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)
August 27, 2020
  

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))

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 August 27, 2020, Photronics, Inc. (the “Company”) issued a press release reporting third 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.
Item 9.01.
Financial Statements and Exhibits.

(d)
Exhibits

 
Press Release dated August 27, 2020.

 
Condensed Consolidated Statements of Income.

 
Condensed Consolidated Balance Sheets.

 
Condensed Consolidated Statements of Cash Flows.

 
Photronics Q3 2020 Financial Results Conference Call August 27, 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:  August 27, 2020


Exhibit 99.1

For Further Information:
R. Troy Dewar, CFA
Vice President, Investor Relations
(203) 740-5610
Press Release

Photronics Reports Third Quarter Fiscal 2020 Results
 

 		•
Third quarter 2020 revenue was $157.9 million, up 11% sequentially and 14% year-over-year
 

 		•
Net income attributable to Photronics, Inc. shareholders was $10.8 million, or $0.17 per diluted share
 

 		•
Cash provided by operating activities was $16.9 million, resulting in a cash balance of $260.6 million
 

 		•
Fourth quarter 2020 guidance: revenue between $148 and $158 million with diluted EPS between $0.12 and $0.19
 
BROOKFIELD, Conn. August 27, 2020 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2020 third quarter ended August 2, 2020.
 
Third quarter revenue was $157.9 million, 11% better than the previous quarter and 14% better than the same quarter last year. Integrated circuit (IC) revenue was $108.7 million, up 12% sequentially and 8% compared with the third quarter of last year. Flat panel display (FPD) revenue was $49.2 million, up 7% compared with last quarter and 30% compared with the same period last year.
 
Net income attributable to Photronics, Inc. shareholders was $10.8 million ($0.17 per diluted share), compared with $6.3 million ($0.10 per diluted share) for the second quarter of 2020 and $6.3 million ($0.10 per diluted share) for the third quarter of 2019.
 
"Customer demand improved this quarter, and we achieved double-digit revenue growth rates compared with last quarter and last year due to our diverse market position and technology leadership,” said Peter Kirlin, chief executive officer. “China demand recovered for both IC and FPD, with total revenue of product shipped to China increasing 10% compared with the previous quarter. From a market perspective, mainstream IC and high-end FPD were notable areas of strength. We were able to leverage the growth in revenues to expand profit margins, while also managing expenses, resulting in 12.6% operating margin and $0.17 earnings per diluted share. Our cash balance grew to $260.6 million, providing us with financial strength and flexibility as we look to continue our strategic growth investments. We are well placed to pursue attractive organic growth opportunities and expand our leadership position.”

Fourth Quarter 2020 Guidance
 
For the fourth quarter of 2020, Photronics expects revenue to be between $148 million and $158 million, and net income attributable to Photronics, Inc. shareholders to be between $0.12 and $0.19 per diluted share.
 
Conference Call
 
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Thursday, August 27, 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.
 
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 50 years. As of October 31, 2019, the company had 1,775 employees. The company has 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 the 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, 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 2,
2020
    
May 3,
2020
    
July 28,
2019
    
August 2,
2020
    
July 28,
2019
  
                               
Revenue
  
$
157,895
    
$
142,774
    
$
138,112
    
$
460,405
    
$
394,404
  
                                         
Cost of goods sold
    
120,161
      
112,341
      
107,542
      
357,636
      
311,721
  
                                         
Gross profit
    
37,734
      
30,433
      
30,570
      
102,769
      
82,683
  
                                         
Operating Expenses:
                                        
                                         
Selling, general and administrative
    
13,306
      
13,267
      
13,124
      
40,792
      
40,186
  
                                         
Research and development
    
4,492
      
4,462
      
4,046
      
13,034
      
11,852
  
                                         
Total Operating Expenses
    
17,798
      
17,729
      
17,170
      
53,826
      
52,038
  
                                         
Operating income
    
19,936
      
12,704
      
13,400
      
48,943
      
30,645
  
                                         
Other  (expense) income, net
    
(2,135
)
    
(951
)
    
(348
)
    
610
      
4,692
  
                                         
Income before income taxes
    
17,801
      
11,753
      
13,052
      
49,553
      
35,337
  
                                         
Income tax provision
    
4,937
      
3,781
      
3,218
      
17,789
      
7,883
  
                                         
Net income
    
12,864
      
7,972
      
9,834
      
31,764
      
27,454
  
                                         
Net income attributable to noncontrolling interests
    
2,088
      
1,688
      
3,487
      
4,404
      
7,361
  
                                         
Net income attributable to Photronics, Inc. shareholders
  
$
10,776
    
$
6,284
    
$
6,347
    
$
27,360
    
$
20,093
  
                                         
Earnings per share:
                                        
