SECURITES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended........April 30, 2001.........
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from..............to..............
Commission file number...0-15451...
...PHOTRONICS, INC...
(Exact name of registrant as specified in its charter)
...CONNECTICUT... ...06-0854886...
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
...1061 EAST INDIANTOWN ROAD, JUPITER, FL... ...33477...
(Address of principal executive offices) (Zip Code)
...(561) 745-1222...
(Registrant's telephone number, including area code)
...................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter 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 .....
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 June 5, 2001
COMMON STOCK, $.01 PAR VALUE 29,986,517 SHARES
PHOTRONICS, INC.
AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet
at April 30, 2001 (unaudited) and
October 31, 2000 3 - 4
Condensed Consolidated Statement of
Operations for the Three and Six Months
Ended April 30, 2001 (unaudited) and
April 30, 2000 (unaudited) 5
Condensed Consolidated Statement of
Cash Flows for the Six Months Ended
April 30, 2001 (unaudited) and
April 30, 2000 (unaudited) 6
Notes to Condensed Consolidated
Financial Statements (unaudited) 7 - 10
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 10 - 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
2
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PHOTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
APRIL 30, OCTOBER 31,
2001 2000
-------- --------
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 25,187 $ 38,182
Accounts receivable (less allowance
for doubtful accounts of $753
in 2001 and $881 in 2000) 69,590 64,019
Inventories 20,201 18,486
Deferred income taxes and
other current assets 24,425 17,906
-------- --------
Total current assets 139,403 138,593
Property, plant and equipment
(less accumulated depreciation of $241,465
in 2001 and $231,426 in 2000) 361,519 395,281
Intangible assets (less accumulated
amortization of $10,293 in 2001 and
$9,373 in 2000) 52,918 59,277
Investments and other assets 21,221 16,410
-------- --------
$575,061 $609,561
======== ========
See accompanying notes to condensed consolidated financial statements.
3
PHOTRONICS, INC. AND SUBISIDARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
APRIL 30, OCTOBER 31,
2001 2000
--------- ---------
(UNAUDITED)
Current liabilities:
Current portion of long-term debt $ 940 $ 849
Accounts payable 33,173 37,917
Accrued salaries and wages 5,114 5,264
Other accrued liabilities 20,777 7,539
--------- ---------
Total current liabilities 60,004 51,569
Long-term debt 168,602 202,797
Deferred income taxes and other liabilities 33,401 34,089
--------- ---------
Total liabilities 262,007 288,455
--------- ---------
Minority interest 29,093 27,126
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
2,000 shares authorized,
none issued and outstanding -- --
Common stock, $0.01 par value,
75,000 shares authorized,
29,967 shares issued and
outstanding in 2001 and 29,688
issued and outstanding in 2000 300 297
Additional paid-in capital 141,747 136,445
Retained earnings 159,457 167,246
Accumulated other comprehensive loss (17,543) (9,877)
Deferred compensation on restricted stock -- (131)
--------- ---------
Total shareholders' equity 283,961 293,980
--------- ---------
$ 575,061 $ 609,561
========= =========
See accompanying notes to condensed consolidated financial statements.
