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 ....February 2, 1997....
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)
...(561) 745-1222...
(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 February 2, 1997
Common Stock, $.01 par value 11,847,244 Shares
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
at February 2, 1997 (unaudited) and
October 31, 1996 3-4
Condensed Consolidated Statement of
Earnings for the Three Months Ended
February 2, 1997 and January 31,
1996 (unaudited) 5
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
February 2, 1997 and January 31,
1996 (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
February 2, October 31,
1997 1996
----------- -----------
(Unaudited)
Current assets:
Cash, cash equivalents and
short-term investments $ 12,940 $ 26,684
Accounts receivable (less allowance
for doubtful accounts of $235 in
1997 and 1996) 25,467 24,750
Inventories 9,102 7,992
Other current assets 6,771 6,154
-------- --------
Total current assets 54,280 65,580
Property, plant and equipment
(less accumulated depreciation of
$56,637 in 1997 and $52,740 in 1996) 135,243 123,666
Intangible assets (less accumulated
amortization of $3,535 in 1997
and $3,256 in 1996) 9,026 9,305
Investments and other assets 10,526 13,352
-------- --------
$209,075 $211,903
======== ========
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
February 2, October 31,
1997 1996
----------- -----------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 39 $ 38
Accounts payable 29,949 34,168
Accrued salaries and wages 4,169 5,561
Other accrued liabilities 3,629 4,200
-------- --------
Total current liabilities 37,786 43,967
Long-term debt 2,005 1,987
Deferred income taxes and other liabilities 8,611 9,532
-------- --------
Total liabilities 48,402 55,486
-------- --------
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,
11,983,744 shares issued in 1997
and 11,973,290 shares in 1996 120 120
Additional paid-in capital 78,084 77,833
Retained earnings 79,298 73,973
Unrealized gains on investments 3,230 4,678
Treasury stock, 136,500 shares at cost (245) (245)
Cumulative foreign currency
translation adjustment 186 58
-------- --------
Total shareholders' equity 160,673 156,417
-------- --------
$209,075 $211,903
======== ========
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
-------------------------
February 2, January 31,
1997 1996
----------- -----------
Net sales $40,029 $34,668
Costs and expenses:
Cost of sales 25,347 21,252
Selling, general and administrative 5,035 4,585
Research and development 2,302 1,825
------- -------
Operating income 7,345 7,006
Interest and other income, net 1,280 545
------- -------
Income before income taxes 8,625 7,551
Provision for income taxes 3,300 2,900
------- -------
Net income $ 5,325 $ 4,651
======= =======
Net income per common share $0.44 $0.39
===== =====
Weighted average number of
common shares outstanding 12,227 12,058
====== ======
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
-----------------------
February 2, January 31,
1997 1996
----------- -----------
Cash flows from operating activities:
Net income $ 5,325 $ 4,651
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,490 2,835
Gain on disposition of investments (1,060) -
Other 212 133
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable (717) 291
Inventories (1,110) 34
Other current assets (617) (318)
Accounts payable and other liabilities (6,218) (1,702)
------- -------
Net cash provided by operating activities 305 5,924
------- -------
Cash flows from investing activities:
Acquisition of photomask operations - (4,900)
Deposits on and purchases of property,
plant and equipment (15,730) (9,629)
Net change in short-term investments 2,814 11,026
Proceeds from sale of investments 1,369 -
Other 70 4
------- -------
Net cash used in investing activities (11,477) (3,499)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (9) (9)
Proceeds from and tax effects of
exercise of stock options 251 786
------- -------
Net cash provided by financing activities 242 777
------- -------
Net increase (decrease) in cash
and cash equivalents (10,930) 3,202
Cash and cash equivalents at beginning of period 18,766 35,644
------- -------
Cash and cash equivalents at end of period $ 7,836 $38,846
======= =======
Cash paid during the period for:
Interest $ 7 $ 8
Income taxes $155 $665
See accompanying notes to consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended February 2, 1997
(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 February 2, 1997 and January 31, 1996.
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, 1996, which give a complete discussion of
these matters.
The Company adopted a fifty-two (52) week fiscal year beginning in the
first quarter of 1997.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Material Changes in Results of Operations
Three Months ended February 2, 1997 versus January 31, 1996
A significant portion of the changes in Photronics, Inc.
("Photronics") results of operations for the three months ended February
2, 1997, as compared to the same period during last fiscal year was
attributable to expansion of international operations through the start-
up of new facilities and acquisitions. Photronics' operations in
Singapore, consisting of a recently constructed state-of-the-art
manufacturing plant, commenced shipments in September 1996. In addition,
Photronics acquired (i) the Litomask Division of Centre Suisse
d'Electronique et de Microtechnique S.A. located in Neuchatel,
Switzerland on April 1, 1996 and (ii) the photomask manufacturing
operations and assets of Plessey Semiconductors Limited, located in
Oldham, United Kingdom, on January 24, 1996.
Net sales for the three months ended February 2, 1997, increased
15.5% to $40.0 million compared with $34.7 million for the three months
ended January 31, 1996. Sales from Photronics' new international
manufacturing operations accounted for slightly more than one-half of
this increase. The remaining portion of the growth resulted from
increased shipments to customers from existing facilities due to the
availability of greater manufacturing capability, reflecting the
implementation of Photronics' capacity expansion program, as well as
stronger overall demand.
Gross profit for the three months ended February 2, 1997, increased
9.4% to $14.7 million compared with $13.4 million for the same period in
the prior fiscal year. Gross margin decreased to 36.7% for the three
months ended February 2, 1997, as compared with 38.7% in the
corresponding period last year. The increase in gross profit resulted
principally from increases in sales volume, both from existing operations
in the U.S. and from the new international operations. To allow for
increased manufacturing capability, Photronics has continued to increase
its staffing levels and added to its manufacturing systems, resulting in
higher labor and equipment-related costs, including depreciation expense.
