Good day ladies and gentlemen, thank you for standing by. Welcome to the Photronics First Quarter Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, February 19, 2014. 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. I would like to thank you for joining our first quarter 2013 conference call. Before we begin, I would 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. This call will be archived on our website until we report our second quarter 2014 results. Joining us on the call today are Constantine Deno Macricostas, Chairman and Chief Executive Officer; Dr. Peter Kirlin, President; Sean T. Smith, Senior Vice President and Chief Financial Officer; Dr. Christopher Progler, Vice President, Chief Technology Officer and Strategic Planning. During our remarks this morning, we will be referring to slides posted on our website under the Investor Relations link. And now, I would like to turn the call over to Deno Macricostas. Deno.

Thank you, Pete, and good morning, everyone. I would like to begin with a few high level comments on our business outlook and then turn the call over to Peter to discuss our results in the first quarter and the trends we see in the market. Over the past several years our leadership team has worked hard to position us to take advantage of the opportunities we see interesting right now. We established a strategic plan to maximize our growth in both mainstream and high-end, with lower cost strengthen our financial base, aligned our strategically and build stronger partnership with our customers. As a result, we now have the opportunity to capitalize on the strong trends to gain markets share, outgrow the industry and build shareholder value. The semiconductor photomask business our high-end equipment footprint is well positioned globally to support our customers. We are presenting a largest installed base of our best advanced equipment of all the merchants combined. As Peter will note, we are strategically located close to our customers. Our costumers continue to be aggressive in moving to advanced nodes, and we expected to be a strong major supplier at the high-end for several years. In FPD in Korea and Taiwan our team is well established with leading technology and capability. We will benefit from strong customer relationship as a transition to new technologies, we expect this industry to continue to innovate and increase the demand for our leading-edge photomask. So as we look forward I’m very optimistic of our ability to deliver to our customers and our shareholders. Our pending joint venture with DNP in Taiwan is progressing well through the regulatory approval process. This combination of resources and capability will create the largest domestic supplier of leading-edge photomask in Taiwan. With the scale project 28-nanometer and beyond technology, when we close this, we expect to drive significantly high-end foundry logic business of Photronics. Our partner Micron continues to successfully integrate its Elpida capacity and offer us opportunity a high-end memory. Our FPD customers continue to advance new designs that will bring opportunities for accelerated high-end growth. Importantly, we have several banking arrangements and a strong management team. As a result, I’m very excited about the opportunities ahead for the company. As the marketplace continues to move in our favor, we are at the best positioned merchants in the industry, we expect this to translate to a meaningful growth and profitability for the company and our shareholders. And now I would like to turn the turn call over to Peter.

Thank you, Deno and good morning everyone. Please turn to Slide 3 in our slide presentation. In Q1 we achieved a sales of $101.5 million meeting our revised guidance. Sean will provide a detailed breakdown of our financials. First, a few highlights on the quarter and some comments on the trends in our business. ICs were $76.2 million, down $3.6 million sequentially, this was attributable to decline in our mainstream sales of $4.6 million, high-end IC sales were up 7% sequentially, FPD sales came in at $25.3 million and though this is was down 3% sequentially, sales were essentially flat in Q1 a year ago and represent solid demand for us in display of photomasks. If you look at the performance of these three segments of our business, FPD was basically stable, high-end IC was up $1 million in a seasonally soft quarter and mainstream IC was down on more than usual seasonal softness. Q1 is typically our weakest quarter due to the holidays. This year the way the holidays fell in the U.S. and Europe, we respectively saw a two week versus one week shutdown. In Asia, we expected some pull-in of business prior to Lunar New Year that did not materialize. From the mainstream market we experienced pronounced seasonal weakness. Today the mainstream business has returned to pre-holiday levels. Finally, we had hoped to see the beginning of the ramp in the next technology node, our large memory customer would have generated an uplifts in our revenues they have delayed ramp. We are confident this new transition will occur this year, and when it does, it we’ll have a significant impact on our top line. Looking forward we are hearing from our customers that they expect 2014 to be strong. Generally speaking when our customers business is strong,…