4
PHOTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 100,572 $ 76,360 $ 199,129 $ 148,945
Costs and expenses:
Cost of sales 64,235 51,132 127,464 101,467
Selling, general and administrative 13,137 10,688 26,611 21,428
Research and development 6,130 4,924 11,986 9,737
Consolidation, restructuring and
related charges 38,100 17,500 38,100 17,500
--------- --------- --------- ---------
Operating income (loss) (21,030) (7,884) (5,032) (1,187)
Other expenses, net (1,837) (205) (4,613) (1,384)
--------- --------- --------- ---------
Income (loss) before income taxes
and minority interest (22,867) (8,089) (9,645) (2,571)
Provision (benefit) for income taxes (8,200) (2,787) (4,500) (800)
--------- --------- --------- ---------
Income (loss) before minority interest (14,667) (5,302) (5,145) (1,771)
Minority interest in income of
consolidated subsidiary (1,524) -- (2,644) --
--------- --------- --------- ---------
Net income (loss) $ (16,191) $ (5,302) $ (7,789) $ (1,771)
========= ========= ========= =========
Earnings (loss) per share:
Basic $ (0.54) $ (0.19) $ (0.26) $ (0.06)
========= ========= ========= =========
Diluted $ (0.54) $ (0.19) $ (0.26) $ (0.06)
========= ========= ========= =========
Weighted average number of common shares outstanding:
Basic 29,908 28,249 29,811 28,062
========= ========= ========= =========
Diluted 29,908 28,249 29,811 28,062
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
5
PHOTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
--------------------
APRIL 30, APRIL 30,
2001 2000
-------- --------
Cash flows from operating activities:
Net loss $ (7,789) $ (1,771)
Adjustment to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 35,581 25,341
Deferred taxes and other (7,817) (4,992)
Consolidation, restructuring and related charges 38,100 17,500
Changes in assets and liabilities:
Accounts receivable (5,507) (1,072)
Inventories (1,654) 1,689
Other current assets 1,000 (5,714)
Accounts payable and accrued liabilities 8,055 (22,530)
-------- --------
Net cash provided by operating activities 59,969 8,451
-------- --------
Cash flows from investing activities:
Investment in photomask operations (12,689) (31,500)
Deposits on and purchases of property,
plant and equipment (28,886) (19,612)
Other 667 (938)
-------- --------
Net cash used in investing activities (40,908) (52,050)
-------- --------
Cash flows from financing activities:
Borrowings (repayments) of long term debt (34,016) 32,889
Proceeds from issuance of common stock 3,577 4,993
-------- --------
Net cash provided by (used in) financing activities (30,439) 37,882
-------- --------
Effect of exchange rate changes on cash flows (1,617) (1,714)
-------- --------
Net decrease in cash and cash equivalents (12,995) (7,431)
Cash and cash equivalents at beginning of period 38,182 23,115
Adjustment related to Align-Rite's net cash flows
from differences in fiscal reporting periods -- 90
-------- --------
Cash and cash equivalents at end of period $ 25,187 $ 15,774
======== ========
Cash paid during the period for:
Interest $ 5,435 $ 4,263
Income taxes $ 156 $ 909
See accompanying notes to condensed consolidated financial statements.
6
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED APRIL 30, 2001 AND 2000
(UNAUDITED)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with accounting principles generally accepted
in the United States 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 for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended April 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending October 31,
2001. Certain amounts in the Condensed Consolidated Financial Statements for
prior periods have been reclassified to conform to the current presentation. 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, 2000.
NOTE 2 - BUSINESS COMBINATIONS
ALIGN-RITE MERGER
On June 7, 2000, Photronics completed its merger with Align-Rite
International, Inc. ("Align-Rite"), hereinafter collectively referred to as the
Company. The merger constituted a tax-free reorganization and has been accounted
for as a pooling-of-interests. The Condensed Consolidated Financial Statements
for the three and six months ended April 30, 2001 and 2000 and the accompanying
notes thereto reflect the Company's financial position, results of operations
and cash flows as if Align-Rite had been a wholly-owned subsidiary of Photronics
for all periods presented. The financial statement balances of Align-Rite have
been reclassified to conform to Photronics' presentation.
ACQUISITION OF PSMC
During fiscal year 2000, the Company acquired a majority share of
Precision Semiconductor Mask Corporation (PSMC), a photomask manufacturer based
in Taiwan, for approximately $63.4 million. The acquisition was accounted for as
a purchase. The operating results of PSMC have been included in the Condensed
Consolidated Statement of Operations since June 20, 2000. Had the acquisition of
PSMC occurred at the beginning of fiscal 2000, the unaudited pro forma condensed
consolidated net sales for the three and six months ended April 30, 2000 would
have been $82.1 million and $158.7 million, respectively, and the pro forma net
loss and loss per diluted share for the three and six months ended April 30,
2000 would have been $7.6 million and $5.8 million, respectively, and $0.27 and
$0.21, respectively. In management's opinion, these unaudited pro forma amounts
are not necessarily indicative of what the actual combined results of operations
might have been if the acquisition of PSMC had been effective at the beginning
of the periods presented.
