Photronics Reports Second Quarter Fiscal 2014 Results

  Photronics Reports Second Quarter Fiscal 2014 Results

  *Quarterly results include impact of PDMC JV from April 4
  *Gain, net of expenses, of $14.4 million related to formation of PDMC JV
  *Quarterly High-end IC photomask sales of $17.2 million, up 4% sequentially
  *Quarterly High-end FPD photomask sales of $20.6 million, up 32%
    sequentially
  *Non-GAAP EPS of $0.02 per diluted share
  *EBITDA of $25 million
  *Net working capital of $209 million, up $33 million sequentially

Business Wire

BROOKFIELD, Conn. -- May 19, 2014

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 2014 second quarter ended May 4,
2014.

Constantine (“Deno”) Macricostas, Photronics' chairman and chief executive
officer commented, “During the quarter we closed on our new PDMC joint venture
in Taiwan, and we expect this initiative to generate solid growth in the
coming quarters. Customers are positive about the formation of PDMC, and we
are off to a great start in integrating our operations to enable efficient
photomask delivery in the region. We remain confident in our prospects for
profitable growth across the company due to our global infrastructure,
advanced technology and efficient operating model.”

Sales for the second quarter of fiscal 2014 were $104.9 million, a sequential
increase of 3% compared with $101.5 million for the first quarter of fiscal
2014. Sales for the second quarter of 2013 were $106.7 million. Sales of
semiconductor photomasks were $76.6 million, or 73% of revenues, during the
second quarter of fiscal 2014, and sales of flat panel display (FPD)
photomasks were $28.3 million, or 27% of revenues. GAAP net income
attributable to Photronics, Inc. shareholders for the second quarter of fiscal
2014 was $15.5 million, or $0.22 per diluted share, and non-GAAP net income
attributable to Photronics, Inc. shareholders for the second quarter of fiscal
2014 was $1.2 million, or $0.02 per diluted share, compared with the second
quarter of fiscal 2013 GAAP net income and non-GAAP net income attributable to
Photronics, Inc. shareholders of $4.9 million, or $0.08 per diluted share.
Non-GAAP net income attributable to Photronics, Inc. shareholders for the
second quarter of fiscal 2014 excluded the non-cash gain on acquisition of
$16.4 million and transaction expenses of $2.0 million related to the joint
venture, PDMC, in Taiwan.

Sales for the first six months of fiscal 2014 were $206.4 million, compared
with $206.5 million for the first six months of fiscal 2013. For the first six
months of fiscal 2014, sales of semiconductor photomasks were $152.8 million,
or 74% of revenues, and sales of FPD photomasks were $53.6 million, or 26% of
revenues. GAAP net income attributable to Photronics, Inc. shareholders for
the first six months of fiscal 2014 was $17.5 million, or $0.27 per diluted
share, and non-GAAP net income attributable to Photronics, Inc. shareholders
for the first six months of fiscal 2014 was $3.6 million, or $0.06 per diluted
share, compared with the first six months of fiscal 2013 GAAP and Non-GAAP net
income attributable to Photronics, Inc. shareholders of $7.2 million, or $0.12
per diluted share. Non-GAAP net income attributable to Photronics, Inc.
shareholders for the first six months of fiscal 2014 excludes the acquisition
gain and expenses related to the joint venture.

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.

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. 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:

  *Non-cash acquisition gain and transaction expenses 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.

A conference call with investors and the media to discuss these results is
scheduled for 8:30 a.m. Eastern time on Tuesday, May 20, 2014. 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 for instant replay
access until the Company reports its fiscal 2014 third quarter results.

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.

07-2014

PLAB – E

                                                             
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
                                                                      
                     Three Months Ended              Six Months Ended
                     May 4,          April 28,       May 4,           April 28,
                      2014          2013          2014           2013     
                                                                      
Net sales            $ 104,882       $ 106,680       $ 206,424        $ 206,519
                                                                      
Costs and
expenses:
                                                                      
Cost of sales          (82,692 )       (81,891 )       (161,352 )       (160,632 )
                                                                      
Selling, general
and                    (13,419 )       (12,151 )       (25,697  )       (23,218  )
administrative
                                                                      
Research and          (5,939  )      (4,556  )      (10,913  )      (9,395   )
development
                                                                      
Operating income       2,832           8,082           8,462            13,274
                                                                      
Gain on                16,372          -               16,372           -
acquisition
                                                                      
Other expense,        (1,222  )      (916    )      (2,095   )      (1,507   )
net
                                                                      
Income before          17,982          7,166           22,739           11,767
income taxes
                                                                      
Income tax            (2,032  )      (1,724  )      (4,747   )      (3,466   )
provision
                                                                      
Net income             15,950          5,442           17,992           8,301
                                                                      
Net income
attributable to       (410    )      (579    )      (459     )      (1,114   )
noncontrolling
interests
                                                                      
