PHTN Photon Dynamics (MM)

SAN JOSE, Calif., July 31 /PRNewswire-FirstCall/ -- Photon Dynamics, Inc. (NASDAQ:PHTN) today reported financial results for the third quarter of fiscal year 2008, ended June 30, 2008. Revenue for the third quarter of fiscal 2008 was $46.1 million, compared to second quarter of fiscal 2008 revenue of $45.1 million and third quarter of fiscal 2007 revenue of $14.4 million. Net income for the third quarter was $3.9 million or $0.21 earnings per diluted share, compared to second quarter net income of $3.9 million or $0.21 earnings per share and a net loss of $8.7 million or $0.52 loss per share for the third quarter a year ago. Net income for the third quarter of fiscal 2008 reflects net charges of $2.5 million related to the following items: -- Stock-based employee compensation expense of $1.1 million -- Acquisition related charges of $1.6 million -- Recovery of previously reserved inventory of $1.1 million -- Amortization of intangible assets of $0.9 million Third quarter non-GAAP net income was $6.4 million or $0.34 earnings per diluted share, compared to second quarter non-GAAP net income of $4.2 million or $0.23 earnings per diluted share and non-GAAP loss of $8.1 million or $0.49 loss per share for the third quarter a year ago. A reconciliation of these non-GAAP measures is provided after the GAAP financial statements below. Bookings for the third quarter of fiscal 2008 reached $105.0 million, and the Company posted a shippable backlog of $170.5 million at the end of June 2008. 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 Company's cash, cash equivalents, short-term and long term investments were $71.8 million as of June 30, 2008. "Photon Dynamics' results for the third fiscal quarter reflect the superb execution of our financial and operational initiatives as well as healthier than expected market conditions in the second half of 2008," said Jeff Hawthorne, president and chief executive officer. "While the revenue grew 2%, our net income on a non-GAAP basis increased by 50% sequentially. As exemplified in our third consecutive record bookings of $105 million, our continuous product innovation, dedicated customer support, and enhanced business efficiency positioned us exceptionally well to benefit from the near term strength in the LCD equipment market. We firmly believe in the long term growth prospects for the LCD market and our capability of capitalizing on that growth. Photon Dynamics remains fully devoted to meeting our customer commitments and keenly focused on fulfilling the customers' delivery requirements." On June 26, Photon Dynamics, Inc. and Orbotech Ltd. announced the signing of a definitive agreement for Orbotech to acquire Photon Dynamics. The transaction is subject to customary conditions to closing, including approval by Photon Dynamics' shareholders and requisite regulatory approvals, and is expected to close during the second half of 2008. Given the pending transaction, the Company has suspended the historic practice of providing the Company projection for the coming quarter. Information Regarding Non-GAAP Financial Measures Photon Dynamics provides non-GAAP net income and earnings per share data in addition to 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 or loss and non-GAAP earnings per diluted share exclude the effect of SFAS 123 (R), acquisition related charges, recovery of previously reserved inventory, and amortization of intangible assets. Management believes that these non-GAAP financial measures can enhance the comparability of historical results, and as a result uses these measures in making financial, operating and planning decisions and in evaluating the Company's performance. About Photon Dynamics, Inc. Photon Dynamics, Inc. (NASDAQ:PHTN) is a global supplier utilizing advanced machine vision technology for market leading Liquid Crystal Display (LCD) flat panel display test and repair systems and for high performance digital imaging systems for defense, surveillance, industrial inspection and medical imaging applications. For more information about Photon Dynamics, visit its website at http://www.photondynamics.com/. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as PDI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe our business strategy, outlook, objectives, projections, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are based on current expectations as of the date of this press release and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include but are not limited to: cancellations or rescheduling of backlog which could cause revenue to fail to meet expectations; our continued ability to sustain profitability; competitive and growth trends in the overall flat panel market; and those risks and uncertainties described in 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' Annual Report on Form 10-K for the year ended September 30, 2007 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 as filed with the Securities and Exchange Commission. As a result, actual results may differ substantially from expectations. 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. CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) June 30, March 31, September 30, 2008 2008 2007 ASSETS Current assets: Cash and cash equivalents $60,672 $44,344 $41,170 Short-term investments 10,156 19,321 42,640 Accounts receivable, net 36,894 30,210 11,934 Inventories 21,409 18,081 13,292 Refundable customs obligations 632 676 560 Other current assets 5,066 4,870 3,661 Total current assets 134,829 117,502 113,257 Long-term investments 1,000 1,525 1,176 Land, property and equipment, net 9,725 8,637 10,583 Other assets 6,174 5,952 5,365 Intangible assets, net 8,348 9,240 11,023 Goodwill 6,857 6,857 6,857 Total assets $166,933 $149,713 $148,261 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $22,112 $14,637 $4,217 Warranty 5,824 3,583 3,217 Employee notes payable 2,733 2,733 - Customs obligations 438 690 4,114 Other current liabilities 11,963 10,084 9,874 Deferred gross margin 1,699 773 3,236 Total current liabilities 44,769 32,500 24,658 Non-current liabilities: Long-term employee note payable 2,667 2,667 5,381 Other non-current liabilities - - 38 Total non-current liabilities 2,667 2,667 5,419 Shareholders' equity: Common stock 302,413 301,222 300,290 Accumulated deficit (182,352) (186,238) (181,503) Accumulated other comprehensive income (563) (438) (603) Total shareholders' equity 119,498 114,546 118,184 Total liabilities and shareholders' equity $166,933 $149,713 $148,261 PHOTON DYNAMICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except per share data) Nine Months Ended Three Months Ended June 30, 6/30/2008 3/31/2008 6/30/2007 2008 2007 Revenue $46,121 $45,093 $14,430 $107,390 $49,793 Cost of revenue 24,986 27,110 11,215 63,821 40,769 Gross margin 21,135 17,983 3,215 43,570 9,024 Operating expenses: Research and development 7,309 6,156 6,213 18,681 21,343 Selling, general and administrative 9,216 7,535 5,831 24,071 17,197 Restructuring charge (benefit) - - (95) - 1,368 Impairment of property and equipment - - - - 2,834 Loss (gain) on sale of property and equipment - 1 (0) (49) (0) Amortization of intangible assets 892 892 254 2,675 999 Total operating expenses 17,417 14,584 12,203 45,378 43,741 Income (loss) from operations 3,719 3,399 (8,988) (1,809) (34,717) Interest income and other, net 423 618 327 1,885 3,337 Income (loss) before income taxes 4,141 4,018 (8,661) 77 (31,380) Provision for income taxes 255 163 72 560 278 Net income (loss) $3,886 $3,854 $(8,733) $(483) $(31,658) Net income (loss) per share: Basic $0.22 $0.22 $(0.52) $(0.03) $(1.91) Diluted $0.21 $0.21 $(0.52) $(0.03) $(1.91) Weighted average number of shares: Basic 17,786 17,749 16,635 17,759 16,605 Diluted 18,624 18,561 16,635 17,759 16,605 Non-GAAP Net Income (Loss) Reconciliation For All Non-GAAP Items (In thousands, except per share data) Nine Months Ended Three Months Ended June 30, 6/30/2008 3/31/2008 6/30/2007 2008 2007 GAAP net income (loss) $3,886 $3,854 $(8,733) $(483) $(31,658) Stock-based employee compensation expense 1,060 509 425 1,982 1,513 Restructuring charge - - (95) - 1,368 Acquisition related charges 1,631 - - 1,631 - Impairment of property and equipment - - - - 2,834 Loss (gain) on sale of property and equipment - 1 - (49) (0) Recovery of previously reserved inventory (1,105) (1,906) - (3,011) - Amortization of intangible assets 892 892 254 2,675 999 Restatement related expenses - 868 - 2,300 - Non-GAAP net income (loss) per share $6,364 $4,218 $(8,149) $5,046 $(24,944) Non-GAAP Net Income (Loss) Per Diluted Share Reconciliation For All Non-GAAP Items GAAP net income (loss) per share - diluted $0.21 $0.21 $(0.52) $(0.03) $(1.91) Stock-based employee compensation expense 0.06 0.03 0.03 0.11 0.09 Restructuring charge - - (0.01) - 0.08 Acquisition related charges 0.09 - - 0.09 - Impairment of property and equipment - - - - 0.17 Loss (gain) on sale of property and equipment - 0.00 - (0.00) (0.00) Recovery of previously reserved inventory (0.06) (0.10) - (0.17) - Amortization of intangible assets 0.05 0.05 0.02 0.14 0.06 Restatement related expenses - 0.04 - 0.12 - Non-GAAP net income (loss) per share - diluted $0.34 $0.23 $(0.49) $0.26 $(1.50) Shares used in basic shares calculation 17,786 17,749 16,635 17,759 16,605 Shares used in diluted shares calculation 18,624 18,561 16,635 18,594 16,605 DATASOURCE: Photon Dynamics, Inc. CONTACT: So-Yeon Jeong, Vice President, Investor Relations and Marketing Communications of Photon Dynamics, Inc., +1-408-360-3084, Web site: http://www.photondynamics.com/

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