form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended July 31, 2011
OR
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___ to ___
Commission file number 0-15451
PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
Connecticut
(State or other jurisdiction of incorporation or organization)
|
|
06-0854886
(IRS Employer Identification Number)
|
15 Secor Road, Brookfield, Connecticut 06804
(Address of principal executive offices and zip code)
(203) 775-9000
(Registrant's telephone number, including area code)
None
(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 periods 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o Accelerated Filer x Non-Accelerated Filer o Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
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 August 31, 2011
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Common Stock, $0.01 par value
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59,830,872 Shares
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Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Photronics, Inc. ("Photronics" or the "Company"). These statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Forward-looking statements may be identified by words like "expect", "anticipate", "believe", "plan", "projects", and similar expressions, or the negative of such terms, or other comparable terminology. All forward-looking statements involve risks and uncertainties that are difficult to predict. In particular, any statement contained in this quarterly report on Form 10-Q, in press releases, written
statements, or other documents filed with the Securities and Exchange Commission or, in the Company's communications and discussions with investors and analysts in the normal course of business through meetings, phone calls, or conference calls, regarding the consummation and benefits of future acquisitions, expectations with respect to future sales, financial performance, operating efficiencies, or 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, performance, or achievements expressed or implied by such forward-looking statements. Factors that might affect such forward-looking statements include, but are not limited to, overall economic and business conditions; economic and
political conditions in international markets; the demand for the Company's products; competitive factors in the industries and geographic markets in which the Company competes; changes in federal, state and international tax requirements (including tax rate changes, new tax laws and revised tax law interpretations); interest rate fluctuations and other capital market conditions, including changes in the market price of the Company's common stock; foreign currency exchange rate fluctuations; changes in technology; the timing, impact, and other uncertainties of future acquisitions; the seasonal and cyclical nature of the semiconductor and flat panel display industries; management changes; damage or destruction to the Company's facilities, or the facilities of its customers or suppliers by natural disasters, labor strikes, political unrest, or terrorist activity; the ability of the
Company to: (i) place new equipment in service on a timely basis; (ii) obtain additional financing; (iii) achieve anticipated synergies and other cost savings in connection with acquisitions and productivity programs; (iv) fully utilize its tools; (v) achieve desired yields, pricing, product mix, and market acceptance of its products; (vi) and obtain necessary export licenses. Any forward-looking statements should be considered in light of these factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company does not assume responsibility for the accuracy and completeness of the forward-looking statements and does not assume an obligation to provide revisions to any forward-looking statements.
PHOTRONICS, INC.
INDEX
PART I.
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FINANCIAL INFORMATION
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Page
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Item 1.
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Condensed Consolidated Financial Statements
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4
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5
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6
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7
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Item 2.
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21
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Item 3.
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28
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Item 4.
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29
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PART II.
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OTHER INFORMATION
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Item 1A.
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30
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Item 2
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30
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Item 6.
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30
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PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
|
|
July 31,
2011
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October 31,
2010
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ASSETS
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Current assets:
|
|
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Cash and cash equivalents
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$ |
202,845 |
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$ |
98,945 |
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Accounts receivable, net of allowance of $4,271 in 2011and $4,235 in 2010
|
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|
97,654 |
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82,951 |
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Inventories
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30,873 |
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15,502 |
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Deferred income taxes
|
|
|
1,313 |
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|
1,173 |
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Other current assets
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|
8,878 |
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|
7,231 |
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Total current assets
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|
341,563 |
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205,802 |
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Property, plant and equipment, net
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397,703 |
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369,814 |
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Investment in joint venture
|
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|
72,504 |
|
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61,127 |
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Intangible assets, net
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43,660 |
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47,748 |
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Other assets
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21,494 |
|
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|
19,388 |
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$ |
876,924 |
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$ |
703,879 |
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LIABILITIES AND EQUITY
|
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Current liabilities:
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|
|
|
|
|
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Current portion of long-term borrowings
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$ |
5,538 |
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$ |
11,467 |
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Accounts payable
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|
89,922 |
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77,630 |
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Accrued liabilities
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|
42,697 |
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30,132 |
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Total current liabilities
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138,157 |
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119,229 |
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Long-term borrowings
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153,527 |
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78,852 |
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Deferred income taxes
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|
515 |
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|
499 |
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Other liabilities
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8,646 |
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9,356 |
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Total liabilities
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300,845 |
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207,936 |
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Commitments and contingencies
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Equity:
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Preferred stock, $0.01 par value, 2,000 shares authorized, none issued and outstanding
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|
- |
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- |
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Common stock, $0.01 par value, 150,000 shares authorized, 59,510 shares issued and outstanding at July 31, 2011 and 53,779 at October 31, 2010
|
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|
595 |
|
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|
538 |
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Additional paid-in capital
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485,439 |
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436,825 |
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Retained earnings (accumulated deficit)
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|
4,314 |
|
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(2,624 |
) |
Accumulated other comprehensive income
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|
27,294 |
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|
7,062 |
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Total Photronics, Inc. shareholders' equity
|
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517,642 |
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441,801 |
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Noncontrolling interests
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58,437 |
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54,142 |
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Total equity
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576,079 |
|
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|
495,943 |
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$ |
876,924 |
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$ |
703,879 |
|
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
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Three Months Ended
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Nine Months Ended
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July 31,
2011
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August 1,
2010
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July 31,
2011
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August 1,
2010
|
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Net sales
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$ |
135,935 |
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$ |
112,251 |
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$ |
389,861 |
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$ |
315,518 |
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Costs and expenses:
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Cost of sales
|
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(97,695 |
) |
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|
(85,979 |
) |
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(284,540 |
) |
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(248,979 |
) |
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Selling, general and administrative
|
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(11,833 |
) |
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(11,068 |
) |
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(33,995 |
) |
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(32,086 |
) |
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Research and development
|
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(3,527 |
) |
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|
(3,427 |
) |
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(11,238 |
) |
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(10,983 |
) |
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Consolidation, restructuring and related (charges) credits
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- |
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(26 |
) |
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- |
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4,810 |
|
Operating income
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|
22,880 |
|
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|
11,751 |
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|
60,088 |
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|
28,280 |
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Other income (expense):
|
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|
|
|
|
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Debt extinguishment loss
|
|
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(4,973 |
) |
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|
- |
|
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|
(35,259 |
) |
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|
- |
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Interest expense
|
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|
(1,907 |
) |
|
|
(1,827 |
) |
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|
(5,499 |
) |
|
|
(7,807 |
) |
Investment and other income (expense), net
|
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|
1,517 |
|
|
|
593 |
|
|
|
3,480 |
|
|
|
1,937 |
|
Income before income taxes
|
|
|
17,517 |
|
|
|
10,517 |
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|
|
22,810 |
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|
22,410 |
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|
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|
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|
|
|
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Income tax provision
|
|
|
(4,895 |
) |
|
|
(2,910 |
) |
|
|
(11,637 |
) |
|
|
(5,790 |
) |
Net income
|
|
|
12,622 |
|
|
|
7,607 |
|
|
|
11,173 |
|
|
|
16,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net (income) loss attributable to noncontrolling interests
|
|
|
(1,357 |
) |
|
|
84 |
|
|
|
(4,235 |
) |
|
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(842 |
) |
|
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Net income attributable to Photronics, Inc.
|
|
$ |
11,265 |
|
|
$ |
7,691 |
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$ |
6,938 |
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$ |
15,778 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
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Basic
|
|
$ |
0.19 |
|
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$ |
0.14 |
|
|
$ |
0.12 |
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$ |
0.30 |
|
Diluted
|
|
$ |
0.16 |
|
|
$ |
0.13 |
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$ |
0.12 |
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|
$ |
0.29 |
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
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|
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|
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|
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Basic
|
|
|
58,987 |
|
|
|
53,516 |
|
|
|
56,163 |
|
|
|
53,341 |
|
Diluted
|
|
|
76,744 |
|
|
|
66,280 |
|
|
|
57,724 |
|
|
|
65,689 |
|
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
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|
August 1,
2010
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
|
$ |
11,173 |
|
|
$ |
16,620 |
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
70,090 |
|
|
|
67,786 |
|
Debt extinguishment loss
|
|
|
27,399 |
|
|
|
- |
|
Consolidation, restructuring and related credits
|
|
|
- |
|
|
|
(5,059 |
) |
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(10,332 |
) |
|
|
(12,419 |
) |
Inventories
|
|
|
(14,196 |
) |
|
|
630 |
|
Other current assets
|
|
|
(1,154 |
) |
|
|
(3,592 |
) |
Accounts payable, accrued liabilities and other
|
|
|
21,471 |
|
|
|
10,211 |
|
Net cash provided by operating activities
|
|
|
104,451 |
|
|
|
74,177 |
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(59,089 |
) |
|
|
(38,040 |
) |
Investment in joint venture
|
|
|
(10,773 |
) |
|
|
- |
|
Proceeds from sale of facility
|
|
|
- |
|
|
|
12,880 |
|
Other
|
|
|
(250 |
) |
|
|
288 |
|
Net cash used in investing activities
|
|
|
(70,112 |
) |
|
|
(24,872 |
) |
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible debt
|
|
|
115,000 |
|
|
|
- |
|
Proceeds from long-term borrowings
|
|
|
17,000 |
|
|
|
28,680 |
|
Repayments of long-term borrowings
|
|
|
(63,445 |
) |
|
|
(62,288 |
) |
Payments of deferred financing fees
|
|
|
(4,318 |
) |
|
|
(1,225 |
) |
Repurchase of common stock by subsidiary
|
|
|
(3,294 |
) |
|
|
- |
|
Proceeds from exercise of share-based arrangements
|
|
|
694 |
|
|
|
75 |
|
Net cash provided by (used in) financing activities
|
|
|
61,637 |
|
|
|
(34,758 |
) |
Effect of exchange rate changes on cash
|
|
|
7,924 |
|
|
|
941 |
|
Net increase in cash and cash equivalents
|
|
|
103,900 |
|
|
|
15,488 |
|
Cash and cash equivalents at beginning of period
|
|
|
98,945 |
|
|
|
88,539 |
|
Cash and cash equivalents at end of period
|
|
$ |
202,845 |
|
|
$ |
104,027 |
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Capital lease obligation for purchase of equipment
|
|
$ |
21,248 |
|
|
$ |
- |
|
Common stock issued to extinguish debt
|
|
$ |
20,234 |
|
|
$ |
- |
|
Change in accrual for purchases of property, plant and equipment
|
|
$ |
(2,712 |
) |
|
$ |
35,735 |
|
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three and Nine Months Ended July 31, 2011 and August 1, 2010
(unaudited)
(in thousands, except share amounts)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Photronics, Inc. and its subsidiaries ("Photronics" or the "Company") is one of the world's leading manufacturers of photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of semiconductors and flat panel displays ("FPDs"), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits ("ICs") and a variety of FPDs and, to a lesser extent, other types of electrical and optical components. The Company currently operates principally from nine manufacturing facilities, two of which are located in Europe, two in Taiwan, one
in Korea, one in Singapore, and three in the United States.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending
October 30, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended October 31, 2010.
Revenue Recognition
The Company recognizes revenue when there is persuasive evidence that an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery is determined by the shipping terms of the individual sales transactions. For sales with FOB destination shipping terms, delivery occurs when the Company’s product reaches its destination and is received by the customer. For sales with FOB shipping point terms, delivery occurs when the Company’s product is received by the common carrier. The Company uses judgment when estimating the effect on revenue of discounts and product warranty obligations, both of which are accrued when the related
revenue is recognized.
Warranties and Other Post Shipment Obligations – For a 30-day period, the Company warrants that items sold will conform to customer specifications. However, the Company’s liability is limited to the repair or replacement of the photomasks as its sole option. The Company inspects photomasks for conformity to customer specifications prior to shipment. Accordingly, customer returns of items under warranty have historically been insignificant. However, the Company records a liability for the insignificant amount of estimated warranty returns based on historical experience. The Company’s specific return policies
include accepting returns of products with defects, or products that have not been produced to precise customer specifications. At the time of revenue recognition, a liability is established for these items.
Sales Taxes – The Company presents its revenues in the condensed consolidated statements of operations, net of sales taxes, if any (excluded from revenues).
See the Company’s Form 10-K for the year ended October 31, 2010 for additional significant accounting policies of the Company.
NOTE 2 - CHANGES IN EQUITY AND COMPREHENSIVE INCOME (LOSS)
The following tables set forth the Company's consolidated changes in equity and comprehensive income (net of tax) for the three and nine months ended July 31, 2011 and August 1, 2010:
|
|
Three Months Ended July 31, 2011
|
|
|
|
Photronics, Inc. Shareholders
|
|
|
|
|
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|
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|
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Accum-
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|
|
|
|
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|
|
|
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|
|
|
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Retained
|
|
|
ulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add'l
|
|
|
(Accum-
|
|
|
Compre-
|
|
|
Total
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
ulated
|
|
|
hensive
|
|
|
Photronics,
|
|
|
controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Income
|
|
|
Inc.
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 1, 2011
|
|
|
58,539 |
|
|
$ |
585 |
|
|
$ |
478,009 |
|
|
$ |
(6,951 |
) |
|
$ |
23,991 |
|
|
$ |
495,634 |
|
|
$ |
56,981 |
|
|
$ |
552,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,265 |
|
|
|
- |
|
|
|
11,265 |
|
|
|
1,357 |
|
|
|
12,622 |
|
Amortization of cash flow hedges
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32 |
|
|
|
32 |
|
|
|
- |
|
|
|
32 |
|
Foreign currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,271 |
|
|
|
3,271 |
|
|
|
99 |
|
|
|
3,370 |
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,568 |
|
|
|
1,456 |
|
|
|
16,024 |
|
Common stock issued to extinguish debt
|
|
|
738 |
|
|
|
7 |
|
|
|
6,461 |
|
|
|
- |
|
|
|
- |
|
|
|
6,468 |
|
|
|
- |
|
|
|
6,468 |
|
Sale of common stock through employee stock option and purchase plans
|
|
|
205 |
|
|
|
2 |
|
|
|
243 |
|
|
|
- |
|
|
|
- |
|
|
|
245 |
|
|
|
- |
|
|
|
245 |
|
Restricted stock awards vesting and expense
|
|
|
28 |
|
|
|
1 |
|
|
|
341 |
|
|
|
- |
|
|
|
- |
|
|
|
342 |
|
|
|
- |
|
|
|
342 |
|
Share-based compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
385 |
|
|
|
- |
|
|
|
- |
|
|
|
385 |
|
|
|
- |
|
|
|
385 |
|
Balance at July 31, 2011
|
|
|
59,510 |
|
|
$ |
595 |
|
|
$ |
485,439 |
|
|
$ |
4,314 |
|
|
$ |
27,294 |
|
|
$ |
517,642 |
|
|
$ |
58,437 |
|
|
$ |
576,079 |
|
|
|
Three Months Ended August 1, 2010
|
|
|
|
Photronics, Inc. Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accum-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add'l
|
|
|
Accum-
|
|
|
hensive
|
|
|
Total
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock |
|
|
Paid-in
|
|
|
ulated
|
|
|
Income
|
|
|
Photronics,
|
|
|
controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Inc.
