Peter C. Broadbent - Vice President of Investor Relations and Marketing Constantine S. Macricostas - Chairman of The Board, Chief Executive Officer and President Sean T. Smith - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Christopher J. Progler - Chief Technology Officer and Vice President Peter S. Kirlin - Senior Vice President of U S & Europe

Thomas Yeh - BofA Merrill Lynch, Research Division Edwin Mok - Needham & Company, LLC, Research Division Stephen Chin - UBS Investment Bank, Research Division Thomas Diffely - D.A. Davidson & Co., Research Division William C. Peterson - JP Morgan Chase & Co, Research Division Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division Mahavir Sanghavi - UBS Investment Bank, Research Division

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 5, 2012. I would now like to turn the conference over to Pete Broadbent, Vice President of Investor Relations and Marketing. Please go ahead, Mr. Broadbent. Peter C. 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 fourth quarter 2012 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 and 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 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 and Chief Technology Officer and 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' fourth quarter performance. During Deno's and Sean's remarks, we'll be referring to slides posted on our website under the Investor Relations link. Deno? Constantine S. Macricostas: Thank you, Pete, and good morning, everyone. Please turn to Slide 3 in our slide presentation. In Q4, we achieved sales of $104.2 million, ahead of our revised guidance. Sean will provide detailed revenue breakdown. But first, a few highlights and some comments on the strength of our business. A general softening in the semiconductor for flat panel display markets impacted demand for both IC and FPD photomasks this quarter. The slowdown reflects a challenging global electronics industry environment. Yet the fundamentals of our business remained strong. And despite this trend, we're confident in our market position and long-term growth opportunities. Management team remained diligent in controlling costs. Even with the top line decrease, we were comfortable in generating cash. We delivered solid gross and operating margins of 23.3% and 7.3%, respectively. We generated non-GAAP earnings of $0.07 per share, which exceeded our revised guidance. Non-GAAP EBITDA was $28 million, and we improved our net cash position by $22 million sequentially. So despite the soft electronic industry environment, we continue to generate profits and improve our cash position. Also, we believe that we strengthened our growing leadership position in the marketplace. Today, we have strong world position -- global operations. We have a leading-edge technology. We have a strong balance sheet. And basically, we believe we are the most cost-efficient major supplier in the business. Photronics is profitable. And based on published reports, we don't believe our competition is. While we live [ph] in a tough environment, market trends position is strong, to get even stronger, we are poised for growth. In the near term, the team is focused on reducing costs, gaining additional customer qualification and generating cash. A discussion we are having today with our customers on the leading edge would not have been possible a few years ago. Our leading-edge technology provide us with opportunities to grow share over the coming years. So our outlook is tied to global economic condition. We believe the strategic opportunities in the marketplace, our goal is to be in the best position to capitalize them. As our results, we are pleased with our progress and prospects for future growth. Looking forward for the coming year, we believe the softness will carry through this quarter and hopefully, stabilize. We do believe the industry growth will begin during the year, and we'll finish the year with improved momentum. Longer term, we believe the basic trends in the new electronic devices will yield continuous growth and market share gains for Photronics. And we are uniquely positioned to outperform the competition in the coming years. Please turn to Slide 4 in our slide presentation. Looking back on this past year, revenue was down 12% as the market was soft compared to a strong 2011. Mainstream revenue declined 19% year-over-year, which showed the drop mostly in the first quarter. After that, revenue remained essentially flat at approximately $60 million per quarter. At the same time, our high-end IC sales grew 16% for the year. This demonstrates the continued success of our high-end strategy. High-end growth might not have been -- might have been even better had the memory market been stronger. Sequentially, high-end sales were down during the last 3 quarters as the industry softness affected both high-end memory and logics. And I'd like to highlight again that it is a very competitive environment. And I won't [ph] believe we're winning in the marketplace. As those sales were down, we were profitable again this year and will continue to strengthen financial solution -- financial position. Before I turn the call over to Sean, I would like to thank the entire Photronics global organization for the efforts throughout the year. Our team continues to deliver better efficiencies and technology solutions to our customers everyday. And now I will turn the call over to Sean. Sean T. Smith: Thanks, Deno, and good morning, everyone. I'll provide a brief analysis of our financial results for the fourth quarter of fiscal year 2012, review our balance sheet and cash flows, and then provide our outlook for the first quarter of 2013. 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 October 31, 2012, press release. Please refer to Slide 5 for our GAAP to non-GAAP net income and EPS reconciliation as we review the first quarter -- fourth quarter. During the quarter, we did incur a minor charge of about $200k related to a Singapore consolidation. Slide 6, 7, and 8 show our sequential, quarterly and year-to-date IC and FPD performance. Fourth quarter revenue decreased by 10.6% sequentially to $104.2 million as a result of the general softness Deno discussed for both for IC and FPD photomasks. During the quarter, we experienced sequential declines for both high-end and mainstream IC and FPD photomasks. Revenues for IC and FPD photomasks were $83.9 million and $20.3 million, respectively, for the fourth quarter of 2012. Breaking out sales geographically, 60% of total sales were from Asia, 31% from North America and 9% from Europe. High-end global IC sales were $23.6 million or 28% of total IC sales for the quarter. This represents a sequential decrease of $3.8 million. Global mainstream sales decreased sequentially by $2.6 million or 4%. Advanced FPD sales were $11.7 million or 58% of total FPD sales. 