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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 0-20839
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DUPONT PHOTOMASKS, INC.
(Exact name of registrant as specified in our charter)
Delaware 74-2238819
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
131 Old Settlers Boulevard
Round Rock, Texas 78664
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 310-6500
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
As of April 30, 2000, there were 15,688,471 shares of the registrant's
common stock, $.01 par value, outstanding.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
PART I
Item 1. Financial Statements
Income Statement for the Three Months Ended March 31, 1999 and
2000....................................................... 3
Income Statement for the Nine Months Ended March 31, 1999 and
2000....................................................... 4
Balance Sheet at June 30, 1999 and March 31, 2000............. 5
Statement of Cash Flows for the Nine Months Ended March 31,
1999 and 2000.............................................. 6
Notes to Financial Statements................................. 7
Management's Discussion and Analysis of Financial Condition
Item 2. and Results of Operations.................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 13
PART II
Item 1. Legal Proceedings............................................. 14
Item 2. Changes in Securities and Use of Proceeds..................... 14
Item 3. Defaults Upon Senior Securities............................... 14
Item 4. Submission of Matters to a Vote of Security Holders........... 14
Item 5. Other Information............................................. 14
Item 6. Exhibits and Reports on Form 8-K.............................. 14
Signatures.................................................... 15
</TABLE>
2
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PART I
Item 1. Financial Statements
DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
INCOME STATEMENT
(Dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 2000
----------- -----------
<S> <C> <C>
Sales................... $ 67,159 $ 86,790
Cost of goods sold...... 47,419 59,339
Selling, general and
administrative
expense................ 8,657 10,466
Research and development
expense................ 4,574 6,071
----------- -----------
Operating profit........ 6,509 10,914
Other (income) expense.. 209 (303)
----------- -----------
Income before income
taxes and minority
interest............... 6,300 11,217
Provision for income
taxes.................. 2,003 2,765
----------- -----------
Income before minority
interest............... 4,297 8,452
Minority interest in
joint ventures......... (158) 1,340
----------- -----------
Net income.............. $ 4,455 $ 7,112
=========== ===========
Basic earnings per
share.................. $ 0.29 $ 0.45
=========== ===========
Basic weighted average
shares outstanding..... 15,307,852 15,636,474
=========== ===========
Diluted earnings per
share.................. $ 0.28 $ 0.44
=========== ===========
Diluted weighted average
shares outstanding..... 15,918,677 16,281,769
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
3
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DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
INCOME STATEMENT
(Dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------
1999 2000
----------- -----------
<S> <C> <C>
Sales................... $ 190,031 $ 234,673
Cost of goods sold...... 135,897 163,866
Selling, general and
administrative
expense................ 24,552 28,143
Research and development
expense................ 12,306 16,497
----------- -----------
Operating profit........ 17,276 26,167
Other (income) expense.. 1,691 (286)
----------- -----------
Income before income
taxes and minority
interest............... 15,585 26,453
Provision for income
taxes.................. 4,881 7,000
----------- -----------
Income before minority
interest............... 10,704 19,453
Minority interest in
joint ventures......... (158) 1,452
----------- -----------
Net income.............. $ 10,862 $ 18,001
=========== ===========
Basic earnings per
share.................. $ 0.71 $ 1.16
=========== ===========
Basic weighted average
shares outstanding..... 15,293,067 15,493,481
=========== ===========
Diluted earnings per
share.................. $ 0.69 $ 1.12
=========== ===========
Diluted weighted average
shares outstanding..... 15,734,017 16,143,336
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
4
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DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH
JUNE 30, 31,
1999 2000
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 61,311 $ 29,588
Accounts receivable, trade............................... 45,272 56,773
Accounts receivable, related parties..................... 1,388 2,273
Inventories.............................................. 12,707 14,960
Deferred income taxes.................................... 9,547 9,054
Prepaid expenses and other current assets................ 9,421 10,624
-------- --------
Total current assets.................................... 139,646 123,272
Property and equipment.................................... 312,240 392,781
Accounts receivable, related parties...................... 1,324 1,341
Deferred income taxes..................................... 3,596 4,657
