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 2007 third quarter results for the period ended July 29, 2007. Sales for the quarter were $104.3 million compared to $108.2 million for the third quarter of fiscal year 2006. Semiconductor photomasks accounted for $85.3 million, or 81.8% of revenues during the third quarter of fiscal 2007, while flat panel display (FPD) photomasks accounted for $19.0 million, or 18.2% of revenues. During the third quarter of fiscal 2006, semiconductor photomasks accounted for 80.6% of revenues and FPD photomasks accounted for 19.4% of revenues. Net income for the third quarter of fiscal year 2007 amounted to $2.2 million, or $0.05 per diluted share compared to net income of $4.6 million, or $0.11 per diluted share for the third quarter of fiscal 2006. Sales for the first nine months of 2007 were $319.9 million compared to $339.6 million for the first nine months of fiscal 2006. Semiconductor photomasks accounted for $259.2 million, or 81.0% of revenues during the first nine months of fiscal 2007, while FPD photomasks accounted for $60.7 million, or 19.0% of revenues. Year-over-year, semiconductor photomask revenues decreased 1.9%, while FPD photomask revenues decreased 19.4%. Net income for the first nine months of fiscal 2007 amounted to $24.2 million, or $0.53 per diluted share, compared to the prior year’s first nine months net income of $19.5 million, or $0.45 per diluted share. Net income for the first nine months of 2007 includes 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. Net income for the second quarter of 2006 included a charge of $11.4 million after tax, or $0.22 per diluted share, in connection with the Company’s previously disclosed restructuring of its operations in North America. Michael J. Luttati, Chief Executive Officer commented, "During the quarter, revenues were impacted by continued softness in the demand for flat panel display masks and a shortfall in expected design releases from European semiconductor photomask customers. We believe that the conditions affecting design release patterns for both these markets will improve before the end of calendar 2007.” He concluded, "As we turn our attention toward future opportunities, we are confident that the strategic initiatives we have been implementing all throughout fiscal 2007, together with increasingly favorable market dynamics, will begin having a positive and long reaching impact upon our performance throughout fiscal 2008.” 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 in the top right corner of the home page. The call is scheduled for 8:30 a.m. Eastern Time on Thursday, August 16th, and will be archived for instant replay access until the Company reports its fiscal fourth quarter results after the market closes on Tuesday, December 4, 2007. The live call dial-in number is 212-748-2807. 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. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this release are considered "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All forward looking statements involve risks and uncertainties. In particular, any statement contained in this release regarding the consummation and benefits of future acquisitions, expectations with respect to the joint venture, the planned fabrication facility, future sales, financial performance, operating efficiencies and product expansion, are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Company. These factors may cause actual results, performance or achievements to differ materially from anticipated results, performances or achievements. Factors that might affect such forward looking statements include, but are not limited to, overall economic and business conditions; the demand and receipt of orders for the Company's products; competitive factors in the industries and geographic markets in which the Company competes; changes in federal, state and foreign tax requirements (including tax rate changes, new tax laws and revised tax law interpretations); the Company's ability to place new equipment in service on a timely basis; interest rate fluctuations and other capital market conditions, including foreign currency rate fluctuations; economic and political conditions in international markets; the ability to maintain a bank facility or secure other financings; the ability to achieve anticipated synergies and other cost savings in connection with acquisitions and productivity programs; uncertainties with respect to the integration and management of a new joint venture, delays in the construction and equipping of the planned fabrication facility, the ability to transfer licensed applications to other applications, the timing, impact and other uncertainties of future