Photon Dynamics Demonstrates Compliance with NASDAQ Listing Qualifications

January 26, 2008 by · Leave a Comment
Filed under: Americas, Business, Defense, Manufacturing 

SAN JOSE, Calif., Jan. 25  — Photon Dynamics, Inc. (Nasdaq: PHTN), a global supplier utilizing advanced digital imaging technology of Liquid Crystal Display (LCD) yield enhancement systems and high performance digital imaging systems for defense, surveillance, industrial inspection and medical imaging applications, today announced that the Nasdaq Listing Qualifications Panel notified Photon Dynamics (“the Company”) that the Company demonstrated compliance with all Nasdaq Marketplace Rules and the Panel determined to continue the listing of the Company’s securities on The Nasdaq Stock Market.Photon Dynamics reported financial results for its fourth quarter and fiscal year ended September 30, 2007. Revenue for the fourth quarter of fiscal 2007 was $24.5 million, compared to third quarter 2007 revenue of $14.4 million and $29.3 million reported for the same quarter a year ago. The net loss for the quarter was $3.4 million or $0.20 loss per share, compared to a net loss for the prior quarter of $8.7 million or $0.52 loss per share, and a restated net loss of $6.6 million or $0.39 loss per share for the same quarter a year ago.

Net loss for the fourth quarter of fiscal 2007 includes $3.7 million in charges, as follows:

    -- Equity based compensation expense of $0.5 million
    -- Loss on sales of fixed assets of $0.1 million
    -- Acquired in-process research and development of $1.1 million
    -- Amortization of intangible assets of $0.6 million
    -- Restatement related expenses of $1.4 million

Non-GAAP net income for the fourth quarter was $0.3 million or $0.02 earnings per diluted share, compared to non-GAAP net loss for the prior quarter of $5.6 million or $0.34 loss per share, and a non-GAAP net loss of $4.9 million or $0.29 loss per share for the same quarter a year ago. Non-GAAP adjustments are further detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.

Bookings for the fourth quarter of fiscal 2007 were $29 million, and the Company posted a backlog of $45 million at the end of September 2007. 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.

For fiscal year ended September 30, 2007, revenue was $74.3 million, compared to revenue of $172.9 million for the year ended September 30, 2006. Net loss for the year ended September 30, 2007 was $35.1 million and loss per share was $2.09, compared to restated net income of $2.0 million and $0.12 earnings per diluted share for the year ended September 30, 2006.

Net loss for the fiscal 2007 includes $12.7 million in charges, as follows:

    -- Write-down of excess inventory of $2.1 million due to order
       cancellation
    -- Equity based compensation expense of $2.0 million
    -- Restructuring charge of $1.4 million
    -- Impairment of fixed assets charge of $2.8 million
    -- Loss on sales of fixed assets of $0.1 million
    -- Acquired in-process research and development of $1.1 million
    -- Amortization of intangible assets of 1.7 million
    -- Restatement related expenses of $1.5 million

Non-GAAP net loss for fiscal 2007 was $22.4 million or $1.34 loss per share, compared to non-GAAP net income for the prior year of $7.6 million or $0.44 earnings per diluted share.

The Company’s cash, cash equivalents, short-term and long-term investments were $85 million as of September 30, 2007.

Company Projections for First Quarter Fiscal Year 2008

The Company estimates revenue for the first quarter of fiscal 2008 to be between $15.5 and $16.5 million with net loss per share of $0.51 to $0.47.

Amtower Litigation

On January 16, 2008, the Sixth District Court of Appeal for the State of California upheld the trial court’s judgment and award in favor of our Company and our former officers and affirmed the trial court award of approximately $445,000 in fees and costs and awarded additional costs and fees associated with the appeal.

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 or loss and non-GAAP earnings per diluted share exclude the effect of SFAS 123 ®, restructuring charge, Impairment of fixed assets, gain or loss on sale of fixed assets, write-down of excess inventory due to cancelled order, acquired in-process research and development, amortization of intangible assets, income (loss) from discontinued operations and restatement expenses. Because SFAS 123 ® is a material, non-cash item Photon Dynamics has also provided non-GAAP information excluding the impact of SFAS 123 ®. Management excludes the effect of SFAS 123 ® and other charges as indicated, because management does not believe that these charges are directly applicable to the core operating 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.

About Photon Dynamics, Inc.

Photon Dynamics, Inc. 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 (Nasdaq: PHTNNews), visit its website at http://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 financial results for the first quarter of fiscal 2008 are forward-looking statements. Certain statements in this press release are forward-looking statements. These forward-looking statements are based on current expectations on the date of this press release and involve a number of uncertainties and risks including but not limited 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 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.
                    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands, except           June 30,            September 30,
     share data)                      2007          2006           2007
                                                 As Restated(1)

            ASSETS
    Current assets:
      Cash and cash equivalents     $28,253         $47,935       $41,170
      Short-term investments         55,909          54,834        42,640
      Accounts receivable, net       18,927          29,341        11,934
      Inventories                    18,097          18,442        13,292
      Refundable customs obligations  4,082           3,157           560
      Other current assets            3,518           3,972         3,661
        Total current assets        128,786         157,681       113,257
    Long-term investments             4,147             787         1,176
    Land, property and
     equipment, net                  10,210          15,891        10,583
    Other assets                      4,826           4,542         5,365
    Intangible assets, net              717           1,716        11,023
    Goodwill                            153             153         6,857
        Total assets               $148,839        $180,770      $148,261

        LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable               $7,033         $ 7,257        $4,217
      Warranty                        4,691           8,058         3,217
      Employee notes payable             --             977            --
      Customs obligations            11,144           8,673         4,114
      Other current liabilities       9,679           8,967         9,874
      Deferred gross margin           6,603           7,454         3,236
        Total current liabilities    39,150          41,386        24,658
      Long-term employee note payable    --              --         5,381
    Other non-current liabilities        95             119            38
        Total non-current liabilities    95             119          5419
    Shareholders' equity:
      Common stock                  288,376         285,416       300,290
      Accumulated deficit          (178,088)       (146,431)     (181,503)
      Accumulated other
       comprehensive income (loss)     (693)            280          (603)
        Total shareholders' equity  109,595         139,265       118,184

        Total liabilities and
         shareholders' equity      $148,839        $180,770      $148,261

    (1) See Note 2, "Restatements of Consolidated Financial Statements and
        Company Findings" to in Notes Consolidated Financial Statements.

                            PHOTON DYNAMICS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except             Quarter Ended           Year Ended
      per share data)       9/30/2006  6/30/2007 9/30/2007  2006      2007
                               As          As                As
                            restated(1) restated(1)       restated(1)

