Photronics Reports Third Quarter Fiscal 2017 Results
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BROOKFIELD, CT -- (Marketwired) -- 08/14/17 --
- Third quarter sales were $111.6 million, up 3% sequentially with moderate growth in both IC and FPD
- Net income attributable to Photronics, Inc. shareholders was $4.0 million ($0.06 per diluted share)
- Increased capital expenditures to fund strategic growth brought net cash1 down slightly during the third quarter to $277 million; balance sheet retains financial strength and flexibility to fund growth
- Fourth quarter 2017 guidance: sales between $108 and $116 million; diluted EPS between $0.03 and $0.09
Photronics, Inc. (NASDAQ: PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for fiscal 2017 third quarter ended July 30, 2017.
Third quarter sales were $111.6 million, up 3% sequentially and down 9% compared with last year. Sales of integrated circuits (IC) photomasks were $85.1 million, up 3% sequentially and down 7% compared with last year, while sales of flat panel display (FPD) photomasks were $26.5 million, up 3% sequentially and down 16% compared with last year.
Net income attributable to Photronics, Inc. shareholders was $4.0 million ($0.06 per diluted share), compared with $1.8 million ($0.03 per diluted share), for the second quarter of 2017; and $8.1 million ($0.12 per diluted share) for the third quarter of 2016.
"Third quarter sales improved sequentially as we were able to achieve moderate growth in both IC and FPD," said Peter Kirlin, chief executive officer. "IC sales were generally in line with our expectations, as high-end memory grew and high-end logic remained flat. FPD sales were also higher, although slightly below our expectations due to unfavorable product mix. Operating income was modestly lower as an increase in gross profit was offset mostly by higher R&D, as qualification activity remained robust. As we ramped up capex during the quarter, primarily to complete our FPD investment, our cash balance declined slightly. However, we still have tremendous financial strength and flexibility to fund strategic growth initiatives."
Fourth Quarter 2017 Guidance
Kirlin continued, "Our outlook for the fourth quarter calls for performance similar to the third quarter. High-end memory should continue to grow steadily as we've seen every quarter year-to-date. The anticipated recovery in high-end logic has been delayed until 2018. High-end FPD capacity will expand during the quarter, with actual sales growth dependent on the mix of high-end business, which may remain tepid for the quarter. Shifting focus to our balance sheet, our cash balance will likely decrease during the fourth quarter as we ramp up investments for our China expansion." For the fourth quarter of 2017, Photronics expects revenues to be between $108 million and $116 million and net income attributable to Photronics, Inc. shareholders to be between $0.03 and $0.09 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 4:30 p.m. Eastern time on Monday, August 14, 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
Note:
1. Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP.
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.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------------- ---------------------
April
July 30, 30, July 31, July 30, July 31,
2017 2017 2016 2017 2016
---------- ---------- ---------- ---------- ----------
Net sales $ 111,579 $ 108,297 $ 123,209 $ 329,707 $ 376,088
Costs and expenses:
Cost of sales (89,862) (88,140) (91,759) (264,835) (277,915)
---------- ---------- ---------- ---------- ----------
Gross profit 21,717 20,157 31,450 64,872 98,173
Selling, general and
administrative (11,639) (10,894) (11,163) (33,403) (34,386)
Research and
development (4,812) (3,726) (5,466) (12,023) (16,613)
---------- ---------- ---------- ---------- ----------
Operating income 5,266 5,537 14,821 19,446 47,174
Gain on sale of
investment - - 157 - 8,940
Other income
(expense), net (134) (3,622) 1,237 (5,839) (872)
---------- ---------- ---------- ---------- ----------
Income before income
taxes 5,132 1,915 16,215 13,607 55,242
Income tax provision (333) (431) (4,762) (2,814) (6,136)
---------- ---------- ---------- ---------- ----------
Net income 4,799 1,484 11,453 10,793 49,106
Net loss (income)
attributable to
noncontrolling
interests (798) 313 (3,365) (3,048) (8,162)
---------- ---------- ---------- ---------- ----------
Net income
attributable to
Photronics, Inc.