7
NOTE 3 - COMPREHENSIVE INCOME (LOSS)
The following table summarizes comprehensive income (loss) for the
three and six months ended April 30, 2001 and 2000:
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ---------------------
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2001 2000 2001 2000
--------- --------- --------- --------
Net loss $(16,191) $ (5,302) $ (7,789) $(1,771)
Other comprehensive loss:
Unrealized gains (losses) on investments (1,633) (88) (1,491) 2,953
Foreign currency translation adjustments (5,741) (297) (6,175) (3,104)
-------- -------- -------- --------
(7,374) (385) (7,666) (151)
-------- -------- -------- --------
$(23,565) $ (5,687) $(15,455) $(1,922)
======== ======== ======== ========
NOTE 4 - EARNINGS PER SHARE
Earnings per share ("EPS") amounts are calculated in accordance with
the provisions of SFAS No. 128. Basic EPS is based on the weighted average
number of common shares outstanding for the period, excluding any dilutive
common share equivalents. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted.
A reconciliation of basic and diluted EPS for the three and six months
ended April 30, 2001 and 2000, respectively, is as follows (in thousands, except
per share amounts):
NET AVERAGE EARNINGS
INCOME SHARES (LOSS)
(LOSS) OUTSTANDING PER SHARE
------ ------------ ---------
THREE MONTHS
2001:
Basic and diluted (a) $(16,191) 29,908 $(0.54)
======== ====== ======
2000:
Basic and diluted (a) $ (5,302) 28,249 $(0.19)
======== ====== ======
SIX MONTHS
2001:
Basic and diluted (a) $ (7,789) 29,811 $(0.26)
======== ====== ======
2000:
Basic and diluted (a) $ (1,771) 28,062 $(0.06)
======== ====== ======
(a) The effect of the conversion of the convertible subordinated notes
and stock options for the three and six months ended April 30, 2001 and 2000 is
anti-dilutive.
8
NOTE 5 - CONSOLIDATION, RESTRUCTURING AND RELATED CHARGES
In April 2001, the Company announced a plan to consolidate ("the
consolidation plan") its global photomask manufacturing network in order to
increase capacity utilization and manufacturing efficiencies, as well as to
accelerate the expansion of its world-class technology development. The Company
initiated the consolidation plan as the final phase of its June 2000 merger with
Align-Rite. Total consolidation and related charges associated with this plan of
$38.1 million were recorded in the second quarter of 2001. Of the total charge,
$30.6 million related to the consolidation plan and $7.5 million related to the
impairment of intangible assets.
The significant components of the consolidation plan include the
closing of the former Align-Rite manufacturing facilities in Burbank,
California, Palm Bay, Florida and Heilbronn, Germany over the next twelve
months. The Company anticipates that the closing of these facilities will
maximize capacity utilization at its remaining facilities. In addition, the
Company will be relocating its Northern California operations to a new,
state-of-the-art manufacturing facility in the Silicon Valley region. As part of
the plan, the Company will reduce its work force by approximately 125 employees.
The consolidation charge of $30.6 million includes: $4.0 million of
cash charges for severance benefits for terminated employees that will be paid
during their entitlement periods; $4.5 million for facilities closings and lease
termination costs that will be expended over the projected lease terms; and
non-cash charges of $22.1 million that approximate the carrying value of fixed
assets that are primarily associated with the consolidation plan based upon
their expected disposition.
The charges also included $7.5 million that are related to the
impairment in value of associated intangible assets. It was determined during
the period that such assets no longer had any future economic benefit to the
Company because the anticipated undiscounted cumulative cash flows from these
assets were insufficient to support their carrying value.
NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives are reported in the Statement of Operations or as other
comprehensive income (loss) as a separate component of shareholders' equity,
depending on the use of the derivatives and whether they qualify for hedge
accounting. In order to qualify for hedge accounting, the derivative must be
highly effective in achieving offsetting changes in fair value or cash flows of
the hedged items during the term of the hedge. The Company adopted SFAS No. 133,
as amended by SFAS No. 138, in the first quarter of fiscal year 2001. The
adoption did not have a material impact on the Company's financial statements.