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 fourth quarter was 23.3%, which was down 440 basis points sequentially as a result of decreased sales. The 23.3% gross margin for the fourth quarter was actually higher than our Q1 2012 gross margin when we had revenues nearly 8% higher at $112 million. Selling, general and administrative expenses for the fourth quarter were $11.4 million, down sequentially by $400,000 or 3%. Research and development expenses, which consists principally of continued development for our global advanced process technologies and qualifications of advanced nodes, were $5.3 million. During the last 6 months of 2012, we experienced increased qualifications for which we should benefit us in 2013. Please turn to Slide 9. During the quarter, we generated operating income excluding the consolidation charge of $7.6 million or 7.3% of sales. EBITDA, as defined in our credit agreement for the fourth quarter, was $28 million and for the year amounted to $135 million. Also, for the year, free cash flow was $63 million, which is EBITDA of $135 million less nonfinanced cash CapEx of $72 million. Other income and expense for the fourth quarter was expense of $1.6 million, which was up about $900,000 sequentially due principally to unfavorable foreign exchange. During the quarter, we recorded a tax provision of $1.6 million. GAAP net income was $3.8 million or $0.06 per diluted share and non-GAAP net income was $4.1 million or $0.07 per diluted share. At the end of the fourth quarter, we had approximately 1,292 full-time employees. And this equates to revenue per employee of $323,000 on an annualized basis. For fiscal 2012, our headcount decreased by 58 or 4%. Now turning to the balance sheet. Despite missing our initial guidance and decreased sequential operating results, our balance sheet actually improved quarter-over-quarter. Cash and cash equivalents at the year end amounted to $218 million and our net cash was $41 million or up $22 million sequentially. Our working capital at the end of the quarter was $233 million, which was up $21 million compared to Q3 2012. Diligent inventory management and, to a lesser extent, improved AR returns, contributed to this improvement. Accounts payable and accrued current liabilities at year end amounted to $79 million. And at the end of Q4 2012, $7 million of CapEx was accrued for. Please turn to Slide 10 as we review our capitalization. Total debt at year end was $177 million. The principal components of outstanding debt include: $22 million of a 5.5% senior unsecured convertible notes, which are due in October of 2014; $115 million 3.25% senior convertible unsecured notes due in April of 2016; approximately $15 million for capital lease obligation; $24 million, 2.5% 5-year term loan related to the nanoFab building; and approximately $1 million related to an obligation with a customer who co-funded a tool purchase. At the end of the fiscal 2012, we do not have any outstanding borrowings on our $30 million revolving credit line, which matures in April of 2015. Taking a look at our cash flows. Cash provided by operations for the fourth quarter was approximately $25 million. And depreciation and amortization was $20.2 million. For fiscal 2012, cash provided by operations was $133 million. Cash flow used in investing activities during Q4 amounted to approximately $5 million and was $112 million for the whole year of 2012. Fiscal 2012 cash used in investing activities includes $72 million of cash CapEx, a $25 million loan on the nanoFab building and $13 million of increased investment in our joint venture. Net cash used by financing activities during the quarter amounted to $5 million and includes $4 million related to the repurchase of PSMC shares. During fiscal 2012, we increased our ownership in PSMC from 62% to 72%. Please turn to Slide 11, as we take a look ahead. We expect our cash CapEx needs for 2012 to be in the range of $70 million to $90 million. We do, however, have the flexibility to accelerate or decelerate our spend depending upon market conditions. We do expect to continue generate free cash flow once again in 2013. And our 2013 investments will principally be geared towards high-end, leading-edge products for IC and FPD applications. The significant high-end increases in market share gains we have seen over the past few years have certainly validated our high-end investment strategy. Our visibility, as always, continues to be limited as our backlog is typically 1 to 2 weeks. For Q1, we do expect to experience some reduced orders related to the year-end holiday season. We also expect to continue to see a somewhat muted market overall for IC and FPD products. So taking this all into consideration, we are projecting revenue for the first quarter of 2013 to be in the range of $96 million to $100 million. During 2013, our tax rate will be impacted by the flow of income from jurisdictions for which we may have credits and upon our limited ability to recognize tax benefits in areas which we are taxable. For the first quarter of fiscal 2013, this will equate to a range $1 million to $2 million in whole dollar terms. For fiscal 2013, we estimate total taxes will range from $11 million to $13 million. As a result, based upon our current operating model, we estimate earnings per share for the first quarter to be the in range of breakeven to $0.03 per share. Please turn to Slide 11. In summary, I'll leave you with a few key thoughts. First, we continue to expect to generate free cash flow in 2013. Second, we are confident about our business model and our ability to weather any short-term softness in the market while continuing to grow our market share at the high end. We see continued opportunities in our customers' businesses and node migration plan and we have a strong financial position and excellent technology to capitalize on those plans. And finally, we expect to continue to build on the momentum that we have established over the past few years as a leader in advanced photomask technology. Although our visibility is limited as always, we plan to match our operating infrastructure to the market environment. Now I'd like to turn the call over to the operator for questions and answers.

[Operator Instructions] Our first question comes from line of Krish Sankar with Bank of America Merrill Lynch. Thomas Yeh - BofA Merrill Lynch, Research Division: This is Thomas calling on behalf of Krish Sankar. Quickly, can you provide us some color on how to think about the revenue decline into January quarter? How much of it is part of the typical seasonality in 1Q versus the impact of a cyclical slowdown in the industry? And is it really semi or FPD that's driving the sequential decline? Sean T. Smith: Tom, this is Sean. I think it's -- we believe it's a combination of both. We do in the U.S. and Europe expect to experience some softness related to the typical holiday season when fabs shut down for a week or 2, and then gear back up. The Asian New Year this year is, I believe, in early February, so we have less of an impact with our Asian revenue. But overall, the guidance is comprised of a combination of all the factors of the seasonality and of the softness in the market. But as Deno said in his prepared remarks that we do expect to see improvement as we get into 2013. And this should be somewhat of a stable environment as we move forward. Thomas Yeh - BofA Merrill Lynch, Research Division: Great. And looking at your breakeven level, it remains roughly the same compared to 3 years ago when you reached breakeven at around $98 million. Can you talk about your thoughts around the effects of cost control and maybe if gross margins are a factor? And how -- and why the breakeven level has remained relatively unchanged? Sean T. Smith: Tom, this is Sean. The breakeven level for this year actually has gone down. Our bottom line breakeven was about -- for the last quarter, was about $96 million or so. And our operating income breakeven is about $91 million. And if we look at -- it's in my prepared remarks, our gross margin was actually higher at $104 million in revenues than we did in Q1 of this year. I think what you're referring to is 3 or 4 years ago, we dropped our breakeven down to approximately $90 million, but that was before we invested in the high end. We didn't have any high-end business and it came back up, but we've done arguably a fairly successful job of managing our cost controls and generating a lot of leverage within the model. Thomas Yeh - BofA Merrill Lynch, Research Division: Great. And last one for me. I want to get your perspective on which particular aspect of the market do you expect to see driving a rebound or a stabilization. Would it be from semi or flat panel? And within semi, memory or logic customers? Christopher J. Progler: Yes. This is Chris. I can give you a few comments on semi. I think the foundry logic should be fairly strong going into latter part of 2013. The 28 node seems to be picking up and more broadly adopted. Memory, I'm sure you follow and you understand, there's still a lot of inventory and systematic issues there. But we also think due to coming consolidations in the industry and some capacity coming offline, we do think we're going to see a return to node migrations in memory in 2013 as well. So for IC, I would say those 2 aspects are most important. On the display side, I can make a few comments and pass it on. I think we'll start to see high-end displays such as AMOLED scaled to larger form factors. Next year, there'll be more R&D towards that, bigger displays using AMOLED. So that could drive some increased R&D activity as well.

Our next question comes from the line of Edwin Mok with Needham & Company. Edwin Mok - Needham & Company, LLC, Research Division: So Sean, let me first ask you what is your operating breakeven now? I think actually previously you guys talked about around $95 million, in the mid-90s. What's your operating breakeven? Is that $90 million now? Or is it below that? Or where we're at right now? Sean T. Smith: Our operating income breakeven, Edwin, for the quarter was approximately $90 million to $91 million and our bottom line breakeven was about $96 million. It is mix-dependent, but that's roughly. So it has come down from, say, 2, 3 quarters ago. We continuously have cost reductions in place to minimize the impact of any softness. Edwin Mok - Needham & Company, LLC, Research Division: So do you expect that level to come down even more in the January quarter? Is that how we should read that? Sean T. Smith: That is our goal. Edwin Mok - Needham & Company, LLC, Research Division: Great. That's very helpful. And then second question is I think on your prepared remarks, you talked about some new qualification that you had to secured over the last 6 months, right? Any way you can kind of quantify that? Is that a semi, FPD? And within semi and FPD, which -- at least in semi, is it logical memory? And in FPD, is it mostly related to AMOLED? Peter S. Kirlin: Yes. In the semi space, the focus of our qualification efforts have been in the logic space. And as Chris said earlier, that's likely the first segment of the business to start to improve when improvements occur. So we're optimistic that when the business turns, they will be right on the leading edge of that. And I think there's one other thing that Chris said, and that is there's consolidation occurring in the memory space. In one particular case, that consolidation is being driven by one of our largest customers and partners. So we will benefit from that directly when that deal concludes. So we are pretty optimistic certainly about the second half of the year. And to the extent the business recovers sooner, particularly the logic space, we should see a recovery in our business right along with it. Edwin Mok - Needham & Company, LLC, Research Division: And then in FPD? Christopher J. Progler: Yes. FPD, as far as new qualifications, you're starting see broader interest in AMOLED style displays. I think you're going to see more companies use those. And so you start to see that kind of technology more broadly adopted in other panel makers. Even outside of Korea, I think you'll start to see some of that being used. You're also seeing some qualification activity around faster refresh rate displays. Those are smaller transistors across multiple display makers. So I think that's the concentration of where the display work is as opposed to historically larger panel sizes, less activity in that area on the LCD. Some [indiscernible] technologies as well that others are starting to get momentum. Flexible displays, there's some new back play in transistor technology Sharp is working on that looks very interesting. So all of these things will drive qualification more for masks. Edwin Mok - Needham & Company, LLC, Research Division: Yes. But I would imagine those efforts are more longer term obviously for you guys. Is that... Christopher J. Progler: Long-term opportunity in terms of revenue. But your question I think was related to qualification activity. And starting from R&D pipeline up through qualification, it can be a few year kind of cycle when a new display technology is being prepared. So it is actually a fairly long front tail on some of that work. Edwin Mok - Needham & Company, LLC, Research Division: I see. So this increased qualification, it could potentially benefit 2013, but it's more likely 2014 driver. Is that how we should think about the timeframe for that? Christopher J. Progler: Yes. Yes, I think so. Edwin Mok - Needham & Company, LLC, Research Division: I see. Great, very helpful. One last question on the gross margin side. Obviously, it came down because of the low volume. So I understand mix could be a driver there, right? But how do we kind of think about gross margin if your revenue level get back to either the July or the April quarter level, right? And what would be the -- because if we think about mix, right, is it more high-end will drive better gross margin? Is it a high mix of semi? Just if you can give us any kind of way of thinking about that, it would be helpful. Sean T. Smith: Sure, Edwin. The team's goal and is still as we get incremental revenue, we target a minimum of 50% drop-through, and we expect to continue that and hopefully better that as we get into 2013. So to the extent, as Deno stated in his remarks that the situation stabilize and we start picking up incremental revenue as we go out into 2013, we should see a significant drop-through on that revenue. And the sooner it snaps back, the bigger the dollar amount will be. With respect to mix, certainly, high-end will drive the absolute revenue a lot higher because it's less units. But once we reach our saturation point, we're indifferent as to high-end or mainstream.

Our next question comes from line of Stephen Chin with UBS. Stephen Chin - UBS Investment Bank, Research Division: A question on 2013 outlook. Fiscal year '11 was a no-change year for the advanced IC tabs, and you performed really well there. So do you think you can perform the industry in '13? And also, to tag along with that, what are the important themes for advanced IC tabs the next year in both logic and in memory? Peter S. Kirlin: I think as far as relative industry performance, certainly, in the last cycle, we outgrew the photomask market. We outgrew the merchant space, and we believe we outgrew the captives. And the reason for that largely was the penetration of the leading edge, driven by memory with logic filling in the back end of this cycle. The work we've done over the last year or more in new qualifications has largely all been focused on logic. And it's customers and nodes in the last cycle, where we didn't have -- we really had little or no revenue contribution. So we are most definitely expecting our business to do better in the current cycle than the industry based on the new technology nodes and new customers that we continue to put into the portfolio everyday. So the answer -- the short answer is yes. Stephen Chin - UBS Investment Bank, Research Division: Okay, great. A question on operating leverage. In fiscal '12, your sales declined by more than 12%, while OpEx grew by about 10%. So how should we think about OpEx in '13? Sean T. Smith: You're referring to -- just to clarify, you're referring on OpEx, you're referring to R&D and SG&A, correct? Stephen Chin - UBS Investment Bank, Research Division: Yes. Sean T. Smith: Yes. SG&A, essentially, year-over-year was up a very insignificant amount. It should relatively stable with the level of 2012 and hopefully down slightly. R&D should range per quarter in the range of $4.5 million to $5 million, and that's really is, as Peter and Chris alluded to, is the pipeline to advance high-end growth. So we don't mind if that number necessarily goes up a bit. That means we have more activity for future revenue growth. Stephen Chin - UBS Investment Bank, Research Division: Got it. And a question on cash. What is the average level of cash you're looking to run the business? And what is the net cash you're targeting essentially? And do you have any plans to return cash to shareholders? Sean T. Smith: Our cash -- our net cash grew to about $41 million quarter-over-quarter. And we stated in the past, our goal is to get to net cash of $75 million. We do have some opportunities, as we look going forward as advanced leading edge, so we want to ensure that our first opportunity is to pay down debt to the extent we can. And then after that, we look to other opportunities potentially returning to some shareholders. But it is a capital-intensive business and we want to get to a net cash position first of $75 million. Stephen Chin - UBS Investment Bank, Research Division: Okay. And last two questions. So a question on the operating model. You have talked about an EBITDA target in the past. How should we think about a more normalized operating model? And also, are your advanced IC business a lower operating margin business than you had previously estimated? Sean T. Smith: We ended the year at $135 million of EBITDA, certainly was down from our 2012 -- 2011 performance. And we would like to certainly get that back up over $150 million, and then up once we can get it hit on all cylinders up over $175 million. So that's all contingent upon the revenue stream that we get in. With respect to high-end IC, I think you're referring to what is -- the margins are -- is lower than what we anticipate, I would probably -- I would say no, it's not. Stephen Chin - UBS Investment Bank, Research Division: Okay. Not even operating margin? Sean T. Smith: No. Stephen Chin - UBS Investment Bank, Research Division: Okay. And last question. We're seeing some initial ramp activity at some Chinese FPD manufacturers such as DOE. Would you see some activity there in 2013? Sean T. Smith: I don't know at this time that we anticipate significant activity for us on an FPD side in China. We don't have a facility there, and the cost to ship is quite large. I'm sure we do have plans in place to explore opportunities as they present themselves.