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 2, 2010
|
|
|
53,497 |
|
|
$ |
535 |
|
|
$ |
434,976 |
|
|
$ |
(18,459 |
) |
|
$ |
6,217 |
|
|
$ |
423,269 |
|
|
$ |
52,900 |
|
|
$ |
476,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,691 |
|
|
|
- |
|
|
|
7,691 |
|
|
|
(84 |
) |
|
|
7,607 |
|
Reclassification adjustment – unrealized holding gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(76 |
) |
|
|
(76 |
) |
|
|
(56 |
) |
|
|
(132 |
) |
Amortization of cash flow hedges
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
|
|
31 |
|
|
|
- |
|
|
|
31 |
|
Foreign currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(10,820 |
) |
|
|
(10,820 |
) |
|
|
108 |
|
|
|
(10,712 |
) |
Total comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,174 |
) |
|
|
(32 |
) |
|
|
(3,206 |
) |
Sale of common stock through employee stock option and purchase plans
|
|
|
5 |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
Share-based compensation expense
|
|
|
13 |
|
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
487 |
|
Balance at August 1, 2010
|
|
|
53,515 |
|
|
$ |
535 |
|
|
$ |
435,467 |
|
|
$ |
(10,768 |
) |
|
$ |
(4,648 |
) |
|
$ |
420,586 |
|
|
$ |
52,868 |
|
|
$ |
473,454 |
|
|
|
Nine Months Ended July 31, 2011
|
|
|
|
Photronics, Inc. Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accum-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
ulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add'l
|
|
|
(Accum-
|
|
|
Compre-
|
|
|
Total
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
ulated
|
|
|
hensive
|
|
|
Photronics,
|
|
|
controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Income
|
|
|
Inc.
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2010
|
|
|
53,779 |
|
|
$ |
538 |
|
|
$ |
436,825 |
|
|
$ |
(2,624 |
) |
|
$ |
7,062 |
|
|
$ |
441,801 |
|
|
$ |
54,142 |
|
|
$ |
495,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,938 |
|
|
|
- |
|
|
|
6,938 |
|
|
|
4,235 |
|
|
|
11,173 |
|
Amortization of cash flow hedges
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
96 |
|
|
|
96 |
|
|
|
- |
|
|
|
96 |
|
Foreign currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,148 |
|
|
|
20,148 |
|
|
|
3,009 |
|
|
|
23,157 |
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,182 |
|
|
|
7,244 |
|
|
|
34,426 |
|
Common stock issued to extinguish debt
|
|
|
5,229 |
|
|
|
52 |
|
|
|
45,585 |
|
|
|
- |
|
|
|
- |
|
|
|
45,637 |
|
|
|
- |
|
|
|
45,637 |
|
Sale of common stock through employee stock option and purchase plans
|
|
|
315 |
|
|
|
3 |
|
|
|
387 |
|
|
|
- |
|
|
|
- |
|
|
|
390 |
|
|
|
- |
|
|
|
390 |
|
Restricted stock awards vesting and expense
|
|
|
65 |
|
|
|
1 |
|
|
|
763 |
|
|
|
- |
|
|
|
- |
|
|
|
764 |
|
|
|
- |
|
|
|
764 |
|
Share-based compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
1,050 |
|
|
|
- |
|
|
|
- |
|
|
|
1,050 |
|
|
|
- |
|
|
|
1,050 |
|
Common stock warrants exercised
|
|
|
122 |
|
|
|
1 |
|
|
|
1,157 |
|
|
|
- |
|
|
|
- |
|
|
|
1,158 |
|
|
|
- |
|
|
|
1,158 |
|
Repurchase of common stock by subsidiary
|
|
|
- |
|
|
|
- |
|
|
|
(328 |
) |
|
|
- |
|
|
|
(12 |
) |
|
|
(340 |
) |
|
|
(2,949 |
) |
|
|
(3,289 |
) |
Balance at July 31, 2011
|
|
|
59,510 |
|
|
$ |
595 |
|
|
$ |
485,439 |
|
|
$ |
4,314 |
|
|
$ |
27,294 |
|
|
$ |
517,642 |
|
|
$ |
58,437 |
|
|
$ |
576,079 |
|
|
|
Nine Months Ended August 1, 2010
|
|
|
|
Photronics, Inc. Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accum-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add'l
|
|
|
Accum-
|
|
|
Compre-
|
|
|
Total
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
ulated
|
|
|
hensive
|
|
|
Photronics,
|
|
|
controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Inc.
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 1, 2009
|
|
|
53,011 |
|
|
$ |
530 |
|
|
$ |
432,160 |
|
|
$ |
(26,546 |
) |
|
$ |
(6,389 |
) |
|
$ |
399,755 |
|
|
$ |
49,941 |
|
|
$ |
449,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,778 |
|
|
|
- |
|
|
|
15,778 |
|
|
|
842 |
|
|
|
16,620 |
|
Unrealized holding gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
76 |
|
|
|
76 |
|
|
|
56 |
|
|
|
132 |
|
Reclassification adjustment – unrealized holding gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(76 |
) |
|
|
(76 |
) |
|
|
(56 |
) |
|
|
(132 |
) |
Amortization of cash flow hedges
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
96 |
|
|
|
96 |
|
|
|
- |
|
|
|
96 |
|
Foreign currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,645 |
|
|
|
1,645 |
|
|
|
2,085 |
|
|
|
3,730 |
|
Total comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17,519 |
|
|
|
2,927 |
|
|
|
20,446 |
|
Sale of common stock through employee stock option and purchase plans
|
|
|
98 |
|
|
|
1 |
|
|
|
108 |
|
|
|
- |
|
|
|
- |
|
|
|
109 |
|
|
|
- |
|
|
|
109 |
|
Share-based compensation expense
|
|
|
56 |
|
|
|
- |
|
|
|
1,518 |
|
|
|
- |
|
|
|
- |
|
|
|
1,518 |
|
|
|
- |
|
|
|
1,518 |
|
Common stock warrants exercised
|
|
|
350 |
|
|
|
4 |
|
|
|
1,681 |
|
|
|
- |
|
|
|
- |
|
|
|
1,685 |
|
|
|
- |
|
|
|
1,685 |
|
Balance at August 1, 2010
|
|
|
53,515 |
|
|
$ |
535 |
|
|
$ |
435,467 |
|
|
$ |
(10,768 |
) |
|
$ |
(4,648 |
) |
|
$ |
420,586 |
|
|
$ |
52,868 |
|
|
$ |
473,454 |
|
NOTE 3 - JOINT VENTURE
On May 5, 2006, Photronics and Micron Technology, Inc. ("Micron") entered into the MP Mask joint venture (“MP Mask”), which develops and produces photomasks for leading-edge and advanced next generation semiconductors. As part of the formation of the joint venture, Micron contributed its existing photomask technology center located at its Boise, Idaho, headquarters to MP Mask and Photronics invested $135 million in exchange for a 49.99% interest in MP Mask (to which $64.2 million of the original investment was allocated), a license for photomask technology of Micron, and certain supply agreements.