Thanks, Peter and good morning everyone. I’ll provide a brief analysis of our financial results for the first quarter of fiscal year 2014, review our balance sheet and cash flows, our forecast going forward and also provide a brief update on the Taiwan JV. Please refer to Slide 4 for our GAAP to non-GAAP net income and EPS reconciliation as we review the first quarter. For purposes of our discussion, I will be comparing our non-GAAP operating results to the revised first quarter guidance we published in our February 10, 2014 press release. Slides 5, 6 and 7 show a sequential quarterly and year-over-year IC and FPD revenue performance. First quarter revenues decreased by 4.2% sequentially to a $101.5 million for the reasons Peter discussed, revenues for IC photomask was $76.2 million down $3.6 million sequentially. While FPD photomask revenues decreased $900,000 to $25.3 million, breaking out sales geographically, 65% of total sales were from Asia, 25% from North America and 10% from Europe. High-end global IC sales were $16.6 million or 22% of total IC sales for the quarter. This represents the sequential increase of $1 million. Advanced FPD sales were $15.6 million or 62% of total FPD sales. As a reminder, high-end IC revenue consists of revenue derived from semi-designed at and below 45-nanometer, 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 22.5%, down 270 basis points sequentially as a result of the decreased sales volumes. Selling, general and administrative expenses for the fourth quarter were $12.3 million, and includes $400,000 of expenses related to pending JV. Sequentially, SG&A was down a $100,000 when excluding the transaction cost for the pending JV for both quarters. R&D…

Thank you ladies and gentlemen (operator Instructions) Our first question comes from Edwin Mok with Needham

Asking for Edwin Mok today. So the first question I guess about the expense and margins, directionally speaking where do you guys see the OpEx and gross margin go into next quarter?

To the extent we have additional incremental revenue; we would expect a 50% drop through on the gross and operating margin.

50%. Okay, then how about the OpEx?

We do not anticipate any substantial changes in our OpEx going forward.

Okay, I see. That’s great. Then I guess the second quarter I have is with regards to the Ultra HDTV, do you guys see the 4K UHDTV to be a driver for your flat panel display business this year?

Hi this is Chris, I think from the development side we are seeing activity on 4K mostly shrinking the pixel size and resolution on the mask, in terms of volume adoption that technology into mass production, it’s too soon for us to see that. Price point is still high et cetera, but in terms of R&D masks and design activity we are seeing we are connected with 4K, but I don’t think that’s a driver or at least my view of the flat panel business. I think there are other things such as new materials that will be stronger drivers for the industry this year.

I see, I see. So perhaps later next year then. Okay that’s all I have. Thank you very much. Thanks.

Thank you.

Our next question comes from Patrick Ho with Stifel, Nicolaus.

Thank you very much. Maybe as a follow-up to the gross margin question, going forward not only in this quarter but over the next few quarter what are going to be the key variables that will I guess drive gross margins whether up or down?

Patrick the key variable is the volume that’s going to come through and our ability to maintain a cost structure and reduce some cost, that’s why we still project to have a 50% drop through on incremental revenue, the model is intact and you noticed these past quarter we had a 47% reduction in operating income on the decreased sales volume so it does tie closely together. I did mention that our D&A would go up $1 million to $2 million during the quarter. So we have to do some more work on our operating cost to minimize that impact.

Great that’s helpful and a bigger picture question, in terms of qualifications. Now that you are kind of in the process or done on the 28-nanometer side, now how does it look going forward in terms of qualifications for next generation nodes whether it’s 20-nanometers or the next generation after that but didn’t say 14-nanometers, how are those qualifications going, because just want to get a bigger outlook in terms of the roadmap?

Yes, the qual is generally are proceeding well globally whether they would be 1X memory or 14 nanometer is a logic, if you look at the business generally where customers are headed on the logic nodes anyways, it looks like as everyone knows that the 2X the 22-nanometer or 20-nanometer node with the exception of in other words West Coast. Semiconductor manufacturer is going to be a non-node. So we are doing well sub-20 on the quals, but I also would point out that on the 28-nanometer node, with the exception of PMSC the rest of the foundry space is still really early, it’s really early in the game. So we expect to see as the year evolves and the other foundry suppliers including PSMC as they really gain traction we expect to see significant revenue this year on 28.

