8-K
Photronics Inc (PLAB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
| Date of report (Date of earliest event reported) | August 25, 2021 |
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PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
| Connecticut | 0-15451 | 06-0854886 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (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)) |
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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. |
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On August 25, 2021, Photronics, Inc. issued a press release reporting third quarter fiscal 2021 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.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | Press Release dated August 25, 2021. |
| 99.2 | Condensed Consolidated Statements of Income. |
| 99.3 | Condensed Consolidated Balance Sheets. |
| 99.4 | Condensed Consolidated Statements of Cash Flows. |
| 99.5 | Photronics Q3 2021 Financial Results Conference Call August 25, 2021 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: August 25, 2021 |
Exhibit 99.1
| For Further Information: | |
|---|---|
| R. Troy Dewar, CFA | |
| Vice President, Investor Relations | |
| (203) 740-5610 | |
| Press Release | tdewar@photronics.com |
Photronics Reports Third Quarter Fiscal 2021 Results
| • | Revenue was a record $170.6 million, up 7% sequentially and 8% year-over-year |
|---|---|
| • | Net income attributable to Photronics, Inc. shareholders was $17.1 million, or $0.28 per diluted share, and includes a gain on the sale of a fixed asset of $3.5 million, or $0.06 per diluted share |
| --- | --- |
| • | Cash provided by operating activities was $54.9 million, capex was $18.8 million, share repurchases were $12.5 million, and ending cash balance was $283.2 million |
| --- | --- |
| • | Fourth quarter 2021 guidance: revenue between $171 and $179 million with diluted EPS between $0.21 and $0.29 |
| --- | --- |
BROOKFIELD, Conn. August 25, 2021 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2021 third quarter ended August 1, 2021.
Third quarter revenue was $170.6 million, up 7% compared with the previous quarter and 8% compared with the same quarter last year. Integrated circuit (IC) revenue was $117.8 million, up 5% sequentially and 8% compared with the third quarter of last year. Flat panel display (FPD) revenue was $52.9 million, up 11% compared with last quarter and 7% compared with the same period last year.
Net income attributable to Photronics, Inc. shareholders was $17.1 million, or $0.28 per diluted share, compared with $10.5 million, or $0.17 per diluted share, for the second quarter of 2021 and $10.8 million, or $0.17 per diluted share, for the third quarter of 2020.
"Demand trends that we observed over the first two quarters of 2021 continued into the third quarter as we achieved record revenue on a consolidated basis as well as for both IC and FPD,” said Peter Kirlin, chief executive officer. “Design activity was strong, and we were able to expand our global manufacturing presence by adding new tools to our operations. Third quarter margin expansion was in line with our demonstrated ability to keep cost under control even as production increases. Most importantly, we maintained a strong balance sheet, enabling us to invest in organic growth and return cash to shareholders through our share repurchase activity. As the leading merchant photomask manufacturer, we expect our business to continue to grow throughout the balance of this year, and remain on track to deliver on our long-term target model objectives.”
Fourth Quarter 2021 Guidance
For the fourth quarter of 2021, Photronics expects revenue to be between $171 million and $179 million, and net income attributable to Photronics, Inc. shareholders to be between $0.21 and $0.29 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, August 25, 2021. 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.
