Current Report


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
————————————————
 
FORM 8-K
 
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
 
 
Date of report (Date of earliest event reported)         August 16, 2011       

 
PHOTRONICS, INC.
   (Exact name of registrant as specified in its charter)   

 
Connecticut       0-15451       06-0854886
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification Number)

 
15 Secor Road, Brookfield, CT              06804       
(Address of Principal Executive Offices)   (Zip Code)

 
Registrant's Telephone Number, including area code          (203) 775-9000       


 
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

Item        Results of Operations and Financial Condition
2.02    
   
On August 16, 2011, the Company issued a press release reporting third quarter fiscal 2011 results. A copy of the press release is attached to this 8-K.
 
A copy of the press release is furnished as Exhibit 99.1 to this report. The information contained in this Item 2.02 and the attached Exhibits 99.1, 99.2, 99.3, 99.4, 99.5 and 99.6 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth by specific reference in such filing.
 
On August 17, 2011, the Company will conduct a conference call during which certain unaudited, non-GAAP EBITDA financial information related to the Company’s operations for the three months ended July 31, 2011 will be disclosed. This information is set forth in Exhibit 99.6.
 
EBITDA is a non-GAAP financial measure that the Company defines pursuant to its credit agreement. The Company believes that EBITDA is generally accepted as providing useful information regarding the operational strength and performance of its business, including the ability of the Company to pay interest, service debt and fund capital expenditures. The Company’s method for calculating EBITDA may not be comparable to methods used by other companies but is the same method the Company uses for calculating EBITDA under its credit facility.
     
Item 9.01 .   Financial Statements and Exhibits
     
       (d)  Exhibits
       99.1        Press Release dated August 16, 2011
       99.2        Condensed Consolidated Statements of Income
       99.3        Condensed Consolidated Balance Sheets
       99.4        Condensed Consolidated Statements of Cash Flows
       99.5        Reconciliation of GAAP to Non-GAAP Financial Information
       99.6        Reconciliation of GAAP Net Income to EBITDA
 
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 hereunto duly authorized.
 
PHOTRONICS, INC.
(Registrant)
 
 

DATE:  August 17, 2011   BY   /s/ Richelle E. Burr  
      Richelle E. Burr
      Vice President, General Counsel
 
PHOTRONICS, INC.


 
Press Release
For Further Information:
Sean T. Smith
Senior Vice President
Chief Financial Officer
(203) 775-9000
ssmith@photronics.com

PHOTRONICS REPORTS RECORD REVENUES
IN THIRD QUARTER OF FISCAL 2011
 
     Third Quarter Highlights:
     BROOKFIELD, Connecticut August 16, 2011 -- Photronics, Inc. (NASDAQ:PLAB), 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.”
 
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     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:
 
2
 
 

     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
 
3
 

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  


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
Non-GAAP Financial Measure
Reconciliation of GAAP Net income to EBITDA
(in thousands)
(Unaudited)
 
    Three Months Ended   Nine Months Ended
    July 31,   August 1,   July 31,   August 1,
        2011       2010       2011       2010
GAAP Net income   $      12,622   $      7,607   $      11,173   $      16,620  
                           
Add: interest expense     1,907     1,827     5,499     7,807  
Add: income tax expense     4,895     2,910     11,638     5,790  
Add: depreciation and amortization     23,229     21,536     68,923     65,247  
Add(less): special items (a)     5,479     100     37,671     (3,176 )
EBITDA   $ 48,132   $ 33,980   $ 134,904   $ 92,288  
                           

(a)       Special items consist of debt extinguishment loss and non-cash consolidation and restructuring charges/(credits), warrants expense (income), deferred financing fees write-off and stock compensation expense