This joint venture is a variable interest entity ("VIE") (as that term is defined in the Accounting Standards Codification ("ASC") ) primarily because all costs of the joint venture will be passed on to the Company and Micron through purchase agreements they have entered into with the joint venture. In accordance with accounting guidance issued by the Financial Accounting Standards Board (“FASB”) in June 2009, on a quarterly basis the Company reassesses whether its interest in MP Mask gives it a controlling financial interest in this VIE. The purpose of this quarterly reassessment is to identify the primary beneficiary (which is defined in the ASC as the entity that consolidates a VIE) of the VIE. As a
result of the reassessment in the current quarter, the Company determined that Micron is still the primary beneficiary of the VIE, by virtue of its greater voting power, if necessary, within MP Mask’s Board of Managers, thereby giving it the power to direct the activities of MP Mask that most significantly impact its economic performance, including its decision making authority in the ordinary course of business and its purchasing the majority of products produced by the VIE.
The Company has utilized MP Mask for both high-end IC photomask production and research and development purposes. MP Mask charges its variable interest holders based on their actual usage of its facility. MP Mask separately charges for any research and development activities it engages in at the requests of its owners. The Company recorded cost of sales of $6.5 million and $14.8 million and research and development expenses of $0.2 million and $0.7 million during the three and nine month periods ended July 31, 2011. Cost of sales of $1.8 million and $4.5 million and research and development expenses of $0.2 million and $0.7 million were recorded during the three and nine month periods ended August 1,
2010.
MP Mask is governed by a Board of Managers, appointed by Micron and the Company. Since MP Mask's inception, Micron, as a result of its majority ownership, has held majority voting power on the Board of Managers. The voting power held by each party is subject to change as ownership interests change. Under the MP Mask joint venture operating agreement, the Company may be required to make additional capital contributions to MP Mask up to the maximum amount defined in the operating agreement. However, should the Board of Managers determine that further additional funding is required, MP Mask shall pursue its own financing. If MP Mask is unable to obtain its own financing, it may request additional capital contributions
from the Company. Should the Company choose not to make a requested contribution to MP Mask, its ownership percentage may be reduced. During the three and nine month periods ended July 31, 2011, the Company increased its investment in MP Mask by $0.5 million and $10.7 million, respectively, primarily related to capital calls requested by MP Mask. The Company did not make any contributions to MP Mask during the three and nine month periods ended August 1, 2010, and did not receive any distributions from MP Mask during its first three quarterly periods of fiscal 2011 or 2010.
The Company's investment in the VIE, which represents its maximum exposure to loss, was $72.5 million at July 31, 2011 and $61.1 million at October 31, 2010. These amounts are reported in the Company's condensed consolidated balance sheets as "Investment in joint venture". The Company recorded income from its investment in the VIE of $0.6 million in the nine month period ended July 31, 2011, and recorded no income from its investment in the three month period ended July 31, 2011, or in the three and nine month periods ended August 1, 2010. Income from the VIE is included in "Investment and other income, net" in the condensed consolidated statements of income.
NOTE 4 - LONG-TERM BORROWINGS
Long-term borrowings consist of the following:
|
|
July 31,
2011
|
|
|
October 31,
2010
|
|
|
|
|
|
|
|
|
3.25% convertible senior notes due on April 1, 2016
|
|
$ |
115,000 |
|
|
$ |
- |
|
5.5% convertible senior notes due on October 1, 2014
|
|
|
22,054 |
|
|
|
57,500 |
|
3.09% capital lease obligation payable through March 2016
|
|
|
19,881 |
|
|
|
- |
|
4.75% financing loan with customer
|
|
|
2,130 |
|
|
|
2,954 |
|
8.0% capital lease obligation
|
|
|
- |
|
|
|
16,220 |
|
5.6% capital lease obligation
|
|
|
- |
|
|
|
8,645 |
|
Borrowings under revolving credit facility, which bear interest at a variable rate, as defined (3.8% at October 31, 2010)
|
|
|
- |
|
|
|
5,000 |
|
|
|
|
159,065 |
|
|
|
90,319 |
|
Less current portion
|
|
|
5,538 |
|
|
|
11,467 |
|
|
|
$ |
153,527 |
|
|
$ |
78,852 |
|
On March 28, 2011, the Company issued through a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended, $115 million aggregate principal amount of 3.25% convertible senior notes. The notes mature on April 1, 2016, and note holders may convert each $1,000 principal amount of notes to 96.3879 shares of common stock (equivalent to an initial conversion price of $10.37 per share of common stock) at any time prior to the close of business on the second scheduled trading day immediately preceding April 1, 2016. The conversion rate is subject to adjustment upon the occurrence of certain events, which are described in the indenture dated March 28, 2011. The Company is not
required to redeem the notes prior to their maturity date. Interest on the notes accrues in arrears, and is to be paid semiannually through the notes’ maturity date, with payments commencing on October 1, 2011. The net proceeds of the notes were approximately $110.5 million, which were used, in part, to acquire $35.4 million, through July 31, 2011, of the Company’s 5.5% convertible senior notes which were to mature on October 1, 2014, and to repay, in full, its then outstanding obligations under capital leases of $19.8 million.
On March 18, 2011, the Company amended its revolving credit facility (“the credit facility”) which, as amended, included, among other things: i) a reduction of the aggregate commitments of the lenders from $65 million to $30 million; ii) a reduction of the applicable interest rates and modifications of the leverage ratios relating thereto; iii) an extension of the maturity date to April 30, 2015; iv) an increase of certain financed capital assets up to $75 million outstanding at any one time; v) an allowance to issue the 3.25% convertible senior notes; vi) an increase in the investments “basket” from $15 million to $25 million per year; vii) an allowance to repurchase the 5.5% convertible
senior notes and other indebtedness; and viii) removal of the limitation on maximum last twelve months capital expenditures. The credit facility bears interest (2.69% at July 31, 2011), based on the Company’s total leverage ratio, at LIBOR plus a spread, as defined in the credit facility.
The credit facility is secured by substantially all of the Company’s assets located in the United States, as well as common stock the Company owns in certain of its foreign subsidiaries, and is subject to the following financial covenants: minimum fixed charge ratio, total leverage ratio and minimum unrestricted cash balance. The Company, in connection with a February 2010 amendment to the credit facility, wrote off $1.0 million of deferred financing fees in its second quarter of fiscal 2010.
In January 2011 a $10 million irrevocable stand-by letter of credit, which expired in July 2011, for the purchase of manufacturing equipment was issued under the credit facility. As of July 2011, the Company had no outstanding borrowings under the credit facility and $30 million was available for borrowing.
In June 2011 the Company acquired $5.0 million of its 5.5% convertible senior notes in exchange for 0.7 million shares of its common stock with a fair value of $6.5 million and cash of $3.2 million (the note holders received 147.529 shares and cash of $647 for each $1,000 note). The Company, in connection with this repurchase, recorded an extinguishment loss of $5.0 million, which includes the write off of deferred financing fees of $0.3 million. The loss is included in other income (expense) in the Company's condensed consolidated statements of income.
In March 2011 the Company acquired $30.4 million of its 5.5% convertible senior notes in exchange for 4.5 million shares of its common stock with a fair value of $39.2 million and cash of $19.7 million (the note holders received 147.529 shares and cash of $647 for each $1,000 note). The Company, in connection with this repurchase, recorded an extinguishment loss of $30.1 million, which includes the write off of deferred financing fees of $1.7 million. The loss is included in other income (expense) in the Company's condensed consolidated statements of income.