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 | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br> <br>2021 | May 2,<br><br> <br>2021 | August 2,<br><br> <br>2020 | August 1,<br><br> <br>2021 | August 2,<br><br> <br>2020 | ||||||||
| Revenue | $ | 170,643 | $ | 159,763 | $ | 157,895 | $ | 482,473 | $ | 460,405 | ||
| Cost of goods sold | 125,318 | 120,514 | 120,161 | 367,370 | 357,636 | |||||||
| Gross Profit | 45,325 | 39,249 | 37,734 | 115,103 | 102,769 | |||||||
| Operating Expenses: | ||||||||||||
| Selling, general and administrative | 15,083 | 14,067 | 13,306 | 43,203 | 40,792 | |||||||
| Research and development | 5,305 | 4,375 | 4,492 | 14,390 | 13,034 | |||||||
| Total Operating Expenses | 20,388 | 18,442 | 17,798 | 57,593 | 53,826 | |||||||
| Other operating income, net | 3,525 | - | - | 3,525 | - | |||||||
| Operating Income | 28,462 | 20,807 | 19,936 | 61,035 | 48,943 | |||||||
| Other non-operating income (expense), net | 3,735 | (772 | ) | (2,135 | ) | 3,643 | 610 | |||||
| Income Before Income Tax Provision | 32,197 | 20,035 | 17,801 | 64,678 | 49,553 | |||||||
| Income tax provision | 7,842 | 3,714 | 4,937 | 14,493 | 17,789 | |||||||
| Net Income | 24,355 | 16,321 | 12,864 | 50,185 | 31,764 | |||||||
| Net income attributable to noncontrolling interests | 7,279 | 5,795 | 2,088 | 14,547 | 4,404 | |||||||
| Net income attributable to Photronics, Inc. shareholders | $ | 17,076 | $ | 10,526 | $ | 10,776 | $ | 35,638 | $ | 27,360 | ||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.28 | $ | 0.17 | $ | 0.17 | $ | 0.58 | $ | 0.42 | ||
| Diluted | $ | 0.28 | $ | 0.17 | $ | 0.17 | $ | 0.57 | $ | 0.42 | ||
| Weighted-average number of common shares outstanding: | ||||||||||||
| Basic | 60,884 | 62,054 | 64,780 | 61,804 | 65,090 | |||||||
| Diluted | 61,515 | 62,568 | 65,247 | 62,362 | 65,704 |
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| August 1,<br><br> <br>2021 | October 31,<br><br> <br>2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 283,249 | $ | 278,665 |
| Accounts receivable | 151,190 | 134,470 | ||
| Inventories | 53,165 | 57,269 | ||
| Other current assets | 42,860 | 29,735 | ||
| Total current assets | 530,464 | 500,139 | ||
| Property, plant and equipment, net | 699,609 | 631,475 | ||
| Intangible assets, net | 904 | 3,437 | ||
| Other assets | 50,780 | 53,131 | ||
| Total assets | $ | 1,281,757 | $ | 1,188,182 |
| Liabilities and Equity | ||||
| Current liabilities: | ||||
| Debt | $ | 25,163 | $ | 13,678 |
| Accounts payable and accrued liabilities | 142,454 | 129,261 | ||
| Total current liabilities | 167,617 | 142,939 | ||
| Long-term debt | 92,740 | 54,980 | ||
| Other liabilities | 26,939 | 27,997 | ||
| Photronics, Inc. shareholders' equity | 817,892 | 804,962 | ||
| Noncontrolling interests | 176,569 | 157,304 | ||
| Total equity | 994,461 | 962,266 | ||
| Total liabilities and equity | $ | 1,281,757 | $ | 1,188,182 |
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Nine Months Ended | ||||||
|---|---|---|---|---|---|---|
| August 1,<br><br> <br>2021 | August 2,<br><br> <br>2020 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 50,185 | $ | 31,764 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 69,305 | 71,120 | ||||
| Share-based compensation | 4,034 | 3,773 | ||||
| Changes in operating assets, liabilities and other | (10,428 | ) | (28,393 | ) | ||
| Net cash provided by operating activities | 113,096 | 78,264 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment | (92,301 | ) | (36,693 | ) | ||
| Government incentives | 5,775 | 5,263 | ||||
| Purchases of intangible assets | (170 | ) | (139 | ) | ||
| Net cash used in investing activities | (86,696 | ) | (31,569 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from long-term debt | 20,858 | 5,699 | ||||
| Purchases of treasury stock | (35,750 | ) | (16,894 | ) | ||
| Repayments of debt | (13,311 | ) | (5,929 | ) | ||
| Contribution from noncontrolling interest | - | 17,596 | ||||
| Proceeds from share-based arrangements | 2,251 | 3,869 | ||||
| Net settlements of restricted stock awards | (403 | ) | (248 | ) | ||
| Net cash (used in) provided by financing activities | (26,355 | ) | 4,093 | |||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 4,602 | 3,486 | ||||
| Net increase in cash, cash equivalents, and restricted cash | 4,647 | 54,274 | ||||