shareholders $ 4,001 $ 1,797 $ 8,088 $ 7,745 $ 40,944
========== ========== ========== ========== ==========
Earnings per share:
Basic $ 0.06 $ 0.03 $ 0.12 $ 0.11 $ 0.61
---------- ---------- ---------- ---------- ----------
Diluted $ 0.06 $ 0.03 $ 0.12 $ 0.11 $ 0.56
---------- ---------- ---------- ---------- ----------
Weighted-average
number of common
shares outstanding:
Basic 68,525 68,426 67,953 68,376 67,377
---------- ---------- ---------- ---------- ----------
Diluted 69,380 69,385 74,317 69,311 76,990
========== ========== ========== ========== ==========
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
July 30, October 30,
2017 2016
--------------- ---------------
Assets
Current assets:
Cash and cash equivalents $ 340,572 $ 314,074
Accounts receivable 91,812 92,636
Inventories 25,668 22,081
Other current assets 10,558 12,795
--------------- ---------------
Total current assets 468,610 441,586
Property, plant and equipment, net 501,720 506,434
Intangible assets, net 18,320 19,854
Other assets 19,948 20,114
--------------- ---------------
Total assets $ 1,008,598 $ 987,988
=============== ===============
Liabilities and Equity
Current liabilities:
Current portion of long-term borrowings $ 5,541 $ 5,428
Accounts payable and accrued liabilities 73,769 75,889
--------------- ---------------
Total current liabilities 79,310 81,317
Long-term borrowings 57,776 61,860
Other liabilities 16,384 19,337
Photronics, Inc. shareholders' equity 739,282 710,363
Noncontrolling interests 115,846 115,111
--------------- ---------------
Total equity 855,128 825,474
--------------- ---------------
Total liabilities and equity $ 1,008,598 $ 987,988
=============== ===============
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
-------------------------------
July 30, July 31,
2017 2016
--------------- ---------------
Cash flows from operating activities:
Net income $ 10,793 $ 49,106
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 64,081 60,102
Gain on sale of investment - (8,940)
Changes in assets, liabilities and other (1,085) (8,881)
--------------- ---------------
Net cash provided by operating activities 73,789 91,387
--------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment (38,759) (44,828)
Acquisition of Business (5,400) -
Proceeds from sale of investments 167 101,853
Other (458) 584
--------------- ---------------
Net cash provided by (used in) investing
activities (44,450) 57,609
--------------- ---------------
Cash flows from financing activities:
Repayments of long-term borrowings (4,057) (56,276)
Proceeds from share-based arrangements 2,529 3,172
Dividends paid to noncontrolling interests (8,298) (11,890)
Other (33) (19)
--------------- ---------------
Net cash used in financing activities (9,859) (65,013)
--------------- ---------------
Effect of exchange rate changes on cash 7,018 1,819
--------------- ---------------
Net increase in cash and cash equivalents 26,498 85,802
Cash and cash equivalents, beginning of
period 314,074 205,867
--------------- ---------------
Cash and cash equivalents, end of period $ 340,572 $ 291,669
=============== ===============
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 Nine Months Ended
-------------------------------- ---------------------
July 30, April 30, July 31, July 30, July 31,
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 $ 4,001 $ 1,797 $ 8,088 $ 7,745 $ 40,944
Income tax benefit
(a) - - - - (3,004)
Gain on sale of
investment, net of
tax (b) - - - - (8,753)
---------- ---------- ---------- ---------- ----------
Non-GAAP net income
attributable to
Photronics, Inc.
shareholders $ 4,001 $ 1,797 $ 8,088 $ 7,745 $ 29,187
========== ========== ========== ========== ==========
Weighted average
number of diluted
shares outstanding
GAAP 69,380 69,385 74,317 69,311 76,990
========== ========== ========== ========== ==========
Non-GAAP 69,380 69,385 74,317 69,311 76,990
========== ========== ========== ========== ==========
Net income per diluted
share
GAAP $ 0.06 $ 0.03 $ 0.12 $ 0.11 $ 0.56
========== ========== ========== ========== ==========
Non-GAAP $ 0.06 $ 0.03 $ 0.12 $ 0.11 $ 0.41
========== ========== ========== ========== ==========
Reconciliation of GAAP
Net Income to Non-
GAAP EBITDA
GAAP Net Income (c) $ 4,799 $ 1,484 $ 11,453 $ 10,793 $ 49,106
Interest expense 550 550 612 1,658 2,750
Income tax expense 333 431 4,762 2,814 6,136
Depreciation and
amortization 21,840 21,345 19,572 64,081 60,102
Other items (d) 984 921 975 2,842 2,848
---------- ---------- ---------- ---------- ----------
Non-GAAP EBITDA $ 28,506 $ 24,731 $ 37,374 $ 82,188 $ 120,942
========== ========== ========== ========== ==========
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
For Further Information: R. Troy Dewar, CFA Director, Investor Relations (203) 740-5610 [email protected]
Source: Photronics, Inc.
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