In September 2009 the Company issued, through a public offering, $57.5 million aggregate principal amount of 5.5% convertible senior notes, which were to mature on October 1, 2014. Under the terms of the offering, the note holders could convert each $1,000 principal amount of notes to 196.7052 shares of common stock (equivalent to an initial conversion price of $5.08 per share of common stock) on, or before, September 30, 2014. The conversion rate is subject to adjustment upon the occurrence of certain events which are described in the indenture dated September 16, 2009. The Company is not required to redeem the notes prior to their maturity. The net proceeds of this
offering were approximately $54.9 million, which were used to reduce amounts outstanding under the Company’s then existing credit facility.
In the first quarter of 2008 a capital lease agreement with Micron commenced for the U.S. nanoFab facility. Quarterly lease payments, which bore interest at 8%, were $3.8 million through January 2013. This lease was cancelled in the third fiscal quarter of 2009, at which time the Company and Micron (the lessor) entered into a new lease agreement for the facility. Under the provisions of the new lease agreement, quarterly lease payments were reduced from $3.8 million to $2.0 million, the term of the lease was extended from December 31, 2012 to December 31, 2014, and ownership of the property will not transfer to the Company at the end of the lease term. The interest rate of the new lease agreement remained at
8%. As a result of the new lease agreement, the Company reduced its lease obligation and the carrying value of its assets under capital leases by approximately $28 million. The Company paid the lease obligation in full with a portion of the net proceeds of the March 28, 2011, issuance of its 3.25% convertible senior notes. The lease will be accounted for as an operating lease during the additional two years of the new lease term.
In April 2011 the Company entered into a 5-year, $21.2 million capital lease for manufacturing equipment. Payments under the lease, which bears interest at 3.09%, are $0.4 million per month through March 2016. The lease agreement provides that the Company must maintain the equipment in good working order, and includes a cross default with cross acceleration provision related to certain non-financial covenants incorporated in the Company's credit facility agreement. As of July 31, 2011, the total amount payable through the end of the lease term was $21.4 million, of which $19.9 million represented principal and $1.5 million represented interest.
In October 2007 the Company entered into a capital lease agreement in the amount of $19.9 million associated with certain equipment. Payments under the lease were $0.4 million per month over a 5-year term at a 5.6% interest rate. On April 6, 2011, the Company used a portion of the net proceeds of the March 28, 2011, issuance of its 3.25% convertible senior notes, to repay in full the outstanding balance of this lease of $7.0 million. In connection with this repayment, the Company paid a $0.2 million prepayment penalty which was recorded as a debt extinguishment loss, included in other income (expense) in the Company's condensed statements of income.
In January 2010 the Company borrowed $3.7 million from a customer to purchase manufacturing equipment. This loan bears interest at 4.75% and is primarily being repaid with product supplied to the customer. Product valued at $0.3 million and $0.9 million was shipped to the customer and applied against the loan during the three and nine month periods ended July 31, 2011, and product valued at $0.3 and $0.5 million was shipped and applied against the loan during the comparable prior year periods. During the three month period ending October 30, 2011, the Company may make a cash payment against this loan of approximately $0.6 million. The Company estimates that the loan will be fully repaid in fiscal
2013.
NOTE 5 - COMMON STOCK WARRANTS
On September 10, 2009, the Company entered into two warrant agreements with Intel Capital Corporation to purchase a total of 750,000 shares of the Company's common stock. Under one warrant agreement 500,000 shares of the Company's common stock can be purchased at an exercise price of $4.15 per share and under the second warrant agreement 250,000 shares of the Company's common stock can be purchased at an exercise price of $5.08 per share. The warrant agreements expire on September 10, 2014. Also on September 10, 2009, the Company and Intel Corporation entered into an agreement to share technical and operations information regarding the development of the Company’s products, the capabilities of the
Company’s photomask manufacturing lines and the alignment of photomask toolsets. The warrants were recorded at their fair value on their date of grant, which was determined using the Black-Scholes option pricing model. As of July 31, 2011, none of the warrants had been exercised.
In conjunction with the May 2009 amendment to its credit facility, the Company also entered into a warrant agreement with its lenders. See Note 6 for further discussion of these warrants.
NOTE 6 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company utilizes derivative instruments to reduce its exposure to the effects of the variability of interest rates and foreign currencies on its financial performance when it believes such action is warranted. Historically, the Company has been a party to derivative instruments to hedge either the variability of cash flows of a prospective transaction or the fair value of a recorded asset or liability. In certain instances, the Company has designated these transactions as hedging instruments. However, whether or not a derivative was designated as being a hedging instrument, the Company's purpose for engaging in the derivative has always been for risk management and not speculative purposes. The Company
historically has not been a party to a significant number of derivative instruments and does not expect its derivative activity to significantly increase in the foreseeable future.
In addition to the utilization of derivative instruments discussed above, the Company attempts to minimize its risk of foreign currency exchange rate variability by, whenever possible, procuring production materials within the same country that it will utilize the materials in manufacturing, and by selling to customers from manufacturing sites within the country in which the customers are located.
On May 15, 2009, in connection with an amendment to its credit facility, the Company issued 2.1 million warrants, each exercisable for one share of the Company's common stock at an exercise price of $0.01 per share. Forty percent of the warrants were exercisable upon issuance, and the remaining balance was to become exercisable in twenty percent increments at various points in time after October 31, 2009. As a result of certain net cash settleable put provisions within the warrant agreement, the warrants were recorded as a liability in the Company's consolidated balance sheet. As of the issuance date and for future periods that such warrants remain outstanding, the Company has, and will continue to, adjust the
liability based upon the current fair value of the warrants, with any changes in their fair value being recognized in earnings. Due to the warrants' exercise price of $0.01 per share, their fair value will approximate the market price of the Company's common stock. Approximately 1.2 million of these warrants were cancelled as a result of the Company's early repayment of certain amounts under its credit facility during the year ended November 1, 2009, and the associated liability was reduced accordingly.
The table below presents the effect of derivative instruments on the Company's condensed consolidated balance sheets at July 31, 2011 and October 31, 2010.
Derivatives
|
|
|
|
|
|
|
Not Designated
|
|
|
|
|
|
|
as Hedging
|
|
|
|
|
Fair Value at |
|
Instruments Under
|
|
|
|
|
July 31, |
|
|
October 31, |
|
ASC 815
|
|
|
Balance Sheet Location
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants on common stock
|
|
|
Other liabilities
|
|
$ |
1,322
|
|
|
$ |
1,881
|
|
The table below presents the effect of derivative instruments on the Company's condensed consolidated statements of income for the three and nine month periods ended July 31, 2011 and August 1, 2010.
Derivatives Not Designated
|
|
|
|
|
Amount of Gain (Loss) Recognized Related to Derivative Instruments |
|
as Hedging
|
|
|
Location of Gain (Loss)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Instruments Under
|
|
|
Related to
|
|
July 31, |
|
|
August 1, |
|
|
July 31, |
|
|
August 1, |
|
ASC 815
|
|
|
Derivative Instruments
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants on common stock
|
|
|
Investment and other income (expense), net
|
|
$ |
221
|
|
|
$ |
388
|
|
|
$ |
$(599
|
) |
|
$ |
$(363
|
) |
NOTE 7 - SHARE-BASED COMPENSATION
In March 2007 shareholders approved a new share-based compensation plan ("Plan"), under which options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, and other awards based on, or related to, shares of the Company's common stock may be granted from shares authorized but unissued, or shares previously issued and reacquired by the Company. A maximum of six million shares of common stock may be issued under the Plan. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated.