Net income
attributable to      $ 15,540       $ 4,863        $ 17,533        $ 7,187    
Photronics, Inc.
shareholders
                                                                      
Earnings per
share:
Basic                $ 0.25         $ 0.08         $ 0.29          $ 0.12     
                                                                      
Diluted              $ 0.22         $ 0.08         $ 0.27          $ 0.12     
                                                                      
Weighted-average
number of common
shares
outstanding:
Basic                 61,372        60,493        61,286         60,385   
                                                                      
Diluted               77,705        61,501        77,632         61,298   
                                                                                 


PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
                                                        
                                             May 4,          November 3,
                                             2014            2013
                                                             
Assets
                                                             
Current assets:
Cash and cash equivalents                    $ 191,828       $  215,615
Accounts receivable                            97,654           73,357
Inventories                                    21,923           18,849
Other current assets                          29,406          10,645
                                                             
Total current assets                           340,811          318,466
                                                             
Property, plant and equipment, net             534,065          422,740
Investment in joint venture                    93,085           93,124
Intangible assets, net                         32,767           34,080
Other assets                                  20,282          17,519
                                                             
                                             $ 1,021,010     $  885,929
                                                             
                                                             
Liabilities and Equity
                                                             
Current liabilities:
Current portion of long-term borrowings      $ 10,231        $  11,818
Accounts payable and accrued liabilities      121,174         92,769
                                                             
Total current liabilities                      131,405          104,587
                                                             
Long-term borrowings                           158,691          182,203
Other liabilities                              21,175           11,308
                                                             
Photronics, Inc. shareholders' equity          603,121          585,314
Noncontrolling interests                      106,618         2,517
Total equity                                  709,739         587,831
                                                             
                                             $ 1,021,010     $  885,929
                                                                


PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                                              
                                                   Six Months Ended
                                                   May 4,          April 28,
                                                    2014          2013    
                                                                   
Cash flows from operating activities:
Net income                                         $ 17,992        $ 8,301
Adjustments to reconcile net income to net
cash
provided by operating activities:
Gain on acquisition                                  (16,372 )       -
Depreciation and amortization                        36,782          37,490
Changes in assets and liabilities and other         1,497         (9,857  )
                                                                   
Net cash provided by operating activities           39,899        35,934  
                                                                   
Cash flows from investing activities:
Purchases of property, plant and equipment           (42,385 )       (31,866 )
Cash from acquisition                                4,508           -
Other                                               (910    )      (2,822  )
                                                                   
Net cash used in investing activities               (38,787 )      (34,688 )
                                                                   
Cash flows from financing activities:
Repayments of long-term borrowings                   (25,100 )       (3,319  )
Repurchase of common stock of subsidiary             -               (4,190  )
Payment of deferred financing fees                   (309    )       (40     )
Proceeds from share-based arrangements               888             588
Other                                               (543    )      -       
                                                                   
Net cash used in financing activities               (25,064 )      (6,961  )
                                                                   
Effect of exchange rate changes on cash             165           (1,776  )
                                                                   
Net decrease in cash and cash equivalents            (23,787 )       (7,491  )
Cash and cash equivalents, beginning of period      215,615       218,043 
                                                                   
Cash and cash equivalents, end of period           $ 191,828      $ 210,552 
                                                                   
                                                                   
Noncash net assets from acquisition                $ 110,213       $ -
                                                                             

                                                            
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 4,          April 28,     May 4,          April 28,
                        2014         2013           2014         2013
                                                                     
Reconciliation of
GAAP to Non-GAAP
Net Income
Attributable to
Photronics, Inc.
Shareholders
                                                                     
GAAP net income
attributable to        $ 15,540        $  4,863      $ 17,533        $  7,187
Photronics, Inc.
shareholders
                                                                     
(a) Gain on
acquisition, net         (16,372 )        -            (16,372 )        -
of tax
                                                                     
(b) Acquisition
transaction              2,018            -            2,455            -
expenses, net of
tax
                                                                  
                                                                     
Non-GAAP net
income
attributable to        $ 1,186        $  4,863      $ 3,616        $  7,187
Photronics, Inc.
shareholders
                                                                     
Reconciliation of
GAAP to Non-GAAP
Net Income
Applicable to
Common
Shareholders
                                                                     
Weighted average
number of diluted
shares outstanding
                                                                     
GAAP                    77,705         61,501      77,632         61,298
                                                                     
Non-GAAP                62,282         61,501      62,209         61,298
                                                                     
Net income per
diluted share
                                                                     
GAAP                   $ 0.22         $  0.08       $ 0.27         $  0.12
                                                                     
Non-GAAP               $ 0.02         $  0.08       $ 0.06         $  0.12
                                                                        

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

Contact:

Photronics
Pete Broadbent, 203-775-9000
Vice President, Investor Relations & Marketing
pbroadbent@photronics.com
 
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