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Form 8-K PHOTRONICS INC For: May 18

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May 18, 2016 4:06 PM EDT
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)  May 18, 2016
 
 
PHOTRONICS, INC.
  
 
(Exact name of registrant as specified in its charter)
  

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

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Item 2.02
Results of Operations and Financial Condition

On May 18, 2016 the Company issued a press release reporting second quarter fiscal 2016 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 May 18, 2016, 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 May 1, 2016 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
 
Press Release dated May 18, 2016
Condensed Consolidated Statements of Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Reconciliation of GAAP to Non-GAAP Financial Information
Reconciliation of GAAP Net Income to Non-GAAP 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: May 18, 2016
BY
/s/ Richelle E. Burr
   
Richelle E. Burr
   
Vice President, General Counsel
     
PHOTRONICS, INC.
 
 
Exhibit 99.1
 
For Further Information:
R. Troy Dewar, CFA
Director, Investor Relations
(203) 740-5610
   
Press Release
 
Photronics Reports Second Quarter Fiscal 2016 Results
 
• 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
 
BROOKFIELD, Connecticut – May 18, 2016 — 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.
 
Exhibit 99.2
 
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)

   
Three Months Ended
    
Six Months Ended
  
   
May 1,
2016
    
May 3,
2015
    
May 1,
2016
    
May 3,
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
  
 
Exhibit 99.3
 
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

   
May 1,
2016
    
November 1,
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
  
 
Exhibit 99.4
 
PHOTRONICS,  INC.  AND  SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

   
Six Months Ended
  
   
May 1,
2016
    
May 3,
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
  
 
Exhibit 99.5
 
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,
2016
    
May 3,
2015
    
May 1,
2016
    
May 3,
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
 
 
Exhibit 99.6
 
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,
2016
    
May 3,
2015
    
May 1,
2016
    
May 3,
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
 

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