Photronics Reports Third Quarter Results

Photronics, Inc. (Nasdaq:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported fiscal 2008 third quarter results for the period ended July 27, 2008. Sales for the quarter were $105.7 million compared to $104.3 million for the third quarter of fiscal year 2007. Semiconductor photomasks accounted for $77.1 million, or 72.9% of revenues, during the third quarter of fiscal 2008, while flat panel display (FPD) photomasks accounted for $28.6 million, or 27.1% of revenues. During the third quarter of fiscal 2007, semiconductor photomasks accounted for 81.8% of revenues and FPD photomasks accounted for 18.2% of revenues. Net loss for the third quarter of fiscal year 2008 was $205.6 million, or $4.93 per share compared to net income of $2.2 million, or $0.05 per diluted share for the third quarter of fiscal 2007. The net loss for the third quarter of 2008 included the following charges: (1) A non-cash, pre-tax goodwill impairment charge of $138.5 million, or $137.3 million net of tax and $3.30 per diluted share; (2) A non-cash, pre-tax long-lived asset impairment charge of $66.9 million or $60.9 million net of tax and $1.46 per diluted share; and (3) a $1.0 million, net of tax, or $0.02 per diluted share, severance charge related to the separation agreement with its former chief executive officer. On a non-GAAP basis, excluding the effect of the impairment charges and severance costs, the Company's net loss was $6.4 million, or $0.15 per share. Sales for the first nine months of 2008 were $319.2 million compared to $319.9 million for the first nine months of fiscal 2007. Semiconductor photomasks accounted for $237.5 million, or 74.4% of revenues during the first nine months of fiscal 2008, while FPD photomasks accounted for $81.8 million, or 25.6% of revenues. Year-over-year, semiconductor photomask revenues decreased 8.4%, while FPD photomask revenues increased 34.6%. Net loss for the first nine months of fiscal 2008 was $211 million, or $5.07 per share, compared to net income of $24.2 million, or $0.53 per diluted share, in the first nine months of the prior year. Net loss for the first nine months of 2008 includes the impact of the impairment and severance charges of $199.2 million, or $4.78 per diluted share. Net income for the first nine months of 2007 included a net benefit of $7.9 million, or $0.16 per share, relating to the resolution and settlement of United States and foreign tax liabilities associated with uncertain tax positions in prior years. Constantine ("Deno") S. Macricostas, Photronics’ chairman and interim chief executive officer commented, "Photronics’ third quarter performance was primarily affected by reduced demand for high-end IC photomasks as a result of the downturn in the memory market and customer restructurings. While we expect that the memory market will remain soft for the near term, we remain committed to our high-end strategy and expect that it will be an important, long-term contributor to Photronics’ future growth. Qualifications with key customers are progressing, and we anticipate an increase in high-end IC photomask sales over the next few quarters.” "During this time, we will continue to accelerate our cost reduction programs in order to improve our bottom line and better leverage our sales growth when the market rebounds,” concluded Macricostas. A conference call with investors and the media to discuss these results can be accessed by logging onto Photronics' web site at www.photronics.com, then clicking on the "Conference Calls" button on the top right corner of the home page. The call is scheduled for 8:30 a.m. Eastern Daylight Time on Thursday, August 14, 2008. The live dial-in number is 719-325-4846. The call will be archived for instant replay access until the Company reports its fiscal fourth quarter results after the market closes on Tuesday, December 9, 2008. Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components. They are produced in accordance with product designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed at www.photronics.com. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Photronics, Inc. and its subsidiaries (the Company). The forward-looking statements contained in this press release and other parts of Photronics' web site involve risks and uncertainties that may affect the Company's operations, markets, products, services, prices, and other factors as discussed in filings with the U. S. Securities and Exchange Commission (SEC). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements. PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (Unaudited)       Three Months Ended   Nine Months Ended July 27,   July 29, July 27,   July 29, 2008 2007 2008 2007   Net sales $ 105,697 $ 104,301 $ 319,242 $ 319,908   Costs and expenses:   Cost of sales (91,813 ) (80,595 ) (264,487 ) (240,344 )   Selling, general and administrative (13,741 ) (16,039 ) (43,620 ) (46,922 )   Research and development (4,298 ) (4,241 ) (13,148 ) (13,285 )   Impairment of goodwill and long-lived assets (205,408 ) - (205,408 ) -   Gain on sale of facility   -     -     -     2,254     Operating income (loss) (209,563 ) 3,426 (207,421 ) 21,611   Other income (expense), net   (2,575 )   867     (6,340 )   1,012     Income (loss) before income taxes and minority interest (212,138 ) 4,293 (213,761 ) 22,623   Income tax benefit (provision)   7,020     (1,126 )   4,216     3,962     Income (loss) before minority interest (205,118 ) 3,167 (209,545 ) 26,585   Minority interest   (474 )   (929 )   (1,456 )   (2,424 )   Net income (loss) $ (205,592 ) $ 2,238   $ (211,001 ) $ 24,161     Earnings (loss) per share: Basic $ (4.93 ) $ 0.05   $ (5.07 ) $ 0.58     Diluted $ (4.93 ) $ 0.05   $ (5.07 ) $ 0.53     Weighted average number of common shares outstanding: Basic   41,662     41,558     41,642     41,515     Diluted   41,662     41,864     41,642     51,355   PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) (Unaudited)       July 27, October 28, 2008 2007   Assets   Current assets: Cash, cash equivalents and short-term investments of $2,458 in 2008 and $5,657 in 2007 $ 79,628 $ 151,706 Accounts receivable 71,595 68,248 Inventories 18,201 17,716 Other current assets   14,286   9,315   Total current assets 183,710 246,985   Property, plant and equipment, net 500,403 531,578 Goodwill - 138,534 Investment in joint venture 70,595 67,900 Other intangibles, net 63,937 68,835 Other assets   5,680   5,948   $ 824,325 $ 1,059,780       Liabilities and Shareholders' Equity   Current liabilities: Current portion of long-term borrowings $ 19,213 $ 4,482 Accounts payable and accrued liabilities   99,246   145,897   Total current liabilities 118,459 150,379   Long-term borrowings 209,328 191,253 Deferred income taxes and other liabilities 7,956 14,399 Minority interest 53,710 49,465   Shareholders' equity   434,872   654,284   $ 824,325 $ 1,059,780 PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)     Nine Months Ended July 27,   July 29, 2008 2007     Cash flows from operating activities: Net income (loss) $ (211,001 ) $ 24,161 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 79,794 72,234 Gain on sale of facility - (3,027 ) Minority interest in income of consolidated subsidiaries 1,456 2,424 Impairment of goodwill 138,535 - Impairment of long-lived assets 66,873 - Changes in assets and liabilities and other   (9,740 )   (1,718 )   Net cash provided by operating activities   65,917     94,074     Cash flows from investing activities: Purchases of property, plant and equipment (94,941 ) (56,951 ) Purchases of short-term investments and other (327 ) (5,465 ) Proceeds from sales of investments and other 3,558 48,253 Proceeds from sale of facility and other - 5,783 Investment in joint venture   (2,598 )   (1,000 )   Net cash used in investing activities   (94,308 )   (9,380 )   Cash flows from financing activities: Repayments of long-term borrowings (179,968 ) (94,587 ) Proceeds from long-term borrowings 139,640 3,369 Proceeds from issuance of common stock - 631 Other   (950 )   (1,485 )   Net cash used in financing activities   (41,278 )   (92,072 )   Effect of exchange rate changes on cash   790     (1,991 )   Net decrease in cash and cash equivalents (68,879 ) (9,369 ) Cash and cash equivalents, beginning of period   146,049     129,425       Cash and cash equivalents, end of period $ 77,170   $ 120,056     Supplemental disclosure of cash flow information: Change in accrual for purchases of property, plant and equipment $ (40,144 ) $ 16,480   Capital lease obligation for purchases of property, plant and equipment $ 61,662 $ -