The lower margins were due primarily to Photronics' newly expanded
manufacturing base, which was not fully utilized, as well as the
inclusion of international operations which generated margins below those
generally experienced at Photronics' domestic operations. Partially
offsetting these increased costs, are better margins resulting from a
favorable product mix of complex photomasks during the current year
period. Photronics anticipates that its fixed operating costs will
increase in connection with its continuing capacity expansion which it
expects to offset with increases in net sales.
Selling, general and administrative expenses increased 9.8% to $5.0
million for the three months ended February 2, 1997, compared with $4.6
million for the same period in the prior fiscal year. However, as a
percentage of net sales, selling, general and administrative expenses
decreased to 12.6% for the three months ended February 2, 1997, compared
with 13.2% for the same period in the prior fiscal year. The increases
in costs resulting from the addition of the international operations were
offset by the absence of a proportionate increase in costs in the U.S.
business which have not been significantly different than the prior year.
Research and development expenses for the three months ended
February 2, 1997, increased 26.1% to $2.3 million, compared with $1.8
million for the same period in the prior fiscal year. This increase
reflects expansion of Photronics' research and development organization
and an increase in its development efforts which have focused on new
high-end, more complex photomasks such as phase shift, optical proximity
correction and deep ultra-violet technologies as well as large area
photomasks. As a percentage of net sales, research and development
expenses increased to 5.8% for the three months ended February 2, 1997,
compared with 5.3% in the corresponding prior fiscal period.
Interest and other income, net, for the three months ended February
2, 1997, increased to $1.3 million compared with $0.5 million for the
same period in the prior fiscal year due principally to a $1.1 million
gain from the sale of investment securities, offset in part by a decrease
in interest income resulting from lower levels of funds available for
investment.
Net income for the three months ended February 2, 1997, increased
14.5% to $5.3 million, or $0.44 per share, compared with $4.7 million or
$0.39 per share, for the corresponding prior year period. Net income in
the first quarter of 1997 included $0.7 million, or $0.05 per share, from
the gain on the sale of investment securities. The weighted average
number of common shares outstanding increased to 12.2 million for the
three months ended February 2, 1997, from 12.1 million for the same
period last year principally as a result of the issuance of shares in
connection with employee stock option exercises since the first quarter
of 1996.
Liquidity and Capital Resources
Photronics' cash and short-term investments decreased $13.7 million
during the three months ended February 2, 1997, largely as a result of
funding $15.7 million of capital expenditures for equipment and
construction in progress in connection with Photronics' expansion of
manufacturing capacity.
Accounts receivable increased only slightly from October 31, 1996.
Inventory increased $1.1 million or 14% as Photronics' equipment
subsidiary, Beta Squared, purchased several machines for refurbishment
and resale. Other current assets increased $0.6 million primarily as a
result of the timing of receipt of the proceeds from the sale of
investment securities.
Property, plant and equipment increased to $135.2 million at
February 2, 1997, from $123.7 million at October 31, 1996, as a result of
the construction of the new Austin, Texas and Manchester, United Kingdom
plants as well as continued expansion of Photronics' existing
manufacturing capacity. These increases were offset by normal
depreciation expense of $4.2 million.
Investments and other assets decreased to $10.5 million at February
2, 1997, from $13.4 million at October 31, 1996, principally due to the
sale of certain investment securities as well as the net decrease in the
fair value of Photronics' available-for-sale investments during the
period.
Accounts payable decreased $4.2 million from October 31, 1996 to
$29.9 million at February 2, 1997, principally due to timing of payments
of unusually high payables at October 31, 1996 which had resulted from
the acceptance of significant equipment purchases at the end of the
fiscal year. Accrued salaries and wages and other liabilities decreased
$2.0 million from October 31, 1996 largely as a result of payments of
fiscal 1996 incentive compensation and timing of other expenses.
There was no significant change in long-term debt during the period.
Deferred income taxes and other liabilities decreased to $8.6 million at
February 2, 1997, from $9.5 million at October 31, 1996, principally due
to the tax effect of the net decrease in fair value of investments.
Photronics' 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 February 2, 1997, Photronics had commitments outstanding for capital
expenditures of approximately $62 million. Additional commitments for
facilities under construction and other capital requirements are expected
to be incurred in fiscal 1997. Subsequent to the end of the quarter,
Photronics utilized its bank credit lines and at March 5, 1997, $3.0
million was outstanding. Photronics will continue to use its working
capital, bank lines of credit and leasing arrangements to finance its
capital expenditures. Photronics believes that its currently available
resources, together with its capacity for substantial growth and its
access to other debt and equity financing sources, are sufficient to
satisfy its currently planned capital expenditures, as well as its
anticipated working capital requirements for the foreseeable future.
"Safe Harbor" Statement under the Private
Securities Litigation Reform Act of 1995:
Except for historical information, the matters discussed above may be
considered forward-looking statements and may be subject to certain risks
and uncertainties that could cause the actual results to differ
materially from those projected, including uncertainties in the market,
pricing competition, procurement and manufacturing efficiencies, and
other risks.
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 6, 1997
FORMS\10Q297/p
5
1,000
3-MOS
OCT-31-1996
FEB-2-1997
7,836
5,104
25,702
235
9,102
54,280
191,916
56,673
209,075
37,786
2,005
0
0
120
160,553
209,075
40,029
40,029
25,347
25,347
0
0
36
8,625
3,300
5,325
0
0
0
5,325
0.44
0.00