acquisitions and investments; the seasonal and cyclical nature of the semiconductor industry; the availability of capital; management changes; damage or destruction to our facilities by natural disasters, labor strikes, political unrest or terrorist activity; the ability to fully utilize its tools; the ability of the Company to receive desired yields, pricing, product mix, and market acceptance of its products; changes in technology; and other risks and uncertainties set forth in the Company’s SEC filings from time to time. Any forward-looking statements should be considered in light of these factors. The Company assumes no obligation to update the information in this release. PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (in thousands, except per share amounts)       Three Months Ended Nine Months Ended July 29 July 30 July 29 July 30 2007 2006 2007 2006   Net sales $ 104,301 $ 108,160 $ 319,908 $ 339,579   Costs and expenses:   Cost of sales 80,595 75,256 240,344 228,685   Selling, general and administrative 16,039 15,524 46,922 46,438   Research and development   4,241     6,741     13,285     22,985   3,426 10,639 19,357 41,471   Consolidation, restructure, and related charges - (1,790 ) - (13,216 )   Gain on sale of facility   -     -     2,254     -     Operating income 3,426 8,849 21,611 28,255   Other income (expense), net   867     (1,274 )   1,012     4,292     Income before income taxes and minority interest 4,293 7,575 22,623 32,547   Income tax benefit (provision)   (1,126 )   (1,692 )   3,962     (9,324 )   Income before minority interest 3,167 5,883 26,585 23,223   Minority interest   (929 )   (1,328 )   (2,424 )   (3,710 )   Net income $ 2,238   $ 4,555   $ 24,161   $ 19,513     Earnings per share: Basic $ 0.05   $ 0.11   $ 0.58   $ 0.47     Diluted $ 0.05   $ 0.11   $ 0.53   $ 0.45     Weighted average number of common shares outstanding: Basic   41,558     41,383     41,515     41,344     Diluted   41,864     41,735     51,355     51,036   PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands)       July 29 October 29   2007   2006   Assets   Current assets: Cash, cash equivalents and short-term investments of $25,182 in 2007 and $69,899 in 2006 $ 145,238 $ 199,324 Accounts receivable 72,527 84,299 Inventories 16,630 19,209 Other current assets   11,790   16,055   Total current assets 246,185 318,887   Property, plant and equipment, net 460,116 443,637 Goodwill 138,534 138,534 Investment in joint venture 65,646 64,365 Other intangibles, net 70,004 71,763 Other assets   6,857   8,497   $ 987,342 $ 1,045,683       Liabilities and Shareholders' Equity   Current liabilities: Current portion of long-term debt $ 25,000 $ 86,903 Accounts payable 65,962 53,907 Other accrued liabilities   31,123   50,386   Total current liabilities 122,085 191,196   Long-term debt 149,608 170,288 Deferred income taxes and other liabilities 16,509 23,920 Minority interest 48,914 45,997   Shareholders' equity   650,226   614,282   $ 987,342 $ 1,045,683 PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands)     Nine Months Ended July 29 July 30   2007     2006       Cash flows from operating activities: Net income $ 24,161 $ 19,513 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 72,234 67,594 Gain on sale of facility and other (3,027 ) - Gain on sale of investments (257 ) - Minority interest in income of consolidated subsidiaries 2,424 3,710 Consolidation, restructuring and related charges - 13,216 Changes in assets and liabilities and other   (1,461 )   (24,135 )   Net cash provided by operating activities   94,074     79,898     Cash flows from investing activities: Purchases of property, plant and equipment (56,951 ) (83,441 ) Purchases of short-term investments and other (5,465 ) (64,983 ) Proceeds from sales of investments and other 48,253 78,697 Proceeds from sale of facility 5,783 - Investment in joint venture, technology and supply agreements (1,000 ) (120,505 ) Acquisition of additional interest in PK Ltd.   -     (8,432 )   Net cash used in investing activities   (9,380 )   (198,664 )   Cash flows from financing activities: Repayments of long-term debt and other (94,587 ) (4,725 ) Proceeds from long-term debt 3,369 12,218 Proceeds from issuance of common stock 631 1,172 Other   (1,485 )   -     Net cash (used in) provided by financing activities   (92,072 )   8,665     Effect of exchange rate changes on cash   (1,991 )   (709 )   Net decrease in cash and cash equivalents (9,369 ) (110,810 ) Cash and cash equivalents, beginning of period   129,425     196,049       Cash and cash equivalents, end of period $ 120,056   $ 85,239     Supplemental disclosure of cash flow information: Change in accrual for purchases of property, plant and equipment 16,480 12,585