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Photronics Reports Fourth Quarter Fiscal 2017 Results

BROOKFIELD, CT--(Marketwired - November 29, 2017) -

  • Fourth quarter fiscal 2017 revenue was $121.0 million, up 8% sequentially and 13% year-over-year
  • Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share)
  • Capital expenditures of $53 million led to cash of $308 million at year end; balance sheet remains strong while funding strategic growth initiatives
  • First quarter fiscal 2018 guidance: revenue between $110 and $118 million with diluted EPS between $0.02 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 its fiscal 2017 fourth quarter ended October 29, 2017.

Fourth quarter revenue was $121.0 million, increases of 8% sequentially and 13% compared with last year. Integrated circuit (IC) revenue was $96.1 million, up 13% sequentially and 17% compared with last year. Flat panel display (FPD) revenue was $24.9 million, decreases of 6% sequentially and 1% compared with last year.

Net income attributable to Photronics, Inc. shareholders was $5.4 million ($0.08 per diluted share), compared with $4.0 million ($0.06 per diluted share) for the third quarter of 2017 and $5.3 million ($0.08 per diluted share) for the fourth quarter of 2016. The results for fourth quarter 2016 included a non-recurring tax benefit of $1.8 million ($0.03 per diluted share).

"Revenue improved this quarter on the strength of high-end mask sales, particularly in IC where high-end memory continued the positive trend of the last four quarters, and high-end logic advanced on growing Asia foundry 28 nm demand," said Peter Kirlin, chief executive officer. "High-end FPD also improved due in part to continued growth in demand for AMOLED in China. Operating margin improved to 10.3% due to our operating leverage and effective cost control. Continued strong cash generation supports our ability to fund planned investments, including the two China projects. The capex forecast of approximately $250 million in 2018 will be the most the Company has spent in one year. We believe the China investments, when complete and fully operational, will provide attractive returns and will make significant contributions to revenue and profit growth."

Full Year Results

Full year revenue in fiscal 2017 was $450.7 million, 7% less than fiscal 2016 full-year revenue. Revenue from IC photomasks of $350.3 million was 4% less than prior year, and FPD revenue was $100.4 million, 16% less than prior year FPD revenue.

Full year net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $46.2 million ($0.64 per diluted share) in 2016. Non-GAAP net income attributable to Photronics, Inc. shareholders was $13.1 million in fiscal 2017 ($0.19 per diluted share), compared with $32.6 million ($0.47 per diluted share) in fiscal 2016.

First Quarter 2018 Guidance

Kirlin continued, "For fiscal 2018 first quarter, underlying high-end IC demand drivers still appear healthy, potentially tempered by anticipated seasonal softness. We expect high-end FPD demand to remain flat. Our cash balance will likely decrease during the quarter as we ramp up investments for the China expansion. For the first quarter of fiscal 2018, Photronics expects revenues to be between $110 million and $118 million, and net income attributable to Photronics, Inc. shareholders to be between $0.02 and $0.09 per diluted share."

Conference Call

A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, November 29, 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

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 display 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             Year Ended      
                      -------------------------------  -------------------- 
                       October               October    October    October  
                         29,      July 30,     30,        29,        30,    
                         2017       2017       2016       2017       2016   
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Revenue               $ 120,971  $ 111,579  $ 107,368  $ 450,678  $ 483,456 
                                                                            
Cost of goods sold      (94,529)   (89,862)   (86,835)  (359,363)  (364,750)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
    Gross profit         26,442     21,717     20,533     91,315    118,706 
                                                                            
Operating Expenses:                                                         
                                                                            
  Selling, general and                                                      
   administrative       (10,182)   (11,639)   (10,191)   (43,585)   (44,577)
                                                                            
  Research and                                                              
   development           (3,838)    (4,812)    (5,041)   (15,862)   (21,654)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Total Operating                                                             
 Expenses               (14,020)   (16,451)   (15,232)   (59,447)   (66,231)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
    Operating income     12,422      5,266      5,301     31,868     52,475 
                                                                            
Gain on sale of                                                             
 investment                   -          -          -          -      8,940 
                                                                            
Other income                                                                
 (expense), net             536       (134)       (69)    (5,303)      (941)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
    Income before                                                           
     income taxes        12,958      5,132      5,232     26,565     60,474 
                                                                            
Income tax (provision)                                                      
 benefit                 (2,462)      (333)     1,337     (5,276)    (4,798)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
    Net income           10,496      4,799      6,569     21,289     55,676 
                                                                            
Net income                                                                  
 attributable to                                                            
 noncontrolling                                                             
 interests               (5,110)      (798)    (1,313)    (8,159)    (9,476)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net income                                                                  
 attributable to                                                            
 Photronics, Inc.                                                           
 shareholders         $   5,386  $   4,001  $   5,256  $  13,130  $  46,200 
                      =========  =========  =========  =========  ========= 
                                                                            
Earnings per share:                                                         
    Basic             $    0.08  $    0.06  $    0.08  $    0.19  $    0.68 
                      =========  =========  =========  =========  ========= 
                                                                            
    Diluted           $    0.08  $    0.06  $    0.08  $    0.19  $    0.64 
                      =========  =========  =========  =========  ========= 
                                                                            
Weighted-average                                                            
 number of common                                                           
 shares outstanding:                                                        
    Basic                68,615     68,525     68,025     68,436     67,539 
                      =========  =========  =========  =========  ========= 
                                                                            
    Diluted              69,218     69,380     68,906     69,288     76,354 
                      =========  =========  =========  =========  ========= 
                                                                            
                                                                            
                      PHOTRONICS, INC. AND SUBSIDIARIES                     
                    Condensed Consolidated Balance Sheets                   
                               (in thousands)                               
                                 (Unaudited)                                
                                                                            
                                                                            
                                                   October 29,   October 30,
                                                      2017          2016    
                                                  ------------  ------------
                                                                            
Assets                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                       $    308,021  $    314,074
  Accounts receivable                                  105,320        92,636
  Inventories                                           23,703        22,081
  Other current assets                                  12,080        12,795
                                                  ------------  ------------
                                                                            
    Total current assets                               449,124       441,586
                                                                            
Property, plant and equipment, net                     535,197       506,434
Intangible assets, net                                  17,122        19,854
Other assets                                            19,351        20,114
                                                  ------------  ------------
                                                                            
Total assets                                      $  1,020,794  $    987,988
                                                  ============  ============
                                                                            
                                                                            
                                                                            
Liabilities and Equity                                                      
                                                                            
Current liabilities:                                                        
  Current portion of long-term borrowings         $      4,639  $      5,428
  Accounts payable and accrued liabilities              77,137        75,889
                                                  ------------  ------------
                                                                            
    Total current liabilities                           81,776        81,317
                                                                            
Long-term borrowings                                    57,337        61,860
Other liabilities                                       16,386        19,337
                                                                            
Photronics, Inc. shareholders' equity                  744,564       710,363
Noncontrolling interests                               120,731       115,111
                                                  ------------  ------------
    Total equity                                       865,295       825,474
                                                  ------------  ------------
                                                                            
Total liabilities and equity                      $  1,020,794  $    987,988
                                                  ============  ============
                                                                            
                                                                            
                     PHOTRONICS, INC. AND SUBSIDIARIES                      
              Condensed Consolidated Statements of Cash Flows               
                               (in thousands)                               
                                (Unaudited)                                 
                                                                            
                                                                            
                                                         Year Ended         
                                                 -------------------------- 
                                                  October 29,   October 30, 
                                                     2017          2016     
                                                 ------------  ------------ 
                                                                            
Cash flows from operating activities:                                       
  Net income                                     $     21,289  $     55,676 
  Adjustments to reconcile net income to net                                
   cash provided by operating activities:                                   
    Depreciation and amortization                      86,573        82,406 
    Gain on sale of investment                              -        (8,940)
    Changes in assets, liabilities and other          (11,029)       (7,005)
                                                 ------------  ------------ 
                                                                            
Net cash provided by operating activities              96,833       122,137 
                                                 ------------  ------------ 
                                                                            
Cash flows from investing activities:                                       
    Purchases of property, plant and equipment        (91,965)      (50,147)
    Acquisition of Business                            (5,400)            - 
    Proceeds from sale of investments                     167       101,853 
    Other                                                (868)          584 
                                                 ------------  ------------ 
                                                                            
Net cash (used in) provided by investing                                    
 activities                                           (98,066)       52,290 
                                                 ------------  ------------ 
                                                                            
Cash flows from financing activities:                                       
    Repayments of long-term borrowings                 (5,428)      (57,609)
    Payments to noncontrolling interests               (8,298)      (12,856)
    Proceeds from share-based arrangements              2,830         3,463 
    Other                                                 (32)          (20)
                                                 ------------  ------------ 
                                                                            
Net cash used in financing activities                 (10,928)      (67,022)
                                                 ------------  ------------ 
                                                                            
Effect of exchange rate changes on cash                 6,108           802 
                                                 ------------  ------------ 
                                                                            
Net (decrease) increase in cash and cash                                    
 equivalents                                           (6,053)      108,207 
Cash and cash equivalents, beginning of period        314,074       205,867 
                                                 ------------  ------------ 
                                                                            
Cash and cash equivalents, end of period         $    308,021  $    314,074 
                                                 ============  ============ 
                                                                            
                                                                            
                     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            Year Ended     
                         -----------------------------  ------------------- 
                          October             October    October   October  
                            29,     July 30,    30,        29,       30,    
                            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            $   5,386 $   4,001 $   5,256  $  13,130 $  46,200 
    Income tax benefit                                                      
     (a)                         -         -    (1,834)         -    (4,838)
    Gain on sale of                                                         
     investment, net of                                                     
     tax (b)                     -         -         -          -    (8,753)
                                                                            
                         --------- --------- ---------  --------- --------- 
Non-GAAP net income                                                         
 attributable to                                                            
 Photronics, Inc.                                                           
 shareholders            $   5,386 $   4,001 $   3,422  $  13,130 $  32,609 
                         ========= ========= =========  ========= ========= 
                                                                            
Weighted average number                                                     
 of diluted shares                                                          
 outstanding                                                                
                                                                            
    GAAP                    69,218    69,380    68,906     69,288    76,354 
                         ========= ========= =========  ========= ========= 
                                                                            
    Non-GAAP                69,218    69,380    68,906     69,288    76,354 
                         ========= ========= =========  ========= ========= 
                                                                            
Net income per diluted                                                      
 share                                                                      
                                                                            
    GAAP                 $    0.08 $    0.06 $    0.08  $    0.19 $    0.64 
                         ========= ========= =========  ========= ========= 
                                                                            
    Non-GAAP             $    0.08 $    0.06 $    0.05  $    0.19 $    0.47 
                         ========= ========= =========  ========= ========= 
                                                                            
                                                                            
Reconciliation of GAAP                                                      
 Net Income to Non-GAAP                                                     
 EBITDA                                                                     
                                                                            
GAAP Net Income (c)      $  10,496 $   4,799 $   6,569  $  21,289 $  55,676 
    Interest expense           578       550       616      2,235     3,366 
    Income tax expense       2,462       333    (1,337)     5,276     4,798 
    Depreciation and                                                        
     amortization           22,492    21,840    22,304     86,573    82,406 
    Other items (d)            785       984       980      3,627     3,828 
                                                                            
                         --------- --------- ---------  --------- --------- 
Non-GAAP EBITDA          $  36,813 $  28,506 $  29,132  $ 119,000 $ 150,074 
                         ========= ========= =========  ========= ========= 
                                                                            
                                                                            
                                                                            
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
tdewar@photronics.com

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