PLAB Photronics Inc

Photronics, Inc. (Nasdaq:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported fiscal 2009 fourth quarter results for the period ended November 1, 2009.

Sales for the fourth quarter were $94.7 million, down 8.3% compared to $103.3 million for the fourth quarter of fiscal year 2008. Sales of semiconductor photomasks accounted for $73.8 million, or 77.9% of revenues during the fourth quarter of fiscal 2009, and sales of flat panel display (FPD) photomasks accounted for $20.9 million, or 22.1% of revenues. GAAP net income for the fourth quarter of fiscal 2009 was $1.2 million, or $0.11 loss per diluted share. The diluted loss per share reflects the assumed conversion of warrants to acquire 1.4 million shares originally issued in connection with the Company's May 2009 credit facility amendment as well as the associated assumed reversal of $6.5 million in mark-to-market gains which were recorded in other income. This compares to net income of $0.2 million, or $0.01 earnings per diluted share, for the fourth quarter of fiscal 2008.

Sales for the 2009 fiscal year were $361.4 million, down 14.5% from $422.5 million for fiscal 2008. Sales of semiconductor photomasks accounted for $272.9 million, or 75.5% of revenues during the 2009 fiscal year, and sales of FPD photomasks accounted for $88.5 million, or 24.5% of revenues. GAAP net loss for the 2009 fiscal year amounted to $41.9 million, or $0.97 loss per diluted share, as compared to 2008 fiscal net loss of $210.8 million, or $5.06 loss per diluted share.

Pro forma net loss for the fourth quarter of fiscal year 2009 was $3.2 million, or $0.07 loss per diluted share, as compared to pro forma net income of $0.6 million or $0.01 earnings per diluted share for the fourth quarter of fiscal year 2008. Pro forma net loss for the 2009 fiscal year was $26.2 million, or $0.63 loss per diluted share, as compared to pro forma net loss for the 2008 fiscal year of $11.2 million or $0.27 loss per diluted share. The section below entitled “Non-GAAP Financial Measures” provides a definition and information about the use of pro forma financial measures in this press release and the attached financial supplement reconciles pro forma financial information with Photronics, Inc.’ financial results under GAAP.

Constantine (“Deno”) Macricostas, Photronics’ chairman and chief executive officer commented, “During the fourth quarter we successfully recapitalized our balance sheet and paid down $65 million in debt. We also benefited from continued traction at the nanoFab where we gained additional market share with new qualified and volume production customers, while sequentially improving its operating cash flow. For the year Photronics significantly reduced fixed operating costs and realigned its global manufacturing network to better match customer demand. We enter 2010 in a solid position to capitalize on market improvement,” concluded Macricostas.

Non-GAAP Financial Measures

Pro forma net income (loss) and pro forma earnings (loss) 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 pro forma net income (loss) and pro forma earnings (loss) per share that exclude certain non-cash or non-recurring income or expense items are useful for analysts and investors to evaluate Photronics, Inc.’ future on-going performance because they enable a more meaningful comparison of Photronics, Inc.’ projected earnings and performance with its historical results from prior periods. These pro forma metrics, in particular pro forma net income (loss) and pro forma earnings (loss) per share, are not intended to represent funds available for Photronics, Inc.’ discretionary use and are not intended to represent or be used as a substitute for operating income (loss), net income (loss) or cash flows from operations data as measured under GAAP. The items excluded from these pro forma metrics, but included in the calculation of their closest GAAP equivalent, are significant components of consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance. Pro forma financial information is adjusted for the following items:

• Consolidation and restructuring charges are excluded because they are not a part of ongoing operations
• Gain on sale of building is excluded because it is not a part of ongoing operations
• Deferred financing fees write-off net of interest savings is excluded because it is not a part of ongoing operations and was not anticipated when establishing forecast guidance for Q4-2009
• Impact of warrant mark-to-market gains (losses) are excluded because it does not affect cash earnings
• Primarily goodwill and long-lived asset impairment charges are excluded because they do not affect cash earnings and are not a 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 generally accepted accounting principles in the United States. The attached financial supplement reconciles pro forma financial information with Photronics, Inc.' 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, December 9, 2009. The live dial-in number is 913-312-0713. 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 as discussed in filings with the U. S. Securities and Exchange Commission (SEC). 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. The Company assumes no obligation to provide revisions to any forward-looking statements.

20-2009

PLAB - E

 

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)                 Three Months Ended Year Ended November 1, November 2, November 1, November 2, 2009 2008 2009 2008   Net sales $ 94,677 $ 103,306 $ 361,353 $ 422,548   Costs and expenses:   Cost of sales (77,660 ) (85,354 ) (304,282 ) (349,841 )   Selling, general and administrative (10,166 ) (11,547 ) (41,162 ) (55,167 )   Research and development (3,768 ) (4,327 ) (15,423 ) (17,475 )   Consolidation, restructuring and related charges (811 ) (510 ) (13,557 ) (510 )   Impairment of goodwill and long-lived assets - - (1,458 ) (205,408 )   Gain on sale of facility   2,034     -     2,034     -     Operating income (loss) 4,306 1,568 (12,495 ) (205,853 )   Other income (expense), net   (1,765 )   24     (24,609 )   (6,316 )   Income (loss) before income taxes and minority interest 2,541 1,592 (37,104 ) (212,169 )   Income tax (provision) benefit   (1,398 )   (1,438 )   (4,323 )   2,778     Income (loss) before minority interest 1,143 154 (41,427 ) (209,391 )   Minority interest   98     81     (483 )   (1,374 )   Net income (loss) $ 1,241   $ 235   $ (41,910 ) $ (210,765 )   Earnings (loss) per share: Basic $ 0.03   $ 0.01   $ (0.97 ) $ (5.06 )   Diluted $ (0.11 ) $ 0.01   $ (0.97 ) $ (5.06 )  

Weighted average number of common shares outstanding:

Basic   47,522     41,703     43,210     41,658     Diluted   48,907     41,996     43,210     41,658      

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)             November 1, November 2, 2009 2008  

Assets

  Current assets:

Cash, cash equivalents and short-term investments

of $148 in 2009 and $1,343 in 2008

$ 88,687 $ 85,106 Accounts receivable 66,920 68,095 Inventories 14,826 17,548 Other current assets   9,564   11,748   Total current assets 179,997 182,497   Property, plant and equipment, net 347,889 436,528 Investment in joint venture 60,945 65,737 Other intangibles, net 55,054 62,386 Other assets   19,771   10,859   $ 663,656 $ 758,007    

 

Liabilities and Shareholders' Equity

  Current liabilities: Current portion of long-term borrowings $ 10,301 $ 20,630 Accounts payable and accrued liabilities   80,154   95,448   Total current liabilities 90,455 116,078   Long-term borrowings 112,137 202,979 Deferred income taxes and other liabilities 11,368 6,552 Minority interest 49,941 49,616   Shareholders' equity   399,755   382,782   $ 663,656 $ 758,007    

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)           Year Ended November 1, November 2, 2009 2008     Cash flows from operating activities: Net loss $ (41,910 ) $ (210,765 )

Adjustments to reconcile net loss to net cash provided by operating activities:

 

Depreciation and amortization 90,474 103,932 Gain on sale of facility (2,034 ) - Minority interest in income of consolidated subsidiaries 483 1,374 Consolidation, restructuring and related charges - non-cash 10,514 510 Impairment of goodwill and long-lived assets 1,458 205,408 Changes in assets and liabilities and other   9,163     (8,379 )   Net cash provided by operating activities   68,148     92,080     Cash flows from investing activities: Purchases of property, plant and equipment (34,995 ) (105,125 ) Distribution from joint venture 5,000 5,000 Proceeds from sale of facility 4,321 - Proceeds from sales of investments 1,252 3,815 Investment in joint venture - (2,598 ) Other   (256 )   (327 )   Net cash used in investing activities   (24,678 )   (99,235 )   Cash flows from financing activities: Repayments of long-term borrowings (161,841 ) (183,509 ) Proceeds from long-term borrowings 28,112 139,640 Net proceeds from convertible debt and common stock offerings 97,961 - Deferred financing costs and other   (4,734 )   (3,790 )   Net cash used in financing activities   (40,502 )   (47,659 )   Effect of exchange rate changes on cash   1,808     (7,472 )   Net increase (decrease) in cash and cash equivalents 4,776 (62,286 ) Cash and cash equivalents, beginning of period   83,763     146,049       Cash and cash equivalents, end of period $ 88,539   $ 83,763     Supplemental disclosure of cash flow information: Change in accrual for purchases of property, plant and equipment $ (13,551 ) $ (46,769 )

Capital lease obligation for purchases of property, plant and equipment

$ (28,244 ) $ 61,662 Issuances of common stock warrants $ 5,320 $ -              

PHOTRONICS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Pro Forma Financial Information

(in thousands, except per share data) (Unaudited)   Three Months Ended Year Ended   November 1, November 2, November 1, November 2, 2009 2008 2009 2008  

Reconciliation of GAAP to Pro Forma Net Loss

  GAAP net income (loss) $ 1,241 $ 235 $ (41,910 ) $ (210,765 )   (a) Consolidation and restructuring charges, net of tax 626 367 12,913 367   (b) Gain on sale of building, net of tax (1,474 ) - (1,474 ) -   (c) Deferred financing fees net of interest savings, net of tax 2,942 - 2,942 -   (d) Warrant mark-to-market (gains)/charges, net of tax (6,544 ) - 304 -   (e) Primarily goodwill and long-lived assets impairment, net of tax - - 1,050 199,177         Pro forma net income (loss) $ (3,209 ) $ 602 $ (26,175 ) $ (11,221 )   Three Months Ended Year Ended   November 1, November 2, November 1, November 2, 2009 2008 2009 2008   Reconciliation of GAAP Pro Forma Net Income/Loss

Applicable to Common Shareholders

  GAAP weighted average number of diluted shares outstanding 48,907 41,996 43,210 41,658  

(f) Adjustment to exclude equivalent shares issued September 16, 2009

  (5,603 )   -   (1,401 )   -     Pro forma weighted average number of diluted shares outstanding   43,304     41,996   41,809     41,658     Net income (loss) per diluted share   GAAP $ (0.11 ) $ 0.01 $ (0.97 ) $ (5.06 )   Pro forma $ (0.07 ) $ 0.01 $ (0.63 ) $ (0.27 )  

(a)

 

Includes charges related to announced restructurings in China and United Kingdom.

 

(b)

Represents net gain recognized on sale of Manchester, United Kingdom facility.

 

(c)

Represents write-off of deferred financing fees of $3.7 million recorded in interest expense as a result of reduced debt offset by $0.8 million of reduced interest expense resulting from the $98 million debt repayment with the proceeds of the common stock and senior unsecured debt issuance.

 

(d)

Represents market value impact of outstanding warrants and the clawback of 1.2 million warrants ($6.0 million) both of which are recorded in other income.

 

(e)

Represents goodwill and long-lived assets impairment charge, net of tax

 

(f)

Adjustment to reflect the excluded impact on weighted average shares outstanding during quarter and year of the equivalent shares issued on September 16, 2009.