AGM 2021

Mar 11, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the Photronics twenty twenty one Annual Shareholders Meeting. Participants at this time, all participants' lines are in listen only. I would now like to hand the conference over to your speaker today, Mr. Dino Macriochsys. Thank you. Please go ahead. Will the meeting please come to order? Good morning. I'm Dina Marquecostas, Chairman of the Board. I wish to welcome all of you to the twenty twenty one Annual Meeting of shareholders of Ultronix. We're excited to be hosting a virtual shareholders meeting, which allows to be more inclusive and reach a greater number of our stockholders. We have a staff who is attending via via the web portal. As is our custom, we'll contact the business portion of our meeting first and answer questions at the end of the meeting. So we may not be able to answer every question. We'll do our best to provide a response to as many as possible. In keeping with the digital approach to this year's meeting, it is now 08:30 Eastern Standard Time on March 11, and the meeting is official call to order. I would like now to turn the meeting over to our chief executive officer, Peter Koehler. Thank you. Thank you, Dino. Hello, and welcome, everyone. Twenty twenty was a challenging year with the pandemic and the resolving lockdowns across the globe, coupled with the trade tension between us and China causing supply chain disruptions. Despite these challenges, we performed well with growth across most of our markets. Revenue was $609,700,000 in 2020, up 11% from 2019 and the third consecutive year of record revenue. We achieved growth in IC and FPD with FPT achieving record revenue for the second consecutive year. IC revenue improved 3% in 2020 to $418,400,000 as growth in the market for IC based on mainstream nodes was slightly offset by softness in the market for high end ICs. The growth in mainstream was driven primarily by strong foundry demand in Asia, while high end weakened as strong logic was offset by memory declines. Demand from customers in China was particularly strong, improving 33% year over year and reaching record levels, representing 22% of our total IC revenue. FAD revenue was $191,300,000 a strong high end demand with an offset of decline in mainstream. The primary driver of the increase was demand for mobile applications, including both active matrix, organic light emitting diode, known as AMOLED, and low temperature polysilicon, known as LTPS display technologies. These screen types are becoming more popular for mobile applications and we anticipate demand growth to continue. We also saw significant growth in generation 10.5 and greater form factor for ultra large liquid crystal diode displays as that size is ramping production at our new facility at Hefei, Plant. We ended the year with a cash balance of $278,700,000 up $72,100,000 from 2019. Cash generated from operating activities for the year was $143,000,000 more than double the amount in 2019. I would like to thank all our employees for your contributions to our success and thanks to all our shareholders for your continued support. We look forward to updating you on our progress throughout 2021. I'll now turn the meeting over to our Secretary. Thank you, Peter. I'd like to introduce the directors for nomination, Walter M. Federowitz. Walter Federowitz has been a private investor and consultant since August of nineteen ninety seven. Mr. Federowitz brings to the Board of Directors substantial experience in analyzing and forecasting economic conditions both domestically and internationally. Through his service on the boards of other companies, he has gained extensive experience in leadership, risk management, and corporate governance matters. Mr. Federowitz is Chairman of the Compensation Committee, Vice Chairman of the Audit Committee, and Vice Chairman of the Nominating Committee. Peter Kernan joined Photronics in 02/2008 as Senior Vice President, US and Europe. Doctor. Kernan became Chief Executive Officer in May of twenty fifteen after having been named President in 2013. Prior to joining Photronics, Doctor. Kurlin, a twenty five year veteran of the photomask and semiconductor industries, held several senior leadership positions of increasing responsibility. Doctor. Kurlin was Vice President of Business Development at Entegris, a developer, manufacturer and supplier of liquid and gas delivery systems, components and consumables used in the semiconductor manufacturing process. Chairman and Chief Executive Officer of DuPont Photomath and Group Vice President of ATMI, a supplier of ultra high purity materials and services used in the manufacture of semiconductors. Doctor. Curlin was also Executive Chair of the privately held firm Acreon, a provider of service preparation solutions to the semiconductor and electronics industry. Doctor. Curlin was Executive Chair of Acreon from 02/2007 to February. Doctor. Curlin brings leadership, strategic direction, extensive business experience and a wealth of knowledge of the photomask and semiconductor industry to the Board. Daniel Lau is currently serving as Senior Advisor of Asia Pacific for Lam Research Corporation. He was previously Chairman of Asia Pacific for 2017 until his retirement from that role in February of twenty twenty. As Chairman, Mr. Lyle was responsible for operations in a rapidly growing region. Prior to that, he served as Group Vice President of Asia Pacific Operations from 1997 until February, at which time he was promoted to President of APAC Operations. He started at the company in 1993 as General Manager of Taiwan, China, and Southeast Asia Operations. Prior to joining Lam, Mr. Lau held various engineering roles at Integrated Device Technology Inc, acquired by Renaissance Electronics Corporation in 2019 and Intel Corporation. In addition to his extensive experience working in the semiconductor industry, Mr. Lyle was also a member of the Board of Directors for Amcor Technology. He received a MS degree in Electrical Engineering and Applied Physics from Case Western Reserve University in Cleveland, Ohio and a BS degree from National Chengkong University in Taiwan. Mr. Lau brings a wealth of industry experience, especially in international operations and technology development that will complement our current board structure and expertise. Photonics has made a significant commitment to the semiconductor industry in Asia, and Mr. Lyle's background and experience will be beneficial to us as we continue to grow and invest in this region. Konstantin Makrokostis is Chairman of the Board. Mr. Makrokostis is also Founder of the company. Mr. Makrokostis was Executive Chairman of the company until January 2038. Mr. Makrokostis previously served as Chief Executive Officer to the company on three different occasions, from 1974 until August of nineteen ninety seven, from February 2004 to February, and from April 2009 until May of twenty fifteen. Mr. Microkostis is also a former director of RagingWire Data Centers, Inc. Mr. Makrokastis is the father of George Makrokastis, a founder of the company. Mr. Makrokastis's knowledge of the company and its operations as well as the industry is invaluable to the Board of Directors in evaluating and directing the company's future. Through his long service to the company and his vast experience in the photomask industry, he has developed extensive knowledge in the areas of leadership, safety, risk oversight, management, and corporate governance, each of which provides great value to the Board of Directors. Mr. Makrokastis is a member of the Cybersecurity Committee of the Board. George Makrokastis is an investor and entrepreneur. He was founder, chairman, and CEO of RagingWire Data Centers, a provider of mission critical data center collocation facilities, which is where the cloud is. Mr. Microcostis guided the company through an 80% sale to NTT of Japan in 2014 and completed the sale in 2018. Mr. Microcostis has twenty nine years of technical business management experience in business operations and information technology. From 02/2006, Mr. Microcostis has served as the Director of the Jane Goodall Institute, a nonprofit organization. Previously, he was a Senior Vice President at Photonics, where he was responsible for all aspects of the company's IT infrastructure. Mr. Microcostis also serves as a board member of the Microcostis Family Foundation, a nonprofit organization that funds philanthropic educational and environmental causes. Mr. Makrokastis brings industry risk management leadership and business experience to the board. Mr. Makrokastis is Chairman of the Cybersecurity Committee. Mary Paladino is a certified public accountant with over twenty five years of financial accounting and auditing experience. Ms. Palladino is currently a partner she was the Audit and Access Services Practice Leader for the firm's White Plains, New York location. Prior to joining this firm in 02/2008, she held various leadership roles in the auditing group of Delight and Touche LLP and BDO Seedman LLP. Ms. Palladino brings broad experience in corporate finance and is highly experienced in the field of public accounting and internal control, both of which contribute to her effective service on the Board of Directors of the company. Mitch Tyson is an independent business strategy and clean energy consultant, serves on multiple industry government and corporate boards of directors. He's also an adjunct professor at the Brandeis International Business School, managing partner at the Clean Energy Venture Group, Venture Partner in the Clean Energy Venture Fund, Co Founder and Former Chair of the Northeast Clean Energy Council, Chair of the Venture Cafe Foundation, Executive Residence and Board Member of the Greentown Lab. He also serves on a number of corporate boards and mentors numerous startups. Previously, Mr. Tyson served as the Chief Executive Officer of PRI Automation, a publicly traded corporation that supplied automation systems including hardware, software and services to the semiconductor industry. From 1987 to 02/2002, he held positions of increasing management responsibility and helped transform PRI Automation from a small robotics manufacturer to the world's leading supplier of semiconductor fab automation systems. Prior to joining PRI Automation, Mr. Tyson worked at GCA Corporation from 1985 to 1987 as Director of Product Management and served as Science Advisor and Legislative Assistant to the late US Senator Paul Tungsus from 1979 to 1985. Mr. Tyson is Chairman of the nominating committee and a member of the Audit Committee of the company. Mr. Tyson brings leadership and extensive business experience as well as finance experience to the Board. I also wanted to add that Mary Pelagino is Chairman of the Audit Committee. I apologize for missing that. And she a member of the Compensation Committee. I'd also like to state that Santiago Fernandez and Kevin Burkhart of Delinquent Touche LLP, the independent accounts for the company, are also joining us today. We will now attend to the first formal part of the business as set forth in the notice of meeting. Afterwards, Mr. Zarnacki will report to you the results of the tabulation of the vote on matters before the meeting. After the vote is reported, we will be pleased to answer any questions you may have concerning the business of the company. Please remember to state your name if you ask any questions on the web. Only validated stockholders may ask questions in the designated field on the web portal. However, no one attending via the webcast or telephone is permitted to use any audio recording devices. I presented a meeting proof by affidavit that notice of the meeting has been duly given and that common stock of the company are present in person or by proxy at this meeting. As such, a quorum quorum is present for the transaction of business. The first item of business is to elect some of directors to serve for a term of one year. The nominations are open. Thank you, Peter. I nominate the following seven persons who are named in the proxy statement, Walter M. Federowitz, Peter S. Kerlin, Daniel Lau, Constantine Makrokoskas, George Makrokoskas, Mary Pelodino, and Mitch Tyson. If there are no other nominations, I will entertain a motion that nominations be closed. I move that the nominations for directors be closed. It's been moved and seconded that the nominations be closed. All those in favor of closing nominations say aye. Aye. Those opposed say no. The motion to close the nominations is carried. The second item of business is to ratify the selection of Deloitte and Tush as independent registered public accounting firm for the fiscal year ending 10/31/2021. The third item of business is to approve by non binding advisory vote the compensation of our named executive officers as described in the compensation discussion and analysis and the narrative disclosures as included in the proxy statement. The approval or disapproval of proposal three will not be binding on the company or the board of directors nor will it be construed as overruling a decision by the company or the board of directors. Neither the approval or disapproval of proposal three will create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties for the company or the board of directors. However, the company will consider the results of these advisory votes in making future decisions regarding the company's compensation policies and compensation of the company's named executive officers. I now declare the polls open. I now declare the polls closed. I will now request that Doug Zornicki report as to the tabulation of votes. Thank you, Rochelle. The report of the inspector states that a plurality of the shares have been voted in favor of the election of each of the nominees or directors named in the proxy statement. The report of the inspector also states that a majority of the shares present in person or by proxy have voted in favor of the ratification of the selection of Deloitte Touche LLP as independent registered public accounting firm for the fiscal year ending 10/31/2021. The report of the inspector states that a majority of the shares present in person or by proxy voted by nonbinding vote to approve the compensation of Photronics Inc. Named executive officers. Thank you, Doug. Accordingly, such persons are elected directors to serve for a term of one year and until their successors and officers are elected and qualified. The selection of Deloitte and Touche LLP as independent registered public registered accountants for the fiscal year ending 10/31/2021 has been ratified by non binding vote the compensation of our named executive office which has been approved. This now concludes the formal portion of our meeting. We would like to open things up for any shareholder questions or comments. Troy, are there any questions? There are no questions. If there are no further questions or further business, I will entertain a motion that the meeting be adjourned. You know, I move that the meeting be adjourned. I second the motion. The meeting is adjourned. Thank you. Excellent. Thank you all so very much.