| Cash, cash equivalents, and restricted cash, beginning of period | 281,602 | 209,291 | ||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 286,249 | $ | 263,565 |
Exhibit 99.5
Q3 2021 Financial Results Conference CallAugust 25, 2021 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. 8/25/2021 2
Q3 2021 Summary Revenue was a record $170.6M, up 7% Q/Q and 8% Y/YIC and FPD both achieved record revenueRecord revenue to China, up 9% Q/Q and 22% Y/YNet income attributable to Photronics, Inc. shareholders of $17.1M ($0.28/share)Cash balance $283M$55M generated from operating activity$19M invested in capex$13M returned to investors through share repurchasesFPD capacity expansion finished ahead of planInvesting to expand mainstream IC capacity 8/25/2021 3 Strategic investments driving long-term, profitable growth
Income Statement Summary $M (except EPS) Q321 Q221 Q/Q Q320 Y/Y Revenue $ 170.6 $ 159.8 7% $ 157.9 8% Gross Profit $ 45.3 $ 39.2 15% $ 37.7 20% Gross Margin 26.6% 24.6% 200 bps 23.9% 270 bps Operating Income $ 28.5 $ 20.8 37% $ 19.9 43% Operating Margin 16.7% 13.0% 370 bps 12.6% 410 bps Other non-operating income (expense) $ 3.7 ($ 0.8) $ 4.5 ($ 2.1) $ 5.9 Income tax provision $ 7.8 $ 3.7 $ 4.1 $ 4.9 $ 2.9 Minority interest $ 7.3 $ 5.8 $ 1.5 $ 2.1 $ 5.2 Net Income* $ 17.1 $ 10.5 62% $ 10.8 58% Diluted EPS* $ 0.28 $ 0.17 $ 0.11 $ 0.17 $ 0.11 Days in quarter 91 91 - 91 - Margins improved on higher revenue and better mainstream IC ASPOperating income includes $3.5M gain on sale of fixed asset ($0.06 per share)Other non-operating income (expense) primarily due to FX gain (loss); Q221 includes China interest expense subsidyMinority interest from IC JVs in Taiwan and China 8/25/2021 4 *Net income attributable to Photronics, Inc. shareholders
$M Q321 Q221 Q/Q Q320 Y/Y High-End* $ 42.4 $ 41.3 3% $ 38.7 10% Mainstream $ 75.4 $ 70.7 7% $ 70.0 8% Total $ 117.8 $ 112.0 5% $ 108.7 8% IC Photomask Revenue 8/25/2021 5 High-end growth driven by strong logic, especially in Taiwan & ChinaMainstream up on positive demand trends and higher ASPChina revenue +10% Q/Q and +46% Y/Y; represents 29% of IC revenueOutlookContinued strength from remote work and educationMainstream demand strong, with positive pricingContinued macro risk from trade policies and shelter-in-place mandates *28nm and smaller Total may differ due to rounding
FPD Photomask Revenue 8/25/2021 6 High-end improved on AMOLED mobile demand; G10.5+ up Q/QMainstream recovered Q/QChina revenue +9% Q/Q and +2% Y/Y; represents 53% of FPD revenueOutlookDynamic market environmentMobile demand strength expected to continueFurther benefit from new capacityTechnology development drives demand for higher-value masks *≥G10.5, AMOLED and LTPS $M Q321 Q221 Q/Q Q320 Y/Y High-End* $ 40.6 $ 39.4 3% $ 36.7 11% Mainstream $ 12.2 $ 8.4 46% $ 12.6 (3%) Total $ 52.9 $ 47.8 11% $ 49.2 7% Total may differ due to rounding
Select Financial Data $M Q321 Q221 Q320 Cash $ 283 $ 256 $ 261 Debt $ 118 $ 114 $ 53 Net Cash* $ 165 $ 142 $ 208 Operating Cash Flow $ 55 $ 32 $ 17 Capital Expenditures $ 19 $ 56 $ 7 Government Incentives for Capital Equipment - $ 5 - Share repurchase $ 13 $ 10 - Debt is US equipment lease and local China loansExpect 2021 capex to be ~$120M (was $92M YTD)Completed initial China IC investmentNext phase of FPD investmentMainstream IC capacity expansionTotal share repurchases of $53M under current $100M plan (Sep 2020)Balance sheet able to fund investments, share repurchases, and strategic M&A opportunities 8/25/2021 7 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP
Q421 Guidance Revenue ($M) $171 - $179 Operating Margin 16% - 18% Taxes ($M) $6 - $8 EPS $0.21 - $0.29 Diluted Shares (M) ~62 Positive industry demand trendsRemote work and learningMade in China 2025Advanced display technologiesOutlook clouded by geopolitical uncertaintyShelter-in-place mandatesUS/China trade policiesWe remain focused on expanding margins and improving cash flows 8/25/2021 8
For Additional Information:R. Troy Dewar, CFAVice President, Investor Relations203.740.5610tdewar@photronics.com Thank you for your interest!
Appendix
Total Revenue 8/25/2021 11 IC FPD Total may differ due to rounding
IC Photomask Revenue 8/25/2021 12 Mainstream High-End High-End: 28nm and smaller; total may differ due to rounding
FPD Photomask Revenue 8/25/2021 13 Mainstream High-End High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding