PHTN Photon Dynamics (MM)

SAN JOSE, Calif., May 1 /PRNewswire-FirstCall/ -- Photon Dynamics, Inc. (NASDAQ:PHTN) today reported financial results for the second quarter of fiscal year 2008, ended March 31, 2008. Revenue for the second quarter of fiscal 2008 was $45.1 million, compared to first quarter fiscal 2008 revenue of $16.2 million and second quarter of 2007 of $13.9 million. Net income for the second quarter was $3.9 million or $0.21 earnings per diluted share, compared to first quarter net loss of $8.2 million or $0.46 loss per share and a loss of $15.7 million or $0.95 loss per share for the second quarter a year ago. Net income for the second quarter of fiscal 2008 reflects a net of $0.3 million in charges related to the following items: -- Stock-based employee compensation expense of $0.5 million -- Recovery of previously reserved inventory of $1.9 million -- Amortization of intangible assets of $0.9 million -- Restatement-related expenses of $0.9 million Second quarter non-GAAP net income was $4.2 million or $0.23 earnings per diluted share, compared to first quarter non-GAAP net loss of $5.7 million or $0.31 loss per share and non-GAAP loss of $10.9 million or $0.66 loss per share for the second quarter a year ago. A reconciliation of these non-GAAP measures is provided after the GAAP financial statements below. Bookings for the second quarter of fiscal 2008 reached $80.0 million, and the Company posted a shippable backlog of $125.6 million at the end of March 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 $65.2 million as of March 31, 2008. Jeff Hawthorne, president and chief executive officer, commented, "Our second consecutive quarter of record bookings and our return to profitability demonstrate the execution of our strategic initiatives to enhance our competitiveness and drive to sustained profitability. With steady implementation of our strategic initiatives and with the shippable backlog of $125.6 million at the end of March, we are solidly poised to capitalize on the current growth cycle. We remain sharply focused on enhancing our profitability through a cycle. I appreciate all employees for their relentless hard work and dedication which facilitated our business wins." Company Projections for Fiscal Year 2008 Third Quarter The Company estimates revenue for the third quarter of fiscal 2008 to be between $41.0 and $45.0 million, with earnings per diluted share between $0.20 and $0.24 on a GAAP basis. 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), gain or loss on sale of fixed assets, amortization of intangible assets, and restatement-related expenses. 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. Second Quarter Earnings Conference Call The Company will host a quarterly conference call today at 4:30 p.m. EDT. To access the conference call in the U.S. or Canada, dial (800) 240-4186. For all international calls, dial (303) 262-2075. A digital replay will be available on Photon Dynamics' website at http://www.photondynamics.comunder/ "Events and Webcasts" 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 2008 financial results. You may access the telephone replay by dialing (800) 405-2236 or (303) 590-3000 and entering access code 11112456. 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 and the Quarterly Report on Form 10-Q for the quarter ended December 31, 2007 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) March 31 December 31 September 30 2008 2007 2007 ASSETS Current assets: Cash and cash equivalents $44,344 $40,267 $41,170 Short-term investments 19,321 30,242 42,640 Accounts receivable, net 30,210 13,421 11,934 Inventories 18,081 18,112 13,292 Refundable customs obligations 676 560 560 Other current assets 4,870 3,795 3,661 Total current assets 117,502 106,397 113,257 Long-term investments 1,525 - 1,176 Land, property and equipment, net 8,637 10,166 10,583 Other assets 5,952 5,672 5,365 Intangible assets, net 9,240 10,132 11,023 Goodwill 6,857 6,857 6,857 Total assets $149,713 $139,224 $148,261 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $14,637 $10,128 $4,217 Warranty 3,583 2,675 3,217 Employee notes payable 2,733 2,781 - Customs obligations 690 1,433 4,114 Other current liabilities 10,084 7,402 9,874 Deferred gross margin 773 2,184 3,236 Total current liabilities 32,500 26,603 24,658 Long-term employee note payable 2,667 2,667 5,381 Other non-current liabilities - 10 38 Total non-current liabilities 2,667 2,677 5,419 Shareholders' equity: Common stock 301,222 300,635 300,290 Accumulated deficit (186,238) (190,091) (181,503) Accumulated other comprehensive income (438) (600) (603) Total shareholders' equity 114,546 109,944 118,184 Total liabilities and shareholders' equity $149,713 $139,224 $148,261 PHOTON DYNAMICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except Six Months Ended per share data) Quarter Ended March 31, 3/31/2008 12/31/2007 3/31/2007 2008 2007 Revenue $45,093 $16,176 $13,928 $61,269 $35,363 Cost of revenue 27,110 11,725 13,604 38,835 29,554 Gross margin 17,983 4,451 324 22,434 5,809 Operating expenses: Research and development 6,156 5,216 7,194 11,372 15,130 Selling, general and administrative 7,535 7,321 6,484 14,856 11,366 Restructuring charge - - 1,017 - 1,463 Impairment of property and equipment - - 2,834 - 2,834 Loss (gain) on sale of property and equipment 1 (50) - (49) - Acquired in-process research and development - - - - - Amortization of intangible assets 892 891 372 1,783 745 Total operating expenses 14,584 13,378 17,901 27,962 31,538 Income (loss) from operations 3,399 (8,927) (17,577) (5,528) (25,729) Interest income and other, net 618 845 1,996 1,463 3,010 Income (loss) from continuing operations before income taxes and discontinued operations 4,017 (8,082) (15,581) (4,065) (22,719) Provision for income taxes 163 141 105 304 206 Net income (loss) $3,854 $(8,223) $(15,686) $(4,369) $(22,925) Net income (loss) per share: Basic $0.22 $(0.46) $(0.95) $(0.25) $(1.38) Diluted $0.21 $(0.46) $(0.95) $(0.25) $(1.38) Weighted average number of shares: Basic 17,749 17,741 16,591 17,745 16,590 Diluted 18,561 17,741 16,591 17,745 16,590 Non-GAAP Net Income (Loss) Reconciliation For All Non-GAAP Items Six Months Ended Quarter Ended March 31, 3/31/2008 12/31/2007 3/31/2007 2008 2007 GAAP net income (loss) $3,854 $(8,223) $(15,686) $(4,369) $(22,925) Stock-based employee compensation expense 509 299 593 853 1,006 Restructuring charge - - 1,017 - 1,463 Impairment of property and equipment - - 2,834 - 2,834 Loss (gain) on sale of property and equipment 1 (50) - (49) - Recovery of previously reserved inventory (1,906) - - - - Amortization of intangible assets 892 891 372 1,783 745 Restatement related expenses 868 1,432 - 2,300 - Non-GAAP net income (loss) per share $4,218 $(5,651) $(10,870) $518 $(16,877) Non-GAAP Net Income (Loss) Per Diluted Share Reconciliation For All Non-GAAP Items GAAP net income (loss) per share - diluted $0.21 $(0.46) $(0.95) $(0.24) $(1.38) Stock-based employee compensation expense 0.03 0.02 0.04 0.05 0.06 Restructuring charge - - 0.06 - 0.09 Impairment of property and equipment - - 0.17 - 0.17 Loss (gain) on sale of property and equipment 0.00 (0.00) - (0.00) - Recovery of previously reserved inventory (0.10) - - - - Amortization of intangible assets 0.05 0.05 0.02 0.10 0.04 Restatement related expenses 0.04 0.08 - 0.12 - Non-GAAP net income (loss) per share $0.23 $(0.31) $(0.66) $0.03 $(1.02) Shares used in basic shares calculation 17,749 17,741 16,591 17,745 16,590 Shares used in diluted shares calculation 18,561 17,741 16,591 18,559 16,590 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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