Photronics Reports Second Quarter Results

Photronics, Inc. (Nasdaq:PLAB), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported fiscal 2008 second quarter results for the period ended April 27, 2008.

Sales for the quarter were $110.3 million compared to $109.6 million for the second quarter of fiscal year 2007. Semiconductor photomasks accounted for $80.0 million, or 72.5% of revenues during the second quarter of fiscal 2008, while flat panel display (FPD) photomasks accounted for $30.3 million, or 27.5% of revenues. During the second quarter of fiscal 2007, semiconductor photomasks accounted for 80.5% of revenues and FPD photomasks accounted for 19.5% of revenues.

Net loss for the second quarter of fiscal year 2008 amounted to $2.1 million, or $0.05 per diluted share compared to net income of $14.1 million, or $0.30 per diluted share for the second quarter of fiscal 2007. Net income for the second quarter of 2007 included a net benefit of $7.9 million, or $0.16 per diluted share, related to the resolution and settlement of United States and foreign tax liabilities associated with uncertain tax positions in prior years.

Sales for the first six months of 2008 were $213.5 million compared to $215.6 million for the first six months of fiscal 2007. Semiconductor photomasks accounted for $160.4 million, or 75.1% of revenues during the first six months of fiscal 2008, while FPD photomasks accounted for $53.1 million, or 24.9% of revenues. Year-over-year, semiconductor photomask revenues decreased 7.7%, while FPD photomask revenues increased 27.3%.

Net loss for the first six months of fiscal 2008 amounted to $5.4 million, or $0.13 per diluted share, compared to the prior year's first six months net income of $21.9 million, or $0.47 per diluted share.

Michael J. Luttati, Chief Executive Officer, commented, "Results for the quarter were in line with our projections. Flat panel sales were up considerably and marked a record quarter for the Company. As planned, we began revenue generating shipments from the U.S. NanoFab, just 18 months after breaking ground at the site. We continue to be pleased with the execution progress we are making against our strategic plans and expect continued improvements in our operational and financial performance through the remainder of the year. "

A conference call with investors and the media to discuss these results can be accessed by logging onto Photronics' web site atwww.photronics.com, then clicking on the "Conference Calls" button in the top right corner of the home page. The call is scheduled for 8:30 a.m. Eastern Time on Wednesday, May 14thand will be archived for instant replay access until the Company reports its fiscal third quarter results after the market closes on Wednesday, August 13, 2008. The live call dial-in number is 719-325-4930.

Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components. They are produced in accordance with product designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed atwww.photronics.com.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Photronics, Inc. and its subsidiaries (the Company). The forward-looking statements contained in this press release and other parts of Photronics' web site involve risks and uncertainties that may affect the Company's operations, markets, products, services, prices, and other factors as discussed in filings with the U.S. Securities and Exchange Commission (SEC). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements.

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Six Months Ended

April 27,

April 29,

April 27,

April 29,

2008

2007

2008

2007

Net sales

$ 110,330

$ 109,626

$ 213,545

$ 215,607 

Costs and expenses:

Cost of sales

(90,056)

(83,433)

(172,675)

(159,749)

Selling, general and administrative

(13,575)

(14,442)

(29,878)

(30,883)

Research and development

(4,613)

(4,324)

(8,851)

(9,044)

Gain on sale of facility

-

-

-

2,254

Operating income

2,086

7,427

2,141

18,185

Other income (expense), net

(3,196)

430

(3,764)

145

Income (loss) before income taxes and minority interest

(1,110)

7,857

(1,623)

18,330

Income tax benefit (provision)

(932)

6,400

(2,804)

5,088

Income (loss) before minority interest

(2,042)

14,257

(4,427)

23,418

Minority interest

(27)

(191)

(982)

(1,495)

Net income (loss)

$ (2,069) 

$ 14,066

$ (5,409)

$ 21,923

Earnings (loss) per share:

Basic

$ (0.05)

$ 0.34

$ (0.13)

$ 0.53

Diluted

$ (0.05)

$ 0.30

$ (0.13)

$ 0.47

Weighted average number of common shares

outstanding:

Basic

41,638

41,513 

41,632

41,494

Diluted

41,638

51,399

41,632

51,380

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets 

(in thousands)

(Unaudited)

April 27,

October 28,

2008

2007

Assets

Current assets:

Cash, cash equivalents and short-term

investments of $2,494 in 2008 and $5,657 in 2007

$ 

69,597

$

151,706

Accounts receivable

79,034

68,248

Inventories

19,655

17,716

Other current assets

8,916

9,315

Total current assets

177,202

246,985

Property, plant and equipment, net

590,953

531,578

Goodwill

138,534

138,534

Investment in joint venture

70,506

67,900

Other intangibles, net

65,763

68,835

Other assets

5,848

5,948

$

1,048,806

$

1,059,780

Liabilities and Shareholders' Equity

Current liabilities:

Current portion of long-term borrowings

$

17,523

$

4,482

Accounts payable and accrued liabilities

117,418

145,897

Total current liabilities

134,941

150,379 

Long-term borrowings 

204,938

191,253

Deferred income taxes and other liabilities

14,034

14,399

Minority interest

53,362

49,465

Shareholders' equity

641,531

654,284

$

1,048,806

$

1,059,780

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six Months Ended

April 27,

April 29, 

2008

2007

Cash flows from operating activities:

Net income (loss)

$

(5,409

)

$

21,923

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

51,280

47,840

Gain on sale of facility

-

(2,254

)

Minority interest in income of consolidated subsidiaries

982

1,495

Changes in assets and liabilities and other

(11,750

) 

2,541

Net cash provided by operating activities

35,103

71,545

Cash flows from investing activities: 

Purchases of property, plant and equipment

(78,067

)

(37,346

)

Purchases of short-term investments and other

(306

)

-

Proceeds from sales of investments and other

3,487

48,507

Proceeds from sale of facility and other

65

5,011

Investment in joint venture

(2,598

)

-

Net cash provided by (used in) investing activities

(77,419

)

16,172

Cash flows from financing activities:

Repayments of long-term borrowings

(168,991

)

(87,087

)

Proceeds from long-term borrowings

132,140

3,369

Proceeds from issuance of common stock

-

552

Other

(498

)

-

Net cash used in financing activities

(37,349

)

(83,166

)

Effect of exchange rate changes on cash

719

(2,186

)

Net increase (decrease) in cash and cash equivalents

(78,946

)

2,365

Cash and cash equivalents, beginning of period

146,049 

129,425

Cash and cash equivalents, end of period

$ 

67,103

$

131,790

Supplemental disclosure of cash flow information:

Change in accrual for purchases of property, plant and equipment

$

(25,991

)

$

(702 

)

Capital lease obligation for purchases of property, plant and equipment

$ 

61,662

$

-