Other assets.............................................. 23,600 42,001
-------- --------
Total assets............................................ $480,406 $564,052
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade.................................. $ 34,563 $ 49,618
Accounts payable, related parties........................ 1,742 1,864
Short-term borrowings.................................... 2,702 4,701
Income taxes payable..................................... 5,179 4,447
Other accrued liabilities................................ 24,326 29,190
-------- --------
Total current liabilities............................... 68,512 89,820
Long-term borrowings...................................... 4,659 2,408
Long-term borrowings, related parties..................... 100,000 112,000
Deferred income taxes..................................... 13,644 14,166
Other liabilities......................................... 2,837 15,483
Minority interest in net assets of joint ventures......... 16,453 27,349
-------- --------
Total liabilities....................................... 206,105 261,226
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 100,000,000 shares autho-
rized;
15,332,282 and 15,687,438 issued and outstanding........ 153 157
Additional paid-in capital............................... 164,342 174,862
Retained earnings........................................ 109,806 127,807
-------- --------
Total stockholders' equity.............................. 274,301 302,826
-------- --------
Total liabilities and stockholders' equity.............. $480,406 $564,052
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
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DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
--------------------
1999 2000
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 10,862 $ 18,001
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 29,284 42,259
Other.................................................. (1,505) 1,145
Cash provided (used) by changes in assets and liabili-
ties:
Accounts receivable................................... 3,578 (11,750)
Inventories........................................... 4,198 (1,635)
Prepaid expenses and other current assets............. (4,264) (1,707)
Accounts payable...................................... (12,757) 8,394
Other accrued liabilities............................. 2,518 2,542
--------- ---------
Net cash provided by operating activities............ 31,914 57,249
--------- ---------
Cash flows from investing activities:
Capital expenditures.................................... (63,926) (106,970)
Payment for acquisitions................................ (40,355) (10,025)
--------- ---------
Net cash used in investing activities................ (104,281) (116,995)
--------- ---------
Cash flows from financing activities:
Increase in borrowings.................................. 88,253 11,813
Proceeds from issuance of common stock.................. 876 7,495
Increase in minority interest in net assets of joint
ventures............................................... 16,394 9,442
--------- ---------
Net cash provided by financing activities............ 105,523 28,750
--------- ---------
Effect of exchange rate changes on cash.................. (1,669) (727)
--------- ---------
Net increase (decrease) in cash and cash equivalents..... 31,487 (31,723)
Cash and cash equivalents at beginning of period......... 19,688 61,311
--------- ---------
Cash and cash equivalents at end of period............... $ 51,175 $ 29,588
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
6
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DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
Our accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with our audited financial statements
and accompanying notes thereto included in our 1999 Annual Report on Form 10-K.
Our unaudited interim financial statements include all adjustments, consisting
only of normal recurring adjustments, which our management considers necessary
for the fair presentation of the interim periods. Results for interim periods
are not necessarily indicative of results for the year.
NOTE 2--INVENTORIES
Inventories consist primarily of raw materials.
NOTE 3--SEGMENT INFORMATION
In accordance with SFAS 131, segment information as of or for the nine
months ended March 31 is as follows:
<TABLE>
<CAPTION>
UNITED STATES EUROPE ASIA TOTAL
------------- ------- ------- --------
1999
----
<S> <C> <C> <C> <C>
Sales........................... $111,186 $39,425 $39,420 $190,031
Transfers between geographic
areas.......................... 14,574 1,967 1,202
-------- ------- ------- --------
$125,760 $41,392 $40,622 $190,031
======== ======= ======= ========
Net income (loss)............... $ 6,337 $(2,506) $ 7,031 $ 10,862
Identifiable assets............. 242,514 75,265 144,447 462,226
<CAPTION>
2000
----
<S> <C> <C> <C> <C>
Sales........................... $139,457 $42,560 $52,656 $234,673
Transfers between geographic
areas.......................... 17,182 2,135 11,181
-------- ------- ------- --------
$156,639 $44,695 $63,837 $234,673
======== ======= ======= ========
Net income (loss)............... $ 4,782 $ (583) $13,802 $ 18,001
Identifiable assets............. 237,190 100,400 226,462 564,052
</TABLE>
Products are transferred between geographic areas on a basis intended to
approximate the market value of such products.
NOTE 4--COMMITMENTS AND CONTINGENCIES
We are constructing new photomask production facilities in Singapore and
Corbeil-Essonnes, France. Additionally, construction of our photomask
production facility in Gresham, Oregon has been delayed indefinitely. If
additional capacity is needed, we can complete the Gresham facility within
approximately six months.
7
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DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
We have various purchase commitments incidental to the normal course of
business including non-refundable deposits to purchase equipment. In the
aggregate, such commitments are not at prices in excess of current market. We
also have guaranteed a portion of certain equipment leases of the DPI Reticle
Technology Center. Such leases are generally for four years and provide for
payments not in excess of current market.
We are subject to litigation in the normal course of business. We believe
the effect, if any, of an unfavorable settlement of such litigation would not
have a material adverse impact on our financial position, results of
operations, cash flows or liquidity.
NOTE 5--ACQUISITION
In December 1999, we acquired the photomask production equipment of Altis
Semiconductor, a joint venture between IBM and Infineon Technologies. The
acquisition included the purchase of equipment, the purchase of inventory, the
execution of a supply agreement with IBM and the hiring of employees in the
photomask manufacturing organization. Consideration for the acquisition was
approximately $40 million. Approximately $23 million has been assigned to
intangible assets.
8
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations should be read in conjunction with our financial statements and
related notes thereto. References to years are to fiscal years ended June 30.
Results for interim periods are not necessarily indicative of results for the
full year.
OVERVIEW
Based on worldwide sales, we believe we are one of the largest photomask
manufacturers in the world. We sell our products to over 200 customers in 20
different countries. Essentially all of our sales are to customers in the
semiconductor manufacturing industry. We manufacture a broad range of
photomasks based on customer-supplied design data. We also manufacture
photoblanks and pellicles, the principal components of photomasks, primarily
for internal consumption. We operate globally with established manufacturing
facilities in North America, Europe and Asia.
The demand for photomasks is driven primarily by semiconductor design
activity. A number of recent trends have fueled growth in photomasks,
including:
. The proliferation of semiconductor applications;
. Increasing customization of semiconductor designs;
. Growing complexity of semiconductor devices; and
. Decreasing feature size of semiconductor designs.
These trends have increased the importance of photomask technology in the
semiconductor manufacturing process.
Photomask manufacturing operations are capital intensive. Accordingly, at a
given threshold of manufacturing capacity, a high proportion of our operating
costs are fixed and remain relatively constant as sales volume increases or
decreases. To the extent that we have under-utilized production capacity,
operating profit increases or decreases significantly as sales volume increases
or decreases. In the early 1990's, we had excess capacity. As sales increased
through 1997, costs associated with manufacturing remained relatively unchanged
and our operating margin over the period increased. In 1998 and 1999, our
operating costs on an absolute basis increased more than our sales. As a
result, our operating margin declined. We anticipate that our operating costs
will continue to increase as we add capacity to position ourselves for future
growth. If our sales growth does not keep pace with increases in operating
costs, our operating margin will decline further.
RESULTS OF OPERATIONS
Sales. Sales are comprised primarily of photomask sales to semiconductor
manufacturers. Sales increased 29.2% (25.6% prior to the licensing of $2.5
million of intellectual property related to mask technology) from $67.2 million
in the quarter ended March 31, 1999 to $86.8 million in the quarter ended March
31, 2000. Sales in North America, Europe and Asia increased from $40.1 million,
$13.3 million and $13.7 million, respectively, in the quarter ended March 31,
1999 to $50.4 million, $16.0 million and $20.4 million, respectively, in the
quarter ended March 31, 2000. Sales increased 23.5% from $190.0 million in the
nine months ended March 31, 1999 to $234.7 million in the nine months ended
March 31, 2000. Sales in North America, Europe and Asia increased from $111.2
million, $39.4 million and $39.4 million, respectively, in the nine months
ended March 31, 1999 to $139.5 million, $42.6 million and $52.7 million,
respectively, in the nine months ended March 31, 2000. Licensing of $2.5
million of intellectual property related to mask technology represented 12.7%
of the increase in sales in the quarter ended March 31, 2000 and 5.6% of the
increase in sales in the nine months ended March 31, 2000. Increased average
selling price and increased unit volume both also contributed to the
9
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increase in sales during the quarter ended and nine months ended March 31,
2000. Unit volume increases represented approximately 50% of the increase in
sales in the quarter ended March 31, 2000 and approximately 60% of the increase
in sales in the nine months ended March 31, 2000. Average selling price
increases represented the rest of the increase in sales in the quarter ended
and nine months ended March 31, 2000. We continue to experience an increase in
demand for advanced photomasks, those with design technology of 0.25 micron and
below, which for the quarter ended March 31, 2000, represented approximately
47% of our sales. This shift in demand reflects what we believe to be a
continued trend toward higher utilization of complex semiconductor devices with
finer line widths.
Cost of Goods Sold. Cost of goods sold consists of material, labor,
depreciation and overhead. Cost of goods sold increased 25.1% from $47.4
million in the quarter ended March 31, 1999 to $59.3 million in the quarter
ended March 31, 2000 and also increased 20.6% from $135.9 million in the nine
months ended March 31, 1999 to $163.9 million in the nine months ended March
31, 2000. The increase resulted primarily from higher costs associated with
increased manufacturing capacity. As we add capacity to position ourselves for
future growth, we will incur additional costs related to new facilities and
costs related to capacity expansions at existing facilities. As a percentage of
sales, cost of goods sold decreased from 70.6% in the quarter ended March 31,
1999 to 68.4% in the quarter ended March 31, 2000 and decreased from 71.5% in
the nine months ended March 31, 1999 to 69.8% in the nine months ended March
31, 2000. The percentage of sales decrease was primarily due to improved
capacity utilization.
Selling, General and Administrative Expense. Selling, general and
administrative expense includes salaries of sales personnel, marketing expense,
general and administrative expense and product distribution expense. Selling,
general and administrative expense increased 20.9% from $8.7 million in the
quarter ended March 31, 1999 to $10.5 million in the quarter ended March 31,
2000 and increased 14.6% from $24.6 million in the nine months ended March 31,
1999 to $28.1 million in the nine months ended March 31, 2000. The increases
are primarily the result of increased costs related to new facilities and
initiatives with the increase for the nine months ended March 31, 2000
partially offset by regularized incentive compensation expense. Selling,
general and administrative expense as a percentage of sales decreased from
12.9% in the quarter ended March 31, 1999 to 12.1% in the quarter ended March
31, 2000 and decreased from 12.9% in the nine months ended March 31, 1999 to
12.0% in the nine months ended March 31, 2000. The decreases are primarily the
result of higher sales. We anticipate that selling, general and administrative
expense will increase in the future.
Research and Development Expense. Research and development expense consists
primarily of employee costs, cost of material consumed, depreciation,
engineering related costs and our share of costs of the DPI Reticle Technology
Center. Research and development expense increased 32.7% from $4.6 million in
the quarter ended March 31, 1999 to $6.1 million in the quarter ended March 31,
2000 and increased 34.1% from $12.3 million in the nine months ended March 31,
1999 to $16.5 million in the nine months ended March 31, 2000. Research and
development expense as a percentage of sales increased from 6.8% in the quarter
ended March 31, 1999 to 7.0% in the quarter ended March 31, 2000 and increased
from 6.5% in the nine months ended March 31, 1999 to 7.0% in the nine months
ended March 31, 2000. The increases were due primarily to increased focus on
research and development at our facility in Ichon and our joint venture
participation with Advanced Micro Devices, Micron Technology and Motorola in
the DPI Reticle Technology Center, which was formed to develop advanced
photomask technology and fabricate leading-edge photomasks. We believe that,
through our participation in the DPI Reticle Technology Center, we will be able
to help meet the future technology needs of the semiconductor industry for
advanced photomasks. We anticipate that research and development expense will
continue to increase in absolute dollars in the future reflecting our strategy
of advancing our technological leadership. However, there can be no assurance
that such expenditures will enable us to develop new technologies or to
maintain our technological leadership.
Other (Income) Expense. Other (income) expense includes interest expense,
interest income and exchange gains and losses. Other (income) expense was $0.2
million in the quarter ended March 31, 1999 and ($0.3 million) in the quarter
ended March 31, 2000 and was $1.7 million in the nine months ended March 31,
1999 and ($0.3 million) in the nine months ended March 31, 2000. The decrease
relates primarily to lower interest expense on our credit agreement discussed
below.
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Provision for Income Taxes. Our tax expense has been determined in
accordance with SFAS 109 and is based on the statutory rates in effect in the
countries in which we operate. Our effective tax rate was 31% for the quarter
and nine months ended March 31, 1999. Our effective tax rate was 28% for the
quarter and nine months ended March 31, 2000. Our effective tax rate varied
from the maximum statutory rate primarily because certain of our operations in
Asia are subject to government granted tax exemptions.
Minority Interest in Joint Ventures. The minority interest impact of our
joint ventures was $1.3 million for the quarter ended March 31, 2000 and $1.5
million for the nine months ended March 31, 2000. Minority interest reflects
the partners' share of the joint venture operations.
LIQUIDITY AND CAPITAL RESOURCES
Our working capital was $71.1 million at June 30, 1999 and $33.5 million at
March 31, 2000. The decrease in working capital was due principally to lower
cash balances resulting from capital expenditures and the December 1999 IBM
acquisition. Cash and cash equivalents were $61.3 million at June 30, 1999 and
$29.6 million at March 31, 2000. Cash provided by operating activities
increased from $31.9 million in the nine months ended March 31, 1999 to $57.2
million in the nine months ended March 31, 2000.
Cash used in investing activities (capital expenditures and payment for
acquisition) was $104.3 million in the nine months ended March 31, 1999 and
$117.0 million in the nine months ended March 31, 2000. Management expects
capital expenditures for the remainder of 2000 to be approximately $50 to $70
million. Capital expenditures have been and will be used primarily to expand
our manufacturing capacity and advance our technical capability. In addition,
we may in the future pursue additional acquisitions of businesses, products and
technologies, or enter into other joint venture arrangements that could
complement or expand our business. Any material acquisition or joint venture
could result in a decrease to our working capital depending on the amount,
timing and nature of the consideration to be paid.
Cash provided by financing activities was $105.5 million in the nine months
ended March 31, 1999 and $28.8 million in the nine months ended March 31, 2000.
Pursuant to our credit agreement with DuPont, DuPont originally agreed to
provide a credit facility in an aggregate amount of $100.0 million. This credit
facility expires in 2001 and any loans thereunder bear interest at LIBOR plus
0.25% per annum. At our option, advances under this credit facility are
convertible into term loans with maturities up to seven years. We have borrowed
a maximum of approximately $69 million under this credit facility and, at March
31, 2000, borrowings of $12 million were outstanding under this credit
facility. In March 1999, we amended our credit agreement with DuPont to add a
second credit facility with an additional borrowing capacity of $100.0 million.
The second credit facility has a term of three years and outstanding amounts
bear interest at 0.25% per annum for the first two years and LIBOR plus 0.25%
per annum for the third year. We have borrowed a maximum of $100.0 million
under this credit facility and, at March 31, 2000, borrowings of $100.0 million
were outstanding under this credit facility. The amended credit agreement
contains, among other things, covenants restricting our ability to incur
additional debt.
Our ongoing cash requirements will be for capital expenditures,
acquisitions, research and development and working capital. We are constructing
new photomask production facilities in Singapore and Corbeil-Essonnes, France.
Additionally, construction of our photomask production facility in Gresham,
Oregon has been delayed indefinitely. If additional capacity is needed, we can
complete the Gresham facility within approximately six months. Management
believes that cash provided by operations and the credit agreement with DuPont
will be sufficient to meet our cash requirements for at least the next 12
months. Thereafter, based on our current operating plans, we may require
external financing from time to time to fund our capital expenditures. There
can be no assurance that we will be able to obtain the additional financing
required to fund these capital investments on reasonable terms, or at all.
11
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Furthermore, there can be no assurance that alternative sources of financing
will be available upon expiration of the DuPont credit facilities or that
alternative sources of funding will be available if our capital requirements
exceed the facilities and cash flow from operations. In addition, there can be
no assurance that, even if funding is available, the terms thereof will be
attractive.
OTHER MATTERS
Changing Accounting Standards. In June 1998, the Financial Accounting
Standards Board issued SFAS 133 which is not expected to have a material impact
on our results.
Foreign Currency Exposure. Non-U.S. operations are subject to certain risks
inherent in conducting business abroad, including price and currency exchange
controls, fluctuation in the relative value of currencies and restrictive
governmental actions. Changes in the relative value of currencies occur from
time to time and may, in certain instances, have a material effect on our
results of operations. Our financial statements reflect remeasurement of items
denominated in non-U.S. currencies to U.S. Dollars, our functional currency.
Exchange gains or losses are included in income in the period in which they
occur. We monitor our exchange rate exposure and attempt to reduce such
exposure by hedging. We have entered into forward contracts in currencies of
the countries in which we conduct business in order to reduce such exposure. At
March 31, 2000, we held forward contracts with a notional amount of
approximately $9.6 million, a carrying amount of approximately $9.4 million and
an unrealized gain of approximately $0.2 million. There can be no assurance
that such forward contracts or any other hedging activity will be available or
adequate to eliminate, or even mitigate, the impact of our exchange rate
exposure. There can be no assurance that such risks will not have a material
adverse impact on our liquidity and results of operations in the future.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by forward-looking
words such as "anticipate," "intend," "plan," "estimate," "expect," "believe,"
"may," "should," "would," "will" and "could" or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial position or state other forward-looking information. We believe that
it is important to communicate our future expectations. However, there may be
events in the future that we are unable to accurately predict or control. The
factors listed in our 1999 Annual Report on Form 10-K in the section captioned
"Risk Factors," which are highlighted below, as well as any cautionary language
in this document, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Risk Factors listed in our 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
September 21, 1999 include: (i) our operations are dependent on the activities
of semiconductor manufacturers, (ii) our financial results may be affected by
factors outside of our control, (iii) we may not obtain sufficient capital to
fund our needs, (iv) our operating results will be adversely affected by under-
utilized production capacity, (v) rapid technological change could render our
products obsolete, (vi) our market is highly competitive and subject to pricing
pressures, (vii) our international operations present special risks, (viii) our
operating results are influenced by the performance of Asian economies, (ix) we
face risks associated with manufacturing difficulties, (x) we depend on a few
significant customers, (xi) we depend on a limited number of equipment
manufacturers, (xii) we depend on a limited number of raw material suppliers,
(xiii) we depend on a limited number of management and technical personnel,
(xiv) DuPont controls all stockholder votes, (xv) we must integrate and manage
our recent acquisitions and joint ventures, (xvi) we are subject to risks
associated with future acquisitions or joint ventures, (xvii) we may be unable
to enforce or defend our ownership and use of proprietary technology, (xviii)
we may be unprepared for changes in environmental laws and regulations, (xix)
Year 2000 issues expose us to liability, (xx) we face uncertainty implementing
a new global information system, (xxi) our market price is volatile, (xxii)
relatively small changes in revenue have a significant impact on our net income
and (xxiii) our stock price may be affected when additional shares are sold.
12
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Included in Management's Discussion and Analysis of Financial Condition and
Results of Operations.
13
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PART II
ITEM 1. LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(11) Statement re Computation of Per Share Earnings
(27) Financial Data Schedule
(B) Reports on Form 8-K
Not applicable
14
<PAGE>
EXHIBIT 11
DUPONT PHOTOMASKS, INC.
EARNINGS PER SHARE COMPUTATION
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
BASIC DILUTED
---------- ----------
QUARTER ENDED
MARCH 31, 1999
---------------------
<S> <C> <C>
Weighted average shares outstanding...................... 15,307,852 15,307,852
Dilutive effect of stock performance plans............... 610,825
---------- ----------
15,307,852 15,918,677
---------- ----------
Net income............................................... $ 4,455 $ 4,455
Earnings per share....................................... $ 0.29 $ 0.28
<CAPTION>
BASIC DILUTED
---------- ----------
QUARTER ENDED
MARCH 31, 2000
---------------------
<S> <C> <C>
Weighted average shares outstanding...................... 15,636,474 15,636,474
Dilutive effect of stock performance plans............... 645,295
---------- ----------
15,636,474 16,281,769
---------- ----------
Net income............................................... $ 7,112 $ 7,112
Earnings per share....................................... $ 0.45 $ 0.44
<CAPTION>
BASIC DILUTED
---------- ----------
NINE MONTHS ENDED
MARCH 31, 1999
---------------------
<S> <C> <C>
Weighted average shares outstanding...................... 15,293,067 15,293,067
Dilutive effect of stock performance plans............... 440,950
---------- ----------
15,293,067 15,734,017
---------- ----------
Net income............................................... $ 10,862 $ 10,862
Earnings per share....................................... $ 0.71 $ 0.69
<CAPTION>
BASIC DILUTED
---------- ----------
NINE MONTHS ENDED
MARCH 31, 2000
---------------------
<S> <C> <C>
Weighted average shares outstanding...................... 15,493,481 15,493,481
Dilutive effect of stock performance plans............... 649,855
---------- ----------
15,493,481 16,143,336
---------- ----------
Net income............................................... $ 18,001 $ 18,001
Earnings per share....................................... $ 1.16 $ 1.12
</TABLE>
At March 31, 2000, we had outstanding anti-dilutive commitments under our
stock performance plans covering 52,627 shares.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DUPONT PHOTOMASKS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JUL-01-1999 JAN-01-2000
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 29,588 29,588
<SECURITIES> 0 0
<RECEIVABLES> 56,773 56,773
<ALLOWANCES> 0 0
<INVENTORY> 14,960 14,960
<CURRENT-ASSETS> 123,272 123,272
<PP&E> 658,442 658,442
<DEPRECIATION> (265,661) (265,661)
<TOTAL-ASSETS> 564,052 564,052
<CURRENT-LIABILITIES> 89,820 89,820
<BONDS> 114,408 114,408
0 0
0 0
<COMMON> 157 157
<OTHER-SE> 302,669 302,669
<TOTAL-LIABILITY-AND-EQUITY> 564,052 564,052
<SALES> 234,673 86,790
<TOTAL-REVENUES> 234,673 86,790
<CGS> 163,866 59,339
<TOTAL-COSTS> 163,866 59,339
<OTHER-EXPENSES> 44,354 16,234
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 26,453 11,217
<INCOME-TAX> 7,000 2,765
<INCOME-CONTINUING> 18,001 7,112
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,001 7,112
<EPS-BASIC> 1.16 0.45
<EPS-DILUTED> 1.12 0.44
</TABLE>
