SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ......January 30, 2000....
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............. to .............
Commission file number...0-15451...
...PHOTRONICS, INC...
(Exact name of registrant as specified in its charter)
...Connecticut... ...06-0854886...
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
......1061 East Indiantown Road, Jupiter, FL...... ..33477..
(Address of principal executive offices) (Zip Code)
...(561) 745-1222...
(Registrant's telephone number, including area code)
..............................
(Former name, former address and former fiscal year,
if changed since last report)
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 .....
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 30, 2000
Common Stock, $.01 par value 24,096,933 Shares
<PAGE>
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheet
at January 30, 2000 (unaudited) and
October 31, 1999 3-4
Condensed Consolidated Statement of
Earnings for the Three Months Ended
January 30, 2000 and January 31, 1999
(unaudited) 5
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
January 30, 2000 and January 31, 1999
(unaudited) 6
Condensed Consolidated Statement of
Shareholders' Equity for the Three
Months Ended January 30, 2000 and
January 31, 1999 (unaudited) 7
Notes to Condensed Consolidated
Financial Statements (unaudited) 8-9
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 10-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
<TABLE>
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in thousands)
ASSETS
<CAPTION>
January 30, October 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,951 $ 16,269
Accounts receivable (less allowance
for doubtful accounts of $235 in
2000 and 1999) 42,497 41,293
Inventories 14,398 13,888
Other current assets 15,321 14,757
-------- --------
Total current assets 81,167 86,207
Property, plant and equipment
(less accumulated depreciation of
$147,476 in 2000 and $139,742 in 1999) 276,191 282,157
Intangible assets (less accumulated
amortization of $8,607 in 2000
and $8,062 in 1999) 30,030 28,357
Investments and other assets 18,699 13,635
-------- --------
$406,087 $410,356
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands, except share and per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
January 30, October 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 252 $ 261
Accounts payable 35,270 45,608
Accrued salaries and wages 3,427 2,490
Other accrued liabilities 3,934 8,657
------- -------
Total current liabilities 42,883 57,016
Long-term debt 116,634 116,703
Deferred income taxes and other liabilities 32,108 28,937
------- -------
Total liabilities 191,625 202,656
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
2,000,000 shares authorized,
none issued and outstanding - -
Common stock, $0.01 par value,
75,000,000 shares authorized,
24,096,933 shares issued in 2000
and 23,948,807 shares in 1999 241 239
Additional paid-in capital 83,005 80,242
Retained earnings 133,772 130,759
Accumulated other comprehensive
loss (2,527) (3,489)
Deferred compensation on restricted
stock (29) (51)
-------- --------
Total shareholders' equity 214,462 207,700
-------- --------
$406,087 $410,356
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
----------------------------
January 30, January 31,
2000 1999
----------- -----------
<S> <C> <C>
Net sales $58,316 $47,815
Costs and expenses:
Cost of sales 39,928 35,287
Selling, general and administrative 8,174 7,263
Research and development 4,493 3,519
------- -------
Operating income 5,721 1,746
Other expense, net (1,008) (729)
------- -------
Income before income taxes 4,713 1,017
Provision for income taxes 1,700 400
------- -------
Net income $ 3,013 $ 617
======= =======
Earnings per share:
Basic $0.13 $0.03
===== =====
Diluted $0.13 $0.03
===== =====
Weighted average number of common
shares outstanding:
Basic 23,983 24,102
====== ======
Diluted 23,983 24,102
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
------------------------
January 30, January 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,013 $ 617
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,709 9,350
Other (1,695) (235)
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable (1,330) 1,381
Inventories (545) 291
Other current assets (588) (285)
Accounts payable and other liabilities (14,254) 6,348
------- -------
Net cash provided by (used in)
operating activities (4,690) 17,467
------- -------