    Revenue                 $29,259    $14,430   $24,474  $172,872   $74,267
    Cost of revenue          25,580     11,215    15,605   114,205    56,374
      Gross margin            3,679      3,215     8,869    58,667    17,893
    Operating expenses:
      Research and
       development            7,280      6,213     5,404    32,577    26,747
      Selling, general and
       administrative         3,784      5,831     5,879    24,506    23,076
      Restructuring charge       --        (95)       --        30     1,368
      Impairment of property
       and equipment             31         --        --        81     2,834
      Loss (gain) on sale
       of property and equipment 58         --        87        58        87
      Acquired in-process
       research and development  --         --     1,110        --     1,110
      Amortization of
       intangible assets        372        254       654     1,489     1,653
        Total operating
         expenses            11,525     12,203    13,134    58,741    56,875
    Loss from operations     (7,846)    (8,988)   (4,265)      (74)  (38,982)
    Interest income and
     other, net                 717        327       853     2,803     4,190
    Income (loss) from
     continuing operations
     before income taxes
     and discontinued
     operations              (7,129)    (8,661)   (3,412)    2,729   (34,792)
    Provision for income
     taxes                     (195)        72         3       561       280
    Income (loss) from
     continuing operations
     before discontinued
     operations               2,168    (35,072)   (6,934)   (8,733)   (3,415)
    Income (loss) from
     discontinued operations    346         --        --      (127)       --
      Net income (loss)     $(6,588)   $(8,733)  $(3,415)   $2,041  $(35,072)
    Income (loss) per share
     from continuing
     operations:
      Basic                  $(0.41)    $(0.52)   $(0.20)    $0.13    $(2.09)
      Diluted                $(0.41)    $(0.52)   $(0.20)    $0.13    $(2.09)
    Income (loss) per share
     from discontinued
     operations:
      Basic                   $0.02       $ --      $ --    $(0.01)     $ --
      Diluted                 $0.02       $ --      $ --    $(0.01)     $ --
    Net income (loss)
     per share:
      Basic                  $(0.39)    $(0.52)   $(0.20)    $0.12    $(2.09)
      Diluted                $(0.39)    $(0.52)   $(0.20)    $0.12    $(2.09)
    Weighted average number
     of shares:
      Basic                  16,849     16,635    17,434    16,978    16,814
      Diluted                16,849     16,635    17,434    17,011    16,814

    (1) See Note 2, "Restatements of Consolidated Financial Statements and
        Company Findings" to in Notes Consolidated Financial Statements.

     Non-GAAP Net Income (Loss) Reconciliation For All Non-GAAP Items

                                                              Year Ended
                                     Quarter Ended            September
    (In thousands, except   9/30/2006  6/30/2007 9/30/2007   2006    2007
     per share data)           As          As                 As
                            restated(1) restated(1)        restated(1)
    GAAP net income
     (loss)                   $(6,588)  $(8,733)  $(3,415) $2,041 $(35,072)
    Write-down of excess
     inventory due to order
     cancellation                         2,144                      2,144
    Stock-based employee
     compensation expense         929       507       460   3,985    1,973
    Restructuring charge           --        95        --      30    1,368
    Impairment of property
     and equipment                 31                  --      81    2,834
    Loss (gain) on sale
     of property and equipment     58                  87      58       87
    Acquired in-process
     research and development      --               1,110      --    1,110
    Amortization of intangible
     assets                       372       254       654   1,489    1,653
    Loss (income) from
     discountinued operations     346                  --    (127)      --
    Restatement related expense    --        88     1,416      --    1,504
    Non-GAAP net income        (4,852)   (5,645)      312   7,557  (22,399)

    Non-GAAP Net Income (Loss) Per Diluted Share Reconciliation
     For All Non-GAAP Items

    GAAP net income (loss)
     per share - diluted       $(0.39)   $(0.52)   $(0.20)  $0.12   $(2.09)
    Write-down of excess
     inventory due to
     order cancellation            --      0.13        --      --     0.13
    Stock-based employee
     compensation expense        0.06      0.03      0.03    0.23     0.12
    Restructuring charge           --      0.01        --    0.00     0.08
    Impairment of property
     and equipment               0.00        --        --    0.00     0.17
    Loss (gain) on sale of
     property and equipment      0.00        --      0.00    0.00     0.01
    Acquired in-process
     research and development      --        --      0.06      --     0.07
    Amortization of intangible
     assets                      0.02      0.02      0.04    0.09     0.10
    Loss (income) from
     discountinued operations    0.02        --        --   (0.01)      --
    Restatement related expense    --       0.0      0.08      --      0.1
    Non-GAAP net income (loss)
     per share - diluted       $(0.29)   $(0.34)    $0.02   $0.44   $(1.34)

    Shares used in basic
     shares calculation        16,849    16,635    17,434  16,978   16,814
    Shares used
     in diluted shares
     calculation               16,849    16,635    17,434  17,011   16,814



Source: Photon Dynamics, Inc.