678
Abstentions/Broker Non-Votes.......2,900,238
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, 1996:
Affirmative Votes........10,879,031
Negative Votes......... 18,105
Abstentions/Broker Non-Votes....... 16,788
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 report on
Form 8-K was 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: June 13, 1996
FORMS\10Q496/p
5
1000
6-MOS
OCT-31-1996
APR-30-1996
28,860
4,025
23,638
195
7,715
69,132
139,702
46,370
188,934
27,654
1,790
0
0
119
147,284
188,934
75,182
75,182
46,063
46,063
0
0
72
16,018
6,100
9,918
0
0
0
9,918
0.82
0.82
