SAN JOSE, CA -- 05/07/2007 -- Photon Dynamics, Inc. (NASDAQ: PHTN), a leading global supplier of integrated yield management solutions for the flat panel display (FPD) market, today reported financial results for the second quarter of fiscal year 2007, ended March 31, 2007.
Revenue for the second quarter of fiscal 2007 was $13.9 million, compared to first quarter fiscal 2007 revenue of $21.4 million.
Net loss for the second quarter was $15.5 million or $0.94 loss per share, compared to first quarter net loss of $7.2 million or $0.43 loss per share. The second quarter net loss included the following charges:
1. $2.8 million for property and equipment impairment mostly as a result of relocating certain manufacturing operations to Asia; 2. $1.0 million associated with a previously announced reduction in workforce; and 3. $3.0 million for additional inventory reserves largely as a consequence of the industry's cyclical slowdown.The aggregate of these charges of approximately $6.8 million, net of related tax, or $0.41 loss per share, accounts for the difference from our previously issued guidance of $0.55 to $0.65 loss per share.
Second quarter non-GAAP net loss was $13.5 million or $0.81 loss per share, excluding the impact of equity-based compensation expenses, restructuring charges and amortization of intangible assets, net of related tax, compared to first quarter non-GAAP net loss of $6.0 million or $0.36 loss per share. A reconciliation of these non-GAAP measures is provided after the GAAP financial statements below.
The Company had cash, cash equivalents, and short-term and long-term investments of $90.5 million as of March 31, 2007, compared to cash, cash equivalents and short-term investments of $97.1 million as of December 31, 2006.
Second quarter bookings were $14.1 million, and backlog as of March 31, 2007 was $66.3 million. The Company noted that bookings and backlog are not necessarily indicative of future revenue and that historically bookings have fluctuated on a quarter-to-quarter basis. These fluctuations in bookings may continue in the future.
"The results for the quarter reflect our commitment to accelerate the Company's objective of consistent profitability," said Jeffrey Hawthorne, Photon Dynamics' Chief Executive Officer. "In response to a reduction in capital expenditure spending levels for 2007 by certain of our customers, we announced during the quarter a company-wide plan to drive improved performance and position Photon Dynamics for future success. As part of the plan, we sought to establish a smaller, more variable cost base, and announced a reduction in our workforce of approximately 20 percent."
Hawthorne continued, "In addition to executing on our flat panel display operations initiatives, during the quarter we implemented an objective of expanding into adjacent markets. We have taken the initial step with the formation of a new venture, Salvador Systems LLC, which we believe will leverage our core machine vision technology to address the military, security and industrial low light imaging markets.
"In conclusion," Hawthorne said, "we have begun to expand our market opportunities while we continue our focus on enhancing the Company's FPD base business. We remain optimistic that the outlook for the FPD market is improving."
Company Projections for Fiscal Year 2007 Third Quarter
The Company estimates revenue for the third quarter of fiscal 2007 to be between $15 and $20 million, with a loss per share of ($0.30) to ($0.40).
Information Regarding Non-GAAP Financial Measures
Photon Dynamics provides non-GAAP net income and non-GAAP earnings per share data as additional information for its operating results. These measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Photon Dynamics' non-GAAP net income and non-GAAP earnings per share exclude the effect of SFAS 123 (R), restructuring charges, amortization of intangible assets, and income (loss) from discontinued operations, as well as the tax effects of these adjustments. Because SFAS 123 (R) is a material, non-cash item, Photon Dynamics has also provided non-GAAP information excluding the impact of SFAS 123 (R). Management excludes the effect of SFAS 123 (R) and other charges as indicated, because management does not believe that these charges are directly applicable to the core operating performance of Photon Dynamics. As a result, management excludes the effect of these charges for budgeting purposes, as well as for analyzing the underlying performance of Photon Dynamics. Management believes that although GAAP measures are important for investors to understand, providing investors with this non-GAAP measure provides investors additional important information to enable them to assess, in the way that management assesses, both the current and future operations of Photon Dynamics.
Second Quarter Earnings Conference Call
The Company will host a quarterly conference call today at 4:30 pm EDT. To access the conference call in the U.S. or Canada, dial (800) 366-7417. For all international calls, dial (303) 205-0033.
A digital replay will be available on Photon Dynamics' website at www.photondynamics.com under 'presentation/conference call' in the 'investors' section of the website two hours after the conclusion of the conference until such time as Photon Dynamics issues a press release announcing its third quarter fiscal 2007 financial results.
A replay will also be available by phone two hours after the conclusion of the conference call, from May 7 to May 22, 2007. You may access the telephone replay by dialing (800) 405-2236 or (303) 590-3000 and entering access code 11087763.
About Photon Dynamics, Inc.
Photon Dynamics, Inc. (PDI) is a leading global supplier of integrated yield management solutions for the flat panel display market. Utilizing the Company's advanced digital imaging technology, PDI develops systems that enable flat panel display manufacturers to collect and analyze data from the production line, and quickly diagnose and repair process-related defects, thereby allowing manufacturers to decrease material costs and improve throughput. The Company's customers use its systems to increase manufacturing yields of high performance flat panel displays used in a number of products, including notebook and desktop computers, televisions and advanced mobile electronic devices such as cellular phones, personal digital assistants and portable video games. Its test and repair systems are used by manufacturers to collect data, analyze product quality and identify and repair product defects at critical steps in the active matrix liquid crystal display manufacturing process.
Founded in 1986, Photon Dynamics is headquartered in San Jose, California with sales and customer support offices in Beijing, China; Seoul, Daejeon, Gumi, and Cheonan, Korea; Hsinchu, Tainan, and Taichung, Taiwan; and Tokyo and Tsu, Japan. The Company's common stock is publicly traded on the NASDAQ Global Market (NASDAQ: PHTN). For more information about Photon Dynamics, visit its website at www.photondynamics.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
The statements in this press release relating to Photon Dynamics' estimated results for the third quarter of fiscal 2007, and the outlook for the FPD market, are forward-looking statements. Forward-looking statements are commonly identified by words such as "may," "believe," "plan," and other terms of similar meaning. These forward-looking statements are based on current expectations on the date of this press release and involve a number of uncertainties and risks. These uncertainties and risks include, but are not limited to: the adoption of new technology by the Company's customers; the delay of investments by the Company's customers in response to current economic factors, which could reduce their demand for Photon Dynamics' products; the migration of our manufacturing operations offshore and the changing customer investment climate, which could lead to further impairments of assets and incurring of restructuring costs; an increase in competitive pricing pressures; the introduction of competing products having technological and/or pricing advantages, which would reduce the demand for Photon Dynamics' products; and failure to comply with a variety of United States and foreign federal, state and local laws and regulations, which could lead to the Company incurring additional expenses, interest and penalties. As a result, Photon Dynamics' actual results and end user demand may differ substantially from expectations. For further information on risks affecting Photon Dynamics, refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the caption "Factors Affecting Operating Results" in Photon Dynamics' Quarterly Report on Form 10-Q as filed on February 14, 2007 with the Securities and Exchange Commission. Photon Dynamics undertakes no obligation to update or revise any forward-looking statements whether as a result of new developments or otherwise.
PHOTON DYNAMICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 31, December 2007 31, 2006 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 25,253 $ 47,935 Short-term investments 56,815 54,834 Accounts receivable, net 14,255 29,341 Inventories 26,187 18,442 Other current assets 3,432 3,972 ---------- ---------- Total current assets 125,942 154,524 Long-term investments 8,389 787 Land, property and equipment, net 11,200 15,891 Other assets 5,489 4,542 Intangible assets, net 971 1,716 Goodwill 153 153 ---------- ---------- Total assets $ 152,144 $ 177,613 ========== ========== LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 7,217 $ 7,657 Warranty 7,418 8,058 Other current liabilities 11,807 9,944 Deferred gross margin 2,985 7,454 ---------- ---------- Total current liabilities 29,427 33,113 Other liabilities 107 119 Commitments and contingencies Shareholders’ equity: Common stock, no par value 287,433 285,510 Accumulated deficit (164,132) (141,409) Accumulated other comprehensive income (691) 280 ---------- ---------- Total shareholders’ equity 122,610 144,381 ---------- ---------- Total liabilities and shareholders’ equity $ 152,144 $ 177,613 ========== ========== PHOTON DYNAMICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, -------------------- -------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Revenue $ 13,928 $ 50,322 $ 35,363 $ 91,955 Cost of revenue 13,391 33,069 29,262 55,451 --------- --------- --------- --------- Gross margin 537 17,253 6,101 36,504 Operating expenses: Research and development 7,197 8,560 15,192 16,631 Selling, general and administrative 6,550 6,984 11,480 13,835 Restructuring charge (benefit) 1,017 (32) 1,463 30 Impairment of property and equipment 2,834 -- 2,834 -- Amortization of intangible assets 372 373 745 745 --------- --------- --------- --------- Total operating expenses 17,970 15,885 31,714 31,241 --------- --------- --------- --------- Income (loss) from operations (17,433) 1,368 (25,613) 5,263 Interest income and other, net 2,015 1,019 3,096 1,519 --------- --------- --------- --------- Income (loss) from continuing operations before income taxes and discontinued operations (15,418) 2,387 (22,517) 6,782 Provision for income taxes 105 199 206 551 --------- --------- --------- --------- Income (loss) from continuing operations before discontinued operations (15,523) 2,188 (22,723) 6,231 Income (loss) from discontinued operations -- 334 -- (346) --------- --------- --------- --------- Net income (loss) $ (15,523) $ 2,522 $ (22,723) $ 5,885 ========= ========= ========= ========= Income (loss) per share from continuing operations: Basic $ (0.94) $ 0.13 $ (1.37) $ 0.37 ========= ========= ========= ========= Diluted $ (0.94) $ 0.13 $ (1.37) $ 0.37 ========= ========= ========= ========= Income (loss) per share from discontinued operations: Basic $ -- $ 0.02 $ -- $ (0.02) ========= ========= ========= ========= Diluted $ -- $ 0.02 $ -- $ (0.02) ========= ========= ========= ========= Net income (loss) per share: Basic $ (0.94) $ 0.15 $ (1.37) $ 0.35 ========= ========= ========= ========= Diluted $ (0.94) $ 0.15 $ (1.37) $ 0.34 ========= ========= ========= ========= Weighted average number of shares: Basic 16,591 17,018 16,590 17,011 ========= ========= ========= ========= Diluted 16,591 17,077 16,590 17,062 ========= ========= ========= ========= PHOTON DYNAMICS, INC. Reconciliation of GAAP to Non-GAAP Results (In thousands, except per share data) (Unaudited) Three Months Three Months Ended Ended Six Months Ended March 31, December 31, March 31, ------------------ ----------------- ------------------ 2007 2006 2007 2006 2007 2006 --------- ------- -------- ------- --------- ------- Non-GAAP Net Income (Loss) Reconciliation GAAP net income (loss) $ (15,523) $ 2,522 $ (7,200) $ 3,363 $ (22,723) $ 5,885 Stock-based employee compensation expense 656 1,017 400 985 1,056 2,002 Restructuring charge (benefit) 1,017 (32) 446 62 1,463 30 Amortization of intangible assets 372 373 373 372 745 745 Loss (income) from discontinued operations -- (334) -- 680 -- 346 Income tax effect of non-GAAP adjustments -- 6 -- (10) -- (4) --------- ------- -------- ------- --------- ------- Non-GAAP net income (loss) $ (13,478) $ 3,552 $ (5,981) $ 5,452 $ (19,459) $ 9,004 ========= ======= ======== ======= ========= ======= Non-GAAP Net Income (Loss) Per Diluted Share Reconciliation For All Non-GAAP Items GAAP net income (loss) per share - diluted $ (0.94) $ 0.15 $ (0.43) $ 0.20 $ (1.37) $ 0.34 Stock-based employee compensation expense 0.04 0.06 0.02 0.06 0.06 0.12 Restructuring charge (benefit) 0.06 (0.00) 0.03 0.00 0.09 0.00 Amortization of intangible assets 0.02 0.02 0.02 0.02 0.04 0.04 Loss (income) from discontinued operations -- (0.02) -- 0.04 -- 0.02 Income tax effect of non-GAAP adjustments -- 0.00 -- (0.00) -- (0.00) --------- ------- -------- ------- --------- ------- Non-GAAP net income (loss) - diluted $ (0.81) $ 0.21 $ (0.36) $ 0.32 $ (1.17) $ 0.53 ========= ======= ======== ======= ========= ======= Shares used in basic per shares calculation 16,591 17,018 16,590 16,946 16,590 17,011 ========= ======= ======== ======= ========= ======= Shares used in diluted per shares calculation 16,591 17,077 16,590 17,047 16,590 17,062 ========= ======= ======== ======= ========= =======
Contacts: Corporation: Photon Dynamics Michael Schradle (408) 360-3561 investor@photondynamics.com Investors and Media: Guerrant Associates Laura Guerrant (808) 882-1467 lguerrant@guerrantir.com