- Published: 17 August 2011
- Written by Editor
Photronics Reports Record Revenues in Third Quarter of Fiscal 2011
Third Quarter Highlights:
Record sales of $135.9 million; exceeds guidance of $128 - $133 million
High-end IC photomask sales increase 24% sequentially
Record non-GAAP net income of $16 million
Non-GAAP EPS of $0.23; exceeds guidance of $0.17 - $0.21 per diluted share
GAAP net income increases to $11.3 million, or $0.16 per diluted share
Operating margin improves 90 bps sequentially
Balance Sheet continues to strengthen
Photronics, Inc. (NASDAQ:PLAB - News), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported results for the third quarter ended July 31, 2011.
Constantine (“Deno”) Macricostas, Photronics’ chairman and chief executive officer, commented: “We exceeded our guidance range and reported record revenue of $135.9 million, while also achieving a new quarterly sales record for IC photomasks. Demonstrating the success of our high-end strategy, advanced IC sales grew 24% sequentially to $34.9 million.”
“We also continued to perform exceptionally well on the bottom-line, demonstrating the excellent leverage in our business model,” said Macricostas. “We increased operating margin by 90 basis points sequentially to 16.8%, achieved record non-GAAP net income of $16 million, or $0.23 per diluted share, exceeding our guidance range. We also continued to strengthen our balance sheet, improve working capital and increase net cash. The continued improvement in our balance sheet gives us the flexibility to execute on our strategic growth initiatives. Looking forward, we are encouraged by our prospects for growth and plan to make continued investments to gain further high-end market share.”
Sales for the third quarter were $135.9 million, compared with the guided range of $128 million to $133 million. This is a 21% increase from $112.3 million in revenue reported for the third quarter of fiscal year 2010. Sales of semiconductor photomasks were $104.9 million, or 77% of revenues, during the third quarter of fiscal 2011, and sales of flat panel display (FPD) photomasks were $31 million, or 23% of revenues. GAAP net income attributable to Photronics, Inc. for the third quarter of fiscal year 2011 was $11.3 million, or $0.16 per diluted share, which includes an extinguishment of debt loss of $5.0 million, compared to net income attributable to Photronics, Inc. of $7.7 million, or $0.13 per diluted share, for the third quarter of fiscal 2010.
Non-GAAP net income attributable to Photronics, Inc. for the third quarter of 2011, which excludes the extinguishment debt loss of $5.0 million, was $16 million, or $0.23 earnings per diluted share, as compared to the previously guided range of $0.17 to $0.21. This is an increase of 119% from non-GAAP net income attributable to Photronics, Inc. of $7.3 million, or $0.13 earnings per diluted share, for the third quarter of 2010. The section below entitled “Non-GAAP Financial Measures” provides a definition and information about the use of non-GAAP financial measures in this press release, and the attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.’s financial results under GAAP.
Sales for the first nine months of 2011 rose 24% to $389.9 million from $315.5 million for the first nine months of fiscal 2010. Sales of semiconductor photomasks were $294.7 million, or 76% of revenues, for the first nine months of 2011, and sales of FPD photomasks were $95.2 million, or 24% of revenues. GAAP net income attributable to Photronics, Inc. for the first nine months of fiscal 2011 was $6.9 million, or $0.12 per diluted share, compared with net income of $15.8 million, or $0.29 per diluted share, for the first nine months of 2010. Non-GAAP net income attributable to Photronics, Inc. for the first nine months of fiscal 2011, which excludes the $35.5 million loss on extinguishment was $43.0 million, or $0.66 per diluted share, compared with non-GAAP net income attributable to Photronics, Inc. for the first nine months of fiscal 2010 of $12.7 million, or $0.23 per diluted share. Non-GAAP net income for the first nine months of 2010 excluded a $4.8 million gain related to consolidation and restructuring credits.
Non-GAAP Financial Measures
Non-GAAP net income attributable to Photronics, Inc. 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. Photronics, Inc. believes that non-GAAP net income attributable to Photronics, Inc. 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. 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:
Loss on extinguishment of debt is excluded because it is not a part of ongoing operations and was not anticipated when establishing forecast guidance for the third quarter of fiscal 2011.
Consolidation and restructuring credits in fiscal 2010 are excluded because they are not a part of ongoing operations.
Impact of financing expenses related to warrants is excluded because it does not affect cash earnings.
Deferred financing fees written-off in fiscal 2010 are excluded because they are not a part of ongoing operations.
The presentation of this financial information should not be considered in isolation 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.
A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, August 17, 2011. The live dial-in number is (408) 774-4601. The call can also be accessed by logging onto Photronics’ web site at www.photronics.com.
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. 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.
15-2011
PLAB – E
PHOTRONICS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, August 1, July 31, August 1,
2011 2010 2011 2010
Reconciliation of GAAP to Non-GAAP Net Income
Attributable to Photronics, Inc.
GAAP net income attributable to Photronics, Inc. $ 11,265 $ 7,691 $ 6,938 $ 15,778
(a) Debt extinguishment loss and net interest impact,
net of tax 4,973 - 35,486 -
(b) Consolidation and restructuring charges (credits), net of tax - 26 - (4,810 )
(c) Impact of warrants, net of tax (221 ) (388 ) 599 692
(d) Deferred financing fees write off, net of tax - - - 1,011
Non-GAAP net income attributable to Photronics, Inc. $ 16,017 $ 7,329 $ 43,023 $ 12,671
Reconciliation of GAAP to Non-GAAP Net Income
Applicable to Common Shareholders
Weighted average number of diluted shares outstanding
GAAP 76,744 66,280 57,724 65,689
(e) Non-GAAP 76,692 65,864 70,559 54,378
Net income per diluted share
GAAP $ 0.16 $ 0.13 $ 0.12 $ 0.29
Non-GAAP $ 0.23 $ 0.13 $ 0.66 $ 0.23
(a)
Represents extinguishment charges during the three and nine months ended July 31, 2011 related to the repurchase of $5.0 million and $35.4 million, respectively, of our 5.50% convertible senior notes due in October 2014, and net interest impact on convertible transactions.
(b)
Includes charges (credits) related to restructuring in China.
(c)
Represents financing expenses related to warrants, which are recorded in other income (expense).
(d)
Represents write-off of deferred financing fees recorded in interest expense, as a result of an amendment to our revolving credit facility.
(e)
Excludes the impact of shares issued on June 13, 2011 (0.4 million shares during the three months ended July 31, 2011 and 0.1 million shares during the nine months ended July 31, 2011), primarily related to the issuance of common stock in exchange for $5.0 million of our 5.5% convertible senior notes due in October 2014.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, August 1, July 31, August 1,
2011 2010 2011 2010
Net sales $ 135,935 $ 112,251 $ 389,861 $ 315,518
Costs and expenses:
Cost of sales (97,695 ) (85,979 ) (284,540 ) (248,979 )
Selling, general and administrative (11,833 ) (11,068 ) (33,995 ) (32,086 )
Research and development (3,527 ) (3,427 ) (11,238 ) (10,983 )
Consolidation, restructuring and related (charges) credits - (26 ) - 4,810
Operating income 22,880 11,751 60,088 28,280
Debt extinguishment loss (4,973 ) - (35,259 ) -
Other income (expense), net (390 ) (1,234 ) (2,019 ) (5,870 )
Income before income taxes 17,517 10,517 22,810 22,410
Income tax provision (4,895 ) (2,910 ) (11,637 ) (5,790 )
Net income 12,622 7,607 11,173 16,620
Net (income) loss attributable to noncontrolling interests (1,357 ) 84 (4,235 ) (842 )
Net income attributable to Photronics, Inc. $ 11,265 $ 7,691 $ 6,938 $ 15,778
Earnings per share:
Basic $ 0.19 $ 0.14 $ 0.12 $ 0.30
Diluted $ 0.16 $ 0.13 $ 0.12 $ 0.29
Weighted average number of common shares
outstanding:
Basic 58,987 53,516 56,163 53,341
Diluted 76,744 66,280 57,724 65,689
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
July 31, October 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 202,845 $ 98,945
Accounts receivable 97,654 82,951
Inventories 30,873 15,502
Other current assets 10,191 8,404
Total current assets 341,563 205,802
Property, plant and equipment, net 397,703 369,814
Investment in joint venture 72,504 61,127
Intangible assets, net 43,660 47,748
Other assets 21,494 19,388
$ 876,924 $ 703,879
Liabilities and Equity
Current liabilities:
Current portion of long-term borrowings $ 5,538 $ 11,467
Accounts payable and accrued liabilities 132,619 107,762
Total current liabilities 138,157 119,229
Long-term borrowings 153,527 78,852
Deferred income taxes and other liabilities 9,161 9,855
Equity 576,079 495,943
$ 876,924 $ 703,879
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
July 31, August 1,
2011 2010
Cash flows from operating activities:
Net income $ 11,173 $ 16,620
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 70,090 67,786
Debt extinguishment loss 27,399 -
Consolidation, restructuring and related credits - (5,059 )
Changes in assets and liabilities and other (4,211 ) (5,170 )
Net cash provided by operating activities 104,451 74,177
Cash flows from investing activities:
Purchases of property, plant and equipment (59,089 ) (38,040 )
Investment in joint venture (10,773 ) -
Proceeds from sale of facility - 12,880
Other (250 ) 288
Net cash used in investing activities (70,112 ) (24,872 )
Cash flows from financing activities:
Proceeds from issuance of convertible debt 115,000 -
Proceeds from long-term borrowings 17,000 28,680
Repayments of long-term borrowings (63,445 ) (62,288 )
Payments of deferred financing fees (4,318 ) (1,225 )
Repurchase of common stock by subsidiary (3,294 ) -
Proceeds from exercise of share based arrangements 694 75
Net cash provided by (used in) financing activities 61,637 (34,758 )
Effect of exchange rate changes on cash 7,924 941
Net increase in cash and cash equivalents 103,900 15,488
Cash and cash equivalents, beginning of period 98,945 88,539
Cash and cash equivalents, end of period $ 202,845 $ 104,027
Supplemental disclosure of cash flow information:
Capital lease obligation for purchase of equipment $ 21,248 $ -
Common stock issued to extinguish debt $ 20,234 $ -
Change in accrual for purchases of property, plant and equipment $ (2,712 ) $ 35,735
Contact:
Photronics, Inc.
Sean T. Smith, 203-775-9000
Senior Vice President
Chief Financial Officer
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