UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

graphic
 Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

Date of report (Date of earliest event reported)
December 9, 2020

PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
 
Connecticut
 		0-15451
06-0854886
(Incorporation State or Other Jurisdiction of)
(Commission File Number)
(IRS Employer Identification No.)

 
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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
COMMON STOCK, $0.01 par value per share
PLAB
 NASDAQ Global Select Market
PREFERRED STOCK PURCHASE RIGHTS
 N/A
 N/A

Item 2.02.
Results of Operations and Financial Condition.
 
On December 9, 2020, Photronics, Inc. (the “Company”) issued a press release reporting fourth quarter fiscal 2020 results.

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, and 99.5, 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.

Additionally, the Company will host an investor and analyst day on December 14, 2020.  The event will be conducted virtually and feature updates from management and a Q&A session.

Item 9.01.
Financial Statements and Exhibits.
 
(d)
  
Exhibits
     
 
Press Release dated December 9, 2020.
 
Condensed Consolidated Statements of Income.
 
Condensed Consolidated Balance Sheets.
 
Condensed Consolidated Statements of Cash Flows.
 
Photronics Q4 2020 Financial Results Conference Call December 9, 2020 slides.

SIGNATURE
 
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)
   
 
By:
/s/ Richelle E. Burr
 
Name:
Richelle E. Burr
 
Title:
Executive Vice President,

  Chief Administrative Officer,

  General Counsel and Secretary
Date:  December 9, 2020
    


Exhibit 99.1
For Further Information:
R. Troy Dewar, CFA
Vice President, Investor Relations
(203) 740-5610
Press Release [email protected]

Photronics Reports Full Year and Fourth Quarter Fiscal 2020 Results
 

 •
2020 revenue was a record $609.7 million, an increase of 11% compared with 2019 and the third consecutive year of record annual revenue
 

 •
Fourth quarter 2020 revenue was $149.3 million, down 5% sequentially and 4% year-over-year
 

 •
Net income attributable to Photronics, Inc. shareholders was $33.8 million, or $0.52 per diluted share, for the full year of 2020; and $6.5 million, or $0.10 per diluted share, for the fourth quarter of 2020
 

 •
During the fourth quarter, cash provided by operating activities was $64.8 million, capex was $34.1 million, share repurchases were $17.5 million, and ending cash balance was $278.7 million
 

 •
First quarter 2021 guidance: revenue between $145 and $155 million with diluted EPS between $0.07 and $0.14
 
BROOKFIELD, Conn. December 9, 2020 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2020 full year and fourth quarter ended October 31, 2020.
 
Full year revenue was a record $609.7 million, up 11% compared with 2019. IC revenue was $418.4 million, up 3% compared with last year; and FPD revenue was a record $191.3 million, up 32% compared with last year.
 
Fourth quarter revenue was $149.3 million, down 5% compared with the previous quarter and 4% compared with the same quarter last year. Integrated circuit (IC) revenue was $105.9 million, down 3% sequentially and 6% compared with the fourth quarter of last year. Flat panel display (FPD) revenue was $43.4 million, down 12% compared with last quarter and 1% compared with the same period last year.
 
Net income attributable to Photronics, Inc. shareholders was $33.8 million ($0.52 per diluted share) compared with $29.8 million ($0.44 per diluted share) in 2019; fourth quarter net income was $6.5 million ($0.10 per diluted share), compared with $10.8 million ($0.17 per diluted share) for the third quarter of 2020 and $9.7 million ($0.15 per diluted share) for the fourth quarter of 2019.
 
"We achieved record annual revenue for the third consecutive year in 2020, overcoming tremendous global and regional challenges,” said Peter Kirlin, chief executive officer. “Fourth quarter revenue declined 5% sequentially as typical seasonality was worsened by geopolitical factors and softness in some sectors. With the decrease in quarterly revenue, profit margins contracted due to the effect of operating leverage on our income. We increased our cash balance while investing in organic growth and returning cash to our shareholders through share repurchases, ending 2020 in a strong financial position. Our expectations are for another growth year in 2021, with high single-digit percent growth in revenue and an up-tick in operating profit similar to the 23% increase achieved in 2020.”

First Quarter 2021 Guidance

For the first quarter of 2021, Photronics expects revenue to be between $145 million and $155 million, and net income attributable to Photronics, Inc. shareholders to be between $0.07 and $0.14 per diluted share.
 
Conference Call
 
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, December 9, 2020. The call can be accessed by logging onto Photronics' website 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’ website.
 