9
NOTE 7 - SUBSEQUENT EVENTS
On June 12, 2001, the Company's $125 million unsecured revolving credit
facility was amended in order to modify certain financial covenants and
definitions in connection with the consolidation plan. The Company is subject to
compliance with and maintenance of certain financial covenants and ratios set
forth in the credit facility, as amended.
In June 2001, the Company announced it had acquired additional shares
of PKL Co., Ltd. ("PKL"), an independent photomask supplier in Korea. The
Company now owns approximately 23% of PKL. As of April 30, 2001 the Company
owned approximately 14% of PKL.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
On June 7, 2000, Photronics, Inc. ("Photronics" or the "Company"),
completed its merger with Align-Rite International, Inc. ("Align-Rite"), an
independent publicly traded manufacturer of photomasks in the United States and
Europe. The transaction was accounted for as a pooling-of-interests. The
Condensed Consolidated Financial Statements, the accompanying notes and this
management discussion and analysis have been restated to reflect the Company's
financial results of operations and cash flows as if Align-Rite was a
consolidated wholly-owned subsidiary of the Company for all periods presented.
During fiscal year 2000, the Company acquired a majority share of
Precision Semiconductor Mask Corporation (PSMC), a photomask manufacturer based
in Taiwan, for approximately $63.4 million. The acquisition was accounted for as
a purchase. The operating results of PSMC have been included in the Condensed
Consolidated Statement of Operations since June 20, 2000.
In April 2001, the Company announced a plan to consolidate ("the
consolidation plan") its global photomask manufacturing network in order to
increase capacity utilization and manufacturing efficiencies, as well as to
accelerate the expansion of its world-class technology development. The Company
initiated the consolidation plan as the final phase of its June 2000 merger with
Align-Rite. Total consolidation and related charges associated with this plan of
$38.1 million were recorded in the second quarter of 2001. Of the total charge,
$30.6 million related to the consolidation plan and $7.5 million related to the
impairment of intangible assets.
The significant components of the consolidation plan include the
closing of the former Align-Rite manufacturing facilities in Burbank,
California, Palm Bay, Florida and Heilbronn, Germany over the next twelve
months. The Company anticipates that the closing of these facilities will
maximize capacity utilization at its remaining facilities. In addition, the
Company will be relocating its Northern California operations to a new,
state-of-the-art manufacturing facility in the Silicon Valley region. As part of
the plan, the Company will reduce its work force by approximately 125 employees.
The consolidation charge of $30.6 million includes: $4.0 million of
cash charges for severance benefits for terminated employees that will be paid
over their entitlement periods; $4.5 million for facilities closings and lease
termination costs that will be expended over the projected lease terms; and
non-
10
cash charges of $22.1 million that approximate the carrying value of fixed
assets that are primarily associated with the consolidation plan based upon
their expected disposition.
The charges also included $7.5 million that are related to the
impairment in value of associated intangible assets. It was determined during
the period that such assets no longer had any future economic benefit to the
Company because the anticipated undiscounted cumulative cash flows from these
assets were insufficient to support their carrying value.
During March 2000, the Company implemented a plan to consolidate its
mature products group in order to increase capacity utilization, manufacturing
efficiencies and customer service activities worldwide. Total restructuring and
related charges associated with this consolidation plan of $17.5 million were
recorded in the second quarter of fiscal 2000. Of the total charge, $9.1 million
related to restructuring and $8.4 million related to the impairment of
intangible assets.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED APRIL 30, 2001 VERSUS APRIL 30, 2000
The following tables represent selected financial information,
expressed as a percentage of net sales and pro forma earnings per diluted share,
respectively:
Three Months Ended Six Months Ended
--------------------- ---------------------
April 30, April 30, April 30, April 30,
2001 2000 2001 2000
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 63.9 67.0 64.0 68.1
-------- -------- -------- --------
Gross margin 36.1 33.0 36.0 31.9
Selling, general and
administrative expenses 13.0 14.0 13.4 14.4
Research and development
expenses 6.1 6.4 6.0 6.5
-------- -------- -------- --------
Operating income before
consolidation, restructuring
and related charges 17.0% 12.6% 16.6% 11.0%
======== ======== ======== ========
Pro forma earnings (loss) per diluted share:
Net income, excluding consolidation
restructuring and related
charges $ 0.32 $ 0.21 $ 0.60 $ 0.33
Impact of consolidation,
restructuring and related
charges (0.75) (0.34) (0.75) (0.34)
-------- -------- -------- --------
Net loss $ (0.43) $ (0.13) $ (0.15) $ (0.01)
======== ======== ======== ========
Net sales for the three and six months ended April 30, 2001 increased
31.7% to $100.6 million and 33.7% to $199.1 million, respectively, compared to
$76.4 million and $148.9 million for the corresponding prior year periods. The
increases for the three and six months ended April 30, 2001 were due to the
addition of the Company's new Taiwan operation, an increase in unit volumes,
11
market share gains and higher average selling prices resulting from an improved
mix of high-end technology products. International operations accounted for
39.9% and 38.0% of sales for the three and six months ended April 30, 2001
compared to 27.6% and 28.0% in the corresponding prior year periods.
Gross margins for the three and six months ended April 30, 2001
increased to 36.1% and 36.0%, respectively, compared to 33.0% and 31.9% for the
corresponding prior year periods. The gross margin increases were attributable
to higher utilization of our fixed equipment cost base, as well as a greater mix
of higher margin products.
Selling, general and administrative expenses increased 22.9% to $13.1
million and 24.2% to $26.6 million for the three and six months ended April 30,
2001, respectively, compared with $10.7 million and $21.4 million for the same
periods in the prior fiscal year. As a percentage of net sales, selling, general
and administrative expenses decreased to 13.0% and 13.4%, respectively, compared
with 14.0% and 14.4% for the same periods in the prior fiscal year. The higher
expenses for the three and six months ended April 30, 2001 were principally due
to costs associated with the Company's expansion, both domestically and
internationally, including costs incurred in Taiwan, and growth of the Company's
information technology infrastructure.
Research and development expenses increased 24.5% to $6.1 million and
23.1% to $12.0 million for the three and six months ended April 30, 2001,
respectively, compared with $4.9 million and $9.7 million for the same periods
in the prior fiscal year. As a percentage of net sales, research and development
expenses decreased to 6.1% and 6.0%, respectively, compared with 6.4% and 6.5%
for the same periods in the prior fiscal year. This increase in costs reflects
the continuing development efforts of advanced, sub-wavelength reticle
solutions, primarily in the United States, Taiwan and Next Generation
Lithography (NGL) applications.
Net other expenses of $1.8 million and $4.6 million for the three and
six months ended April 30, 2001, respectively, increased $1.6 million and $3.2
million, respectively, as a result of higher interest costs, principally
resulting from borrowings in connection with the PSMC acquisition. In addition,
other income for the three and six months ended April 30, 2000 included $3.6
million and $5.3 million, respectively, of investment income from the sales of
securities.
Minority interest for the three and six months ended April 30, 2001 was
$1.5 million and $2.6 million, respectively, and reflects the minority interest
in earnings of the Company's subsidiary in Taiwan.
Net loss for the three and six months ended April 30, 2001, increased
to $16.2 million and $7.8 million, respectively, or $0.54 and $0.26 per basic
and diluted share. These amounts compare to $5.3 million, or $0.19 per basic and
diluted share, and $1.8 million, or $0.06 per basic and diluted share, for the
corresponding prior year periods. Fiscal year 2001 includes the effect of the
consolidation and related charges amounting to $26.1 million after tax, or $0.75
per diluted share. Fiscal year 2000 includes the effect of the restructuring and
related charges amounting to $14.8 million after tax, or $0.34 per diluted
share.
12
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at April 30, 2001 was $79.4 million
compared to $87.0 million at October 31, 2000. The decrease in working capital
is due primarily to lower cash balances resulting from repayments of borrowings
under the Company's unsecured revolving credit line, together with higher
accounts payable balances. Cash and cash equivalents at April 30, 2001 were
$25.2 million compared to $38.2 million at October 31, 2000. Cash provided by
operating activities for the six months ended April 30, 2001 amounted to $60.0
million compared to $8.5 million in the corresponding prior year period. This
increase is primarily attributable to higher income in 2001 before depreciation,
amortization and restructuring charges and the net change in working capital
principally due to the timing of progress payments for capital equipment coming
due during the respective periods.
