SOURCE: Photronics, Inc.

Photronics, Inc.

May 18, 2016 06:00 ET

Photronics Reports Second Quarter Fiscal 2016 Results

BROOKFIELD, CT--(Marketwired - May 18, 2016) -

  • Second quarter sales were $122.9 million, down 3% compared with last year
  • Net income of $11.9 million ($0.16 per diluted share) includes net, non-recurring tax benefit of $3.0 million ($0.03 per diluted share)
  • FPD sales increased 36% year-over-year, with high-end FPD sales up 66%; investing $40 million through 2017 in additional FPD capacity and capability
  • Reduced total debt $60 million and grew net cash $23 million sequentially, providing additional financial strength and flexibility to fund growth
  • Third quarter 2016 guidance: sales between $118 and $128 million; diluted EPS between $0.10 and $0.18

Photronics, Inc. (NASDAQ: PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for fiscal 2016 second quarter ended May 1, 2016.

Second quarter sales were $122.9 million, down 3% compared with last year and 5% sequentially. Sales of flat panel display (FPD) photomasks were $32.0 million, up 36% compared with last year and 6% sequentially, while sales of integrated circuits (IC) photomasks were $90.9 million, down 12% from the same period last year and 9% from last quarter. Net income attributable to Photronics, Inc. shareholders was $11.9 million ($0.16 per diluted share) and included a net, non-recurring tax benefit of $3.0 million ($0.03 per diluted share) primarily related to the recognition of certain tax benefits in Taiwan, compared with $10.1 million ($0.14 per diluted share), for the second quarter of 2015.

"FPD sales remained extremely strong this quarter, as customers continue to release new, innovative products, such as AMOLED displays for mobile applications, and our capacity remains sold out," stated Peter Kirlin, chief executive officer. "Unfortunately, the strong demand for FPD masks was not enough to offset softer IC demand, especially at the high-end, causing overall sales to fall and profit margins to slip. On the positive side, we generated cash from operations and reduced total debt by $60 million, primarily due to the redemption of our convertible debt. Additionally, subsequent to quarter-end, we received the anticipated $93 million payment from Micron for the termination of our JV in early May. With the strong balance sheet and based upon the current and anticipated demand for FPD, we are investing approximately $40 million through 2017 in additional FPD capability and capacity, which should enable sales growth by mid-2017. This is just one example of the type of investments we are planning over the next several years to continue to profitably grow our business."

Year-to-date Results

Year-to-date sales were $252.9 million, up 1% compared with last year. Sales of IC photomasks were down 7%, while sales of FPD photomasks increased 37%. GAAP net income attributable to Photronics, Inc. shareholders was $32.9 million ($0.44 per diluted share), compared with $13.9 million ($0.21 per diluted share) in 2015. Non-GAAP net income attributable to Photronics, Inc. shareholders was $21.1 million ($0.29 per diluted share), compared with $14.8 million ($0.22 per diluted share) in 2015.

Third Quarter 2016 Guidance

Kirlin continued, "Industry data points and customer commentary continue to support increasing IC logic demand for the second half of the year. However, with the termination of our joint venture with Micron earlier this month, we do anticipate lower demand from them. FPD should remain strong as the industry launches new high-end products." For the third quarter of 2016, Photronics expects revenues to be between $118 million and $128 million and net income attributable to Photronics, Inc. shareholders to be between $0.10 and $0.18 per diluted share.

Non-GAAP Financial Measures

Non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings 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. The attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.'s financial results under GAAP. Photronics, Inc. believes that non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings 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 of prior periods. These non-GAAP metrics, in particular non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings 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, net income 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 the 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:

  • Net, non-recurring tax benefit related to the recognition of certain tax benefits in Taiwan
  • Non-recurring net gain on sale of investment in fiscal 2016
  • Financing expenses in fiscal 2015 related to the exchange of convertible senior notes

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

Conference Call

A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 18, 2016. The call can be accessed by logging onto Photronics' web site at www.photronics.com. The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada. The call will be archived on Photronics' web site for instant replay access.