Investor and Analyst Day
 
Photronics will host an investor and analyst day on December 14, 2020. The event will be conducted virtually and feature updates from management and a Q&A session. More information can be found on the Investors section of Photronics' website at www.photronics.com.
 
About Photronics
 
Photronics is a leading worldwide manufacturer of integrated circuit (IC) and flat panel display (FPD) photomasks. High precision quartz plates that contain microscopic images of electronic circuits, photomasks are a key element in the IC and FPD manufacturing process. Founded in 1969, Photronics has been a trusted photomask supplier for over 50 years. As of October 31, 2020, the company had 1,728 employees. The company operates 11 strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the company can be accessed at www.photronics.com.
 
Forward-Looking Statements
 
Certain statements in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of the company and its subsidiaries. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of Photronics to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate,” “will,” “should,” “would,” “may” and “could” or similar words or expressions are generally forward-looking in nature and not historical facts. Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results are also forward-looking statements. Important risks, assumptions and other important factors that could cause future results to differ materially from those expressed in the forward-looking statements are specified in Photronics’ Annual and Quarterly filings with the Securities and Exchange Commission under headings such as “Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other filings and furnishings made by Photronics with the Securities and Exchange Commission from time to time. These risks and uncertainties include, but are not limited to, the current pandemic and future recurrences and other developments with respect thereto, governmental responses to the pandemic and related matters, changes in end markets resulting therefrom, changes in investment, tax, trade, exchange and other laws and regulations, compliance with local, State and Federal laws, rules and regulations including, but not limited to, import and export controls, tariffs and penalties, fines and violations related thereto, as well as economic, competitive, legal, governmental, political, monetary and fiscal policy, and technological factors and decisions we may make in the future regarding our business, capital structure and other matters. Photronics undertakes no obligation to release publicly any revisions to any forward-looking statements or, except as required to be disclosed in filings or furnishings with the Securities and Exchange Commission, to report events or to report the occurrence of unanticipated events. There is no assurance that Photronics’ expectations will be realized.
 

Exhibit 99.2

PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)

   
Three Months Ended
    
Year Ended
  
   
October 31,
2020
    
August 2,
2020
    
October 31,
2019
    
October 31,
2020
    
October 31,
2019
  
                               
Revenue
  
$
149,286
    
$
157,895
    
$
156,257
    
$
609,691
    
$
550,660
  
                                         
Cost of goods sold
    
117,401
      
120,161
      
118,098
      
475,037
      
429,819
  
                                         
Gross profit
    
31,885
      
37,734
      
38,159
      
134,654
      
120,841
  
                                         
Operating Expenses:
                                        
                                         
Selling, general and administrative
    
12,790
      
13,306
      
12,140
      
53,582
      
52,326
  
 
                                        
Research and development
    
4,110
      
4,492
      
4,543
      
17,144
      
16,394
  
                                         
Total Operating Expenses
    
16,900
      
17,798
      
16,683
      
70,726
      
68,720
  
                                         
Operating income
    
14,985
      
19,936
      
21,476
      
63,928
      
52,121
  
 
                                        
Other  (expense) income, net
    
(2,937
)
    
(2,135
)
    
(6,111
)
    
(2,327
)
    
(1,420
)
                                         
Income before income tax provision
    
12,048
      
17,801
      
15,365
      
61,601
      
50,701
  
                                         
Income tax provision
    
3,469
      
4,937
      
2,327
      
21,258
      
10,210
  
                                         
Net income
    
8,579
      
12,864
      
13,038
      
40,343
      
40,491
  
                                         
Net income attributable to noncontrolling interests
    
2,119
      
2,088
      
3,338
      
6,523
      
10,698
  
                                         
Net income attributable to Photronics, Inc. shareholders
  
$
6,460
    
$
10,776
    
$
9,700
    
$
33,820
    
$
29,793
  
                                         
Earnings per share:
                                        
                                         
Basic
  
$
0.10
    
$
0.17
    
$
0.15
    
$
0.52
    
$
0.45
  
                                         
Diluted
  
$
0.10
    
$
0.17
    
$
0.15
    
$
0.52
    
$
0.44
  
                                         
Weighted-average number of common shares outstanding:
                                        
                                         
Basic
    
64,193
      
64,780
      
66,230
      
64,866
      
66,347
  
                                         
Diluted
    
64,768
      
65,247
      
66,862
      
65,470
      
69,155
  


Exhibit 99.3

PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

   
October 31,
2020
    
October 31,
2019
  
             
Assets
            
             
Current assets:
            
Cash and cash equivalents
  
$
278,665
    
$
206,530
  
Accounts receivable
    
134,470
      
134,454
  
Inventories
     57,269
       48,155  
Other current assets
    
29,735
      
38,388
  
                 
Total current assets
    
500,139
      
427,527
  
                 
Property, plant and equipment, net
    
631,475
      
632,441
  
Intangible assets, net
    
3,437
      
7,870
  
Other assets
     53,131
       50,827
  
                 
Total assets
   $ 1,188,182     $ 1,118,665  
                 
Liabilities and Equity
                
                 
Current liabilities:
                
Debt
   $ 13,678     $ 10,873  
Accounts payable and accrued liabilities
    
129,261
      
141,081
  
                 
Total current liabilities
    
142,939
      
151,954
  
                 
Long-term debt
     54,980
       41,887
  
Other liabilities
     27,997
       13,732
  
                 
Photronics, Inc. shareholders' equity
    
804,962
      
769,892
  
Noncontrolling interests
    
157,304
      
141,200
  
Total equity
     962,266       911,092
  
                 
Total liabilities and equity
  
$
1,188,182
    
$
1,118,665
  


Exhibit 99.4
PHOTRONICS,  INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

   
Year Ended
  
   
October 31,
2020
    
October 31,
2019
  
             
Cash flows from operating activities:
            
Net income
  
$
40,343
    
$
40,491
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
    
93,814
      
83,879
  
Share-based compensation
    
4,927
      
3,680
  
Changes in operating assets, liabilities and other
    
3,962
      
(59,664
)
                 
Net cash provided by operating activities
    
143,046
      
68,386
  
                 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
    
(70,815
)
    
(178,375
)
Government incentive
    
5,263
      
27,003
  
Other
    
(159
)
    
(34
)
                 
Net cash used in investing activities
    
(65,711
)
    
(151,406
)
                 
Cash flows from financing activities:
                
Proceeds from debt
    
20,340
      
54,633
  
Contributions from noncontrolling interest
    
17,596
      
29,394
  
Purchases of treasury stock
    
(34,394
)
    
(21,696
)
Dividends paid to noncontrolling interests
    
(16,151
)
    
(45,050
)
Repayments of debt
    
(7,392
)
    
(61,319
)
Proceeds from share-based arrangements
    
4,239
      
2,071
  
Other
    
(248
)
    
(92
)
                 
Net cash used in financing activities
    
(16,010
)
    
(42,059
)
                 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
    
10,986
      
2,381
  
                 
Net increase (decrease) in cash, cash equivalents, and restricted cash
    
72,311
      
(122,698
)
Cash, cash equivalents, and restricted cash, beginning of period
    
209,291
      
331,989
  
                 
Cash, cash equivalents, and restricted cash, end of period
  
$
281,602
    
$
209,291
  


Exhibit 99.5

 Q4 2020 Financial Results Conference CallDecember 9, 2020  Photronics, Inc. 
 
 Safe Harbor Statement  This presentation and some of our comments may contain projections or other forward-looking statements regarding future events, our future financial performance and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. Actual events or results may differ materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “plan”, “project”, “in our view” or the negative thereto. We cannot guarantee the accuracy of any forecasts or estimates, and we are not obligated to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to time with the Securities and Exchange Commission.  12/8/2020  2 
 
 Please Join Us  Photronics’ 2020 Investor and Analyst Day (Virtual)December 14, 202010:00 AM ETDetails available on “Investors” section of our website: www.photronics.com   12/8/2020  3 
 
 2020 Summary  Revenue was $609.7M; up 11%3rd consecutive year of record revenueFPD revenue was record $191.3M, up 32%Revenue of product shipped to China was a record, improving 40%Operating income improved 23%Generated $143M in cash from operating activities, invested $71M in capex, and returned $34M in cash to shareholdersChina facilities contributed $79M in revenue with operating loss of $2M; Hefei was profitable for the year2021 expectationsRevenue up high single-digit percentOperating income Y/Y growth similar to 2020  12/8/2020  4 
 
 Q4 2020 Summary  Revenue was $149.3M, down 5% Q/Q and 4% Y/YDemand lower across IC and FPD Revenue to China was flat Q/Q, down 2% Y/Y; IC achieved record China revenue; FPD was down on Huawei-related disruptionsNet income attributable to Photronics, Inc. shareholders of $6.5M ($0.10/share)Cash balance grew to $279M$65M generated from operating activity$34M invested in capex$18M returned to investors through share repurchasesChina facilities contributed $21M in revenue and $1M in operating profitNext phase of FPD capacity investment on track for tool delivery in 2021  12/8/2020  5  Strategic investments driving long-term, profitable growth 
 