Great, thank you

(Operator Instructions) Our next question comes from Tom Diffely with D.A. Davidson.

Sean, first a question on the guidance, $100 million to $105 million. It seems like if your mainstream business is returning to normal levels that should be enough in and of itself to get you above $105 million. So, are you actually expecting a decrease on the high-end side due to the memory ramp delay?

Not necessarily, but we just wanted to make sure that we are prudent in our guidance, and just on another topic that we are not providing specific guidance. Typically over the last couple of years Q2 and FPD is down a little bit. So based on the visibility we have today and the impact of some of the high-end memory ramps comes in we could – like I said we have the opportunity to be better than that’s our best estimate on where we stand today.

Okay, when you look at the potential memory ramp is that more of a NAND or DRAM driven events?

It’s really – Tom it’s really both, so we expect to see those NAND and DRAM more or less ramp simultaneously. So as Sean said in his prepared marks and I also said in mine, we are expecting now to see that in the third quarter, it will be greater if its pulls out a little bit sooner, but that’s the best information we have now.

Okay and as you said during your prepared remarks that you are fully qualified, I mean all of the consortium social partners or all the pieces of your big customer in the memory side?

Yes, what I said was we worked really hard with the new addition to the family to be qualified on their memory technology which is unique and distinct and yes Boise campus is all set and ready to go. So we’re hopeful that node will ramp sooner rather than later, but also as Sean said, we’ve seen this push out now on this a quarter or two and we are going to wait until it materializes before we guide on it rather than either way around.

Okay that makes sense. And then on the high-end logic side, does it matter to you whether or not you have big product lines going through your customers, if it’s a number of smaller products, if there is a transition does that matter you, is it just as long as that fab is fully utilized, how do you benefit?

Hi Thomas this is Chris, can you just clarify the question. Do you mean design starts versus volume usage of a fab on a single part, the difference between those two?

Yes if you are – yes if you are just looking at some of your high-end customers and them doing a large run for one of their customers, if that transitions and you have a huge run of a single product versus several runs smaller products in a fab, does it matter to you from a profitability point of view? What scenario are you in?

I think its healthy to have a combination of both, if there are lot of kind of short runner and many designs the mask unit numbers go up, so that’s certainly beneficial, but often times those can be smaller field masks that are little bit lower ASP even with a given – within a given node. The high runners tends to be the largest most complex masks often times, so ASPs tend to be a little higher. The best scenario is both, base of high runners at a given node and then a healthy design mix as well is really the best option for us.

Okay and then Chris, I know over the last couple years the flat panel business is driven a lot by the new design especially the AMOLED. We’re starting to hear from the other equipment vendors though that capacity buys are coming back and they expect some nice capacity over the next year. Do you see that as a good drivers well?

For sure we see on the LCD side, particularly kind of a resurgent a little bit in design activity trying to push that platform a little faster and new materials coming in as well, finer pixels and things like that and so it seems to AMOLED is looking strong, but also we’ve seen some R&D resulting in new products on the standard LCD side that should drive demand also.

Okay and then finally Sean when you look at the joint venture you talked about being accretive in fiscal 2015, is it truly to figure out what the impact on fiscal 2014 is going to be from dollars and cents point of view?

Good point Tom, it’s too early to tell, because we are not sure when it’s going to close. When we announced the JV in November we said it should be accretive in 2015 or sooner and I believe at that point in time we had earmarked at the end of January, but it takes a little while with some regulatory processes and we are dealing with three different – U.S., Japan and Taiwan, so if it happens during this quarter before we end this quarter we will certainly do everything we can to get those synergies in place to make it as accretive as soon as possible.

Okay, thank you.

Well ladies and gentlemen; there are no further questions at this time. I would like to turn the call back over to our host.

Thank you for participating in this morning’s call, I would like to thank all the Photronics employees for their dedication and hard work. Thank you guys, have a good day.

Well ladies and gentlemen, that concluded the conference call for today. We thank you for your participation, and we ask that you disconnect your lines.