The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. The Company incurred total share-based compensation costs for the three and nine month periods ended July 31, 2011, of $0.7 million and $1.8 million, respectively, and $0.5 million and $1.5 million for the three and nine month periods ended August 1, 2010, respectively. The Company received cash from option exercises of $0.2 million and $0.4 million for the three and nine month periods ended July 31, 2011, respectively, and $0.1 million for the nine month period ended August 1, 2010. The Company did not receive any cash from option exercises during the three month period ended August 1, 2010. No share-based compensation cost was capitalized as part of inventory and no related income tax benefits were recorded during the periods presented.
Stock Options
Option awards generally vest over one to four year periods, and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price equal to the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on the closing prices of the Company’s common stock on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The
risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options issued during the three and nine month periods ended July 31, 2011 and August 1, 2010, are presented in the following table.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
N/A |
|
|
|
91.6 |
% |
|
|
98.7 |
% |
|
|
89.5 |
% |
Risk free rate of return
|
|
|
N/A |
|
|
|
1.7 |
% |
|
|
1.0% - 1.9 |
% |
|
|
1.7% - 2.4 |
% |
Dividend yield
|
|
|
N/A |
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected term
|
|
|
N/A |
|
|
4.3 years
|
|
|
4.2 years
|
|
|
4.5 years
|
|
Information on outstanding and exercisable option awards as of July 31, 2011, is presented below:
Options
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 31, 2011
|
|
|
4,047,441 |
|
|
$ |
9.32 |
|
6.4 years
|
|
$ |
9,642 |
|
Exercisable at July 31, 2011
|
|
|
2,055,723 |
|
|
$ |
14.51 |
|
4.4 years
|
|
$ |
2,602 |
|
There were no share options granted during the three month period ended July 31, 2011, and there were 80,000 share options granted during the three month period ended August 1, 2010, with a weighted-average grant date fair value of $3.08 per share. There were 620,750 share options granted during the nine month period ended July 31, 2011, with a weighted-average grant date fair value of $4.75 per share and 926,400 share options granted during the nine month period ended August 1, 2010, with a weighted-average grant date fair value of $2.98 per share. As of July 31, 2011, the total unrecognized compensation cost related to non-vested option awards was approximately $3.6 million. That cost is expected to be recognized
over a weighted-average amortization period of 2.9 years.
Restricted Stock
The Company periodically grants restricted stock awards. The restrictions on these awards lapse over a service period that has ranged from less-than-one to eight years. No restricted stock awards were granted during the three month period ended July 31, 2011, and 176,250 restricted stock awards were granted during the nine month period ended July 31, 2011, with a weighted-average grant date fair value of $6.71 per share. No restricted stock awards were granted during the nine month period ended August 1, 2010. As of July 31, 2011, the total compensation cost not yet recognized related to unvested restricted stock awards was approximately $1.5 million. That cost is expected to be recognized over a weighted-average
amortization period of 2.6 years. As of July 31, 2011, there were 208,577 shares of restricted stock outstanding.
NOTE 8 - CONSOLIDATION, RESTRUCTURING AND RELATED CHARGES (CREDITS)
In the third quarter of fiscal 2009, the Company ceased the manufacture of photomasks at its Shanghai, China, facility and recorded an initial restructuring charge of $10.1 million, which included $7.7 million to write down the carrying value of the Company's Shanghai manufacturing facility to its estimated fair value at that time. In the second quarter of fiscal 2010, the Company sold its facility in Shanghai, China, for net proceeds of $12.9 million ($4.2 million of which was received as a deposit in the first quarter of fiscal 2010), which resulted in a gain of $5.4 million. The gain was recorded as a credit to the restructuring reserve in that quarter. On a cumulative basis the Company recorded total net charges
of $5.2 million, including $4.7 million of net asset write-downs, through its completion in fiscal 2010. The fair value of the assets written down was determined by management using a market approach. The following tables set forth the Company's restructuring reserve related to its Shanghai, China, facility as of August 1, 2010, and reflects the activity affecting the reserve for the three and nine month periods then ended.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
August 1, 2010
|
|
|
August 1, 2010
|
|
|
|
May 3,
2010
|
|
|
Charges
|
|
|
Utilized
|
|
|
August 1,
2010
|
|
|
November 2,
2009
|
|
|
Charges
(credits)
|
|
|
Utilized
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on sales of assets and other
|
|
$ |
218 |
|
|
$ |
- |
|
|
$ |
(21 |
) |
|
$ |
197 |
|
|
$ |
- |
|
|
$ |
(5,020 |
) |
|
$ |
5,217 |
|
|
$ |
197 |
|
Employee terminations
|
|
|
- |
|
|
|
26 |
|
|
|
(26 |
) |
|
|
- |
|
|
|
134 |
|
|
|
210 |
|
|
|
(344 |
) |
|
|
- |
|
|
|
$ |
218 |
|
|
$ |
26 |
|
|
$ |
(47 |
) |
|
$ |
197 |
|
|
$ |
134 |
|
|
$ |
(4,810 |
) |
|
$ |
4,873 |
|
|
$ |
197 |
|
NOTE 9 - INCOME TAXES
The effective tax rate differs from the U.S. statutory rate of 35% in the third quarter and through the first three quarters of fiscal year 2011 primarily due to the impact of the non-deductible debt extinguishment loss recorded in the second and third quarters of 2011, a higher level of earnings taxed at lowered statutory rates in foreign jurisdictions, offset by the impact of a foreign subsidiary tax settlement in the three month period ended July 31, 2011. In the third quarter and through the first three quarters of fiscal year 2010, the effective tax rate differed from the U.S. statutory rate primarily because income tax provisions incurred in jurisdictions where the Company generated income before income taxes
were, due to valuation allowances, not significantly offset by income tax benefits in jurisdictions where the Company incurred losses before income taxes. Further, in Korea and in Taiwan, various investment tax credits have been earned, which reduced the Company’s effective income tax rate.
The Company accounts for uncertain tax positions by recording a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in its tax returns. The Company recognizes any interest and penalties related to uncertain tax positions in the income tax provision in its condensed consolidated statements of operations.
As a result of the Company’s foreign subsidiary’s income tax settlement in the third quarter of 2011, other liabilities for unrecognized tax benefits associated with uncertain tax positions in the condensed balance sheets were reduced by $1.0 million including interest and penalties.
Unrecognized tax benefits associated with uncertain tax positions of $1.0 million, including interest and penalties, were included in other liabilities in the condensed consolidated balance sheets at July 31, 2011 and $2.0 million, including $0.3 million for interest and penalties, at October 31, 2010. If recognized, the benefits would favorably affect the Company's effective income tax rate in future periods. Although the Company does not expect to report a significant change in the amount of liabilities recorded for uncertain tax positions in the next twelve months, changes in the recorded reserves could impact future reported results. Currently, the statutes of limitations remain open subsequent to,
and including, 2006 in the U.S., 2009 in the U.K., 2008 in Germany, 2011 in Korea and 2010 in Taiwan.
NOTE 10 - EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is presented below.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Photronics, Inc.
|
|
$ |
11,265 |
|
|
$ |
7,691 |
|
|
$ |
6,938 |
|
|
$ |
15,778 |
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on convertible notes, net of related tax effects
|
|
|
1,595 |
|
|
|
1,022 |
|
|
|
- |
|
|
|
3,063 |
|
Gain related to common stock warrants fair value adjustment
|
|
|
(221 |
) |
|
|
(388 |
) |
|
|
- |
|
|
|
- |
|
Earnings for diluted earnings per share
|
|
$ |
12,639 |
|
|
$ |
8,325 |
|
|
$ |
6,938 |
|
|
$ |
18,841 |
|
Weighted-average common shares computations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares used for basic earnings per share
|
|
|
58,987 |
|
|
|
53,516 |
|
|
|
56,163 |
|
|
|
53,341 |
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
15,909 |
|
|
|
11,311 |
|
|
|
- |
|
|
|
11,311 |
|
Share-based payment awards
|
|
|
1,314 |
|
|
|
969 |
|
|
|
1,252 |
|
|
|
983 |
|
Common stock warrants
|
|
|
534 |
|
|
|
484 |
|
|
|
309 |
|
|
|
54 |
|
Potentially dilutive common shares
|
|
|
17,757 |
|
|
|
12,764 |
|
|
|
1,561 |
|
|
|
12,348 |
|
Weighted-average common shares used for diluted earnings per share
|
|
|
76,744 |
|
|
|
66,280 |
|
|
|
57,724 |
|
|
|
65,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$ |
0.19 |
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.30 |
|
Diluted earnings per share
|
|
$ |
0.16 |
|
|
$ |
0.13 |
|
|
$ |
0.12 |
|
|
$ |
0.29 |
|
The table below shows the outstanding weighted-average share-based payment awards and common stock warrants that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period or, under application of the treasury stock method, they were otherwise determined to be anti-dilutive. The table also shows convertible notes that, if converted, would have been anti-dilutive.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment awards
|
|
|
2,206 |
|
|
|
2,700 |
|
|
|
2,412 |
|
|
|
2,668 |
|
Convertible notes
|
|
|
- |
|
|
|
- |
|
|
|
13,519 |
|
|
|
- |
|
Common stock warrants
|
|
|
- |
|
|
|
250 |
|
|
|
225 |
|
|
|
792 |
|
Total potentially dilutive shares excluded
|
|
|
2,206 |
|
|
|
2,950 |
|
|
|
16,156 |
|
|
|
3,460 |
|
NOTE 11 – GEOGRAPHIC INFORMATION
The Company operates as a single operating segment as a manufacturer of photomasks, which are high precision quartz plates containing microscopic images of electronic circuits for use in the fabrication of ICs and FPDs. Geographic net sales are based primarily on where the Company's manufacturing facility is located. The Company's net sales by geographic area and for ICs and FPDs for the three and nine month periods ended July 31, 2011 and August 1, 2010 and its long-lived assets by geographic area as of July 31, 2011, and October 31, 2010, are presented below.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
$ |
80,051 |
|
|
$ |
70,349 |
|
|
$ |
238,224 |
|
|
$ |
192,977 |
|
Europe
|
|
|
11,833 |
|
|
|
11,116 |
|
|
|
35,643 |
|
|
|
31,298 |
|
North America
|
|
|
44,051 |
|
|
|
30,786 |
|
|
|
115,994 |
|
|
|
91,243 |
|
|
|
$ |
135,935 |
|
|
$ |
112,251 |
|
|
$ |
389,861 |
|
|
$ |
315,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IC
|
|
$ |
104,891 |
|
|
$ |
86,001 |
|
|
$ |
294,691 |
|
|
$ |
244,489 |
|
FPD
|
|
|
31,044 |
|
|
|
26,250 |
|
|
|
95,170 |
|
|
|
71,029 |
|
|
|
$ |
135,935 |
|
|
$ |
112,251 |
|
|
$ |
389,861 |
|
|
$ |
315,518 |
|
|
|
As of
|
|
|
|
July 31,
2011
|
|
|
October 31,
2010
|
|
Long-lived assets
|
|
|
|
|
|
|
Asia
|
|
$ |
216,502 |
|
|
$ |
221,283 |
|
Europe
|
|
|
11,338 |
|
|
|
14,182 |
|
North America
|
|
|
169,863 |
|
|
|
134,349 |
|
|
|
$ |
397,703 |
|
|
$ |
369,814 |
|
NOTE 12 - FAIR VALUE MEASUREMENTS
The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted market prices in active markets for identical securities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly; and Level 3, defined as unobservable inputs that are not corroborated by market data.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below present assets and liabilities as of July 31, 2011 and October 31, 2010 that are measured at fair value on a recurring basis.
|
|
July 31, 2011
|
|
|
|
Quoted Prices in Active Markets for Identical Instruments
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants
|
|
$ |
- |
|
|
$ |
1,322 |
|
|
$ |
- |
|
|
$ |
1,322 |
|
Total liabilities
|
|
$ |
- |
|
|
$ |
1,322 |
|
|
$ |
- |
|
|
$ |
1,322 |
|
|
|
October 31, 2010
|
|
|
|
Quoted Prices in Active Markets for Identical Instruments
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants
|
|
$ |
- |
|
|
$ |
1,881 |
|
|
$ |
- |
|
|
$ |
1,881 |
|
Total liabilities
|
|
$ |
- |
|
|
$ |
1,881 |
|
|
$ |
- |
|
|
$ |
1,881 |
|
The fair value of the common stock warrants liability was determined using the Black-Scholes option pricing model. A significant observable input into the model included the market price of the Company's common stock at the measurement date. Gains or losses related to fair value adjustments to the common stock warrants liability are included in other income (expense), net.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company did not have any nonfinancial assets or liabilities measured at fair value on a nonrecurring basis as of July 31, 2011 and October 31, 2010.
Fair Value of Other Financial Instruments
The fair values of the Company's cash and cash equivalents, accounts receivable, accounts payable, and certain other current assets and current liabilities approximate their carrying value due to their short-term maturities. The fair value of the Company's variable rate long-term debt approximates its carrying value due to the variable nature of the underlying interest rate. The estimated fair values of the Company's 3.25% and 5.5% convertible senior notes were $119.5 million and $37.1 million, respectively, as of July 31, 2011, and the estimated fair value of the Company’s 5.5% senior convertible notes was $83.2 million, as of October 31, 2010. The Company acquired $35.4 million face amount of its
5.5% senior convertible notes during the nine month period ended July 31, 2011.
NOTE 13 – SUBSIDIARY SHARE REPURCHASE
During the three month period ended May 1, 2011, the board of directors of Photronics Semiconductor Mask Corporation (PSMC), a subsidiary of the Company based in Taiwan, authorized PSMC to repurchase for retirement up to 5% of its outstanding common stock on the open market. The repurchase program, which expired in April 2011, resulted in approximately 7.7 million shares (or approximately 2.7 % of its outstanding shares) being repurchased at a total cost of $3.3 million. PSMC’s repurchase of these shares increased the Company’s ownership of PSMC from 57.53% at October 31, 2010, to 59.14% at May 1, 2011. The table below presents the effect of the change in Photronics, Inc.'s ownership interest in PSMC on
the Company's equity for the nine month periods ended July 31, 2011 and August 1, 2010.
