8-K

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

 Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

Date of report (Date of earliest event reported) May 22, 2019

PHOTRONICS, INC.

(Exact name of registrant as specified in its charter)

Connecticut	0-15451	06-0854886
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

15 Secor Road, Brookfield, CT	06804
(Address of principal executive offices)	(Zip Code)

Registrant's Telephone Number, including area code (203) 775-9000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
COMMON	PLAB	NASDAQ Global Select Market

Item 2.02 Results of Operation and Financial Condition

On May 22, 2019, the Corporation issued a press release reporting second quarter fiscal 2019 results.

A copy of the press release is furnished as Exhibit 99.1 to this report.  The information contained in this Item 2.02 and the attached Exhibits 99.1, 99.2, 99.3, 99.4, and 99.5, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth by specific reference in such filing.

On May 22, 2019, the Company will conduct a conference call during which certain unaudited, non-GAAP financial information related to the Company’s operations for the three months ended April 28, 2019 may be disclosed.  This information is set forth in Exhibit 99.5.

EBITDA is a non-GAAP financial measure that the Company defines pursuant to its credit agreement. The Company believes that EBITDA is generally accepted as providing useful information regarding the operational strength and performance of its business, including the ability of the Company to pay interest, service debt and fund capital expenditures. The Company’s method for calculating EBITDA may not be comparable to methods used by other companies but is the same method the Company uses for calculating EBITDA under its credit facility. The Company has included in the press release certain reconciliation information for EBITDA to its most directly comparable financial measure of net income calculated and reported in accordance with GAAP.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

99.1	Press Release dated May 22, 2019.
99.2	Condensed Consolidated Statements of Income.
99.3	Condensed Consolidated Balance Sheets.
99.4	Condensed Consolidated Statements of Cash Flows.
99.5	Photronics Q2 2019 Financial Results Conference Call May 22, 2019 slides.

SIGNATURE

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 hereunto duly authorized.

	PHOTRONICS, INC.
	(Registrant)
	By:	/s/ Richelle E. Burr
		Name: Richelle E. Burr
		Title: Vice President, General Counsel and Secretary
Date: May 22, 2019

EX-99.1

Exhibit 99.1

	For Further Information: R. Troy Dewar, CFA Vice President, Investor Relations (203) 740-5610 tdewar@photronics.com
Press Release

Photronics Reports Second Quarter Fiscal 2019 Results

• Second quarter 2019 revenue was $131.6 million, up 6% sequentially and 1% year-over-year

• Net income attributable to Photronics, Inc. shareholders was $8.5 million, or $0.13 per diluted share

• Cash balance was $167.1 million, with capital expenditures of $33.5 million primarily to fund China investments

• Repaid $57.5 million convertible security, reducing total debt and eliminating 5.5 million potentially dilutive shares

• Celebrated grand opening of new Xiamen and Hefei facilities in China

• Shipped first G10.5+ photomask, marking entry into new, growing market

• Third quarter 2019 guidance: revenue between $132 and $142 million with diluted EPS between $0.05 and $0.14

BROOKFIELD, Conn. May 22, 2019 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2019 second quarter ended April 28, 2019.

Second quarter revenue was $131.6 million, 6% better than the previous quarter and 1% better than the same quarter last year. Integrated circuit (IC) revenue was $98.6 million, up 4% sequentially and down 4% compared with the second quarter of last year. Flat panel display (FPD) revenue was $33.0 million, up 11% compared with last quarter and 16% compared with the same period last year.

Net income attributable to Photronics, Inc. shareholders was $8.5 million ($0.13 per diluted share), compared with $5.3 million ($0.08 per diluted share) for the first quarter of 2019 and $10.7 million ($0.15 per diluted share) for the second quarter of 2018.

"We performed well in the second quarter despite a challenging industry environment, delivering sequential growth in IC and strong sequential and year-over-year growth in FPD,” said Peter Kirlin, chief executive officer. “The double-digit FPD growth resulted from a strong market for masks for mobile displays, including AMOLED and LTPS LCD, with a contribution from our first shipment of a G10.5+ photomask. In IC, we achieved sequential growth with the anticipated recovery in high-end memory. Startup activity in China impacted operating profit, resulting in operating margin of 7.0%. Cash at the end of the quarter was $167.1 million after repayment of $57.5 million in convertible debt, which eliminated 5.5 million potentially dilutive shares, and $33.5 million in capital expenditures, primarily in China. Besides solid financial results, we celebrated the grand opening of our new Xiamen and Hefei facilities in China. We are excited to serve our customers in mainland China with locally produced reticles. With these milestones, we are on track to meet our 2020 targets of $630 million revenue and $0.80 earnings per share.”

Third Quarter 2019 Guidance

For the third quarter of 2019, Photronics expects revenue to be between $132 million and $142 million, and net income attributable to Photronics, Inc. shareholders to be between $0.05 and $0.14 per diluted share.

Conference Call

A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 22, 2019. The call can be accessed by logging onto Photronics' website at www.photronics.com.  The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada. The call will be archived on Photronics’ website for instant replay access.

About Photronics

Photronics is a leading worldwide manufacturer of integrated circuit (IC) and flat panel display (FPD) photomasks. High precision quartz plates that contain microscopic images of electronic circuits, photomasks are a key element in the IC and FPD manufacturing process. Founded in 1969, Photronics has been a trusted photomask supplier for 50 years. As of October 31, 2018, the company had 1,575 employees across 11 strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed at www.photronics.com.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of the company and its subsidiaries. The forward-looking statements contained in this press release involve risks and uncertainties that may affect the company’s operations, markets, products, services, prices, and other factors. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, political, and technological factors as well as decisions we may make in the future regarding our business, capital structure and other matters. These forward-looking statements generally can be identified by phrases such as “believes”, “expects”, “anticipates”, “plans”, “projects”, and similar expressions.  There is no assurance that the company’s expectations will be realized. For additional information please see the company’s quarterly and annual reports filed with the Securities and Exchange Commission. The company assumes no obligation to provide revisions to any forward-looking statements.

EX-99.2

Exhibit 99.2

PHOTRONICS, INC.

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	April 28, 2019		January 27, 2019		April 29, 2018		April 28, 2019		April 29, 2018
Revenue	$	131,580	$	124,712	$	130,779	$	256,291	$	254,225
Cost of goods sold		105,570		98,610		97,960		204,179		193,744
Gross profit		26,010		26,102		32,819		52,112		60,481
Operating Expenses:
Selling, general and administrative		13,269		13,792		13,637		27,061		25,387
Research and development		3,542		4,263		3,817		7,805		7,921
Total Operating Expenses		16,811		18,055		17,454		34,866		33,308
Operating income		9,199		8,047		15,365		17,246		27,173
Other income (expense), net		3,931		1,108		3,332		5,039		(774	)
Income before income taxes		13,130		9,155		18,697		22,285		26,399
Income tax provision		3,278		1,387		3,508		4,665		1,729
Net income		9,852		7,768		15,189		17,620		24,670
Net income attributable to noncontrolling interests		1,373		2,501		4,524		3,874		8,107
Net income attributable to Photronics, Inc. shareholders	$	8,479	$	5,267	$	10,665	$	13,746	$	16,563
Earnings per share:
Basic	$	0.13	$	0.08	$	0.15	$	0.21	$	0.24
Diluted	$	0.13	$	0.08	$	0.15	$	0.20	$	0.23
Weighted-average number of common shares outstanding:
Basic		66,261		66,583		69,293		66,422		69,024
Diluted		70,597		67,047		75,190		71,593		75,052

EX-99.3

Exhibit 99.3

PHOTRONICS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

	April 28, 2019		October 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	167,066	$	329,277
Accounts receivable		123,371		120,515
Inventories		34,696		29,180
Other current assets		76,555		23,759
Total current assets		401,688		502,731
Property, plant and equipment, net		654,357		571,781
Intangible assets, net		10,182		12,368
Other assets		19,011		23,129
Total assets	$	1,085,238	$	1,110,009
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	505	$	57,453
Accounts payable and accrued liabilities		138,779		133,623
Total current liabilities		139,284		191,076
Long-term debt		35,921		-
Other liabilities		11,705		14,364
Photronics, Inc. shareholders' equity		763,568		759,671
Noncontrolling interests		134,760		144,898
Total equity		898,328		904,569
Total liabilities and equity	$	1,085,238	$	1,110,009

EX-99.4

Exhibit 99.4

PHOTRONICS,  INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended
	April 28,			April 29,
	2019			2018
Cash flows from operating activities:
Net income	$	17,620		$	24,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,515			44,429
Changes in operating assets, liabilities and other		(58,422	)		(31,191	)
Net cash (used in) provided by operating activities		(2,287	)		37,908
Cash flows from investing activities:
Purchases of property, plant and equipment		(140,436	)		(44,129	)
Government incentive		5,698			-
Other		(23	)		296	*
Net cash used in investing activities		(134,761	)		(43,833	)*
Cash flows from financing activities:
Proceeds from debt		39,633			-
Contribution from noncontrolling interest		29,394			11,998
Repayments of debt		(61,220	)		(2,771	)
Dividends paid to noncontrolling interests		(26,102	)		-
Purchase of treasury stock		(10,696	)		-
Proceeds from share-based arrangements		1,033			3,776
Other		(45	)		(267	)
Net cash (used in) provided by financing activities		(28,003	)		12,736
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		2,843			6,330	*
Net (decrease) increase in cash, cash equivalents, and restrcited cash		(162,208	)		13,141	*
Cash, cash equivalents, and restricted cash, beginning of period		331,989	*		310,936	*
Cash, cash equivalents, and restricted cash, end of period	$	169,781		$	324,077	*

* Amount has been modified to reflect the adoption of ASU 2016-18

EX-99.5

Exhibit 99.5

 Photronics, Inc.  Q2 2019 Financial Results Conference CallMay 22, 2019 

 Safe Harbor Statement  2  This presentation and some of our comments may contain projections or other forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. Actual events or results may differ materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “plan”, “project” or the negative thereto. We cannot guarantee the accuracy of any forecasts or estimates, and we are not obligated to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to time with the Securities and Exchange Commission.Non-GAAP Financial MeasuresThis presentation and some of our comments may reference non-GAAP financial measures. These non-GAAP financial measures exclude certain income or expense items, and are consistent with another way management internally analyzes our results of operations. Non-GAAP information should be considered to be a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Please see the “Reconciliation of GAAP to Non-GAAP Financial Information” in this presentation. 

 Revenue up 6% Q/Q and 1% Y/YSequential IC growth on high-end memory recoveryFPD growth driven by mobile display (AMOLED and LTPS LCD)Record revenue to China, representing 26% of total revenueNet income attributable to Photronics, Inc. shareholders of $8.5M ($0.13/share)Capex of $34M ($140M YTD) to support China investmentsRepaid $57.5M convertible debt; eliminated 5.5M potentially dilutive sharesChina grand opening ceremonies were held week of April 22Hefei shipped first G10.5+ mask in Q2; working to quickly complete customer qualificationsCompleting tool fine-tuning in Xiamen; qualifications to begin soonOn track for 2020 targets: $630M revenue & $0.80 EPS  Q2 2019 Summary  3  Successfully repositioned the business; China investments driving long-term, profitable growth 

 $M (except EPS)  Q219  Q119  Q/Q  Q218  Y/Y  Revenue  $ 131.6  $ 124.7  6%  $ 130.8  1%  Gross Profit  $ 26.0  $ 26.1  ─  $ 32.8  (21%)  Gross Margin  19.8%  20.9%   (110 bps)  25.1%  (530 bps)  Operating Income  $ 9.2  $ 8.0  14%  $ 15.4  (40%)  Operating Margin  7.0%  6.5%  50 bps  11.7%  (470 bps)  Other income  $ 3.9  $ 1.1  $ 2.8  $ 3.3  $ 0.6  Income tax   $ 3.3  $ 1.4  $ 1.9  $ 3.5  ($ 0.2)  Minority interest  $ 1.4  $ 2.5  ($ 1.1)  $ 4.5  ($ 3.2)  Net Income*  $ 8.5  $ 5.3  61%  $ 10.7  (20%)  Diluted EPS*  $ 0.13  $ 0.08  $ 0.05  $ 0.15  ($ 0.02)  Days in quarter  91  88  3  91  -  Gross margin lower on China startupOperating expense down due primarily to completion of certain IC qualification activityChina startup activity was $4.1M negative impact to operating incomeOther income primarily attributable to FX gainMinority interest reflects Taiwan gain partially offset by China loss  Income Statement Summary  4  *Net income attributable to Photronics, Inc. shareholders 

 Revenue grew Q/Q on high-end memory recoveryChina revenue +21% Q/Q; +68% Y/YRepresents 18% of Q219 IC revenueNew long-term purchase agreement increases sustainability of China businessOutlookExpect stable to improving high-end demandInitial shipments planned from Xiamen  $M  Q219  Q119  Q/Q  Q218  Y/Y  High-End*  $ 38.4  $ 34.6  11%  $ 41.5  (7%)  Mainstream  $ 60.2  $ 60.3  ─   $ 60.8  (1%)  Total  $ 98.6  $ 94.9  4%  $ 102.3  (4%)  IC Photomask Revenue  5  *28nm and smaller  Total may differ due to rounding 

 High-end driven by growth in AMOLED for mobile displaysDemand for mobile LTPS LCD displays remains strong; drives Q/Q mainstream growthChina revenue +20% Q/Q; +58% Y/YRepresents 47% of Q219 FPD revenueShipped first G10.5+ plate from HefeiOutlookAMOLED technology remains in high demandPlan to increase Hefei shipments  $M  Q219  Q119  Q/Q  Q218  Y/Y  High-End*  $ 23.0  $ 21.5  7%  $ 18.2  26%  Mainstream  $ 10.0  $ 8.4  20%  $ 10.3  (2%)  Total  $ 33.0  $ 29.8  11%  $ 28.5  16%  FPD Photomask Revenue  6  *≥G8 and AMOLED  Total may differ due to rounding 

 $M  Q219  Q119  Q218  Cash  $ 167  $ 232  $ 321  Debt  $ 36  $ 86  $ 59  Net Cash*  $ 131  $ 146  $ 262  Operating Cash Flow  $ 17  ($ 19)  $ 7  Capital Expenditures  $ 34  $ 107  $ 33  Share repurchase  -  $ 11  -  LTM EBITDA  $ 148  $ 156  $ 138  Deploying cash balance to fund China investmentsYTD capex $140M; still anticipate FY capex ~ $210MReduced debt and dilutive share count with repayment of $57.5M convertible; remaining debt is local China borrowingBalance sheet able to fund planned investments, strategic M&A opportunities, and potential share repurchases  Select Financial Data  7  *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP 

 Revenue ($M)  $132 - $142  Taxes ($M)  $2 - $3  EPS  $0.05 - $0.14  Diluted Shares (M)  ~66  Anticipate sequential growth in Q3High-end IC markets stable to improvingLegacy FPD expected to remain at capacity with Hefei ramping productionPotential macro headwind & impact from trade policyExpect margin headwinds from China startupAnticipate Q319 EPS impact of $0.03 - $0.06Plan to be profitable in China by end of 2019  Q319 Guidance   8 

 Thank you for your interest!  For Additional Information:R. Troy Dewar, CFAVice President, Investor Relations203.740.5610tdewar@photronics.com  

 Appendix 

 IC Photomask Revenue  11  Mainstream$253.1M61%  High-End$158.5M39%  High-End: 28nm and smaller; total may differ due to rounding  Mainstream$255.7M61%  High-End$160.3M39% 

 FPD Photomask Revenue  12  Mainstream$42.3M34%  High-End$83.5M66%  High-End: ≥G8 and AMOLED; total may differ due to rounding  Mainstream$43.1M36%  High-End$76.1M64% 

 Non-GAAP Reconciliation 

 14