About Photronics

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. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors as well as decisions we may make in the future regarding our business, capital structure and other matters. These forward-looking statements generally can be identified by phrases such as "believes", "expects", "anticipates", "plans", "projects", and similar expressions. Accordingly, there is no assurance that the Company's expectations will be realized. For a fuller discussion of the factors that may affect the Company's operations, see "Forward Looking Statements" in the Company's Quarterly and Annual Reports to the Securities and Exchange Commission on Forms 10-Q and 10-K. The Company assumes no obligation to provide revisions to any forward-looking statements.

   
PHOTRONICS, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Income  
(in thousands, except per share amounts)  
(Unaudited)  
               
    Three Months Ended     Six Months Ended  
    May 1,     May 3,     May 1,     May 3,  
    2016     2015     2016     2015  
                                 
Net sales   $ 122,923     $ 127,309     $ 252,879     $ 250,814  
                                 
Costs and expenses:                                
                                 
  Cost of sales     (91,636 )     (94,214 )     (186,156 )     (189,535 )
                                 
  Selling, general and administrative     (11,024 )     (12,421 )     (23,222 )     (24,365 )
                                 
  Research and development     (5,447 )     (5,809 )     (11,148 )     (10,490 )
                                 
    Operating income     14,816       14,865       32,353       26,424  
                                 
Gain on sale of investment     -       -       8,785       -  
                                 
Other expense, net     (2,989 )     (1,457 )     (2,111 )     (2,740 )
                                 
    Income before income taxes     11,827       13,408       39,027       23,684  
                                 
Income tax benefit (provision)     2,326       (1,252 )     (1,374 )     (4,386 )
                                 
    Net income     14,153       12,156       37,653       19,298  
                                 
Net income attributable to noncontrolling interests     (2,299 )     (2,096 )     (4,797 )     (5,401 )
                                 
Net income attributable to Photronics, Inc. shareholders   $ 11,854     $ 10,060     $ 32,856     $ 13,897  
                                 
Earnings per share:                                
    Basic   $ 0.18     $ 0.15     $ 0.49     $ 0.21  
                                 
    Diluted   $ 0.16     $ 0.14     $ 0.44     $ 0.21  
                                 
Weighted-average number of common shares outstanding:                                
    Basic     67,372       66,230       67,090       66,148  
                                 
    Diluted     77,516       78,228       78,326       72,624  
 
 
 
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
         
    May 1,   November 1,
    2016   2015
             
Assets            
             
Current assets:            
  Cash and cash equivalents   $ 193,978   $ 205,867
  Accounts receivable     104,330     110,056
  Inventories     24,510     24,157
  Other current assets     24,409     24,034
             
    Total current assets     347,227     364,114
             
Property, plant and equipment, net     523,669     547,284
Investment in joint venture     92,911     93,021
Intangible assets, net     22,071     24,616
Other assets     16,030     16,520
             
    $ 1,001,908   $ 1,045,555
             
             
             
Liabilities and Equity            
             
Current liabilities:            
  Current portion of long-term borrowings   $ 5,806   $ 65,495
  Accounts payable and accrued liabilities     108,311     127,197
             
    Total current liabilities     114,117     192,692
             
Long-term borrowings     64,419     67,120
Other liabilities     20,600     23,677
             
Photronics, Inc. shareholders' equity     693,284     646,555
Noncontrolling interests     109,488     115,511
    Total equity     802,772     762,066
             
    $ 1,001,908   $ 1,045,555
   
   
   
PHOTRONICS, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
(Unaudited)  
             
    Six Months Ended  
    May 1,     May 3,  
    2016     2015  
                 
Cash flows from operating activities:                
  Net income   $ 37,653     $ 19,298  
  Adjustments to reconcile net income to net cash                
  provided by operating activities:                
    Depreciation and amortization     40,832       40,318  
    Gain on sale of investment     (8,785 )     -  
    Changes in assets and liabilities and other     (4,561 )     (1,709 )
                 
Net cash provided by operating activities     65,139       57,907  
                 
Cash flows from investing activities:                
    Purchases of property, plant and equipment     (34,928 )     (67,935 )
    Proceeds from sale of investments     8,785       -  
    Other     193       (218 )
                 
Net cash used in investing activities     (25,950 )     (68,153 )
                 
Cash flows from financing activities:                
    Repayments of long-term borrowings     (54,951 )     (4,751 )
    Proceeds from share-based arrangements     3,046       1,195  
    Other     (19 )     (76 )
                 
Net cash used in financing activities     (51,924 )     (3,632 )
                 
Effect of exchange rate changes on cash     846       (3,001 )
                 
Net decrease in cash and cash equivalents     (11,889 )     (16,879 )
Cash and cash equivalents, beginning of period     205,867       192,929  
                 
Cash and cash equivalents, end of period   $ 193,978     $ 176,050  
 
 
 
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 1,     May 3,   May 1,     May 3,
    2016     2015   2016     2015
                             
Reconciliation of GAAP to Non-GAAP Net Income                            
Attributable to Photronics, Inc. Shareholders                            
                             
GAAP net income attributable to Photronics, Inc. shareholders   $ 11,854     $ 10,060   $ 32,856     $ 13,897
                             
  (a) Income tax benefit     (3,004 )     -     (3,004 )     -
                             
  (b) Gain on sale of investment, net of tax     -       -     (8,753 )     -
                             
  (c) Financing expenses, net of tax     -       -     -       901
                             
                             
Non-GAAP net income attributable to Photronics, Inc. shareholders   $ 8,850     $ 10,060   $ 21,099     $ 14,798
                             
Reconciliation of GAAP to Non-GAAP Net Income                            
Applicable to Common Shareholders                            
                             
Weighted average number of diluted shares outstanding                            
                             
    GAAP     77,516       78,228     78,326       72,624
                             
    Non-GAAP     77,516       78,228     78,326       78,166
                             
Net income per diluted share                            
                             
    GAAP   $ 0.16     $ 0.14   $ 0.44     $ 0.21
                             
    Non-GAAP   $ 0.13     $ 0.14   $ 0.29     $ 0.22

(a) Represents net, non-recurring tax benefit related to the recognition of certain tax benefits in Taiwan 

(b) Represents gain on sale of investment in a foreign entity 

(c) Represents financing expenses related to the exchange of $57.5 million of 3.25% convertible senior notes

 
 
 
PHOTRONICS, INC. AND SUBSIDIARIES    
Non-GAAP Financial Measure    
Reconciliation of GAAP Net Income to Non-GAAP EBITDA    
(in thousands)    
(Unaudited)    
                   
    Three Months Ended   Six Months Ended
    May 1,     May 3,   May 1,   May 3,
    2016     2015   2016   2015
                           
GAAP Net Income (a)   $ 14,153     $ 12,156   $ 37,653   $ 19,298
                           
Add: interest expense     964       1,233     2,138     2,603
Add (less): income tax expense (benefit)     (2,326 )     1,252     1,374     4,386
Add: depreciation and amortization     20,073       19,293     40,530     39,900
Add: special items (b)     976       912     1,873     2,738
Non-GAAP EBITDA   $ 33,840     $ 34,846   $ 83,568   $ 68,925

(a) Includes net income attributable to noncontrolling interests, and in the six months ended May 1, 2016 includes gain on sale of investment in a foreign entity

(b) Special items consist of stock compensation expense, and in the six months ended May 3, 2015 includes financing expenses in connection with the exchange of $57.5 million of 3.25% convertible senior notes

Contact Information

  • For Further Information:
    R. Troy Dewar, CFA
    Director, Investor Relations
    (203) 740-5610
    tdewar@photronics.com