                                         
Basic
  
$
0.17
    
$
0.10
    
$
0.10
    
$
0.42
    
$
0.30
  
                                         
Diluted
  
$
0.17
    
$
0.10
    
$
0.10
    
$
0.42
    
$
0.30
  
                                         
Weighted-average number of common shares outstanding:
                                        
                                         
Basic
    
64,780
      
64,937
      
66,313
      
65,090
      
66,386
  
                                         
Diluted
    
65,247
      
65,417
      
66,570
      
65,704
      
69,919
  


Exhibit 99.3

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

   
August 2,
2020
    
October 31,
2019
  
             
Assets
            
             
Current assets:
            
Cash and cash equivalents
  
$
260,597
    
$
206,530
  
Accounts receivable
    
146,843
      
134,454
  
Inventories
    
54,733
      
48,155
  
Other current assets
    
48,468
      
38,388
  
                 
Total current assets
    
510,641
      
427,527
  
                 
Property, plant and equipment, net
    
623,247
      
632,441
  
Intangible assets, net
    
4,535
      
7,870
  
Other assets
    
57,419
      
50,827
  
                 
Total assets
  
$
1,195,842
    
$
1,118,665
  
                 
Liabilities and Equity
                
                 
Current liabilities:
                
Debt
  
$
14,683
    
$
10,873
  
Accounts payable and accrued liabilities
    
160,626
      
141,081
  
                 
Total current liabilities
    
175,309
      
151,954
  
                 
Long-term debt
    
38,183
      
41,887
  
Other liabilities
    
25,665
      
13,732
  
                 
Photronics, Inc. shareholders' equity
    
790,242
      
769,892
  
Noncontrolling interests
    
166,443
      
141,200
  
Total equity
    
956,685
      
911,092
  
                 
Total liabilities and equity
  
$
1,195,842
    
$
1,118,665
  


Exhibit 99.4

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

   
Nine Months Ended
  
   
August 2,
2020
    
July 28,
2019
  
             
Cash flows from operating activities:
            
Net income
  
$
31,764
    
$
27,454
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
    
71,120
      
60,387
  
Share-based compensation
    
3,773
      
2,871
  
Changes in operating assets, liabilities and other
    
(28,393
)
    
(67,208
)
                 
Net cash provided by operating activities
    
78,264
      
23,504
  
                 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
    
(36,693
)
    
(160,149
)
Government incentive
    
5,263
      
17,694
  
Other
    
(139
)
    
(24
)
                 
Net cash used in investing activities
    
(31,569
)
    
(142,479
)
                 
Cash flows from financing activities:
                
Proceeds from long-term debt
    
5,699
      
53,227
  
Contribution from noncontrolling interest
    
17,596
      
29,394
  
Purchase of treasury stock
    
(16,894
)
    
(10,696
)
Repayments of debt
    
(5,929
)
    
(61,319
)
Proceeds from share-based arrangements
    
3,869
      
1,314
  
Dividends paid to noncontrolling interests
    
-
      
(26,102
)
Other
    
(248
)
    
(92
)
                 
Net cash provided by (used in) financing activities
    
4,093
      
(14,274
)
                 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
    
3,486
      
1,206
  
                 
Net increase (decrease) in cash, cash equivalents, and restricted cash
    
54,274
      
(132,043
)
Cash, cash equivalents, and restricted cash, beginning of period
    
209,291
      
331,989
  
                 
Cash, cash equivalents, and restricted cash, end of period
  
$
263,565
    
$
199,946
  


Exhibit 99.5

 Photronics, Inc.  Q3 2020 Financial Results Conference CallAugust 27, 2020 
 
 Safe Harbor Statement  2  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. 
 
