Photronics Reports Fourth Quarter Fiscal 2015 Results

December 2, 2015 | By Business Wire News

BROOKFIELD, Conn.

Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for the fiscal 2015 fourth quarter and fiscal year ended November 1, 2015.

Fourth quarter sales were $141.7 million, a sequential increase of 8% and up 14% compared with last year. Sales of semiconductor photomasks were $111.5 million, up 12% compared with the fourth quarter of 2014, and sales of flat panel display (FPD) photomasks were $30.2 million, up 21% compared with last year. Net income attributable to Photronics, Inc. shareholders was $18.6 million, or $0.25 per diluted share, compared with $4.3 million, or $0.07 per diluted share, for the fourth quarter of 2014.

“We benefited from very strong demand for High–End photomasks in both IC and FPD,” stated Peter Kirlin, chief executive officer. “High-End memory and flat panel display have been strong all year, and those trends continued through the fourth quarter. High-End logic also contributed as customers introduced new designs at advanced nodes. Coupled with these strong demand drivers, we realized a high level of operating leverage, allowing us to deliver strong bottom line growth. Finally, our net cash position expanded to $73 million, providing additional flexibility as we look to invest in our future and increase shareholder value. Needless to say, I’m very pleased with these results and the performance by everyone in the organization to achieve them.”

Full Year Results

Sales for fiscal year 2015 were a record $524.2 million, growing 15% over fiscal year 2014. Sales of IC photomasks increased 19% while sales of FPD photomasks were up 1%. Non-GAAP net income attributable to Photronics, Inc. shareholders for fiscal 2015 was a record $45.5 million, or $0.64 per diluted share, compared with $12.1 million, or $0.19 per diluted share, in fiscal 2014.

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:

Financing expenses in fiscal 2015 related to the exchange of convertible senior notes are excluded because they are not a part of ongoing operations.
Non-cash acquisition gain and transaction expenses in fiscal 2014 related to the joint venture, PDMC, in Taiwan are excluded because they are not 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.

Conference Call

A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern Time on Thursday, December 3, 2015. The call can be accessed by logging onto Photronics’ web site at www.photronics.com. The live dial-in number is (408) 774-4601. 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.

18-2015


PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)


	Three Months Ended						Year Ended
	November 1,			November 2,			November 1,			November 2,
		2015			2014			2015			2014

Net sales	$	141,692		$	124,251		$	524,206		$	455,527

Costs and expenses:

Cost of sales		(97,078	)		(97,626	)		(381,070	)		(355,181	)

Selling, general and administrative		(12,189	)		(11,547	)		(48,983	)		(49,638	)

Research and development		(5,177	)		(5,801	)		(21,920	)		(21,913	)

Operating income		27,248			9,277			72,233			28,795

Gain on acquisition		–			–			–			16,372

Other income (expense), net		308			(574	)		(2,193	)		(3,837	)

Income before income taxes		27,556			8,703			70,040			41,330

Income tax provision		(5,406	)		(2,004	)		(13,181	)		(9,295	)

Net income		22,150			6,699			56,859			32,035

Net income attributable to noncontrolling interests		(3,527	)		(2,422	)		(12,234	)		(6,039	)

Net income attributable to Photronics, Inc. shareholders	$	18,623		$	4,277		$	44,625		$	25,996

Earnings per share:
Basic	$	0.28		$	0.07		$	0.67		$	0.42

Diluted	$	0.25		$	0.07		$	0.63		$	0.41

Weighted-average number of common shares outstanding:
Basic		66,575			63,106			66,331			61,779

Diluted		78,631			64,085			78,383			66,679


PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)


	November 1,		November 2,
		2015		2014

Assets

Current assets:
Cash and cash equivalents	$	205,867	$	192,929
Accounts receivable		110,056		94,515
Inventories		24,157		22,478
Other current assets		24,034		26,570

Total current assets		364,114		336,492

Property, plant and equipment, net		547,284		550,069
Investment in joint venture		93,021		93,122
Intangible assets, net		24,616		30,294
Other assets		16,520		19,206

	$	1,045,555	$	1,029,183



Liabilities and Equity

Current liabilities:
Current portion of long-term borrowings	$	65,495	$	10,381
Accounts payable and accrued liabilities		127,197		128,736

Total current liabilities		192,692		139,117

Long-term borrowings		67,120		131,805
Other liabilities		23,677		18,767

Photronics, Inc. shareholders’ equity		646,555		628,050
Noncontrolling interests		115,511		111,444
Total equity		762,066		739,494

	$	1,045,555	$	1,029,183


PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)


	Year Ended
	November 1,			November 2,
		2015			2014

Cash flows from operating activities:
Net income	$	56,859		$	32,035
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		82,413			80,136
Gain on acquisition		–			(16,372	)
Changes in assets and liabilities and other		(6,077	)		562

Net cash provided by operating activities		133,195			96,361

Cash flows from investing activities:
Purchases of property, plant and equipment		(104,033	)		(91,085	)
Cash from acquisition		–			4,508
Other		(272	)		(908	)

Net cash used in investing activities		(104,305	)		(87,485	)

Cash flows from financing activities:
Repayments of long-term borrowings		(9,571	)		(29,782	)
Payment of deferred financing fees		–			(346	)
Proceeds from share-based arrangements		2,651			1,298
Other		(179	)		(711	)

Net cash used in financing activities		(7,099	)		(29,541	)

Effect of exchange rate changes on cash		(8,853	)		(2,021	)

Net increase (decrease) in cash and cash equivalents		12,938			(22,686	)
Cash and cash equivalents, beginning of period		192,929			215,615

Cash and cash equivalents, end of period	$	205,867		$	192,929


Noncash net assets from acquisition	$	–		$	110,211


PHOTRONICS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands, except per share data)
(Unaudited)


	Three Months Ended				Year Ended
	November 1,		November 2,		November 1,		November 2,
	2015		2014		2015		2014

Reconciliation of GAAP to Non-GAAP Net Income
Attributable to Photronics, Inc. Shareholders

GAAP net income attributable to Photronics, Inc. shareholders	$	18,623	$	4,277	$	44,625	$	25,996

(a) Financing expenses, net of tax		–		–		901		–

(b) Gain on acquisition, net of tax		–		–		–		(16,372	)

(c) Acquisition transaction expenses, net of tax		–		–		–		2,455


Non-GAAP net income attributable to Photronics, Inc. shareholders	$	18,623	$	4,277	$	45,526	$	12,079

Reconciliation of GAAP to Non-GAAP Net Income
Applicable to Common Shareholders

Weighted average number of diluted shares outstanding

GAAP		78,631		64,085		78,383		66,679

Non-GAAP		78,631		64,085		78,383		62,734

Net income per diluted share

GAAP	$	0.25	$	0.07	$	0.63	$	0.41

Non-GAAP	$	0.25	$	0.07	$	0.64	$	0.19


(a) Represents financing expenses related to the exchange of $57.5 million of 3.25% convertible senior notes, recorded in other expense, net

(b) Represents gain on acquisition of DNP Photomask Technology Taiwan Co., Ltd (DPTT), a wholly-owned subsidiary of Dai Nippon Printing Co., Ltd.

(c) Represents transaction expenses in connection with the acquisition of DPTT


PHOTRONICS, INC. AND SUBSIDIARIES
Non-GAAP Financial Measure
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
(in thousands)
(Unaudited)

	Three Months Ended				Year Ended
	November 1,		November 2,		November 1,		November 2,
	2015		2014		2015		2014

GAAP Net Income (a)	$	22,150	$	6,699	$	56,859	$	32,035

Add: interest expense		1,178		1,638		4,991		7,247
Add: income tax expense		5,406		2,004		13,181		9,295
Add: depreciation and amortization		20,777		21,421		81,653		78,685
Add (less): special items (b)		905		941		4,590		(9,846	)
Non-GAAP EBITDA	$	50,416	$	32,703	$	161,274	$	117,416

(a) Includes net income attributable to noncontrolling interests.

(b) Special items consist of stock compensation expense, and in 2015 financing expenses in connection with the exchange
of $57.5 million of 3.25% convertible senior notes, and in 2014 noncash gain on acquisition of DNP Photomask Technology
Taiwan, Co., Ltd., a wholly-owned subsidiary of Dai Nippon Printing Co., Ltd., and related acquisition transaction expenses.