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Photronics Reports Fourth Quarter Fiscal 2017 Results

BROOKFIELD, CT--(Marketwired - November 29, 2017) -

  • Fourth quarter fiscal 2017 revenue was $121.0 million, up 8% sequentially and 13% year-over-year
  • Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share)
  • Capital expenditures of $53 million led to cash of $308 million at year end; balance sheet remains strong while funding strategic growth initiatives
  • First quarter fiscal 2018 guidance: revenue between $110 and $118 million with diluted EPS between $0.02 and $0.09

Photronics, Inc. (PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for its fiscal 2017 fourth quarter ended October 29, 2017.

Fourth quarter revenue was $121.0 million, increases of 8% sequentially and 13% compared with last year. Integrated circuit (IC) revenue was $96.1 million, up 13% sequentially and 17% compared with last year. Flat panel display (FPD) revenue was $24.9 million, decreases of 6% sequentially and 1% compared with last year.

Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share), compared with $4.0 million ($0.06 per diluted share) for the third quarter of 2017 and $5.3 million ($0.08 per diluted share) for the fourth quarter of 2016. The results for fourth quarter 2016 included a non-recurring tax benefit of $1.8 million ($0.03 per diluted share).

"Revenue improved this quarter on the strength of high-end mask sales, particularly in IC where high-end memory continued the positive trend of the last four quarters, and high-end logic advanced on growing Asia foundry 28 nm demand," said Peter Kirlin, chief executive officer. "High-end FPD also improved due in part to continued growth in demand for AMOLED in China. Operating margin improved to 10.3% due to our operating leverage and effective cost control. Continued strong cash generation supports our ability to fund planned investments, including the two China projects. The capex forecast of approximately $250 million in 2018 will be the most the Company has spent in one year. We believe the China investments, when complete and fully operational, will provide attractive returns and will make significant contributions to revenue and profit growth."

Full Year Results

Full year revenue in fiscal 2017 was $450.7 million, 7% less than fiscal 2016 full-year revenue. Revenue from IC photomasks of $350.3 million was 4% less than prior year, and FPD revenue was $100.4 million, 16% less than prior year FPD revenue.

Full year net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $46.2 million ($0.64 per diluted share) in 2016. Non-GAAP net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $32.6 million ($0.47 per diluted share) in fiscal 2016.

First Quarter 2018 Guidance

Kirlin continued, "For fiscal 2018 first quarter, underlying high-end IC demand drivers still appear healthy, potentially tempered by anticipated seasonal softness. We expect high-end FPD demand to remain flat. Our cash balance will likely decrease during the quarter as we ramp up investments for the China expansion. For the first quarter of fiscal 2018, Photronics expects revenues to be between $110 million and $118 million, and net income attributable to Photronics, Inc. shareholders to be between $0.02 and $0.09 per diluted share."

Conference Call

A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, November 29, 2017. 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.

Non-GAAP Financial Measures

Non-GAAP net income attributable to Photronics, Inc. shareholders, non-GAAP earnings per share, and non-GAAP EBITDA 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 Photronics, Inc.'s financial results under GAAP to non-GAAP financial information. Photronics, Inc. believes these non-GAAP financial measures 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 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 condensed consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance. Non-GAAP financial information is adjusted for the following items:

  • Non-recurring tax benefit in fiscal 2016 related to the recognition of certain tax benefits in Taiwan that were determined to be realizable in filings for future tax periods
  • Non-recurring net gain on sale of investment in fiscal 2016
  • Interest expense, income tax expense/(benefit), depreciation and amortization, and other items are added to GAAP net income to derive non-GAAP EBITDA

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 display 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     Year Ended  
  October 29,     July 30,     October 30,     October 29,     October 30,  
  2017     2017     2016     2017     2016  
                                       
Revenue $ 120,971     $ 111,579     $ 107,368     $ 450,678     $ 483,456  
                                       
Cost of goods sold   (94,529 )     (89,862 )     (86,835 )     (359,363 )     (364,750 )
                                       
    Gross profit   26,442       21,717       20,533       91,315       118,706  
                                       
Operating Expenses:                                      
                                       
  Selling, general and administrative   (10,182 )     (11,639 )     (10,191 )     (43,585 )     (44,577 )
                                       
  Research and development   (3,838 )     (4,812 )     (5,041 )     (15,862 )     (21,654 )
                                       
Total Operating Expenses   (14,020 )     (16,451 )     (15,232 )     (59,447 )     (66,231 )
                                       
    Operating income   12,422       5,266       5,301       31,868       52,475  
                                       
Gain on sale of investment   -       -       -       -       8,940  
                                       
Other income (expense), net   536       (134 )     (69 )     (5,303 )     (941 )
                                       
    Income before income taxes   12,958       5,132       5,232       26,565       60,474  
                                       
Income tax (provision) benefit   (2,462 )     (333 )     1,337       (5,276 )     (4,798 )
                                       
    Net income   10,496       4,799       6,569       21,289       55,676  
                                       
Net income attributable to noncontrolling interests   (5,110 )     (798 )     (1,313 )     (8,159 )     (9,476 )
                                       
Net income attributable to Photronics, Inc. shareholders $ 5,386     $ 4,001     $ 5,256     $ 13,130     $ 46,200  
                                       