Our next question comes from the line of Tom Diffely with D.A. Davidson. Thomas Diffely - D.A. Davidson & Co., Research Division: Sean, first, I want to talk a little bit about the mainstream business. It was down 19% last year, it was kind of the one bad part of the story. And I'm curious, was the drop off a combination of volume and pricing? And how do you look at that mainstream business on a long-term basis from a size point of view? Sean T. Smith: I think certainly, the mainstream's business, as we've stated all along, is very competitive. And to some extent, it's a war of attrition. We believe we're winning that war. It was a combination of both price and units. But we believe, certainly, as we look at our model, and I think as Deno alluded to in his prepared remarks, and I'll turn it over to Peter for some additional color, it's a very profitable segment of our business. The margins are good, and we generate quite a bit of cash. And it has stabilized after the first quarter. And Peter, do you want to add to that? Peter S. Kirlin: And Tom, our mainstream business on a sequential basis really stepped down to about $60 million in the first quarter, and it's been stable plus or minus $1 million or $2 million on a quarterly run-rate basis all year long. Really, the behavior we saw of the mainstream customer base was they got conservative early, and they remained conservative. I guess, the good news in that is they haven't gotten more conservative. So it's a stable base that we hope to build upon when the market recovers. I would also say that without a doubt, it's a shrinking market. And the fact that our revenues in it over the year have been stable, I think, reflects the fact that we're picking up. Well, I know we're picking up either volume, so we're gaining market share. Thomas Diffely - D.A. Davidson & Co., Research Division: Could you view 2011 as more of the abnormal year then on the high side versus the year just finished? Sean T. Smith: I think we had good momentum in 2011 in the mainstream business. And the good momentum was a result of the fact that the market was more or less firing on all cylinders. So all our customers were the high-end or mainstream or customers that have abundant of both. We're optimistic about the business, and we're launching new products. In addition to that, as we were gaining high-end market share, there was a wake behind that, that was positive for our mainstream business. So in 2011, we kind of had all -- we had [indiscernible] our back in the market as far as the market is concerned. And from an execution point of view, we had all that disappointing buff. So that was 2011. We don't -- we didn't experience that in 2012. Having said that, I don't think it's out of reason to think that we could go through a similar period again so -- but time will tell. Because I do think that when the market turns, we'll -- again, we'll be picking up more business. I think will be somewhat of a wake again behind this. So I do think we could see a 2011-like period again. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay, all right. And then I guess, when you look at the high-end business where all the growth is coming from and where it's really kind of the future of the company, Sean, how would you characterize the high-end capacity today? And just on -- I don't know if utilization rates are right metric or not, but can you talk about high-end capacity today versus how much you would be adding with that $70 million to $90 million with CapEx next year? Sean T. Smith: Well, certainly, adding that $70 million to $90 million, strategically, we will increase our high-end capacity in 3 primary locations, in Boise and in Korea and in Taiwan, to capitalize on and to align ourselves with our customer roadmap. So without quoting a specific percentage of utilization because it's rather something we don't typically do, we certainly have installed capacity today to do well in excess of $130 million plus, $140 million plus, depending upon the mix. So we see the -- we want to be prepared for the opportunity as we move forward because we believe we're -- we see it with our customers and want to align ourselves. And Deno, I don't know if you want to talk a little bit about some of what our plans are on some leading edge capacity as compared to our competition? Constantine S. Macricostas: We're very bullish about the longer term definitely. Aligned with the right customers, I think we're the strongest mask maker in the memory sector there. We see opportunities there the second half of next year. We're qualifying with some key large customers, and I believe the company is in a very good position long-term. And we're making our investments for the future. Short term is going to be tough another quarter or 2, but long term, we're very bullish, we feel very strong. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And a lot of times you guys talked about the capacity being $130 million, $140 million. But I was just I guess curious if with a little softness in the mainstream, if the point thing to look at is the capacity for the high-end and if that's tight requires more capital spending that impacts the cash flow over the next year? Sean T. Smith: Well, I think what we've done subtly and strategically, we've invested and we've worked with our customers and our tool vendors to improve our cash yet continue to invest and improve the balance sheet. So behind the scenes, I think, I know the team is doing a very good job of putting capacity in place and capitalizing on opportunities. Assuming to Peter's comments on the mainstream, if that comes back and we see the "wake" or the firing on all cylinders, we have installed capacity there obviously that we can hit, fill and deliver those orders relatively quickly. Constantine S. Macricostas: I will comment, we're still very bullish longer term because our competition not investing. We believe the great demand for high-end capacity, one of the things on the business pick up again. Thomas Diffely - D.A. Davidson & Co., Research Division: That is -- the high-end -- it seems like all the pieces are in place there. You have on the memory side obviously with Micron and [indiscernible] recovery you got that. Peter's coming into the fold and high end logic it sounds like between Samsung and Global Foundries, a lot of potential growth there. Just kind of curious, the near-term basis, with the seasonality, have you seen the seasonal trends through the year change at all? I mean, over the last 10 years, you kind of the business peaks in the fourth quarter and obviously falls off in the first quarter because of the shutdowns. But, because of the memory exposure, is the peak going more third quarter these days? Sean T. Smith: I think the last 2 to 3 years, the peak has been either Q2 or Q3, with Q4 -- the last 2 years certainly down. But you're correct, Tom, if you look back 5, 10 years, go even 3 years, our typical seasonality, if you will, can fluctuate because of the opportunities we now have at the leading edge. So historical patterns, aside from the mainstream holiday season, it's really difficult to determine. It's more market-driven. Thomas Diffely - D.A. Davidson & Co., Research Division: Yes, okay. And then I guess, just a last question here. You talked about the R&D going between $4.5 million and $5 million. Does that mean that the kind of recent line of kind of high levels of R&D for the high end qualifications, is that going to drop-down given the first quarter? Or is stays at the higher level for a couple more quarters? Sean T. Smith: It's difficult to say. It's really the opportunity that we have. We're not necessarily projecting absolute dollars between $4 million and $5 million in R&D. But I think we averaged about $4.5 million, in the last 2 quarters we're about $5 million. So it's all dependent upon the opportunities we see in the marketplace. But it is absolutely dollars well spent for the future of the company. Peter C. Broadbent: Yes, in terms of large new R&D initiatives, we don't see those on the horizon. It's R&D sustaining next node technology developments, new qualifications, those sorts of things. And expect it to be relatively steady because the opportunities are there, and we want to take advantage of them. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. Is that actually just material cost then or is it time on your tools? Peter S. Kirlin: A combination. Thomas Diffely - D.A. Davidson & Co., Research Division: Yes, what generates that cost in that case? Peter C. Broadbent: A combination of material, labor, tool time, so it's a combination of a number of factors. And just as Deno mentioned, our competition aren't investing so that's creating opportunity to us. So Sean said, it's money very well spent because when the business returns it translates transition turn into revenue.

Our next question comes from the line of Christopher Blansett with JPMorgan. William C. Peterson - JP Morgan Chase & Co, Research Division: It's Bill Peterson calling for Chris. Thanks for taking the question. If I could just poke at the CapEx plans again. I believe you guys have talked about opportunities and it sounds like what Chris said is that a lot of easy kind of more second half opportunities. Maybe housekeeping, but are you talking fiscal second half or calendar second half? And it's only a few months off but just kind of trying to get a feel for linearity relative to your CapEx plans? And also, how you view some of the revenue opportunities? Sean T. Smith: Our CapEx plan still are -- some of the tools have longer lead times than others. So obviously, as we prepare for 2013, and even to 2014, we have to make some plans to for those opportunities. So we prepare well in advance of what we expect. We need to do so. And with respect to the second half, whether it's calendar or fiscal, I think Deno mentioned -- and I'll turn it back to Deno or Chris or Peter then we'll have any further comments, we expect it to pick up hopefully, picked up sooner than later but that's on installed capacity which we have in place. And we haven't provided guidance necessary for the second and third quarter. But if it snaps back, if you will, quicker, we certainly can handle those orders. Peter S. Kirlin: Yes, the CapEx is related to -- we talked a little bit about capacity expense but also some capability insertions as well. And as Sean mentioned, those have to be a little bit of advanced of when we anticipate a qualification of production ramp. So they are staged appropriately and that the capability will come in a little sooner than we expect in aid of any capacity expansion might need we would time with an expansion of the opportunity, the manufacturing opportunity.