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
Net income attributable to Photronics, Inc.
|
|
$ |
6,938 |
|
|
$ |
15,778 |
|
|
|
|
|
|
|
|
|
|
Decrease in Photronics, Inc.'s additional paid-in capital for PSMC's repurchase of 7.7 million shares of its common stock
|
|
|
(328 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Change from net income attributable to Photronics, Inc. and transfer to noncontrolling interest
|
|
$ |
6,610 |
|
|
$ |
15,778 |
|
In August 2011, the board of directors of PSMC authorized PSMC to repurchase for retirement up to 5% of its outstanding common stock on the open market through October 14, 2011, should such stock become available for repurchase within a certain price per share range.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
As of July 31, 2011, the Company had commitments outstanding for capital expenditures of approximately $16 million.
The Company is subject to various claims that arise in the ordinary course of business. The Company believes such claims, individually or in the aggregate, will not have a material adverse effect on its business, financial condition, results of operations or cash flows.
NOTE 15 – RECENT ACCOUNTING GUIDANCE
In June 2011 the FASB issued Accounting Standards Update (ASU) No. 2011-05, “Presentation of Comprehensive Income”, with the purpose of increasing the prominence of items reported in other comprehensive income. The amended guidance requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate statements. The amendments also require that reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) be presented on the face of the financial statements. ASU No. 2011-05 is to be applied retrospectively and is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of ASU No. 2011-05 will have no effect on the Company’s reported financial condition, financial performance or cash flows.
In May 2011 the FASB issued ASU No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs", which amended its guidance on fair value measurements with the purpose of achieving commonality of its fair value measurement and disclosure requirements with those of International Financial Reporting Standards (IFRSs). ASU No. 2011-04 clarifies the FASBs intentions regarding the application of existing fair value measurement and disclosure requirements, changes certain principles for measuring fair value and changes the disclosure requirements for fair value measurements. ASU No. 2011-04 is to be applied prospectively and is effective during interim and annual
periods beginning after December 15, 2011. The Company is currently evaluating the effect, if any, ASU No. 2011-04 will have on its consolidated financial statements.
Item 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Overview
Management's discussion and analysis ("MD&A") of the Company's financial condition, results of operations and outlook should be read in conjunction with its condensed consolidated financial statements and related notes. Various segments of this MD&A contain forward-looking statements, all of which are presented based on current expectations and may be adversely affected by uncertainties and risk factors (presented throughout this filing and in the Company's Annual Report on Form 10-K for the fiscal 2010 year), that may cause actual results to materially differ from these expectations.
The Company sells substantially all of its photomasks to semiconductor designers and manufacturers, and manufacturers of FPDs. Photomask technology is also being applied to the fabrication of other higher performance electronic products such as photonics, micro-electronic mechanical systems and certain nanotechnology applications. Thus, the Company's selling cycle is tightly interwoven with the development and release of new semiconductor designs and flat panel applications, particularly as it relates to the semiconductor industry's migration to more advanced design methodologies and fabrication processes. The Company believes that the demand for photomasks primarily depends on design activity rather than sales
volumes from products produced using photomask technologies. Consequently, an increase in semiconductor or FPD sales does not necessarily result in a corresponding increase in photomask sales. However, the reduced use of customized ICs, reductions in design complexity, other changes in the technology or methods of manufacturing or designing semiconductors, or a slowdown in the introduction of new semiconductor or FPD designs could reduce demand for photomasks even if demand for semiconductors and FPDs increases. Advances in semiconductor and photomask design and semiconductor production methods could reduce the demand for photomasks. Historically, the semiconductor industry has been volatile, with sharp periodic downturns and slowdowns. These downturns have been characterized by, among other things, diminished product demand, excess production capacity and accelerated erosion of selling
prices.
The global semiconductor industry is driven by end markets which have been closely tied to consumer driven applications of high performance semiconductor devices including, but not limited to, communications and mobile computing solutions. The Company is typically required to fulfill its customer orders within a short period of time, sometimes within 24 hours. This results in the Company having a minimal level of back-log orders, typically one to two weeks for IC photomasks and two to three weeks for FPD photomasks. The Company cannot predict the timing of the industry's transition to volume production of next generation technology nodes or the timing of up and down cycles with precise accuracy, but believes that
such transitions and cycles will continue into the future, beneficially and adversely affecting its business, financial condition and operating results in the near term. The Company's ability to remain successful in these environments is dependent upon achieving its goals of being a service and technology leader, an efficient solutions supplier, and a company able to continually reinvest in its global infrastructure.
Although the Company issued $115 million in convertible senior notes on March 28, 2011, the effects of the weakened global economy and the tightened credit market may make it increasingly difficult for the Company to obtain additional external sources of financing, if necessary, to fund its operations.
The Company's ability to comply with the financial and other covenants in its debt agreements may be affected by economic or business conditions, or other events. Existing covenant restrictions limit the Company's ability to obtain additional debt financing and, should the Company be unable to meet one or more of these covenants, its lenders may require the Company to repay its outstanding balances prior to the expiration date of the agreements. The Company cannot assure that additional sources of financing would be available to the Company to pay off its long-term borrowings to avoid default. Should the Company default on any of its long-term borrowings, a cross default would occur on certain of its other long-term
borrowings, unless amended or waived. As of July 31, 2011, the Company was in compliance with its debt covenants.
Material Changes in Results of Operations Three and Nine Months ended July 31, 2011 and August 1, 2010
The following table represents selected operating information expressed as a percentage of net sales.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
July 31,
2011
|
|
|
August 1,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales
|
|
|
(71.9 |
) |
|
|
(76.6 |
) |
|
|
(73.0 |
) |
|
|
(78.9 |
) |
Gross margin
|
|
|
28.1 |
|
|
|
23.4 |
|
|
|
27.0 |
|
|
|
21.1 |
|
Selling, general and administrative expenses
|
|
|
(8.7 |
) |
|
|
(9.9 |
) |
|
|
(8.7 |
) |
|
|
(10.1 |
) |
Research and development expenses
|
|
|
(2.6 |
) |
|
|
(3.0 |
) |
|
|
(2.9 |
) |
|
|
(3.5 |
) |
Consolidation, restructuring and related credits
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.5 |
|
Operating income
|
|
|
16.8 |
|
|
|
10.5 |
|
|
|
15.4 |
|
|
|
9.0 |
|
Debt extinguishment loss
|
|
|
(3.6 |
) |
|
|
- |
|
|
|
(9.0 |
) |
|
|
- |
|
Other expense, net
|
|
|
(0.3 |
) |
|
|
(1.1 |
) |
|
|
(0.5 |
) |
|
|
(1.9 |
) |
Net income before income taxes
|
|
|
12.9 |
|
|
|
9.4 |
|
|
|
5.9 |
|
|
|
7.1 |
|
Income tax provision
|
|
|
(3.6 |
) |
|
|
(2.6 |
) |
|
|
(3.0 |
) |
|
|
(1.8 |
) |
Net income
|
|
|
9.3 |
|
|
|
6.8 |
|
|
|
2.9 |
|
|
|
5.3 |
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(1.0 |
) |
|
|
0.1 |
|
|
|
(1.1 |
) |
|
|
(0.3 |
) |
Net income attributable to Photronics, Inc.
|
|
|
8.3 |
% |
|
|
6.9 |
% |
|
|
1.8 |
% |
|
|
5.0 |
% |
All of the following tabular comparisons, unless otherwise indicated, are for the three months ended July 31, 2011 (Q3-11) and August 1, 2010 (Q3-10) and for the nine months ended July 31, 2011 (YTD-11) and August 1, 2010 (YTD-10) in millions of dollars.
Net Sales
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Q3-11 |
|
|
Q3-10 |
|
|
Percent
Change
|
|
|
YTD-11
|
|
|
YTD-10
|
|
|
Percent
Change
|
|
|
< |