Photon Dynamics Reports Fiscal 2008 Second Quarter Results

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 [phone]. For all international calls, dial [phone].

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 [phone] or [phone] 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., [phone],





Web site:  http://www.photondynamics.com/ 

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