 Income Statement Summary  $M (except EPS)  Q420  Q320  Q/Q  Q419  Y/Y  Revenue  $ 149.3  $ 157.9  (5%)  $ 156.3  (4%)  Gross Profit  $ 31.9  $ 37.7  (16%)  $ 38.2  (16%)  Gross Margin  21.4%  23.9%  (250 bps)  24.4%  (300 bps)  Operating Income  $ 15.0  $ 19.9  (25%)  $ 21.5  (30%)  Operating Margin  10.0%  12.6%  (260 bps)  13.7%  (370 bps)  Other income (expense)  ($ 2.9)  ($ 2.1)  ($ 0.8)  ($ 6.1)  $ 3.2  Income tax provision  $ 3.5  $ 4.9  ($ 1.5)  $ 2.3  $ 1.1  Minority interest  $ 2.1  $ 2.1  -  $ 3.3  ($ 1.2)  Net Income*  $ 6.5  $ 10.8  (40%)  $ 9.7  (33%)  Diluted EPS*  $ 0.10  $ 0.17  ($ 0.07)  $ 0.15  ($ 0.05)  Days in quarter  90  91  (1)  91  (1)  Gross and operating margin down on lower revenue (operating leverage)China operations contributed $1M to operating incomeOther income / (expense) primarily due to FX gain / (loss)Minority interest includes IC JVs in Taiwan and China  12/8/2020  6  *Net income attributable to Photronics, Inc. shareholders 
 
 $M  Q420  Q320  Q/Q  Q419  Y/Y  High-End*  $ 38.2  $ 38.7  (1%)  $ 45.0  (15%)  Mainstream  $ 67.8  $ 70.0  (3%)  $ 67.6  -  Total  $ 105.9  $ 108.7  (3%)  $ 112.5  (6%)  IC Photomask Revenue  12/8/2020  7  Improvement at some logic foundries in US and Asia; memory demand softRecord China revenue in Q420Up 14% Q/Q and 6% Y/YRepresents 25% of Q420 IC revenueOutlookSome sectors benefiting from remote work and educationTrade uncertainty remains post US electionPotential headwinds if governments escalate shelter-in-place mandates  *28nm and smaller  Total may differ due to rounding 
 
 FPD Photomask Revenue  12/8/2020  8  High-end down Q/Q on lower AMOLED (Huawei) and G10.5+Strong LCD market causes panel makers to run current product, limiting new design activityChina revenue Down 12% Q/Q and 10% Y/YRepresents 56% of Q420 FPD revenueOutlookDynamic market environmentRecovery underway as supply chain adjusts to Huawei restrictions  *≥G10.5, AMOLED and LTPS  $M  Q420  Q320  Q/Q  Q419  Y/Y  High-End*  $ 31.3  $ 36.7  (15%)  $ 25.4  23%  Mainstream  $ 12.1  $ 12.6  (4%)  $ 18.3  (34%)  Total  $ 43.4  $ 49.2  (12%)  $ 43.7  (1%)  Total may differ due to rounding 
 
 Select Financial Data  $M  Q420  Q320  Q419  Cash  $ 279  $ 261  $ 207  Debt  $ 69  $ 53  $ 53  Net Cash*  $ 210  $ 208  $ 154  Operating Cash Flow  $ 65  $ 17  $ 45  Capital Expenditures  $ 34  $ 7  $ 18  Government Incentives for Capital Equipment  -  -  $ 9  Share repurchase  $ 18  -  $ 11  Debt is mostly local China borrowing to finance fixed assets, working capital and VAT2020 capex was $71M; expect 2021 capex to be ~$100MBalance sheet able to fund investments, share repurchases, and strategic M&A opportunities  12/8/2020  9  *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP 
 
 Q121 Guidance   Revenue ($M)  $145 - $155  Operating Margin  8% - 12%  Taxes ($M)  $4 - $5  EPS  $0.07 - $0.14  Diluted Shares (M)  ~64.5  Positive industry demand trends due to remote work and learning offset by typical seasonalityOutlook clouded by geopolitical uncertaintyCoronavirus reactionUS/China trade policiesWe remain focused on expanding margins and improving cash flows  12/8/2020  10 
 
 For Additional Information:R. Troy Dewar, CFAVice President, Investor [email protected]   Thank you for your interest! 
 
 Appendix   
 
 Total Revenue  12/8/2020  13      IC  FPD  Total may differ due to rounding 
 
 IC Photomask Revenue  12/8/2020  14      Mainstream  High-End  High-End: 28nm and smaller; total may differ due to rounding 
 
 FPD Photomask Revenue  12/8/2020  15      Mainstream  High-End  High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding