Ladies and gentlemen, thank you for standing by. Welcome to the Photronics Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, December 11, 2013. I would now like to turn the conference over to Pete Broadbent, Vice President, Investor Relations and Marketing. Please go ahead, Mr. Broadbent. You may begin.

Thank you, and good morning, everyone. I'd like to thank you for joining our fourth 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. This call will be archived on our website until we report our first 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. Also joining us on the call today is Dr. Frank Lee, President of PSMC. During our remarks this morning, we will be referring to slides posted on our website under the Investor Relations link. And now, I'd like to turn the call over to Deno Macricostas. Deno?

Thank you, Pete, and good morning, everyone. I would like to begin by highlighting a few of our major accomplishments here and then I will turn the call over to Peter Kirlin, who is promoted to the position of President during the quarter. Peter will speak to our results in the fourth quarter and the trends we see in the market. Since the beginning of 2013 through today, we completed a number of strategic moves that position us for future growth. We successfully completed our tender offer for the outstanding shares of PSMC. We entered into a JV agreement with the DNP in Taiwan, which will give us access to high-end logic technology, a faster growth and higher revenues. The JV immediately strengthens our network for serving key customers in the region, including Micron and affiliates, UMC, SMIC and GLOBALFOUNDRIES. The restructured loan agreement will give us more financial flexibility while reducing expenses. We successfully deployed additional capital equipment to serve our high-end customers globally. The result is our footprint now represent the largest installed base of 14-nanometer cable equipment of all dimensions. We have invested more at this stage than our 3 largest competitors combined. And we're investing in line with our customer roadmaps, while maintaining a strong net cash position and balance sheet. While fiscal 2013 was a growth year, we expect a -- we took significant strategic actions that position us well for future growth. So from that perspective, it was an excellent year for Photronics. Reticles were up operationally and performed well on the bottom line. We'll continue to use our cash strategically while reducing our debt and building our working capital. Importantly, we put the key pieces of our strategic plan in place this year to capitalize on the expected ramp in the high-end next year. In summary, we are very optimistic about 2014. We have established strong partnership with key customers. Our JV will bring opportunities for accelerated high-end growth, we have a favorable banking arrangement, and we are very well positioned in the marketplace by investing in high-end. As a result, I'm very excited about the opportunities ahead for the company. And now, I would like to turn the call over to Peter. Peter?

Thank you, Deno, and good morning everyone. Please turn to Slide 3 in our slide presentation. In Q4, we achieved sales of $106 million, at the top of our revised guidance. Sean will provide a detailed breakdown of our financials but first, a few highlights and some comments on the trends in our business. The general trends in the semiconductor [indiscernible] and photomask markets, are positive. During the quarter, we had solid momentum in our FPD and mainstream IC businesses. FPD sales of $26.2 million were up 3% sequentially, with 11% growth in the high-end. IC mainstream sales grew $3 million or 5% sequentially, which is a solid quarter for us. The $64.2 million of mainstream sales represent the highest quarter for us in 2 years. Our challenge in Q4 was the high-end IC sales and reflects the transition we continue to face with 2 key customers. As we have discussed previously, in memory, the volume in reticle demand linked to new designs for next-generation devices was light because the wafer fabs have been running essentially flat out with existing chip designs. In addition, we have yet to receive the boost from new demand that we expect from one of our largest customer's recent acquisitions. Both of these factors contributed to this short-term delay in, but not a loss of, some high-end photomask sales. On the foundry side, we had expected to start seeing revenues resulting from the qualification of one of our largest customers at the 28-nanometer node. We did not complete this qualification on schedule. As of today, we expect to qualify during the current quarter. Our relationship with this customer remains solid and we have started to qualify at the 14-nanometer node. We expect to see sound demand in 28 nanometers as soon as the qualification is…

Thanks, Peter, and good morning, everyone. I'll provide a brief analysis of our financial results for the fourth quarter, review our balance sheet and cash flows, discuss our forecast and also provide additional information on the recently announced Taiwan JV. Please refer to Slide 4 for our GAAP to non-GAAP net income and EPS reconciliation as we review the fourth quarter. For purposes of our discussions, I will be primarily comparing our non-GAAP operating results to the revised fourth quarter guidance we published in our November 13 press release. Slides 5, 6 and 7 show our sequential quarterly and year-to-date IC and FPD revenue performance. Fourth quarter revenue decreased by 3.3% sequentially to $106 million for the reasons Peter discussed. Revenues for IC photomask were $79.8 million, down $4.3 million sequentially for the fourth quarter, while FPD photomask revenue increased 700k sequentially to $26.2 million. Breaking out sales geographically, 62% of total sales were from Asia, 27% from North America and 11% from Europe. High-end global IC sales were $15.6 million or 20% of total IC sales for the quarter. This represents a sequential decrease of $7.3 million. Global mainstream sales increased sequentially by $2.9 million or 5%. Advanced FPD sales increased by $1.8 million to $18.5 million or 71% of total FPD sales. As a reminder, high-end IC revenues consist 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 fourth quarter was 25.2%, up 50 basis points sequentially. The increase was primarily related to certain manufacturing costs reallocated to R&D as a result of the increased qualification activity. Selling, general and administrative expenses for the fourth quarter were $12.9 million, up sequentially…

[Operator Instructions] And the first question is from Edwin Mok of Needham & Company. Y. Edwin Mok - Needham & Company, LLC, Research Division: So Sean, first question actually I have for you is, how do we kind of think about -- given that you guys will be considering a joint venture following the -- maybe in the April quarter according to your commentary, right, how do you kind of think about what impact or benefit do you expect to gain from the joint venture in terms of effect on your gross margin and operating expenses?

I think initially, Edwin, depending upon when the JV closes, certainly, the top line will grow immediately. And then, as we extract synergies, we would expect our operating gross and operating margins to improve. So the timing of the closure of the JV will have an impact on 2014. Y. Edwin Mok - Needham & Company, LLC, Research Division: Right, I understand. Maybe a different way to think -- ask that is if I look at the back half '14 when you expect to have the joint venture closed, right, do we expect gross margin to be at a higher level than where we're at right now, and also operating margins?

We expect, on a standalone basis, our gross and operating margins to be higher year-over-year, certainly in 2014. To the extent the JV closes earlier in the year, we would expect them to be higher as well for 2014. It's all in the timing of the closure of the JV. Y. Edwin Mok - Needham & Company, LLC, Research Division: I see. Okay, that's helpful. And then I guess a question on the marketplace. So for the quarter, you guys have come light at high-end and you mentioned that memory was a contributing factor beyond the qualification into a customer, right? And January is seasonally a slow quarter. How do you kind of think about memories spending on photomask as we go beyond the January quarter? And specifically on the high-end, do we expect that to come back and contribute and bring your high-end revenue -- excluding the JVs, bring your high-end revenue back to $20 million-plus range that you have reported previously?

Yes, Edwin, we expect, as we enter the new calendar year, to start to see our memory business benefit from a significant node transition. So towards the end of the first quarter and then moving forward in the year, the memory business, we expect to improve sequentially. And by the time we get into the third quarter, it should be quite strong. Y. Edwin Mok - Needham & Company, LLC, Research Division: Is that largely due to one, your joint venture customer is to come, doing this node transition, in the DRAM side or is it some other factors that you guys have looked in?

I think you understand it correctly. Y. Edwin Mok - Needham & Company, LLC, Research Division: Okay, that's helpful. And then lastly, any kind of additional update you can provide in terms of qualification of the customer on -- the logic customers that you guys have talked about? Do you guys -- is the equipment installed? Are you still going through the qualification? When do you kind of expect that to be completed? Is any timing of customer investment or spending could -- would that have an impact on kind of when you expect January revenue after you had qualified?

Yes. I think in the past what we have demonstrated is, once we get qualified, we ramp quite quickly on a node regardless of the customer. And in this particular case, there is no customer issues that would, in any way, impact our ability to do that. So once the qual completes, we expect to ramp business with them immediately. Y. Edwin Mok - Needham & Company, LLC, Research Division: In terms of timing of qualifications, do you have any kind of target for that?

Yes. What we said is it didn't occur this quarter as we had expected. What we didn't say is we understand why it didn't work. We fixed it and we're expecting that the qual is going to conclude by the end of the quarter.

And our next question comes from the line of Patrick Ho of Stifel, Nicolaus. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Maybe just going back to the foundry qualification situation. As you move from 28 nanometers to 14 nanometers, are there any additional "tool sets" or any additional changes that need to be made there that could change the dynamics of that qualification process going forward?

At the 14-nanometer node, we have customers in various stages of, what I would describe as, maturity on their way for process flow. So for example, our most leading customer, their tool set is fully stable and we're far beyond the midway point on that particular qual. In that case, it's basically locked down, bulletproof, don't expect any changes. We have other customers that are -- where we're early in, some haven't started. The ones that haven't started, obviously, are tools set not solidified. The ones that are really in could still change. So right now, the 14-nanometer logic node is bulletproof in some cases, fluid in others. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. Maybe a question for Chris in terms of the technology and, especially, as we look at 2014 on the NAND Flash side of things. As the industry begins to transition to 3D NAND and you're hearing more chatter from not only the first player involved but others now potentially bringing on their capabilities as 2014 progresses, what are some of the mask implications of that transition given that there's going to be an increase of layers as you basically flip them over? And maybe if could just give me a little bit in terms of both, I guess, the technology process and what some of the potential opportunities are going forward.

Sure. Thanks, Patrick. We are qualifying and actually qualified for some of the vertical NAND devices already, the so-called 3D NAND. So we know those flows very well. There are more mask layers per device, generally, more non-critical layers as well. There are some specifications for the mask that actually get a little tighter than the previous floating gate planar NAND and then some of them relax as well. We've analyzed it pretty closely and, in total, there's not that much of a difference from a total mask perspective between scaling with standard planar floating gate NAND and 3D NAND. We should see more layers, but some of the layers will be a little easier to manufacture. So in total, we don't see big differences between these. The most important thing is the roadmap continues to scale, the node transitions continue to happen in NAND, which we believe will -- is occurring and on, also, a pretty aggressive basis. So I would say it's kind of business as usual for the most part for masks and perhaps some upside from the part of units as the 3D transition unfolds in 2014. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Great. And final question for me in terms of your high-end opportunity, primarily on the IC side of things. Given that this joint venture allows you to get even greater penetration on the high-end, have you seen any changes on the competitive landscape because of your increasing share at the high-end or have things kind of been pretty, I guess, rational at this point?

The marketplace is, to use your words, rational. The opportunities that we have seen -- the fact that we are starting to separate ourselves is now becoming very clear. So in the business opportunities that we're actively engaged in, what we really see is more willingness of the customers to work with us to accelerate what we're currently doing because they see that now, even more than before, as time well spent.

Yes. One thing I might add Patrick, on the competitive side. As Deno mentioned in his comments, from an investment point of view, when you look at the high-end 14 nanometers, as far as the capacity and the technology to service that node, for sure, we're best positioned. So there's always competition and that won't change. But on the other hand, we have a very strong position in our infrastructure and the JV adds to that. So we're fairly confident we're well positioned there.

[Operator Instructions] And the next question is from Tom Diffely of D.A. Davidson. Thomas Diffely - D.A. Davidson & Co., Research Division: So first, Sean, a question on your capital spending, the $70 million to $90 million, is that earmarked initially for high-end IC like it has in the last couple of years?

I think what we stated in the past that the revenue differential between IC and FPD is sometimes 75%, 25%. So we generally, I believe, stated that our CapEx spend is roughly about that split. Certainly, we do expect to see some significant growth on the high-end IC side. We've actually invested, as you most people are well aware, on some leading-edge lithography and inspection tools that were installed in 2013 that we expect to benefit from a revenue ramp in 2014. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. So as revenue ramps over the next few quarters, what is the capacity that's currently in place for the type of revenue that's making that support?

Certainly, well in excess of what we ended the quarter and we have high goals without giving specific guidance for the full year, but we do expect to see substantial growth as we move out into Q2, Q3. I think Peter mentioned that in his remarks. Thomas Diffely - D.A. Davidson & Co., Research Division: And as far as the growth that you're seeing for 2014, is that already accounted for with your capital in place or do you need to spend more to get that capacity in place? I guess, what I'm again asking, is the $70 million to $90 million for this year capacity or is it out-year capacity?

It's a combination of both. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And also, this morning you talked about some strength, relative strength, in the mainstream business. Do you think that's sustainable going forward or what are the dynamics there?

The strength in the mainstream business is, I think, a bright spot for us year-over-year. We actually saw a slight increase in revenues in a market where the units are clearly decreasing. So we're picking up market share there. And our objective is to continue to do that. Having said that, as everyone on the phone knows, our business really sings when we execute on all cylinders and that's our focus in the coming year, not 1 or 2, but all. Like in the [indiscernible] on mainstream side, the improvements, certainly in the balance sheet or the cash flow generation, is driven quite a bit by the mainstream business, which is a cash cow and allows us to invest for leading-edge capacity. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. I guess, on those slides, too, what does 2014 look like from a flat panel business point of view, both mainstream and high-end flat panel?

Yes. This is Chris, I can make a few comments on the high-end part of it. 2013 was a strong year for flat panel, high-end in particular, and that includes the AMOLED work. Our largest customer there seems to be very intensely working on new designs for AMOLED. Still mostly in the mobile space, but a lot of new design work on tablets, some new curve display things coming out that are based off AMOLED technology. So to the extent all of those things go into mass production, then it should be also, 2014, quite a strong year on the high-end display side. On mainstream side, Sean, maybe has some comments.

Yes. Where we saw the growth this year was, as Chris alluded to, is on the high-end side, particularly centered with our 2 Korean-based customers. Mainstream business is primarily centered in Taiwan and, to a lesser extent, Korea. And that's a little bit more, as we talked about in the past, competitive and commodity type pricing. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And last question, Sean, does the joint venture impact long-term tax -- having long-term tax implications?

Actually, we expect the JV to have some preferential tax benefits when it closes, so it should only improve the overall effective rate.

[Operator Instructions] And the next question comes from Edwin Mok of Needham & Company. Y. Edwin Mok - Needham & Company, LLC, Research Division: Sean, I have a question about the R&D. What happened last quarter? How come it went up so much?

We had some increased qualification activity that caused it to increase. Y. Edwin Mok - Needham & Company, LLC, Research Division: I see. Is this something that you expect to moderate? I mean, obviously, excluding the effect on foundry, is it something that you expect to moderate after the qualifications are completed?

I would expect it to go back to the levels that it had previously. But to the extent that it stays where it's at and it's with other new applications, it bodes well for our future as well.

Yes. But to add to Sean's commentary, there was a great effort to fix the problem that we had. And to some extent, the spend reflects that.

Ladies and gentlemen, there are no further questions at this time. I'll turn the call back over to Mr. Macricostas for closing remarks.

Thank you for participating in this morning call, and I would like to thank Photronics employees for their dedication and hard work this past year. I'd like to wish everyone happy holidays and a prosperous new year. Thank you.

Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation, and we ask that you please disconnect your line at this time.