Earnings per share:                                      
    Basic $ 0.08     $ 0.06     $ 0.08     $ 0.19     $ 0.68  
                                       
    Diluted $ 0.08     $ 0.06     $ 0.08     $ 0.19     $ 0.64  
                                       
Weighted-average number of common shares outstanding:                                      
    Basic   68,615       68,525       68,025       68,436       67,539  
                                       
    Diluted   69,218       69,380       68,906       69,288       76,354  
 
 
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
 
       
  October 29,   October 30,
  2017   2016
           
Assets          
           
Current assets:          
  Cash and cash equivalents $ 308,021   $ 314,074
  Accounts receivable   105,320     92,636
  Inventories   23,703     22,081
  Other current assets   12,080     12,795
           
    Total current assets   449,124     441,586
           
Property, plant and equipment, net   535,197     506,434
Intangible assets, net   17,122     19,854
Other assets   19,351     20,114
           
Total assets $ 1,020,794   $ 987,988
           
           
           
Liabilities and Equity          
           
Current liabilities:          
  Current portion of long-term borrowings $ 4,639   $ 5,428
  Accounts payable and accrued liabilities   77,137     75,889
           
    Total current liabilities   81,776     81,317
           
Long-term borrowings   57,337     61,860
Other liabilities   16,386     19,337
           
Photronics, Inc. shareholders' equity   744,564     710,363
Noncontrolling interests   120,731     115,111
    Total equity   865,295     825,474
           
Total liabilities and equity $ 1,020,794   $ 987,988
   
   
PHOTRONICS, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
(Unaudited)  
             
             
    Year Ended  
    October 29,     October 30,  
    2017     2016  
                 
Cash flows from operating activities:                
  Net income   $ 21,289     $ 55,676  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     86,573       82,406  
    Gain on sale of investment     -       (8,940 )
    Changes in assets, liabilities and other     (11,029 )     (7,005 )
                 
Net cash provided by operating activities     96,833       122,137  
                 
Cash flows from investing activities:                
    Purchases of property, plant and equipment     (91,965 )     (50,147 )
    Acquisition of Business     (5,400 )     -  
    Proceeds from sale of investments     167       101,853  
    Other     (868 )     584  
                 
Net cash (used in) provided by investing activities     (98,066 )     52,290  
                 
Cash flows from financing activities:                
    Repayments of long-term borrowings     (5,428 )     (57,609 )
    Payments to noncontrolling interests     (8,298 )     (12,856 )
    Proceeds from share-based arrangements     2,830       3,463  
    Other     (32 )     (20 )
                 
Net cash used in financing activities     (10,928 )     (67,022 )
                 
Effect of exchange rate changes on cash     6,108       802  
                 
Net (decrease) increase in cash and cash equivalents     (6,053 )     108,207  
Cash and cash equivalents, beginning of period     314,074       205,867  
                 
Cash and cash equivalents, end of period   $ 308,021     $ 314,074  
   
   
PHOTRONICS, INC. AND SUBSIDIARIES  
Non-GAAP Financial Measures  
Reconciliation of GAAP to Non-GAAP Financial Information  
(in thousands, except per share data)  
(Unaudited)  
                       
  Three Months Ended     Year Ended  
  October 29,   July 30,   October 30,     October 29,   October 30,  
  2017   2017   2016     2017   2016  
                                 
Reconciliation of GAAP to Non-GAAP Net Income                                
Attributable to Photronics, Inc. Shareholders and EPS data                                
                                 
GAAP net income attributable to Photronics, Inc. shareholders $ 5,386   $ 4,001   $ 5,256     $ 13,130   $ 46,200  
  Income tax benefit (a)   -     -     (1,834 )     -     (4,838 )
  Gain on sale of investment, net of tax (b)   -     -     -       -     (8,753 )
                                 
Non-GAAP net income attributable to Photronics, Inc. shareholders $ 5,386   $ 4,001   $ 3,422     $ 13,130   $ 32,609  
                                 
Weighted average number of diluted shares outstanding                                
                                 
  GAAP   69,218     69,380     68,906       69,288     76,354  
                                 
  Non-GAAP   69,218     69,380     68,906       69,288     76,354  
                                 
Net income per diluted share                                
                                 
  GAAP $ 0.08   $ 0.06   $ 0.08     $ 0.19   $ 0.64  
                                 
  Non-GAAP $ 0.08   $ 0.06   $ 0.05     $ 0.19   $ 0.47  
                                 
                                 
Reconciliation of GAAP Net Income to Non-GAAP EBITDA                                
                                 
GAAP Net Income (c) $ 10,496   $ 4,799   $ 6,569     $ 21,289   $ 55,676  
  Interest expense   578     550     616       2,235     3,366  
  Income tax expense   2,462     333     (1,337 )     5,276     4,798  
  Depreciation and amortization   22,492     21,840     22,304       86,573     82,406  
  Other items (d)   785     984     980       3,627     3,828  
                                 
Non-GAAP EBITDA $ 36,813   $ 28,506   $ 29,132     $ 119,000   $ 150,074  
                                 
                                 
   
Notes:
(a) Represents tax benefit primarily related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary in Taiwan
(b) Represents gain on sale of investment in a foreign entity
(c) Includes net income attributable to noncontrolling interests, and in 2016 includes gain on sale of investment in a foreign entity
(d) Consists of stock compensation expense