Cash flows from investing activities:
Deposits on and purchases of property,
plant and equipment (4,671) (20,863)
Net change in short-term investments - 1,449
Other 445 616
------- -------
Net cash used in investing activities (4,226) (18,798)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (62) (1,869)
Proceeds from issuance of common stock 2,765 1,882
Purchase and retirement of common stock - (3,425)
Other (5) (301)
------- -------
Net cash provided by (used in)
financing activities 2,698 (3,713)
------- -------
Effect of exchange rate changes on cash flows (1,100) (163)
------- -------
Net decrease in cash and cash equivalents (7,318) (5,207)
Cash and cash equivalents at beginning of period 16,269 23,841
------- -------
Cash and cash equivalents at end of period $ 8,951 $18,634
======= =======
Cash paid during the period for:
Interest $3,192 $3,120
Income taxes $ 22 $ 185
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE> PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(in thousands)
(unaudited)
<CAPTION>
Accumulated Other
Comprehensive Income
(Loss)
------------------------- Deferred
Unreal- Compen-
ized Foreign sation- Total
Common Stock Add'l Invest- Currency on Re- Share-
-------------- Paid-In Retained ment Trans- stricted holders'
Shares Amount Capital Earnings Gains lation Total Stock Equity
------ ------ ------- -------- ------ ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
November 1, 1998 24,164 $ 242 $82,377 $120,091 $1,167 $(3,308) $(2,141) $ (139) $200,430
Comprehensive income:
Net income - - - 617 - - - - 617
Change in unrealized gains
on investments - - - - 1,340 - 1,340 - 1,340
Foreign currency
translation adjustment - - - - - (35) (35) - (35)
-------- ----- ------ ----- -------
Total comprehensive income - - - 617 1,340 (35) 1,305 - 1,922
Sale of common stock through
employee stock option
and purchase plans 116 1 1,881 - - - - - 1,882
Amortization of restricted
stock to compensation
expense - - - - - - - 22 22
Common stock repurchases (250) (3) (3,422) - - - - - (3,425)
------ ---- ------- -------- ------ ------- ------- ----- --------
Balance at
January 31, 1999 24,030 $240 $80,836 $120,708 $2,507 $(3,343) $ (836) $(117) $200,831
====== ==== ======= ======== ====== ======= ======= ===== ========
Balance at
October 31, 1999 23,949 $239 $80,242 $130,759 $2,524 $(6,013) $(3,489) $ (51) $207,700
Comprehensive income:
Net income - - - 3,013 - - - - 3,013
Change in unrealized
gains on investments - - - - 3,041 - 3,041 - 3,041
Foreign currency
translation adjustment - - - - - (2,079) (2,079) - (2,079)
-------- ------ ------ ------ -------
Total comprehensive income - - - 3,013 3,041 (2,079) 962 - 3,975
Sale of common stock through
employee stock option
and purchase plans 148 2 2,763 - - - - - 2,765
Amortization of restricted
stock to compensation
expense - - - - - - - 22 22
------ ---- ------- -------- ------ ------- ------- ---- --------
Balance at
January 30, 2000 24,097 $241 $83,005 $133,772 $5,565 $(8,092) $(2,527) $(29) $214,462
====== ==== ======= ======== ====== ======= ======= ==== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended January 30, 2000 and January 31, 1999
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended January 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending October 30, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in Company's
Annual Report on Form 10-K for the year ended October 31, 1999.
NOTE 2 - EARNINGS PER SHARE
Basic Earnings Per Share ("EPS") is based on the weighted average number of
common shares outstanding for the period, excluding any dilutive common share
equivalents. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted.
A reconciliation of basic and diluted EPS for the three months ended
January 30, 2000 and January 31, 1999 is as follows (in thousands, except per
share amounts):
Average
Net Shares Earnings
Income Outstanding Per Share
------- ----------- ---------
2000:
Basic $3,013 23,983 $0.13
Effect of potential dilution =====
from exercise of stock options
and conversion of notes (a) - -
------ ------
Diluted $3,013 23,983 $0.13
====== ====== =====
1999:
Basic $ 617 24,102 $0.03
Effect of potential dilution =====
from exercise of stock options
and conversion of notes (a) - -
------- ------
Diluted $ 617 24,102 $0.03
======= ====== =====
(a) The effect of the exercise of stock options and the conversion of notes
for the three months ended January 30, 2000 and January 31, 1999 is anti-
dilutive.
<PAGE>
NOTE 3 - COMPREHENSIVE INCOME
The Company's comprehensive income as reported in the Condensed
Consolidated Statement of Shareholders' Equity, consists of net earnings, and
all changes in equity during a period except those resulting from investments
by owners and distributions to owners, which are presented before tax. The
Company does not provide for U.S. income taxes on foreign currency translation
adjustments because it does not provide for such taxes on undistributed earnings
of foreign subsidiaries. Other comprehensive income (loss) consists of
unrealized gains and losses on certain investments in equity securities and
foreign currency translation adjustments. The related tax effects allocated
to each component of other comprehensive income (loss) for the three months
ended January 30, 2000 and January 31, 1999 were as follows:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
---------- ------------ ----------
2000:
Foreign currency
translation adjustment $(8,092) $ - $(8,092)
------- ------ -------
Unrealized gains on
investments:
Unrealized holding
gains arising during
the period 11,745 (4,463) 7,282
Less: reclassification
adjustment for gains
realized in net income (2,769) 1,052 (1,717)
------- ------- -------
Net unrealized gains 8,976 (3,411) 5,565
------- ------- -------
Other comprehensive income (loss) $ 884 $(3,411) $(2,527)
======= ======= =======
1999:
Foreign currency
translation adjustment $(3,343) $ - $(3,343)
------- ------- -------
Unrealized losses on
investments:
Unrealized holding
gains arising during
the period 4,578 (1,740) 2,838
Less: reclassification
adjustment for gains
realized in net income (534) 203 (331)
------- ------- -------
Net unrealized gains 4,044 (1,537) 2,507
------- ------- -------
Other comprehensive income (loss) $ 701 $(1,537) $ (836)
======= ======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Material Changes in Results of Operations
Three Months ended January 30, 2000 versus January 31, 1999.
Net sales for the three months ended January 30, 2000 increased 22.0% to
$58.3 million compared with $47.8 million for the three months ended January 31,
1999, primarily due to an increase in new design releases, principally in the
United States, and a better mix of orders for high-end technology products. The
first quarter of fiscal 1999 reflected the downturn in the global semi-conductor
industry which resulted in extended customer shut-downs, a slow-down in the
releases of new designs, and price reductions for mature products. The Company
continues to see a weakness in selling prices for mature technologies but has
benefitted from its investment in high-end manufacturing capability through a
mix shift toward high-end technology products. Sales outside of the U.S. were
consistent in the first quarter of 2000 compared to the first quarter of 1999
at approximately 23% of total sales.
Cost of sales for the three months ended January 30, 2000, increased 13.2%
to $39.9 million, compared with $35.3 million for the same period in the prior
fiscal year. Gross margins increased to 31.5% of sales in the first quarter of
fiscal 2000, compared with 26.2% for the first quarter of 1999. The gross
margin increase was primarily attributable to an increase in higher margin .25
micron and below product shipments, partially offset by increases in costs,
principally higher depreciation and service contract expenses from the Company's
expansion of its technological capability.
Selling, general and administrative expenses increased 12.5% to $8.2
million for the three months ended January 30, 2000, compared with $7.3 million
for the same period in the prior fiscal year. As a percentage of net sales,
selling, general and administrative expenses decreased to 14.0% for the three
months ended January 30, 2000, compared with 15.2% for the same period in the
prior fiscal year. The higher expenses were due principally to staffing and
other costs associated with the Company's expansion, both domestically and
internationally, together with increases in information systems and
communications costs.
Research and development expenses for the three months ended January 30,
2000, increased 27.7% to $4.5 million, compared with $3.5 million for the same
period in the prior fiscal year. This increase reflects the continuing
development efforts on high-end, more complex photomasks such as phase shift and
optical proximity correction applications, and on process enhancements for the
manufacture of high-end photomasks. In addition, R&D expenses in the current
year increased as a result of the new Mask Center of Competency, a joint effort
with IBM, established in the second half of fiscal 1999. As a percentage of net
sales, research and development was 7.7% for the three months ended January 30,
2000 compared to 7.4% for the quarter ended January 31, 1999.
Net other expenses of approximately $1.0 million in the first quarter of
2000 was comprised principally of interest expense on the convertible notes
offset by interest and other income earned on investments. This compares to
$0.7 million of net interest and other expenses in the first quarter of 1999.
The prior year included higher income earned on investments whereas the current
year included higher interest expense as a result of utilization of revolving
credit lines.
<PAGE>
Net income for the three months ended January 30, 2000, increased to $3.0
million, or $0.13 per share on a basic and a diluted basis, compared with $0.6
million or $0.03 per basic and diluted share for the corresponding prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
Photronics' cash and cash equivalents decreased $7.3 million during the
three months ended January 30, 2000, largely as a result of capital expenditures
for equipment of approximately $5 million and the timing of payments of amounts
accrued at the end of fiscal 1999, including semi-annual interest on the
Company's convertible notes.
Accounts receivable increased 2.9% from October 31, 1999 due to higher
international sales, especially in Asia, and a stretch-out in days sales
outstanding. Inventory increased by 3.7% during the quarter as a result of the
Company's strategic decision to increase quantities of certain critical
materials in anticipation of any potential Year 2000 issues.
Property, plant and equipment decreased to $276.2 million at January 30,
2000, from $282.2 million at October 31, 1999, primarily as a result of
depreciation expense, offset by approximately $5 million of new capital
additions.
Intangible and other non-current assets increased $6.7 million during the
quarter ended January 30, 2000, principally due to an increase in the market
value of investments available for sale.
Accounts payable and accruals decreased 24.9% or $14.1 million from
October 31, 1999, due to the timing of payments principally for capital
equipment, interest on the convertible notes and property taxes.
Photronics' commitments represent investments in additional manufacturing
capability as well as advanced equipment for research and development of high-
end, more complex photomasks. At January 30, 2000, Photronics had commitments
outstanding for capital expenditures of approximately $30 million. Additional
commitments for capital requirements are expected to be incurred during fiscal
2000. Photronics will continue to use its working capital and bank lines of
credit to finance its capital expenditures. Photronics believes that its
currently available resources, together with its capacity for substantial
growth and its access to other debt and equity financing sources, are
sufficient to satisfy its currently planned capital expenditures, as well
as its anticipated working capital requirements for the foreseeable future.
YEAR 2000
As of the date of this filing, the Company has not experienced any Year
2000 problems that have affected its operations, the realization of financial
assets, or the Company's results of operations. The Company will continue to
monitor its operations for non-compliant components. The Company is also
monitoring its open transactions with customers and vendors to ensure that
there are no undetected problems that could have a future impact.
As of the date of this filing, the Company believes there are no
remaining significant risks or exposure as a result of the Year 2000 issue.
<PAGE>
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995:
Except for historical information, the matters discussed above may be
considered forward-looking statements and may be subject to certain risks and
uncertainties that could cause the actual results to differ materially from
those projected, including uncertainties in the market, pricing, competition,
procurement and manufacturing efficiencies, and other risks.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report is filed, the following
reports on Form 8-K were filed by the Company, each reporting
information under Item 5, as follows:
(i) Form 8-K dated November 4, 1999 reported certain
information with respect to Photronics' withdrawal and
refiling of a notification and report under the Hart-
Scott-Rodino Antitrust Improvements Act ("Hart-Scott")
related to Photronics' proposed acquisition of Align-Rite
International, Inc. ("Align-Rite").
(ii) Form 8-K dated November 29, 1999 reported certain
additional information regarding Photronics' and Align-
Rite's receipt from the United States Department of
Justice of a request for additional information related
to the Hart-Scott filing.
(iii) Form 8-K dated January 14, 2000 reported that Photronics
and Align-Rite entered into an amendment of the merger
agreement pursuant to which Photronics would acquire
Align-Rite.
SIGNATURES
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 thereunto duly authorized.
PHOTRONICS, INC.
(Registrant)
By:______ROBERT J. BOLLO_________
Robert J. Bollo
Vice President/Finance
(Duly Authorized Officer and
Principal Financial Officer)
Date: March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Earnings and the Consolidated Balance
Sheet and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-30-2000
<PERIOD-END> JAN-30-2000
<CASH> 8,951
<SECURITIES> 0
<RECEIVABLES> 42,732
<ALLOWANCES> 235
<INVENTORY> 14,398
<CURRENT-ASSETS> 81,167
<PP&E> 423,667
<DEPRECIATION> 147,476
<TOTAL-ASSETS> 406,087
<CURRENT-LIABILITIES> 42,883
<BONDS> 116,634
0
0
<COMMON> 241
<OTHER-SE> 214,221
<TOTAL-LIABILITY-AND-EQUITY> 406,087
<SALES> 58,316
<TOTAL-REVENUES> 58,316
<CGS> 39,928
<TOTAL-COSTS> 39,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,804
<INCOME-PRETAX> 4,713
<INCOME-TAX> 1,700
<INCOME-CONTINUING> 3,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,013
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