Cash used in investing activities of $40.9 million consisted
principally of capital equipment purchases and additional investments in Asian
photomask companies.
Cash used in financing activities of $30.4 million included net
repayments of borrowings of $34.0 million, partially offset by $3.6 million of
proceeds from the exercise of employee stock options.
On June 12, 2001, the Company's $125 million unsecured revolving credit
facility was amended in order to modify certain financial covenants and
definitions in connection with the consolidation plan. The Company is subject to
compliance with and maintenance of certain financial covenants and ratios set
forth in the credit facility, as amended. The Company had $36.8 million of
outstanding borrowings and $88.2 million available under the revolving credit
facility at April 30, 2001.
Photronics' commitments represent investments in additional
manufacturing capacity as well as advanced equipment for the production of
high-end, more complex photomasks. At April 30, 2001, Photronics had commitments
outstanding for capital expenditures of approximately $90 million. Additional
commitments for capital requirements are expected to be incurred during fiscal
2001. Photronics will continue to use its working capital and bank lines of
credit to finance its capital expenditures. Photronics believes that its
currently available resources, together with its capacity for substantial growth
and its access to other debt and equity financing sources, are sufficient to
satisfy its currently planned capital expenditures, as well as its anticipated
working capital requirements for the foreseeable future.
13
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives are reported in the statement of operations or as other
comprehensive income (loss) as a separate component of shareholders' equity,
depending on the use of the derivatives and whether they qualify for hedge
accounting. In order to qualify for hedge accounting, the derivative must be
highly effective in achieving offsetting changes in fair value or cash flows of
the hedged items during the term of the hedge. The Company adopted SFAS No. 133,
as amended by SFAS No. 138, in the first quarter of fiscal year 2001. The
adoption did not have a material impact on the Company's financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." SAB No. 101, as amended, is required to be adopted by the
Company no later than the fourth fiscal quarter of fiscal 2001. The Company's
adoption of SAB No. 101 is not expected to have a material impact on the
Company's consolidated financial position or results of operations.
FORWARD LOOKING INFORMATION
Certain statements in this report are considered "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All forward looking statements involve risks and uncertainties. For a
description of the factors that could cause the actual results of the Company to
be materially different from those projected, please review the Company's SEC
reports that detail these risks and uncertainties and the section captioned
"Forward Looking Information" contained in the Company's Annual Report on Form
10-K for the year ended October 31, 2000. Any forward looking statements should
be considered in light of these factors.
14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The matters set forth in this Item 4 were submitted
to a vote of security holders of the Company at an
Annual Meeting of Shareholders held on March 21,
2001.
(b) The following directors, constituting the entire
Board of Directors, were elected at the Annual
Meeting of Shareholders held on March 21, 2001. Also
indicated are the affirmative, negative and authority
withheld votes for each director.
AUTHORITY
FOR AGAINST WITHHELD
---------- ------- --------
Walter M. Fiederowicz 25,438,433 - 304,032
Joseph A. Fiorita, Jr. 25,438,093 - 304,372
James L. Mac Donald 25,470,498 - 271,967
Constantine S. Macricostas 25,431,010 - 311,455
Willem D. Maris 25,470,987 - 271,478
Michael J. Yomazzo 25,399,201 - 343,264
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibits Index.
(b) Reports on Form 8-K
During the quarter for which this report is filed,
the Company filed a Form 8-K dated May 3, 2001
reporting information under Item 5.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHOTRONICS, INC.
Registrant
By: /s/ ROBERT J. BOLLO
-------------------
Robert J. Bollo
Senior Vice President
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
DATE: JUNE 12, 2001
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EXHBITS INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Third Amendment Agreement dated as of June 12, 2001
among Photronics, Inc., the lenders party thereto,
the Chase Manhattan Bank, as Administrative Agent,
and The Bank of New York, as Documentation Agent.
16