Ladies and gentlemen, thank you for standing by. Welcome to the Photronics First Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded on Thursday, February 14, 2013. I would now like to turn the conference over to Pete Broadbent, Vice President, Investor Relations and Marketing. Please go ahead, Mr. Broadbent.

Thank you and good morning, everyone. My name is Pete Broadbent, Vice President, Investor Relations and Marketing of Photronics. We’d like to thank you for joining our first quarter 2013 conference call. Before we begin, I’d like to remind all participants about the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. And thus, any statement we make during this call, except for historical events, may be considered forward-looking and may be subject to certain risks and uncertainties that could cause actual events to differ materially from those projected, including uncertainties that may affect the company’s operations, market, pricing, competition, procurement, manufacturing efficiencies and other risks detailed from time to time in the company’s SEC reports. These statements will contain words such as believe, anticipate, expect or similar expressions. The call will be archived on our website, until we report our second quarter 2013 results. Joining us on the call today are Constantine Deno Macricostas, Chairman and Chief Executive Officer; Sean T. Smith, Senior Vice President and Chief Financial Officer; Dr. Christopher Progler, Vice President, Chief Technology Officer & Strategic Planning; and Dr. Peter Kirlin, Senior Vice President, U.S. and Europe. Deno will first provide a brief review of market conditions and our strategic direction. Sean will then provide a comprehensive review of Photronics’ first quarter performance. During Deno’s and Sean’s remarks, they will be referring to slides posted on our website under the Investor Relations link. Before I return the call over to Deno, I’d like to inform everyone that we will be hosting an Analyst/Investor Day on Wednesday, April 3, in New York City. And, now, I’ll turn the call over to Deno. Deno?

Thank you, Pete, and good morning, everyone. Please turn to slide three in our slide presentation. As anticipated, holiday shutdowns and soft market conditions impacted revenue in the first quarter. Given the softer environment, we were pleased to achieve sales of $99.8 million. This was at the high end of our guidance. On the bottom line, we delivered earnings of $0.04 per share, which exceeded our guidance. High-end IC sales declined sequentially on soft demand. Offsetting this, high-end flat panel display orders were especially strong at the end of the quarter. In total, our high-end sales were flat sequentially. Momentum for the high-end FPD orders built through the quarter, and high-end IC began stronger, as we exited the quarter. Management remained diligent on costs. We delivered gross and operating margins of 21.1% and 5.2%, respectively. EBIDTA was $26 million, and net cash improved $43 million. Looking forward, we’re optimistic about the short term and confident about the long term. Based on our customer sentiment and because general market conditions are improving, we expect sequential growth through the fiscal year. Long term, we see significant opportunities to grow our high-end business and gain market share. Many of our customers have aggressive roadmaps and are accelerating node transitions. We have an opportunity to capitalize on the high-end demand, which is building in the marketplace. As a result, we’re accelerating the delivery of two advanced lithography tools. As Sean will explain in greater detail, these orders were secured last year for delivery later in 2013. These high-end tools will now be delivered in the next two to three months. They will be strategically located in the U.S. and Asia to support our high-end customers. We pulled the e-beams in because we believe high-end demand will exceed supply. For this investment, we expect to have the strongest and most advanced high-end global merchant manufacturing footprint. Our results demonstrate that the high-end strategy we implemented few years ago is paying off. Prior to 2006, we were a fast follower in terms of technology development. As a result of our strategy, we’re now in position to be the technology leader in high-end merchant photomask production. Today, 35% of our top-line comes from sales of high-end photomasks. Long term, we believe our technology plan aligned close to our customer roadmaps will lead to accelerated high-end growth and continued market share. Before I turn the call over to Sean, I would like to thank the entire Photronics global organization for their efforts at the start of this year. Our team continues to build on our high-end sizing, cost management and customer service. And now, I’ll turn the call over to Sean. Sean?

Thanks Deno and good morning everyone. I’ll provide a brief analysis of our financial results for the first quarter of fiscal year 2013, review our balance sheet and cash flows, and then provide our outlook. Please refer to slide four for our GAAP to non-GAAP net income and EPS reconciliation as we review the first quarter. Slides five and six show our sequential IC and FPD revenue performance. First quarter revenue decreased by 4.2% sequentially to $99.8 million, as a result of the soft demand for IC photomask, including leading-edge. This soft demand for IC photomask was offset by increasing demand for high-end FPD applications. Revenues for IC and FPD photomasks – respectively for the first quarter. Breaking out sales geographically, 53% of total sales were from Asia, 28% from North America, and 9% from Europe. High-end global IC sales were $17.9 million, or 24% of total IC sales for the quarter. This represents a sequential decrease of $5.7 million. Advanced FPD sales were $17.4 million, a sequential increase of $5.7 million, or 49%. Total high-end sales for the quarter were $35.3 million, which equaled Q4 2012 total high-end. As a reminder, high-end IC revenues consist of revenue derived from semi designed at and below 45-nanometers. And high-end FPD revenues consist of revenue at and above G8, as well as AMOLED-based products. Now, let’s continue through the income statement. Gross margin for the first quarter was 21.1%, down 220 basis points sequentially as a result of the decreased sales. Selling, general and administrative expenses for the first quarter were $11.1 million, down sequentially by $300,000 or 3%. R&D expenses, which consist principally of continued development for our global advanced process technologies and qualifications at advanced nodes were $4.8 million, down approximately $400,000 sequentially. During the quarter, we generated operating income…

Thank you. (Operator Instructions) Our first question comes from Krishna Sankar with Bank of America. Thomas Yeh – Bank of America: This is Thomas Yeh calling in for Krish Sankar. Just wanted to get a little bit more color on the pickup in high-end IC orders you saw late in the quarter. IC revenue seems to have reached a new low during January Q, is it multiple customers you started seeing coming back? And should we expect to see IC revenues this quarter coming back to 4Q levels, or are you baking in a slower recovery than that?

I’ll start Thomas and maybe turn over to Peter or Chris. The quarter started slow, generally, for all of IC applications and we saw a pickup in January and we expect that to continue and I believe it’s broad-based. But perhaps, Peter, if you want to add some color to that?

Yeah. Certainly, the – I mean, our mainstream business behaved more or less seasonal. So, it was down, I believe, 6% in the December quarter. That’s pretty typical. As far as the high-end goes, as Sean said, November and December were quite slow. We saw a strong pickup in January, very broad-based and we’re expecting that to continue into the coming quarter and beyond, really. Thomas Yeh – Bank of America: That’s helpful. And then, can you give us a sense of your expectations for the size of the overall photomask market in 2013? And within that, maybe share any specific metrics you have for goals around market share and how it’s split between new competitors and the captive market? Thanks.

Yeah. This is Chris. Sure. I mean, overall, photomask market relatively flat, usually runs 1% to 2% of total IC. So, to the extent total IC grows, photomask will grow along with it. But the second part of your question related to captive versus merchant, or could you clarify that please? Thomas Yeh – Bank of America: Right. Just market share split and goals around gaining market share this year.

Yeah. So, in terms of our goals around gaining market share, we see opportunities in all the major segments, that’s foundry, logic, mainstream and high-end. Memory, we already have quite a strong position and we think we can solidify that and maybe pick up additional share with some new possible fab opportunities coming later in the year. And for microprocessor, there we also think we can pick up some market share. So, across all three main segments, we think we can do pretty well. In terms of the captives versus the merchants, the few captives that remain are investing fairly strongly, but we have good partnerships with all of them. They all maintain fairly strong outsourcing strategies and we’re keeping up with them on their node transition. So, we think we can pick up some good business there as well through partnership arrangements. Thomas Yeh – Bank of America: Thanks. That’s helpful.

Our next question comes from Stephen Chin with UBS. Stephen Chin – UBS: Hi. Thank you for taking my question. A question on FPD. So, Applied talked about some momentum in the display business, can you give us some color on what is the lag between the equipment move-in to when the new mask orders are placed?

This is Chris again. I can make a few comments and then throw it back to the Brookfield team. It does vary and it varies by segment and application. Take the memory as the first example. In that case, we have a joint venture, as you know, with Micron. Most of the processes of record are established in the joint venture. When we bring equipment into service that segment, it’s roughly copying processes that are already qualified. So, we can ramp production – assuming demand is there, we can ramp production quite quickly once equipment is installed. On foundry logic side, it does take a little bit longer. There are many, many more device types. It can take, in a very accelerated way, a few months to as long as nine months, even to a year sometimes to get full qualifications done. So, in that case, the band is quite wide. On the microprocessor side, also can take a little bit more time, something between foundry logic and memory in duration. So, quick answer is, pending demand, memory can ramp equipment very quickly once installed, and foundry logic and microprocessor, three months optimistically, nine months to 12 months a little more pessimistically.

Yeah. And then on the FPD front, I think you were referring to Applied report last night. So, they see an uptick in equipment orders. They didn’t have to deliver those orders. So, there’s normally more or less a six-month lag between when Applied sees an uptick in orders and when the equipment is shipped out the door and being installed. So, there’s at least another three-month delay behind the uptick in orders added to the six months until the equipment comes online. And display market is a bit different than the IC market, in that, we don’t have the typical technology transitions that are occurring. There is technology movement, but it’s not on a, quote, Moore’s Law like trajectory. So, from when Applied sees an uptick in orders, until we see an uptick in demand, is nine to 12 months, typically, as far as the installation of new equipment is concerned. But as you know, an uptick in orders typically comes as a result of an improvement in the business and our FPD orders were up in the quarter and the reason they were up in the quarter is because the overall market improved. So, there’s really two answers to your question. I think I give you both of them. Stephen Chin – UBS: That was great. Thank you. Another question on the tool pull in that you talked about. Is that for FPD or IC? And is this based on new qualification wins and can you give us some color on the customer type?

Yes. The pull in of the high-end litho capacity is really – it’s focused on the IC, not the FPD market. And just as I answered the other question, we see our customers pulling in their roadmaps. And as their – what I would describe as their trusted partner, we want to be ready when their demand is really ramping. So, for us to take delivery of the tools in the next three months, it’s going to take us another three months to install them and, as Chris said, in some cases, qualify them. So, pulling the tools in to the next three months, really for us, means incremental revenue on those tools, really exiting this fiscal year and building strongly into next fiscal year. So, that’s the reason why we pulled in those tools, because our customers are sharing with us their roadmaps and their expected demand and we need to be there when they need us. Stephen Chin – UBS: Got it. Thank you. And question on the high-end IC mask. One of the big themes in the foundry business, the shift of the large customer from Korean foundry to Taiwan. Given that you have quite a strong share at the Korean foundry, can you give us some color on how does this impact you and if you’re taking any actions?

We certainly have plans in place in our capital spend, in our tool deployment to handle any uptick in business which we anticipate in Taiwan, in Korea and in North America.

And I guess, the other comment I would make on that, to the extent the large Korean foundry loses – if it happens, loses a high-volume wafer customer, I think they will not let that capacity sit idle and they will go out and acquire additional fabless companies, and that does lead to demand for masks, because there are a lot more prototypes, a lot more test chips as they try to bring in new customers. So, to some extent, it could actually result in an increase in demand on that particular foundry side. Stephen Chin – UBS: Got it. Thank you. That was very helpful. And a question on your new qualification wins. Can you give us some color on when do you expect those new wins that you had mentioned on the last call?

We have a queue, so to speak, of new qualification wins. One of the reasons why we’re bullish on the coming quarters, we’re going to start to see conversion of some of the logic balls this coming quarter into real revenue. So, we have one wave, I think, where over the next quarter or two, in high end foundry logic where we expect to see more business. Then, as you know, we have a partner – a very close partner that’s coming upon the anticipated conclusion of the significant merger. And I believe it’s fair to say that we expect to see some radical demand from that in late summer type timeframe. And then we have another wave of high-end qualifications where we expect revenues to start materializing from them at the end of our fiscal year, building into next fiscal year. So, there is really a continuum of uptick in business we can see, either as a result of quals being completed or as a result of our partners expanding their business. Stephen Chin – UBS: Got it. Thank you. That’s all I have.

Our next question comes from Edwin Mok with Needham & Company. Edwin Mok – Needham & Company: Hi. Thanks for taking my question. So, my first question is, I guess, a follow through to your last comment there. So, you guys are expecting sequential growth beyond the second quarter into the third and fourth quarter, and it sounds like it’s mostly in IC side. Do you expect similar trend continues or any way you can comment – get some color around that?

I think, Edwin, this is Sean. We don’t break out in our guidance the IC and FPD side. But as Peter alluded to, FPD demand was strong. There’s a lot of prototyping going on, which requires masks and we did have a rather robust quarter. And there is no reason why we wouldn’t think that would stay somewhat strong as we move forward, but to quantify the exact amount, it’s embedded in our guidance. Edwin Mok – Needham & Company: Okay. Okay. That’s helpful. And then, my second question is actually related to the effect of current – the yen rate, which is the foreign rate. So, I was wondering if you start to see more price competition coming from your competitor as a result of that maybe on the mainstream side. And I think that your mask writer is in Japan, do you see some benefit in terms of the cost of tool as well, can you quantify that?

But generally, there will be – there is a positive impact for our balance sheet P&L and our future commitments, because we do buy certain tools based in Japanese yen. And certainly, in our forecast, the yen has moved quite significantly over the last six to seven weeks. So, we’ll have some uptick there. We do not necessarily compete with our competitors on the mainstream side. So, we don’t believe on the mainstream side, we’ll have any impact on our business, at all.

Yeah. I mean, I think to clarify that, our mainstream competitors, they’re doing transactional business locally. So, the yen-dollar exchange rate really has not affected the pricing dynamic in the mainstream market. But I would say there was a question earlier about market share and the market share tends to be counted up in dollars. And with the dollar strengthening relative to the yen, the value of our competitor’s Japanese business is going to be diminished when at the end of the year we count up market share. So, I do think from a sort of a second order effect, our market share this year is going to go up substantially, because our Japanese competitors, the value of their business in dollars is going to come down. And the benefit of that over the last two years to three years, we’ll get likewise the benefit on the other side coming out. So, in summary, our tool costs are going down in dollar terms; that’s good news. The pricing environment not really affected and there is a second order market share affect that’s not real, but it’s where the unit volumes go. But it’s very real in dollar terms and we’ll see that, I think, when the numbers are tallied at the end of the year. Edwin Mok – Needham & Company: Okay. Great. That was helpful. And then lastly, on – I guess, going back to the two that you guys are pulling in, right. I think you mentioned that there was cost basically matching the customer roadmap. Can you help quantify how much of that was driven by logic versus foundry versus memory, because I think you mentioned a few of those? I’m just trying to understand, is there one particular customer that’s driving that growth or is it more broad-based? Thank you.

It’s broad-based, Edwin. As we mentioned, we have – we’re deploying one of the tools in North America. Obviously, that would be invoicing one of the tools in Asia. So, it’s really to complement our – all our high-end customers and opportunities. Edwin Mok – Needham & Company: Okay. Great. That’s all I have. Thank you.

(Operator Instructions) Our next question comes from Patrick Ho with Stifel, Nicolaus. Patrick Ho – Stifel Nicolaus: Thank you very much. Maybe a little more color on the flat-panel display side. Aside for the prototyping that you mentioned, what have your customers qualitatively have told you that gives you confidence that that business may also be seeing a recovery similar to the IC side?

Hi, Patrick, this is Chris. I mean, qualitatively, I think they’re seeing somewhat increase in demand. You saw the Applied announcement, of course, where capacity and capability being added to the fab, so that’s driven by general demand in the space. But, also looking to differentiate their display products, for sure, leading to stronger design cycles on mobile displays, AMOLED, adding additional features to LCD-type displays and also going to higher resolution, so-called high-definition formats, there is a lot of work that needs to be done there to make that commercially viable to consumer level. So, we’re seeing a broad-based activity on design, R&D, and then the expectation that overall demand will increase, driven by larger format mobile applications and also higher-definition TV. Patrick Ho – Stifel Nicolaus: Great. That’s helpful. Going back to the IC side of things for a second, you mentioned the pull-ins for the two tools. Now, those typically have long lead times for you guys. When you mentioned pull-ins, where these things that you had ordered already and had a – I guess, a shipment date and you’re pulling it in? Or was this that came at the last minute where you’re accelerating, I guess, order as well as a delivery date?

Well, Patrick, as you know, these tools do have – you’re correct, do have long lead times, we actually secured two slots for two advanced e-beam tools earlier in fiscal 2012 and actually paid cash last year, about 20% of that amount last year for the combined two tools. And as the business softened in the fall, we evaluated our opportunities whether we pushed the delivery dates out or – into 2014, and as a result of the last six or seven weeks, what we’re seeing, we decided to pull them in. And there is flexibility to do so. So, we’ll hit the ground running with our – and match our customer roadmap. So, we did evaluate quite for a long time in the fall whether we’re going to push it out or leave the original delivery dates. What we’ve done is actually pulled them in. Patrick Ho – Stifel Nicolaus: Great. That’s it from my end. Thank you very much.

Our next question comes from Tom Diffely with DA Davidson. Tom Diffely – DA Davidson: Yeah. Good morning. The question on the new litho tools, so did these new tools – do they add capabilities or they just add capacity with your existing capabilities?

Hi, Tom. I can make a few comments. This is Chris. Definitely, they add capability. These are state-of-the-art litho tools, multi-node kind of compatibility – multi-node forward kind of compatibility. Really, the leading-edge workhorses of the mask industry we see over the next few nodes. So, definitely adding capability. But also the way we use them, they also add capacity at existing nodes. So, I think the answer is both, but primarily it’s roadmap capability to me, What we see is increased demand from our customers at the leading-edge. Tom Diffely – DA Davidson: So, will this take you down into the teens as far as the nanometer node goes and give you capabilities of doing 3D transistors as well?

I mean, it should, 28 and 20, for sure, slot in very well to these types of tools. 14-nanometer is accessible with these tools, at least for initial production. So, you’re looking at a three node kind of platforms, potentially. So, the answer to that part, I think, is yes. In terms of the 3D transistor, that drives the different set of challenges on mask making. Not all of them push the lithography step in the same way as standard technologies. However, we will say another benefit of these new equipment is the throughput or the speed. Our ability to write these very, very complicated masks at a faster rate increases with these tools. So, affectively, we get more capacity and better cost of ownership with these kinds of tools. So, from that point of view, 3D which drives larger mask counts is also enabled by some of these additional platforms. Tom Diffely – DA Davidson: Okay. And then, Sean, when you look at the CapEx for these tools, what’s the impact of whether it’s straight-out purchase versus capital lease? How does that impact the CapEx on the timing or dollar value?

Well, the capital lease is paid out over five years. So, it’s not going to have a significant drain on our cash as we move forward and the other tool that we paid out or going to purchase – that’s going to make payments on that tool in 2013 and into 2014. So – I’m sorry, go ahead, Deno.

As we have said previously (inaudible) down basically.

Right. So, we like – what we’re going to plan to do is, from a cash flow standpoint, as I mentioned earlier, we will still – we still expect to be free cash flow positive for this year. Our goal is to still have net cash as we exit the year. But very favorable terms and conditions on the leasing at the 2% rate minimizes any big pay downs, and certainly the softness in the market enables us to negotiate better terms and conditions with respect to our tool vendors. Tom Diffely – DA Davidson: Okay. And then, when you look at the high-end capacity at this point, any way to quantify once these tools are installed what’s your high-end capacity is?

I think the rate we – well, there’s a financial way to quantify it, and maybe Sean will do that. But from a competitive point of view, I think, without a doubt, we’re going to have more horsepower at the 28, 20 and 14-nanometer nodes than our competitors once these tools are in place. So, if I gave you the competitive answer, Sean, you might want to give you the financial answer.

I think the financial answer is, we – as Peter mentioned earlier, we expect to get some revenue at latter part of 2013, but really it’s going to hit in 2014. And I think we’ll provide additional color when we have our Analyst Day as things progress over the next six to seven weeks. But certainly, we believe it’s a great opportunity for us. We planned ahead. We’ve evaluated our position and we have the confidence that we’ll generate cash with those tools and market share. Tom Diffely – DA Davidson: All right. So, it sounds like it still supports a pretty aggressive ramp in high-end ICs for the next couple of years then?

Yeah. Tom Diffely – DA Davidson: Okay. And then, Chris, one more question on the memory side. DRAM and NAND prices are both being going up lately, I just want to talk about how NAND growth is going to take off in the second half of this year. From your point of view, does it matter if it’s DRAM or NAND from a mask point of view? Is there a big benefit of one over the other?

There is not a big benefit in one over the other. I’d say from a mask manufacturing perspective, DRAM is more challenging than NAND. But there is not a huge benefit between them. We run a stronger NAND mask business inside Photronics right now than DRAM. We see that almost immediately on the NAND side if capacity is added there. DRAM, the integration of the mask takes a little bit longer, it’s a little bit more protracted and it’s a little bit more lag in terms of new capacity in mask volume. But the short answer is a healthy mix between those two memory technologies is the best case, because we have a different variety of pricing and mask complexity for each node. Tom Diffely – DA Davidson: Okay. Great. And then final question here. Applied did talk about how there has been strength in the high-end, but the smaller screens on the flat-panel side for the tablets and the phones. They also said, though, that the TVs are starting to pick up for the first time in a while with the 60-inch and the 4K screens. Any more chatter about Gen 10 at this point?

I’d say not really. Of course, Gen 10 was a node that a lot of the flat panel people thought was pretty well assured. There are Gen 10 products – one Gen 10 project that’s been in our estimation fairly limited success. It’s a fairly difficult node for TV for a lot of reasons. So, we don’t hear a lot of robust talk on that or re-planning on that at the current time. But to the extent that these price points go down on a very large screens, that could pressurize a Gen 10 conversation again. But nothing major, I think, we would consider now. Tom Diffely – DA Davidson: Okay. Thank you.

Thanks, Tom.

And I’m not showing any further question at this time. I’d like to turn the conference back to our host for closing comments.

Well, no other questions. I’d like to thank all the participants and – thank you participants. Thank you very much. Have a good day.