Okay, that's helpful. I guess, also, related to qualifications, could you give, can you provide some color on whether or not these qualifications are at customers that have their own mask houses? Or are they at customers that do not have their own mask houses, thus you're competing with competition in the merchant space? Trying to get a feel for this because I think a lot of the mask houses they're running relatively low utilization, that may lead to less opportunity at least for the near-term for you. Sean T. Smith: Yes, the answer is it's both, both customers with and customers without their own captives. So we're working new calls really across a broad base of customers, and the comment you made is correct, and that is -- I mean, the reality of the leading edge today is to be successful, one thing you have to do is not all you need to do. You've got to be the trusted partner of some of the industry leaders. And the goodness is we've been very successful at doing that. That's no small feat. That's not easy to do, but we've done it. When the business turns down because they have their own captives, then our business goes down more rapidly, that's the bad news. The good news is when the business snaps back and their captive capacity has exceeded, when the revenues ramp for us, they'll ramp quickly. Peter S. Kirlin: And historically, captives would toll a lot of the work internal, sometimes exclusively. But these process technologies are much more complicated now. And they know they cannot disengage from the outside supplier, even when they have excess capacity, because they need to continue to work on qualifications and need to send us business and orders so we can work on yields and things like that. So you don't see that complete pull in of work inside the captive that maybe we've seen many years ago when they had excess capacity. They know they have to stay engaged so have a viable supply base. William C. Peterson - JP Morgan Chase & Co, Research Division: Okay, that's helpful. Maybe a question about seasonality, it's more near-term focused. I'm wondering when you look at even the current quarter, do you see some indications that designers or customers are trying to spend money that they have available for the year? Did you see like an uptick, for example, in the very near term followed by maybe people taking off extra holidays? And how do you look at the near-term seasonality in fact and again, the trend visibility as well but that should always be on the horizon now? Sean T. Smith: Yes, the large percent, the most general effect we see in Christmas is it's when customers who have that -- not all certainly, but if they do shut down for an annual maintenance, that's when it's done over the Christmas holidays. And the designers tend to take more time off. So that is the overriding large effect. We do see a small set of some customers spending their budgets out for the year. I mean, honestly, those customers tend to be, once they get funding from government agencies that are on a time clock, so to speak, calendar time clock, but that is a much smaller muted effect relative to the larger holiday, the fact that the designers aren't working, therefore, they're not taking out. And that is a nontrivial fraction of our mainstream customers with fabs, close the fabs down for an annual maintenance. William C. Peterson - JP Morgan Chase & Co, Research Division: Okay. Along those lines, are you seeing more customers shutting down facilities this year compared to last year or prior year? We're seeing that maybe could have been stronger businesses? Sean T. Smith: No, actually, it's pretty typical, which gives me some optimism because if you asked me that question 2 or 3 months ago, it appeared like the holiday shutdowns, at least in the mainstream sector, are going to be more and going to last longer. But as the last few months have played out, it's looking the mainstream much more like a typical year.

[Operator Instructions] Our next question comes from the line of Michael Birch [ph] with Kennedy Capital [ph].

Just I wanted to follow up on one of the earlier questions around, I guess, it was more from the standpoint of qualifications. So I wanted to examine this remark from a volume perspective or the actual business units that you're doing and think about the mix of the business and how it's just changed over the last couple of years. I know you don't have perfect visibility into the end markets where your customers are taking those products from your assets and deploying them, but how that sort of changed over time, particularly as you invested more heavily in the high-end side of the business? Sean T. Smith: Do you mean the end users, the transition from PCs to mobile, that sort of thing? Is that what you're getting at?

Yes, exactly. Christopher J. Progler: I think the changes we're seeing are similar to a lot of suppliers and semiconductor companies in the industry we're seeing, which is a move from the desktop into the mobile space and then much more emphasis on consumer-oriented applications that are high end. Historically, those are not high-end technologies. Today, some of those drive roadmaps more aggressively than any other application, particularly in the low power arena. So I think you're seeing much broader use of high-end technologies and lower cost devices. On the other hand, the number of companies doing high-end and the number of tapeouts is not increasing. The number of companies working on high-end, actually, is pretty stable, maybe declining a little bit. So much more penetration of high-end technologies into more devices with fewer companies working on it and much more complicated process technologies. In terms of our total mix of units and how that blends in, maybe Peter, you might have a comment or Sean on that? But is that answering your question to some extent?

Yes, we're getting there, yes. Christopher J. Progler: Okay. And on the memory side, if you're following memory, DRAM, PCs are a huge consumer of DRAM chips that's a flat to declining trend and nobody believes that's going to change. The mobile DRAM is growing, but it's not replacing the bit count that PCs used to have. So DRAM is relatively flat, but NAND flash solid stage storage on the other hand, of course, is exploding year-over-year for bit growth. But there's a lot of competition in capacity in that space for the end makers. But for company like Photronics is creating the whole new high-end segment, which is solid-state or flash-type memories. So that's been very positive trend, I think, in the industry in the mobile applications.

Okay. And Sean, any comment on what you think about the total mix of units and how that's been across business, how that's changed? Sean T. Smith: Generally, Michael, we, 3 or 4 years ago, we did not have access to high-end business. We want to have high end business, and we're going to the qualification process. The mix differential, as Chris alluded to, there's less customers but the ASPs are much higher so it's heavily weighted toward growth. And it's more on the high-end of leading-edge technology collaboration that we didn't have 3 or 4 years ago. So it's much more designer working or fab manager working with our team as opposed to the mainstream side of the business where it's more of a commoditized buy. That's the biggest change.

Okay. And just one more thing to follow up on this. So if you were to characterize how you guys thought your mix of business looked, let's say, 2 years ago versus the industry and again, that sort of shift we've seen from computing to mobile, do you think you were more heavily weighted in the industry towards computing, let's say, 2 or 3 years ago versus now? And do you think that's completely flipped the other way where you may be more heavily weighted towards mobile just as the industry has gone? Sean T. Smith: No, I don't think we're more heavily weighted to the computing side some numbers of year ago. The mainstream business is more driven by analog applications, power devices, discrete, very, very broad use of very very fairly low cost chips. The computing side is microprocessors and very, very dense, high-end DRAM. At that time, we did not have that much exposure to those segments. We do now. So we're enjoying some of that. But also, those high-end logic and memory chips are moving into the mobile space. So our kind of application area has changed from that point of view, I would say. But no we didn't we were not computing heavy per se 3 to 5 years ago.

Fair enough. And I guess, I'm approaching computing more from the end market standpoint which of course would pull a lot of analog and panel distributors as well not just the microprocessors, but I understand your point, if that makes sense. Let me ask another question then, if you think and specifically about the mainstream business, which stepped down significantly in fiscal quarter 1 this year, and then it's been basically stable. Again, if thinking around where all those little bits and pieces go, would you characterize that step down in being more conservative from your customer standpoint as maybe trying to manage the supply chain better without visibility for the euro being really strong demand? Or is it really that demand itself is really just falling to low level and then just stayed there? Sean T. Smith: Well, I think our customers were out in front of a demand in the mainstream. They reacted more quickly as small companies tend to do. And then they stayed the course where our larger customers, that are really have large labs, had big R&D budgets, they stayed the course through a longer fraction of the calendar year and then adjusted more rapidly at the end of the year. So that's how I would answer the question. I think our mainstream customers more or less drive in sync with demand at the beginning of the year, and our larger customers made the effort to adjust towards the end of the year and their adjustment was quicker, therefore, and more dramatic.

Okay. And then last question, you guys made a comment about in the high-end where you're not seeing competitors making the same kinds of investments necessary that you guys are. Would that be something you would look at across both merchant and captive competitors? Or is it one more than the other? Peter S. Kirlin: I think the captives do, although at least a few larger captives that remain, do continue to invest quite heavily to support their primary customer, their internal use. We're really referring more to the merchant side competitors and we view captives as to some extent, competitors but more positively as collaborators and partners for the most part.

Our next question comes from line of Patrick Ho with Stifel, Nicolaus. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Maybe just a follow-up on some of the high-end IC questions you mentioned. You talked about the 28-nanometer as being the year of qualifications this past year and you're waiting for I guess, a turn in both the environment to see some of I guess, some of that turning to revenues. Can you maybe discuss a little bit how much of it is the market environment versus the improvement of yields that chipmakers themselves are seeing at 28, which could drive, I guess, an acceleration in revenues? Sean T. Smith: Patrick, I think it's both. When we talk about the industry, we talk about the logic roadmap, the large microprocessor company that everyone thinks about really drives logic technology with the core PSMC slugging behind. But the rest of the foundries are more than a full note in arrears, as you know. So I wouldn't say, although I want to speak for our customers, that any of the foundry right now is happy with its -- that any foundry reach plateau yields in this particular business cycle of 28. So as the next cycle goes forward, we're going to have a much better process platform in the foundry space, much more robust. And we're going to have a market uplift. Both of those factors point very favorably towards an evolving demand profile for us. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great, that's helpful. And maybe a specific question for Chris in terms of some of the design activity. So again, 28-nanometer was a lot of the activity last year in terms of designs. What do you see on the IC front in terms of 20-nanometer designs and the activity that's coming to you? And what are some of the, I guess, issues that you're dealing with on that note? Christopher J. Progler: Yes, 20-nanometer is a very interesting node for the foundry. I mean, of course, Intel is in production at 22 moving to 14 shortly. The 20 node for a foundry are the interesting one because right now, I think they're struggling with strategy on going to the FinFET style transistor and how quickly that will work. Some of the design community seems to believe the ROI for 20-nanometer foundry is not completely there because speed doesn't scale quite as well. They're not getting a power benefit, so I think all the foundries frankly are struggling a little bit with that node. With that said, the early adopters, the big fabless companies will do a plainer 20-nanometer devices. We are engaged with foundries now on 20-nanometer development in R&D. But that 20, 14 are going to be 2 interesting nodes, and that story, I think, is going to unfold over the next 2 years in terms of how the foundries approach it and what process technologies they offer. Mahavir Sanghavi - UBS Investment Bank, Research Division: Great. And a final question for me and maybe for Sean, specifically, in terms of CapEx and the variability between the high-end and the low end of your guidance. In the past, you've mentioned that your trying to catch up a little bit on the flat panel display high-end capacity. Is there any weighting to one of those businesses in that CapEx number? Or is it going to be more dictated by, I guess, whichever IC or flat panel display sees, I guess, higher activity? Sean T. Smith: I think Patrick, generally, our CapEx matches the revenue stream typically any given year, given quarter at FPD/IC, 75-25 split. So we don't give specific guidance for competitive reasons, but Deno's remarks and Peter and Chris I think followed up. Certainly, we're investing at the high-end, when we talk about investing at the high-end, and our competition isn't, that's related primarily to the IC segment.

Ladies and gentlemen, there are no further questions at this time. I'd like to turn it back to Deno Macriocostas for closing remarks. Constantine S. Macricostas: Thank you for participating this morning call, and I would like to wish you, all of you, a very happy holidays and a prosperous year. Thank you, guys.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation, and ask that you please disconnect your line.