 Revenue was $157.9M, up 11% Q/Q and 14% Y/Y12th consecutive quarter of YOY revenue growthFPD production remained at capacity, with sequential growth across all high-end technologiesIC revenue grew on China recoveryRevenue of products shipped to China improved 10% Q/Q and 46% Y/YNet income attributable to Photronics, Inc. shareholders of $10.8M ($0.17/share)Cash balance grew to $261M$17M generated from operating activity$10M contribution from JV partnerChina production contributed $21M in revenue and $1M in operating profitNext phase of FPD capacity investment on track for tool delivery in 2021Daniel Liao (Senior Advisor, Lam Research Corp.) joined Board of Directors  Q3 2020 Summary  3  Successfully repositioned the business; strategic investments driving long-term, profitable growth 
 
 $M (except EPS)  Q320  Q220  Q/Q  Q319  Y/Y  Revenue  $ 157.9  $ 142.8  11%  $ 138.1  14%  Gross Profit  $ 37.7  $ 30.4  24%  $ 30.6  23%  Gross Margin  23.9%  21.3%  260 bps  22.1%  180 bps  Operating Income  $ 19.9  $ 12.7  57%  $ 13.4  49%  Operating Margin  12.6%  8.9%  370 bps  9.7%  290 bps  Other income (expense)  ($ 2.1)  ($ 1.0)  ($ 1.2)  ($ 0.3)  ($ 1.8)  Income tax provision  $ 4.9  $ 3.8  $ 1.2  $ 3.2  $ 1.7  Minority interest  $ 2.1  $ 1.7  $ 0.4  $ 3.5  ($ 1.4)  Net Income*  $ 10.8  $ 6.3  71%  $ 6.3  70%  Diluted EPS*  $ 0.17  $ 0.10  $ 0.07  $ 0.10  $ 0.07  Days in quarter  91  91  -  91  -  Gross and operating margin moved up with revenue (operating leverage, cost controls)China operations contributed $1.0M to operating incomeOther income / (expense) primarily due to FX gain / (loss)Minority interest includes IC JVs in Taiwan and China  Income Statement Summary  4  *Net income attributable to Photronics, Inc. shareholders 
 
 High-end flat; mainstream up on China foundry recoveryChina revenue Up 15% Q/Q and 60% Y/YRepresents 22% of Q320 IC revenueOutlookNew US restrictions on Huawei (8/17) creating greater uncertaintyPotential headwinds if governments escalate shelter-in-place mandates  $M  Q320  Q220  Q/Q  Q319  Y/Y  High-End*  $ 38.7  $ 38.3  1%  $ 38.5  1%  Mainstream  $ 70.0  $ 58.6  19%  $ 61.7  13%  Total  $ 108.7  $ 96.8  12%  $ 100.2  8%  IC Photomask Revenue  5  *28nm and smaller  Total may differ due to rounding 
 
 High-end revenue growth across all technologies (AMOLED, G10.5+, LTPS)China revenue Up 5% Q/Q and 36% Y/YRepresents 56% of Q320 FPD revenueOutlookDynamic market environmentTemporary dislocation as supply chain reacts to Huawei restrictionsPlanned annual PM in Hefei  $M  Q320  Q220  Q/Q  Q319  Y/Y  High-End*  $ 36.7  $ 31.8  15%  $ 23.1  59%  Mainstream  $ 12.6  $ 14.1  (11%)  $ 14.8  (15%)  Total  $ 49.2  $ 45.9  7%  $ 37.9  30%  FPD Photomask Revenue  6  *≥G10.5, AMOLED and LTPS  Total may differ due to rounding 
 
 $M  Q320  Q220  Q319  Cash  $ 261  $ 238  $ 197  Debt  $ 53  $ 53  $ 49  Net Cash*  $ 208  $ 184  $ 148  Operating Cash Flow  $ 17  $ 31  $ 26  Capital Expenditures  $ 7  $ 16  $ 20  Government Incentives for Capital Equipment  -  $ 3  $ 12  Share repurchase  -  $ 6  -  Debt is mostly local China borrowing to finance fixed assets, working capital and VATYTD capex is $37M; expect FY 2020 capex ~$80MBalance sheet able to fund planned investments, share repurchases, and strategic M&A opportunities  Select Financial Data  7  *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP 
 
 Revenue ($M)  $148 - $158  Operating Margin  10% - 14%  Taxes ($M)  $4 - $5  EPS  $0.12 - $0.19  Diluted Shares (M)  ~65  Huawei restrictions creates uncertainty across IC & FPD supply chainsAnnual PM planned for Hefei plantFocus on expanding margins and improving cash flowsPotential geopolitical headwind due to coronavirus reaction and trade policy decisions  Q420 Guidance   8 
 
 Thank you for your interest!  For Additional Information:R. Troy Dewar, CFAVice President, Investor [email protected]  
 
 Appendix 
 
 Total Revenue  11      IC  FPD  Total may differ due to rounding 
 
 IC Photomask Revenue  12      Mainstream  High-End  High-End: 28nm and smaller; total may differ due to rounding 
 
 FPD Photomask Revenue  13      Mainstream  High-End  High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding